collapse of Lehman Brothers

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pages: 249 words: 66,383

House of Debt: How They (And You) Caused the Great Recession, and How We Can Prevent It From Happening Again by Atif Mian, Amir Sufi

Andrei Shleifer, asset-backed security, balance sheet recession, bank run, banking crisis, behavioural economics, Ben Bernanke: helicopter money, break the buck, business cycle, Carmen Reinhart, collapse of Lehman Brothers, creative destruction, debt deflation, Edward Glaeser, en.wikipedia.org, financial innovation, full employment, high net worth, Home mortgage interest deduction, housing crisis, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, liquidity trap, Long Term Capital Management, low interest rates, market bubble, Martin Wolf, money market fund, moral hazard, mortgage debt, negative equity, paradox of thrift, quantitative easing, Robert Shiller, Robert Solow, school choice, seminal paper, shareholder value, subprime mortgage crisis, the payments system, the scientific method, tulip mania, young professional, zero-sum game

And once the decline in house prices destroyed the net worth of indebted home owners, one consequence proved disastrous—they stopped spending. 3: Cutting Back A powerful narrative of the Great Recession focuses on the collapse of Lehman Brothers in September 2008. Allowing the bank to go bankrupt, the argument goes, was a “colossal error,” and the failure to save it triggered the global economic downturn.1 In an article on the causes of the Great Recession, Jacob Weisberg of the Daily Beast described it as “near-consensus” that “a global recession became inevitable once the government decided not to rescue Lehman Brothers.”2 This narrative is closely tied to the banking view articulated in chapter 1. According to this view, the collapse of Lehman Brothers froze the credit system, preventing businesses from getting the loans they needed to continue operating.

According to this view, the collapse of Lehman Brothers froze the credit system, preventing businesses from getting the loans they needed to continue operating. As a result, they were forced to cut investment and lay off workers. In this narrative, if we could have prevented Lehman Brothers from failing, our economy would have remained intact. The Consumption-Driven Recession Is the collapse of Lehman Brothers the linchpin of any theory of the recession? Let’s go back to the data. One of the facts that jumped out in chapter 1 is that the Great Recession was consumption-driven. Let’s look more closely at the timing and magnitude of the spending declines. The decline in spending was in full force before the fall of 2008.

Both new construction and remodeling are a function of household demand for housing services. As a result, residential investment is best viewed as another form of household spending on durable goods. The collapse in residential investment was already in full swing in 2006, a full two years before the collapse of Lehman Brothers. In the second quarter of 2006, residential investment fell by 17 percent on an annualized basis. In every quarter from the second quarter of 2006 through the second quarter of 2009, residential investment declined by at least 12 percent, reaching negative 30 percent in the fourth quarter of 2007 and the first quarter of 2008.


Global Financial Crisis by Noah Berlatsky

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

Among the billions 124 Effects of the Global Financial Crisis on Wealthier Nations The Financial Crisis Has Fueled Anti-Semitism As the financial crisis continues to affect markets around the world, anti-Semites are still using it to promote conspiracy theories about Jewish involvement in the crisis, and anti-Semitic statements and other anti-Jewish messages are appearing on a daily basis on financial Internet discussion groups and on Web sites and blogs both in the United States and abroad. The crisis has also given birth to new anti-Semitic conspiracy theories. One of the most common rumors being circulated on the Internet suggests that, just prior to the collapse of Lehman Brothers, “$400 billion was frantically transferred to banks in Israel” by the company. That conspiracy theory, which has no basis in fact, is reminiscent of the one that emerged immediately after the 9/11 terrorist attacks, which claimed that “4,000 Jews” did not report to work at the World Trade Center that day because they had advance warning that an attack was imminent.

Reproduced by permission of the author. 207 The Global Financial Crisis Introduction I am much honored to be invited to address the 4th Deposit Insurance Corporation of Japan Round Table in Tokyo. As you are well aware, the global financial system is unstable due to the burst of the global credit bubble. In particular, global financial markets have been under severe strain since the collapse of Lehman Brothers last autumn. Both the central bank and the deposit insurance corporation do not draw much attention under normal circumstances, and their presence stands out only when depositors and financial market participants do not have full confidence in the soundness of financial institutions and financial system stability.

In Japan, the default of a mid-sized securities firm in the interbank money market, despite the small amount of default, triggered a steep liquidity contraction in the money market and led to turmoil in Japan’s financial system as a whole. In the current financial crisis, after the severity of the credit-related debt problem surfaced in August 2007, U.S. and European financial institutions faced a liquidity shortage, and the collapse of Lehman Brothers further exacerbated the conditions in the funding markets. 212 Solutions to the Global Financial Crisis As such, while a lack of liquidity was the starting point of the problem, the root cause of the problem was an issue of the solvency of financial institutions. In the early phase of a crisis, it is difficult to recognize how serious the liquidity problem is and how serious the solvency problem is.


pages: 355 words: 92,571

Capitalism: Money, Morals and Markets by John Plender

activist fund / activist shareholder / activist investor, Alan Greenspan, Andrei Shleifer, asset-backed security, bank run, Berlin Wall, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Black Swan, bond market vigilante , bonus culture, Bretton Woods, business climate, business cycle, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, computer age, Corn Laws, Cornelius Vanderbilt, corporate governance, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, discovery of the americas, diversification, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, Fall of the Berlin Wall, fiat currency, financial engineering, financial innovation, financial intermediation, Fractional reserve banking, full employment, Glass-Steagall Act, God and Mammon, Golden arches theory, Gordon Gekko, greed is good, Hyman Minsky, income inequality, industrial research laboratory, inflation targeting, information asymmetry, invention of the wheel, invisible hand, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, labour market flexibility, liberal capitalism, light touch regulation, London Interbank Offered Rate, London Whale, Long Term Capital Management, manufacturing employment, Mark Zuckerberg, market bubble, market fundamentalism, mass immigration, means of production, Menlo Park, money market fund, moral hazard, moveable type in China, Myron Scholes, Nick Leeson, Northern Rock, Occupy movement, offshore financial centre, paradox of thrift, Paul Samuelson, plutocrats, price stability, principal–agent problem, profit motive, proprietary trading, quantitative easing, railway mania, regulatory arbitrage, Richard Thaler, rising living standards, risk-adjusted returns, Robert Gordon, Robert Shiller, Ronald Reagan, savings glut, shareholder value, short selling, Silicon Valley, South Sea Bubble, spice trade, Steve Jobs, technology bubble, The Chicago School, The Great Moderation, the map is not the territory, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, tulip mania, Upton Sinclair, Veblen good, We are the 99%, Wolfgang Streeck, zero-sum game

Above all I am indebted to my beloved wife Stephanie, who was both a wonderful supporter-in-chief through some very difficult times during the gestation of the book, and a superbly perceptive subeditor. My debt to her in everything is beyond enumeration. INTRODUCTION The great financial crisis that began in 2008 with the collapse of Lehman Brothers, the US investment bank, has been the worst since the Wall Street Crash of 1929. Unlike that earlier crisis, it has not put the survival of the capitalist system in doubt. Indeed, the Great Recession that began shortly before the Lehman debacle was the first modern crisis in which no systemic alternative to capitalism was on offer.

I conclude by explaining why the world is still on the edge of an abyss despite all the efforts of politicians, central bankers and financial watchdogs to strengthen the global financial system. Sadly, there is every likelihood that we will experience a further and more damaging crisis in due course. CHAPTER ONE THE ROOT OF ALL EVIL (OR NOT, AS THE CASE MAY BE) Capitalism is unloved. Since the collapse of Lehman Brothers, the American investment bank, in September 2008, it has become commonplace to refer to it as broken. Certainly its legitimacy is being questioned more than at any time since the Wall Street Crash of 1929 and the subsequent Great Depression. Few find it easy to live with the turbulent nature of the capitalist market economy, with its constant fluctuations in output and employment, accompanied by recurring financial crises.

What is striking about this progression is that there have been two conspicuous spikes in the level of financial activity and profitability. One was in the Roaring Twenties, which led to a peak contribution by finance to the wider economy of nearly 6 per cent of GDP after the 1929 crash. The other was in the years before the recent credit crunch and subsequent collapse of Lehman Brothers. Even more impressive growth can be seen in the UK, where, over 160 years, financial services outstripped growth in the economy as a whole by 2 percentage points a year, accounting for no less than 9.4 per cent of GDP in 2006. In a less heavily regulated environment, UK bank balance sheets grew much faster than those in the US.


pages: 391 words: 102,301

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

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

For five days, the world’s leaders seem to agree on a narrative about how the world works. At Davos, even the most intractable political differences are temporarily smothered by the globalization consensus. But at the Davos forum in 2009, it was clear that something had gone badly wrong. The meeting took place just four months after the collapse of Lehman Brothers had tipped the world into the biggest financial crisis since 1929. The international bankers who normally strutted proudly around the Davos cocktail circuit were in hiding as their institutions reeled and public opprobrium mounted. The Obama administration—locked in desperate economic negotiations at home—was conspicuous by its absence.

She was the champion of the small entrepreneur and the shopkeeper, rather than the union boss or the senior civil servant. She was determined to cut red tape, regulation, and taxes. She believed in the market, not the state. One of her most famous and pithiest statements was “You can’t buck the market,”1 a phrase that essentially sums up the global ideological drift from 1978 until the collapse of Lehman Brothers in 2008. Thatcher was given her chance because by the late 1970s, Britain was in the grip of a powerful sense of national decline. It was a characteristic of the Age of Transformation that in country after country, free-market reforms were pushed through against a background of national economic crisis.

The whole neo-conservative philosophy exemplified by Krauthammer’s speech in 2004 was based on an unexamined assumption of continued American economic supremacy. By the end of the Bush presidency, however, the United States was becoming much more conscious of the limits of its own power. Both the Iraq and Afghanistan wars had turned into long, bloody, and unpopular slogs. Then, in September 2008, the collapse of Lehman Brothers precipitated the biggest financial and economic crash in the United States since the Great Depression. The economic crisis was also a turning point in the presidential campaign. In the aftermath of the fall of Lehman, Barack Obama established a lead over John McCain in the opinion polls and went on to decisive victory in November 2008.


pages: 491 words: 131,769

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

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

After much kicking and screaming, the banks were forced to bring their SIV exposure back onto their balance sheets, sustaining massive losses in the process. The worst was yet to come. Beginning in August 2007, a much more severe shock—a full-blown liquidity and credit crunch—seized the financial markets, culminating in the collapse of Lehman Brothers and bringing the global financial system to the brink of collapse. During that time the remnants of the shadow banking system collapsed, and even the conventional banking system came under assault. The crisis was just beginning. Fear of the Unknown Risk, Uncertainty, and Profit, first published in 1921, contains iconoclastic economist Frank H.

In fact, few people likely understood that stress in the repo or commercial paper market in one country could be quickly transmitted elsewhere. While there had been some crises that crossed national borders, none came close to rivaling the Great Depression; understanding of how the global financial system could—and would—unravel was limited. That ignorance ended after the collapse of Lehman Brothers on September 15, 2008. When it failed, the hundreds of billions of dollars in short-term debt it had issued—most of it commercial paper and other bond debt—became worthless, triggering panic among the various investors and funds that held it. This panic prompted a run on the money market funds that provided lending to the commercial paper market and sowed further panic throughout the global banking system.

Japan, which many initially hailed as immune to the crisis, saw its economy contract at an annualized rate of 12.7 percent in the final quarter of 2008; South Korea saw an even bigger decline of 13.2 percent. China managed to avoid an outright recession, even if its growth dropped below sustainable levels. Most of the rest of the world was not so lucky. In the finger-pointing that followed, many market watchers focused on the collapse of Lehman Brothers, seeing in that catastrophe the cause of all the world’s ills. Even now some consider this event the catalyst for the crisis. This interpretation is comforting but wrong. By the time of Lehman’s collapse in September 2008, the United States had been in a recession for ten months, and much of the rest of the world was already in the same boat.


pages: 405 words: 109,114

Unfinished Business by Tamim Bayoumi

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

The press release prompted an injection of liquidity into the markets by the European Central Bank that was a precursor to many such moves on both sides of the Atlantic as well as policy rate cuts by the US Federal Reserve. Such palliatives had only limited effects, given market jitters coming from uncertainty about the viability of major banks. This financial equivalent of a phony war ended with the market panic that followed the collapse of Lehman Brothers, a mid-sized US investment bank, on September 15, 2008. The subsequent freezing of North Atlantic financial markets, global recession, and painfully slow recovery have forced both central banks to dabble with all sorts of “unconventional” policies such as buying assets and lowering interest rates below zero

Despite the obvious attractions of including the Swiss and UK experiences (both countries experienced major banking problems) their addition would have involved adding a lot of country-specific detail without a commensurate increase in underlying insights.8 Figure 2: Output losses were mainly in the North Atlantic region. Source: Haver Analytics. * * * What Went Wrong There have been many books about the crisis that followed the 2008 collapse of Lehman Brothers in the United States and the 2009 admission of the size of Greek debt in the Euro area. At the risk of oversimplification, the main strand of the US literature involves blow-by-blow accounts of the crisis in which (for example) large and complex banks appear fully formed, while the equivalent narratives on the Euro area are similar except that they provide greater historical background on the creation of the currency union.9 In both cases, the focus on how policymakers reacted to the new and largely unexpected challenges.

As the SEC predicted, easier access to the repos market further deepened the already substantial role of US assets in international banking, including the booming market for mortgage-backed securities. The deep involvement of European banks in US repos markets explains why the seizing up of these markets after the collapse of Lehman Brothers over the crisis immediately translated into dollar and liquidity shortages at European banks. The second and even more corrosive trend was to increase the desirability of high-yielding mortgage-backed securities issued by private firms. Before the SEC decision, mortgage-backed securities represented a useful way of pooling risk and selling bundles of loans to investors.


pages: 397 words: 112,034

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

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

Most of the losses that will be sustained by banks domiciled elsewhere among advanced economies will result from their operations in American or British markets, or from their exposure to American mortgage-backed and corporate securities. Given the importance of the US and, to a lesser extent, British economies and financial systems to their global counterparts, it was inevitable that the North Atlantic financial crisis would have serious global consequences. In particular, the collapse of Lehman Brothers and AIG in September 2008 triggered an abrupt decline in business and consumer confidence and, via their impact on share prices, a sudden and substantial loss of household and corporate wealth. The ensuing financial turmoil triggered a sharp contraction in the availability of finance for, among other things, international trade.

The Australian banking system did have an Achilles’ heel in the form of a relatively low deposit-to-loan ratio and, correspondingly, an unusually high level of dependence on “wholesale funding,” especially from offshore. This rendered Australian banks potentially vulnerable to the drying up of international liquidity. As such, the Australian government’s prompt extension of a guarantee of banks’ wholesale borrowing after the collapse of Lehman Brothers was critical in preventing the loss of liquidity. Australia’s Residential Property Market Rested on Firmer Foundation House prices in Australia’s major cities rose by about 150 percent over the twelve years preceding the onset of the financial crisis—more than in the United States or Canada, but less than in a number of European countries, including the Netherlands, Norway, the United Kingdom, Spain, and especially Ireland.

Contraction in Global Manufacturing-Trade Had Little Impact on Australia As noted earlier, one of the principal channels through which the North Atlantic financial crisis was transmitted to the global economy was via the dramatic contraction in trade, particularly in manufactured goods, that was prompted by the abrupt decline in discretionary spending in the United States and Britain, and by the associated fierce inventory cycle that followed the collapse of Lehman Brothers. However, this sharp trade downturn had very little impact on Australia as a result of the unusual (for an advanced economy) composition and orientation of Australia’s exports. North America and Western Europe account for only 15 percent of Australia’s merchandise exports, with Asia taking 70 percent (within that total, non-Japan Asia makes up just over 50 percent); thus, the sharp contraction in American and European imports had little direct impact on Australia’s exports.


pages: 409 words: 125,611

The Great Divide: Unequal Societies and What We Can Do About Them by Joseph E. Stiglitz

"World Economic Forum" Davos, accelerated depreciation, accounting loophole / creative accounting, affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Alan Greenspan, Asian financial crisis, banking crisis, Bear Stearns, Berlin Wall, Bernie Madoff, Branko Milanovic, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Carmen Reinhart, carried interest, classic study, clean water, collapse of Lehman Brothers, collective bargaining, company town, computer age, corporate governance, credit crunch, Credit Default Swap, deindustrialization, Detroit bankruptcy, discovery of DNA, Doha Development Round, everywhere but in the productivity statistics, Fall of the Berlin Wall, financial deregulation, financial innovation, full employment, gentrification, George Akerlof, ghettoisation, Gini coefficient, glass ceiling, Glass-Steagall Act, global macro, global supply chain, Home mortgage interest deduction, housing crisis, income inequality, income per capita, information asymmetry, job automation, Kenneth Rogoff, Kickstarter, labor-force participation, light touch regulation, Long Term Capital Management, low interest rates, manufacturing employment, market fundamentalism, mass incarceration, moral hazard, mortgage debt, mortgage tax deduction, new economy, obamacare, offshore financial centre, oil shale / tar sands, Paul Samuelson, plutocrats, purchasing power parity, quantitative easing, race to the bottom, rent-seeking, rising living standards, Robert Solow, Ronald Reagan, Savings and loan crisis, school vouchers, secular stagnation, Silicon Valley, Simon Kuznets, subprime mortgage crisis, The Chicago School, the payments system, Tim Cook: Apple, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Turing machine, unpaid internship, upwardly mobile, urban renewal, urban sprawl, very high income, War on Poverty, Washington Consensus, We are the 99%, white flight, winner-take-all economy, working poor, working-age population

The documentary raises a question: Could this have influenced some economists’ judgments? RESPONSES TO THE CRISIS Just as the “making of the crisis” illustrates several of the themes of this book, so do the articles I wrote in 2008 and 2009 on the responses, of which one, “How to Get Out of the Financial Crisis,” published in Time magazine a month after the collapse of Lehman Brothers, is included here. The disparity between what was needed and what was done illustrates the great divide. Even though the crisis had long been in the making, and even though there had been ample warnings, those in charge, both at the Fed and in the administration, seemed surprised, and I believe genuinely were—a remarkable testament to the ability to close one’s senses to information that one finds unpleasant and contradicts one’s preconceptions.

Yet the Fed chair Ben Bernanke would blithely claim that the risks were “contained.”13 The precipitating event that plunged the country from the recession that began in December 2007 (which Bush’s policies—another tax cut for the rich in February 2008—had done little to end) into a deep recession, the worst since the Great Depression, was the collapse of Lehman Brothers on September 15, 2008. After confidently asserting that letting it collapse would have only a limited effect on the economy—and would teach banks an important lesson—the Fed and Treasury took a 180-degree turn and bailed out AIG, the most expensive bailout in human history, an amount of corporate welfare to one firm that exceeded that given to the millions of poor Americans over years and years.

(Of course, as I explained in Freefall and earlier in this book, one could save the banks without saving the bankers and the banks’ shareholders and bondholders. The irony was that what we did was unnecessarily expensive to the taxpayer, and less effective than it could or should have been.) Two years after the collapse of Lehman Brothers, the banks were largely back to health. Lending to small and medium-size enterprises was still markedly below the crisis, but this was partly because we had focused rescue efforts on the big banks, letting hundreds of the smaller, local, and regional banks that are disproportionately engaged in such lending to be shut down.


pages: 573 words: 115,489

Prosperity Without Growth: Foundations for the Economy of Tomorrow by Tim Jackson

"World Economic Forum" Davos, Alan Greenspan, bank run, banking crisis, banks create money, Basel III, basic income, biodiversity loss, bonus culture, Boris Johnson, business cycle, carbon footprint, Carmen Reinhart, Cass Sunstein, choice architecture, circular economy, collapse of Lehman Brothers, creative destruction, credit crunch, Credit Default Swap, critique of consumerism, David Graeber, decarbonisation, degrowth, dematerialisation, en.wikipedia.org, energy security, financial deregulation, Financial Instability Hypothesis, financial intermediation, full employment, Garrett Hardin, Glass-Steagall Act, green new deal, Growth in a Time of Debt, Hans Rosling, Hyman Minsky, impact investing, income inequality, income per capita, intentional community, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invisible hand, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, liberal capitalism, low interest rates, Mahatma Gandhi, mass immigration, means of production, meta-analysis, Money creation, moral hazard, mortgage debt, Murray Bookchin, Naomi Klein, negative emissions, new economy, ocean acidification, offshore financial centre, oil shale / tar sands, open economy, paradox of thrift, peak oil, peer-to-peer lending, Philip Mirowski, Post-Keynesian economics, profit motive, purchasing power parity, quantitative easing, retail therapy, Richard Thaler, road to serfdom, Robert Gordon, Robert Solow, Ronald Reagan, science of happiness, secular stagnation, short selling, Simon Kuznets, Skype, smart grid, sovereign wealth fund, Steve Jobs, TED Talk, The Chicago School, The Great Moderation, The Rise and Fall of American Growth, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, Tragedy of the Commons, universal basic income, Works Progress Administration, World Values Survey, zero-sum game

But this vision of progress as a paradise of continually rising consumption has come under serious scrutiny – not just from those who doubt its feasibility on a finite planet or question its desirability from a human perspective, but also from those wondering where on earth economic growth is going to come from in the wake of the worst financial crisis in almost a century. The fault lines in conventional economics have widened. What once seemed tiny fissures, barely visible to the Western eye, have now become deep chasms threatening to engulf entire nations. The collapse of Lehman Brothers on 15 September 2008 signalled more than the onset of a cyclical liquidity crisis. The pallid light of recession has illuminated crack after crack in the shiny surface of capitalism. It is now apparent that these cracks run right to the heart of the model. An economy whose stability rests on the relentless stimulation of consumer demand destroys not only the fragile resource base of this finite planet, but also the stability of its financial and political system.

At the very least, as this chapter argues, it is clear that the task of rebuilding an economy fit for the challenges of the twenty-first century has become more not less essential in the years since this book was first published. In search of villains In November 2008, two months after the collapse of Lehman Brothers, Queen Elizabeth II visited the London School of Economics and asked why exactly no one had seen the crisis coming. Feeling perhaps a little caught out by Her Majesty’s interest in the matter, the assembled economists went away and did what academics do best: they organised a seminar. A group of economic heavyweights deliberated long and hard before putting their names to a carefully written three-page letter they hoped would set the record straight.

It’s just that this doesn’t really answer Her Majesty’s question.5 How did these system risks arise? Why didn’t economists understand them? Why on earth would we leave it to ‘collective imagination’ to prevent financial disaster? What were the invisible causes of the financial crisis? A little hindsight is a valuable thing. The proximate cause of collapse of Lehman Brothers is usually taken to be subprime lending in the US housing market. Some have highlighted the unmanageability of the ‘credit default swaps’ used to parcel up ‘toxic debts’ and hide them from scrutiny. Others have pointed the finger of blame at greedy speculators and unscrupulous investors intent on making a killing at the expense of vulnerable institutions.


Firefighting by Ben S. Bernanke, Timothy F. Geithner, Henry M. Paulson, Jr.

Asian financial crisis, asset-backed security, bank run, Basel III, Bear Stearns, break the buck, Build a better mousetrap, business cycle, Carmen Reinhart, collapse of Lehman Brothers, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Doomsday Book, financial deregulation, financial engineering, financial innovation, Glass-Steagall Act, housing crisis, Hyman Minsky, income inequality, invisible hand, Kenneth Rogoff, labor-force participation, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, money market fund, moral hazard, mortgage debt, negative equity, Northern Rock, opioid epidemic / opioid crisis, pets.com, price stability, quantitative easing, regulatory arbitrage, Robert Shiller, Savings and loan crisis, savings glut, short selling, sovereign wealth fund, special drawing rights, tail risk, The Great Moderation, too big to fail

The collapse of Bear Stearns on March 14 would mark an inflection point in the crisis, exposing the system to its greatest peril and putting America’s emergency arsenal to its sternest test since the Depression. The Fed crossed a Rubicon by intervening to prevent the implosion of a nonbank. The Bear rescue did help avert the cascade of financial defaults and economic pain that we would later see after the collapse of Lehman Brothers, and it helped buy six months of relative calm. But it was not particularly comforting even at the time. We would not have been able to prevent a chaotic failure if JPMorgan Chase hadn’t been willing to buy Bear and guarantee the vast majority of its obligations. And we knew that Bear wasn’t the only overleveraged and interconnected nonbank at risk of a run.

STRATEGY As losses worsened early in the crisis, U.S. policymakers urged financial institutions to raise private capital. Private capital raised between Jan. 1, 2007, and Oct. 13, 2008, for the nine banks receiving initial government investments Source: Goldman Sachs U.S. STRATEGY Then, as panic followed the collapse of Lehman Brothers, Treasury made large capital investments in the biggest banks using new authority from Congress . . . Government and other capital raised between Oct. 14, 2008, and May 6, 2009, the day before stress test results were released Source: Goldman Sachs *Includes capital injections made under the Capital Purchase Program (CPP).


pages: 475 words: 155,554

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

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

The FSA required that Kaupthing Singer & Friedlander (Kaupthing’s UK branch) hold 90–95% of the value of deposits. In his book Frozen Assets, Armand Thorvaldsson, the CEO of Kaupthing’s London arm, reveals one remarkable rescue effort. Kaupthing presented the UK FSA with a plan to move its headquarters from Reykjavik to London. Even in the aftermath of the collapse of Lehman Brothers, Kaupthing’s deposits increased from £75–100 million per week to £150 million per week. There were more depositors, but volumes were below the £35,000 limit for deposit insurance. It was after the nationalisation of Iceland’s troubled third biggest bank Glitnir that the bank run on Iceland started.

There were all sorts of different views within the tripartite committee representing the Treasury, the Bank of England and the FSA. Britain going it alone on recapitalisation had risks, and so the various UK authorities were keen on a concerted international plan. However, just after the collapse of Lehman Brothers, the US Treasury secretary, Hank Paulson, announced TARP (Troubled Asset Relief Program) – an entirely different type of rescue plan involving the purchase of toxic assets, rather than bolstering up the banks with new capital. Britain paused its bank recapitalisation plans. In August 2008 two senior government figures communicated to the bosses of Lloyds TSB and HBoS that ‘If you want to ask us a question then you should ask.’

The fear was that an HBoS collapse would have hit RBS, then Barclays, then the domino effect would have been impossible to stop. The question HBoS and Lloyds did ask was whether competition law could be waived to enable a merger. The Treasury was split, as was most of the tripartite committee, and there was a dither. It took the collapse of Lehman Brothers to convince the doubters. At this point, many in government were convinced that having seen HBoS’s rotten books, Lloyds would drop its bid. It did not. ‘Taxpayers got a great deal. It would have cost a lot more to separately bail out HBoS,’ reflects a former minister. Nonetheless, separate plans to do just that were prepared in case Lloyds pulled out of the HBoS deal.


pages: 330 words: 59,335

The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success by William Thorndike

Albert Einstein, AOL-Time Warner, Atul Gawande, Berlin Wall, book value, Checklist Manifesto, choice architecture, Claude Shannon: information theory, collapse of Lehman Brothers, compound rate of return, corporate governance, discounted cash flows, diversified portfolio, Donald Trump, Fall of the Berlin Wall, Gordon Gekko, Henry Singleton, impact investing, intangible asset, Isaac Newton, junk bonds, Louis Pasteur, low interest rates, Mark Zuckerberg, NetJets, Norman Mailer, oil shock, pattern recognition, Ralph Waldo Emerson, Richard Feynman, shared worldview, shareholder value, six sigma, Steve Jobs, stock buybacks, Teledyne, Thomas Kuhn: the structure of scientific revolutions, value engineering, vertical integration

He travels by corporate jet and spends much of his time touring operations, meeting with Wall Street analysts, and attending conferences. The adjective rock star is often used to describe these fast-moving executives who are frequently recruited into their positions after well-publicized searches and usually come from top executive positions at well-known companies. Since the collapse of Lehman Brothers in September 2008, this breed of high-profile chief executive has been understandably vilified. They are commonly viewed as being greedy (possibly fraudulent) and heartless as they fly around in corporate planes, laying off workers, and making large deals that often destroy value for stockholders.

—Rudyard Kipling, “If” As the Nobel Prize–winning chemist Louis Pasteur once observed, “Chance favors . . . the prepared mind,” and speaking of prepared minds, let’s conclude by looking at how the two remaining active outsider CEOs, Warren Buffett and John Malone, navigated the financial meltdown that followed the September 2008 collapse of Lehman Brothers. As you would expect, both pursued dramatically different courses from their peers’. At a time when virtually all of corporate America was sitting on the sidelines, shepherding cash, and nursing ailing balance sheets, these two lions in winter were actively on the prowl. Buffett, after a long period of relative inactivity stretching back to the immediate aftermath of 9/11, has had one of the most active periods of his long career.


pages: 376 words: 109,092

Paper Promises by Philip Coggan

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

Banks also are the medium through which most monetary exchanges are made; cheques, debit-card and credit-card payments are all processed through the banking system and cash payments are usually withdrawn from a bank. The reason why the authorities panicked so much in the autumn of 2008 after the collapse of Lehman Brothers was that they feared the banking system was freezing up. Banks seemed unable to raise funds in the money markets (where companies and pension funds store their cash and billions are lent and borrowed on a short-term basis). Without such vital funds, banks might have become unable to perform their role as a medium of exchange; what if the cashpoint machines stopped working or businesses could no longer pay their employees?

In every respect, he proved to be correct. Eventually, however, Galbraith warned that the process would have to come to an end. And what would happen then, he wondered, given that ‘an interruption in the increase in debt means an actual reduction in demand for goods’. The debt crisis provides some clues. After the collapse of Lehman Brothers, credit-card companies started to restrict the amount of credit they offered and consumers started to use their cards less often. The total amount of US credit-card debt fell in every month for the next two years and, by November 2010, was 15 per cent below its peak. ‘Although our economy has experienced other long episodes in which revolving credit growth has slowed, we have never seen such a prolonged period of outright decline,’ said Elizabeth Duke of the Federal Reserve Bank of Philadelphia.7 In part, this was because the default rate on credit cards rose from 4 per cent in 2007 to more than 9 per cent in 2009.

The rescue of the banks caused a great degree of cynicism, especially among those who remembered the arguments advanced back in the 1980s that ‘lame duck’ industries such as mining and steel should not be rescued, and who noticed the change of tune when the powerful banking sector was in trouble. Issues of fiscal probity also seemed to be forgotten. As Joseph Stiglitz, the Nobel prize-winning economist, remarked: ‘When the banks said they needed hundreds of billions of dollars, all worries about the size of the deficit were shunted aside.’1 Stiglitz even sees the collapse of Lehman Brothers as a moment to rival the fall of the Berlin Wall;2 in this case, it was the free market capitalist model that was undermined. To critics like Stiglitz, the US could no longer claim that its financial system was the best allocator of capital. The rival Chinese approach, with governments controlling the banks and restricting the flow of international capital, looked much more appealing to developing countries.


pages: 357 words: 107,984

Trillion Dollar Triage: How Jay Powell and the Fed Battled a President and a Pandemic---And Prevented Economic Disaster by Nick Timiraos

"World Economic Forum" Davos, Alan Greenspan, asset-backed security, banking crisis, Bear Stearns, Bernie Sanders, bitcoin, Black Monday: stock market crash in 1987, Bonfire of the Vanities, break the buck, central bank independence, collapse of Lehman Brothers, collective bargaining, coronavirus, corporate raider, COVID-19, credit crunch, cryptocurrency, Donald Trump, fear index, financial innovation, financial intermediation, full employment, George Akerlof, George Floyd, global pandemic, global supply chain, Greta Thunberg, implied volatility, income inequality, inflation targeting, inverted yield curve, junk bonds, lockdown, Long Term Capital Management, low interest rates, managed futures, margin call, meme stock, money market fund, moral hazard, non-fungible token, oil shock, Phillips curve, price stability, pushing on a string, quantitative easing, Rishi Sunak, risk tolerance, rolodex, Ronald Reagan, Savings and loan crisis, secular stagnation, Skype, social distancing, subprime mortgage crisis, Tesla Model S, too big to fail, unorthodox policies, Y2K, yield curve

Jay Powell watched closely, and he would later borrow extensively from Bernanke’s playbook. Chapter Three “WE WOULD TREAT HIM PRETTY UGLY” The problems boiled over in 2007, when Ben Bernanke had been slow to recognize how the subprime mortgage crisis had stretched its tentacles through the entire economy. But after the collapse of Lehman Brothers in September 2008 plunged the financial system into its worst crisis since the Great Depression, Bernanke moved quickly and creatively to prevent a rerun of 1929. The Fed deployed scarcely used emergency-lending authorities—first to rescue the investment bank Bear Stearns, and later the insurance giant American International Group—to stem a financial panic.

Bernanke’s initial response to the economic turmoil was a standard monetary tool: reducing the federal-funds rate. The Fed moved interest rates down by purchasing short-term Treasury bills with money it created out of thin air to expand the money supply. This standard monetary response would not be enough. The financial panic that followed the collapse of Lehman Brothers in September 2008 ultimately prompted Bernanke to slash the rate to effectively zero by the end of the year—the first time it had ever been so low. With the interest-rate tool maxed out (officials weren’t willing to push the fed-funds rate below zero) but the economy still hobbled by the wreckage from the housing bust, Bernanke moved to deliver more stimulus with a tool dubbed quantitative easing, or QE.

Technically, the roughly $90 billion in the account was supposed to be used for Treasury intervention in currency markets. Congress and the Roosevelt administration had created it in 1934 to stabilize the value of the dollar after the US went off the gold standard. But at the height of the financial panic after the collapse of Lehman Brothers in 2008, the Treasury Department announced it would temporarily guarantee more than $3 trillion in deposits in certain money-market mutual funds using $50 billion from the ESF. The Treasury acted without congressional approval, and Congress later formalized the guarantee and reimbursed the ESF.


pages: 180 words: 61,340

Boomerang: Travels in the New Third World by Michael Lewis

Apollo 11, Bear Stearns, Berlin Wall, Bernie Madoff, Carmen Reinhart, Celtic Tiger, collapse of Lehman Brothers, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, fiat currency, financial engineering, financial thriller, full employment, German hyperinflation, government statistician, Irish property bubble, junk bonds, Kenneth Rogoff, Neil Armstrong, offshore financial centre, pension reform, Ponzi scheme, proprietary trading, Ronald Reagan, Ronald Reagan: Tear down this wall, South Sea Bubble, subprime mortgage crisis, the new new thing, Tragedy of the Commons, tulip mania, women in the workforce

(Laxness won the 1955 Nobel Prize in Literature, the greatest global honor for an Icelander until the 1980s, when two Icelandic women, in rapid succession, captured Miss World titles.) THE WORLD IS now pocked with cities that feel as if they are perched on top of bombs. The bombs have yet to explode, but the fuses have been lit, and there’s nothing anyone can do to extinguish them. Walking around Manhattan just before the collapse of Lehman Brothers, you saw empty stores, empty streets, and, even when it was raining, empty taxis; the people had fled before the bomb exploded. Reykjavík had the same feel of incipient doom, but the fuse burned strangely. The government mandates three months’ severance pay, and so the many laid-off bankers were paid until early February, when the government promptly fell.

The Irish bank regulator, for his part, looked as if he had been dragged from a hole into which he badly wanted to return. He wore an insecure little mustache, stammered rote answers to questions he had not been asked, and ignored the ones he had been asked. A banking system is an act of faith: it survives only for as long as people believe it will. Two weeks earlier the collapse of Lehman Brothers had cast doubt on banks everywhere. Ireland’s banks had not been managed to withstand doubt; they had been managed to exploit blind faith. Now the Irish people finally caught a glimpse of the guy meant to be safeguarding them: the crazy uncle had been sprung from the family cellar. Here he was, on their televisions, insisting that the Irish banks’ problems had nothing whatsoever to do with the loans they’d made . . . when anyone with eyes could see, in the vacant skyscrapers and empty housing estates around them, evidence of bank loans that were not merely bad but insane.


pages: 575 words: 171,599

The Billionaire's Apprentice: The Rise of the Indian-American Elite and the Fall of the Galleon Hedge Fund by Anita Raghavan

"World Economic Forum" Davos, airport security, Asian financial crisis, asset allocation, Bear Stearns, Bernie Madoff, Boeing 747, British Empire, business intelligence, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, delayed gratification, estate planning, Etonian, glass ceiling, high net worth, junk bonds, kremlinology, Larry Ellison, locking in a profit, Long Term Capital Management, Marc Andreessen, mass immigration, McMansion, medical residency, Menlo Park, new economy, old-boy network, Ponzi scheme, risk tolerance, rolodex, Ronald Reagan, short selling, Silicon Valley, sovereign wealth fund, stem cell, technology bubble, too big to fail

The deal eventually was announced on October 7, but it wasn’t the home run either Rajaratnam or Michaelson were seeking. Galleon lost money on its investment in AMD. Technology stocks, like much of the market, got clobbered in the wake of Lehman Brothers’ move to file for bankruptcy on September 15. * * * Geetanjali Gupta vividly remembers the weekend after the collapse of Lehman Brothers. She was coming home from Boston to celebrate her thirtieth birthday. The Guptas were actually preparing to celebrate two birthdays that weekend. Her mother’s was on September 21, a day after hers. On Saturday, September 20, Geetanjali was in the library, lined on two walls with books and overlooking a swimming pool, at her parents’ home in Westport talking to her father.

Geetanjali is an investment analyst at Harvard Management Company, which oversees the university’s endowment, a potential investor in the fund. Gupta told his daughter he was angry because he had reason to believe that Rajaratnam had pulled money out of the fund without telling him. If he had, he wanted to know why he was not allowed to withdraw his money too. And after the collapse of Lehman Brothers, Gupta had come to learn that the $10 million he had invested in the Voyager fund, a vehicle that was managed by Rajaratnam, had evaporated to nothing. He felt that it was Rajaratnam’s responsibility to make him whole; after all, Gupta was only a passive investor in the fund. The unflappable Gupta was so angry that he later contemplated suing Rajaratnam.

Chapter Thirty “Buy Goldman Sachs, Buy Goldman Sachs” It was around 10 a.m. on September 23, 2008, and Byron David Trott, a tall, silver-haired banker, sat in his New York office on the seventeenth floor of Goldman Sachs’s headquarters building, preparing for a call. As he glanced at the television screen hanging in his office, he saw his former mentor and boss, Hank Paulson, giving testimony before a congressional committee. Ever since the collapse of Lehman Brothers a week earlier, Paulson, who had become Treasury secretary in 2006, was ubiquitous, hitting the airwaves and Capitol Hill in a bid to impress upon Americans the magnitude of the financial crisis facing the country. Trott turned away from the television and gave some thought to the call he was about to place.


pages: 257 words: 71,686

Swimming With Sharks: My Journey into the World of the Bankers by Joris Luyendijk

activist fund / activist shareholder / activist investor, bank run, barriers to entry, Bonfire of the Vanities, bonus culture, collapse of Lehman Brothers, collective bargaining, corporate raider, credit crunch, Credit Default Swap, Emanuel Derman, financial deregulation, financial independence, Flash crash, glass ceiling, Gordon Gekko, high net worth, hiring and firing, information asymmetry, inventory management, job-hopping, Large Hadron Collider, light touch regulation, London Whale, Money creation, Nick Leeson, offshore financial centre, regulatory arbitrage, Satyajit Das, selection bias, shareholder value, sovereign wealth fund, the payments system, too big to fail

In his mid thirties, slightly restless but quick to laugh, he is one of the most good-natured people I have met in two years of researching. We met on a grey day in January for lunch. After fighting the urge to order a glass of cider he settled on alcohol-free ginger beer and a pork pie. ‘Those were scary times’, he said about the days, weeks and months after the collapse of Lehman Brothers in 2008. ‘You think: we are in a new paradigm. Nothing works the way it used to. My department’s potential losses were hundreds of millions of pounds and several billions across the whole of the bank. We began to realise: this could sink the bank. If the market had crashed further we would have gone down.’

Going this far back with someone meant we could skip the small talk and have a truly honest conversation with trust on both sides. This was why I had been so keen to see Peter. I felt almost reluctant to press for the truth. Were the interviewees’ stories about the hours and days following the collapse of Lehman Brothers really true? The hoarding of food, cash and gold, the preparations for the evacuation of the children to the countryside, the alleged stockpiling of arms … If there was anyone who could give me a convincing answer it was Peter. He would set me straight if these anecdotes were crazy exaggerations.


pages: 741 words: 179,454

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

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

—Yves Smith, Founder of www.nakedcapitalism.com and Author of ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism “Most books written about the global financial crisis have been written by those who only became wise after the event. Das is not one of them. Long before the collapse of Lehman Brothers, he warned about the flaws in modern finance. Extreme Money is his account of what went wrong. Read it!” —Edward Chancellor, Member of GMO’s Asset Allocation Team and Author of Devil Take the Hindmost: A History of Financial Speculation “A rich analysis told with color and verve.” —Philip Augar, Author of Reckless: The Rise and Fall of the City Praise for Traders, Guns & Money “...a distinctly timely book...tries to reach out to the mathematically challenged to explain how the world of derivatives “really” works...explaining not only the high-minded theory behind the business and its various products but the sometimes sordid reality of the industry, illustrated by lively anecdotes...very up to date, covering some of the new areas of finance, such as credit derivatives...also gives an excellent sense of the all-important cultural aspect of the business, detailing the complexities of trading-floor politics, the dangerously skewed incentive systems, the obsession with money and the cultural chasm that separates derivative traders from many of their clients—and from many other parts of the bank.”

Financial institutions moved assets to QSPEs (qualified special purpose entities), recording a sale and the amount received as revenue. Securitization and derivatives shifted assets off-balance sheet, but liquidity puts and standby funding arrangements meant that the risk remained with the bank. Following the collapse of Lehman Brothers, a court-appointed examiner found that the investment bank used repos (repurchase agreements) to shift assets off-balance sheet.40 In a repo, the borrower sells an asset, simultaneously agreeing to repurchase it at an agreed price plus interest for funds advanced at a future date. Normally, a repo is treated as a secured loan.

Blaming the messenger of bad news, short selling was banned or restricted in many countries. The debate was informed by Mark Twain’s observation that: “I am not one of those who in expressing opinions confine themselves to facts.” In South Korea an online blogger, using the pseudonym Minerva, the Roman goddess of wisdom, predicted the imminent collapse of Lehman Brothers and made dire forecasts about the South Korean currency (the won), his site registering 40 million hits. When the won fell 26 percent, an unimpressed Korean government arrested the celebrity blogger, known to netizens as “the Internet Economic President.” Newtonian Economics In 2003, Robert Lucas, a Nobel-Prize-winning economist, declared: “macroeconomics...has succeeded.


pages: 270 words: 73,485

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

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

It had exposed itself in the securitized mortgage market and as the prices fell, its exposure increased and the Fed could not rescue it. It had assets of $400 billion but a debt of $33 per each dollar of its capital. Bear Stearns had already fired its CEO in January. It had to be sold at the low price of $10 per share compared to its recent peak of $133 to JPMorgan Chase, another US bank. This was followed by the collapse of Lehman Brothers in September of that same year: the fourth largest investment firm in the US went bankrupt after the US government refused to bail it out. Soon the collapse was general and AIG, an insurance firm, had to be rescued. US taxpayers had to put up $800 billion to launch the Troubled Assets Recovery Program (TARP).

Since some of the rentiers may be pension funds, there is an intertemporal aspect to the necessity for the borrower to maintain a good credit rating. The Crisis in the Eurozone This has been shown in the eurozone crisis, which began in 2010 – the second leg of the crisis that had started with the collapse of Lehman Brothers. The European search for stability in exchange rates had climaxed in the decision to have a single currency, the euro, to which the first countries signed up in 1999.10 The European Central Bank (ECB) was set up in the image of the German Bundesbank. It has a mandate to keep inflation low, using an explicitly monetarist strategy.


pages: 241 words: 81,805

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

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

Much of the Swiss franc carry trade at that time was accounted for not by hedge funds or financial speculators but by individuals and families in Eastern Europe who had taken out mortgages in Swiss francs because it was much cheaper than borrowing in their own currencies. At the end of 2006, Swiss franc borrowing by Hungarian residents from their domestic banks totaled about US$20 billion—this in what was a very small economy. The collapse of the total currency carry trade began in earnest in July 2008, two months before the collapse of Lehman brothers. This is fairly clear from the charts shown in this chapter, such as Figure 2.2. But it is even clearer from simply looking at the key exchange rates themselves. Figure 2.1 30 THE RISE OF CARRY suggests that the Australian dollar was probably the biggest carry trade recipient currency prior to the 2007–2009 global financial crisis.

If a Ponzi scheme is to recover from a run, then it will become even larger; the restoration of confidence following the successful test of confidence suggests this, as also does the requirement for the scheme to continue to grow larger because any outflows need to be financed with new inflows. For example, imagine a hypothetical—admittedly completely unrealistic—alternative scenario for the notorious, and huge, Ponzi scheme run by Bernard (“Bernie”) Madoff. Madoff’s giant Ponzi scheme collapsed in December 2008, during the global carry crash associated with the collapse of Lehman Brothers. At the time of the Madoff scheme collapse, Madoff’s clients had an illusory US$65 billion standing to their credit in the scheme. Madoff’s scheme was a classic Ponzi scheme, operated simply by marking up client accounts to reflect fabricated good and consistent returns, while financing any client withdrawals from the scheme with new client inflows.


The Trade Lifecycle: Behind the Scenes of the Trading Process (The Wiley Finance Series) by Robert P. Baker

asset-backed security, bank run, banking crisis, Basel III, Black-Scholes formula, book value, Brownian motion, business continuity plan, business logic, business process, collapse of Lehman Brothers, corporate governance, credit crunch, Credit Default Swap, diversification, financial engineering, fixed income, functional programming, global macro, hiring and firing, implied volatility, interest rate derivative, interest rate swap, locking in a profit, London Interbank Offered Rate, low interest rates, margin call, market clearing, millennium bug, place-making, prediction markets, proprietary trading, short selling, statistical model, stochastic process, the market place, the payments system, time value of money, too big to fail, transaction costs, value at risk, Wiener process, yield curve, zero-coupon bond

The OIS seller offers the purchaser a fixed leg reflecting his view of how overnight interest rates will average out over a given period of time. By looking at the prices of OIS trades, it is easier to see the likely direction of interest rates (and hence the time value of money) unencumbered by credit effects. One of the problems caused by the collapse of Lehman Brothers and the resulting credit crunch was that even major banks were reluctant to lend to each other. This meant that LIBOR (interbank trading) was trading at 354 basis points (3.54%) above the equivalent OIS. Normally the difference is between 10 and 15 basis points (0.1 to 0.15%) Tradeflow issues The asset underpinning an interest rate trade is simply the currency.

Counterparty risk control has to balance the legitimate concern of traders to be able to trade as widely as possible, while seeking to protect the company from People 191 unnecessary losses. The appetite for accepting counterparty risk depends on the risk profile of the company’s management and the prevailing financial climate. After the collapse of Lehman Brothers, a state approaching panic swept through the financial services industry and credit risk limits were slashed. This precipitated the credit crunch – nobody wanting to extend credit to anyone else. Finance As in any company, the books and records of the trading activities must be accurately produced and reported.

Hedge funds typically make use of prime brokers to execute trades on their behalf. The prime broker takes collateral from the hedge fund to secure the transactions and then rehypothicates this collateral when it does its own trades. Although this used to Regulation 213 be common practice, hedge funds became much more wary of it after the collapse of Lehman Brothers and the ensuing credit crunch. The legal status of rehypothication varies between jurisdictions. For example in the United States, the SEC puts a limit of 140% of the loan amount to a client under rule 15c3-3, but in continental Europe there is no restriction. Portfolio-based CVA Regulatory authorities tend to take CVA on a portfolio basis rather than on an individual trade.


pages: 261 words: 86,905

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

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

The thing that’s interesting about his nickname is that “whale” is a term from gambling: a whale is a punter who gets free hospitality from casinos because he (usually a he) bets such huge sums. According to the amazing Senate subcommittee report into the affair, by the time the bets went wrong, Iksil and his colleagues were out on the limb for $157 billion53—this nearly four years after the collapse of Lehman Brothers, when the lessons about excessive risk taking were supposed to have been learned. long and short To be long on something is to think that it’s going to go up in value, and to have invested accordingly. If I’m long on Apple, it means I own the shares and am holding them expecting them to rise in value.

If you had gone the full monty and used your $100,000 to buy $1,000,000 of wheat on margin, you’d have just used the power of margin to lose all your money, and another $50,000 on top. In finance, a margin call can also be triggered by doubts about an institution’s creditworthiness. In the collapse of Lehman Brothers, one of the short-term triggers was other banks deciding Lehman needed to put up more collateral—in effect to raise more money against the possibility of a margin call. margin, high and low Margin in this sense is the amount of profit a business owner makes by selling something. An Italian restaurant owner once told me that more than anything else in the world, he loves pasta.


pages: 268 words: 81,811

Flash Crash: A Trading Savant, a Global Manhunt, and the Most Mysterious Market Crash in History by Liam Vaughan

algorithmic trading, backtesting, bank run, barriers to entry, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, Bob Geldof, centre right, collapse of Lehman Brothers, data science, Donald Trump, Elliott wave, eurozone crisis, family office, financial engineering, Flash crash, Great Grain Robbery, high net worth, High speed trading, information asymmetry, Jeff Bezos, Kickstarter, land bank, margin call, market design, market microstructure, Market Wizards by Jack D. Schwager, Navinder Sarao, Nick Leeson, offshore financial centre, pattern recognition, Ponzi scheme, proprietary trading, Ralph Nelson Elliott, Reminiscences of a Stock Operator, Ronald Reagan, selling pickaxes during a gold rush, sovereign wealth fund, spectrum auction, Stephen Hawking, the market place, Timothy McVeigh, Tobin tax, tulip mania, yield curve, zero-sum game

After a few weeks, he made his second career-defining trade and, like the last one, it had less to do with scalping than with sheer conviction and intuition. On Thursday, November 20, 2008, the S&P 500 closed at 752 points, its lowest level in more than a decade. Two months had passed since the collapse of Lehman Brothers and, with the financial system still teetering, reports suggested the U.S. government and the Federal Reserve might have to adopt more drastic measures. Arriving in the office on Friday morning, Nav started loading up on S&P 500 futures, reasoning that markets had only one way to go. Sure enough, after a shaky few hours, U.S. stock prices started to climb.

The Eurozone crisis continued to roil markets around the world, and by 2011 Nav’s system, an amalgamation of a modified TT algo and his own rapid-fire scalping, was working better than ever. His best day, by some margin, came on August 4, when apocalyptic headlines from Italy and Spain collided with weak U.S. employment figures and speculation about a forthcoming downgrade of U.S. government debt, driving the S&P 500 down 4.8 percent, its biggest drop since the collapse of Lehman Brothers. Nav rode the e-mini all the way down. By the time the market closed, he’d made $4.1 million. With so much money piling in, Nav’s biggest problem was knowing what to do with it all. He liked fast cars and expensive watches and trips to fancy night clubs—in theory—but nowhere near as much as he liked the feeling of accumulating wealth; and he found it hard not to view any purchases, no matter how small, as eating into his trading capital.


pages: 303 words: 84,023

Heads I Win, Tails I Win by Spencer Jakab

Alan Greenspan, Asian financial crisis, asset allocation, backtesting, Bear Stearns, behavioural economics, Black Monday: stock market crash in 1987, book value, business cycle, buy and hold, collapse of Lehman Brothers, correlation coefficient, crowdsourcing, Daniel Kahneman / Amos Tversky, diversification, dividend-yielding stocks, dogs of the Dow, Elliott wave, equity risk premium, estate planning, Eugene Fama: efficient market hypothesis, eurozone crisis, Everybody Ought to Be Rich, fear index, fixed income, geopolitical risk, government statistician, index fund, Isaac Newton, John Bogle, John Meriwether, Long Term Capital Management, low interest rates, Market Wizards by Jack D. Schwager, Mexican peso crisis / tequila crisis, money market fund, Myron Scholes, PalmPilot, passive investing, Paul Samuelson, pets.com, price anchoring, proprietary trading, Ralph Nelson Elliott, random walk, Reminiscences of a Stock Operator, risk tolerance, risk-adjusted returns, Robert Shiller, robo advisor, Savings and loan crisis, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, statistical model, Steve Jobs, subprime mortgage crisis, survivorship bias, technology bubble, transaction costs, two and twenty, VA Linux, Vanguard fund, zero-coupon bond, zero-sum game

That fact tells you a great deal about why the biggest reason so many people live in Lake Moneybegone is zigging when they should zag. They occurred mostly not when things were great but when they were terrifying. Of the ten best days, seven were in the thick of bear markets, with some of the very best in the weeks after the collapse of Lehman Brothers and the emergency bailout of other major financial institutions. Two were in the first few weeks of the bull market that began in 2009—a time when few people believed and no one knew for sure that the worst stock selloff in seventy years had ended. I’d like to be a fly on the wall in a retail brokerage on a day that the bottom falls out of the market.

Not surprisingly, Luby estimates that the two highest VIX readings ever would have been immediately after 1987’s Black Monday, and Black Tuesday in 1929 when he calculates it reached about 112 and 111, respectively. The third, and also the highest spike since the VIX’s invention, was a reading just below 90 after the collapse of Lehman Brothers in 2008. Other high points include the 9/11 terrorist attacks, Germany’s invasion of Poland (when Templeton was backing up the truck and buying stocks), and the collapse of hedge fund Long Term Capital Management in 1998. As you might have guessed from my reference to Templeton, buying when the fear index is highest can be very profitable.


pages: 88 words: 22,980

One Way Forward: The Outsider's Guide to Fixing the Republic by Lawrence Lessig

collapse of Lehman Brothers, crony capitalism, crowdsourcing, en.wikipedia.org, Filter Bubble, jimmy wales, Occupy movement, Ronald Reagan, Yochai Benkler

Conclusion The Promise In 2008, Iceland, like much of the rest of the world, suffered a major economic collapse after its recently privatized banks suffered a catastrophic default. The legalized gambling that the world’s banking system had become left Iceland’s three major banks holding nine times the country’s GDP in debt. When the collapse of Lehman Brothers ended their ability to refinance that debt, the banks entered bankruptcy—the largest collapse, relative to the size of a nation’s economy, in the history of the world. When a coalition government tried to bail out the banks—with a package that would have required each Icelandic citizen to pay about one hundred euros a month for fifteen years at 5.5 percent interest—the citizens revolted.


pages: 554 words: 158,687

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

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

This policy amounted to a public subsidy to banks since it reduced the cost of bank liabilities, and hence raised the profitability of banking, particularly as banks simultaneously acquired public sector debt that carried a low risk of default. In addition to lowering interest rates, and again following the practice of the BoJ in the 1990s and 2000s, central banks supplied public liquidity directly to commercial banks. Both the US and UK central banks adopted quantitative easing after the collapse of Lehman Brothers, and further deployed this policy in subsequent years. Quantitative easing implies the systematic over-expansion of reserves held by banks with the central bank, as was shown in Chapter 4. Unlike the BoJ, however, the Federal Reserve and the Bank of England did not adopt quantitative targets for the reserves of commercial banks.

The previously noted discrepancy from Bagehot’s historic prescription has once again emerged: liquidity has been provided to banks on poor collateral and at a very low rate of interest. ECB liquidity intervention has in effect meant that private banks have been provided with a substantial subsidy, similarly to the liquidity interventions of the Federal Reserve. Large advances took place in August 2007 as the financial crisis first burst out; in 2008 following the collapse of Lehman Brothers; and at the end of 2011 as the sovereign debt crisis emerged in full earnest.54 The fundamental difference with the earlier phase of the crisis, however, was that at the end of 2009 liquidity shortages also affected peripheral states, which began to face increasing difficulties in issuing bonds in financial markets worried about the risk of sovereign default.

Controlling finance as a system would acquire a different complexion, if public ownership and control over banks were re-introduced systematically. Note that public ownership of banks and other major financial institutions is not an unusual occurrence in financialized capitalism. After the collapse of Lehman Brothers, the extension of public ownership over stricken banks was publicly discussed even in the US.40 Capital injections in the period that followed, in both the US and the UK, effectively established a strong public ownership stake in banking. However, public ownership has typically been treated as a temporary counter-crisis measure aimed at restoring the solvency of banks with the aim of returning them to private ownership.


pages: 324 words: 90,253

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

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

Three years later, bank rate remained at this – by historic standards – absurdly low level. By that stage, the UK government's long-term borrowing costs had dropped to well below 2 per cent, the lowest since records began in the early 1700s. The UK's experience was hardly unique. At the end of 2008, shortly after the collapse of Lehman Brothers, US Fed funds – the equivalent of UK bank rate – dropped more or less to zero. And, as with the UK, US government borrowing costs plummeted. The same was happening in parts of continental Europe, notably Germany. Initially, central bankers hoped remarkably low borrowing costs would kick-start economic growth.

The modern-day equivalent would be for the administration to take away the Fed's independence and to insist on a radical redrawing of the rules governing monetary and fiscal policy. Yet, in the absence of earlier deflation, the justification for doing so is not immediately obvious. Whereas, in the 1930s, the value of national income dropped 50 per cent from peak to trough, the value of national income at the end of 2012, four years after the collapse of Lehman Brothers, was already almost 10 per cent higher than it had been at the previous peak. There is simply no comparison. Outside the eurozone periphery, there is no deflation, no depression and no persistent economic collapse. Those who claim otherwise are confusing the disaster of depression with the melancholy of stagnation, two completely different concepts.


pages: 135 words: 26,407

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

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

“Insights from the World Bank's 2017 Global Findex database ....” 20 Apr. 2018, https://www.devex.com/news/insights-from-the-world-bank-s-2017-global-findex-database-92589. 5. “Washington Mutual (WaMu): How It Went Bankrupt.” https://www.thebalance.com/washington-mutual-how-wamu-went-bankrupt-3305620. 6. “The Collapse of Lehman Brothers: A Case ....” 26 Nov. 2019, https://www.investopedia.com/articles/economics/09/lehman-brothers-collapse.asp. 7. “Failed Bank List – FDIC.” https://www.fdic.gov/bank/individual/failed/banklist.html. 8. "financial crisis - GovInfo." https://www.govinfo.gov/content/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf. . 9.


pages: 289 words: 95,046

Chaos Kings: How Wall Street Traders Make Billions in the New Age of Crisis by Scott Patterson

"World Economic Forum" Davos, 2021 United States Capitol attack, 4chan, Alan Greenspan, Albert Einstein, asset allocation, backtesting, Bear Stearns, beat the dealer, behavioural economics, Benoit Mandelbrot, Bernie Madoff, Bernie Sanders, bitcoin, Bitcoin "FTX", Black Lives Matter, Black Monday: stock market crash in 1987, Black Swan, Black Swan Protection Protocol, Black-Scholes formula, blockchain, Bob Litterman, Boris Johnson, Brownian motion, butterfly effect, carbon footprint, carbon tax, Carl Icahn, centre right, clean tech, clean water, collapse of Lehman Brothers, Colonization of Mars, commodity super cycle, complexity theory, contact tracing, coronavirus, correlation does not imply causation, COVID-19, Credit Default Swap, cryptocurrency, Daniel Kahneman / Amos Tversky, decarbonisation, disinformation, diversification, Donald Trump, Doomsday Clock, Edward Lloyd's coffeehouse, effective altruism, Elliott wave, Elon Musk, energy transition, Eugene Fama: efficient market hypothesis, Extinction Rebellion, fear index, financial engineering, fixed income, Flash crash, Gail Bradbrook, George Floyd, global pandemic, global supply chain, Gordon Gekko, Greenspan put, Greta Thunberg, hindsight bias, index fund, interest rate derivative, Intergovernmental Panel on Climate Change (IPCC), Jeff Bezos, Jeffrey Epstein, Joan Didion, John von Neumann, junk bonds, Just-in-time delivery, lockdown, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, Mark Spitznagel, Mark Zuckerberg, market fundamentalism, mass immigration, megacity, Mikhail Gorbachev, Mohammed Bouazizi, money market fund, moral hazard, Murray Gell-Mann, Nick Bostrom, off-the-grid, panic early, Pershing Square Capital Management, Peter Singer: altruism, Ponzi scheme, power law, precautionary principle, prediction markets, proprietary trading, public intellectual, QAnon, quantitative easing, quantitative hedge fund, quantitative trading / quantitative finance, Ralph Nader, Ralph Nelson Elliott, random walk, Renaissance Technologies, rewilding, Richard Thaler, risk/return, road to serfdom, Ronald Reagan, Ronald Reagan: Tear down this wall, Rory Sutherland, Rupert Read, Sam Bankman-Fried, Silicon Valley, six sigma, smart contracts, social distancing, sovereign wealth fund, statistical arbitrage, statistical model, stem cell, Stephen Hawking, Steve Jobs, Steven Pinker, Stewart Brand, systematic trading, tail risk, technoutopianism, The Chicago School, The Great Moderation, the scientific method, too big to fail, transaction costs, University of East Anglia, value at risk, Vanguard fund, We are as Gods, Whole Earth Catalog

Sans tie as always, clad in brown slacks and a blue jacket, he seemed something akin to a dapper biblical prophet proclaiming doom as the foolhardy fat cats were routed from the temple. It was just one week after the stock market had crashed on Congress’s fateful bailout vote, a month after the collapse of Lehman Brothers. Doom was in the air. He made his apocalyptic pronouncements in a calm, steady voice, occasionally gesticulating toward the crowd with a sweep of his hand. Financial markets, and the world itself, were far more volatile than many believed, as giant institutions toppled like dominoes. His concern with Black Swans, he said, extended beyond financial markets to the scientific method itself.

On a Wednesday night at the forum, Taleb sat on a podium alongside Niall Ferguson, the British professor of history and bestselling author; Nouriel Roubini, known as Dr. Doom for having forecast the financial collapse; and behavioral finance Nobelist Danny Kahneman. The subject of their discussion: the fateful hours surrounding the collapse of Lehman Brothers and its role in the ensuing crisis. Most agreed that while Lehman had made things worse, the problems in the financial sector were far broader and systemic. Ferguson, looking ahead, said the world was entering a “global lost decade.” Things would be worst in the U.S., he added, leading to “the twilight of the American hegemony.”


pages: 121 words: 31,813

The Art of Execution: How the World's Best Investors Get It Wrong and Still Make Millions by Lee Freeman-Shor

Alan Greenspan, behavioural economics, Black Swan, buy and hold, Carl Icahn, cognitive bias, collapse of Lehman Brothers, credit crunch, Daniel Kahneman / Amos Tversky, diversified portfolio, family office, I think there is a world market for maybe five computers, index fund, Isaac Newton, Jeff Bezos, Long Term Capital Management, loss aversion, Market Wizards by Jack D. Schwager, Pershing Square Capital Management, Richard Thaler, Robert Shiller, rolodex, Skype, South Sea Bubble, Stanford marshmallow experiment, Steve Jobs, technology bubble, The Wisdom of Crowds, too big to fail, tulip mania, world market for maybe five computers, zero-sum game

Sadly, nowadays the Royal Bank of Scotland has become synonymous with the credit crunch because it needed to be bailed out by the government, a source of anger for many in the UK. It was deemed too big to fail. At the time of writing the government owns 82% of the shares outstanding, having been forced to recapitalise the bank in order to prevent a run on the banking system. An Assassin bought shares in the Royal Bank of Scotland on 30 May 2008, before the collapse of Lehman Brothers and the onset of the credit crunch, at £22.29. As the credit crisis broke, he actually moved quicker than his stop-loss, killing the investment on 3 October 2008 at £18.62, a loss of 16%. The stock then fell a further 82%. Had he not sold, he would have required his shares in the Royal Bank of Scotland to make a return of 667% just to break even, which equates to 25 years given average market returns.


pages: 93 words: 30,572

How to Stop Brexit (And Make Britain Great Again) by Nick Clegg

Berlin Wall, Boris Johnson, Brexit referendum, collapse of Lehman Brothers, Dominic Cummings, Donald Trump, eurozone crisis, Fall of the Berlin Wall, Francis Fukuyama: the end of history, Jeremy Corbyn, low interest rates, offshore financial centre, sceptred isle, Snapchat, Steve Bannon

The pound, for so long a symbol of pride for champions of Brexit, has suffered one of the largest devaluations in its history. Following steady losses in the months running up to the referendum, the pound saw the biggest one-day fall on record – worse than that caused by the shockwaves from the collapse of Lehman Brothers in 2008, and worse than ‘Black Wednesday’ on 16th September 1992, when the UK tumbled out of the European Exchange Rate Mechanism. A year after the vote, the pound is worth around 15 per cent less against the euro and the dollar. Compared with the summer of 2015, when the reality of the impending referendum set in and the decline in sterling began, it is around 20 per cent lower.32 Let’s be clear why that is: it’s the judgement of the currency markets that the UK’s growth potential is significantly less than it was before the referendum.


The Metropolitan Revolution: How Cities and Metros Are Fixing Our Broken Politics and Fragile Economy by Bruce Katz, Jennifer Bradley

"World Economic Forum" Davos, 3D printing, additive manufacturing, Affordable Care Act / Obamacare, benefit corporation, British Empire, business climate, carbon footprint, clean tech, clean water, collapse of Lehman Brothers, company town, congestion pricing, data science, deindustrialization, demographic transition, desegregation, Donald Shoup, double entry bookkeeping, edge city, Edward Glaeser, financial engineering, global supply chain, immigration reform, income inequality, industrial cluster, intermodal, Jane Jacobs, jitney, Kickstarter, knowledge economy, Lewis Mumford, lone genius, longitudinal study, Mark Zuckerberg, Masdar, megacity, megaproject, Menlo Park, Moneyball by Michael Lewis explains big data, Network effects, new economy, New Urbanism, Occupy movement, place-making, postindustrial economy, purchasing power parity, Quicken Loans, race to the bottom, Richard Florida, Shenzhen was a fishing village, Silicon Valley, smart cities, smart grid, sovereign wealth fund, tech worker, TechCrunch disrupt, TED Talk, the built environment, The Death and Life of Great American Cities, the market place, The Spirit Level, Tony Hsieh, too big to fail, trade route, transit-oriented development, urban planning, white flight, Yochai Benkler

Over the course of the year, global economic activity would shrink by half a percent—the worst downturn since 1945.1 By the end of the year, 7 million Americans had lost their jobs, and an additional 8.8 million were involuntarily working part-time. The unemployment rate had reached 10 percent nationwide. New York’s large financial sector made the city uniquely vulnerable to the fortunes of the industry where the crisis began. The collapse of Lehman Brothers was a watershed moment for New York City’s economy, as it was for the global financial sector. After it became clear that there would be no buyers or bailouts for Lehman Brothers in September of 2008, the city began to lose jobs rapidly from other financial firms and in other sectors across the economy.

How can we do things differently to get more out of our limited resources? How can we employ our existing community resources to create good jobs for New Yorkers? In early 2009 people all over the country were asking the same kinds of questions, both about their local economies and about the nation’s economy. While New York struggled with the collapse of Lehman Brothers and related shake-outs in other sectors, cities and metros in Nevada and Florida wondered how to move ahead from the loud and painful bursting of the real estate bubble that had inflated their economies to wondrous but unsustainable size. Communities in Ohio, Kentucky, and Michigan were suddenly mired in their own foreclosure crises, compounded by another deep slide in the auto industry as General Motors and Chrysler wobbled on the precipice of bankruptcy.


pages: 274 words: 93,758

Phishing for Phools: The Economics of Manipulation and Deception by George A. Akerlof, Robert J. Shiller, Stanley B Resor Professor Of Economics Robert J Shiller

Andrei Shleifer, asset-backed security, Bear Stearns, behavioural economics, Bernie Madoff, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carl Icahn, collapse of Lehman Brothers, compensation consultant, corporate raider, Credit Default Swap, Daniel Kahneman / Amos Tversky, dark matter, David Brooks, desegregation, en.wikipedia.org, endowment effect, equity premium, financial intermediation, financial thriller, fixed income, full employment, George Akerlof, greed is good, income per capita, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, junk bonds, Kenneth Arrow, Kenneth Rogoff, late fees, loss aversion, market bubble, Menlo Park, mental accounting, Michael Milken, Milgram experiment, money market fund, moral hazard, new economy, Pareto efficiency, Paul Samuelson, payday loans, Ponzi scheme, profit motive, publication bias, Ralph Nader, randomized controlled trial, Richard Thaler, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, short selling, Silicon Valley, stock buybacks, the new new thing, The Predators' Ball, the scientific method, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, theory of mind, Thorstein Veblen, too big to fail, transaction costs, Unsafe at Any Speed, Upton Sinclair, Vanguard fund, Vilfredo Pareto, wage slave

Cohan, Money and Power: How Goldman Sachs Came to Rule the World (New York: Doubleday, 2011); Greg Farrell, Crash of the Titans: Greed, Hubris, the Fall of Merrill Lynch, and the Near-Collapse of Bank of America (New York: Crown Business, 2010); Kate Kelly, Street Fighters: The Last 72 Hours of Bear Stearns, the Toughest Firm on Wall Street (New York: Penguin, 2009); Michael Lewis, Boomerang: Travels in the New Third World (New York: W. W. Norton, 2011) and The Big Short: Inside the Doomsday Machine (New York: W. W. Norton, 2010), on financial speculation; Lawrence G. McDonald, with Patrick Robinson, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers (New York: Crown Business, 2009); Gretchen Morgenson and Joshua A. Rosner, Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon (New York: Times Books/Henry Holt, 2011), on Fannie Mae and Freddie Mac; Henry M. Paulson, On the Brink: Inside the Race to Stop the Collapse of the Global Financial System (New York: Business Plus, 2010), on the US Treasury; Raghuram Rajan, Fault Lines: How Hidden Fractures Still Threaten the World Economy (Princeton: Princeton University Press, 2010), on the financial system; Robert J.

New York Times, May 11, 2005. McCubbins, Mathew D., and Arthur Lupia. The Democratic Dilemma: Can Citizens Learn What They Really Need to Know? New York: Cambridge University Press, 1998. McDonald, Lawrence G., with Patrick Robinson. A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers. New York: Crown Business, 2009. McFadden, Robert D. “Charles Keating, 90, Key Figure in ’80s Savings and Loan Crisis, Dies.” New York Times, April 2, 2014. Accessed May 27, 2015. http://www.nytimes.com/2014/04/02/business/charles-keating-key-figure-in-the-1980s-savings-and-loan-crisis-dies-at-90.html?


pages: 350 words: 109,379

How to Run a Government: So That Citizens Benefit and Taxpayers Don't Go Crazy by Michael Barber

Affordable Care Act / Obamacare, anti-fragile, Atul Gawande, battle of ideas, Berlin Wall, Black Swan, Checklist Manifesto, collapse of Lehman Brothers, collective bargaining, deep learning, deliberate practice, facts on the ground, failed state, fear of failure, full employment, G4S, illegal immigration, invisible hand, libertarian paternalism, Mark Zuckerberg, Nate Silver, North Sea oil, obamacare, performance metric, Potemkin village, Ronald Reagan, school choice, The Signal and the Noise by Nate Silver, transaction costs, WikiLeaks

Needless to say, you cannot create a crisis too often because you would then undermine the entire government machine. This book is mainly about making sure that the machine becomes more effective at delivering for the citizens, but, just occasionally, when a problem is at Level 4 or heading that way, it is worth remembering the phrase that became ubiquitous after the collapse of Lehman Brothers in 2008: a crisis is a terrible thing to waste. To summarize, as it becomes apparent there is a problem – you can see it in the data, for example – step one is to acknowledge its existence, step two is to decide what kind of problem it is – both its intensity and its nature – and step three is to do something about it – and to do so without giving the benefit of the doubt.

Iceland and its banking system were close to collapse and one of its banks would probably fail that day. In Ireland the day before they had, without warning, underwritten all the savings in their banks, causing disarray for everyone else in Europe. Three weeks earlier, in the United States, the collapse of Lehman Brothers, one of the country’s oldest banks, had pushed the rest of Wall Street to the edge. We were looking over the precipice.23 Here you see a finance minister from one of the world’s top economies sensing that he had (almost) lost control. And if Alistair Darling can’t control events, then you can be reasonably confident no one else could.


pages: 430 words: 109,064

13 Bankers: The Wall Street Takeover and the Next Financial Meltdown by Simon Johnson, James Kwak

Alan Greenspan, American ideology, Andrei Shleifer, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, Bonfire of the Vanities, bonus culture, book value, break the buck, business cycle, business logic, buy and hold, capital controls, Carmen Reinhart, central bank independence, Charles Lindbergh, collapse of Lehman Brothers, collateralized debt obligation, commoditize, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency risk, Edward Glaeser, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, George Akerlof, Glass-Steagall Act, Gordon Gekko, greed is good, Greenspan put, Home mortgage interest deduction, Hyman Minsky, income per capita, information asymmetry, interest rate derivative, interest rate swap, junk bonds, Kenneth Rogoff, laissez-faire capitalism, late fees, light touch regulation, Long Term Capital Management, low interest rates, market bubble, market fundamentalism, Martin Wolf, Michael Milken, money market fund, moral hazard, mortgage tax deduction, Myron Scholes, Paul Samuelson, Ponzi scheme, price stability, profit maximization, proprietary trading, race to the bottom, regulatory arbitrage, rent-seeking, Robert Bork, Robert Shiller, Ronald Reagan, Saturday Night Live, Satyajit Das, Savings and loan crisis, sovereign wealth fund, Tax Reform Act of 1986, The Myth of the Rational Market, too big to fail, transaction costs, Tyler Cowen, value at risk, yield curve

Simply asking bankers to behave differently will not work; the solution can only come by changing the rules of the financial system, which requires government action. Five days after President Obama’s election, his chief of staff, Rahm Emanuel, said, “Rule one: Never allow a crisis to go to waste. They are opportunities to do big things.”6 But more than a year after the collapse of Lehman Brothers, even relatively moderate legislation to reform the financial sector was still stuck in Congress. The Obama administration attempted to show that it was serious about change. “The industry needs to show that they get it on the compensation issue,” Obama said at the March 27, 2009, White House meeting discussed in the Introduction.

Street Fighters: The Last 72 Hours of Bear Stearns, the Toughest Firm on Wall Street. New York: Portfolio, 2009. Lewis, Michael. The Big Short: Inside the Doomsday Machine. New York: W. W. Norton, 2010. McDonald, Lawrence G., and Patrick Robinson. A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers. New York: Crown Business, 2009. Sorkin, Andrew Ross. Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves. New York: Viking, 2009. Tett, Gillian. Fool’s Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe.


pages: 523 words: 111,615

The Economics of Enough: How to Run the Economy as if the Future Matters by Diane Coyle

accounting loophole / creative accounting, affirmative action, Alan Greenspan, An Inconvenient Truth, bank run, banking crisis, behavioural economics, Berlin Wall, bonus culture, Branko Milanovic, BRICs, business cycle, call centre, carbon tax, Cass Sunstein, central bank independence, classic study, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation does not imply causation, Credit Default Swap, deindustrialization, demographic transition, Diane Coyle, different worldview, disintermediation, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Financial Instability Hypothesis, Francis Fukuyama: the end of history, general purpose technology, George Akerlof, Gini coefficient, global supply chain, Gordon Gekko, greed is good, happiness index / gross national happiness, hedonic treadmill, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, illegal immigration, income inequality, income per capita, industrial cluster, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jane Jacobs, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, light touch regulation, low skilled workers, market bubble, market design, market fundamentalism, megacity, Network effects, new economy, night-watchman state, Northern Rock, oil shock, Paradox of Choice, Pareto efficiency, principal–agent problem, profit motive, purchasing power parity, railway mania, rising living standards, Robert Solow, Ronald Reagan, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, social contagion, South Sea Bubble, Steven Pinker, tacit knowledge, The Design of Experiments, The Fortune at the Bottom of the Pyramid, The Market for Lemons, The Myth of the Rational Market, The Spirit Level, the strength of weak ties, Tragedy of the Commons, transaction costs, transfer pricing, tulip mania, ultimatum game, University of East Anglia, vertical integration, web application, web of trust, winner-take-all economy, World Values Survey, zero-sum game

“Free” market outcomes are unlikely to achieve the best outcomes in terms of social welfare when there are important externalities and a growing degree of mutual independence. So in this chapter I’ll argue that markets remain a fundamentally important institution, but the next chapter will look at some of the new challenges of governance. THE MERITS OF MARKETS The economic and financial crisis triggered by the collapse of Lehman Brothers in September 2008 prompted in its turn a wider questioning of the role of markets in the organization of the economy and society. In fact, the questioning of the priority given to markets by the dominant policies in most countries had been under way for some time. The high tide of what some would see as the fetishizing of markets came in the years of Ronald Reagan’s presidency in the United States and Margaret Thatcher’s premiership in the United Kingdom.

Every commentator agreed that it has been the most serious crisis and recession since the 1930s, and that policy reform is essential. But that reform has moved at a snail’s pace given the need to achieve international agreement on both the principles and the practical details of implementation. Two years from the collapse of Lehman Brothers, as I write, very little financial reform has yet been achieved, and indeed the financial crisis has moved into a new phase with the bailout of Greece and crisis of the euro. It will be another three or four years before relatively minor reforms are implemented. With such difficulty on reforms about which there is such a consensus, but a powerful opposition lobby in the banking industry, how much harder will it be when it comes to far more divisive or political challenges?


pages: 829 words: 186,976

The Signal and the Noise: Why So Many Predictions Fail-But Some Don't by Nate Silver

airport security, Alan Greenspan, Alvin Toffler, An Inconvenient Truth, availability heuristic, Bayesian statistics, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, big-box store, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, book value, Broken windows theory, business cycle, buy and hold, Carmen Reinhart, Charles Babbage, classic study, Claude Shannon: information theory, Climategate, Climatic Research Unit, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, computer age, correlation does not imply causation, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, Daniel Kahneman / Amos Tversky, disinformation, diversification, Donald Trump, Edmond Halley, Edward Lorenz: Chaos theory, en.wikipedia.org, equity premium, Eugene Fama: efficient market hypothesis, everywhere but in the productivity statistics, fear of failure, Fellow of the Royal Society, Ford Model T, Freestyle chess, fudge factor, Future Shock, George Akerlof, global pandemic, Goodhart's law, haute cuisine, Henri Poincaré, high batting average, housing crisis, income per capita, index fund, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Internet Archive, invention of the printing press, invisible hand, Isaac Newton, James Watt: steam engine, Japanese asset price bubble, John Bogle, John Nash: game theory, John von Neumann, Kenneth Rogoff, knowledge economy, Laplace demon, locking in a profit, Loma Prieta earthquake, market bubble, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, Monroe Doctrine, mortgage debt, Nate Silver, negative equity, new economy, Norbert Wiener, Oklahoma City bombing, PageRank, pattern recognition, pets.com, Phillips curve, Pierre-Simon Laplace, Plato's cave, power law, prediction markets, Productivity paradox, proprietary trading, public intellectual, random walk, Richard Thaler, Robert Shiller, Robert Solow, Rodney Brooks, Ronald Reagan, Saturday Night Live, savings glut, security theater, short selling, SimCity, Skype, statistical model, Steven Pinker, The Great Moderation, The Market for Lemons, the scientific method, The Signal and the Noise by Nate Silver, The Wisdom of Crowds, Thomas Bayes, Thomas Kuhn: the structure of scientific revolutions, Timothy McVeigh, too big to fail, transaction costs, transfer pricing, University of East Anglia, Watson beat the top human players on Jeopardy!, Wayback Machine, wikimedia commons

On the weekend before the 2008 presidential election, for instance, McLaughlin asked his panelists whether John McCain or Barack Obama was going to win.1 That one ought not to have required very much thought. Barack Obama had led John McCain in almost every national poll since September 15, 2008, when the collapse of Lehman Brothers had ushered in the worst economic slump since the Great Depression. Obama also led in almost every poll of almost every swing state: in Ohio and Florida and Pennsylvania and New Hampshire—and even in a few states that Democrats don’t normally win, like Colorado and Virginia. Statistical models like the one I developed for FiveThirtyEight suggested that Obama had in excess of a 95 percent chance of winning the election.

David Miles, Bank of England, “Monetary Policy in Extraordinary Times,” speech given to the Centre for Economic Policy Research and London Business School, February 23, 2011. http://www.bankofengland.co.uk/publications/Documents/speeches/2011/speech475.pdf 77. Investopedia staff, “Case Study: The Collapse of Lehman Brothers,” Investopedia; April 2, 2009. http://www.investopedia.com/articles/economics/09/lehman-brothers-collapse.asp#axzz1bZ61K9wz. 78. George A. Akerlof, “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism,” Quarterly Journal of Economics 84, no. 3 (Aug. 1970). http://sws.bu.edu/ellisrp/EC387/Papers/1970Akerlof_Lemons_QJE.pdf. 79.

Akerlof, “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism,” Quarterly Journal of Economics 84, no. 3 (Aug. 1970). http://sws.bu.edu/ellisrp/EC387/Papers/1970Akerlof_Lemons_QJE.pdf. 79. “Lehman Brothers F1Q07 (Qtr End 2/28/07) Earnings Call Transcript,” Seeking Alpha, Mar. 14, 2007. http://seekingalpha.com/article/29585-lehman-brothers-f1q07-qtr-end-2-28-07-earnings-call-transcript?part=qanda. 80. Investopedia staff, “Case Study: The Collapse of Lehman Brothers.” 81. Abigail Field, “Lehman Report: Why the U.S. Balked at Bailing Out Lehman,” DailyFinance, March 15, 2010. http://www.dailyfinance.com/2010/03/15/why-the-u-s-balked-at-bailout-out-lehman/ 82. Summers was also secretary of the treasury under President Clinton. 83.


pages: 394 words: 124,743

Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry by Steven Rattner

activist fund / activist shareholder / activist investor, affirmative action, Alan Greenspan, bank run, banking crisis, Bear Stearns, business cycle, Carl Icahn, centre right, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, creative destruction, credit crunch, David Brooks, David Ricardo: comparative advantage, declining real wages, Ford Model T, friendly fire, hiring and firing, income inequality, Joseph Schumpeter, low skilled workers, McMansion, Mikhail Gorbachev, moral hazard, Ronald Reagan, Saturday Night Live, shareholder value, subprime mortgage crisis, supply-chain management, too big to fail

Of course, just as we had done with Chrysler and were planning to do with GM, not giving all the creditors of an insolvent institution 100 cents on the dollar is fundamental to the bankruptcy process. But among the differences between banks and car companies is that the banks' creditors included counterparties to trillions of dollars of various derivative and swap transactions. The collapse of Lehman Brothers had nearly brought down the financial system when traders became terrified of being counterparties with anyone. Seeing creditors get more than they deserved was distasteful, to be sure, but compromising the counterparties of Citi and B of A would surely have had even more cataclysmic results.

Congress yields authority only under the direst of circumstances, as the example of TARP shows. As Rahm had presciently urged his team at the outset, "Never let a crisis go to waste." Congress had been bludgeoned into passing TARP by Hank Paulson and the Bush administration in the midst of the near panic caused by the collapse of Lehman Brothers. At Paulson's insistence, TARP granted the White House and the Treasury unprecedented discretion over the use of $700 billion, bypassing Congress's customary role in approving individual appropriations. Almost immediately, Congress tried to walk back the cat. The Democratic leadership appointed an oversight panel, led by Elizabeth Warren, a professor at Harvard Law School, that seemed to spend most of its time second-guessing tough calls that the administration had made (including those on autos).


pages: 413 words: 117,782

What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences by Steven G. Mandis

activist fund / activist shareholder / activist investor, algorithmic trading, Bear Stearns, Berlin Wall, Bob Litterman, bonus culture, book value, BRICs, business process, buy and hold, Carl Icahn, collapse of Lehman Brothers, collateralized debt obligation, commoditize, complexity theory, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, disintermediation, diversification, eat what you kill, Emanuel Derman, financial innovation, fixed income, friendly fire, Glass-Steagall Act, Goldman Sachs: Vampire Squid, high net worth, housing crisis, junk bonds, London Whale, Long Term Capital Management, merger arbitrage, Myron Scholes, new economy, passive investing, performance metric, proprietary trading, radical decentralization, risk tolerance, Ronald Reagan, Saturday Night Live, Satyajit Das, shareholder value, short selling, sovereign wealth fund, subprime mortgage crisis, systems thinking, The Nature of the Firm, too big to fail, value at risk

They wanted to invest in the business. In contrast, the more-senior partners had reached their highest ownership percentage and were likely incentivized to maximize the value and liquidity of their shares. Swedberg notes that in the case of Lehman (see R. Swedberg, “The Structure of Confidence and the Collapse of Lehman Brothers,” in Markets on Trial: The Economic Sociology of the U.S. Financial Crisis, ed. M. Lounsbury and P. M. Hirsch [Bingley, UK: Emerald, 2010], 81), CEO Richard Fuld ran Lehman in an authoritarian manner, “setting his own distinct mark on the aggressive and competitive type of corporate culture that seems to be characteristic of modern investment banks.”

“Without question, direct government support helped stabilize the financial system. We believe that the government action was critical, and we benefited from it.” Testimony by Lloyd Blankfein, www.goldmansachs.com/media-relations/in-the-news/archive/1-13-testimony.html. 3. R. Swedberg, “The Structure of Confidence and the Collapse of Lehman Brothers,” in Markets on Trial: The Economic Sociology of the U.S. Financial Crisis, ed. M. Lounsbury and P. M. Hirsch (Bingley, UK: Emerald, 2010), 69–112. 4. My analysis as a sociologist focusing on the organizational factors should not detract from serious questions and concerns raised by many people, such as the Senate Subcommittee on Investigations, chaired by Carl Levin (D.


pages: 484 words: 136,735

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

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

The scorched-earth economics always demanded by free-market ideologues at times of crisis are rejected, and central bankers ensure that the day of reckoning for past excesses is postponed. In short, democracy usually offers capitalism a breathing space that allows the system and its institutions to evolve. Capitalism doesn’t break because it bends. What does this approach imply about the crisis that reached its climax in the weeks after the collapse of Lehman Brothers on September 15, 2008? Rather than destroying or permanently crippling the international financial system, as many commentators suggested at the time, this crisis probably marked the start of a fourth great transition in the 250-year history of modern capitalism. Far from suffering extinction, the capitalist system has started evolving into a new species, which will presumably be better suited for life in the early twenty-first century.

In the end, the total losses from Lehman’s bankruptcy came to about $75 billion.17 This was a lot of money by the standards of normal business bankruptcies, but modest in comparison with the multitrillion dollar write-downs already suffered by banks around the world before Lehman went down. The collapse of Lehman Brothers was much more catastrophic than the raw numbers might have suggested—or Henry Paulson expected—partly because Lehman was a participant in many of the lending chains that had been gradually unraveling since the start of the credit crunch. Once Lehman defaulted, the orderly unwinding of these mutual obligations, which the Fed had tried to facilitate with the Bear Stearns bailout, become impossible.


pages: 455 words: 138,716

The Divide: American Injustice in the Age of the Wealth Gap by Matt Taibbi

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", Alan Greenspan, banking crisis, Bear Stearns, Bernie Madoff, book value, butterfly effect, buy and hold, collapse of Lehman Brothers, collateralized debt obligation, company town, Corrections Corporation of America, Credit Default Swap, credit default swaps / collateralized debt obligations, Edward Snowden, ending welfare as we know it, fake it until you make it, fixed income, forensic accounting, Glass-Steagall Act, Gordon Gekko, greed is good, illegal immigration, information retrieval, London Interbank Offered Rate, London Whale, Michael Milken, naked short selling, off-the-grid, offshore financial centre, Ponzi scheme, profit motive, regulatory arbitrage, Savings and loan crisis, short selling, social contagion, telemarketer, too big to fail, two and twenty, War on Poverty

Simultaneously, the insiders from Lehman who had come up with the idea took lucrative jobs at Barclays, taking hundreds of millions in future bonus payments to do so. This is a hard story to follow. But if you keep that one image in mind, of a shopkeeper fleeing town in the middle of the night with borrowed profits, the collapse of Lehman Brothers—one of the great unpunished swindles of all time—starts to make sense. Lehman Brothers succumbed to fraud, bad decisions, and book-cooking, dying not of any one specific thing but more generally of corruption itself, in the manner of elderly mobsters or Soviet rulers. The company was founded by a pair of Bavarian-born immigrants to the American South, Henry and Emmanuel Lehman, who in 1850 set up a cotton-trading business based in Montgomery, Alabama.

So in the end, after hundreds of thousands of pages of motions and depositions, after all that harried effort scouring emails and documents in search of evidence, and after the long hearing in which it was all formally presented, this was the final excuse that all those expensive minds collectively used to wash away the Lehman case: Shit happens! Years after the collapse of Lehman Brothers, many of the company’s creditors were still feeling the sting. The city of Long Beach, for instance, has been enacting sweeping budget cuts ever since the crash. In the first year after Lehman’s collapse, the Long Beach school system cut summer school classes and bus routes for one thousand students.


pages: 457 words: 128,838

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

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

As if learning from the Renaissance merchant bankers, Wall Street had again found an effective way to take sovereign money and multiply it many times over through a form of private money built on debt. But it was happening in an area that was far more thinly regulated than the traditional banking system. When it finally dawned on people how important this shadow system was, it was too late. With the collapse of Lehman Brothers, this fragile edifice came tumbling down. The Great Moderation had carried a curse. Not only did it foster a false sense of security, but also it caused us to forget our responsibilities as a society to use our political process to change unwelcome economic circumstances. Everyone from voters to Wall Street traders to congressmen to the president wanted to believe the financial system could be left in the hands of the Fed.

Because the banks had become so very, very large and interconnected within the global financial system, governments worldwide felt compelled to put up trillions of taxpayer dollars, pounds, and euros to avoid bringing down that entire system. The rise of cryptocurrencies can properly be understood only in relation to those cataclysmic events. * * * On the Wednesday after the September 15 collapse of Lehman Brothers in 2008, Mohamed El-Erian, then co-CEO of the massive asset manager Pacific Investment Management Co. and at that time working around the clock to try to extract his firm from the swirling financial maelstrom, took the time to call his wife from PIMCO’s headquarters in Newport Beach, California.


pages: 166 words: 49,639

Start It Up: Why Running Your Own Business Is Easier Than You Think by Luke Johnson

Albert Einstein, barriers to entry, Bear Stearns, Bernie Madoff, business cycle, collapse of Lehman Brothers, compensation consultant, Cornelius Vanderbilt, corporate governance, corporate social responsibility, creative destruction, credit crunch, false flag, financial engineering, Ford Model T, Grace Hopper, happiness index / gross national happiness, high net worth, James Dyson, Jarndyce and Jarndyce, Jarndyce and Jarndyce, Kickstarter, mass immigration, mittelstand, Network effects, North Sea oil, Northern Rock, patent troll, plutocrats, Ponzi scheme, profit motive, Ralph Waldo Emerson, Silicon Valley, software patent, stealth mode startup, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, traveling salesman, tulip mania, Vilfredo Pareto, wealth creators

As the wheel inevitably turns and conditions deteriorate, so credit tightens, companies fail and assets are recycled. This is an irresistible sequence of events. Mere mortals cannot resist the tide of history. Markets and exchanges are merely mechanisms that reflect the temperament of man. Witnessing and participating in such upheaval can be traumatic. Take the collapse of Lehman Brothers and the forced sell-offs of Merrill Lynch and HBoS. For the staff, their families, and other stakeholders, this classic example of Schumpeter’s ‘creative destruction’ is hardly something to be celebrated. Here is a sudden and jolting reallocation of resources. Overnight, venerable institutions are destroyed, and new ones spring up, phoenix-like, to fill the gap.


pages: 177 words: 50,167

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

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

When the major center-left and center-right parties, hobbled by their country’s membership in the Eurozone, failed to revive their nation’s economies, voters began looking to the new populist parties in these countries for answers. The Eurocrisis The financial crash, which surfaced in the United States in September 2008 with the collapse of Lehman Brothers, spread by the year’s end to European banks, which had heavily invested in American derivatives. Credit dried up, borrowers defaulted, investment lagged, and unemployment rose. By 2009, the EU’s average unemployment rate was 9.6 percent; in 2012, it would be 11.4 percent. And it would be far worse in Southern Europe—18 percent in Spain in 2009 and 25.1 percent in 2012.


pages: 204 words: 53,261

The Tyranny of Metrics by Jerry Z. Muller

Affordable Care Act / Obamacare, Atul Gawande, behavioural economics, Cass Sunstein, Checklist Manifesto, Chelsea Manning, collapse of Lehman Brothers, corporate governance, Credit Default Swap, crowdsourcing, delayed gratification, deskilling, Edward Snowden, Erik Brynjolfsson, financial engineering, Frederick Winslow Taylor, George Akerlof, Goodhart's law, Hyman Minsky, intangible asset, Jean Tirole, job satisfaction, joint-stock company, joint-stock limited liability company, Minsky moment, Moneyball by Michael Lewis explains big data, performance metric, price mechanism, RAND corporation, Salesforce, school choice, scientific management, Second Machine Age, selection bias, Steven Levy, tacit knowledge, TED Talk, total factor productivity, transaction costs, Tyler Cowen, WikiLeaks

Harvard Journal of Law and Public Policy 33, no. 2 (2010), pp. 507–18, and Arnold Kling, Specialization and Trade (Washington, D.C., 2016). 17. Kling, “The Financial Crisis”; and Kling, Specialization and Trade, pp. 182–83. 18. Lawrence G. McDonald with Patrick Robinson, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers (New York, 2009), pp. 106–9. 19. Amar Bhidé, “Insiders and Outsiders,” Forbes, September 24, 2008. 20. The paragraphs that follow draw upon Jerry Z. Muller, “Capitalism and Inequality: What the Right and the Left Get Wrong,” Foreign Affairs (March–April 2013), pp. 30–51. 21. Hyman P.


pages: 180 words: 55,805

The Price of Tomorrow: Why Deflation Is the Key to an Abundant Future by Jeff Booth

3D printing, Abraham Maslow, activist fund / activist shareholder / activist investor, additive manufacturing, AI winter, Airbnb, Albert Einstein, AlphaGo, Amazon Web Services, artificial general intelligence, augmented reality, autonomous vehicles, basic income, bitcoin, blockchain, Bretton Woods, business intelligence, butterfly effect, Charles Babbage, Claude Shannon: information theory, clean water, cloud computing, cognitive bias, collapse of Lehman Brothers, Computing Machinery and Intelligence, corporate raider, creative destruction, crony capitalism, crowdsourcing, cryptocurrency, currency manipulation / currency intervention, dark matter, deep learning, DeepMind, deliberate practice, digital twin, distributed ledger, Donald Trump, Elon Musk, fiat currency, Filter Bubble, financial engineering, full employment, future of work, game design, gamification, general purpose technology, Geoffrey Hinton, Gordon Gekko, Great Leap Forward, Hyman Minsky, hype cycle, income inequality, inflation targeting, information asymmetry, invention of movable type, Isaac Newton, Jeff Bezos, John Maynard Keynes: Economic Possibilities for our Grandchildren, John von Neumann, Joseph Schumpeter, late fees, low interest rates, Lyft, Maslow's hierarchy, Milgram experiment, Minsky moment, Modern Monetary Theory, moral hazard, Nelson Mandela, Network effects, Nick Bostrom, oil shock, OpenAI, pattern recognition, Ponzi scheme, quantitative easing, race to the bottom, ride hailing / ride sharing, self-driving car, software as a service, technoutopianism, TED Talk, the long tail, the scientific method, Thomas Bayes, Turing test, Uber and Lyft, uber lyft, universal basic income, winner-take-all economy, X Prize, zero-sum game

It is becoming abundantly clear that we are in the midst of a serious global meltdown.” Janet Yellen Federal Reserve transcripts4 One of the few economists to correctly forecast what was happening at the time was Nouriel Roubini, an economics professor at New York University. In 2006, two years before the collapse of Lehman Brothers and the rescue of the financial system, Roubini “stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing.” In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession.


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

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

They have done too little to boost investment and implement reforms to open up healthier future growth. And at a time when the private sector was cutting back and non-Europeans were not in a position to take up all the slack, they embarked on premature, front-loaded, slash-and-burn fiscal austerity. When the world economy went into freefall after the chaotic collapse of Lehman Brothers, the leaders of the Group of Twenty (G-20) most important economies in the world agreed in London in April 2009 to embark on a big fiscal stimulus to support growth.86 This was a success, not least thanks to bold pre-emptive action by the Chinese government. But after Greece’s public-debt problems led it to seek an EU-IMF loan in April 2010, eurozone governments took fright at rising debt levels and slammed on the brakes.

Back home, banks’ reckless lending, mostly against the perceived security of booming house prices, saw British households pile on record amounts of debt, rising from 108 per cent of their disposable income in 2000 to a whopping 170 per cent in early 2008.391 When the US housing bubble burst, bank lending froze and then UK house prices slumped too, one bank after another toppled. The first was Northern Rock, an overextended local bank that pumped out cheap, risky mortgages financed by short-term debt, which suffered a run in September 2007 and was eventually nationalised in February 2008. Days after the collapse of Lehman Brothers in September 2008, HBOS, a retail bank similarly laid low by wild mortgage lending financed with fickle debt, was rescued through a government-brokered takeover by Lloyds TSB, a more conservative lender seduced by the prospect of dominating high-street banking. But swallowing HBOS dragged Lloyds down too: to save it from collapse the following month, the British government took a 43 per cent stake in the bank.


pages: 665 words: 146,542

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

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

In this account, there would be nothing left to do except observe prices on the financial markets, in order to act in accordance with the most complete knowledge – which, as a bonus, is affirmed as ‘true’. We are thus presented with a portrayal of the best of possible worlds. Let us go further into the events of the crisis that we all remember (because we lived through it). After the collapse of Lehman Brothers, finance in the so-called advanced countries had entered into a process of self-destruction, lacking the capacity to stabilise itself by its own means. Finance itself produced the devastating contagion that was now spreading unopposed. Everything was unfolding as if the counterfactual horizon of the future had disappeared.

The banks become reticent to continue opening up lines of credit to one another. That is how the international interbank market froze in mid-August 2007, thus obliging the central banks to mount a coordinated last-resort intervention. But the interbank market did not truly recover, and its paralysis became much more serious in September 2008 after the collapse of Lehman Brothers. The deregulation of finance in the 1980s initiated the transition to market finance. This further weakened the banks in all countries. Indeed, the enormous boom in securities transactions was financed by debt levers provided by bank credit, which repeatedly proved excessive. Errors in appreciating asset price movements translated into massive undervaluations of credit risk, insufficient reserves, inadequate own funds, and distorted maturities.


pages: 202 words: 58,823

Willful: How We Choose What We Do by Richard Robb

activist fund / activist shareholder / activist investor, Alvin Roth, Asian financial crisis, asset-backed security, Bear Stearns, behavioural economics, Bernie Madoff, Brexit referendum, capital asset pricing model, cognitive bias, collapse of Lehman Brothers, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, delayed gratification, diversification, diversified portfolio, effective altruism, endowment effect, Eratosthenes, experimental subject, family office, George Akerlof, index fund, information asymmetry, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, lake wobegon effect, loss aversion, market bubble, market clearing, money market fund, Paradox of Choice, Pareto efficiency, Paul Samuelson, Peter Singer: altruism, Philippa Foot, principal–agent problem, profit maximization, profit motive, Richard Thaler, search costs, Silicon Valley, sovereign wealth fund, survivorship bias, the scientific method, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, transaction costs, trolley problem, ultimatum game

We persuaded some contractors to continue working and others to delay enforcement on sizeable obligations—the Belgian manufacturers of the steel foundations were owed €46.5 million but agreed to continue rolling 50,000 tons so that installation could start in December. Johan and I put most of our own money into the project to keep it afloat a few more days. What else could we do? Then came the collapse of Lehman Brothers on September 15. My overall terror that day was heightened by fear for this deal. On the afternoon of Friday, September 26, we were informed that Iberdrola’s CEO wanted to postpone the deal due to market conditions. The following Tuesday morning, he came to London to negotiate. We struck a revised deal, with our fund leaving its money in the project alongside Iberdrola’s.


pages: 217 words: 63,287

The Participation Revolution: How to Ride the Waves of Change in a Terrifyingly Turbulent World by Neil Gibb

Abraham Maslow, Adam Neumann (WeWork), Airbnb, Albert Einstein, blockchain, Buckminster Fuller, call centre, carbon footprint, Clayton Christensen, collapse of Lehman Brothers, corporate social responsibility, creative destruction, crowdsourcing, data science, Didi Chuxing, disruptive innovation, Donald Trump, gentrification, gig economy, iterative process, Jeremy Corbyn, job automation, Joseph Schumpeter, Khan Academy, Kibera, Kodak vs Instagram, Mark Zuckerberg, Menlo Park, Minecraft, mirror neurons, Network effects, new economy, performance metric, ride hailing / ride sharing, shareholder value, side project, Silicon Valley, Silicon Valley startup, Skype, Snapchat, Steve Jobs, Susan Wojcicki, the scientific method, Thomas Kuhn: the structure of scientific revolutions, trade route, urban renewal, WeWork

The problem came when the world was tipped upside down and those models were ill-equipped to making sense of behaviours” Andrew Haldane, chief economist, Bank of England, 2017 When Andy Haldane addressed the Institute of Government in London in early 2017, he described his profession’s inability to foresee the collapse of Lehman Brothers or the ensuing global financial crisis as its “Michael Fish moment” – referring to an infamous incident in 1987 when a BBC weather forecaster confidently predicted that a hurricane was going to miss the UK, only for it to hit the country with full-force the next day, causing devastation and mayhem; the worst storm in a century.


Phil Thornton by The Great Economists Ten Economists whose thinking changed the way we live-FT Publishing International (2014)

Alan Greenspan, availability heuristic, behavioural economics, Berlin Wall, bitcoin, Bretton Woods, British Empire, business cycle, business process, call centre, capital controls, Cass Sunstein, choice architecture, cognitive bias, collapse of Lehman Brothers, Corn Laws, creative destruction, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, double helix, endogenous growth, endowment effect, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, fiat currency, financial deregulation, fixed income, Ford Model T, full employment, hindsight bias, income inequality, inflation targeting, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Kenneth Arrow, Kenneth Rogoff, Kickstarter, liquidity trap, loss aversion, mass immigration, means of production, mental accounting, Myron Scholes, paradox of thrift, Pareto efficiency, Paul Samuelson, Post-Keynesian economics, price mechanism, pushing on a string, quantitative easing, Richard Thaler, road to serfdom, Ronald Coase, Ronald Reagan, school vouchers, Simon Kuznets, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, Toyota Production System, trade route, transaction costs, unorthodox policies, Vilfredo Pareto, women in the workforce

Seeing the threat to their own industries, other governments retaliated with tariffs, with the result that international trade fell by half. More than 1,000 economists signed a petition to the US government warning that the Smoot-Hawley Tariff Act would have disastrous economic repercussions. Fast forward to 2009 when the world was seen as teetering on the brink of a new depression in the wake of the collapse of Lehman Brothers. This time world leaders took a leaf out of Ricardo’s books and agreed not to embark on protectionist measures. As then British prime minister Gordon Brown said in the run-up to the London summit of the G20: ‘Protectionism must be rejected as protectionism is the politics of defeatism, retreat and fear and in the end protects no one at all.’2 2. http://www.europarl.europa.eu/sides/getDoc.do?


pages: 526 words: 158,913

Crash of the Titans: Greed, Hubris, the Fall of Merrill Lynch, and the Near-Collapse of Bank of America by Greg Farrell

"World Economic Forum" Davos, Airbus A320, Apple's 1984 Super Bowl advert, bank run, banking crisis, Bear Stearns, Black Monday: stock market crash in 1987, bonus culture, call centre, Captain Sullenberger Hudson, collapse of Lehman Brothers, collateralized debt obligation, compensation consultant, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, financial engineering, financial innovation, fixed income, glass ceiling, Glass-Steagall Act, high net worth, junk bonds, Ken Thompson, Long Term Capital Management, mass affluent, Mexican peso crisis / tequila crisis, Michael Milken, Nelson Mandela, plutocrats, Ronald Reagan, six sigma, sovereign wealth fund, technology bubble, too big to fail, US Airways Flight 1549, yield curve

The program would allow each of these banks access to capital at relatively low rates, since the banks would only have to pay a 5 percent annual dividend to the government for several years, at which point a rising dividend would encourage the banks to buy back the preferred shares. But there was one catch to the program: Executive compensation at the banks receiving the funds would be restricted. The economic devastation wreaked by the bursting of the real estate bubble and the collapse of Lehman Brothers had exacerbated public outrage at the multimillion-dollar pay packages common on Wall Street. To address that contentious topic, the $700 billion bailout fund—known as the “troubled asset relief program” or TARP—placed restrictions on the types of golden parachute payments that could be made to top executives.

McCain’s defeat also foreclosed any chance that existed for John Thain to succeed Hank Paulson as U.S. treasury secretary. Thain had emerged a year earlier as McCain’s primary fundraiser and leading supporter on Wall Street. The Arizona senator’s short-lived lead in the polls, in early September, evaporated with the collapse of Lehman Brothers and the subsequent government bailout of AIG. The creation of the $700 billion TARP fund, by a Republican administration, fueled populist anger at the banking industry to the point where McCain and his running mate, Alaska governor Sarah Palin, blamed “greed on Wall Street” as the driving force behind the financial crisis and the nation’s economic woes.


Manias, Panics and Crashes: A History of Financial Crises, Sixth Edition by Kindleberger, Charles P., Robert Z., Aliber

active measures, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, Bonfire of the Vanities, break the buck, Bretton Woods, British Empire, business cycle, buy and hold, Carmen Reinhart, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, Corn Laws, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cross-border payments, currency peg, currency risk, death of newspapers, debt deflation, Deng Xiaoping, disintermediation, diversification, diversified portfolio, edge city, financial deregulation, financial innovation, Financial Instability Hypothesis, financial repression, fixed income, floating exchange rates, George Akerlof, German hyperinflation, Glass-Steagall Act, Herman Kahn, Honoré de Balzac, Hyman Minsky, index fund, inflation targeting, information asymmetry, invisible hand, Isaac Newton, Japanese asset price bubble, joint-stock company, junk bonds, large denomination, law of one price, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market bubble, Mary Meeker, Michael Milken, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, new economy, Nick Leeson, Northern Rock, offshore financial centre, Ponzi scheme, price stability, railway mania, Richard Thaler, riskless arbitrage, Robert Shiller, short selling, Silicon Valley, South Sea Bubble, special drawing rights, Suez canal 1869, telemarketer, The Chicago School, the market place, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, very high income, Washington Consensus, Y2K, Yogi Berra, Yom Kippur War

Henry Paulson, the US Secretary of the Treasury from 2007 to 2009 and previously the head of Goldman Sachs, authored On the Brink: Inside the Race to the Stop the Collapse of the Global Financial System. Lawrence McDonald wrote A Colossal Failure of Common Sense; the Inside Story of the Collapse of Lehman Brothers, his former employer. William D. Cohan, a former banker turned journalist, brought out House of Cards: A Tale of Hubris and Wretched Excess on Wall Street, while Alex Pollock, another former banker, published Boom and Bust: Financial Cycles and Human Prosperity. George Cooper, a financial analyst, wrote The Origin of Financial Crises.

The United States experienced a much sharper decline in household wealth in 2008 and 2009; prices of residential real estate declined by more than 30 percent and stock prices fell by nearly 50 percent – before a partial recovery. Property prices began to decline at the end of 2006 and economic growth was positive throughout 2007 and in the first half of 2008; the first negative quarter was the third quarter of 2008 – and even then the decline was modest. Then the collapse of Lehman Brothers in September 2008 triggered a panic and a crash. The credit system froze; interest rate spreads surged, and LIBOR increased by 500 basis points relative to the Federal Funds rate whereas the traditional spread had been 10 to 20 basis points. The combination of the more restrictive supplies of credit and the greater cautiousness by households led to a very sharp decline in GDP.


pages: 193 words: 11,060

Ethics in Investment Banking by John N. Reynolds, Edmund Newell

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, banking crisis, Bear Stearns, collapse of Lehman Brothers, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, discounted cash flows, financial independence, Glass-Steagall Act, index fund, invisible hand, junk bonds, light touch regulation, margin call, Michael Milken, moral hazard, Nick Leeson, Northern Rock, proprietary trading, quantitative easing, shareholder value, short selling, South Sea Bubble, stem cell, the market place, The Wealth of Nations by Adam Smith, too big to fail, two and twenty, zero-sum game

The ethics of speculation will be considered later. Ethical problems and the financial crisis Despite their strategic importance to the economy, investment banks have faced hostility and come under particular scrutiny during the recent financial crisis, in which three of the largest and best-known went out of business. The collapse of Lehman Brothers in September 2008 sent shock waves around the world and proved to be the tipping point of the “credit 16 Ethics in Investment Banking crunch”, which also saw the fall of Bear Stearns (acquired by JP Morgan with US Government support) and Merrill Lynch (which was bought by the Bank of America).


pages: 202 words: 66,742

The Payoff by Jeff Connaughton

Alan Greenspan, algorithmic trading, bank run, banking crisis, Bear Stearns, Bernie Madoff, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cuban missile crisis, desegregation, Flash crash, Glass-Steagall Act, locking in a profit, London Interbank Offered Rate, London Whale, Long Term Capital Management, naked short selling, Neil Kinnock, plutocrats, Ponzi scheme, proprietary trading, risk tolerance, Robert Bork, Savings and loan crisis, short selling, Silicon Valley, TED Talk, too big to fail, two-sided market, uptick rule, young professional

Thanks to Josh’s intrepid research and synthesis, tutorials from our covert industry insiders, and our own exhaustive (and exhausting) reading, Ted and I became extremely knowledgeable about these practices and how they affect market stability. In fact, Ted even predicted the flash crash—when the market dropped one thousand points in just minutes on May 6, 2010—eight months before it happened. In a speech on September 14, 2009, the anniversary of the collapse of Lehman Brothers, Ted warned of a flash crash and how HFT would fuel it: [U]nlike specialists and traditional market-makers that are regulated, some of these new high-frequency traders are unregulated, though they are acting in a market-maker capacity. They have no requirements to “maintain a fair and orderly” market.


pages: 249 words: 66,492

The Rare Metals War by Guillaume Pitron

Albert Einstein, Berlin Wall, carbon footprint, circular economy, clean tech, cloud computing, collapse of Lehman Brothers, commodity super cycle, connected car, David Attenborough, decarbonisation, degrowth, deindustrialization, dematerialisation, Deng Xiaoping, Donald Trump, driverless car, dual-use technology, Elon Musk, energy transition, Fairphone, full employment, green new deal, green transition, industrial robot, Internet of things, invisible hand, Jeff Bezos, Kickstarter, knowledge economy, Lyft, mittelstand, offshore financial centre, oil shale / tar sands, planetary scale, planned obsolescence, Silicon Valley, smart cities, smart grid, smart meter, South China Sea, spinning jenny, Tesla Model S, Yom Kippur War

China, too, is the target of trade retaliation measures orchestrated by Western states and corporations. Since 2011, protectionist measures against China have tripled, according to the Global Trade Alert (GTA) in its report ‘The Global Trade Disorder’ (2014). The financial crisis triggered by the collapse of Lehman Brothers was unquestionably a turning point. States went from their traditional role of safeguarding international trade to becoming one of its harshest critics. In this context, ‘China has to manage a shift in the globalisation paradigm at a time when the former winners thereof — the West — are in the process of becoming the losers’, says Brian Jackson, an analyst at the Beijing bureau of IHS group.


pages: 733 words: 179,391

Adaptive Markets: Financial Evolution at the Speed of Thought by Andrew W. Lo

Alan Greenspan, Albert Einstein, Alfred Russel Wallace, algorithmic trading, Andrei Shleifer, Arthur Eddington, Asian financial crisis, asset allocation, asset-backed security, backtesting, bank run, barriers to entry, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, bitcoin, Bob Litterman, Bonfire of the Vanities, bonus culture, break the buck, Brexit referendum, Brownian motion, business cycle, business process, butterfly effect, buy and hold, capital asset pricing model, Captain Sullenberger Hudson, carbon tax, Carmen Reinhart, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computerized trading, confounding variable, corporate governance, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, Daniel Kahneman / Amos Tversky, delayed gratification, democratizing finance, Diane Coyle, diversification, diversified portfolio, do well by doing good, double helix, easy for humans, difficult for computers, equity risk premium, Ernest Rutherford, Eugene Fama: efficient market hypothesis, experimental economics, experimental subject, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, financial intermediation, fixed income, Flash crash, Fractional reserve banking, framing effect, Glass-Steagall Act, global macro, Gordon Gekko, greed is good, Hans Rosling, Henri Poincaré, high net worth, housing crisis, incomplete markets, index fund, information security, interest rate derivative, invention of the telegraph, Isaac Newton, it's over 9,000, James Watt: steam engine, Jeff Hawkins, Jim Simons, job satisfaction, John Bogle, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, Joseph Schumpeter, Kenneth Rogoff, language acquisition, London Interbank Offered Rate, Long Term Capital Management, longitudinal study, loss aversion, Louis Pasteur, mandelbrot fractal, margin call, Mark Zuckerberg, market fundamentalism, martingale, megaproject, merger arbitrage, meta-analysis, Milgram experiment, mirror neurons, money market fund, moral hazard, Myron Scholes, Neil Armstrong, Nick Leeson, old-boy network, One Laptop per Child (OLPC), out of africa, p-value, PalmPilot, paper trading, passive investing, Paul Lévy, Paul Samuelson, Paul Volcker talking about ATMs, Phillips curve, Ponzi scheme, predatory finance, prediction markets, price discovery process, profit maximization, profit motive, proprietary trading, public intellectual, quantitative hedge fund, quantitative trading / quantitative finance, RAND corporation, random walk, randomized controlled trial, Renaissance Technologies, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance, Robert Shiller, Robert Solow, Sam Peltzman, Savings and loan crisis, seminal paper, Shai Danziger, short selling, sovereign wealth fund, Stanford marshmallow experiment, Stanford prison experiment, statistical arbitrage, Steven Pinker, stochastic process, stocks for the long run, subprime mortgage crisis, survivorship bias, systematic bias, Thales and the olive presses, The Great Moderation, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Triangle Shirtwaist Factory, ultimatum game, uptick rule, Upton Sinclair, US Airways Flight 1549, Walter Mischel, Watson beat the top human players on Jeopardy!, WikiLeaks, Yogi Berra, zero-sum game

Beginning on January 1, 2005, Merrill Lynch was the first to volunteer, followed by Goldman Sachs, then Bear Stearns, Lehman Brothers, and Morgan Stanley at the beginning of fiscal year 2006.8 As we’ll see shortly, this chronology is important for understanding the narrative. Normally, this rule change would be a minor bit of regulatory history. However, on August 8, 2008, in that nervous month before the collapse of Lehman Brothers, the former director of the SEC’s Division of Trading and Markets, Lee Pickard, published an article in American Banker with a shocking claim: the rule change by the SEC in 2004 allowed broker-dealers to greatly increase their leverage, thereby creating the conditions for the financial crisis.9 This was the smoking gun that crisis watchers had been looking for.

Journal of Applied Social Psychology 39: 2809–2839. McCulloch, Warren, and Walter Pitts. 1943. “A Logical Calculus of the Ideas Immanent in Nervous Activity.” Bulletin of Mathematical Biophysics 7: 115–133. McDonald, Lawrence G., and Patrick Robinson. 2009. A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers. New York: Three Rivers Press. McDougall, Ian, Francis H. Brown, and John G. Fleagle. 2005. “Stratigraphic Placement and Age of Modern Humans from Kibish, Ethiopia.” Nature 433: 733–736. Merton, Robert C. 1973. “Theory of Rational Option Pricing.” Bell Journal of Economics and Management Science 4: 141–183. ___. 1989.


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

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

The Bank of England was slow to respond to the growing signs of banking crisis. In Howard Davies’s words, ‘[it] lectured on moral hazard, while the banking system imploded round it’. Unlike the US Federal Reserve, the European Central Bank also worried about ‘imaginary inflationary dangers’.21 But following the collapse of Lehman Brothers in September 2008 the policy rates of the main central banks were rapidly slashed towards zero. 253 M ac roe c onom ic s i n t h e C r a s h a n d A f t e r , 2 0 0 7 – Figure 40. Cutting interest rates: central banks’ base rates22 (per cent) 7 European Central Bank Bank of England Federal Reserve 6 5 4 3 2 1 16 nJa 15 nJa 14 13 nJa nJa 12 11 nJa nJa 10 n- 09 Ja nJa 08 07 nJa nJa 06 nJa 05 04 nJa nJa Ja n- 03 0 This was the traditional response.

The fairy is the satirical creation of Paul Krugman (Krugman (2010)) to depict the unsubstantial character of this argument. Mackenzie (2010). The ‘short view’ of Mackenzie’s title accurately describes the view of bond-market traders. ‘You should have just asked a Swabian housewife,’ said Angela Merkel in October 2008, in response to a question about the collapse of Lehman Brothers. The distributional effects may not be considered desirable, but they do not impose a net burden on the future generation considered as a whole. Office for Budget Responsibility (2012), p. 33. Data: International Monetary Fund (2008, 2012, 2017a). Graph: author’s own. HM Treasury (2010), p. 8.


pages: 265 words: 74,941

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

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

Chapter Seven Unraveling Now, we all know what it feels like to live through the bursting of a huge economic and financial bubble. We can literally feel the demise of the old suburban way of life all around us. But how exactly did it come to this? Others have chronicled the financial shenanigans and policy blunders that led to the collapse of Lehman Brothers and the onset of the economic and financial crisis. But, to a surprising degree, the causes of the crash are also geographic in nature. The bursting bubble that sparked this crisis signaled a system of economic organization and spatial fix long past its sell-by date. Suburbanization worked well for a time.


pages: 267 words: 74,296

Unhappy Union: How the Euro Crisis - and Europe - Can Be Fixed by John Peet, Anton La Guardia, The Economist

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

Those involved speak only in guarded terms about precisely what they would have done. Would the departure of, say, Greece have required Cyprus to leave as well, given their close interconnection? The ECB would have flooded the financial system with liquidity to try to ensure that credit markets did not dry up, as they had done after the collapse of Lehman Brothers, and to forestall runs on both banks and sovereigns. Large quantities of banknotes would have been made available in the south to reassure anxious depositors especially if, as during the Cyprus crisis, banks were shut down and capital controls imposed. The ECB would probably have engaged in unprecedented bond-buying to hold down the borrowing costs of vulnerable countries.


The Handbook of Personal Wealth Management by Reuvid, Jonathan.

asset allocation, banking crisis, BRICs, business cycle, buy and hold, carbon credits, collapse of Lehman Brothers, correlation coefficient, credit crunch, cross-subsidies, currency risk, diversification, diversified portfolio, estate planning, financial deregulation, fixed income, global macro, high net worth, income per capita, index fund, interest rate swap, laissez-faire capitalism, land tenure, low interest rates, managed futures, market bubble, merger arbitrage, negative equity, new economy, Northern Rock, pattern recognition, Ponzi scheme, prediction markets, proprietary trading, Right to Buy, risk tolerance, risk-adjusted returns, risk/return, short selling, side project, sovereign wealth fund, statistical arbitrage, systematic trading, transaction costs, yield curve

The sub-prime debacle illustrated the fragility of the banking system and the perceived security of capital lent to or invested in banks. The reason that structured products use bank notes is twofold; the first is that banks are regulated in such a way that assets should always exceed liabilities. The second is that it provides cheap funding to the issuing banks. The collapse of Lehman Brothers, which issued many structured products to retail investors through financial advisers, reminded all investors that capital-protected does not mean guaranteed nor safe. In the UK, the capital structure of most financial institutions is constructed as shown in Figure 1.4.3, representing the priority for repayment in the event of default.


pages: 264 words: 76,643

The Growth Delusion: Wealth, Poverty, and the Well-Being of Nations by David Pilling

Airbnb, Alan Greenspan, banking crisis, Bernie Sanders, Big bang: deregulation of the City of London, Branko Milanovic, call centre, carbon tax, centre right, clean tech, clean water, collapse of Lehman Brothers, collateralized debt obligation, commoditize, Credit Default Swap, credit default swaps / collateralized debt obligations, dark matter, Deng Xiaoping, Diane Coyle, Donald Trump, double entry bookkeeping, Easter island, Erik Brynjolfsson, falling living standards, financial deregulation, financial engineering, financial intermediation, financial repression, Gini coefficient, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Google Hangouts, Great Leap Forward, Hans Rosling, happiness index / gross national happiness, Higgs boson, high-speed rail, income inequality, income per capita, informal economy, invisible hand, Jeremy Corbyn, job satisfaction, Mahatma Gandhi, Mahbub ul Haq, market fundamentalism, Martin Wolf, means of production, military-industrial complex, Monkeys Reject Unequal Pay, mortgage debt, off grid, old-boy network, Panopticon Jeremy Bentham, peak oil, performance metric, pez dispenser, profit motive, purchasing power parity, race to the bottom, rent-seeking, Robert Gordon, Ronald Reagan, Rory Sutherland, science of happiness, shareholder value, sharing economy, Simon Kuznets, sovereign wealth fund, TED Talk, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Malthus, total factor productivity, Tragedy of the Commons, transaction costs, transfer pricing, trickle-down economics, urban sprawl, women in the workforce, World Values Survey

In the hope that he was wrong about that, I hope you’ll read on. * * * — We all sense instinctively that something is wrong. But we struggle to put our finger on it. The global financial crisis of 2008 was the ultimate signal that economics had let us down. In the run-up to the collapse of Lehman Brothers and the onset of recession in virtually the whole Western world, the cult of growth had led us to celebrate our economies. People like Alan Greenspan, chairman of the Federal Reserve, said everything was going swimmingly and that the markets should be left alone to create ever more wealth.


pages: 280 words: 74,559

Fully Automated Luxury Communism by Aaron Bastani

"Peter Beck" AND "Rocket Lab", Alan Greenspan, Anthropocene, autonomous vehicles, banking crisis, basic income, Berlin Wall, Bernie Sanders, Boston Dynamics, Bretton Woods, Brexit referendum, capital controls, capitalist realism, cashless society, central bank independence, collapse of Lehman Brothers, computer age, computer vision, CRISPR, David Ricardo: comparative advantage, decarbonisation, deep learning, dematerialisation, DIY culture, Donald Trump, double helix, driverless car, electricity market, Elon Musk, energy transition, Erik Brynjolfsson, fake news, financial independence, Francis Fukuyama: the end of history, future of work, Future Shock, G4S, general purpose technology, Geoffrey Hinton, Gregor Mendel, housing crisis, income inequality, industrial robot, Intergovernmental Panel on Climate Change (IPCC), Internet of things, Isaac Newton, James Watt: steam engine, Jeff Bezos, Jeremy Corbyn, Jevons paradox, job automation, John Markoff, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kevin Kelly, Kuiper Belt, land reform, Leo Hollis, liberal capitalism, low earth orbit, low interest rates, low skilled workers, M-Pesa, market fundamentalism, means of production, mobile money, more computing power than Apollo, new economy, off grid, pattern recognition, Peter H. Diamandis: Planetary Resources, post scarcity, post-work, price mechanism, price stability, private spaceflight, Productivity paradox, profit motive, race to the bottom, rewilding, RFID, rising living standards, Robert Solow, scientific management, Second Machine Age, self-driving car, sensor fusion, shareholder value, Silicon Valley, Simon Kuznets, Slavoj Žižek, SoftBank, stem cell, Stewart Brand, synthetic biology, technological determinism, technoutopianism, the built environment, the scientific method, The Wealth of Nations by Adam Smith, Thomas Malthus, transatlantic slave trade, Travis Kalanick, universal basic income, V2 rocket, Watson beat the top human players on Jeopardy!, We are as Gods, Whole Earth Catalog, working-age population

Even that paled into insignificance, however, when in 2016 Britain voted to leave the European Union, becoming the first member-state in its history to do so. While ‘Brexit’ was the most important political moment in Europe for a generation, it was soon outdone by events across the Atlantic when, just a few months later, Donald Trump was elected the forty-fifth president of the United States. Less than a decade after the collapse of Lehman Brothers in 2008, it was now undeniable. An expansionist Russia, isolationist Britain and broken economic model had all been outdone by a reality TV star becoming the most powerful person on Earth. History was back. Trump’s inauguration speech the following February stood in defiant contrast to the heady rhetoric of his predecessor, Barack Obama, when he assumed office eight years earlier.


pages: 318 words: 77,223

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

"World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Airbnb, Alan Greenspan, balance sheet recession, bank run, barriers to entry, Bear Stearns, behavioural economics, Black Monday: stock market crash in 1987, break the buck, Bretton Woods, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, collapse of Lehman Brothers, corporate governance, currency peg, disruptive innovation, driverless car, Erik Brynjolfsson, eurozone crisis, fear index, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, fixed income, Flash crash, forward guidance, friendly fire, full employment, future of work, geopolitical risk, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, income inequality, inflation targeting, Jeff Bezos, Kenneth Rogoff, Khan Academy, liquidity trap, low interest rates, Martin Wolf, megacity, Mexican peso crisis / tequila crisis, moral hazard, mortgage debt, Norman Mailer, oil shale / tar sands, price stability, principal–agent problem, quantitative easing, risk tolerance, risk-adjusted returns, risk/return, Second Machine Age, secular stagnation, sharing economy, Sheryl Sandberg, sovereign wealth fund, The Great Moderation, The Wisdom of Crowds, too big to fail, University of East Anglia, yield curve, zero-sum game

But it is even more costly not to think about a crisis that does occur (Type II). In taking this approach, I have been heavily influenced not just by my fifteen-year tenure at the IMF, where involvement in tricky crisis management situations was quite common, but also by what I lived through during the disorderly collapse of Lehman Brothers in September 2008. Conventional wisdom is that PIMCO must have predicted Lehman’s collapse. After all, the vast majority of the firm’s clients not only avoided large losses but also outperformed by making money on the funds that had been entrusted to us for investment management services.


pages: 183 words: 17,571

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

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

During the Great Moderation, individuals and institutions learned that the market was back-stopped by the state, their profits were theirs to keep, and their losses would be picked up by the taxpayer. The Great Panic: Cause and Effect Much 20/20 hindsight lavished on the financial market meltdown revolves around the collapse of Lehman Brothers and the market freefall that ensued. What made the event so shocking was that the Great Moderation had taught the global financial economy that a large market player with huge obligations to and from other key players would somehow be saved. Certainly Lehman’s management must have made this assumption.


pages: 280 words: 79,029

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

Affordable Care Act / Obamacare, Alan Greenspan, algorithmic trading, Andrei Shleifer, asset-backed security, availability heuristic, bank run, banking crisis, behavioural economics, Black Monday: stock market crash in 1987, Black-Scholes formula, bonus culture, break the buck, Bretton Woods, call centre, Carmen Reinhart, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, David Graeber, diversification, diversified portfolio, Edmond Halley, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, eurozone crisis, family office, financial deregulation, financial engineering, financial innovation, fixed income, Flash crash, Google Glasses, Gordon Gekko, high net worth, housing crisis, Hyman Minsky, impact investing, implied volatility, income inequality, index fund, information asymmetry, Innovator's Dilemma, interest rate swap, Kenneth Rogoff, Kickstarter, late fees, London Interbank Offered Rate, Long Term Capital Management, longitudinal study, loss aversion, low interest rates, margin call, Mark Zuckerberg, McMansion, Minsky moment, money market fund, mortgage debt, mortgage tax deduction, Myron Scholes, negative equity, Network effects, Northern Rock, obamacare, payday loans, peer-to-peer lending, Peter Thiel, principal–agent problem, profit maximization, quantitative trading / quantitative finance, railway mania, randomized controlled trial, Richard Feynman, Richard Thaler, risk tolerance, risk-adjusted returns, Robert Shiller, Savings and loan crisis, short selling, Silicon Valley, Silicon Valley startup, Skype, South Sea Bubble, sovereign wealth fund, statistical model, subprime mortgage crisis, tail risk, Thales of Miletus, the long tail, transaction costs, Tunguska event, unbanked and underbanked, underbanked, Vanguard fund, web application

One HSBC veteran happily recounted stories of the financial crisis that gripped Asia in the late 1990s, when tellers were instructed to bring piles of cash into view to reassure people that banks were overflowing with money. Tales of improvisation from Asia were not supposed to be relevant to the West’s ultrasophisticated financial system. But far worse was to come. A chain of events was under way that would lead in time to the collapse of Lehman Brothers, a huge US investment bank, state takeovers of swaths of the rich world’s banking systems, a deep global recession, and the Eurozone debt crisis. I observed these later phases of the crisis from the position of the Economist’s finance editor, a post that I held from July 2009 until October 2013.


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

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

The following day he packed his bags and caught a flight back to Washington to tell his colleagues they had a case on their hands. The Fix: How Bankers Lied, Cheated and Colluded to Rig the World’s Most Important Number By Liam Vaughan and Gavin Finch © 2017 Liam Vaughan and Gavin Finch Chapter 10 Goodbye, Big Nose A fter single-handedly saving UBS tens of millions of dollars following the collapse of Lehman Brothers, Hayes saw out the year in style with a trip to Las Vegas with Sarah Tighe. The couple had been together just over a year, and Hayes had never been happier. What he’d done to deserve this intelligent, attractive woman he didn’t know, but he was smitten. As the clock counted down to midnight on New Year’s Eve, amid the bright lights of the Strip, Hayes asked Tighe to marry him.


pages: 272 words: 76,154

How Boards Work: And How They Can Work Better in a Chaotic World by Dambisa Moyo

"Friedman doctrine" OR "shareholder theory", activist fund / activist shareholder / activist investor, Airbnb, algorithmic trading, Amazon Web Services, AOL-Time Warner, asset allocation, barriers to entry, Ben Horowitz, Big Tech, bitcoin, Black Lives Matter, blockchain, Boeing 737 MAX, Bretton Woods, business cycle, business process, buy and hold, call centre, capital controls, carbon footprint, collapse of Lehman Brothers, coronavirus, corporate governance, corporate social responsibility, COVID-19, creative destruction, cryptocurrency, deglobalization, don't be evil, Donald Trump, fake news, financial engineering, gender pay gap, geopolitical risk, George Floyd, gig economy, glass ceiling, global pandemic, global supply chain, hiring and firing, income inequality, index fund, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Jeff Bezos, knowledge economy, labor-force participation, long term incentive plan, low interest rates, Lyft, money: store of value / unit of account / medium of exchange, multilevel marketing, Network effects, new economy, old-boy network, Pareto efficiency, passive investing, Pershing Square Capital Management, proprietary trading, remote working, Ronald Coase, Savings and loan crisis, search costs, shareholder value, Shoshana Zuboff, Silicon Valley, social distancing, Social Responsibility of Business Is to Increase Its Profits, SoftBank, sovereign wealth fund, surveillance capitalism, The Nature of the Firm, Tim Cook: Apple, too big to fail, trade route, Travis Kalanick, uber lyft, Vanguard fund, Washington Consensus, WeWork, women in the workforce, work culture

The 2020 global pandemic and economic shutdown has offered an unnerving idea of what economic carnage might look like in terms of spiking unemployment and plummeting growth prospects, especially in the most affected sectors of travel, tourism, and retail. Recent memory provides plenty of examples of the fallout of individual corporate failure. Kmart’s bankruptcy and restructuring in 2002–2003 led to over sixty thousand job losses. The collapse of Lehman Brothers at the start of the financial crisis in 2008 destroyed nearly $700 billion and paralyzed the financial system. That crisis writ large had a devastating effect across the whole economy. A huge number of families defaulted on their mortgages and had their homes repossessed, with disastrous consequences for communities.


pages: 318 words: 78,451

Kanban: Successful Evolutionary Change for Your Technology Business by David J. Anderson

airport security, anti-pattern, business intelligence, call centre, collapse of Lehman Brothers, continuous integration, corporate governance, database schema, domain-specific language, index card, Kaizen: continuous improvement, Kanban, knowledge worker, lateral thinking, loose coupling, performance metric, six sigma, systems thinking, tacit knowledge, Toyota Production System, transaction costs

By aligning all the groups up and down the value stream with the same goals, there is an incentive for swarming behavior to emerge. Everyone wins when idle people volunteer to collaborate to resolve an issue that affects them even though it is not in their immediate work area or area of responsibility. Other Market Factors In October 2008, following the collapse of Lehman Brothers and series of related traumatic events in the financial sector, banks and investment firms in leading financial centers such as London and New York started to cancel or significantly modify IT projects in development. The reason was that their world had been turned upside down. They were fighting for their survival.


pages: 701 words: 199,010

The Crisis of Crowding: Quant Copycats, Ugly Models, and the New Crash Normal by Ludwig B. Chincarini

affirmative action, Alan Greenspan, asset-backed security, automated trading system, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Black-Scholes formula, Bob Litterman, business cycle, buttonwood tree, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, corporate governance, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, delta neutral, discounted cash flows, diversification, diversified portfolio, family office, financial engineering, financial innovation, financial intermediation, fixed income, Flash crash, full employment, Gini coefficient, Glass-Steagall Act, global macro, high net worth, hindsight bias, housing crisis, implied volatility, income inequality, interest rate derivative, interest rate swap, John Meriwether, Kickstarter, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low interest rates, low skilled workers, managed futures, margin call, market design, market fundamentalism, merger arbitrage, Mexican peso crisis / tequila crisis, Mitch Kapor, money market fund, moral hazard, mortgage debt, Myron Scholes, National best bid and offer, negative equity, Northern Rock, Occupy movement, oil shock, price stability, proprietary trading, quantitative easing, quantitative hedge fund, quantitative trading / quantitative finance, Ralph Waldo Emerson, regulatory arbitrage, Renaissance Technologies, risk free rate, risk tolerance, risk-adjusted returns, Robert Shiller, Ronald Reagan, Sam Peltzman, Savings and loan crisis, Sharpe ratio, short selling, sovereign wealth fund, speech recognition, statistical arbitrage, statistical model, survivorship bias, systematic trading, tail risk, The Great Moderation, too big to fail, transaction costs, value at risk, yield curve, zero-coupon bond

Claims against Lehman executives, Richard Fuld, Chris O’Meara, Erin Callan, Ian Lowitt, and against the auditor, Ernst & Young, for failing to adequately disclose the practice of Repo 105. 6. Claims against J.P. Morgan and CitiBank due to their modifications of guarantee agreements and demands for extra collateral from Lehman Brothers in the final days of Lehman’s existence. They found these demands directly impacted Lehman’s liquidity pool and were central in the collapse of Lehman Brothers. Who Would Have Been Next? Once Lehman Brothers failed, the stock prices of remaining investment banks immediately began collapsing (see Figure 11.5). From September 15 to September 18, Goldman Sachs fell 30% and Morgan Stanley fell 39%. By September 15, 2008, the residential real estate market had fallen a total of 23% from its peak.

Associated Press Online, September 15, 2008. Martin, Timothy. “Atlanta School Scandal Sparks House Cleaning.” BusinessWeek, July 13, 2011. McDermott, Daniel. “In Search of Certainty.” Wall Street Journal, June 27, 2011. McDonald, Lawrence G. and Patrick Robinson. A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers. Crown Publishing Group, 2009. McGeehan, Patrick. “Lehman Offers a Rare Glimpse of Risk Profile.” Wall Street Journal, October 6, 1998. McGrane, Victoria and Deborah Salomon. “CFTC Chief Feels Need for Speed.” Wall Street Journal, December 14, 2010. McGrane, Victoria and Robin Sidel.


pages: 700 words: 201,953

The Social Life of Money by Nigel Dodd

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

What began as a crisis in the U.S. subprime mortgage market in 2007 was now manifesting itself as a slow-motion bank run. This problem was not confined to Greece but was happening throughout the Eurozone amid widespread doubt about the future of a project that had been launched with such optimism a little more than a decade before. Since the collapse of Lehman Brothers in September 2008, the world’s major central banks have been plowing vast quantities of money into the banking system. The U.S. Federal Reserve has made commitments totaling some $29 trillion, lending $7 trillion to banks during the course of one single fraught week. The Bank of England has spent around £325 billion on quantitative easing alone—a figure that could yet rise to £600 billion—while the U.K. government has committed a total of £1.162 trillion to bank rescues.

In block capitals drawn in black felt tip pen were the words, “If Karl Marx was alive he would say ‘I told you so.’ ”2 Five days earlier, financial services firm Lehman Brothers had filed for Chapter 11 bankruptcy protection in a case that remains the biggest in U.S. history. The firm held more than $600 billion in assets. The Financial Times headline warned of a “Day of Reckoning on Wall Street”; the Telegraph called it “Meltdown Monday”; and Hong Kong’s South China Morning Post simply said, “Wall Street Crumbles.” One month after the collapse of Lehman Brothers, The Times (London) carried a feature on Marx under the headline, “Did he get it all right?”3 And as sales of Capital increased threefold, a quotation from the book, suggesting that Marx had shown prescience worthy of Nostradamus, went viral on the Internet. It read, “Owners of capital will stimulate the working class to buy more and more of expensive goods … until their debt becomes unbearable.


pages: 935 words: 197,338

The Power Law: Venture Capital and the Making of the New Future by Sebastian Mallaby

"Susan Fowler" uber, 23andMe, 90 percent rule, Adam Neumann (WeWork), adjacent possible, Airbnb, Apple II, barriers to entry, Ben Horowitz, Benchmark Capital, Big Tech, bike sharing, Black Lives Matter, Blitzscaling, Bob Noyce, book value, business process, charter city, Chuck Templeton: OpenTable:, Clayton Christensen, clean tech, cloud computing, cognitive bias, collapse of Lehman Brothers, Colonization of Mars, computer vision, coronavirus, corporate governance, COVID-19, cryptocurrency, deal flow, Didi Chuxing, digital map, discounted cash flows, disruptive innovation, Donald Trump, Douglas Engelbart, driverless car, Dutch auction, Dynabook, Elon Musk, Fairchild Semiconductor, fake news, family office, financial engineering, future of work, game design, George Gilder, Greyball, guns versus butter model, Hacker Ethic, Henry Singleton, hiring and firing, Hyperloop, income inequality, industrial cluster, intangible asset, iterative process, Jeff Bezos, John Markoff, junk bonds, Kickstarter, knowledge economy, lateral thinking, liberal capitalism, Louis Pasteur, low interest rates, Lyft, Marc Andreessen, Mark Zuckerberg, market bubble, Marshall McLuhan, Mary Meeker, Masayoshi Son, Max Levchin, Metcalfe’s law, Michael Milken, microdosing, military-industrial complex, Mitch Kapor, mortgage debt, move fast and break things, Network effects, oil shock, PalmPilot, pattern recognition, Paul Graham, paypal mafia, Peter Thiel, plant based meat, plutocrats, power law, pre–internet, price mechanism, price stability, proprietary trading, prudent man rule, quantitative easing, radical decentralization, Recombinant DNA, remote working, ride hailing / ride sharing, risk tolerance, risk/return, Robert Metcalfe, ROLM, rolodex, Ronald Coase, Salesforce, Sam Altman, Sand Hill Road, self-driving car, shareholder value, side project, Silicon Valley, Silicon Valley startup, Skype, smart grid, SoftBank, software is eating the world, sovereign wealth fund, Startup school, Steve Jobs, Steve Wozniak, Steven Levy, super pumped, superconnector, survivorship bias, tech worker, Teledyne, the long tail, the new new thing, the strength of weak ties, TikTok, Travis Kalanick, two and twenty, Uber and Lyft, Uber for X, uber lyft, urban decay, UUNET, vertical integration, Vilfredo Pareto, Vision Fund, wealth creators, WeWork, William Shockley: the traitorous eight, Y Combinator, Zenefits

Now would Yu see him? Surprised, curious, even a little bit impressed, Yu suggested a meeting at the Starbucks in Palo Alto. It was his job to raise capital for Facebook, after all, and these days even implausible investors were worth seeing. In the wake of the financial crisis triggered by the collapse of Lehman Brothers, U.S. pension funds and endowments were scared. The VCs who invested their money were holding back from new commitments. Yu arrived at the Starbucks and found Milner already there, together with a business partner who had flown in from London.[2] The Russian ordered black tea and proceeded to lay out his proposal.

“There was no whiteboard discussion about ‘Hey, let’s be private-equity investors,’” Coleman said later.[27] But by moving sideways from hedge-fund stock picking into private technology bets, Tiger had created the template for Milner’s later Facebook investment. The Tiger tool kit featured the global tabulation of tech business segments, the modeling of earnings and fair value, and rapid intercontinental opportunism in response to a shock—in Tiger’s case, SARS; in Milner’s case, the collapse of Lehman Brothers. Yet in order for Milner to learn from Tiger’s template, he had to know of its existence. At the end of 2003, around the time that Ctrip went public, Shleifer flew to Moscow. He was looking, again, for “the this of the that”: he had heard that Russia had two Yahoos and a Google. His first meeting took place at a bar on the roof of a hotel.


pages: 394 words: 85,734

The Global Minotaur by Yanis Varoufakis, Paul Mason

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

Marx, K. (1972) Capital, Vols. I–III, London: Lawrence and Wishart. Marx, K. (1973) Grundrisse: Foundations of the Critique of Political Economy (Rough Draft), trans. Martin Nicolaus, Harmondsworth: Penguin. McDonald, L. with P. Robinson (2009) A Colossal Failure of Common Sense: The inside story of the collapse of Lehman Brothers, London: Ebury Press. Minsky, H. (2008) Stabilizing an Unstable Economy, New York: McGraw-Hill. Parker, D. (2009) The Official History of Privatisation, Vol. 1, The Formative Years 1970–1987, London: Routledge. Reinhart, C. and K. Rogoff (2009) This Time Is Different: Eight centuries of financial folly, Princeton, NJ: Princeton University Press.


pages: 302 words: 86,614

The Alpha Masters: Unlocking the Genius of the World's Top Hedge Funds by Maneet Ahuja, Myron Scholes, Mohamed El-Erian

"World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Alan Greenspan, Asian financial crisis, asset allocation, asset-backed security, backtesting, Bear Stearns, Bernie Madoff, book value, Bretton Woods, business process, call centre, Carl Icahn, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, en.wikipedia.org, family office, financial engineering, fixed income, global macro, high net worth, high-speed rail, impact investing, interest rate derivative, Isaac Newton, Jim Simons, junk bonds, Long Term Capital Management, managed futures, Marc Andreessen, Mark Zuckerberg, merger arbitrage, Michael Milken, Myron Scholes, NetJets, oil shock, pattern recognition, Pershing Square Capital Management, Ponzi scheme, proprietary trading, quantitative easing, quantitative trading / quantitative finance, Renaissance Technologies, risk-adjusted returns, risk/return, rolodex, Savings and loan crisis, short selling, Silicon Valley, South Sea Bubble, statistical model, Steve Jobs, stock buybacks, systematic bias, systematic trading, tail risk, two and twenty, zero-sum game

That year turned out to be the turbulent 2008. Sensing a period of difficulty, Weinstein’s group was positioned cautiously. Consequently, says Weinstein, “all through the Bear Stearns collapse and into the summer, we were slightly ahead for the year, which was a decent result.” Then came the collapse of Lehman Brothers. “That in itself wasn’t the problem for a fund that is both long and short, but it was the secondary effect, where people actually thought Goldman Sachs and Morgan Stanley could go under, that was stunning.” As part of Deutsche’s senior management, Weinstein spent that dramatic “Lehman Weekend” at the Federal Reserve Bank in New York, in the company of senior government officials and the top executives of the other large banks, attempting to work out contingency plans.


pages: 332 words: 81,289

Smarter Investing by Tim Hale

Albert Einstein, asset allocation, buy and hold, buy low sell high, capital asset pricing model, classic study, collapse of Lehman Brothers, corporate governance, credit crunch, currency risk, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, Donald Trump, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, eurozone crisis, fiat currency, financial engineering, financial independence, financial innovation, fixed income, full employment, Future Shock, implied volatility, index fund, information asymmetry, Isaac Newton, John Bogle, John Meriwether, Long Term Capital Management, low interest rates, managed futures, Northern Rock, passive investing, Ponzi scheme, purchasing power parity, quantitative easing, random walk, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, South Sea Bubble, technology bubble, the rule of 72, time value of money, transaction costs, Vanguard fund, women in the workforce, zero-sum game

12.4 Gold Gold has always been an asset that has attracted significant attention, particularly as a store of value at times of extreme uncertainty. A case can certainly be made for holding some physical gold, perhaps in the form of coins or ingots, in the liquidity reserves of those who fear the breakdown of fiat currencies at times of extreme market events such as those surrounding the collapse of Lehman Brothers. In the extreme collapse of the financial system, paper gold (e.g. via a gold fund) would be less favourable given the counterparty risk of failure and inability to access the value of the gold. This is a purely personal decision that sits outside a long-term investment portfolio. Does it have a strategic role in your portfolio?


pages: 348 words: 82,499

DIY Investor: How to Take Control of Your Investments & Plan for a Financially Secure Future by Andy Bell

asset allocation, bank run, Bear Stearns, Black Monday: stock market crash in 1987, buy and hold, collapse of Lehman Brothers, credit crunch, currency risk, diversification, diversified portfolio, estate planning, eurozone crisis, fixed income, high net worth, hiring and firing, Isaac Newton, junk bonds, Kickstarter, lateral thinking, low interest rates, money market fund, Northern Rock, passive investing, place-making, quantitative easing, selection bias, short selling, South Sea Bubble, technology bubble, transaction costs, Vanguard fund

The UK fared worse than most in that crash, with the FT30, then the leading index in this country, falling 73 per cent top to bottom. Since then we have lived through 1987’s Black Monday, 1992’s Black Wednesday, 1997’s Asian Crisis, 1998’s Russian Crisis, 2000’s dot.com bubble, the 9/11 market falls and the 2002 downturn, among others. Then, of course, there was the credit crunch of 2008, kicked off by the collapse of Lehman Brothers, which triggered the global financial crisis that developed economies are still struggling to extricate themselves from to this day. And it is fairly certain there will be more along in the future. But don’t let that put you off. Easy to say, you might think, but with all that bad news, why would anyone want to invest in equities?


pages: 285 words: 86,174

Twilight of the Elites: America After Meritocracy by Chris Hayes

"Hurricane Katrina" Superdome, "World Economic Forum" Davos, affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, barriers to entry, Bear Stearns, Berlin Wall, Bernie Madoff, carried interest, circulation of elites, Climategate, Climatic Research Unit, collapse of Lehman Brothers, collective bargaining, creative destruction, Credit Default Swap, dark matter, David Brooks, David Graeber, deindustrialization, Fall of the Berlin Wall, financial deregulation, fixed income, full employment, George Akerlof, Gunnar Myrdal, hiring and firing, income inequality, Jane Jacobs, jimmy wales, Julian Assange, Kenneth Arrow, Mark Zuckerberg, mass affluent, mass incarceration, means of production, meritocracy, meta-analysis, military-industrial complex, money market fund, moral hazard, Naomi Klein, Nate Silver, peak oil, plutocrats, Ponzi scheme, post-truth, radical decentralization, Ralph Waldo Emerson, rolodex, Savings and loan crisis, The Spirit Level, too big to fail, University of East Anglia, Vilfredo Pareto, We are the 99%, WikiLeaks, women in the workforce

., “Racial and Ethnic Residential Segregation in the Chicago Metropolitan Area, 1980–2009,” in Institute of Government & Public Affairs, University of Illinois, Changing American Neighborhoods and Communities Report, Series 2, p. 2. 10 26 percent of Americans lived in what Bishop calls “landslide counties”: Bill Bishop, The Big Sort: Why the Cluster of Like-Minded America Is Tearing Us Apart (Boston: Houghton Mifflin Harcourt, 2009), p. 9. 11 Dick Fuld … had a separate elevator that was commandeered: See “A Look Back at the Collapse of Lehman Brothers,” PBS NewsHour, http://www.pbs.org/newshour/bb/business/july-dec09/solmanlehman_09-14.html, accessed January 23, 2012. 12 “They help him focus on the real problems people are facing”: See Stephen Splane, “ ‘Dear President Obama’: The President Reads 10 Letters a Day from the Public, with Policy Ramifications,” ABC News, February 23, 2009. 13 The high-power group were far more likely to draw an “E” as if they were reading it themselves: Adam Galinsky et al., “Power and Perspectives Not Taken,” Psychological Science 17, no. 12 (2006): 1069, http://www.kellogg.northwestern.edu/faculty/galinsky/power%252520and%252520perspective-taking%252520psych%252520science%2525202006.pdf, accessed January 23, 2012. 14 “made more accurate inferences about emotion”: Michael W.


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

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

Said another way, banks would have to apply a 100 percent compulsory reserves rule, and since no bank-debt money could be created at all, banks would de facto be limited to the role of money brokers.17 The Glass-Steagall Act was repealed with the Gramm-Leach-Bliley Act, signed by President Clinton. Since then, this repeal has been blamed for triggering the subprime crisis and the collapse of Lehman Brothers in September 2008, which in turn precipitated the global banking scramble, leaving so many governments overindebted. The 1930s debate—whether to reinstate some form of the GlassSteagall Act or implement some version of the Chicago Plan—is now starting all over again. Although unofficial reports have surfaced that several nations are discussing the latter strategy, there are clear reasons that the Chicago Plan isn’t the best solution available, given the current understanding of systems.


pages: 263 words: 80,594

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

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

They lived through the death of the world of neoliberal prosperity, and the birth of the world of post-crisis stagnation. They could see the contingency of the existing order. Suddenly, another world was possible again. But what kind of world would it be? Ten and a half years to the day after the collapse of Lehman Brothers, the planet was presented with two potential futures. On 15 March 2019, a white supremacist opened fire on a mosque in Christchurch, New Zealand, killing forty-nine people, from young children to the elderly. The killer, Brenton Tarrant, posted a “manifesto” on Twitter before the shooting, in which he claimed that it was necessary to create a “climate of fear” for Muslims living in the West to prevent a “white genocide”.


pages: 323 words: 95,492

The Rise of the Outsiders: How Mainstream Politics Lost Its Way by Steve Richards

"World Economic Forum" Davos, Affordable Care Act / Obamacare, Airbnb, banking crisis, battle of ideas, Bernie Sanders, Boris Johnson, Brexit referendum, call centre, centre right, collapse of Lehman Brothers, David Brooks, Dominic Cummings, Donald Trump, driverless car, Etonian, eurozone crisis, fake news, falling living standards, full employment, gentrification, high-speed rail, housing crisis, Jeremy Corbyn, low skilled workers, manufacturing employment, Martin Wolf, mass immigration, Neil Kinnock, obamacare, Occupy movement, post-truth, Ronald Reagan, Silicon Valley, Steve Bannon

The crash changed the dynamics of politics immediately. What was the right thing to do not only became politically possible, but urgently necessary. Yet the centre left was trapped by its immediate past and its failure to form accessible arguments about what needed to be done next. In the days leading up to the collapse of Lehman Brothers, the then Cabinet minister, Ed Miliband, caught the end of a radio interview with two guests pleading for governments to intervene, in order to prevent a financial crash across the globe. He assumed that the interviewees were two left-wingers. To his delighted amazement, one was from Goldman Sachs and the other was from Lehman’s, which was heading towards the cliff’s edge.


pages: 351 words: 93,982

Leading From the Emerging Future: From Ego-System to Eco-System Economies by Otto Scharmer, Katrin Kaufer

Affordable Care Act / Obamacare, agricultural Revolution, Albert Einstein, Asian financial crisis, Basel III, behavioural economics, Berlin Wall, Branko Milanovic, cloud computing, collaborative consumption, collapse of Lehman Brothers, colonial rule, Community Supported Agriculture, creative destruction, crowdsourcing, deep learning, dematerialisation, Deng Xiaoping, do what you love, en.wikipedia.org, European colonialism, Fractional reserve banking, Garrett Hardin, Glass-Steagall Act, global supply chain, happiness index / gross national happiness, high net worth, housing crisis, income inequality, income per capita, intentional community, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Johann Wolfgang von Goethe, Joseph Schumpeter, Kickstarter, market bubble, mass immigration, Mikhail Gorbachev, Mohammed Bouazizi, mutually assured destruction, Naomi Klein, new economy, offshore financial centre, Paradox of Choice, peak oil, ride hailing / ride sharing, Ronald Reagan, Silicon Valley, smart grid, Steve Jobs, systems thinking, technology bubble, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, Tragedy of the Commons, vertical integration, Washington Consensus, working poor, Zipcar

Sadly, the emerging failures of the EU prove the same point. Bad economics and bad politics result from defining one’s self-interest too narrowly. In the euro crisis, we can see in a nutshell how a narrowly defined self-interest translates into poor economic and political decision-making. In September 2008, after the collapse of Lehman Brothers, the German finance minister claimed in front of the parliament that this was an American problem, not a European or German problem.13 The second and bigger error of judgment happened on October 12, 2008, when the German chancellor and finance minister met with their EU colleagues in Paris at the first crisis summit and decided that each country would develop its own rescue mechanism rather than a joint European mechanism that could have taken care of all of them.14 What is missing from how this story unfolded is a moment of reflective disruption in which all players would have come together, looked in the mirror, and realized what they were doing to themselves.


pages: 344 words: 93,858

The Post-American World: Release 2.0 by Fareed Zakaria

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

In the two decades since the end of the Cold War, we have lived through a paradox, one we experience every morning when reading the newspapers. The world’s politics seems deeply troubled, with daily reports of bombings, terror plots, rogue states, and civil strife. And yet the global economy forges ahead. As the events beginning with the collapse of Lehman Brothers reminded us, markets do panic—but over economic, not political news. The front page of the newspaper often seems unconnected to the business section. I remember speaking to a senior member of the Israeli government a few days after the war with Hezbollah in July 2006. He was genuinely worried about his country’s physical security.


pages: 294 words: 89,406

Lying for Money: How Fraud Makes the World Go Round by Daniel Davies

Alan Greenspan, bank run, banking crisis, Bernie Madoff, bitcoin, Black Swan, Bretton Woods, business cycle, business process, collapse of Lehman Brothers, compound rate of return, cryptocurrency, fake it until you make it, financial deregulation, fixed income, Frederick Winslow Taylor, Gordon Gekko, high net worth, illegal immigration, index arbitrage, junk bonds, Michael Milken, multilevel marketing, Nick Leeson, offshore financial centre, Peter Thiel, Ponzi scheme, price mechanism, principal–agent problem, railway mania, Ronald Coase, Ronald Reagan, Savings and loan crisis, scientific management, short selling, social web, South Sea Bubble, tacit knowledge, tail risk, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, time value of money, vertical integration, web of trust

Other markets rose and fell, stock exchanges mutated and were taken over by super-fast robots, but the LIBOR rate for the day was still determined by a process that could only slightly unfairly be termed ‘a quick ring-around’. Nobody noticed until it was too late that hundreds of trillions of dollars* of the world economy rested on a number compiled by the few dozen people in the world with the greatest incentive to fiddle it. It all fell apart in the immediate aftermath of the collapse of Lehman Brothers in 2008, when banks were so scared that they effectively stopped lending to each other. Although the market was completely frozen, the daily LIBOR ring-around still took place, and banks still gave, almost entirely speculatively, answers to the question ‘If you were to borrow a reasonable size, what would you expect to pay?’.


pages: 344 words: 94,332

The 100-Year Life: Living and Working in an Age of Longevity by Lynda Gratton, Andrew Scott

"World Economic Forum" Davos, 3D printing, Airbnb, asset light, assortative mating, behavioural economics, carbon footprint, carbon tax, classic study, Clayton Christensen, collapse of Lehman Brothers, creative destruction, crowdsourcing, deep learning, delayed gratification, disruptive innovation, diversification, Downton Abbey, driverless car, Erik Brynjolfsson, falling living standards, financial engineering, financial independence, first square of the chessboard, first square of the chessboard / second half of the chessboard, future of work, gender pay gap, gig economy, Google Glasses, indoor plumbing, information retrieval, intangible asset, Isaac Newton, job satisfaction, longitudinal study, low skilled workers, Lyft, Nelson Mandela, Network effects, New Economic Geography, old age dependency ratio, pattern recognition, pension reform, Peter Thiel, Ray Kurzweil, Richard Florida, Richard Thaler, risk free rate, Second Machine Age, sharing economy, Sheryl Sandberg, side project, Silicon Valley, smart cities, Stanford marshmallow experiment, Stephen Hawking, Steve Jobs, tacit knowledge, The Future of Employment, uber lyft, warehouse robotics, women in the workforce, young professional

Further, even those who do invest in equities tend not to diversify enough; in other words, they invest in just a few specific companies. Second, when households do invest in equities they tend to have a ‘local’ bias, investing in stocks that are familiar to them or based nearby. Third, households tend to hold concentrated portfolios in the shares of their own employers and, as the collapse of Lehman Brothers demonstrated, by doing so they risk losing both their jobs and their wealth. Fourth, when it comes to selling assets, households tend to sell assets that have been rising in price and hold on to those that have fallen. Finally, there is the question of inertia. Households tend to have a ‘status quo bias’ and do not revisit their portfolios.


pages: 342 words: 94,762

Wait: The Art and Science of Delay by Frank Partnoy

algorithmic trading, Atul Gawande, behavioural economics, Bernie Madoff, Black Swan, blood diamond, Cass Sunstein, Checklist Manifesto, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate governance, cotton gin, Daniel Kahneman / Amos Tversky, delayed gratification, Flash crash, Frederick Winslow Taylor, George Akerlof, Google Earth, Hernando de Soto, High speed trading, impulse control, income inequality, information asymmetry, Isaac Newton, Long Term Capital Management, Menlo Park, mental accounting, meta-analysis, MITM: man-in-the-middle, Nick Leeson, paper trading, Paul Graham, payday loans, Pershing Square Capital Management, Ralph Nader, Richard Thaler, risk tolerance, Robert Shiller, Ronald Reagan, Saturday Night Live, scientific management, six sigma, social discount rate, Spread Networks laid a new fibre optics cable between New York and Chicago, Stanford marshmallow experiment, statistical model, Steve Jobs, systems thinking, The Market for Lemons, the scientific method, The Wealth of Nations by Adam Smith, upwardly mobile, Walter Mischel, work culture

Francesco Guerrera was born in Milan and has a first-class degree from City University in London. He has won numerous awards, including a Foreign Press Association Award for his investigation of “blood diamonds,” an Overseas Press Award for his scoop on CNOOC’s takeover bid for Unocal, and a SABEW Award for a video series on the collapse of Lehman Brothers.23 He is widely considered one of the world’s leading business reporters and is editor of the Wall Street Journal’s respected “Money and Investing” section. He is twenty-eight years younger than Kroft. When Guerrera began working as a journalist during the 1990s, technology had not yet transformed journalism, but it was about to.


pages: 324 words: 93,606

No Such Thing as a Free Gift: The Gates Foundation and the Price of Philanthropy by Linsey McGoey

"World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, agricultural Revolution, American Legislative Exchange Council, Bear Stearns, bitcoin, Bob Geldof, cashless society, clean water, cognitive dissonance, collapse of Lehman Brothers, colonial rule, corporate governance, corporate social responsibility, crony capitalism, effective altruism, Etonian, Evgeny Morozov, financial innovation, Food sovereignty, Ford paid five dollars a day, germ theory of disease, hiring and firing, Howard Zinn, Ida Tarbell, impact investing, income inequality, income per capita, invisible hand, Jane Jacobs, John Elkington, Joseph Schumpeter, Leo Hollis, liquidationism / Banker’s doctrine / the Treasury view, M-Pesa, Mahatma Gandhi, Mark Zuckerberg, meta-analysis, Michael Milken, microcredit, Mitch Kapor, Mont Pelerin Society, Naomi Klein, Neil Armstrong, obamacare, Peter Singer: altruism, Peter Thiel, plutocrats, price mechanism, profit motive, public intellectual, Ralph Waldo Emerson, rent-seeking, road to serfdom, Ronald Reagan, school choice, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, Slavoj Žižek, Steve Jobs, strikebreaker, subprime mortgage crisis, tacit knowledge, technological solutionism, TED Talk, The Wealth of Nations by Adam Smith, Thorstein Veblen, trickle-down economics, urban planning, W. E. B. Du Bois, wealth creators

The value of pro-market solutions particularly during times of economic catastrophe has been one of the most common themes to emerge out of the 2008 collapse, a crisis which initially led to questions over whether the private sector was, as Georgia Keohane writes, ‘the best exemplar of corporate governance, accountability, or long-term investment savvy’.39 At the 2009 Skoll World Forum, just months after the collapse of Lehman Brothers and Bear Stearns, there was very little acknowledgement of the role that business played in destabilizing markets. Rather, there was a remarkably self-congratulatory, proselytizing tenor to proceedings, a sense that the ‘new’ socially oriented entrepreneurship offered salvation in dark times.


pages: 312 words: 93,836

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

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

According to FSA transcripts,23 on Monday 17 March 2008, a LIBOR submitter at Barclays asked a manager: ‘I presume that you want me now to set LIBORs … exactly where the market is setting them?’ The manager confirmed that he did. Two days later, a submitter was instructed to lower Barclays’ submissions: ‘Just set it where everyone else sets it, we do not want to be standing out.’ A couple of weeks after the collapse of Lehman Brothers, on 8 October 2008, a submitter was asked about LIBOR in a phone conversation. The submitter responded that ‘[Manager E]’s asked me to put it lower than it was yesterday … to send the message that we’re not in the shit.’ The banks wanted to look good and sound relative to the others, but at the same time imitate the crowd to be ‘part of the pack’.


pages: 327 words: 90,013

Boundless: The Rise, Fall, and Escape of Carlos Ghosn by Nick Kostov

"World Economic Forum" Davos, airport security, bitcoin, business logic, collapse of Lehman Brothers, corporate governance, COVID-19, cryptocurrency, Donald Trump, glass ceiling, Google Earth, Les Trente Glorieuses, lockdown, Masayoshi Son, offshore financial centre, rolodex, self-driving car, Silicon Valley, the payments system

Alain Dassas was just the type. Before bringing him to Japan, Ghosn had put him in charge of Renault’s Formula One team and tasked him with ensuring that the program wasn’t a financial black hole. The accounting whiz was a year into his job at Nissan when the wheels of global finance seized up. The shocking collapse of Lehman Brothers in September 2008 shattered the bonds of trust that linked banks and corporations, pushing the world into a brutal economic recession. Consumers were afraid to buy cars, and banks were afraid to lend money. Vehicle sales collapsed, leaving carmakers in Detroit, Europe, and Asia scrambling to cut costs and fighting for survival.


pages: 443 words: 98,113

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

"World Economic Forum" Davos, 3D printing, Airbnb, Alan Greenspan, Albert Einstein, Amazon Mechanical Turk, anti-fragile, Asian financial crisis, asset-backed security, bank run, banking crisis, basic income, Ben Bernanke: helicopter money, Bernie Sanders, Big bang: deregulation of the City of London, Big Tech, bilateral investment treaty, Bonfire of the Vanities, Boris Johnson, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, carried interest, cashless society, central bank independence, centre right, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, commons-based peer production, credit crunch, crony capitalism, cross-border payments, crowdsourcing, debt deflation, declining real wages, deindustrialization, disruptive innovation, Doha Development Round, Donald Trump, Double Irish / Dutch Sandwich, ending welfare as we know it, eurozone crisis, Evgeny Morozov, falling living standards, financial deregulation, financial innovation, Firefox, first-past-the-post, future of work, Garrett Hardin, gentrification, gig economy, Goldman Sachs: Vampire Squid, Greenspan put, Growth in a Time of Debt, housing crisis, income inequality, independent contractor, information retrieval, intangible asset, invention of the steam engine, investor state dispute settlement, it's over 9,000, James Watt: steam engine, Jeremy Corbyn, job automation, John Maynard Keynes: technological unemployment, labour market flexibility, light touch regulation, Long Term Capital Management, low interest rates, lump of labour, Lyft, manufacturing employment, Mark Zuckerberg, market clearing, Martin Wolf, means of production, megaproject, mini-job, Money creation, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, Neil Kinnock, non-tariff barriers, North Sea oil, Northern Rock, nudge unit, Occupy movement, offshore financial centre, oil shale / tar sands, open economy, openstreetmap, patent troll, payday loans, peer-to-peer lending, Phillips curve, plutocrats, Ponzi scheme, precariat, quantitative easing, remote working, rent control, rent-seeking, ride hailing / ride sharing, Right to Buy, Robert Gordon, Ronald Coase, Ronald Reagan, Sam Altman, savings glut, Second Machine Age, secular stagnation, sharing economy, Silicon Valley, Silicon Valley startup, Simon Kuznets, SoftBank, sovereign wealth fund, Stephen Hawking, Steve Ballmer, structural adjustment programs, TaskRabbit, The Chicago School, The Future of Employment, the payments system, The Rise and Fall of American Growth, Thomas Malthus, Thorstein Veblen, too big to fail, Tragedy of the Commons, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, Y Combinator, zero-sum game, Zipcar

In early 2008, the Money Advice Trust, a British debt charity, estimated that the average person had only enough money to survive for fifty-two days if they lost their job; a third would run out of cash in just two weeks. So, there was little scope for resilience even before the financial crash. The subsequent shift of the debt burden onto households has made another financial crisis more likely. Adair Turner, former head of the UK’s Financial Services Authority, who took over days after the collapse of Lehman Brothers in 2008, has also argued that the 2008 crash was due to the stoking of household debt by the financial sector, especially to buy property.9 Traditionally, banks took deposits from households and lent to businesses to invest to expand production. These days, most lending is for property, mainly to buy existing assets rather than create new ones.


pages: 831 words: 98,409

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

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

Within just five days, one of the smallest economies in Europe had sparked a crisis that threatened to spread to Portugal and Spain, leading to fears of a currency breakup with incalculable consequences. A disorderly currency implosion, or only the fear thereof, triggering a run on the banks and a market crash was everyone’s worst nightmare. Following the traumatic collapse of Lehman Brothers in 2008, the U.S. administration was particularly worried about contagion in the global financial system spreading to U.S. shores. Therefore, it took the liberty of volunteering unsolicited advice and exerting gentle pressure on Europeans. From the perspective of their own more unified system and proactive mentality, they could not understand why the Europeans seemed so lethargic.


pages: 327 words: 103,336

Everything Is Obvious: *Once You Know the Answer by Duncan J. Watts

"World Economic Forum" Davos, active measures, affirmative action, Albert Einstein, Amazon Mechanical Turk, AOL-Time Warner, Bear Stearns, behavioural economics, Black Swan, business cycle, butterfly effect, carbon credits, Carmen Reinhart, Cass Sunstein, clockwork universe, cognitive dissonance, coherent worldview, collapse of Lehman Brothers, complexity theory, correlation does not imply causation, crowdsourcing, death of newspapers, discovery of DNA, East Village, easy for humans, difficult for computers, edge city, en.wikipedia.org, Erik Brynjolfsson, framing effect, Future Shock, Geoffrey West, Santa Fe Institute, George Santayana, happiness index / gross national happiness, Herman Kahn, high batting average, hindsight bias, illegal immigration, industrial cluster, interest rate swap, invention of the printing press, invention of the telescope, invisible hand, Isaac Newton, Jane Jacobs, Jeff Bezos, Joseph Schumpeter, Kenneth Rogoff, lake wobegon effect, Laplace demon, Long Term Capital Management, loss aversion, medical malpractice, meta-analysis, Milgram experiment, natural language processing, Netflix Prize, Network effects, oil shock, packet switching, pattern recognition, performance metric, phenotype, Pierre-Simon Laplace, planetary scale, prediction markets, pre–internet, RAND corporation, random walk, RFID, school choice, Silicon Valley, social contagion, social intelligence, statistical model, Steve Ballmer, Steve Jobs, Steve Wozniak, supply-chain management, tacit knowledge, The Death and Life of Great American Cities, the scientific method, The Wisdom of Crowds, too big to fail, Toyota Production System, Tragedy of the Commons, ultimatum game, urban planning, Vincenzo Peruggia: Mona Lisa, Watson beat the top human players on Jeopardy!, X Prize

McCotter, Trent. 2008. “Hitting Streaks Don’t Obey Your Rules.” New York Times, March 30. McDonald, Ian. 2005. “Bill Miller Dishes on His Streak and His Strategy.” Wall Street Journal, Jan. 6. McDonald, Lawrence G., and Patrick Robinson. 2009. A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers. New York: Crown Business. McFadden, Daniel. 1999. “Rationality for Economists?” Journal of Risk and Uncertainty 19 (1–3):73–105. McPherson, Miller J., and Lynn Smith-Lovin. 1987. “Homophily in Voluntary Organizations: Status Distance and the Composition of Face-to-Face Groups.” American Sociological Review 52:370–79.


pages: 342 words: 99,390

The greatest trade ever: the behind-the-scenes story of how John Paulson defied Wall Street and made financial history by Gregory Zuckerman

1960s counterculture, Alan Greenspan, banking crisis, Bear Stearns, collapse of Lehman Brothers, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, financial engineering, financial innovation, fixed income, index fund, Isaac Newton, Jim Simons, junk bonds, Larry Ellison, Long Term Capital Management, low interest rates, margin call, Mark Zuckerberg, Menlo Park, merger arbitrage, Michael Milken, mortgage debt, mortgage tax deduction, Ponzi scheme, Renaissance Technologies, rent control, Robert Shiller, rolodex, short selling, Silicon Valley, statistical arbitrage, Steve Ballmer, Steve Wozniak, technology bubble, zero-sum game

Carrick Mollenkamp, Susanne Craig, Jeffrey McCracken, and Jon Hilsenrath, “"The Two Faces of Lehman’'s Fall—--Private Talks of Raising Capital Belied Firm’'s Public Optimism,”" The Wall Street Journal, October 6, 2008; Lawrence G. McDonald with Patrick Robinson, A Colossal Failure of Common Sense—--The Inside Story of the Collapse of Lehman Brothers, New York: Crown Business, 2009. 3. Kate Kelly, “"The Saga of Bear’'s Fund Chiefs—--In a Jail Cell, One Asks, ‘'How Did We End Up in This Spot?,’'”" The Wall Street Journal, June 21, 2008. Epilogue1.Cityfile.com, “"Security Precautions: John Paulson Beefs Up the Hedges,”" http://cityfile.com/dailyfile/4361, February 11, 2009.


pages: 354 words: 99,690

Thinking About It Only Makes It Worse: And Other Lessons From Modern Life by David Mitchell

bank run, Boris Johnson, British Empire, cakes and ale, cognitive dissonance, collapse of Lehman Brothers, credit crunch, don't be evil, double helix, Downton Abbey, Dr. Strangelove, Etonian, eurozone crisis, Golden age of television, haute cuisine, high-speed rail, Julian Assange, lateral thinking, Northern Rock, Ocado, offshore financial centre, payday loans, plutocrats, profit motive, Russell Brand, sensible shoes, Skype, The Wisdom of Crowds, WikiLeaks

We, as customers and taxpayers, can make or break them; they know it and will pay to subvert that power. This causes immense waste and injustice, much of which would be obviated if our political system enjoyed the comparatively modest state funding that would protect it from lobbyists’ cash. * By December 2011, over three years after the collapse of Lehman Brothers, the country still felt like shit … Sometimes it’s down to the director-general of the British Retail Consortium to sum up the national mood. “Non-food is having a thoroughly miserable and difficult time,” he said. He’s so right – it really is. And, of all the non-foods, the humans are particularly depressed, with more than 2.64 million of us now out of work.


pages: 391 words: 97,018

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

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

The American tendency to add fuel to the fire helps explain the epic, unexpected job losses of early 2009. In six months, between November 2008 and April 2009, the U.S. economy shed 4.4 million jobs, an average of 738,000 per month, or about 25,000 a day. But after the worst of the downturn, procyclicality can also hasten recovery. In the months after the collapse of Lehman Brothers in September 2008, companies were ruthless about cutting payroll, idling factories, wiggling out of commitments, and shirking burdens. Borrowers turned over factories, hotels, and office towers to lenders, who in turn wrote off debts. Companies diluted shareholders’ existing holdings as they raised new capital, jettisoned long-cherished assets, and didn’t hesitate to seek the shelter of bankruptcy protection.


pages: 414 words: 101,285

The Butterfly Defect: How Globalization Creates Systemic Risks, and What to Do About It by Ian Goldin, Mike Mariathasan

air freight, air traffic controllers' union, Andrei Shleifer, Asian financial crisis, asset-backed security, bank run, barriers to entry, Basel III, Bear Stearns, behavioural economics, Berlin Wall, biodiversity loss, Bretton Woods, BRICs, business cycle, butterfly effect, carbon tax, clean water, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, connected car, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, digital divide, discovery of penicillin, diversification, diversified portfolio, Douglas Engelbart, Douglas Engelbart, Edward Lorenz: Chaos theory, energy security, eurozone crisis, Eyjafjallajökull, failed state, Fairchild Semiconductor, Fellow of the Royal Society, financial deregulation, financial innovation, financial intermediation, fixed income, Gini coefficient, Glass-Steagall Act, global pandemic, global supply chain, global value chain, global village, high-speed rail, income inequality, information asymmetry, Jean Tirole, John Snow's cholera map, Kenneth Rogoff, light touch regulation, Long Term Capital Management, market bubble, mass immigration, megacity, moral hazard, Occupy movement, offshore financial centre, open economy, precautionary principle, profit maximization, purchasing power parity, race to the bottom, RAND corporation, regulatory arbitrage, reshoring, risk free rate, Robert Solow, scientific management, Silicon Valley, six sigma, social contagion, social distancing, Stuxnet, supply-chain management, systems thinking, tail risk, TED Talk, The Great Moderation, too big to fail, Toyota Production System, trade liberalization, Tragedy of the Commons, transaction costs, uranium enrichment, vertical integration

At the Risk Center at the Swiss Eidgenössische Technische Hochschule Zürich (Federal Institute of Technology), Zurich, or in the Complex Agent-Based Dynamic Network at the University of Oxford, first steps toward a paradigm shift have been taken. We draw on the lessons from this research. Following the collapse of Lehman Brothers, the world continues to struggle with the consequences of the first systemic crisis of the twenty-first century. Yet larger and potentially more harmful risks are lurking. These include climate change and pandemics. We see fragility in global supply chains and the interdependent physical infrastructure on which they rely.


pages: 317 words: 101,475

Chavs: The Demonization of the Working Class by Owen Jones

Asperger Syndrome, banking crisis, Berlin Wall, Boris Johnson, British Empire, Bullingdon Club, call centre, collapse of Lehman Brothers, credit crunch, deindustrialization, Etonian, facts on the ground, falling living standards, first-past-the-post, ghettoisation, Gini coefficient, green new deal, hiring and firing, housing crisis, illegal immigration, income inequality, informal economy, low skilled workers, low-wage service sector, mass immigration, meritocracy, Neil Kinnock, Occupy movement, pension reform, place-making, plutocrats, post-war consensus, race to the bottom, Right to Buy, rising living standards, social distancing, The Bell Curve by Richard Herrnstein and Charles Murray, The Spirit Level, too big to fail, unpaid internship, upwardly mobile, We are the 99%, wealth creators, Winter of Discontent, women in the workforce, working-age population

The key slogan of the Occupy movement, 'We are the 99 per cent', reflected that the interests of the overwhelming majority of people conflicted with those of the elite 1 per cent at the top. It may not have been an accurate figure, but that wasn't the point: the slogan tapped into a deep sense of injustice that had taken root since the collapse of Lehman Brothers in September 2008. Above all, it served as a reminder of who had caused the economic crisis and who was actually being made to pay for it.And itresonated. A poll conducted by ICM in October 2011 revealed that 38 per cent believed 'the protesters are naive; there is no practical alternative to capitalism-the point is to get it moving again'.


pages: 357 words: 99,684

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

anti-globalists, back-to-the-land, balance sheet recession, bank run, banking crisis, Berlin Wall, business cycle, capital controls, capitalist realism, centre right, Chekhov's gun, citizen journalism, collapse of Lehman Brothers, collective bargaining, creative destruction, credit crunch, Credit Default Swap, currency manipulation / currency intervention, currency peg, disinformation, do-ocracy, eurozone crisis, Fall of the Berlin Wall, floating exchange rates, foreign exchange controls, Francis Fukuyama: the end of history, full employment, ghettoisation, illegal immigration, informal economy, land tenure, Leo Hollis, low skilled workers, mass immigration, means of production, megacity, Mohammed Bouazizi, Naomi Klein, Network effects, New Journalism, Occupy movement, price stability, quantitative easing, race to the bottom, rising living standards, short selling, Slavoj Žižek, Stewart Brand, strikebreaker, union organizing, We are the 99%, Whole Earth Catalog, WikiLeaks, Winter of Discontent, women in the workforce, working poor, working-age population, young professional

But once you see Spain’s unemployment figures, there is no mystery to the anger: by mid-2011 youth unemployment was running at 46 per cent. As in Cairo, Athens and beyond, it’s economic disruption—joblessness, price rises, austerity—that has driven the unrest. To most people it may feel as though this period of disruption started with the collapse of Lehman Brothers. But the real disruption began much earlier, with the onset of globalization, and in particular after 2001. Once you grasp this, you can grasp the scale of the challenge facing those in power. How we came to the crisis The first decade of the twenty-first century saw an uncontrolled expansion of credit, during which the major financial actors’ understanding of the risks involved in lending became—and was encouraged by governments to become—detached from reality.


pages: 335 words: 98,847

A Bit of a Stretch: The Diaries of a Prisoner by Chris Atkins

Boris Johnson, butterfly effect, collapse of Lehman Brothers, crowdsourcing, Donald Trump, Elon Musk, fake news, forensic accounting, G4S, housing crisis, illegal immigration, index card, Mark Zuckerberg, Milgram experiment, Panopticon Jeremy Bentham, payday loans

Mr Hart locks up the tramp for his own safety, and the situation immediately deteriorates. Foley owes much of this canteen to his new cellmate, who is in turn heavily indebted around the wing. News of their insolvency quickly spreads, and a complex network of prison debt begins to unravel. It reminds me of the collapse of Lehman Brothers, where the contagion from toxic loans swiftly infected the entire economy. The landings descend into uproar, and Martyn and I retreat from the field of battle. Hours later, I gingerly return to deliver the visit slips. G Wing is still reeling from the recent economic crash, and dozens of inmates have been trying to exact retribution on the occupant of G4-24.


pages: 412 words: 96,251

Why We're Polarized by Ezra Klein

affirmative action, Affordable Care Act / Obamacare, barriers to entry, Bernie Sanders, Black Lives Matter, Cass Sunstein, centre right, Climategate, collapse of Lehman Brothers, currency manipulation / currency intervention, David Brooks, demographic transition, desegregation, disinformation, Donald Trump, ending welfare as we know it, fake news, Ferguson, Missouri, illegal immigration, immigration reform, microaggression, Nate Silver, no-fly zone, obamacare, Ralph Nader, Ronald Reagan, Silicon Valley, single-payer health, source of truth, systems thinking

Revamping the budget process to make budgeting more automatic, with predictable spending changes that trigger in the absence of a new budget, would be a more sensible way to finance the government and would permit Congress to fight at less cost to the American people and the services they depend on. Similarly, a lesson of the Great Recession was that the relationship between polarization and extended economic suffering is dangerously dysfunctional. Moments of emergency, like the collapse of Lehman Brothers, might temporarily puncture the system’s inertia, but as the crisis drags on, it becomes tempting for the minority party to cease cooperating and commence criticizing—the public anger that recessions generate is a potent electoral weapon. An expansion of automatic economic stabilizers offers a possible answer: as the unemployment rate rises, the federal government can automatically absorb more state Medicaid costs, boost unemployment and food stamp spending, and begin lowering payroll taxes or expanding Social Security checks.


pages: 417 words: 97,577

The Myth of Capitalism: Monopolies and the Death of Competition by Jonathan Tepper

"Friedman doctrine" OR "shareholder theory", Affordable Care Act / Obamacare, air freight, Airbnb, airline deregulation, Alan Greenspan, bank run, barriers to entry, Berlin Wall, Bernie Sanders, Big Tech, big-box store, Bob Noyce, Boston Dynamics, business cycle, Capital in the Twenty-First Century by Thomas Piketty, citizen journalism, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, compensation consultant, computer age, Cornelius Vanderbilt, corporate raider, creative destruction, Credit Default Swap, crony capitalism, diversification, don't be evil, Donald Trump, Double Irish / Dutch Sandwich, Dunbar number, Edward Snowden, Elon Musk, en.wikipedia.org, eurozone crisis, Fairchild Semiconductor, Fall of the Berlin Wall, family office, financial innovation, full employment, gentrification, German hyperinflation, gig economy, Gini coefficient, Goldman Sachs: Vampire Squid, Google bus, Google Chrome, Gordon Gekko, Herbert Marcuse, income inequality, independent contractor, index fund, Innovator's Dilemma, intangible asset, invisible hand, Jeff Bezos, Jeremy Corbyn, Jevons paradox, John Nash: game theory, John von Neumann, Joseph Schumpeter, junk bonds, Kenneth Rogoff, late capitalism, London Interbank Offered Rate, low skilled workers, Mark Zuckerberg, Martin Wolf, Maslow's hierarchy, means of production, merger arbitrage, Metcalfe's law, multi-sided market, mutually assured destruction, Nash equilibrium, Network effects, new economy, Northern Rock, offshore financial centre, opioid epidemic / opioid crisis, passive investing, patent troll, Peter Thiel, plutocrats, prediction markets, prisoner's dilemma, proprietary trading, race to the bottom, rent-seeking, road to serfdom, Robert Bork, Ronald Reagan, Sam Peltzman, secular stagnation, shareholder value, Sheryl Sandberg, Silicon Valley, Silicon Valley billionaire, Skype, Snapchat, Social Responsibility of Business Is to Increase Its Profits, SoftBank, Steve Jobs, stock buybacks, tech billionaire, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, undersea cable, Vanguard fund, vertical integration, very high income, wikimedia commons, William Shockley: the traitorous eight, you are the product, zero-sum game

Stock buybacks were illegal following the 1929 financial markets crash. It was considered stock manipulation. Inequality is both a result of, and driven by, stock ownership. Chapter Ten The Missing Piece of the Puzzle Something is rotten in the state of Denmark. —Hamlet, Act 1, Scene 4, Marcellus to Horatio In the months after the collapse of Lehman Brothers and the bailout of almost all global banks, politicians, businessmen, and pundits were convinced that we were in the midst of a crisis of capitalism that would bring about far reaching reforms. Nothing would ever be the same again, we were told. “Another ideological god has failed,” the dean of financial commentators, Martin Wolf, wrote in the Financial Times.


pages: 318 words: 99,524

Why Aren't They Shouting?: A Banker’s Tale of Change, Computers and Perpetual Crisis by Kevin Rodgers

Alan Greenspan, algorithmic trading, bank run, banking crisis, Basel III, Bear Stearns, Berlin Wall, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black-Scholes formula, buy and hold, buy low sell high, call centre, capital asset pricing model, collapse of Lehman Brothers, Credit Default Swap, currency peg, currency risk, diversification, Fall of the Berlin Wall, financial innovation, Financial Instability Hypothesis, fixed income, Flash crash, Francis Fukuyama: the end of history, Glass-Steagall Act, Hyman Minsky, implied volatility, index fund, interest rate derivative, interest rate swap, invisible hand, John Meriwether, latency arbitrage, law of one price, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, Minsky moment, money market fund, Myron Scholes, Northern Rock, Panopticon Jeremy Bentham, Ponzi scheme, prisoner's dilemma, proprietary trading, quantitative easing, race to the bottom, risk tolerance, risk-adjusted returns, Silicon Valley, systems thinking, technology bubble, The Myth of the Rational Market, The Wisdom of Crowds, Tobin tax, too big to fail, value at risk, vertical integration, Y2K, zero-coupon bond, zero-sum game

Appendix 1: Euromoney FX Survey – Market Shares 1996–2015 Appendix 2: A Timeline of Events Mentioned in the Text Date Event 1973, May Black and Scholes option-pricing paper 1986, October ‘Big Bang’ regulatory regime in the UK 1987, October Stock market crash 1990, August Iraq invades Kuwait 1992, September ERM crisis, ‘Black Wednesday’ 1993, Summer Second ERM crisis 1993, Autumn Hedge fund LTCM set up 1994, February Federal Reserve unexpected rate rise; bond crash 1995 Deutsche Bank investment banking build-out starts 1996, May Bankers Trust settles with Procter and Gamble 1997, May Election of Tony Blair’s New Labour government in UK 1997, July Thailand devalues the baht 1997, October First big sell-off in Russian bonds 1998, August Russia defaults and devalues 1998, September Failure of LTCM 1998, November Deutsche Bank bids for Bankers Trust 1999, January Creation of the euro 1999 Merger of Prebon Yamane and Marshalls 1999, June Bankers Trust taken over by Deutsche Bank 1999, November Gramm–Leach–Bliley Act in the US repeals Glass–Steagall 2000, Spring Deutsche Bank wins Euromoney FX poll for first time 2001, September 9/11 attacks on World Trade Center and Pentagon 2003, Autumn EBS launches dealing API 2004, Spring Launch of EBS Prime 2005, May Deutsche Bank wins 2004 Euromoney poll 2005, Summer Barclays launch Precision Pricing; EBS opens to funds 2006, April EBS bought by ICAP 2006, July Deutsche Bank buys MortgageIT 2007, July Ratings agencies begin to downgrade CDOs 2007, September Run on Northern Rock 2008, September Collapse of Lehman Brothers 2008, October Introduction of the TARP; start of global recession 2010, May Flash Crash 2012, August Failure of Knight Capital; Collapse of EURCHF to 1.0000 2012, September SNB imposes EURCHF floor (cap on value of Swiss franc) 2013, December Closure of Deutsche Bank’s Commodities department 2015, January SNB abandons the EURCHF floor Notes Chapter 1 1 ‘Deutsche Bank Guide to Currency Indices’, George Saravelos et al., October 2007, p14, http://cbs.db.com/new/docs/DBGuideToFXIndices.pdf 2 ‘Interdealer Broking History’, Tullett Prebon, http://www.tullettprebon.com/about/about_ourstory.aspx Chapter 3 1 ‘Electronic Platforms in Foreign Exchange Trading’, Celent E-Forex Report 2007, Figure 10, https://forex-pdf.com/doc/1610--electronic-platforms-in-foreign-exchange-trading/?


pages: 358 words: 106,729

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

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

Trimbath, and Glenn Yago, The Savings and Loan Crisis: Lessons from a Regulatory Failure (Los Angeles: Milken Institute, 2004). 29 Bethany McLean, “Fannie Mae’s Last Stand,” Vanity Fair, February 2009. 30 Steven Holmes, “Fannie Mae Eases Credit to Aid Mortgage Lending,” New York Times, September 30, 1999. 31 Wayne Barrett, “Andrew Cuomo and Fannie and Freddie: How the Youngest Housing and Urban Development Secretary in History Gave Birth to the Mortgage Crisis,” Village Voice, August 5, 2008. 32 National Home Ownership Strategy (Washington, DC: Department of Housing and Urban Development, 1995), chapter 4. I thank Professor Joseph Mason of Louisiana State University for bringing my attention to this document and for first highlighting these issues. 33 See Lawrence McDonald and Patrick Robinson, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers (New York: Crown Business, 2009). 34 Neil Bhutta, “Giving Credit Where Credit Is Due? The Community Reinvestment Act and Mortgage Lending in Lower-Income Neighborhoods,” Federal Reserve Board Working Paper 2008–61, Washington, DC, 2008. Also see Peter Wallison, “Deregulation and the Financial Crisis: Another Urban Myth,” American Enterprise Institute, www.aei.org/outlook/100089, October 2009. 35 George W.


pages: 354 words: 110,570

Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood, and the World by Tom Wright, Bradley Hope

"World Economic Forum" Davos, Asian financial crisis, Bear Stearns, Bernie Madoff, Boeing 747, collapse of Lehman Brothers, colonial rule, corporate social responsibility, Credit Default Swap, Donald Trump, failed state, family office, financial engineering, forensic accounting, Frank Gehry, Global Witness, high net worth, junk bonds, low interest rates, Michael Milken, middle-income trap, Nick Leeson, offshore financial centre, Oscar Wyatt, Ponzi scheme, Right to Buy, risk tolerance, Savings and loan crisis, Snapchat, South China Sea, sovereign wealth fund, Virgin Galactic

Few punishments were meted out and, as a result, banks and regulators didn’t enforce these regulations all that stringently. More often than not, compliance departments were a weak appendage of a bank’s ecosystem, isolated under legal affairs. The subprime crisis, starting in 2007, changed the picture. U.S. regulators had been caught napping, and the collapse of Lehman Brothers and Bear Stearns, under the weight of bad mortgage loans, led to tighter scrutiny of banks’ actions. That extended to anti–money laundering, as Treasury and the Justice Department began to hand out heftier punishments to transgressors. Wachovia Bank, in early 2010, agreed to pay $160 million in penalties for failing to report $8 billion in dodgy transfers.


pages: 398 words: 105,917

Bean Counters: The Triumph of the Accountants and How They Broke Capitalism by Richard Brooks

"World Economic Forum" Davos, accounting loophole / creative accounting, Alan Greenspan, asset-backed security, banking crisis, Bear Stearns, Big bang: deregulation of the City of London, blockchain, BRICs, British Empire, business process, Charles Babbage, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Strachan, Deng Xiaoping, Donald Trump, double entry bookkeeping, Double Irish / Dutch Sandwich, energy security, Etonian, eurozone crisis, financial deregulation, financial engineering, Ford Model T, forensic accounting, Frederick Winslow Taylor, G4S, Glass-Steagall Act, high-speed rail, information security, intangible asset, Internet of things, James Watt: steam engine, Jeremy Corbyn, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, junk bonds, light touch regulation, Long Term Capital Management, low cost airline, new economy, Northern Rock, offshore financial centre, oil shale / tar sands, On the Economy of Machinery and Manufactures, Ponzi scheme, post-oil, principal–agent problem, profit motive, race to the bottom, railway mania, regulatory arbitrage, risk/return, Ronald Reagan, Savings and loan crisis, savings glut, scientific management, short selling, Silicon Valley, South Sea Bubble, statistical model, supply-chain management, The Chicago School, too big to fail, transaction costs, transfer pricing, Upton Sinclair, WikiLeaks

Their consultancy-driven slogans tell of transformation from financial watchdogs to professional jacks-of-all-trades, offering the answers on everything from complying with regulations to IT systems, mergers and acquisitions and corporate strategy. KPMG goes with ‘Cutting Through Complexity’, while EY captures virtue and success with ‘Building a Better Working World’ (having ditched ‘Quality in Everything We Do’ as part of a rebrand following its implication in the 2008 collapse of Lehman Brothers). PwC leaves no room for doubt about what matters: ‘Building Relationships, Creating Value’. Deloitte simply has an enigmatic dot after its name. There is vanishingly little evidence that the world is any better for the consultancy advice that now provides almost two thirds of the firms’ income.


pages: 354 words: 26,550

High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems by Irene Aldridge

algorithmic trading, asset allocation, asset-backed security, automated trading system, backtesting, Black Swan, Brownian motion, business cycle, business process, buy and hold, capital asset pricing model, centralized clearinghouse, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, computerized trading, diversification, equity premium, fault tolerance, financial engineering, financial intermediation, fixed income, global macro, high net worth, implied volatility, index arbitrage, information asymmetry, interest rate swap, inventory management, Jim Simons, law of one price, Long Term Capital Management, Louis Bachelier, machine readable, margin call, market friction, market microstructure, martingale, Myron Scholes, New Journalism, p-value, paper trading, performance metric, Performance of Mutual Funds in the Period, pneumatic tube, profit motive, proprietary trading, purchasing power parity, quantitative trading / quantitative finance, random walk, Renaissance Technologies, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Sharpe ratio, short selling, Small Order Execution System, statistical arbitrage, statistical model, stochastic process, stochastic volatility, systematic trading, tail risk, trade route, transaction costs, value at risk, yield curve, zero-sum game

Measuring Credit and Counterparty Risk The credit and counterparty risk reflects the probability of financial loss should one party in the trading equation not live up to its obligations. An example of losses due to a counterparty failure is a situation in which a fund’s money is custodied with a broker-dealer, and the broker-dealer goes bankrupt. The collapse of Lehman Brothers in October 2008 was the most spectacular counterparty failure in recent memory. According to Reuters, close to $300 billion was frozen in bankruptcy proceedings as a result of the bank’s collapse, pushing many prominent hedge funds to the brink of insolvency. Credit risk is manifest in decisions to extend lines of credit or margins.


pages: 356 words: 105,533

Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market by Scott Patterson

Alan Greenspan, algorithmic trading, automated trading system, banking crisis, bash_history, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, butterfly effect, buttonwood tree, buy and hold, Chuck Templeton: OpenTable:, cloud computing, collapse of Lehman Brothers, computerized trading, creative destruction, Donald Trump, financial engineering, fixed income, Flash crash, Ford Model T, Francisco Pizarro, Gordon Gekko, Hibernia Atlantic: Project Express, High speed trading, information security, Jim Simons, Joseph Schumpeter, junk bonds, latency arbitrage, Long Term Capital Management, machine readable, Mark Zuckerberg, market design, market microstructure, Michael Milken, military-industrial complex, pattern recognition, payment for order flow, pets.com, Ponzi scheme, popular electronics, prediction markets, quantitative hedge fund, Ray Kurzweil, Renaissance Technologies, seminal paper, Sergey Aleynikov, Small Order Execution System, South China Sea, Spread Networks laid a new fibre optics cable between New York and Chicago, stealth mode startup, stochastic process, three-martini lunch, Tragedy of the Commons, transaction costs, uptick rule, Watson beat the top human players on Jeopardy!, zero-sum game

“What happens is, everyone tries to sell at the same time and the bids and the buyers that you see in the market now will disappear,” he told Bloomberg host Carol Massar. “The price vacuum will start, and we’re going to plunge down. That’s my big fear.” High-speed backers pointed to the stock market’s resilience after the collapse of Lehman Brothers in the fall of 2008, when it seemed as if every other corner of Wall Street was shattering. “We believe that the current national market system is performing extremely well,” John McCarthy, general counsel for Getco, wrote in a letter to the SEC. “For instance, the performance during the 2008 financial crisis suggests that our equity markets are resilient and robust even during times of stress and dislocation.”


pages: 370 words: 112,602

Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty by Abhijit Banerjee, Esther Duflo

"World Economic Forum" Davos, Albert Einstein, Andrei Shleifer, business process, business process outsourcing, call centre, Cass Sunstein, charter city, clean water, collapse of Lehman Brothers, congestion charging, demographic transition, diversified portfolio, experimental subject, hiring and firing, Kickstarter, land tenure, low interest rates, low skilled workers, M-Pesa, microcredit, moral hazard, purchasing power parity, randomized controlled trial, Richard Thaler, school vouchers, Silicon Valley, The Fortune at the Bottom of the Pyramid, Thomas Malthus, tontine, urban planning

There is so much risk in the everyday lives of the poor that somewhat paradoxically, events that are perceived to be cataclysmic in rich countries often seem to barely register with them. In February 2009, the World Bank’s president, Robert Zoellick, warned the world’s leaders: “The global economic crisis [sparked by the collapse of Lehman Brothers in September 2008] threatens to become a human crisis in many developing countries unless they can take targeted measures to protect vulnerable people in their communities. While much of the world is focused on bank rescues and stimulus packages, we should not forget that poor people in developing countries are far more exposed if their economies falter.”5 The World Bank note on the subject added that with the drop in global demand, the poor would lose the market for their agricultural products, their casual jobs on construction sites, and their jobs in factories.


pages: 357 words: 110,017

Money: The Unauthorized Biography by Felix Martin

Alan Greenspan, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, call centre, capital asset pricing model, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, creative destruction, credit crunch, David Graeber, en.wikipedia.org, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, fixed income, Fractional reserve banking, full employment, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Hyman Minsky, inflation targeting, invention of writing, invisible hand, Irish bank strikes, joint-stock company, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kenneth Rogoff, land bank, Michael Milken, mobile money, moral hazard, mortgage debt, new economy, Northern Rock, Occupy movement, Paul Volcker talking about ATMs, plutocrats, private military company, proprietary trading, public intellectual, Republic of Letters, Richard Feynman, Robert Shiller, Savings and loan crisis, Scientific racism, scientific worldview, seigniorage, Silicon Valley, smart transportation, South Sea Bubble, supply-chain management, The Wealth of Nations by Adam Smith, too big to fail

As a result, the level of credit insurance that sovereigns had implicitly been providing had ballooned. Only when the crisis had struck, and the policy-makers’ initial efforts to control moral hazard collapsed, had the true scale of the subsidy become clear. In November 2009, a year after the collapse of Lehman Brothers, total sovereign support for the banking sector worldwide was estimated at some $14 trillion—more than 25 per cent of global GDP.20 This was the scale of the downside risks, taxpayers realised, that they had been bearing all along—whilst all the upside went to the shareholders, debt investors, and employees of the banks themselves.


pages: 385 words: 101,761

Creative Intelligence: Harnessing the Power to Create, Connect, and Inspire by Bruce Nussbaum

"World Economic Forum" Davos, 3D printing, Airbnb, Albert Einstein, Berlin Wall, Black Swan, Chuck Templeton: OpenTable:, clean water, collapse of Lehman Brothers, creative destruction, Credit Default Swap, crony capitalism, crowdsourcing, Danny Hillis, declining real wages, demographic dividend, disruptive innovation, Elon Musk, en.wikipedia.org, Eugene Fama: efficient market hypothesis, fail fast, Fall of the Berlin Wall, follow your passion, game design, gamification, gentrification, housing crisis, Hyman Minsky, industrial robot, invisible hand, James Dyson, Jane Jacobs, Jeff Bezos, jimmy wales, John Gruber, John Markoff, Joseph Schumpeter, Kevin Roose, Kickstarter, Larry Ellison, lone genius, longitudinal study, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Martin Wolf, Max Levchin, Minsky moment, new economy, Paul Graham, Peter Thiel, QR code, race to the bottom, reality distortion field, reshoring, Richard Florida, Ronald Reagan, shareholder value, Sheryl Sandberg, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, SimCity, six sigma, Skype, SoftBank, Steve Ballmer, Steve Jobs, Steve Wozniak, supply-chain management, Tesla Model S, The Chicago School, The Design of Experiments, the High Line, The Myth of the Rational Market, thinkpad, TikTok, Tim Cook: Apple, too big to fail, tulip mania, Tyler Cowen, We are the 99%, Y Combinator, young professional, Zipcar

CEOs and top managers trained in metrics and analytics understand the process of squeezing more and more profits out of existing products. What they don’t get is that the profits from innovative new products can have greater value, support higher prices, and generate even greater profits. THE RISE OF FINANCIAL CAPITALISM I attended the World Economic Forum in 2008, just months before the collapse of Lehman Brothers. Hedge fund managers had taken over the tiny village of Davos, Switzerland. They were booking the best hotel rooms, throwing the biggest parties, running the most important panels, and squiring the most beautiful models in the fanciest cars. That year, the influence of hedge fund managers eclipsed that of the old global elite of high-tech hotshots, corporate CEOs, and presidents and premiers from around the world.


pages: 408 words: 108,985

Rewriting the Rules of the European Economy: An Agenda for Growth and Shared Prosperity by Joseph E. Stiglitz

"World Economic Forum" Davos, accelerated depreciation, Airbnb, Alan Greenspan, balance sheet recession, bank run, banking crisis, barriers to entry, Basel III, basic income, behavioural economics, benefit corporation, Berlin Wall, bilateral investment treaty, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, corporate social responsibility, creative destruction, credit crunch, deindustrialization, discovery of DNA, diversified portfolio, Donald Trump, eurozone crisis, Fall of the Berlin Wall, financial engineering, financial intermediation, Francis Fukuyama: the end of history, full employment, gender pay gap, George Akerlof, gig economy, Gini coefficient, Glass-Steagall Act, hiring and firing, housing crisis, Hyman Minsky, income inequality, independent contractor, inflation targeting, informal economy, information asymmetry, intangible asset, investor state dispute settlement, invisible hand, Isaac Newton, labor-force participation, liberal capitalism, low interest rates, low skilled workers, market fundamentalism, mini-job, moral hazard, non-tariff barriers, offshore financial centre, open economy, Paris climate accords, patent troll, pension reform, price mechanism, price stability, proprietary trading, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, Robert Shiller, Ronald Reagan, selection bias, shareholder value, Silicon Valley, sovereign wealth fund, TaskRabbit, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, tulip mania, universal basic income, unorthodox policies, vertical integration, zero-sum game

For instance, the capital requirements imposed on shadow banks were much lower than on commercial banks, in the misguided belief that public money was not at risk because there was no systemic risk that would necessitate a public bailout. The government could easily let one of the investment banks collapse, went the theory, without the dire consequences that would follow from the failure of a large commercial bank. The consequences of the collapse of Lehman Brothers put these beliefs to rest. The shadow banking system should operate under regulations as tough as those imposed on commercial banks, and indeed, the rules for banks that financed lending with wholesale funds should be far higher—such funding can, and did, disappear overnight. Moreover, mutual funds that pretend to be virtually a bank—promising depositors (actually investors) a sure return plus a higher interest rate than commercial banks—need to make clear that there is no guaranteed return, there is no free lunch.


pages: 421 words: 110,272

Deaths of Despair and the Future of Capitalism by Anne Case, Angus Deaton

Affordable Care Act / Obamacare, basic income, Bertrand Russell: In Praise of Idleness, Boeing 737 MAX, business cycle, call centre, collapse of Lehman Brothers, collective bargaining, company town, Corn Laws, corporate governance, correlation coefficient, crack epidemic, creative destruction, crony capitalism, declining real wages, deindustrialization, demographic transition, Dissolution of the Soviet Union, Donald Trump, Downton Abbey, Edward Glaeser, Elon Musk, falling living standards, Fellow of the Royal Society, financial engineering, fulfillment center, germ theory of disease, income inequality, Jeff Bezos, Joseph Schumpeter, Ken Thompson, Kenneth Arrow, labor-force participation, Les Trente Glorieuses, low skilled workers, Martin Wolf, meritocracy, Mikhail Gorbachev, obamacare, opioid epidemic / opioid crisis, pensions crisis, pill mill, randomized controlled trial, refrigerator car, rent-seeking, risk tolerance, shareholder value, Silicon Valley, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, trade liberalization, Tyler Cowen, universal basic income, working-age population, zero-sum game

Beyond that, although some states in America are much less equal than others, the epidemic of deaths of despair is no worse in less equal states. New Hampshire and Utah, two states with the lowest levels of income inequality, have been much harder hit than New York and California, two states with the highest. The Great Recession began in 2008 with the collapse of Lehman Brothers and quickly led to large-scale unemployment and distress, not only in the United States but also in other rich countries. The US unemployment rate, which had been less than 5 percent in February 2008, was nearly 10 percent by the end of 2009, and it did not regain the 5 percent level until September 2016.


pages: 297 words: 108,353

Boom and Bust: A Global History of Financial Bubbles by William Quinn, John D. Turner

accounting loophole / creative accounting, Alan Greenspan, algorithmic trading, AOL-Time Warner, bank run, banking crisis, barriers to entry, Bear Stearns, behavioural economics, Big bang: deregulation of the City of London, bitcoin, blockchain, book value, Bretton Woods, business cycle, buy and hold, capital controls, Celtic Tiger, collapse of Lehman Brothers, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, cryptocurrency, debt deflation, deglobalization, Deng Xiaoping, different worldview, discounted cash flows, Donald Trump, equity risk premium, Ethereum, ethereum blockchain, eurozone crisis, fake news, financial deregulation, financial intermediation, Flash crash, Francis Fukuyama: the end of history, George Akerlof, government statistician, Greenspan put, high-speed rail, information asymmetry, initial coin offering, intangible asset, Irish property bubble, Isaac Newton, Japanese asset price bubble, joint-stock company, Joseph Schumpeter, junk bonds, land bank, light touch regulation, low interest rates, margin call, market bubble, market fundamentalism, Martin Wolf, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, negative equity, Network effects, new economy, Northern Rock, oil shock, Ponzi scheme, quantitative easing, quantitative trading / quantitative finance, railway mania, Right to Buy, Robert Shiller, Shenzhen special economic zone , short selling, short squeeze, Silicon Valley, smart contracts, South Sea Bubble, special economic zone, subprime mortgage crisis, technology bubble, the built environment, total factor productivity, transaction costs, tulip mania, urban planning

In return for a stream of payments, it agreed to reimburse investors in the event of default.31 This business had grown from a notional amount insured of $20 billion in 2002 to $533 billion in 2007.32 The default of many MBSs and CDOs meant that AIG was having to pay out substantial sums on its credit default swaps – sums that it had made little provision for. The failure of AIG would have had major consequences for the solvency of many financial institutions that had bought credit default swaps from it. Following the collapse of Lehman Brothers and AIG, the US Treasury and Federal Reserve came up with a plan to stave off the implosion of the banking system: the Troubled Assets Relief Plan (TARP). The TARP authorised expenditures of $700 billion to help the Treasury buy or insure ‘toxic’ assets (i.e. mortgages, MBSs and CDOs) from banks.


pages: 382 words: 105,166

The Reckoning: Financial Accountability and the Rise and Fall of Nations by Jacob Soll

accounting loophole / creative accounting, bank run, Bear Stearns, Bonfire of the Vanities, British Empire, collapse of Lehman Brothers, computer age, corporate governance, creative destruction, Credit Default Swap, delayed gratification, demand response, discounted cash flows, double entry bookkeeping, financial independence, Frederick Winslow Taylor, Glass-Steagall Act, God and Mammon, High speed trading, Honoré de Balzac, inventory management, invisible hand, Isaac Newton, James Watt: steam engine, joint-stock company, Joseph Schumpeter, new economy, New Urbanism, Nick Leeson, Plato's cave, Ponzi scheme, Ralph Waldo Emerson, scientific management, Scientific racism, South Sea Bubble, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, trade route

On his deathbed in 1715, Louis admitted that he had in effect bankrupted France with his spending. Rather than some relic of a bygone age, the story of Louis’s rise and decline seemed to me all too familiar as I digested the parable of the Sun King’s golden notebooks. That very week in September, a startling parallel story was taking place during the collapse of Lehman Brothers Bank. A monument of American and world capitalism, Lehman was suddenly exposed now as little more than a mirage. Just as Louis had held onto his power through snuffing out good accounting in his government, so U.S. investment banks had made untold riches, even as they destroyed their own institutions by cooking their books through trading overvalued bundles of worthless subprime mortgages and credit default swaps.


pages: 428 words: 103,544

The Data Detective: Ten Easy Rules to Make Sense of Statistics by Tim Harford

Abraham Wald, access to a mobile phone, Ada Lovelace, affirmative action, algorithmic bias, Automated Insights, banking crisis, basic income, behavioural economics, Black Lives Matter, Black Swan, Bretton Woods, British Empire, business cycle, Cambridge Analytica, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, Charles Babbage, clean water, collapse of Lehman Brothers, contact tracing, coronavirus, correlation does not imply causation, COVID-19, cuban missile crisis, Daniel Kahneman / Amos Tversky, data science, David Attenborough, Diane Coyle, disinformation, Donald Trump, Estimating the Reproducibility of Psychological Science, experimental subject, fake news, financial innovation, Florence Nightingale: pie chart, Gini coefficient, Great Leap Forward, Hans Rosling, high-speed rail, income inequality, Isaac Newton, Jeremy Corbyn, job automation, Kickstarter, life extension, meta-analysis, microcredit, Milgram experiment, moral panic, Netflix Prize, Northpointe / Correctional Offender Management Profiling for Alternative Sanctions, opioid epidemic / opioid crisis, Paul Samuelson, Phillips curve, publication bias, publish or perish, random walk, randomized controlled trial, recommendation engine, replication crisis, Richard Feynman, Richard Thaler, rolodex, Ronald Reagan, selection bias, sentiment analysis, Silicon Valley, sorting algorithm, sparse data, statistical model, stem cell, Stephen Hawking, Steve Bannon, Steven Pinker, survivorship bias, systematic bias, TED Talk, universal basic income, W. E. B. Du Bois, When a measure becomes a target

Weekly, daily, hourly—the metronome of the news clock changes the very nature of what is news. Now imagine a much slower rhythm of news: a twenty-five-year newspaper, say. What would the latest edition say? It would be packed with updates, some hopeful and some grim; it would describe the rise of China, the World Wide Web and smartphones, the emergence of al-Qaeda and the collapse of Lehman Brothers. There might be a small feature article on crime, noting that the murder count had fallen in London, but not nearly as much as in New York. Nobody would spare a syllable on the idea that London was experiencing a killing spree; such an observation could only make sense in a fast-twitch media outlet.


pages: 403 words: 105,550

The Key Man: The True Story of How the Global Elite Was Duped by a Capitalist Fairy Tale by Simon Clark, Will Louch

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, An Inconvenient Truth, anti-communist, Berlin Wall, Bernie Madoff, British Empire, clean water, collapse of Lehman Brothers, colonial rule, coronavirus, corporate governance, COVID-19, dark triade / dark tetrad, do well by doing good, Donald Trump, fake news, forensic accounting, high net worth, impact investing, income inequality, Jeffrey Epstein, Kickstarter, load shedding, low cost airline, Mahatma Gandhi, megacity, Menlo Park, Michael Milken, Mohammed Bouazizi, Nelson Mandela, offshore financial centre, planetary scale, plutocrats, Ponzi scheme, profit maximization, rolling blackouts, Ronald Reagan, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, SoftBank, sovereign wealth fund, Suez crisis 1956, TED Talk, The Fortune at the Bottom of the Pyramid, trade route, Virgin Galactic, WikiLeaks, young professional

“Give us a sense of what kind of opportunities and also what kind of challenges exist in a region of the world which some people have had great hopes for but where a lot of those hopes seem to be embroiled now in a level of uncertainty and political risk that makes it look extremely risky.” Arif dodged the question by turning the tables on the professor. Surely Western countries were far riskier than people assumed, Arif said. Didn’t the global financial crisis of 2008 start in New York, the center of the capitalist West, with the collapse of Lehman Brothers, the investment bank where Garten had worked? “Guess what?” Arif said. “When risk came into the global financial system, it came at the heart of global capitalism. It came on Wall Street, right? “That level of risk practically gave us a cataclysmic heart attack to the global financial system.


pages: 489 words: 106,008

Risk: A User's Guide by Stanley McChrystal, Anna Butrico

"Hurricane Katrina" Superdome, Abraham Maslow, activist fund / activist shareholder / activist investor, airport security, Albert Einstein, Apollo 13, banking crisis, Bernie Madoff, Boeing 737 MAX, business process, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, computer vision, coronavirus, corporate governance, cotton gin, COVID-19, cuban missile crisis, deep learning, disinformation, don't be evil, Dr. Strangelove, fake news, fear of failure, George Floyd, Glass-Steagall Act, global pandemic, Googley, Greta Thunberg, hindsight bias, inflight wifi, invisible hand, iterative process, late fees, lockdown, Paul Buchheit, Ponzi scheme, QWERTY keyboard, ride hailing / ride sharing, Ronald Reagan, San Francisco homelessness, School Strike for Climate, Scientific racism, Silicon Valley, Silicon Valley startup, Skype, social distancing, source of truth, Stanislav Petrov, Steve Jobs, Thomas L Friedman, too big to fail, Travis Kalanick, wikimedia commons, work culture

The structure of an organization informs who can work with whom, who exerts influence, and who is subject to power. Healthy Risk Immune Systems acknowledge this very fact, and leaders do well to recognize the ways in which structures impose power dynamics that may determine how effective individuals are—and how successful teams may be. Burying Responsibility The collapse of Lehman Brothers in 2008 is a well-known story of corporate mismanagement: Lehman Brothers made some ill-fated investment choices for a good part of the first decade of the twenty-first century, accumulating high-risk mortgage-backed securities. Andrew Ross Sorkin’s excellent account, Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves, presents a startling truth: Lehman Brothers couldn’t manage risk properly because its risk management functions were buried in corporate hierarchy.


pages: 356 words: 106,161

The Glass Half-Empty: Debunking the Myth of Progress in the Twenty-First Century by Rodrigo Aguilera

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Alan Greenspan, Anthropocene, availability heuristic, barriers to entry, basic income, benefit corporation, Berlin Wall, Bernie Madoff, Bernie Sanders, bitcoin, Boris Johnson, Branko Milanovic, Bretton Woods, Brexit referendum, Capital in the Twenty-First Century by Thomas Piketty, capitalist realism, carbon footprint, Carmen Reinhart, centre right, clean water, cognitive bias, collapse of Lehman Brothers, Colonization of Mars, computer age, Corn Laws, corporate governance, corporate raider, creative destruction, cryptocurrency, cuban missile crisis, David Graeber, David Ricardo: comparative advantage, death from overwork, decarbonisation, deindustrialization, Deng Xiaoping, Doha Development Round, don't be evil, Donald Trump, Doomsday Clock, Dunning–Kruger effect, Elon Musk, European colonialism, fake news, Fall of the Berlin Wall, first-past-the-post, Francis Fukuyama: the end of history, fundamental attribution error, gig economy, Gini coefficient, Glass-Steagall Act, Great Leap Forward, green new deal, Hans Rosling, housing crisis, income inequality, income per capita, index fund, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jean Tirole, Jeff Bezos, Jeremy Corbyn, Jevons paradox, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, karōshi / gwarosa / guolaosi, Kenneth Rogoff, Kickstarter, lake wobegon effect, land value tax, Landlord’s Game, late capitalism, liberal capitalism, long peace, loss aversion, low interest rates, Mark Zuckerberg, market fundamentalism, means of production, meta-analysis, military-industrial complex, Mont Pelerin Society, moral hazard, moral panic, neoliberal agenda, Network effects, North Sea oil, Northern Rock, offshore financial centre, opioid epidemic / opioid crisis, Overton Window, Pareto efficiency, passive investing, Peter Thiel, plutocrats, principal–agent problem, profit motive, public intellectual, purchasing power parity, race to the bottom, rent-seeking, risk tolerance, road to serfdom, Robert Shiller, Robert Solow, savings glut, Scientific racism, secular stagnation, Silicon Valley, Silicon Valley ideology, Slavoj Žižek, Social Justice Warrior, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, Stanislav Petrov, Steven Pinker, structural adjustment programs, surveillance capitalism, tail risk, tech bro, TED Talk, The Spirit Level, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transatlantic slave trade, trolley problem, unbiased observer, universal basic income, Vilfredo Pareto, Washington Consensus, Winter of Discontent, Y2K, young professional, zero-sum game

Virtually no banking crises took place while the Bretton Woods system was in place and there was also a decline in the number of external debt crises (Figure 5.1). But aside from a few marginal attempts at re-regulating the financial system like the Frank-Dodd Act (now partly rolled back by the Trump administration), it has been business as usual for the global economy since 2008–2009. In November 2008, just weeks after the collapse of Lehman Brothers and still months before the global economy would hit rock bottom, US president George W. Bush remained steadfast in his belief that liberal capitalism was not up for criticism even in its hour of shame: The answer is not to try to reinvent that system. It is to fix the problems we face, make the reforms we need, and move forward with the free market principles that have delivered prosperity and hope to people all across the globe.11 The irony that the global economy was saved thanks to state intervention — in the form of trillions of dollars in bailouts, guarantees, and stimulus by the US along with other governments — did not go unnoticed.


pages: 935 words: 267,358

Capital in the Twenty-First Century by Thomas Piketty

accounting loophole / creative accounting, Asian financial crisis, banking crisis, banks create money, Berlin Wall, book value, Branko Milanovic, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, carbon tax, central bank independence, centre right, circulation of elites, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation coefficient, David Ricardo: comparative advantage, demographic transition, distributed generation, diversification, diversified portfolio, European colonialism, eurozone crisis, Fall of the Berlin Wall, financial intermediation, full employment, Future Shock, German hyperinflation, Gini coefficient, Great Leap Forward, high net worth, Honoré de Balzac, immigration reform, income inequality, income per capita, index card, inflation targeting, informal economy, invention of the steam engine, invisible hand, joint-stock company, Joseph Schumpeter, Kenneth Arrow, low interest rates, market bubble, means of production, meritocracy, Money creation, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, open economy, Paul Samuelson, pension reform, power law, purchasing power parity, race to the bottom, randomized controlled trial, refrigerator car, regulatory arbitrage, rent control, rent-seeking, Robert Gordon, Robert Solow, Ronald Reagan, Simon Kuznets, sovereign wealth fund, Steve Jobs, Suez canal 1869, Suez crisis 1956, The Nature of the Firm, the payments system, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade liberalization, twin studies, very high income, Vilfredo Pareto, We are the 99%, zero-sum game

This is a crucial point: the facts show quite clearly that the financial crisis as such cannot be counted on to put an end to the structural increase of inequality in the United States. To be sure, in the immediate aftermath of a stock market crash, inequality always grows more slowly, just as it always grows more rapidly in a boom. The years 2008–2009, following the collapse of Lehman Brothers, like the years 2001–2002, after the bursting of the first Internet bubble, were not great times for taking profits on the stock market. Indeed, capital gains plummeted in those years. But these short-term movements did not alter the long-run trend, which is governed by other forces whose logic I must now try to clarify.

The fact is that all economists—monetarists, Keynesians, and neoclassicals—together with all other observers, regardless of their political stripe, have agreed that central banks ought to act as lenders of last resort and do whatever is necessary to avoid financial collapse and a deflationary spiral. This broad consensus explains why all of the world’s central banks—in Japan and Europe as well as the United States—reacted to the financial crisis of 2007–2008 by taking on the role of lenders of last resort and stabilizers of the financial system. Apart from the collapse of Lehman Brothers in September 2008, bank failures in the crisis have been fairly limited in scope. There is, however, no consensus as to the exact nature of the “unconventional” monetary policies that should be followed in situations like this. What in fact do central banks do? For present purposes, it is important to realize that central banks do not create wealth as such; they redistribute it.


pages: 403 words: 111,119

Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist by Kate Raworth

"Friedman doctrine" OR "shareholder theory", 3D printing, Alan Greenspan, Alvin Toffler, Anthropocene, Asian financial crisis, bank run, basic income, battle of ideas, behavioural economics, benefit corporation, Berlin Wall, biodiversity loss, bitcoin, blockchain, Branko Milanovic, Bretton Woods, Buckminster Fuller, business cycle, call centre, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Cass Sunstein, choice architecture, circular economy, clean water, cognitive bias, collapse of Lehman Brothers, complexity theory, creative destruction, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, degrowth, dematerialisation, disruptive innovation, Douglas Engelbart, Douglas Engelbart, Easter island, en.wikipedia.org, energy transition, Erik Brynjolfsson, Ethereum, ethereum blockchain, Eugene Fama: efficient market hypothesis, experimental economics, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, Financial Instability Hypothesis, full employment, Future Shock, Garrett Hardin, Glass-Steagall Act, global supply chain, global village, Henri Poincaré, hiring and firing, Howard Zinn, Hyman Minsky, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of writing, invisible hand, Isaac Newton, it is difficult to get a man to understand something, when his salary depends on his not understanding it, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kickstarter, land reform, land value tax, Landlord’s Game, loss aversion, low interest rates, low skilled workers, M-Pesa, Mahatma Gandhi, market fundamentalism, Martin Wolf, means of production, megacity, Minsky moment, mobile money, Money creation, Mont Pelerin Society, Myron Scholes, neoliberal agenda, Network effects, Occupy movement, ocean acidification, off grid, offshore financial centre, oil shale / tar sands, out of africa, Paul Samuelson, peer-to-peer, planetary scale, price mechanism, quantitative easing, randomized controlled trial, retail therapy, Richard Thaler, Robert Solow, Ronald Reagan, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Simon Kuznets, smart cities, smart meter, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, statistical model, Steve Ballmer, systems thinking, TED Talk, The Chicago School, The Great Moderation, the map is not the territory, the market place, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, Torches of Freedom, Tragedy of the Commons, trickle-down economics, ultimatum game, universal basic income, Upton Sinclair, Vilfredo Pareto, wikimedia commons

In the words of the political economist Orit Gal, ‘complexity theory teaches us that major events are the manifestation of maturing and converging underlying trends: they reflect change that has already occurred within the system’.11 From this perspective, the 1989 fall of the Berlin Wall, the 2008 collapse of Lehman Brothers and the imminent collapse of the Greenland ice sheet have much in common. All three are reported in the news as sudden events but are actually visible tipping points that result from slowly accumulated pressure in the system – be it the gradual build-up of political protest in Eastern Europe, the build-up of sub-prime mortgages in a bank’s asset portfolio, or the build-up of greenhouse gases in the atmosphere.


pages: 474 words: 120,801

The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being in Charge Isn’t What It Used to Be by Moises Naim

"World Economic Forum" Davos, additive manufacturing, AOL-Time Warner, barriers to entry, Berlin Wall, bilateral investment treaty, business cycle, business process, business process outsourcing, call centre, citizen journalism, Clayton Christensen, clean water, collapse of Lehman Brothers, collective bargaining, colonial rule, conceptual framework, corporate governance, creative destruction, crony capitalism, deskilling, disinformation, disintermediation, disruptive innovation, don't be evil, Evgeny Morozov, failed state, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, illegal immigration, immigration reform, income inequality, income per capita, intangible asset, intermodal, invisible hand, job-hopping, Joseph Schumpeter, Julian Assange, Kickstarter, Lewis Mumford, liberation theology, Martin Wolf, mega-rich, megacity, military-industrial complex, Naomi Klein, Nate Silver, new economy, Northern Rock, Occupy movement, open borders, open economy, Peace of Westphalia, plutocrats, price mechanism, price stability, private military company, profit maximization, prosperity theology / prosperity gospel / gospel of success, radical decentralization, Ronald Coase, Ronald Reagan, seminal paper, Silicon Valley, Skype, Steve Jobs, The Nature of the Firm, Thomas Malthus, too big to fail, trade route, transaction costs, Twitter Arab Spring, vertical integration, Washington Consensus, WikiLeaks, World Values Survey, zero-sum game

Despite fuzziness as to what exactly defines the elite (Wealth? Status measured some other way? Particular professions?), the notion of a resurgent elite further strengthening its hold on government is very much alive. In 2008, days after the massive US bank bailout was announced and a few short weeks after the collapse of Lehman Brothers and the rescue of the insurance giant American International Group (AIG), the critic Naomi Klein described the era as “a revolt of the elites . . . and an incredibly successful one.” She argued that both the long neglect of financial regulation and the sudden bailout reflected elite control over policy.


pages: 374 words: 114,600

The Quants by Scott Patterson

Alan Greenspan, Albert Einstein, AOL-Time Warner, asset allocation, automated trading system, Bear Stearns, beat the dealer, Benoit Mandelbrot, Bernie Madoff, Bernie Sanders, Black Monday: stock market crash in 1987, Black Swan, Black-Scholes formula, Blythe Masters, Bonfire of the Vanities, book value, Brownian motion, buttonwood tree, buy and hold, buy low sell high, capital asset pricing model, Carl Icahn, centralized clearinghouse, Claude Shannon: information theory, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computerized trading, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, Doomsday Clock, Dr. Strangelove, Edward Thorp, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial engineering, Financial Modelers Manifesto, fixed income, Glass-Steagall Act, global macro, Gordon Gekko, greed is good, Haight Ashbury, I will remember that I didn’t make the world, and it doesn’t satisfy my equations, index fund, invention of the telegraph, invisible hand, Isaac Newton, Jim Simons, job automation, John Meriwether, John Nash: game theory, junk bonds, Kickstarter, law of one price, Long Term Capital Management, Louis Bachelier, low interest rates, mandelbrot fractal, margin call, Mark Spitznagel, merger arbitrage, Michael Milken, military-industrial complex, money market fund, Myron Scholes, NetJets, new economy, offshore financial centre, old-boy network, Paul Lévy, Paul Samuelson, Ponzi scheme, proprietary trading, quantitative hedge fund, quantitative trading / quantitative finance, race to the bottom, random walk, Renaissance Technologies, risk-adjusted returns, Robert Mercer, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Savings and loan crisis, Sergey Aleynikov, short selling, short squeeze, South Sea Bubble, speech recognition, statistical arbitrage, The Chicago School, The Great Moderation, The Predators' Ball, too big to fail, transaction costs, value at risk, volatility smile, yield curve, éminence grise

More than a thousand listeners were on the line waiting for Griffin and Beeson to explain what had become of Citadel. Rumors of Citadel’s collapse were spreading rapidly, even hitting TV screens on the financial news network CNBC. Citadel, traders said, was circling the drain. The market turmoil after the collapse of Lehman Brothers had led to massive losses in its giant convertible bond portfolio. If Citadel went under, many feared, the ripple effects would be catastrophic, causing other funds with similar positions to tumble like so many dominoes. According to former senior executives at Citadel, Griffin had started to force out employees as Citadel’s fortunes grew more precarious.


pages: 429 words: 120,332

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

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

London provides endless loopholes for U.S. financial corporations, and many U.S. banking catastrophes can be traced substantially to those companies’ London offices. The unit that blew up the insurance company American International Group (AIG), putting the U.S. taxpayer on the hook for $182.5 billion, was its four hundred–strong AIG Financial Products unit, based in London. The court-appointed examiner looking into the collapse of Lehman Brothers in September 2008 found it had used a trick called Repo 105 to shift $50 billion in assets off its balance sheet, and that while no U.S. law firm would sign off on the transactions, a major law firm in London was delighted to oblige, without breaking the rules.15 When the United States introduced the Sarbanes-Oxley regulations to protect Americans against the likes of Enron or Worldcom, the City of London did not follow, and more U.S. financial business flowed to London.


pages: 434 words: 114,583

Faster, Higher, Farther: How One of the World's Largest Automakers Committed a Massive and Stunning Fraud by Jack Ewing

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", 1960s counterculture, Asilomar, asset-backed security, Bear Stearns, Berlin Wall, business logic, cognitive dissonance, collapse of Lehman Brothers, corporate governance, crossover SUV, Fall of the Berlin Wall, financial engineering, Ford Model T, full employment, hiring and firing, independent contractor, Kaizen: continuous improvement, McMansion, military-industrial complex, self-driving car, short selling, short squeeze, Silicon Valley, sovereign wealth fund, Steve Jobs, subprime mortgage crisis

The prosecution in the Wiedeking and Härter trial was handicapped by a lack of witnesses who would testify that Porsche had been less than honest with investors about its plans for Volkswagen. Some of the former Porsche bankers suffered memory losses on the witness stand. Executives from Maple Bank said it wasn’t true that Porsche was about to run out of money. In the chaos that followed the collapse of Lehman Brothers, the defense lawyers argued, it was impossible to demonstrate that the press release Porsche issued in October 2008 was responsible for the violent fluctuations in Volkswagen’s share price that followed. Still, there was some suspense in the weeks leading up to March 18, 2016, when Judge Maurer was scheduled to deliver the verdict by a five-judge panel.


pages: 464 words: 116,945

Seventeen Contradictions and the End of Capitalism by David Harvey

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

It operates more like the Vatican or the Kremlin than like an open and transparent institution. It assumes a human face only at times of difficulty, when, for example, Hank Paulson (Secretary of the Treasury) and Ben Bernanke (Chair of the Federal Reserve) jointly took to the airwaves to dictate national policy in the wake of the collapse of Lehman Brothers in September 2008, when both the Executive Branch and Congress appeared paralysed and fearful. ‘When the financial system and the state–finance nexus fails, as it did in 1929 and 2008, then everyone recognises there is a threat to the survival of capital and of capitalism and no stone is left unturned and no compromise left unexamined in the endeavours to resuscitate it.’2 But all is not always harmonious in the relation between the capitalist state and private property.


pages: 380 words: 118,675

The Everything Store: Jeff Bezos and the Age of Amazon by Brad Stone

airport security, Amazon Mechanical Turk, Amazon Web Services, AOL-Time Warner, Apollo 11, bank run, Bear Stearns, Bernie Madoff, big-box store, Black Swan, book scanning, Brewster Kahle, buy and hold, call centre, centre right, Chuck Templeton: OpenTable:, Clayton Christensen, cloud computing, collapse of Lehman Brothers, crowdsourcing, cuban missile crisis, Danny Hillis, deal flow, Douglas Hofstadter, drop ship, Elon Musk, facts on the ground, fulfillment center, game design, housing crisis, invention of movable type, inventory management, James Dyson, Jeff Bezos, John Markoff, junk bonds, Kevin Kelly, Kiva Systems, Kodak vs Instagram, Larry Ellison, late fees, loose coupling, low skilled workers, Maui Hawaii, Menlo Park, Neal Stephenson, Network effects, new economy, off-the-grid, optical character recognition, PalmPilot, pets.com, Ponzi scheme, proprietary trading, quantitative hedge fund, reality distortion field, recommendation engine, Renaissance Technologies, RFID, Rodney Brooks, search inside the book, shareholder value, Silicon Valley, Silicon Valley startup, six sigma, skunkworks, Skype, SoftBank, statistical arbitrage, Steve Ballmer, Steve Jobs, Steven Levy, Stewart Brand, the long tail, Thomas L Friedman, Tony Hsieh, two-pizza team, Virgin Galactic, Whole Earth Catalog, why are manhole covers round?, zero-sum game

That year, Bezos learned that Zappos was advertising on the bottoms of the plastic bins at airport-security checkpoints. “They are outthinking us!” he snapped at a meeting. But inside Zappos, a big problem had emerged. It had been acquiring inventory with a revolving $100 million line of credit, and the financial crisis, which intensified with the collapse of Lehman Brothers in the fall of 2008, froze the capital markets. With consumer spending declining, Zappos’ inventory constrained by new borrowing limits, and the competition with Amazon cutting into the company’s profit margins, Zappos’ previously spectacular annual growth rate collapsed to a modest 10 percent.


pages: 309 words: 114,984

The Digital Doctor: Hope, Hype, and Harm at the Dawn of Medicine’s Computer Age by Robert Wachter

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, AI winter, Airbnb, Atul Gawande, Captain Sullenberger Hudson, Checklist Manifesto, Chuck Templeton: OpenTable:, Clayton Christensen, cognitive load, collapse of Lehman Brothers, computer age, creative destruction, crowdsourcing, deep learning, deskilling, disruptive innovation, driverless car, en.wikipedia.org, Erik Brynjolfsson, everywhere but in the productivity statistics, Firefox, Frank Levy and Richard Murnane: The New Division of Labor, general purpose technology, Google Glasses, human-factors engineering, hype cycle, Ignaz Semmelweis: hand washing, Internet of things, job satisfaction, Joseph Schumpeter, Kickstarter, knowledge worker, lifelogging, Marc Benioff, medical malpractice, medical residency, Menlo Park, minimum viable product, natural language processing, Network effects, Nicholas Carr, obamacare, pattern recognition, peer-to-peer, personalized medicine, pets.com, pneumatic tube, Productivity paradox, Ralph Nader, RAND corporation, Richard Hendricks, Robert Solow, Salesforce, Second Machine Age, self-driving car, seminal paper, Silicon Valley, Silicon Valley startup, six sigma, Skype, Snapchat, software as a service, Steve Jobs, Steven Levy, TED Talk, The future is already here, the payments system, The Wisdom of Crowds, Thomas Bayes, Toyota Production System, Uber for X, US Airways Flight 1549, Watson beat the top human players on Jeopardy!, Yogi Berra

“You never want a serious crisis to go to waste,” Rahm Emanuel, chief of staff to President-elect Obama, told the Wall Street Journal on November 19, 2008. “It’s an opportunity to do things that you think you could not do before.” The crisis that Emanuel was referring to, of course, was the global recession that had begun with the collapse of Lehman Brothers two months earlier. The Obama administration knew that time was short; it needed to get money flowing through the veins of the American economy promptly or the damage might become irreparable. But if the money appeared to end up lining the pockets of the same Wall Street moneymen who were being blamed for the crisis, or if it failed to have the desired stimulatory effect, the political fallout would be devastating.


pages: 393 words: 115,263

Planet Ponzi by Mitch Feierstein

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

The issue is not the net levels of debt. The net levels of debt are always going to be OK, those things will always cancel out. The issue is the structure. The quantity of debt we have in our financial system creeps through it like some deadly ivy: poisoning, choking, constricting, and killing. The collapse of Lehman Brothers proves better than anything why it’s not the net levels of debt that count. As we’ve noted before, Lehman collapsed with net debt of ‘just’ $129 billion. In the context of the entire world’s financial system, that $129 billion was a pinprick, nothing more. But it wasn’t the net debt that counted.


On the Road: Adventures From Nixon to Trump by James Naughtie

"Hurricane Katrina" Superdome, Affordable Care Act / Obamacare, Alistair Cooke, anti-communist, Ayatollah Khomeini, Bear Stearns, Berlin Wall, Bernie Sanders, Black Lives Matter, centre right, collapse of Lehman Brothers, Donald Trump, fake news, Ferguson, Missouri, gentrification, Haight Ashbury, illegal immigration, immigration reform, Julian Assange, Mikhail Gorbachev, Norman Mailer, obamacare, Oklahoma City bombing, plutocrats, post-work, Ronald Reagan, Ronald Reagan: Tear down this wall, Seymour Hersh, South China Sea, Steve Bannon, trickle-down economics, white flight, WikiLeaks, Yom Kippur War, young professional, zero-sum game

It had come to think itself drained, shaken cold by 9/11 and then frozen by a financial crash seven years later. An age of excess was over, and an era of decline had begun. Theirs were the arguments that shaped the country for the new century. But Obama was hobbled from the start. He lived his whole time in office under the shadow of the global panic that followed the collapse of Lehman Brothers in mid-September 2008, seven weeks before his election, and all its miserable consequences. The crisis helped him get elected, because Republicans had to shoulder much of the blame, but it weakened his presidency. As voters made up their minds, all Americans were facing up to the truth that in the preceding nine months under George W.


pages: 451 words: 115,720

Green Tyranny: Exposing the Totalitarian Roots of the Climate Industrial Complex by Rupert Darwall

1960s counterculture, active measures, Affordable Care Act / Obamacare, Albert Einstein, Bakken shale, Berlin Wall, Bernie Sanders, California energy crisis, carbon credits, carbon footprint, centre right, clean tech, collapse of Lehman Brothers, creative destruction, decarbonisation, deindustrialization, dematerialisation, disinformation, Donald Trump, electricity market, Elon Musk, energy security, energy transition, facts on the ground, Fall of the Berlin Wall, Garrett Hardin, gigafactory, Gunnar Myrdal, Herbert Marcuse, hydraulic fracturing, Intergovernmental Panel on Climate Change (IPCC), invisible hand, it's over 9,000, James Watt: steam engine, John Elkington, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, liberal capitalism, market design, means of production, megaproject, Mikhail Gorbachev, mittelstand, Murray Bookchin, Neil Armstrong, nuclear winter, obamacare, oil shale / tar sands, Paris climate accords, Peace of Westphalia, peak oil, plutocrats, postindustrial economy, precautionary principle, pre–internet, recommendation engine, renewable energy transition, rent-seeking, road to serfdom, rolling blackouts, Ronald Reagan, shareholder value, Silicon Valley, Silicon Valley billionaire, Solyndra, Strategic Defense Initiative, subprime mortgage crisis, tech baron, tech billionaire, The Wealth of Nations by Adam Smith, Tragedy of the Commons, women in the workforce, young professional

Damaging as the economic consequences of renewable energy were proving for Europe, global warming spoke to the highest purpose of the European polity, a cause tailor-made for the European Union’s postdemocratic, supranational administrative form of governance. To make its claim on America, global warming in turn asserts its uniqueness—that nothing like it has ever happened before, that dealing with it requires an unprecedented response; in short, that global warming is different. In the boom years before the subprime crisis and the collapse of Lehman Brothers, financial experts would explain that the economy had changed and that the past offered no insight into the present and no guide to the future. It was a self-serving delusion. “More money has been lost because of four words than at the point of a gun. Those words are ‘This time is different.’”4 Is this time different?


pages: 388 words: 125,472

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

anti-communist, Asian financial crisis, autism spectrum disorder, bank run, battle of ideas, Big bang: deregulation of the City of London, bonus culture, Boris Johnson, 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, disinformation, don't be evil, Edward Snowden, Etonian, eurozone crisis, falling living standards, Francis Fukuyama: the end of history, full employment, G4S, glass ceiling, hiring and firing, housing crisis, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, James Dyson, Jon Ronson, laissez-faire capitalism, land bank, light touch regulation, low interest rates, market fundamentalism, mass immigration, Monroe Doctrine, Mont Pelerin Society, moral hazard, Neil Kinnock, night-watchman state, Nixon triggered the end of the Bretton Woods system, Northern Rock, Occupy movement, offshore financial centre, old-boy network, open borders, Overton Window, plutocrats, popular capitalism, post-war consensus, 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, subprime mortgage crisis, Suez crisis 1956, The Wealth of Nations by Adam Smith, transfer pricing, Tyler Cowen, union organizing, unpaid internship, Washington Consensus, We are all Keynesians now, wealth creators, Winter of Discontent

When the coalition government pledged to introduce legislation based on the findings, banks were given until 2019 to implement a proposed weak ring-fencing of high street and investment banking – so that investment banks could no longer use ordinary customers’ money to bet on risky products – over a decade after the collapse of Lehman Brothers. Even the Conservative MP Andrew Tyrie claimed that government amendments had reduced the powers of the financial watchdog to enforce such a separation. In opposition, Vince Cable of the Liberal Democrats had called for the total separation of high street and investment banking, but this demand was abandoned by the coalition government.


pages: 386 words: 122,595

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

affirmative action, Alan Greenspan, Albert Einstein, Andrei Shleifer, barriers to entry, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, Boeing 747, Bretton Woods, business cycle, buy and hold, capital controls, carbon tax, Cass Sunstein, central bank independence, classic study, clean water, collapse of Lehman Brothers, congestion charging, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency risk, Daniel Kahneman / Amos Tversky, David Brooks, demographic transition, diversified portfolio, Doha Development Round, Exxon Valdez, financial innovation, fixed income, floating exchange rates, George Akerlof, Gini coefficient, Gordon Gekko, Great Leap Forward, greed is good, happiness index / gross national happiness, Hernando de Soto, income inequality, index fund, interest rate swap, invisible hand, job automation, John Markoff, Joseph Schumpeter, junk bonds, Kenneth Rogoff, libertarian paternalism, low interest rates, low skilled workers, Malacca Straits, managed futures, market bubble, microcredit, money market fund, money: store of value / unit of account / medium of exchange, Network effects, new economy, open economy, presumed consent, price discrimination, price stability, principal–agent problem, profit maximization, profit motive, purchasing power parity, race to the bottom, RAND corporation, random walk, rent control, Richard Thaler, rising living standards, Robert Gordon, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Sam Peltzman, school vouchers, seminal paper, Silicon Valley, Silicon Valley startup, South China Sea, Steve Jobs, tech worker, The Market for Lemons, the rule of 72, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, transaction costs, transcontinental railway, trickle-down economics, urban sprawl, Washington Consensus, Yogi Berra, young professional, zero-sum game

Money that was stuffed under a mattress or locked in a bank vault could not be loaned back into the economy. The Fed did nothing while America’s credit dried up (and actually raised interest rates sharply in 1931 to defend the gold standard). Fed officials should have been doing just the opposite: pumping money into the system. In September 2009, the one-year anniversary of the collapse of Lehman Brothers, the chair of the Council of Economic Advisers, Christina Romer, gave a talk ominously entitled “Back from the Brink,” which laid much of the credit for our escape from economic disaster at the door of the Federal Reserve. She explained, “The policy response in the current episode, in contrast [to the 1930s], has been swift and bold.


pages: 481 words: 120,693

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

"World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Alan Greenspan, Albert Einstein, algorithmic trading, assortative mating, banking crisis, barriers to entry, Basel III, battle of ideas, Bear Stearns, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Black Swan, Boris Johnson, Branko Milanovic, Bretton Woods, BRICs, Bullingdon Club, business climate, call centre, carried interest, Cass Sunstein, Clayton Christensen, collapse of Lehman Brothers, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Deng Xiaoping, disruptive innovation, don't be evil, double helix, energy security, estate planning, experimental subject, financial deregulation, financial engineering, financial innovation, Flash crash, Ford Model T, Frank Gehry, Gini coefficient, Glass-Steagall Act, global village, Goldman Sachs: Vampire Squid, Gordon Gekko, Guggenheim Bilbao, haute couture, high net worth, income inequality, invention of the steam engine, job automation, John Markoff, joint-stock company, Joseph Schumpeter, knowledge economy, knowledge worker, liberation theology, light touch regulation, linear programming, London Whale, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Max Levchin, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, NetJets, new economy, Occupy movement, open economy, Peter Thiel, place-making, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, postindustrial economy, Potemkin village, profit motive, public intellectual, purchasing power parity, race to the bottom, rent-seeking, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, self-driving car, seminal paper, Sheryl Sandberg, short selling, Silicon Valley, Silicon Valley billionaire, Silicon Valley startup, Simon Kuznets, sovereign wealth fund, starchitect, stem cell, Steve Jobs, TED Talk, the long tail, the new new thing, 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, zero-sum game

Other diners included Julian Robertson, legendary founder of the Tiger Management hedge fund; Donald Marron, the former chief executive of PaineWebber and now boss of Lightyear Capital; and Leon Black, cofounder of the Apollo private equity group. In a memo about the luncheon discussion he distributed a few weeks later, Wien wrote that the talk focused on one issue: “Were we about to experience a recession?” We all know the answer today. But just over a year before the collapse of Lehman Brothers definitively plunged the world into the most profound financial crisis since the Great Depression, the private consensus among this group of Wall Street savants was that we were not. According to Wien’s memo, “The conclusion was that we were probably in an economic slowdown and a correction in the market, but we were not about to begin a recession or a bear market.”


pages: 444 words: 124,631

Buy Now, Pay Later: The Extraordinary Story of Afterpay by Jonathan Shapiro, James Eyers

Airbnb, Alan Greenspan, Apple Newton, bank run, barriers to entry, Big Tech, Black Lives Matter, blockchain, book value, British Empire, clockwatching, cloud computing, collapse of Lehman Brothers, computer age, coronavirus, corporate governance, corporate raider, COVID-19, cryptocurrency, delayed gratification, diversification, Dogecoin, Donald Trump, Elon Musk, financial deregulation, George Floyd, greed is good, growth hacking, index fund, Jones Act, Kickstarter, late fees, light touch regulation, lockdown, low interest rates, managed futures, Max Levchin, meme stock, Mount Scopus, Network effects, new economy, passive investing, payday loans, paypal mafia, Peter Thiel, pre–internet, Rainbow capitalism, regulatory arbitrage, retail therapy, ride hailing / ride sharing, Robinhood: mobile stock trading app, rolodex, Salesforce, short selling, short squeeze, side hustle, Silicon Valley, Snapchat, SoftBank, sovereign wealth fund, tech bro, technology bubble, the payments system, TikTok, too big to fail, transaction costs, Vanguard fund

The global financial crisis led Guinness Peat to sell out of some of its technology investments. In April 2008, GPG punished MYOB founder and chief executive Craig Winkler for rejecting a $735 million bid from private-equity firm Archer. GPG used its 15 per cent stake to block a lucrative options package. Archer returned in October, after the markets had cratered following the collapse of Lehman Brothers, with a vastly lower bid of $440 million. The hurt of being forced to agree to sell the highly successful company he’d spent years building at a distressed price to private-equity buyers was too much for Winkler to bare. By then Winkler had already stepped down as CEO. But in February 2009 he left the company altogether, and in April 2009 he ploughed $14.7 million into a rival accounting software start-up called Xero, giving him a 24 per cent stake.


pages: 387 words: 123,237

This Land: The Struggle for the Left by Owen Jones

Berlin Wall, Bernie Sanders, Black Lives Matter, Boris Johnson, Boycotts of Israel, Brexit referendum, call centre, capitalist realism, collapse of Lehman Brothers, Corn Laws, coronavirus, COVID-19, deindustrialization, Dominic Cummings, Donald Trump, European colonialism, falling living standards, first-past-the-post, Francis Fukuyama: the end of history, George Floyd, gig economy, green new deal, housing crisis, Jeremy Corbyn, lockdown, market fundamentalism, Naomi Klein, Neil Kinnock, Nelson Mandela, offshore financial centre, open borders, quantitative easing, race to the bottom, rent control, short selling, The Spirit Level, War on Poverty

Movements emerged against economic injustice, war, austerity, student debt, tax avoidance, the climate emergency and the onslaught against workers’ living standards; together, they helped give a voice to hundreds of thousands of British citizens who felt increasingly unrepresented by an ever more remote political class in Westminster. Younger people were at the forefront, and little wonder: theirs was a generation robbed of the optimism which had been an article of faith for those who came before them, that a better lot in life than their parents’ beckoned. The financial crash that followed the collapse of Lehman Brothers in September 2008 proved a searing experience for many younger people. In an instant, their futures seemed to be snatched away: by 2011, youth unemployment surpassed a million. As they were expected to pick up the tab for the financial calamity, their living standards fell more acutely than in any industrialized country other than Greece.15 Home-ownership plummeted among the young – between the mid-1990s and the mid-2010s, it was cut by more than half among young, middle-income adults16 – and the failure to replace lost council housing stock meant the only other option was a rip-off, poorly regulated private rental sector.


pages: 460 words: 131,579

Masters of Management: How the Business Gurus and Their Ideas Have Changed the World—for Better and for Worse by Adrian Wooldridge

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, affirmative action, Alan Greenspan, barriers to entry, behavioural economics, Black Swan, blood diamond, borderless world, business climate, business cycle, business intelligence, business process, carbon footprint, Cass Sunstein, Clayton Christensen, clean tech, cloud computing, collaborative consumption, collapse of Lehman Brothers, collateralized debt obligation, commoditize, company town, corporate governance, corporate social responsibility, creative destruction, credit crunch, crowdsourcing, David Brooks, David Ricardo: comparative advantage, disintermediation, disruptive innovation, do well by doing good, don't be evil, Donald Trump, Edward Glaeser, Exxon Valdez, financial deregulation, Ford Model T, Frederick Winslow Taylor, future of work, George Gilder, global supply chain, Golden arches theory, hobby farmer, industrial cluster, intangible asset, It's morning again in America, job satisfaction, job-hopping, joint-stock company, Joseph Schumpeter, junk bonds, Just-in-time delivery, Kickstarter, knowledge economy, knowledge worker, lake wobegon effect, Long Term Capital Management, low skilled workers, Mark Zuckerberg, McMansion, means of production, Menlo Park, meritocracy, Michael Milken, military-industrial complex, mobile money, Naomi Klein, Netflix Prize, Network effects, new economy, Nick Leeson, Norman Macrae, open immigration, patent troll, Ponzi scheme, popular capitalism, post-industrial society, profit motive, purchasing power parity, radical decentralization, Ralph Nader, recommendation engine, Richard Florida, Richard Thaler, risk tolerance, Ronald Reagan, science of happiness, scientific management, shareholder value, Silicon Valley, Silicon Valley startup, Skype, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, Steven Levy, supply-chain management, tacit knowledge, technoutopianism, the long tail, The Soul of a New Machine, The Wealth of Nations by Adam Smith, Thomas Davenport, Tony Hsieh, too big to fail, vertical integration, wealth creators, women in the workforce, young professional, Zipcar

Yet the timing of the birthday bash was less than perfect. Lehman Brothers was already looking shaky (the company lost 73 percent of its share-price in the first six months of 2008). And as the school continued to celebrate its birthday over the rest of the year, the capitalist system began to unravel. The collapse of Lehman Brothers almost took down the rest of the banking system, and the world was plunged into the most gut-wrenching depression since the 1930s. The crisis brought down many of the school’s most celebrated products, such as Stan O’Neal, the head of Merrill Lynch, and Andy Hornby, the head of HBOS (who, incidentally, had graduated top of his class).


pages: 515 words: 142,354

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

"there is no alternative" (TINA), "World Economic Forum" Davos, Alan Greenspan, bank run, banking crisis, barriers to entry, battle of ideas, behavioural economics, Berlin Wall, Bretton Woods, business cycle, buy and hold, capital controls, carbon tax, Carmen Reinhart, cashless society, central bank independence, centre right, cognitive dissonance, collapse of Lehman Brothers, collective bargaining, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, currency peg, dark matter, David Ricardo: comparative advantage, disintermediation, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial innovation, full employment, George Akerlof, Gini coefficient, global supply chain, Great Leap Forward, Growth in a Time of Debt, housing crisis, income inequality, incomplete markets, inflation targeting, information asymmetry, investor state dispute settlement, invisible hand, Kenneth Arrow, Kenneth Rogoff, knowledge economy, light touch regulation, low interest rates, manufacturing employment, market bubble, market friction, market fundamentalism, Martin Wolf, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, neoliberal agenda, new economy, open economy, paradox of thrift, pension reform, pensions crisis, price stability, profit maximization, purchasing power parity, quantitative easing, race to the bottom, risk-adjusted returns, Robert Shiller, Ronald Reagan, Savings and loan crisis, savings glut, secular stagnation, Silicon Valley, sovereign wealth fund, the payments system, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, trickle-down economics, Washington Consensus, working-age population

Some banks that had not lent to Greece may have lent money to other banks that had, so they, too, might be at risk. Some banks had bought insurance against losses, but some banks had gambled, taking bets that Greece would not default. It was a mess. And it was a mess that could spread. The world had just experienced a dose of this kind of contagion: in the aftermath of the collapse of Lehman Brothers, the entire world went into an economic recession, as financial markets froze. It was not clear whether Greece was small or large relative to Lehman Brothers; most importantly, it was not clear whether it was systemically significant. In chapter 1, I described how as each country went into crisis, the Troika formulated a program supposedly designed to bring the country back to health, and for the countries that had lost access to international credit markets, to regain access.


pages: 464 words: 139,088

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

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

As in so many crises, the point of greatest vulnerability was in the banking sector. It had become so highly leveraged that, as described in Chapter 1, relatively small items of news from the housing market in the United States in 2006 and the position of some European banks in 2007 led to nervousness about the state of the sector. After the collapse of Lehman Brothers in September 2008, there was both a full-blown banking crisis and an enormous shock to confidence around the world. The stability heuristic was no longer appropriate. The narrative changed. It was now far from obvious how to estimate lifetime income. All that was clear was that spending patterns would have to change.


pages: 476 words: 139,761

Kleptopia: How Dirty Money Is Conquering the World by Tom Burgis

active measures, Anton Chekhov, banking crisis, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, Boris Johnson, Brexit referendum, British Empire, collapse of Lehman Brothers, coronavirus, corporate governance, COVID-19, credit crunch, Credit Default Swap, cryptocurrency, disinformation, do-ocracy, Donald Trump, energy security, Etonian, failed state, fake news, Gordon Gekko, high net worth, Honoré de Balzac, illegal immigration, invisible hand, Julian Assange, liberal capitalism, light touch regulation, lockdown, Mark Zuckerberg, Martin Wolf, Michael Milken, Mikhail Gorbachev, Mohammed Bouazizi, Northern Rock, offshore financial centre, Right to Buy, Ronald Reagan, Skype, sovereign wealth fund, trade route, WikiLeaks

‘This is the same police force that did nothing to tackle the large-scale market manipulation taking place within the banks located in the City. Nor did their political masters, in the shape of the Corporation of London, do anything to protect the millions of consumers conned into buying services that were of no value to them.’ Three years had passed since the collapse of Lehman Brothers, three years since Nigel extracted a thousand pages of confidential documents from inside the financial secrecy industry and alerted the agencies entrusted with preventing abuses of money to what appeared to be glaring examples of such abuses taking place in the heart of the City. Apart from that one furtive meeting with agents from the tax authority, nothing had happened.


pages: 432 words: 143,491

Failures of State: The Inside Story of Britain's Battle With Coronavirus by Jonathan Calvert, George Arbuthnott

Boeing 747, Boris Johnson, Brexit referendum, Bullingdon Club, centre right, collapse of Lehman Brothers, contact tracing, contact tracing app, coronavirus, COVID-19, data science, disinformation, Dominic Cummings, Donald Trump, Etonian, gig economy, global pandemic, high-speed rail, Jeremy Corbyn, Kickstarter, lockdown, nudge unit, open economy, Rishi Sunak, Ronald Reagan, Skype, social distancing, zoonotic diseases

In the meantime, Johnson and those around him would spend the next seven days defending their inaction – while the news became grimmer and grimmer. The week started particularly badly on Monday 9 March, the day before the Cheltenham Festival. The stock market’s fear that something seismic was happening was escalating rapidly. That day, the virus caused the steepest global stock market fall since the collapse of Lehman Brothers, which had triggered the global recession in 2008. Almost £125bn was wiped off the value of the FTSE 100 in an 8 per cent plummet that represented the fifth-worst day in its history. The exchange finished the day below 6,000 points, which was the lowest level since share prices had tumbled following the Brexit vote in 2016.


pages: 565 words: 134,138

The World for Sale: Money, Power and the Traders Who Barter the Earth’s Resources by Javier Blas, Jack Farchy

accounting loophole / creative accounting, airport security, algorithmic trading, Asian financial crisis, Ayatollah Khomeini, banking crisis, book value, BRICs, business climate, business cycle, collapse of Lehman Brothers, commodity super cycle, coronavirus, corporate raider, COVID-19, Deng Xiaoping, Donald Trump, electricity market, energy security, European colonialism, failed state, financial innovation, Ford Model T, foreign exchange controls, Great Grain Robbery, invisible hand, John Deuss, junk bonds, Kickstarter, light touch regulation, lockdown, low interest rates, margin call, new economy, North Sea oil, offshore financial centre, oil shale / tar sands, oil shock, oil-for-food scandal, Oscar Wyatt, price anchoring, proprietary trading, purchasing power parity, Ronald Reagan, Scramble for Africa, sovereign wealth fund, special economic zone, stakhanovite, Suez crisis 1956, trade route, vertical integration, WikiLeaks, Yom Kippur War, éminence grise

It became a self-reinforcing cycle: hedge funds bet against Xstrata, knowing that doing so would put further pressure on Glencore and make a fire sale of its Xstrata shares more likely. At the same time, they were betting against Glencore on the credit markets. The cost of insuring against a Glencore bankruptcy skyrocketed. In the wake of the collapse of Lehman Brothers, when every company in the world was worrying about who might be next, that caused deep concern among Glencore’s banks and trading counterparties. Credit is the lifeblood of commodity trading. It’s what allows traders to handle vast quantities of raw materials without having to pay upfront every time.


India's Long Road by Vijay Joshi

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

Not only did they serve to cover payments deficits but their very presence inspired confidence and prevented capital flight. Since 2008, however, India’s adherence to its payments regime has become more hesitant. D. Subbarao came in as RBI governor at a difficult time, only a week before the collapse of Lehman Brothers in September 2008. For India, the immediate effect of the global turmoil was that capital inflows dried up for six months. Subbarao responded with a mixture of running down reserves and letting the rupee depreciate. So far, his policy was entirely in consonance with Reddy’s. Then, strong inward capital flows resumed because a) it looked as if the worst of the crisis was over and India had come out of it in better shape than many countries; and b) Western governments slashed interest rates to very low levels and started ‘quantitative easing’, which raised the relative return on Indian assets.


pages: 632 words: 159,454

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

accounting loophole / creative accounting, Alan Greenspan, anti-communist, Asian financial crisis, asset-backed security, Atahualpa, balance sheet recession, bank run, banking crisis, Bear Stearns, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, 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 engineering, financial innovation, fixed income, floating exchange rates, foreign exchange controls, Francisco Pizarro, full employment, German hyperinflation, Glass-Steagall Act, guns versus butter model, hiring and firing, income inequality, invisible hand, Isaac Newton, it's over 9,000, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, land bank, liberal capitalism, low interest rates, market bubble, money: store of value / unit of account / medium of exchange, moral hazard, new economy, Nixon triggered the end of the Bretton Woods system, oil shock, plutocrats, Ponzi scheme, price mechanism, quantitative easing, rolodex, Ronald Reagan, South Sea Bubble, subprime mortgage crisis, Suez canal 1869, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the market place, The Wealth of Nations by Adam Smith, too big to fail, War on Poverty, Yom Kippur War

Central banks ‘buy long-term government bonds with newly printed money’.56 The theory was that this purchase of government debt, by which the central bank was effectively printing money and lending it to its own government, would keep bond prices high. High bond prices meant lower interest rates, which would help boost growth. Between November 2010, a full two years after the collapse of Lehman Brothers, and March 2011, the US Treasury issued $589 billion of debt, of which the Federal Reserve bought $514 billion, or 87 per cent. In Britain, from ‘early 2009 through to March 2010’ Her Majesty’s Treasury issued ‘£247 billion ($396 billion) of extra long-term gilts [UK government bonds], of which the Bank of England bought £199 billion’, or 80 per cent.57 In the United States, it was significant that Ben Bernanke, an academic economist who specialized in the history of the Great Depression, had taken over the chairmanship of the Federal Reserve from Alan Greenspan.


pages: 549 words: 147,112

The Lost Bank: The Story of Washington Mutual-The Biggest Bank Failure in American History by Kirsten Grind

"World Economic Forum" Davos, Alan Greenspan, asset-backed security, bank run, banking crisis, Bear Stearns, big-box store, call centre, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, financial engineering, fixed income, fulfillment center, Glass-Steagall Act, housing crisis, junk bonds, low interest rates, Maui Hawaii, money market fund, mortgage debt, naked short selling, NetJets, Savings and loan crisis, shareholder value, short selling, Shoshana Zuboff, Skype, too big to fail, Y2K

Around the world, banks large and small were borrowing from the Federal Reserve’s discount window, a sign of the panic spreading in financial institutions everywhere, not just at WaMu. Usually banks tap the Fed only in an emergency. But during the first week in September, banks borrowed a collective $19 billion, compared with an average of less than $50 million a week in prior years.46 The borrowing volume continued to grow after the collapse of Lehman Brothers and the government bailout of AIG. Some of the largest borrowers were companies that weren’t in the headlines at all. Right after the government forced Fannie Mae and Freddie Mac into conservatorship, U.S. Bancorp, another large consumer bank like WaMu, took out a $3.4 billion overnight loan.


pages: 519 words: 155,332

Tailspin: The People and Forces Behind America's Fifty-Year Fall--And Those Fighting to Reverse It by Steven Brill

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, airport security, American Society of Civil Engineers: Report Card, asset allocation, behavioural economics, Bernie Madoff, Bernie Sanders, Blythe Masters, Bretton Woods, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Carl Icahn, carried interest, clean water, collapse of Lehman Brothers, collective bargaining, computerized trading, corporate governance, corporate raider, corporate social responsibility, Credit Default Swap, currency manipulation / currency intervention, deal flow, Donald Trump, electricity market, ending welfare as we know it, failed state, fake news, financial deregulation, financial engineering, financial innovation, future of work, ghettoisation, Glass-Steagall Act, Gordon Gekko, hiring and firing, Home mortgage interest deduction, immigration reform, income inequality, invention of radio, job automation, junk bonds, knowledge economy, knowledge worker, labor-force participation, laissez-faire capitalism, low interest rates, Mahatma Gandhi, Mark Zuckerberg, Michael Milken, military-industrial complex, mortgage tax deduction, Neil Armstrong, new economy, Nixon triggered the end of the Bretton Woods system, obamacare, old-boy network, opioid epidemic / opioid crisis, paper trading, Paris climate accords, performance metric, post-work, Potemkin village, Powell Memorandum, proprietary trading, quantitative hedge fund, Ralph Nader, ride hailing / ride sharing, Robert Bork, Robert Gordon, Robert Mercer, Ronald Reagan, Rutger Bregman, Salesforce, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, stock buybacks, Tax Reform Act of 1986, tech worker, telemarketer, too big to fail, trade liberalization, union organizing, Unsafe at Any Speed, War on Poverty, women in the workforce, working poor

Years of lobbying had eliminated the guardrails of regulations restricting the spread of their activities and the risks that they could take. So they now had to be bailed out of all those disastrous gambles in mortgage-backed securities, credit default swaps, and synthetic credit default swaps because, in the wake of the collapse of Lehman Brothers, it was clear that letting another big bank go under would take them all down in a calamity no responsible official wanted to allow. Hundreds of billions of taxpayer dollars were allocated to save them, even as individual mortgage holders were thrown out of their homes because they couldn’t or wouldn’t write checks to cover the ballooning payments due on homes suddenly worth less than the money they owed because of the collapse of the housing market.


pages: 566 words: 155,428

After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead by Alan S. Blinder

Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, bank run, banking crisis, banks create money, Bear Stearns, book value, break the buck, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, conceptual framework, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, Detroit bankruptcy, diversification, double entry bookkeeping, eurozone crisis, facts on the ground, financial engineering, financial innovation, fixed income, friendly fire, full employment, Glass-Steagall Act, hiring and firing, housing crisis, Hyman Minsky, illegal immigration, inflation targeting, interest rate swap, Isaac Newton, junk bonds, Kenneth Rogoff, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low interest rates, market bubble, market clearing, market fundamentalism, McMansion, Minsky moment, money market fund, moral hazard, naked short selling, new economy, Nick Leeson, Northern Rock, Occupy movement, offshore financial centre, Paul Volcker talking about ATMs, price mechanism, proprietary trading, quantitative easing, Ralph Waldo Emerson, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, shareholder value, short selling, South Sea Bubble, statistical model, the payments system, time value of money, too big to fail, vertical integration, working-age population, yield curve, Yogi Berra

That date was exquisitely bad timing for one of the primary dealers that was fighting for its life at the time: an investment bank named Bear Stearns. 5 FROM BEAR TO LEHMAN: INCONSISTENCY WAS THE HOBGOBLIN A foolish consistency is the hobgoblin of little minds. —RALPH WALDO EMERSON The six months between the collapse of Bear Stearns into the waiting arms of JP Morgan Chase and the collapse of Lehman Brothers into bankruptcy was interesting, in the sense of the apocryphal Chinese curse. (May you live in interesting times.) In March the Federal Reserve, supported by the Treasury, kicked in almost $30 billion to facilitate the shotgun marriage of Bear to JP Morgan, presumably because a disorderly failure of Bear might have devastated the financial system.


pages: 807 words: 154,435

Radical Uncertainty: Decision-Making for an Unknowable Future by Mervyn King, John Kay

Airbus A320, Alan Greenspan, Albert Einstein, Albert Michelson, algorithmic trading, anti-fragile, Antoine Gombaud: Chevalier de Méré, Arthur Eddington, autonomous vehicles, availability heuristic, banking crisis, Barry Marshall: ulcers, battle of ideas, Bear Stearns, behavioural economics, Benoit Mandelbrot, bitcoin, Black Swan, Boeing 737 MAX, Bonfire of the Vanities, Brexit referendum, Brownian motion, business cycle, business process, capital asset pricing model, central bank independence, collapse of Lehman Brothers, correlation does not imply causation, credit crunch, cryptocurrency, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, DeepMind, demographic transition, discounted cash flows, disruptive innovation, diversification, diversified portfolio, Donald Trump, Dutch auction, easy for humans, difficult for computers, eat what you kill, Eddington experiment, Edmond Halley, Edward Lloyd's coffeehouse, Edward Thorp, Elon Musk, Ethereum, Eugene Fama: efficient market hypothesis, experimental economics, experimental subject, fear of failure, feminist movement, financial deregulation, George Akerlof, germ theory of disease, Goodhart's law, Hans Rosling, Helicobacter pylori, high-speed rail, Ignaz Semmelweis: hand washing, income per capita, incomplete markets, inflation targeting, information asymmetry, invention of the wheel, invisible hand, Jeff Bezos, Jim Simons, Johannes Kepler, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Snow's cholera map, John von Neumann, Kenneth Arrow, Kōnosuke Matsushita, Linda problem, Long Term Capital Management, loss aversion, Louis Pasteur, mandelbrot fractal, market bubble, market fundamentalism, military-industrial complex, Money creation, Moneyball by Michael Lewis explains big data, Monty Hall problem, Nash equilibrium, Nate Silver, new economy, Nick Leeson, Northern Rock, nudge theory, oil shock, PalmPilot, Paul Samuelson, peak oil, Peter Thiel, Philip Mirowski, Phillips curve, Pierre-Simon Laplace, popular electronics, power law, price mechanism, probability theory / Blaise Pascal / Pierre de Fermat, quantitative trading / quantitative finance, railway mania, RAND corporation, reality distortion field, rent-seeking, Richard Feynman, Richard Thaler, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Solow, Ronald Coase, sealed-bid auction, shareholder value, Silicon Valley, Simon Kuznets, Socratic dialogue, South Sea Bubble, spectrum auction, Steve Ballmer, Steve Jobs, Steve Wozniak, Suez crisis 1956, Tacoma Narrows Bridge, Thales and the olive presses, Thales of Miletus, The Chicago School, the map is not the territory, The Market for Lemons, The Nature of the Firm, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Bayes, Thomas Davenport, Thomas Malthus, Toyota Production System, transaction costs, ultimatum game, urban planning, value at risk, world market for maybe five computers, World Values Survey, Yom Kippur War, zero-sum game

This outcome ‘displeased Jonah exceedingly, and he was very angry’, feeling (unlike many modern forecasters) despondent at the very public refutation of his prediction. But God persuaded Jonah that the happy outcome was more important than the failure of his forecast. The King of Nineveh wore sackcloth and sat in ashes; the titans of Wall Street had no similar opportunity or inclination. The collapse of Lehman Brothers on 15 September 2008 could not have been widely predicted because if it had been it would not have happened on that date. Either the bank would have collapsed earlier, or the regulators or Lehman itself would have taken steps to avoid, or at least minimise, the event. And because beliefs influence behaviour the economic system is forever changing.


pages: 586 words: 160,321

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

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

But when a central banker said exactly the same words, the markets knew that the promise was credible. Central banks had in fact become the stars of the global financial crisis. They knew they needed to respond decisively and innovatively to problems that could not easily be tackled by governments, finance ministries, and politicians. In the aftermath of the collapse of Lehman Brothers in September 2008, the US administration and the Congress were paralyzed by the upcoming presidential election, and consequently the government lacked the possibility to act. But the Federal Reserve System could be very decisive. It injected liquidity into the banking system. The New York Fed intervened in a very unorthodox way to prop up a systemically vital financial institution whose collapse would have destroyed the global financial system: it lent AIG $85 billion in return for 80 percent of its stock as well as providing $20.9 billion in the commercial credit program and a $38 billion facility providing liquidity for the company’s securities.


pages: 554 words: 167,247

America's Bitter Pill: Money, Politics, Backroom Deals, and the Fight to Fix Our Broken Healthcare System by Steven Brill

Affordable Care Act / Obamacare, asset light, barriers to entry, behavioural economics, Bernie Sanders, business process, call centre, collapse of Lehman Brothers, collective bargaining, compensation consultant, crony capitalism, desegregation, Donald Trump, Edward Snowden, employer provided health coverage, medical malpractice, Menlo Park, military-industrial complex, Nate Silver, obamacare, Potemkin village, Ronald Reagan, Saturday Night Live, side project, Silicon Valley, the payments system, young professional

For as Santelli screamed into his microphone, a group of capital insiders representing multiple factions of America’s biggest industry—healthcare—was negotiating exactly the kinds of secret deals that would have made Santelli scream louder had he known about them. CHAPTER 8 DEAL TIME March–April 2009 FOR THE SENATE FINANCE COMMITTEE, THERE WAS A SILVER LINING in the collapse of Lehman Brothers that had accelerated the financial meltdown: Antonios “Tony” Clapsis, a bearded, wiry twenty-eight-year-old who loved crunching numbers. When Lehman collapsed in September 2008, Clapsis had been working at the investment bank for about six years as a stock analyst concentrating on the healthcare industry.


pages: 552 words: 168,518

MacroWikinomics: Rebooting Business and the World by Don Tapscott, Anthony D. Williams

"World Economic Forum" Davos, accounting loophole / creative accounting, airport security, Andrew Keen, augmented reality, Ayatollah Khomeini, barriers to entry, Ben Horowitz, bioinformatics, blood diamond, Bretton Woods, business climate, business process, buy and hold, car-free, carbon footprint, carbon tax, Charles Lindbergh, citizen journalism, Clayton Christensen, clean water, Climategate, Climatic Research Unit, cloud computing, collaborative editing, collapse of Lehman Brothers, collateralized debt obligation, colonial rule, commoditize, corporate governance, corporate social responsibility, creative destruction, crowdsourcing, death of newspapers, demographic transition, digital capitalism, digital divide, disruptive innovation, distributed generation, do well by doing good, don't be evil, en.wikipedia.org, energy security, energy transition, Evgeny Morozov, Exxon Valdez, failed state, fault tolerance, financial innovation, Galaxy Zoo, game design, global village, Google Earth, Hans Rosling, hive mind, Home mortgage interest deduction, information asymmetry, interchangeable parts, Internet of things, invention of movable type, Isaac Newton, James Watt: steam engine, Jaron Lanier, jimmy wales, Joseph Schumpeter, Julian Assange, Kevin Kelly, Kickstarter, knowledge economy, knowledge worker, machine readable, Marc Andreessen, Marshall McLuhan, mass immigration, medical bankruptcy, megacity, military-industrial complex, mortgage tax deduction, Netflix Prize, new economy, Nicholas Carr, ocean acidification, off-the-grid, oil shock, old-boy network, online collectivism, open borders, open economy, pattern recognition, peer-to-peer lending, personalized medicine, radical decentralization, Ray Kurzweil, RFID, ride hailing / ride sharing, Ronald Reagan, Rubik’s Cube, scientific mainstream, shareholder value, Silicon Valley, Skype, smart grid, smart meter, social graph, social web, software patent, Steve Jobs, synthetic biology, systems thinking, text mining, the long tail, the scientific method, The Wisdom of Crowds, transaction costs, transfer pricing, University of East Anglia, urban sprawl, value at risk, WikiLeaks, X Prize, Yochai Benkler, young professional, Zipcar

Regulators, if not bankers, are getting the message. “Changes in financial rules and accounting standards . . . must be coordinated globally in the effort to help avoid a recurrence of the economic crisis,” said Federal Reserve governor Elizabeth Duke to an accounting industry audience on the first anniversary of the collapse of Lehman Brothers. “Accounting standard setters, regulators and policy makers around the world are discussing and proposing preventative measures. Now the challenge lies in integrating those changes smoothly and seamlessly,” she said.10 The Securities and Exchange Commission has also been pushing for a single, global set of rules for financial services.


pages: 598 words: 169,194

Bernie Madoff, the Wizard of Lies: Inside the Infamous $65 Billion Swindle by Diana B. Henriques

accounting loophole / creative accounting, airport security, Albert Einstein, AOL-Time Warner, banking crisis, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, break the buck, British Empire, buy and hold, centralized clearinghouse, collapse of Lehman Brothers, computerized trading, corporate raider, diversified portfolio, Donald Trump, dumpster diving, Edward Thorp, financial deregulation, financial engineering, financial thriller, fixed income, forensic accounting, Gordon Gekko, index fund, locking in a profit, low interest rates, mail merge, merger arbitrage, messenger bag, money market fund, payment for order flow, plutocrats, Ponzi scheme, Potemkin village, proprietary trading, random walk, Renaissance Technologies, riskless arbitrage, Ronald Reagan, Savings and loan crisis, short selling, short squeeze, Small Order Execution System, source of truth, sovereign wealth fund, too big to fail, transaction costs, traveling salesman

Aside from the hundreds of millions that Madoff diverted for his own use over the years, the cash handed over by investors had been paid out to other investors as bogus investment earnings. Picard had the bank records showing when the cash was withdrawn and by whom; and he knew whose account in which country received the money. By his estimate, more than $6 billion was withdrawn from the Ponzi scheme between the collapse of Lehman Brothers in September 2008 and Madoff’s arrest in December. In the scheme’s final year, withdrawals totalled nearly $13 billion—most of which had flowed in since early 2006. Still, knowing where the money went was one thing, and getting it back was another. While the federal bankruptcy code allowed Picard to seek the return of cash withdrawn within two years of the Madoff firm’s bankruptcy filing, New York State law extended that window to six years.


pages: 580 words: 168,476

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

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

Now our creditability is gone: we are seen to have a political system in which one party tries to disenfranchise the poor, in which money buys politicians and policies that reinforce the inequalities. We should be concerned about the risk of this diminished influence. Even if things had been going better in the United States, the growth of the emerging markets would necessitate a new global order. There was just a short period, between the fall of the Berlin Wall and the collapse of Lehman Brothers, when the United States dominated in virtually every realm. Now the emerging markets are demanding a larger voice in international forums. We moved from the G-8, where the richest industrial countries tried to determine global economic policy, to the G-20, because we had to: the global recession provided the impetus, but one could not deal with global issues, like global warming or global trade, without bringing others in.


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

Alan Greenspan, Andrei Shleifer, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, bonus culture, book value, break the buck, business cycle, 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 engineering, financial innovation, financial intermediation, fixed income, George Akerlof, Glass-Steagall Act, Growth in a Time of Debt, income inequality, information asymmetry, invisible hand, Jean Tirole, joint-stock company, joint-stock limited liability company, junk bonds, Kenneth Rogoff, Larry Wall, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, margin call, Martin Wolf, Money creation, money market fund, moral hazard, mortgage debt, mortgage tax deduction, negative equity, Nick Leeson, Northern Rock, open economy, Paul Volcker talking about ATMs, peer-to-peer lending, proprietary trading, regulatory arbitrage, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Satyajit Das, Savings and loan crisis, shareholder value, sovereign wealth fund, subprime mortgage crisis, technology bubble, The Market for Lemons, the payments system, too big to fail, Upton Sinclair, Yogi Berra

“New Issues in Corporate Finance.” European Economic Review 32: 1167–1188. Mayo, Mike. 2011. Exile on Wall Street: One Analyst’s Fight to Save the Big Banks from Themselves. Hoboken, NJ: John Wiley and Sons. McDonald, Lawrence G. 2010. A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers. New York: Three Rivers. McDonald, Robert L. 2010. “Contingent Capital with a Dual Price Trigger.” Working paper. Kellogg School of Management, Northwestern University. McLean, Bethany, and Peter Elkind. 2004. The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron.


pages: 597 words: 172,130

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

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

Rather, they require people like Bernanke, King, and Trichet to safeguard them, often by doing things that are wildly unpopular. It may seem like damning by faint praise, but a catastrophe averted is no small thing. The central bankers’ judgments were far from perfect, and their mistakes—allowing the collapse of Lehman Brothers, endorsing early fiscal austerity in Britain, moving with such hesitation and delay in the face of the eurozone crisis—will do lasting economic damage. Each will be leaving his institution a very different place from the one he inherited, more deeply entrenched in the vagaries of politics, more thoroughly intertwined in the workings of high finance, with so many Rubicons crossed that there can be no hope of going back.


pages: 526 words: 160,601

A Generation of Sociopaths: How the Baby Boomers Betrayed America by Bruce Cannon Gibney

1960s counterculture, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, AlphaGo, American Society of Civil Engineers: Report Card, Bear Stearns, Bernie Madoff, Bernie Sanders, Black Lives Matter, bond market vigilante , book value, Boston Dynamics, Bretton Woods, business cycle, buy and hold, carbon footprint, carbon tax, Charles Lindbergh, classic study, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, corporate personhood, Corrections Corporation of America, currency manipulation / currency intervention, Daniel Kahneman / Amos Tversky, dark matter, DeepMind, Deng Xiaoping, Donald Trump, Downton Abbey, Edward Snowden, Elon Musk, ending welfare as we know it, equal pay for equal work, failed state, financial deregulation, financial engineering, Francis Fukuyama: the end of history, future of work, gender pay gap, gig economy, Glass-Steagall Act, Haight Ashbury, Higgs boson, high-speed rail, Home mortgage interest deduction, Hyperloop, illegal immigration, impulse control, income inequality, Intergovernmental Panel on Climate Change (IPCC), invisible hand, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jane Jacobs, junk bonds, Kitchen Debate, labor-force participation, Long Term Capital Management, low interest rates, Lyft, Mark Zuckerberg, market bubble, mass immigration, mass incarceration, McMansion, medical bankruptcy, Menlo Park, Michael Milken, military-industrial complex, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, Neil Armstrong, neoliberal agenda, Network effects, Nixon triggered the end of the Bretton Woods system, obamacare, offshore financial centre, oil shock, operation paperclip, plutocrats, Ponzi scheme, price stability, prosperity theology / prosperity gospel / gospel of success, quantitative easing, Ralph Waldo Emerson, RAND corporation, rent control, ride hailing / ride sharing, risk tolerance, Robert Shiller, Ronald Reagan, Rubik’s Cube, Savings and loan crisis, school choice, secular stagnation, self-driving car, shareholder value, short selling, side project, Silicon Valley, smart grid, Snapchat, source of truth, stem cell, Steve Jobs, Stewart Brand, stock buybacks, survivorship bias, TaskRabbit, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, War on Poverty, warehouse robotics, We are all Keynesians now, white picket fence, Whole Earth Catalog, women in the workforce, Y2K, Yom Kippur War, zero-sum game

The financial establishment now dominated by Boomers had to persuade the accounting profession (also dominated by Boomers) to accept the consignment of these derivatives off balance sheet. Accountants, who had only a generation before set the standard for fairness, prudence, and transparency, rolled over.* The collapses of Lehman Brothers and Bear Stearns were both linked to OBS practices and similar practices would have killed AIG, the giant “insurer,” had the government not bailed it out. The private sector, as its proponents trumpet (and in a different context, I’m a fan of the private sector), is an engine for innovation, though under the Boomers inventiveness slid quickly into fraud, helped in substantial part by a sustained deregulatory push.


pages: 1,239 words: 163,625

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

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

A big bear market needs to be preceded by complete euphoria, a major unexpected negative dislocation, and a complete drying up of liquidity. The 2008 bear market happened because financial institutions were going bankrupt. The market was euphoric (India’s Nifty index went up 7× between 2003 and 2007), and liquidity dried up completely (credit markets froze after the collapse of Lehman Brothers). How can excessive booms and busts take place so frequently in an efficient market whose primary foundation is rooted in the combined assumptions of utility-maximizing behavior, market equilibrium, and stable preferences? The answer is found in what Daniel Kahneman describes as the “availability heuristic” (one of the most insidious and potent cognitive biases): People tend to assess the relative importance of issues by the ease with which they are retrieved from memory—and this is largely determined by the extent of coverage in the media.


pages: 662 words: 180,546

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown by Philip Mirowski

"there is no alternative" (TINA), Adam Curtis, Alan Greenspan, Alvin Roth, An Inconvenient Truth, Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, bond market vigilante , bread and circuses, Bretton Woods, Brownian motion, business cycle, capital controls, carbon credits, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, democratizing finance, disinformation, do-ocracy, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, facts on the ground, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, Flash crash, full employment, George Akerlof, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Greenspan put, Hernando de Soto, housing crisis, Hyman Minsky, illegal immigration, income inequality, incomplete markets, information asymmetry, invisible hand, Jean Tirole, joint-stock company, junk bonds, Kenneth Arrow, Kenneth Rogoff, Kickstarter, knowledge economy, l'esprit de l'escalier, labor-force participation, liberal capitalism, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, Pareto efficiency, Paul Samuelson, payday loans, Philip Mirowski, Phillips curve, Ponzi scheme, Post-Keynesian economics, precariat, prediction markets, price mechanism, profit motive, public intellectual, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, savings glut, school choice, sealed-bid auction, search costs, Silicon Valley, South Sea Bubble, Steven Levy, subprime mortgage crisis, tail risk, technoutopianism, The Chicago School, The Great Moderation, the map is not the territory, The Myth of the Rational Market, the scientific method, The Theory of the Leisure Class by Thorstein Veblen, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, Tobin tax, tontine, too big to fail, transaction costs, Tyler Cowen, vertical integration, Vilfredo Pareto, War on Poverty, Washington Consensus, We are the 99%, working poor

Feds, Neel Kashkari and Phillip Swagel drafted a memo entitled “Break the Glass: Bank Recapitalization Plan.”120 In this memo, Kashkari and Swagel identified alternative emergency measures, argued in favor of using asset auctions to remove mortgage-related assets from bank balance sheets, and set forth a timeline for completing the asset purchases. Secretary of the Treasury Henry Paulson would eventually second their judgment to purchase on ideological grounds, but at that juncture essentially ordered that the plan be set aside.121 So when the emergency did eventually arrive, following the September collapse of Lehman Brothers, breaking the glass was something Paulson and the Federal Reserve chairman, Ben Bernanke, attempted to do. They began to make rounds to convince members of congress of the need for an emergency asset purchase plan, solicited an auction plan from the New York Fed, and approached academic market designers to fill in the details.122 But they almost immediately began to encounter difficulties.


pages: 584 words: 187,436

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

Alan Greenspan, Andrei Shleifer, Asian financial crisis, asset-backed security, automated trading system, bank run, barriers to entry, Bear Stearns, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, book value, Bretton Woods, business cycle, buy and hold, capital controls, Carmen Reinhart, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, currency peg, deal flow, do well by doing good, Elliott wave, Eugene Fama: efficient market hypothesis, failed state, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, financial intermediation, fixed income, full employment, German hyperinflation, High speed trading, index fund, Jim Simons, John Bogle, John Meriwether, junk bonds, Kenneth Rogoff, Kickstarter, Long Term Capital Management, low interest rates, machine translation, margin call, market bubble, market clearing, market fundamentalism, Market Wizards by Jack D. Schwager, Mary Meeker, merger arbitrage, Michael Milken, money market fund, moral hazard, Myron Scholes, natural language processing, Network effects, new economy, Nikolai Kondratiev, operational security, pattern recognition, Paul Samuelson, pre–internet, proprietary trading, public intellectual, quantitative hedge fund, quantitative trading / quantitative finance, random walk, Renaissance Technologies, Richard Thaler, risk-adjusted returns, risk/return, Robert Mercer, rolodex, Savings and loan crisis, Sharpe ratio, short selling, short squeeze, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical arbitrage, statistical model, survivorship bias, tail risk, technology bubble, The Great Moderation, The Myth of the Rational Market, the new new thing, too big to fail, transaction costs, two and twenty, uptick rule

In July 2007, a credit hedge fund called Sowood blew up, and the following month a dozen or so quantitative hedge funds tried to cut their positions all at once, triggering wild swings in the equity market and billions of dollars of losses. The following year was more brutal by far. The collapse of Lehman Brothers left some hedge funds with money trapped inside the bankrupt shell, and the turmoil that followed inflicted losses on most others. Hedge funds needed access to leverage, but nobody lent to anyone in the weeks after the Lehman shock. Hedge funds built their strategies on short selling, but governments imposed clumsy restrictions on shorting amid the post-Lehman panic.


pages: 619 words: 177,548

Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity by Daron Acemoglu, Simon Johnson

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 4chan, agricultural Revolution, AI winter, Airbnb, airline deregulation, algorithmic bias, algorithmic management, Alignment Problem, AlphaGo, An Inconvenient Truth, artificial general intelligence, augmented reality, basic income, Bellingcat, Bernie Sanders, Big Tech, Bletchley Park, blue-collar work, British Empire, carbon footprint, carbon tax, carried interest, centre right, Charles Babbage, ChatGPT, Clayton Christensen, clean water, cloud computing, collapse of Lehman Brothers, collective bargaining, computer age, Computer Lib, Computing Machinery and Intelligence, conceptual framework, contact tracing, Corn Laws, Cornelius Vanderbilt, coronavirus, corporate social responsibility, correlation does not imply causation, cotton gin, COVID-19, creative destruction, declining real wages, deep learning, DeepMind, deindustrialization, Demis Hassabis, Deng Xiaoping, deskilling, discovery of the americas, disinformation, Donald Trump, Douglas Engelbart, Douglas Engelbart, Edward Snowden, Elon Musk, en.wikipedia.org, energy transition, Erik Brynjolfsson, European colonialism, everywhere but in the productivity statistics, factory automation, facts on the ground, fake news, Filter Bubble, financial innovation, Ford Model T, Ford paid five dollars a day, fulfillment center, full employment, future of work, gender pay gap, general purpose technology, Geoffrey Hinton, global supply chain, Gordon Gekko, GPT-3, Grace Hopper, Hacker Ethic, Ida Tarbell, illegal immigration, income inequality, indoor plumbing, industrial robot, interchangeable parts, invisible hand, Isaac Newton, Jacques de Vaucanson, James Watt: steam engine, Jaron Lanier, Jeff Bezos, job automation, Johannes Kepler, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph-Marie Jacquard, Kenneth Arrow, Kevin Roose, Kickstarter, knowledge economy, labor-force participation, land reform, land tenure, Les Trente Glorieuses, low skilled workers, low-wage service sector, M-Pesa, manufacturing employment, Marc Andreessen, Mark Zuckerberg, megacity, mobile money, Mother of all demos, move fast and break things, natural language processing, Neolithic agricultural revolution, Norbert Wiener, NSO Group, offshore financial centre, OpenAI, PageRank, Panopticon Jeremy Bentham, paperclip maximiser, pattern recognition, Paul Graham, Peter Thiel, Productivity paradox, profit maximization, profit motive, QAnon, Ralph Nader, Ray Kurzweil, recommendation engine, ride hailing / ride sharing, Robert Bork, Robert Gordon, Robert Solow, robotic process automation, Ronald Reagan, scientific management, Second Machine Age, self-driving car, seminal paper, shareholder value, Sheryl Sandberg, Shoshana Zuboff, Silicon Valley, social intelligence, Social Responsibility of Business Is to Increase Its Profits, social web, South Sea Bubble, speech recognition, spice trade, statistical model, stem cell, Steve Jobs, Steve Wozniak, strikebreaker, subscription business, Suez canal 1869, Suez crisis 1956, supply-chain management, surveillance capitalism, tacit knowledge, tech billionaire, technoutopianism, Ted Nelson, TED Talk, The Future of Employment, The Rise and Fall of American Growth, The Structural Transformation of the Public Sphere, The Wealth of Nations by Adam Smith, theory of mind, Thomas Malthus, too big to fail, total factor productivity, trade route, transatlantic slave trade, trickle-down economics, Turing machine, Turing test, Twitter Arab Spring, Two Sigma, Tyler Cowen, Tyler Cowen: Great Stagnation, union organizing, universal basic income, Unsafe at Any Speed, Upton Sinclair, upwardly mobile, W. E. B. Du Bois, War on Poverty, WikiLeaks, wikimedia commons, working poor, working-age population

Not just too big to jail, these banks were also “too big to fail.” Generous bailouts were provided because, amid the crisis, the banks and other large financial corporations convinced policy makers that what was good for these firms and their executives was good for the economy. After the collapse of Lehman Brothers in September 2008, the prevailing argument became that further failures among leading financial firms would translate into system-wide problems, harming the entire economy. Hence, it was critical to protect the big banks and other large financial firms—their shareholders, creditors, executives, and traders—as much as possible and with few conditions.


pages: 652 words: 172,428

Aftershocks: Pandemic Politics and the End of the Old International Order by Colin Kahl, Thomas Wright

"World Economic Forum" Davos, 2021 United States Capitol attack, banking crisis, Berlin Wall, biodiversity loss, Black Lives Matter, Boris Johnson, British Empire, Carmen Reinhart, centre right, Charles Lindbergh, circular economy, citizen journalism, clean water, collapse of Lehman Brothers, colonial rule, contact tracing, contact tracing app, coronavirus, COVID-19, creative destruction, cuban missile crisis, deglobalization, digital rights, disinformation, Donald Trump, drone strike, eurozone crisis, failed state, fake news, Fall of the Berlin Wall, fear of failure, future of work, George Floyd, German hyperinflation, Gini coefficient, global pandemic, global supply chain, global value chain, income inequality, industrial robot, informal economy, Intergovernmental Panel on Climate Change (IPCC), Internet of things, it's over 9,000, job automation, junk bonds, Kibera, lab leak, liberal world order, lockdown, low interest rates, Mahatma Gandhi, Martin Wolf, mass immigration, megacity, mobile money, oil shale / tar sands, oil shock, one-China policy, open borders, open economy, Paris climate accords, public intellectual, Ronald Reagan, social distancing, South China Sea, spice trade, statistical model, subprime mortgage crisis, W. E. B. Du Bois, World Values Survey, zoonotic diseases

GDP.”23 Japan was already on the brink of a recession at the turn of the new year—a new consumption tax had caused a sharp drop in GDP (an annualized decline of 6.3 percent) in the fourth quarter of 2020—and was considering a fiscal stimulus.24 With little room to cut already low interest rates, the Bank of Japan announced early on that it would pump liquidity into the economy by buying unlimited amounts of government bonds and providing zero-interest-rate financing to banks so they could lend to businesses.25 However, the pandemic did negatively impact the Bank of Japan’s long-term goal of halting deflation—with declining demand, low oil prices, and a government campaign to subsidize travel, prices would fall at their fastest rate in ten years.26 All told, the central banks of the G7 economies, including the U.S. Federal Reserve, would increase their assets by $7 trillion in just eight months—over double the increase in their assets in the year following the collapse of Lehman Brothers in 2008. They did this individually and without much coordination between them, unlike in 2008.27 One reason for this was the fact that the United States was not pressing for a collective response by the G7 or G20. But as a senior ECB official told us, this was less important than it might have been in 2008.


pages: 593 words: 183,240

An Economic History of the Twentieth Century by J. Bradford Delong

affirmative action, Alan Greenspan, Andrei Shleifer, ASML, asset-backed security, Ayatollah Khomeini, banking crisis, Bear Stearns, Bretton Woods, British Empire, business cycle, buy and hold, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, centre right, collapse of Lehman Brothers, collective bargaining, colonial rule, coronavirus, cotton gin, COVID-19, creative destruction, crowdsourcing, cryptocurrency, cuban missile crisis, deindustrialization, demographic transition, Deng Xiaoping, Donald Trump, en.wikipedia.org, ending welfare as we know it, endogenous growth, Fairchild Semiconductor, fake news, financial deregulation, financial engineering, financial repression, flying shuttle, Ford Model T, Ford paid five dollars a day, Francis Fukuyama: the end of history, full employment, general purpose technology, George Gilder, German hyperinflation, global value chain, Great Leap Forward, Gunnar Myrdal, Haber-Bosch Process, Hans Rosling, hedonic treadmill, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, housing crisis, Hyman Minsky, income inequality, income per capita, industrial research laboratory, interchangeable parts, Internet Archive, invention of agriculture, invention of the steam engine, It's morning again in America, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, land reform, late capitalism, Les Trente Glorieuses, liberal capitalism, liquidity trap, Long Term Capital Management, low interest rates, manufacturing employment, market bubble, means of production, megacity, Menlo Park, Mikhail Gorbachev, mortgage debt, mutually assured destruction, Neal Stephenson, occupational segregation, oil shock, open borders, open economy, Paul Samuelson, Pearl River Delta, Phillips curve, plutocrats, price stability, Productivity paradox, profit maximization, public intellectual, quantitative easing, Ralph Waldo Emerson, restrictive zoning, rising living standards, road to serfdom, Robert Gordon, Robert Solow, rolodex, Ronald Coase, Ronald Reagan, savings glut, secular stagnation, Silicon Valley, Simon Kuznets, social intelligence, Stanislav Petrov, strikebreaker, structural adjustment programs, Suez canal 1869, surveillance capitalism, The Bell Curve by Richard Herrnstein and Charles Murray, The Chicago School, The Great Moderation, The Nature of the Firm, The Rise and Fall of American Growth, too big to fail, transaction costs, transatlantic slave trade, transcontinental railway, TSMC, union organizing, vertical integration, W. E. B. Du Bois, Wayback Machine, Yom Kippur War

In fact, a standard playbook has been in existence ever since the British journalist Walter Bagehot, the editor of The Economist, wrote his book about financial crises, Lombard Street, in the 1870s. Call it the Bagehot-Minsky playbook.23 In a Minskyite depression, such as the one that followed the collapse of Lehman Brothers, a government’s best bet is to immediately combat the shortage of safe assets by lending freely on collateral that is good in normal times, but to do so at a penalty rate. The “lending freely” part means to create enough safe assets that they are no longer in short supply. The “good in normal times” part means to try to distinguish institutions that are in trouble and face bankruptcy only because of the financial crisis from institutions that are permanently insolvent and need to be put into receivership.


pages: 829 words: 187,394

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

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

Peter Garber, a professor of economics at Brown University, claims that Law’s credit theory ‘is the centerpiece of most money and macroeconomics textbooks produced in the last two generations and the lingua franca of economic policymakers concerned with the problem of underemployed economics’. Garber believes that Law’s System had every chance of success.59 William Goetzmann of Yale credits Law’s belief that too little money constrains economic activity as ‘the essential principle underlying the decisions by the U.S. Federal Reserve Bank today’.60 The collapse of Lehman Brothers in September 2008 produced economic and financial conditions – a toxic mixture of deflation, high unemployment and soaring government debt – somewhat similar to France’s after the death of Louis XIV. Monetary policymakers responded to these conditions by taking a leaf from Law’s copybook, pushing down interest rates and acquiring large chunks of their national debt (although not going quite so far as Law) with newly printed money.


pages: 840 words: 202,245

Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present by Jeff Madrick

Abraham Maslow, accounting loophole / creative accounting, Alan Greenspan, AOL-Time Warner, Asian financial crisis, bank run, Bear Stearns, book value, Bretton Woods, business cycle, capital controls, Carl Icahn, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, desegregation, disintermediation, diversified portfolio, Donald Trump, financial deregulation, fixed income, floating exchange rates, Frederick Winslow Taylor, full employment, George Akerlof, Glass-Steagall Act, Greenspan put, Hyman Minsky, income inequality, index fund, inflation targeting, inventory management, invisible hand, John Bogle, John Meriwether, junk bonds, Kitchen Debate, laissez-faire capitalism, locking in a profit, Long Term Capital Management, low interest rates, market bubble, Mary Meeker, Michael Milken, minimum wage unemployment, MITM: man-in-the-middle, Money creation, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Myron Scholes, new economy, Nixon triggered the end of the Bretton Woods system, North Sea oil, Northern Rock, oil shock, Paul Samuelson, Philip Mirowski, Phillips curve, price stability, quantitative easing, Ralph Nader, rent control, road to serfdom, Robert Bork, Robert Shiller, Ronald Coase, Ronald Reagan, Ronald Reagan: Tear down this wall, scientific management, shareholder value, short selling, Silicon Valley, Simon Kuznets, tail risk, Tax Reform Act of 1986, technology bubble, Telecommunications Act of 1996, The Chicago School, The Great Moderation, too big to fail, union organizing, V2 rocket, value at risk, Vanguard fund, War on Poverty, Washington Consensus, Y2K, Yom Kippur War

Their highest total purchases of subprime mortgages by far reached 44 percent of the market in 2004 and 33 percent in 2005, before falling back to 20 percent of subprime purchase in 2006, when the frenzy became extreme. 35 FULD’S DREAM HAD COME TRUE: Andrew Ross Sorkin, Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves (New York: Viking, 2009), pp. 19–23. 36 FULD’S AMBITION COULD NOW BE FULLY UNLEASHED: Lawrence G. McDonald with Patrick Robinson, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers (New York: Crown, 2009), pp. 136–38. 37 AT A MANAGEMENT MEETING: Ibid., pp. 268–69. 38 IN THE FACE OF GROWING RISK: Ibid., pp. 274–75. 39 IT WAS PROBABLY THE MOST BRILLIANT TRADE: Lewis, The Big Short, pp. 206–14, 128. 40 LEWIS RANIERI HIMSELF … WARNED: Paul Muolo and Mathew Padilla, Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis (Hoboken, N.J.: John Wiley, 2008), pp. 223–25. 41 ECONOMISTS AT THE BANK FOR INTERNATIONAL SETTLEMENTS: Tett, Fools’ Gold, p. 154. 42 DESPITE THE RUSE: Michael J. de la Merced, “Findings on Lehman Take Even Experts by Surprise,” Wall Street Journal, March 13, 2010, p.


pages: 745 words: 207,187

Accessory to War: The Unspoken Alliance Between Astrophysics and the Military by Neil Degrasse Tyson, Avis Lang

active measures, Admiral Zheng, airport security, anti-communist, Apollo 11, Arthur Eddington, Benoit Mandelbrot, Berlin Wall, British Empire, Buckminster Fuller, Carrington event, Charles Lindbergh, collapse of Lehman Brothers, Colonization of Mars, commoditize, corporate governance, cosmic microwave background, credit crunch, cuban missile crisis, dark matter, Dava Sobel, disinformation, Donald Trump, Doomsday Clock, Dr. Strangelove, dual-use technology, Eddington experiment, Edward Snowden, energy security, Eratosthenes, European colonialism, fake news, Fellow of the Royal Society, Ford Model T, global value chain, Google Earth, GPS: selective availability, Great Leap Forward, Herman Kahn, Higgs boson, invention of movable type, invention of the printing press, invention of the telescope, Isaac Newton, James Webb Space Telescope, Johannes Kepler, John Harrison: Longitude, Karl Jansky, Kuiper Belt, Large Hadron Collider, Late Heavy Bombardment, Laura Poitras, Lewis Mumford, lone genius, low earth orbit, mandelbrot fractal, Maui Hawaii, Mercator projection, Mikhail Gorbachev, military-industrial complex, mutually assured destruction, Neil Armstrong, New Journalism, Northpointe / Correctional Offender Management Profiling for Alternative Sanctions, operation paperclip, pattern recognition, Pierre-Simon Laplace, precision agriculture, prediction markets, profit motive, Project Plowshare, purchasing power parity, quantum entanglement, RAND corporation, Ronald Reagan, Search for Extraterrestrial Intelligence, skunkworks, South China Sea, space junk, Stephen Hawking, Strategic Defense Initiative, subprime mortgage crisis, the long tail, time dilation, trade route, War on Poverty, wikimedia commons, zero-sum game

Asked by a BBC interviewer for a “big thought” on the crisis and whether it constituted “a permanent indictment of capitalism,” he responded, “My big thought is, we desperately need capitalism in order to create interesting work to be done, for ordinary people—unless maybe we can go to war against Mars or something as an alternative.”1 A vibrant economy, in other words, depends on at least one of the following: the profit motive, war on the ground, or war in space. On September 14, 2009, just a few months after the satellite smashup and a few blocks from where the World Trade Center’s Twin Towers had stood eight years and four days earlier, President Barack Obama spoke to Wall Street movers and shakers to mark the first anniversary of the collapse of Lehman Brothers, the investment firm whose bankruptcy is often presented as having triggered the avalanche of financial failures in 2008–2009. That same morning, China laid the cornerstone for its fourth space center on an island close to the equator—the latitude of choice for exploiting Earth’s rotation speed, thereby minimizing the fuel necessary for a launch and maximizing the potential payload.


pages: 828 words: 232,188

Political Order and Political Decay: From the Industrial Revolution to the Globalization of Democracy by Francis Fukuyama

Affordable Care Act / Obamacare, Andrei Shleifer, Asian financial crisis, Atahualpa, banking crisis, barriers to entry, Berlin Wall, blood diamond, British Empire, centre right, classic study, clean water, collapse of Lehman Brothers, colonial rule, conceptual framework, Cornelius Vanderbilt, cotton gin, crony capitalism, Day of the Dead, deindustrialization, Deng Xiaoping, disruptive innovation, double entry bookkeeping, Edward Snowden, Erik Brynjolfsson, European colonialism, facts on the ground, failed state, Fall of the Berlin Wall, first-past-the-post, Francis Fukuyama: the end of history, Francisco Pizarro, Frederick Winslow Taylor, full employment, Gini coefficient, Glass-Steagall Act, Great Leap Forward, Hernando de Soto, high-speed rail, Home mortgage interest deduction, household responsibility system, income inequality, information asymmetry, invention of the printing press, iterative process, Kickstarter, knowledge worker, labour management system, land reform, land tenure, life extension, low interest rates, low skilled workers, manufacturing employment, means of production, Menlo Park, Mohammed Bouazizi, Monroe Doctrine, moral hazard, Nelson Mandela, new economy, open economy, out of africa, Peace of Westphalia, Port of Oakland, post-industrial society, post-materialism, price discrimination, quantitative easing, RAND corporation, rent-seeking, road to serfdom, Ronald Reagan, scientific management, Scientific racism, Scramble for Africa, Second Machine Age, Silicon Valley, special economic zone, stem cell, subprime mortgage crisis, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, too big to fail, trade route, transaction costs, Twitter Arab Spring, Tyler Cowen, Tyler Cowen: Great Stagnation, Vilfredo Pareto, women in the workforce, work culture , World Values Survey, zero-sum game

America today has a vast, diverse, complex national economy, connected to a globalized world economy that moves with extraordinary speed and that takes a great deal of expertise to master. It faces serious external security threats. During the acute phase of the financial crisis that unfolded after the collapse of Lehman Brothers in September 2008, the Federal Reserve and Treasury Department had to make massive decisions literally overnight, decisions that involved flooding the market with trillions of dollars of liquidity, propping up individual banks, and imposing new regulations. The severity of the crisis led Congress to an emergency appropriation of $700 billion for the Troubled Asset Relief Program, largely on the say-so of the Treasury Department and the Bush administration.


pages: 351 words: 102,379

Too big to fail: the inside story of how Wall Street and Washington fought to save the financial system from crisis--and themselves by Andrew Ross Sorkin

"World Economic Forum" Davos, affirmative action, Alan Greenspan, Andy Kessler, Asian financial crisis, Bear Stearns, Berlin Wall, book value, break the buck, BRICs, business cycle, Carl Icahn, collapse of Lehman Brothers, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, deal flow, Dr. Strangelove, Emanuel Derman, Fall of the Berlin Wall, fear of failure, financial engineering, fixed income, Glass-Steagall Act, Goldman Sachs: Vampire Squid, housing crisis, indoor plumbing, invisible hand, junk bonds, Ken Thompson, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market bubble, Michael Milken, Mikhail Gorbachev, money market fund, moral hazard, naked short selling, NetJets, Northern Rock, oil shock, paper trading, proprietary trading, risk tolerance, Robert Shiller, rolodex, Ronald Reagan, Savings and loan crisis, savings glut, shareholder value, short selling, sovereign wealth fund, supply-chain management, too big to fail, uptick rule, value at risk, éminence grise

Tearing Down the Walls: How Sandy Weill Fought His Way to the Top of the Financial World…and Then Nearly Lost It All. New York: Simon & Schuster, 2003. Lowenstein, Roger. When Genius Failed: The Rise and Fall of Long-Term Capital Management. New York: Random House Trade Publishing, 2000. McDonald, Lawrence G., and Patrick Robinson, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers. New York: Crown Business, July 2009. Partnoy, Frank. Fiasco: The Inside Story of a Wall Street Trader. New York: Penguin, 1999. Schroeder, Alice. The Snowball: Warren Buffett and the Business of Life. New York: Bantam Books, 2008. Shelp, Ronald. Fallen Giant: The Amazing Story of Hank Greenberg and the History of AIG.


pages: 944 words: 243,883

Private Empire: ExxonMobil and American Power by Steve Coll

addicted to oil, Alan Greenspan, An Inconvenient Truth, anti-communist, Atul Gawande, banking crisis, Benchmark Capital, Berlin Wall, call centre, carbon footprint, carbon tax, clean water, collapse of Lehman Brothers, company town, corporate governance, corporate social responsibility, decarbonisation, disinformation, energy security, European colonialism, Evgeny Morozov, Exxon Valdez, failed state, Fall of the Berlin Wall, financial engineering, Global Witness, Google Earth, Great Leap Forward, hydraulic fracturing, hydrogen economy, Ida Tarbell, illegal immigration, income inequality, industrial robot, Intergovernmental Panel on Climate Change (IPCC), inventory management, kremlinology, market fundamentalism, McMansion, medical malpractice, Mikhail Gorbachev, oil shale / tar sands, oil shock, peak oil, place-making, Ponzi scheme, precautionary principle, price mechanism, profit maximization, profit motive, Ronald Reagan, Saturday Night Live, Scramble for Africa, shareholder value, Silicon Valley, smart meter, statistical model, Steve Jobs, two and twenty, WikiLeaks

Plus, by 2009, it held in its “treasury” more than 3.2 billion shares of its own stock, with a market value of more than $220 billion, which it had repurchased over the years from the open market and set aside for possible use in acquisitions.15 During the great recession and financial panic that followed the collapse of Lehman Brothers in 2008, many American banks, corporations, and their employees worried week by week about whether their businesses might go under. Rex Tillerson’s greatest worry during the dark September of Lehman’s collapse, he later confessed, was whether ExxonMobil’s massive cash deposits were parked in banks that would survive the crisis.