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pages: 444 words: 151,136

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

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Andy Kessler, asset allocation, backtesting, bank run, banking crisis, Berlin Wall, Bernie Madoff, Black Swan, Branko Milanovic, Bretton Woods, BRICs, business climate, capital asset pricing model, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crony capitalism, cuban missile crisis, currency manipulation / currency intervention, debt deflation, Elliott wave, en.wikipedia.org, Fall of the Berlin Wall, feminist movement, fiat currency, fixed income, floating exchange rates, Fractional reserve banking, full employment, German hyperinflation, housing crisis, income inequality, index fund, inflation targeting, Joseph Schumpeter, laissez-faire capitalism, land reform, liquidity trap, Long Term Capital Management, McMansion, moral hazard, mortgage tax deduction, naked short selling, offshore financial centre, Ponzi scheme, price stability, pushing on a string, quantitative easing, RAND corporation, rent control, reserve currency, riskless arbitrage, Ronald Reagan, school vouchers, seigniorage, short selling, Silicon Valley, six sigma, statistical arbitrage, statistical model, Steve Jobs, The Great Moderation, the scientific method, time value of money, too big to fail, upwardly mobile, War on Poverty, Yogi Berra, young professional

As a consequence, outside a few doomsayers, libertarians, and boldly curious economists or money managers, most observers in our time have little more than a theoretical conception of why a fiat currency system could come under stress, and whether the current crisis might be handled effectively or deepen to the point that the political demand for an alternative form of money 74 ENDLESS MONEY would emerge. U.S. fiscal policy will play a role, for the market’s perception of the credit worthiness of the U.S. government ultimately determines whether its fiat currency is sound. The world might be best served by a fiat currency whose growth is managed such that there is little or no inflation of credit. Milton Friedman suggested that the Fed might be replaced by a computer that would regulate the money supply, holding its growth to a low singledigit rate, originally 3 percent per year, in line with economic expansion.

By comparison at that same date, in the U.S. alone net equity in real estate was $8.8 trillion, stocks and mutual funds were worth $9.8 trillion, and accrued pensions held $12.3 trillion.10 Confiscation of gold today would arbitrarily target those few who fear the consequences of government policies that caused the banking system to become uniformly weak over the last century, and who rationally made a decision to avoid risky paper assets. Probably most of those who read Rothbard’s musings when they were published well before the credit meltdown began in 2008 doubted that the fiat currency system could ever unravel to the extent that it did. All of us suffer from a recent past bias that makes us disbelieve great financial changes might occur. Chapter 3 recounted the monetary history of the United States, which clearly shows a pendulum-like tendency of swinging between hard money and fiat currency, but transitions can take decades. During times of fiat currency use, anyone who prophesied that a complete collapse would usher in hard money would have been dismissed by the experts of his time. Likewise, once gold and silver had been written into the Constitution, no one might have thought that it would be replaced by paper within 60 years.

It is not a giant leap then to question the wisdom of current academic orthodoxy surrounding central banking and fiat currency, for these interrelated institutions are most certainly constructs of man. The experience of analyzing companies and industries teaches one to be open minded, and macroeconomics should be subject to no less healthy respect for the unknown. Part 2 of the book begins with a compressed monetary history of the United States and the global financial events of the interwar period, which may slow the progress of casual readers, but this frames the policy debate and investment outlook for the remainder of the book. The perspective this provides is that over the long term our nation has swung back and forth several times between operating a fiat currency and using hard money. Simple observation of this history could make a reversal in direction of the pendulum appear inevitable.

 

pages: 271 words: 52,814

Blockchain: Blueprint for a New Economy by Melanie Swan

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23andMe, Airbnb, altcoin, Amazon Web Services, asset allocation, banking crisis, bioinformatics, bitcoin, blockchain, capital controls, cellular automata, central bank independence, clean water, cloud computing, collaborative editing, Conway's Game of Life, crowdsourcing, cryptocurrency, disintermediation, Edward Snowden, en.wikipedia.org, ethereum blockchain, fault tolerance, fiat currency, financial innovation, Firefox, friendly AI, Hernando de Soto, Internet Archive, Internet of things, Khan Academy, Kickstarter, litecoin, Lyft, M-Pesa, microbiome, Network effects, new economy, peer-to-peer lending, personalized medicine, post scarcity, prediction markets, ride hailing / ride sharing, Satoshi Nakamoto, Search for Extraterrestrial Intelligence, SETI@home, sharing economy, Skype, smart cities, smart contracts, smart grid, software as a service, technological singularity, Turing complete, unbanked and underbanked, underbanked, web application, WikiLeaks

and popular culture, Bitcoin Culture: Bitfilm Festival pricing, Relation to Fiat Currency terminology, Currency, Token, Tokenizing Web metaphor, Blockchain 2.0: Contracts Bitcoin Association of Berkeley, Campuscoin Bitcoin terminology, Technology Stack: Blockchain, Protocol, Currency BitDrop, Coin Drops as a Strategy for Public Adoption Bitfilm Festival, Bitcoin Culture: Bitfilm Festival bitFlyer, Dapps Bithandle, Digital Identity Verification BitID, Digital Identity Verification-Digital Identity Verification Bitmessage, Dapps BitMixer, eWallet Services and Personal Cryptosecurity Bitnotar, Virtual Notary, Bitnotar, and Chronobit BitPay, Merchant Acceptance of Bitcoin, Financial Services Bitreserve, Relation to Fiat Currency BitShare, Relation to Fiat Currency, Blockchain 2.0 Protocol Projects BitTorrent, The Double-Spend and Byzantine Generals’ Computing Problems, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation block chain cryptography, The Double-Spend and 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Models learning applications, Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy-Learning Contract Exchanges (see also learning and literacy) science applications, Blockchain Science: Gridcoin, Foldingcoin-Charity Donations and the Blockchain—Sean’s Outpost as transnational governance structure, Distributed Censorship-Resistant Organizational Models-Distributed Censorship-Resistant Organizational Models blockchain application progression, Dapps, DAOs, DACs, and DASs: Increasingly Autonomous Smart Contracts blockchain archival system, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation blockchain attestation services, Digital Art: Blockchain Attestation Services (Notary, Intellectual Property Protection)-Personal Thinking Blockchains (see also digital art) automated digital asset protection, Digital Asset Proof as an Automated Feature benefits, Proof of Existence Bitnotar, Virtual Notary, Bitnotar, and Chronobit Chronobit, Virtual Notary, Bitnotar, and Chronobit contract services, Virtual Notary, Bitnotar, and Chronobit hashing and timestamping, Hashing Plus Timestamping-Limitations, Batched Notary Chains as a Class of Blockchain Infrastructure limitations, Limitations notary chains, Batched Notary Chains as a Class of Blockchain Infrastructure personal thinking chains, Personal Thinking Blockchains-Personal Thinking Blockchains Proof of Existence, Proof of Existence-Limitations Virtual Notary, Virtual Notary, Bitnotar, and Chronobit blockchain development platforms, Blockchain Development Platforms and APIs blockchain ecosystem, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation-Blockchain Ecosystem: Decentralized Storage, Communication, and Computation blockchain government, Blockchain Government-Societal Maturity Impact of Blockchain Governance (see also governance) blockchain interoperability, Technical Challenges blockchain neutrality, Blockchain Neutrality blockchain technology, Blockchain 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-M2M/IoT Bitcoin Payment Network to Enable the Machine Economy and consensus models, Blockchain AI: Consensus as the Mechanism to Foster “Friendly” AI-Blockchain Consensus Increases the Information Resolution of the Universe extensibility of, Extensibility of Blockchain Technology Concepts for facilitating big data predictive task automation, Blockchain Layer Could Facilitate Big Data’s Predictive Task Automation future applications, Blockchain AI: Consensus as the Mechanism to Foster “Friendly” AI-Blockchain Consensus Increases the Information Resolution of the Universe limitations of (see limitations) organizational capabilities, Blockchain Technology Is a New and Highly Effective Model for Organizing Activity tracking capabilities, Fundamental Economic Principles: Discovery, Value Attribution, and Exchange-Fundamental Economic Principles: Discovery, Value Attribution, and Exchange blockchain-recorded marriage, Decentralized Governance Services BlockCypher, Blockchain Development Platforms and APIs BOINC, DAOs and DACs bond deposit postings, Technical Challenges Brin, David, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel BTCjam, Financial Services business model challenges, Business Model Challenges Buttercoin, Financial Services Byrne, Patrick, Financial Services C Campus Cryptocurrency Network, Campuscoin Campuscoin, Campuscoin-Campuscoin censorship, Internet (see decentralized DNS system) Chain, Blockchain Development Platforms and APIs challenges (see see limitations) charity donations, Charity Donations and the Blockchain—Sean’s Outpost China, Relation to Fiat Currency ChromaWallet, Wallet Development Projects Chronobit, Virtual Notary, Bitnotar, and Chronobit Circle Internet Financial, eWallet Services and Personal Cryptosecurity Codius, Financial Services coin drops, Coin Drops as a Strategy for Public Adoption coin mixing, eWallet Services and Personal Cryptosecurity coin, defining, Terminology and Concepts, Currency, Token, 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Increases the Information Resolution of the Universe contagious disease relief, Global Public Health: Bitcoin for Contagious Disease Relief contracts, Blockchain 2.0: Contracts-The Blockchain as a Path to Artificial Intelligence (see also smart contracts) crowdfunding, Crowdfunding-Crowdfunding financial services, Financial Services-Financial Services marriage, Decentralized Governance Services prediction markets, Bitcoin Prediction Markets smart property, Smart Property-Smart Property wallet development projects, Wallet Development Projects copyright protection, Monegraph: Online Graphics Protection Counterparty, Blockchain 2.0 Protocol Projects, Counterparty Re-creates Ethereum’s Smart Contract Platform Counterparty currency (XCP), Currency, Token, Tokenizing Counterwallet, Wallet Development Projects crowdfunding, Crowdfunding-Crowdfunding cryptocurrencies benefits of, Currency, Token, Tokenizing cryptosecurity, eWallet Services and Personal Cryptosecurity eWallet services, eWallet Services and Personal Cryptosecurity mechanics of, How a Cryptocurrency Works-Merchant Acceptance of Bitcoin merchant acceptance, Merchant Acceptance of Bitcoin cryptosecurity challenges, eWallet Services and Personal Cryptosecurity cryptowallet, Blockchain Neutrality currency, Technology Stack: Blockchain, Protocol, Currency-Regulatory Status, Currency, Token, Tokenizing-Extensibility of Demurrage Concept and Features Campuscoin, Campuscoin-Campuscoin coin drops, Coin Drops as a Strategy for Public Adoption Communitycoin, Communitycoin: Hayek’s Private Currencies Vie for Attention-Communitycoin: Hayek’s Private Currencies Vie for Attention cryptocurrencies, How a Cryptocurrency Works-Merchant Acceptance of Bitcoin decentralizing, Communitycoin: Hayek’s Private Currencies Vie for Attention defining, Currency, Token, Tokenizing-Currency, Token, Tokenizing, Currency: New Meanings demurrage, Demurrage Currencies: Potentially Incitory and Redistributable-Extensibility of Demurrage Concept and Features double-spend problem, The Double-Spend and Byzantine Generals’ Computing Problems fiat currency, Relation to Fiat Currency-Relation to Fiat Currency monetary and nonmonetary, Currency Multiplicity: Monetary and Nonmonetary Currencies-Currency Multiplicity: Monetary and Nonmonetary Currencies new meanings, Currency: New Meanings technology stack, Technology Stack: Blockchain, Protocol, Currency-Technology Stack: Blockchain, Protocol, Currency currency mulitplicity, Currency Multiplicity: Monetary and Nonmonetary Currencies-Currency Multiplicity: Monetary and Nonmonetary Currencies D DAOs, DAOs and DACs-DAOs and DACs DAOs/DACs, DAOs and DACs-DAOs and DACs, Batched Notary Chains as a Class of Blockchain Infrastructure, Blockchain Government Dapps, Dapps-Dapps, Extensibility of Demurrage Concept and Features Dark Coin, eWallet Services and Personal Cryptosecurity dark pools, Technical Challenges Dark Wallet, eWallet Services and Personal Cryptosecurity DASs, DASs and Self-Bootstrapped Organizations DDP, Crowdfunding decentralization, Smart Contracts, Centralization-Decentralization Tension and Equilibrium decentralized applications (Dapps), Dapps-Dapps decentralized autonomous organization/corporation (DAO) (see DAOs/DACs) decentralized autonomous societies (DASs), DASs and Self-Bootstrapped Organizations decentralized autonomy, eWallet Services and Personal Cryptosecurity decentralized DNS, Namecoin: Decentralized Domain Name System-Decentralized DNS Functionality Beyond Free Speech: Digital Identity challenges of, Challenges and Other Decentralized DNS Services and digital identity, Decentralized DNS Functionality Beyond Free Speech: Digital Identity-Decentralized DNS Functionality Beyond Free Speech: Digital Identity DotP2P, Challenges and Other Decentralized DNS Services decentralized file storage, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation decentralized secure file serving, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation deeds, Decentralized Governance Services demurrage currencies, Demurrage Currencies: Potentially Incitory and Redistributable-Extensibility of Demurrage Concept and Features action-incitory features, Extensibility of Demurrage Concept and Features limitations of, Demurrage Currencies: Potentially Incitory and Redistributable digital art, Digital Art: Blockchain Attestation Services (Notary, Intellectual Property Protection)-Personal Thinking Blockchains (see also blockchain attestation services) hashing and timestamping, Hashing Plus Timestamping-Limitations online graphics protection, Monegraph: Online Graphics Protection digital cryptography, Ethereum: Turing-Complete Virtual Machine, Public/Private-Key Cryptography 101 digital divide, defining, Digital Divide of Bitcoin digital identity verification, Blockchain 2.0: Contracts, Smart Property, Wallet Development Projects, Digital Identity Verification-Digital Divide of Bitcoin, Limitations, Decentralized Governance Services, Liquid Democracy and Random-Sample Elections, Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy, Privacy Challenges for Personal Records dispute resolution, PrecedentCoin: Blockchain Dispute Resolution DIYweathermodeling, Community Supercomputing DNAnexus, Genomecoin, GenomicResearchcoin Dogecoin, Technology Stack: Blockchain, Protocol, Currency, Currency Multiplicity: Monetary and Nonmonetary Currencies, Scandals and Public Perception DotP2P, Challenges and Other Decentralized DNS Services double-spend problem, The Double-Spend and Byzantine Generals’ Computing Problems DriveShare, DAOs and DACs dynamic redistribution of currency (see demurrage currency) E education (see learning and literacy) Electronic Freedom Foundation (EFF), Distributed Censorship-Resistant Organizational Models EMR (electronic medical record) system, EMRs on the Blockchain: Personal Health Record Storage Ethereum, Crowdfunding, Blockchain 2.0 Protocol Projects, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation, Ethereum: Turing-Complete Virtual Machine-Counterparty Re-creates Ethereum’s Smart Contract Platform eWallet services, eWallet Services and Personal Cryptosecurity ExperimentalResultscoin, Blockchain Academic Publishing: Journalcoin F Fairlay, Bitcoin Prediction Markets fiat currency, Relation to Fiat Currency-Relation to Fiat Currency file serving, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation, Ethereum: Turing-Complete Virtual Machine file storage, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation financial services, Regulatory Status, Financial Services-Financial Services, Blockchain Technology Is a New and Highly Effective Model for Organizing Activity, Government Regulation Fitbit, Personal Thinking Blockchains, Blockchain Health Research Commons, Extensibility of Demurrage Concept and Features Florincoin, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel Folding@Home, DAOs and DACs, Blockchain Science: Gridcoin, Foldingcoin, Community Supercomputing franculates, Blockchain Government freedom of speech, Namecoin: Decentralized Domain Name System, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel (see also decentralized DNS system) Freicoin, Demurrage Currencies: Potentially Incitory and Redistributable fundraising (see crowdfunding) futarchy, Futarchy: Two-Step Democracy with Voting + Prediction Markets-Futarchy: Two-Step Democracy with Voting + Prediction Markets G GBIcoin, Demurrage Currencies: Potentially Incitory and Redistributable GBIs (Guaranteed Basic Income initiatives), Demurrage Currencies: Potentially Incitory and Redistributable Gems, Blockchain Development Platforms and APIs, Dapps Genecoin, Blockchain Genomics Genomecoin, Genomecoin, GenomicResearchcoin Genomic Data Commons, Genomecoin, GenomicResearchcoin genomic sequencing, Blockchain Genomics 2.0: Industrialized All-Human-Scale Sequencing Solution-Genomecoin, GenomicResearchcoin GenomicResearchcoin, Genomecoin, GenomicResearchcoin genomics, consumer, Blockchain Genomics-Genomecoin, GenomicResearchcoin Git, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation GitHub, Blockchain Academic Publishing: Journalcoin, Currency Multiplicity: Monetary and Nonmonetary Currencies global public health, Global Public Health: Bitcoin for Contagious Disease Relief GoCoin, Financial Services GoToLunchcoin, Terminology and Concepts governance, Blockchain Government-Societal Maturity Impact of Blockchain Governance decentralized services, Decentralized Governance Services-Decentralized Governance Services dispute resolution, PrecedentCoin: Blockchain Dispute Resolution futarchy, Futarchy: Two-Step Democracy with Voting + Prediction Markets-Futarchy: Two-Step Democracy with Voting + Prediction Markets Liquid Democracy system, Liquid Democracy and Random-Sample Elections-Liquid Democracy and Random-Sample Elections personalized governance services, Blockchain Government random-sample elections, Random-Sample Elections societal maturity impact of blockchain governance, Societal Maturity Impact of Blockchain Governance government regulation, Regulatory Status, Government Regulation-Government Regulation Gridcoin, Blockchain Science: Gridcoin, Foldingcoin-Blockchain Science: Gridcoin, Foldingcoin H hashing, Hashing Plus Timestamping-Limitations, Batched Notary Chains as a Class of Blockchain Infrastructure, Technical Challenges Hayek, Friedrich, Communitycoin: Hayek’s Private Currencies Vie for Attention, Demurrage Currencies: Potentially Incitory and Redistributable, Conclusion, The Blockchain Is an Information Technology health, Blockchain Health-Virus Bank, Seed Vault Backup as demurrage currency, Extensibility of Demurrage Concept and Features doctor vendor RFP services, Doctor Vendor RFP Services and Assurance Contracts health notary services, Blockchain Health Notary health research commons , Blockchain Health Research Commons health spending, Healthcoin healthcare decision making and advocacy, Liquid Democracy and Random-Sample Elections personal health record storage, EMRs on the Blockchain: Personal Health Record Storage virus bank and seed vault backup, Virus Bank, Seed Vault Backup Healthcoin, Healthcoin, Demurrage Currencies: Potentially Incitory and Redistributable I identity authentication, eWallet Services and Personal Cryptosecurity, Blockchain 2.0: Contracts, Smart Property, Smart Property, Wallet Development Projects, Digital Identity Verification-Digital Divide of Bitcoin, Limitations, Decentralized Governance Services, Liquid Democracy and Random-Sample Elections, Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy, Privacy Challenges for Personal Records Indiegogo, Crowdfunding, Dapps industry scandals, Scandals and Public Perception infrastructure needs and issues, Technical Challenges inheritance gifts, Smart Contracts intellectual property, Monegraph: Online Graphics Protection (see also digital art) Internet administration, Distributed Censorship-Resistant Organizational Models Internet Archive, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation, Personal Thinking Blockchains Internet censorship prevention (see Decentralized DNS system) Intuit Quickbooks, Merchant Acceptance of Bitcoin IP protection, Hashing Plus Timestamping IPFS project, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation J Johnston, David, Blockchain Technology Could Be Used in the Administration of All Quanta Journalcoin, Blockchain Academic Publishing: Journalcoin Judobaby, Crowdfunding justice applications for censorship-resistant organizational models, Distributed Censorship-Resistant Organizational Models-Distributed Censorship-Resistant Organizational Models digital art, Digital Art: Blockchain Attestation Services (Notary, Intellectual Property Protection)-Personal Thinking Blockchains (see also digital art, blockchain attestation services) digital identity verification, Blockchain 2.0: Contracts, Smart Property, Wallet Development Projects, Digital Identity Verification-Digital Divide of Bitcoin, Limitations, Decentralized Governance Services, Liquid Democracy and Random-Sample Elections, Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy, Privacy Challenges for Personal Records freedom of speech/anti-censorship, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel governance, Blockchain Government-Societal Maturity Impact of Blockchain Governance (see also governance) Namecoin, Namecoin: Decentralized Domain Name System-Decentralized DNS Functionality Beyond Free Speech: Digital Identity, Monegraph: Online Graphics Protection (see also decentralized DNS) K Kickstarter, Crowdfunding, Community Supercomputing Kipochi, Blockchain Neutrality, Global Public Health: Bitcoin for Contagious Disease Relief, Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy Koinify, Crowdfunding, Dapps Kraken, Financial Services L latency, Blockchain 2.0 Protocol Projects, Technical Challenges, Technical Challenges, Scandals and Public Perception LaZooz, Dapps, Campuscoin, Extensibility of Demurrage Concept and Features Learncoin, Learncoin learning and literacy, Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy-Learning Contract Exchanges learning contract exchanges, Learning Contract Exchanges Ledra Capital, Blockchain 2.0: Contracts, Ledra Capital Mega Master Blockchain List legal implications crowdfunding, Crowdfunding smart contracts, Smart Contracts lending, trustless, Smart Property Lighthouse, Crowdfunding limitations, Limitations-Overall: Decentralization Trends Likely to Persist business model challenges, Business Model Challenges government regulation, Government Regulation-Government Regulation personal records privacy challenges, Privacy Challenges for Personal Records scandals and public perception, Scandals and Public Perception-Scandals and Public Perception technical challenges, Technical Challenges-Technical Challenges Liquid Democracy system, Liquid Democracy and Random-Sample Elections-Liquid Democracy and Random-Sample Elections Litecoin, Technology Stack: Blockchain, Protocol, Currency, Technology Stack: Blockchain, Protocol, Currency, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel, Currency Multiplicity: Monetary and Nonmonetary Currencies, Technical Challenges literacy (see learning and literacy) LTBcoin, Wallet Development Projects, Currency, Token, Tokenizing M M2M/IoT infrastructure, M2M/IoT Bitcoin Payment Network to Enable the Machine Economy, Blockchain Development Platforms and APIs, Blockchain Academic Publishing: Journalcoin-The Blockchain Is Not for Every Situation, The Blockchain Is an Information Technology Maidsafe, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation, Technical Challenges Manna, Crowdfunding marriage, blockchain recorded, Decentralized Governance Services Mastercoin, Blockchain 2.0 Protocol Projects mechanics of cryptocurrencies, How a Cryptocurrency Works Medici, Financial Services mega master blockchain list, Ledra Capital Mega Master Blockchain List-Ledra Capital Mega Master Blockchain List Melotic, Crowdfunding, Wallet Development Projects merchant acceptance, Merchant Acceptance of Bitcoin merchant payment fees, Summary: Blockchain 1.0 in Practical Use messaging, Ethereum: Turing-Complete Virtual Machine, Dapps, Challenges and Other Decentralized DNS Services, Technical Challenges MetaDisk, DAOs and DACs mindfiles, Personal Thinking Blockchains MIT Bitcoin Project, Campuscoin Monegraph, Monegraph: Online Graphics Protection money (see currency) MOOCs (massive open online courses), Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy Moroz, Tatiana, Communitycoin: Hayek’s Private Currencies Vie for Attention multicurrency systems, Demurrage Currencies: Potentially Incitory and Redistributable N Nakamoto, Satoshi, Blockchain 2.0: Contracts, Blockchain 2.0: Contracts Namecoin, Namecoin: Decentralized Domain Name System-Decentralized DNS Functionality Beyond Free Speech: Digital Identity, Monegraph: Online Graphics Protection Nationcoin, Coin Drops as a Strategy for Public Adoption, Demurrage Currencies: Potentially Incitory and Redistributable notary chains, Batched Notary Chains as a Class of Blockchain Infrastructure notary services, Hashing Plus Timestamping, Blockchain Health Notary NSA surveillance, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel NXT, Technology Stack: Blockchain, Protocol, Currency, Blockchain 2.0 Protocol Projects O offline wallets, Technical Challenges OneName, Digital Identity Verification-Digital Identity Verification OneWallet, Wallet Development Projects online graphics protection, Monegraph: Online Graphics Protection-Monegraph: Online Graphics Protection Open Assets, Blockchain 2.0 Protocol Projects Open Transactions, Blockchain 2.0 Protocol Projects OpenBazaar, Dapps, Government Regulation Ostel, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel P passports, Decentralized Governance Services PayPal, The Double-Spend and Byzantine Generals’ Computing Problems, Financial Services, Distributed Censorship-Resistant Organizational Models peer-to-peer lending, Financial Services Peercoin, Technology Stack: Blockchain, Protocol, Currency personal cryptosecurity, eWallet Services and Personal Cryptosecurity personal data rights, Blockchain Genomics personal mindfile blockchains, Personal Thinking Blockchains personal thinking chains, Personal Thinking Blockchains-Personal Thinking Blockchains physical asset keys, Blockchain 2.0: Contracts, Smart Property plagiarism detection/avoidance, Blockchain Academic Publishing: Journalcoin Precedent, PrecedentCoin: Blockchain Dispute Resolution, Terminology and Concepts prediction markets, Bitcoin Prediction Markets, DASs and Self-Bootstrapped Organizations, Decentralized Governance Services, Futarchy: Two-Step Democracy with Voting + Prediction Markets-Futarchy: Two-Step Democracy with Voting + Prediction Markets Predictious, Bitcoin Prediction Markets predictive task automation, Blockchain Layer Could Facilitate Big Data’s Predictive Task Automation privacy challenges, Privacy Challenges for Personal Records private key, eWallet Services and Personal Cryptosecurity Proof of Existence, Proof of Existence-Proof of Existence proof of stake, Blockchain 2.0 Protocol Projects, PrecedentCoin: Blockchain Dispute Resolution, Technical Challenges proof of work, PrecedentCoin: Blockchain Dispute Resolution, Technical Challenges-Technical Challenges property ownership, Smart Property property registration, Decentralized Governance Services public documents registries, Decentralized Governance Services public health, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation, Global Public Health: Bitcoin for Contagious Disease Relief public perception, Scandals and Public Perception-Scandals and Public Perception public/private key cryptography, Public/Private-Key Cryptography 101-Public/Private-Key Cryptography 101 publishing, academic, Blockchain Academic Publishing: Journalcoin-Blockchain Academic Publishing: Journalcoin pull technology, eWallet Services and Personal Cryptosecurity push technology, eWallet Services and Personal Cryptosecurity R random-sample elections, Random-Sample Elections Realcoin, Relation to Fiat Currency redistribution of currency (see demurrage currency) regulation, Government Regulation-Government Regulation regulatory status, Regulatory Status reputation vouching, Ethereum: Turing-Complete Virtual Machine Researchcoin, Blockchain Academic Publishing: Journalcoin REST APIs, Technical Challenges Ripple, Technology Stack: Blockchain, Protocol, Currency, Relation to Fiat Currency, Blockchain 2.0 Protocol Projects Ripple Labs, Financial Services Roadcoin, Blockchain Government S Saldo.mx, Blockchain Neutrality scandals, Scandals and Public Perception science, Blockchain Science: Gridcoin, Foldingcoin-Charity Donations and the Blockchain—Sean’s Outpost community supercomputing, Community Supercomputing global public health, Global Public Health: Bitcoin for Contagious Disease Relief Sean's Outpost, Charity Donations and the Blockchain—Sean’s Outpost secret messaging, Ethereum: Turing-Complete Virtual Machine security issues, Technical Challenges self-bootstrapped organizations, DASs and Self-Bootstrapped Organizations self-directing assets, Automatic Markets and Tradenets self-enforced code, Smart Property self-sufficiency, Smart Contracts SETI@home, Blockchain Science: Gridcoin, Foldingcoin, Community Supercomputing size and bandwidth, Technical Challenges smart contracts, Smart Contracts-Smart Contracts, Smart Contract Advocates on Behalf of Digital Intelligence automatic markets and tradenets, Automatic Markets and Tradenets Counterparty, Counterparty Re-creates Ethereum’s Smart Contract Platform DAOs/DACs, DAOs and DACs-DAOs and DACs Dapps, Dapps-Dapps DASs, DASs and Self-Bootstrapped Organizations Ethereum, Ethereum: Turing-Complete Virtual Machine increasingly autonomous, Dapps, DAOs, DACs, and DASs: Increasingly Autonomous Smart Contracts-Automatic Markets and Tradenets smart literacy contracts, Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy-Learning Contract Exchanges smart property, Smart Property-Smart Property, Monegraph: Online Graphics Protection smartwatch, Extensibility of Demurrage Concept and Features Snowden, Edward, Distributed Censorship-Resistant Organizational Models social contracts, Smart Contracts social network currencies, Currency Multiplicity: Monetary and Nonmonetary Currencies Stellar, Blockchain Development Platforms and APIs stock market, Financial Services Storj, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation, Dapps, Technical Challenges Stripe, Blockchain Development Platforms and APIs supercomputing, Community Supercomputing Svalbard Global Seed Vault, Virus Bank, Seed Vault Backup Swancoin, Smart Property swaps exchange, Financial Services Swarm, Crowdfunding, Dapps Swarm (Ethereum), Ethereum: Turing-Complete Virtual Machine Swarmops, Crowdfunding T Tatianacoin, Communitycoin: Hayek’s Private Currencies Vie for Attention technical challenges, Technical Challenges-Technical Challenges Tendermint, Technical Challenges Tera Exchange, Financial Services terminology, Terminology and Concepts-Terminology and Concepts 37Coins, Global Public Health: Bitcoin for Contagious Disease Relief throughput, Technical Challenges timestamping, Hashing Plus Timestamping-Limitations titling, Decentralized Governance Services tradenets, Automatic Markets and Tradenets transaction fees, Summary: Blockchain 1.0 in Practical Use Tribecoin, Coin Drops as a Strategy for Public Adoption trustless lending, Smart Property Truthcoin, Futarchy: Two-Step Democracy with Voting + Prediction Markets Turing completeness, Ethereum: Turing-Complete Virtual Machine Twister, Dapps Twitter, Monegraph: Online Graphics Protection U Uber, Government Regulation unbanked/underbanked markets, Blockchain Neutrality usability issues, Technical Challenges V value chain composition, How a Cryptocurrency Works versioning issues, Technical Challenges Virtual Notary, Virtual Notary, Bitnotar, and Chronobit voting and prediction, Futarchy: Two-Step Democracy with Voting + Prediction Markets-Futarchy: Two-Step Democracy with Voting + Prediction Markets W wallet APIs, Blockchain Development Platforms and APIs wallet companies, Wallet Development Projects wallet software, How a Cryptocurrency Works wasted resources, Technical Challenges Wayback Machine, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation Wedbush Securities, Financial Services Whatevercoin, Terminology and Concepts WikiLeaks, Distributed Censorship-Resistant Organizational Models Wikinomics, Community Supercomputing World Citizen project, Decentralized Governance Services X Xapo, eWallet Services and Personal Cryptosecurity Z Zennet Supercomputer, Community Supercomputing Zooko's Triangle, Decentralized DNS Functionality Beyond Free Speech: Digital Identity About the Author Melanie Swan is the Founder of the Institute for Blockchain Studies and a Contemporary Philosophy MA candidate at Kingston University London and Université Paris VIII.

-M2M/IoT Bitcoin Payment Network to Enable the Machine Economy and consensus models, Blockchain AI: Consensus as the Mechanism to Foster “Friendly” AI-Blockchain Consensus Increases the Information Resolution of the Universe extensibility of, Extensibility of Blockchain Technology Concepts for facilitating big data predictive task automation, Blockchain Layer Could Facilitate Big Data’s Predictive Task Automation future applications, Blockchain AI: Consensus as the Mechanism to Foster “Friendly” AI-Blockchain Consensus Increases the Information Resolution of the Universe limitations of (see limitations) organizational capabilities, Blockchain Technology Is a New and Highly Effective Model for Organizing Activity tracking capabilities, Fundamental Economic Principles: Discovery, Value Attribution, and Exchange-Fundamental Economic Principles: Discovery, Value Attribution, and Exchange blockchain-recorded marriage, Decentralized Governance Services BlockCypher, Blockchain Development Platforms and APIs BOINC, DAOs and DACs bond deposit postings, Technical Challenges Brin, David, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel BTCjam, Financial Services business model challenges, Business Model Challenges Buttercoin, Financial Services Byrne, Patrick, Financial Services C Campus Cryptocurrency Network, Campuscoin Campuscoin, Campuscoin-Campuscoin censorship, Internet (see decentralized DNS system) Chain, Blockchain Development Platforms and APIs challenges (see see limitations) charity donations, Charity Donations and the Blockchain—Sean’s Outpost China, Relation to Fiat Currency ChromaWallet, Wallet Development Projects Chronobit, Virtual Notary, Bitnotar, and Chronobit Circle Internet Financial, eWallet Services and Personal Cryptosecurity Codius, Financial Services coin drops, Coin Drops as a Strategy for Public Adoption coin mixing, eWallet Services and Personal Cryptosecurity coin, defining, Terminology and Concepts, Currency, Token, Tokenizing Coinapult, Global Public Health: Bitcoin for Contagious Disease Relief Coinapult LOCKS, Relation to Fiat Currency Coinbase, Merchant Acceptance of Bitcoin, Financial Services CoinBeyond, Merchant Acceptance of Bitcoin Coinffeine, Financial Services Coinify, Merchant Acceptance of Bitcoin Coinprism, Wallet Development Projects Coinspace, Crowdfunding CoinSpark, Wallet Development Projects colored coins, Smart Property, Blockchain 2.0 Protocol Projects community supercomputing, Community Supercomputing Communitycoin, Currency, Token, Tokenizing-Communitycoin: Hayek’s Private Currencies Vie for Attention complementary currency systems, Demurrage Currencies: Potentially Incitory and Redistributable concepts, redefining, Terminology and Concepts-Terminology and Concepts consensus models, Blockchain AI: Consensus as the Mechanism to Foster “Friendly” AI-Blockchain Consensus Increases the Information Resolution of the Universe consensus-derived information, Blockchain Consensus Increases the Information Resolution of the Universe contagious disease relief, Global Public Health: Bitcoin for Contagious Disease Relief contracts, Blockchain 2.0: Contracts-The Blockchain as a Path to Artificial Intelligence (see also smart contracts) crowdfunding, Crowdfunding-Crowdfunding financial services, Financial Services-Financial Services marriage, Decentralized Governance Services prediction markets, Bitcoin Prediction Markets smart property, Smart Property-Smart Property wallet development projects, Wallet Development Projects copyright protection, Monegraph: Online Graphics Protection Counterparty, Blockchain 2.0 Protocol Projects, Counterparty Re-creates Ethereum’s Smart Contract Platform Counterparty currency (XCP), Currency, Token, Tokenizing Counterwallet, Wallet Development Projects crowdfunding, Crowdfunding-Crowdfunding cryptocurrencies benefits of, Currency, Token, Tokenizing cryptosecurity, eWallet Services and Personal Cryptosecurity eWallet services, eWallet Services and Personal Cryptosecurity mechanics of, How a Cryptocurrency Works-Merchant Acceptance of Bitcoin merchant acceptance, Merchant Acceptance of Bitcoin cryptosecurity challenges, eWallet Services and Personal Cryptosecurity cryptowallet, Blockchain Neutrality currency, Technology Stack: Blockchain, Protocol, Currency-Regulatory Status, Currency, Token, Tokenizing-Extensibility of Demurrage Concept and Features Campuscoin, Campuscoin-Campuscoin coin drops, Coin Drops as a Strategy for Public Adoption Communitycoin, Communitycoin: Hayek’s Private Currencies Vie for Attention-Communitycoin: Hayek’s Private Currencies Vie for Attention cryptocurrencies, How a Cryptocurrency Works-Merchant Acceptance of Bitcoin decentralizing, Communitycoin: Hayek’s Private Currencies Vie for Attention defining, Currency, Token, Tokenizing-Currency, Token, Tokenizing, Currency: New Meanings demurrage, Demurrage Currencies: Potentially Incitory and Redistributable-Extensibility of Demurrage Concept and Features double-spend problem, The Double-Spend and Byzantine Generals’ Computing Problems fiat currency, Relation to Fiat Currency-Relation to Fiat Currency monetary and nonmonetary, Currency Multiplicity: Monetary and Nonmonetary Currencies-Currency Multiplicity: Monetary and Nonmonetary Currencies new meanings, Currency: New Meanings technology stack, Technology Stack: Blockchain, Protocol, Currency-Technology Stack: Blockchain, Protocol, Currency currency mulitplicity, Currency Multiplicity: Monetary and Nonmonetary Currencies-Currency Multiplicity: Monetary and Nonmonetary Currencies D DAOs, DAOs and DACs-DAOs and DACs DAOs/DACs, DAOs and DACs-DAOs and DACs, Batched Notary Chains as a Class of Blockchain Infrastructure, Blockchain Government Dapps, Dapps-Dapps, Extensibility of Demurrage Concept and Features Dark Coin, eWallet Services and Personal Cryptosecurity dark pools, Technical Challenges Dark Wallet, eWallet Services and Personal Cryptosecurity DASs, DASs and Self-Bootstrapped Organizations DDP, Crowdfunding decentralization, Smart Contracts, Centralization-Decentralization Tension and Equilibrium decentralized applications (Dapps), Dapps-Dapps decentralized autonomous organization/corporation (DAO) (see DAOs/DACs) decentralized autonomous societies (DASs), DASs and Self-Bootstrapped Organizations decentralized autonomy, eWallet Services and Personal Cryptosecurity decentralized DNS, Namecoin: Decentralized Domain Name System-Decentralized DNS Functionality Beyond Free Speech: Digital Identity challenges of, Challenges and Other Decentralized DNS Services and digital identity, Decentralized DNS Functionality Beyond Free Speech: Digital Identity-Decentralized DNS Functionality Beyond Free Speech: Digital Identity DotP2P, Challenges and Other Decentralized DNS Services decentralized file storage, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation decentralized secure file serving, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation deeds, Decentralized Governance Services demurrage currencies, Demurrage Currencies: Potentially Incitory and Redistributable-Extensibility of Demurrage Concept and Features action-incitory features, Extensibility of Demurrage Concept and Features limitations of, Demurrage Currencies: Potentially Incitory and Redistributable digital art, Digital Art: Blockchain Attestation Services (Notary, Intellectual Property Protection)-Personal Thinking Blockchains (see also blockchain attestation services) hashing and timestamping, Hashing Plus Timestamping-Limitations online graphics protection, Monegraph: Online Graphics Protection digital cryptography, Ethereum: Turing-Complete Virtual Machine, Public/Private-Key Cryptography 101 digital divide, defining, Digital Divide of Bitcoin digital identity verification, Blockchain 2.0: Contracts, Smart Property, Wallet Development Projects, Digital Identity Verification-Digital Divide of Bitcoin, Limitations, Decentralized Governance Services, Liquid Democracy and Random-Sample Elections, Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy, Privacy Challenges for Personal Records dispute resolution, PrecedentCoin: Blockchain Dispute Resolution DIYweathermodeling, Community Supercomputing DNAnexus, Genomecoin, GenomicResearchcoin Dogecoin, Technology Stack: Blockchain, Protocol, Currency, Currency Multiplicity: Monetary and Nonmonetary Currencies, Scandals and Public Perception DotP2P, Challenges and Other Decentralized DNS Services double-spend problem, The Double-Spend and Byzantine Generals’ Computing Problems DriveShare, DAOs and DACs dynamic redistribution of currency (see demurrage currency) E education (see learning and literacy) Electronic Freedom Foundation (EFF), Distributed Censorship-Resistant Organizational Models EMR (electronic medical record) system, EMRs on the Blockchain: Personal Health Record Storage Ethereum, Crowdfunding, Blockchain 2.0 Protocol Projects, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation, Ethereum: Turing-Complete Virtual Machine-Counterparty Re-creates Ethereum’s Smart Contract Platform eWallet services, eWallet Services and Personal Cryptosecurity ExperimentalResultscoin, Blockchain Academic Publishing: Journalcoin F Fairlay, Bitcoin Prediction Markets fiat currency, Relation to Fiat Currency-Relation to Fiat Currency file serving, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation, Ethereum: Turing-Complete Virtual Machine file storage, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation financial services, Regulatory Status, Financial Services-Financial Services, Blockchain Technology Is a New and Highly Effective Model for Organizing Activity, Government Regulation Fitbit, Personal Thinking Blockchains, Blockchain Health Research Commons, Extensibility of Demurrage Concept and Features Florincoin, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel Folding@Home, DAOs and DACs, Blockchain Science: Gridcoin, Foldingcoin, Community Supercomputing franculates, Blockchain Government freedom of speech, Namecoin: Decentralized Domain Name System, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel (see also decentralized DNS system) Freicoin, Demurrage Currencies: Potentially Incitory and Redistributable fundraising (see crowdfunding) futarchy, Futarchy: Two-Step Democracy with Voting + Prediction Markets-Futarchy: Two-Step Democracy with Voting + Prediction Markets G GBIcoin, Demurrage Currencies: Potentially Incitory and Redistributable GBIs (Guaranteed Basic Income initiatives), Demurrage Currencies: Potentially Incitory and Redistributable Gems, Blockchain Development Platforms and APIs, Dapps Genecoin, Blockchain Genomics Genomecoin, Genomecoin, GenomicResearchcoin Genomic Data Commons, Genomecoin, GenomicResearchcoin genomic sequencing, Blockchain Genomics 2.0: Industrialized All-Human-Scale Sequencing Solution-Genomecoin, GenomicResearchcoin GenomicResearchcoin, Genomecoin, GenomicResearchcoin genomics, consumer, Blockchain Genomics-Genomecoin, GenomicResearchcoin Git, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation GitHub, Blockchain Academic Publishing: Journalcoin, Currency Multiplicity: Monetary and Nonmonetary Currencies global public health, Global Public Health: Bitcoin for Contagious Disease Relief GoCoin, Financial Services GoToLunchcoin, Terminology and Concepts governance, Blockchain Government-Societal Maturity Impact of Blockchain Governance decentralized services, Decentralized Governance Services-Decentralized Governance Services dispute resolution, PrecedentCoin: Blockchain Dispute Resolution futarchy, Futarchy: Two-Step Democracy with Voting + Prediction Markets-Futarchy: Two-Step Democracy with Voting + Prediction Markets Liquid Democracy system, Liquid Democracy and Random-Sample Elections-Liquid Democracy and Random-Sample Elections personalized governance services, Blockchain Government random-sample elections, Random-Sample Elections societal maturity impact of blockchain governance, Societal Maturity Impact of Blockchain Governance government regulation, Regulatory Status, Government Regulation-Government Regulation Gridcoin, Blockchain Science: Gridcoin, Foldingcoin-Blockchain Science: Gridcoin, Foldingcoin H hashing, Hashing Plus Timestamping-Limitations, Batched Notary Chains as a Class of Blockchain Infrastructure, Technical Challenges Hayek, Friedrich, Communitycoin: Hayek’s Private Currencies Vie for Attention, Demurrage Currencies: Potentially Incitory and Redistributable, Conclusion, The Blockchain Is an Information Technology health, Blockchain Health-Virus Bank, Seed Vault Backup as demurrage currency, Extensibility of Demurrage Concept and Features doctor vendor RFP services, Doctor Vendor RFP Services and Assurance Contracts health notary services, Blockchain Health Notary health research commons , Blockchain Health Research Commons health spending, Healthcoin healthcare decision making and advocacy, Liquid Democracy and Random-Sample Elections personal health record storage, EMRs on the Blockchain: Personal Health Record Storage virus bank and seed vault backup, Virus Bank, Seed Vault Backup Healthcoin, Healthcoin, Demurrage Currencies: Potentially Incitory and Redistributable I identity authentication, eWallet Services and Personal Cryptosecurity, Blockchain 2.0: Contracts, Smart Property, Smart Property, Wallet Development Projects, Digital Identity Verification-Digital Divide of Bitcoin, Limitations, Decentralized Governance Services, Liquid Democracy and Random-Sample Elections, Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy, Privacy Challenges for Personal Records Indiegogo, Crowdfunding, Dapps industry scandals, Scandals and Public Perception infrastructure needs and issues, Technical Challenges inheritance gifts, Smart Contracts intellectual property, Monegraph: Online Graphics Protection (see also digital art) Internet administration, Distributed Censorship-Resistant Organizational Models Internet Archive, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation, Personal Thinking Blockchains Internet censorship prevention (see Decentralized DNS system) Intuit Quickbooks, Merchant Acceptance of Bitcoin IP protection, Hashing Plus Timestamping IPFS project, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation J Johnston, David, Blockchain Technology Could Be Used in the Administration of All Quanta Journalcoin, Blockchain Academic Publishing: Journalcoin Judobaby, Crowdfunding justice applications for censorship-resistant organizational models, Distributed Censorship-Resistant Organizational Models-Distributed Censorship-Resistant Organizational Models digital art, Digital Art: Blockchain Attestation Services (Notary, Intellectual Property Protection)-Personal Thinking Blockchains (see also digital art, blockchain attestation services) digital identity verification, Blockchain 2.0: Contracts, Smart Property, Wallet Development Projects, Digital Identity Verification-Digital Divide of Bitcoin, Limitations, Decentralized Governance Services, Liquid Democracy and Random-Sample Elections, Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy, Privacy Challenges for Personal Records freedom of speech/anti-censorship, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel governance, Blockchain Government-Societal Maturity Impact of Blockchain Governance (see also governance) Namecoin, Namecoin: Decentralized Domain Name System-Decentralized DNS Functionality Beyond Free Speech: Digital Identity, Monegraph: Online Graphics Protection (see also decentralized DNS) K Kickstarter, Crowdfunding, Community Supercomputing Kipochi, Blockchain Neutrality, Global Public Health: Bitcoin for Contagious Disease Relief, Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy Koinify, Crowdfunding, Dapps Kraken, Financial Services L latency, Blockchain 2.0 Protocol Projects, Technical Challenges, Technical Challenges, Scandals and Public Perception LaZooz, Dapps, Campuscoin, Extensibility of Demurrage Concept and Features Learncoin, Learncoin learning and literacy, Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy-Learning Contract Exchanges learning contract exchanges, Learning Contract Exchanges Ledra Capital, Blockchain 2.0: Contracts, Ledra Capital Mega Master Blockchain List legal implications crowdfunding, Crowdfunding smart contracts, Smart Contracts lending, trustless, Smart Property Lighthouse, Crowdfunding limitations, Limitations-Overall: Decentralization Trends Likely to Persist business model challenges, Business Model Challenges government regulation, Government Regulation-Government Regulation personal records privacy challenges, Privacy Challenges for Personal Records scandals and public perception, Scandals and Public Perception-Scandals and Public Perception technical challenges, Technical Challenges-Technical Challenges Liquid Democracy system, Liquid Democracy and Random-Sample Elections-Liquid Democracy and Random-Sample Elections Litecoin, Technology Stack: Blockchain, Protocol, Currency, Technology Stack: Blockchain, Protocol, Currency, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel, Currency Multiplicity: Monetary and Nonmonetary Currencies, Technical Challenges literacy (see learning and literacy) LTBcoin, Wallet Development Projects, Currency, Token, Tokenizing M M2M/IoT infrastructure, M2M/IoT Bitcoin Payment Network to Enable the Machine Economy, Blockchain Development Platforms and APIs, Blockchain Academic Publishing: Journalcoin-The Blockchain Is Not for Every Situation, The Blockchain Is an Information Technology Maidsafe, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation, Technical Challenges Manna, Crowdfunding marriage, blockchain recorded, Decentralized Governance Services Mastercoin, Blockchain 2.0 Protocol Projects mechanics of cryptocurrencies, How a Cryptocurrency Works Medici, Financial Services mega master blockchain list, Ledra Capital Mega Master Blockchain List-Ledra Capital Mega Master Blockchain List Melotic, Crowdfunding, Wallet Development Projects merchant acceptance, Merchant Acceptance of Bitcoin merchant payment fees, Summary: Blockchain 1.0 in Practical Use messaging, Ethereum: Turing-Complete Virtual Machine, Dapps, Challenges and Other Decentralized DNS Services, Technical Challenges MetaDisk, DAOs and DACs mindfiles, Personal Thinking Blockchains MIT Bitcoin Project, Campuscoin Monegraph, Monegraph: Online Graphics Protection money (see currency) MOOCs (massive open online courses), Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy Moroz, Tatiana, Communitycoin: Hayek’s Private Currencies Vie for Attention multicurrency systems, Demurrage Currencies: Potentially Incitory and Redistributable N Nakamoto, Satoshi, Blockchain 2.0: Contracts, Blockchain 2.0: Contracts Namecoin, Namecoin: Decentralized Domain Name System-Decentralized DNS Functionality Beyond Free Speech: Digital Identity, Monegraph: Online Graphics Protection Nationcoin, Coin Drops as a Strategy for Public Adoption, Demurrage Currencies: Potentially Incitory and Redistributable notary chains, Batched Notary Chains as a Class of Blockchain Infrastructure notary services, Hashing Plus Timestamping, Blockchain Health Notary NSA surveillance, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel NXT, Technology Stack: Blockchain, Protocol, Currency, Blockchain 2.0 Protocol Projects O offline wallets, Technical Challenges OneName, Digital Identity Verification-Digital Identity Verification OneWallet, Wallet Development Projects online graphics protection, Monegraph: Online Graphics Protection-Monegraph: Online Graphics Protection Open Assets, Blockchain 2.0 Protocol Projects Open Transactions, Blockchain 2.0 Protocol Projects OpenBazaar, Dapps, Government Regulation Ostel, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel P passports, Decentralized Governance Services PayPal, The Double-Spend and Byzantine Generals’ Computing Problems, Financial Services, Distributed Censorship-Resistant Organizational Models peer-to-peer lending, Financial Services Peercoin, Technology Stack: Blockchain, Protocol, Currency personal cryptosecurity, eWallet Services and Personal Cryptosecurity personal data rights, Blockchain Genomics personal mindfile blockchains, Personal Thinking Blockchains personal thinking chains, Personal Thinking Blockchains-Personal Thinking Blockchains physical asset keys, Blockchain 2.0: Contracts, Smart Property plagiarism detection/avoidance, Blockchain Academic Publishing: Journalcoin Precedent, PrecedentCoin: Blockchain Dispute Resolution, Terminology and Concepts prediction markets, Bitcoin Prediction Markets, DASs and Self-Bootstrapped Organizations, Decentralized Governance Services, Futarchy: Two-Step Democracy with Voting + Prediction Markets-Futarchy: Two-Step Democracy with Voting + Prediction Markets Predictious, Bitcoin Prediction Markets predictive task automation, Blockchain Layer Could Facilitate Big Data’s Predictive Task Automation privacy challenges, Privacy Challenges for Personal Records private key, eWallet Services and Personal Cryptosecurity Proof of Existence, Proof of Existence-Proof of Existence proof of stake, Blockchain 2.0 Protocol Projects, PrecedentCoin: Blockchain Dispute Resolution, Technical Challenges proof of work, PrecedentCoin: Blockchain Dispute Resolution, Technical Challenges-Technical Challenges property ownership, Smart Property property registration, Decentralized Governance Services public documents registries, Decentralized Governance Services public health, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation, Global Public Health: Bitcoin for Contagious Disease Relief public perception, Scandals and Public Perception-Scandals and Public Perception public/private key cryptography, Public/Private-Key Cryptography 101-Public/Private-Key Cryptography 101 publishing, academic, Blockchain Academic Publishing: Journalcoin-Blockchain Academic Publishing: Journalcoin pull technology, eWallet Services and Personal Cryptosecurity push technology, eWallet Services and Personal Cryptosecurity R random-sample elections, Random-Sample Elections Realcoin, Relation to Fiat Currency redistribution of currency (see demurrage currency) regulation, Government Regulation-Government Regulation regulatory status, Regulatory Status reputation vouching, Ethereum: Turing-Complete Virtual Machine Researchcoin, Blockchain Academic Publishing: Journalcoin REST APIs, Technical Challenges Ripple, Technology Stack: Blockchain, Protocol, Currency, Relation to Fiat Currency, Blockchain 2.0 Protocol Projects Ripple Labs, Financial Services Roadcoin, Blockchain Government S Saldo.mx, Blockchain Neutrality scandals, Scandals and Public Perception science, Blockchain Science: Gridcoin, Foldingcoin-Charity Donations and the Blockchain—Sean’s Outpost community supercomputing, Community Supercomputing global public health, Global Public Health: Bitcoin for Contagious Disease Relief Sean's Outpost, Charity Donations and the Blockchain—Sean’s Outpost secret messaging, Ethereum: Turing-Complete Virtual Machine security issues, Technical Challenges self-bootstrapped organizations, DASs and Self-Bootstrapped Organizations self-directing assets, Automatic Markets and Tradenets self-enforced code, Smart Property self-sufficiency, Smart Contracts SETI@home, Blockchain Science: Gridcoin, Foldingcoin, Community Supercomputing size and bandwidth, Technical Challenges smart contracts, Smart Contracts-Smart Contracts, Smart Contract Advocates on Behalf of Digital Intelligence automatic markets and tradenets, Automatic Markets and Tradenets Counterparty, Counterparty Re-creates Ethereum’s Smart Contract Platform DAOs/DACs, DAOs and DACs-DAOs and DACs Dapps, Dapps-Dapps DASs, DASs and Self-Bootstrapped Organizations Ethereum, Ethereum: Turing-Complete Virtual Machine increasingly autonomous, Dapps, DAOs, DACs, and DASs: Increasingly Autonomous Smart Contracts-Automatic Markets and Tradenets smart literacy contracts, Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy-Learning Contract Exchanges smart property, Smart Property-Smart Property, Monegraph: Online Graphics Protection smartwatch, Extensibility of Demurrage Concept and Features Snowden, Edward, Distributed Censorship-Resistant Organizational Models social contracts, Smart Contracts social network currencies, Currency Multiplicity: Monetary and Nonmonetary Currencies Stellar, Blockchain Development Platforms and APIs stock market, Financial Services Storj, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation, Dapps, Technical Challenges Stripe, Blockchain Development Platforms and APIs supercomputing, Community Supercomputing Svalbard Global Seed Vault, Virus Bank, Seed Vault Backup Swancoin, Smart Property swaps exchange, Financial Services Swarm, Crowdfunding, Dapps Swarm (Ethereum), Ethereum: Turing-Complete Virtual Machine Swarmops, Crowdfunding T Tatianacoin, Communitycoin: Hayek’s Private Currencies Vie for Attention technical challenges, Technical Challenges-Technical Challenges Tendermint, Technical Challenges Tera Exchange, Financial Services terminology, Terminology and Concepts-Terminology and Concepts 37Coins, Global Public Health: Bitcoin for Contagious Disease Relief throughput, Technical Challenges timestamping, Hashing Plus Timestamping-Limitations titling, Decentralized Governance Services tradenets, Automatic Markets and Tradenets transaction fees, Summary: Blockchain 1.0 in Practical Use Tribecoin, Coin Drops as a Strategy for Public Adoption trustless lending, Smart Property Truthcoin, Futarchy: Two-Step Democracy with Voting + Prediction Markets Turing completeness, Ethereum: Turing-Complete Virtual Machine Twister, Dapps Twitter, Monegraph: Online Graphics Protection U Uber, Government Regulation unbanked/underbanked markets, Blockchain Neutrality usability issues, Technical Challenges V value chain composition, How a Cryptocurrency Works versioning issues, Technical Challenges Virtual Notary, Virtual Notary, Bitnotar, and Chronobit voting and prediction, Futarchy: Two-Step Democracy with Voting + Prediction Markets-Futarchy: Two-Step Democracy with Voting + Prediction Markets W wallet APIs, Blockchain Development Platforms and APIs wallet companies, Wallet Development Projects wallet software, How a Cryptocurrency Works wasted resources, Technical Challenges Wayback Machine, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation Wedbush Securities, Financial Services Whatevercoin, Terminology and Concepts WikiLeaks, Distributed Censorship-Resistant Organizational Models Wikinomics, Community Supercomputing World Citizen project, Decentralized Governance Services X Xapo, eWallet Services and Personal Cryptosecurity Z Zennet Supercomputer, Community Supercomputing Zooko's Triangle, Decentralized DNS Functionality Beyond Free Speech: Digital Identity About the Author Melanie Swan is the Founder of the Institute for Blockchain Studies and a Contemporary Philosophy MA candidate at Kingston University London and Université Paris VIII.

 

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

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

3D printing, Airbnb, altcoin, bank run, banking crisis, bitcoin, blockchain, Bretton Woods, California gold rush, capital controls, carbon footprint, clean water, collaborative economy, collapse of Lehman Brothers, Columbine, Credit Default Swap, cryptocurrency, David Graeber, disintermediation, Edward Snowden, Elon Musk, ethereum blockchain, fiat currency, financial innovation, Firefox, Flash crash, Fractional reserve banking, hacker house, Hernando de Soto, high net worth, informal economy, Internet of things, inventory management, Julian Assange, Kickstarter, Kuwabatake Sanjuro: assassination market, litecoin, Long Term Capital Management, Lyft, M-Pesa, Mark Zuckerberg, McMansion, means of production, Menlo Park, mobile money, money: store of value / unit of account / medium of exchange, Network effects, new economy, new new economy, Nixon shock, offshore financial centre, payday loans, peer-to-peer lending, pets.com, Ponzi scheme, prediction markets, price stability, profit motive, RAND corporation, regulatory arbitrage, rent-seeking, reserve currency, Robert Shiller, Robert Shiller, 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: Great Stagnation, Uber and Lyft, underbanked, WikiLeaks, Y Combinator, Y2K, Zimmermann PGP

As with Ripple, Bitreserve holdings expressed in these fiat currencies are, in effect, tradable IOUs rather than actual rights to dollars. But unlike Ripple, and like Realcoin, they are backed by reserves of real fiat currencies that are held by the company itself and whose balances are updated and published in real time. The advantage is that with Bitreserve’s server-centralized system backing up all that value, users get a guaranteed store of value denominated in their currency of choice. Centralization here offers a solution to the volatility of holding bitcoins in the decentralized blockchain but retains the ability to quickly and cheaply transfer funds digitally. Bitreserve’s viability is yet to be proven, but Minor’s idea is worth contemplating as a general lesson in how traditional approaches such as fiat-currency reserves and centralized servers can give the revolutionary aspects of cryptocurrency a practical application.

A Vital, If Unseen, Cog One scenario that Silicon Valley visionaries frequently articulate is that cryptocurrencies end up playing a vital role inside the infrastructure of our financial systems but in the background, with fiat currencies continuing as the economies’ main units of account and mediums of exchange. In that case, cryptocurrency protocols and blockchain-based systems for confirming transactions would replace the cumbersome payment system that’s currently run by banks, credit-card companies, payment processors, and foreign-exchange traders. Some of those intermediaries would disappear; others would simply use cryptocurrency technology for their own institution-to-institution transactions. Because of instantaneous conversion into fiat currencies after each transaction, the end-user consumers and businesses would go about their lives quoting prices and handing over money in the same currencies they’ve always used.

It’s got parallels with the financial crisis, and the new sharing economy, and the California gold rush, and before it’s all over, we may have to endure an epic battle between a new high-tech world and the old low-tech world that could throw millions out of work, while creating an entirely new breed of millionaires. Are you ready to jump down the bitcoin rabbit hole? One FROM BABYLON TO BITCOIN The eye has never seen, nor the hand touched a dollar. —Alfred Mitchell Innes For any currency to be viable, be it a decentralized cryptocurrency issued by a computer program or a traditional “fiat” currency issued by a government, it must win the trust of the community using it. For cryptocurrency advocates, as we’ll learn in the chapters ahead, the whole point is to offer an alternative model for that trust. They tout a system of payments in which the payee no longer has to trust “third-party” institutions such as banks or governments to assure that the payer can deliver the agreed-upon funds.

 

pages: 296 words: 86,610

The Bitcoin Guidebook: How to Obtain, Invest, and Spend the World's First Decentralized Cryptocurrency by Ian Demartino

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

3D printing, AltaVista, altcoin, bitcoin, blockchain, buy low sell high, capital controls, cloud computing, corporate governance, crowdsourcing, cryptocurrency, distributed ledger, Edward Snowden, Elon Musk, ethereum blockchain, fiat currency, Firefox, forensic accounting, global village, GnuPG, Google Earth, Haight Ashbury, Jacob Appelbaum, Kevin Kelly, Kickstarter, litecoin, M-Pesa, Marshall McLuhan, Oculus Rift, peer-to-peer lending, Ponzi scheme, prediction markets, ransomware, Satoshi Nakamoto, self-driving car, Skype, smart contracts, Steven Levy, the medium is the message, underbanked, WikiLeaks, Zimmermann PGP

Uphold (previously known as Bitreserve), BitGold, and several other services allow users to invest and hold precious metals or even other fiat currencies. In the case of Uphold, 27 different fiat currencies and precious metals are supported in addition to four digital currencies (Bitcoin, Litecoin, Ether, and Uphold’s own Voxelus). Uphold opens up investment opportunities that would otherwise be unavailable to the average consumer without enough disposable income to make a large initial investment and deal with significant fees. Uphold has recently removed fees for all verified customers—those who prove their identity by uploading personal documents—for fiat currency conversion. The two services described above allow the quick transfer between precious materials or fiat and Bitcoin. Other companies allow users to trade stocks using Bitcoin as collateral.

The most important strategy to keep in mind is diversification—be sure to lend to a number of different borrowers. With enough diversification, BTCJam loans should pay out overall—assuming you aren’t only investing in risky loans. Most loans on BTCJam are pegged either to US dollars or the fiat currency of the borrower. This is to protect the borrower and lender from Bitcoin’s sometimes massive price swings. Although loans are made and paid back using Bitcoin, the amount of Bitcoin required for the loan and the repayment will generally be based on the exchange rate of the fiat currency the borrower chose. This system allows the lender to maintain a somewhat reliable revenue stream—assuming proper research is conducted—and hedge against the fluctuations in Bitcoin price while keeping money “active.” Some loans aren’t tied to fiat price, but these are only recommended for borrowers who make their money in Bitcoin.

Every one of these things can be, and more often are, done with fiat currencies. But cash and other forms of currency also have countless uses. You can use fiat money to pay rent or for education or groceries. You can use it to invest and save and do a million other things. Initially, cryptocurrencies were limited to a few uses and many of them, like the Silk Road, were less than attractive to the average person. What makes Bitcoin and blockchain technologies inherently attractive are the things they can do better than other currencies: Bitcoin and other digital currencies are perfectly designed for remittance, i.e., sending money from one person to another, usually overseas. When we set aside the current difficulties people can have exchanging Bitcoin for a fiat currency, Bitcoin is undoubtedly better for remittance than any other service out there.

 

The Future of Money by Bernard Lietaer

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agricultural Revolution, banks create money, barriers to entry, Bretton Woods, clean water, complexity theory, dematerialisation, discounted cash flows, diversification, fiat currency, financial deregulation, financial innovation, floating exchange rates, full employment, George Gilder, German hyperinflation, global reserve currency, Golden Gate Park, Howard Rheingold, informal economy, invention of the telephone, invention of writing, Lao Tzu, Mahatma Gandhi, means of production, microcredit, money: store of value / unit of account / medium of exchange, Norbert Wiener, North Sea oil, offshore financial centre, pattern recognition, post-industrial society, price stability, reserve currency, Ronald Reagan, seigniorage, Silicon Valley, South Sea Bubble, the market place, the payments system, trade route, transaction costs, trickle-down economics, working poor

It is also complementary because most participants use the normal national currency and a complementary currency in parallel. It is often the case that a single transaction includes partial payments in both currencies at the same time. Another useful differentiation is the one between fiat money and mutual credit currencies. A fiat currency, as we saw earlier (Chapter 2), is a currency which is created out of nothing by an authority. For instance, all our national currencies (including the euro) are fiat currencies. In contrast, mutuP1 credit currencies are created by the participants themselves in a transaction as a simultaneous debit and credit. A more detailed description on how such currencies operate will be provided hereafter in the case of LETS or Time Dollars, both mutual credit currencies. Thomas Greco found references to such mutual credit systems in colonial Massachusetts?"

Paul Glover sells a kit describing; how to set up such a system for $25 or two and a half Ithaca HOURS. As of 1997, there were 39 HOURS systems operational in the world. Bottom line: it is a successful model with very low start-up costs, and it works. However, it has one drawback common to all fiat currencies: Ithaca HOURS require someone to decide centrally how much currency to issue. While this is done in a democratic way by the 'Ithaca Reserve Board', all i central bankers will confirm that managing a fiat currency supply remains a tricky decision. The biggest risk is that if more currency is issued than people want to use, there will be inflation and devaluation of the complementary currency. This will not happen as long as Ithaca HOUR managers follow Paul Glover's and his colleagues' lead in remaining wisely conservative in their money supply decisions.

AU economists would immediately understand why such a process would create employment, but also (erroneously) conclude that complementary currencies would automatically add to inflationary pressures on the economy as a whole. This reasoning would be valid if and only if the complementary currencies were all fiat currencies as are the dollar, the euro or any other national currencies of today. There is indeed one type of complementary currency (the Ithaca HOUR described in Chapter 6) which is such a fiat currency, and which could pose such a risk if its use became widespread. However, it will be shown that other designs, including all mutual credit systems (e.g. LETS, Time Dollars) do not contribute to inflationary pressures. Rather than argue from theory to prove this point, let us take three practical examples of increasing complexity.

 

pages: 275 words: 77,017

The End of Money: Counterfeiters, Preachers, Techies, Dreamers--And the Coming Cashless Society by David Wolman

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Bay Area Rapid Transit, Berlin Wall, Bernie Madoff, bitcoin, Bretton Woods, carbon footprint, cashless society, central bank independence, collateralized debt obligation, corporate social responsibility, credit crunch, cross-subsidies, Diane Coyle, fiat currency, financial innovation, floating exchange rates, German hyperinflation, greed is good, Isaac Newton, M-Pesa, Mahatma Gandhi, mental accounting, mobile money, money: store of value / unit of account / medium of exchange, offshore financial centre, Peter Thiel, place-making, placebo effect, Ponzi scheme, Ronald Reagan, seigniorage, Silicon Valley, special drawing rights, Steven Levy, the payments system, transaction costs

Mint spokesman Tom Jurkowsky told the New York Times. “But you could do it.” You’d be a fool because the silver content makes that coin worth about $38.13 A return to the gold standard, or a gold and silver standard, is one of those perennial ideas that may sound throwback-ish, until you remember that we’ve only been ticking along with a fiat currency system for about a century, and only forty years with the complete separation from gold. It’s also something of a puzzler that fiat currencies are the way of the world, yet central banks themselves hoard so much gold. Still, even distinguished economists who are gravely concerned about the dollar and the global economy’s dependence on it say that a return to the gold standard is a bad idea.14 For one thing, there just isn’t that much of it, a limitation to reviving the gold standard that could, theoretically, be overcome if we were to transact digitally in ever-smaller fractions of an ounce.

“My objection,” Birch continued, “is that by helping other people [and himself] to evade tax, the person in question was making me pay more tax: the use of cash facilitates the transfer of wealth from the law-abiding (e.g., me) to the law-breaking (e.g., his builders). This seems immoral to me.”58 It also helps illuminate why Birch defies the easy characterization often assigned to people who complain about fiat currencies. Part of the reason he favors electronic money is precisely because it would help government, insofar as making tax evasion harder. In the United States overt evasion, or for that matter cash-enabled evasion, doesn’t account for all uncollected taxes. Intentional evasion is only one piece of the noncompliance equation. Noncompliance, or taxes not paid, can result from underreporting (accidental or intentional), underpayment (accidental or intentional), and nonfiling (accidental or intentional, but let’s not kid ourselves—this one is intentional, as jailed actor Wesley Snipes can attest).

As author Douglas Rushkoff put it in a Wall Street Journal interview, centralized currencies were developed and perfected by monarchs centuries ago to prevent peer-to-peer transactions. By issuing currency, the government provides the people with a convenient medium for conducting exchanges. But when using government money, there’s also a built-in transaction between the individual and the central authority. The money people want for purposes of transacting, says Rushkoff, is “also being used by speculators to extract value from communities.” Fiat currency just isn’t good at both reinforcing the economic power of the government and promoting transactions between individuals. So what, then? Replace the dollar? Not necessarily. The democratization of currency that we’re witnessing is about innovating monetary systems that are more efficient and valuable for use at times when government currency is suboptimal. Encouraging or using alternative currencies doesn’t have to be some kind of wholesale revolt against government-issued money, which has—let’s not kid ourselves—helped catalyze an astonishing rise in prosperity over the past century.6 On the surface, this potential phantasmagoria of new currencies—Facebook Credits, Brixton Pounds, World of Warcraft gold, Ithaca HOURs, Bitcoin, Ven, Apple Seeds (I just made that one up)—may appear like an inefficiency disaster in the making that could never possibly compete with the omnipresent and omni-accepted power of the almighty dollar.

 

pages: 515 words: 126,820

Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World by Don Tapscott, Alex Tapscott

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Airbnb, altcoin, asset-backed security, autonomous vehicles, barriers to entry, bitcoin, blockchain, Bretton Woods, business process, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, clean water, cloud computing, cognitive dissonance, corporate governance, corporate social responsibility, Credit Default Swap, crowdsourcing, cryptocurrency, disintermediation, distributed ledger, Donald Trump, double entry bookkeeping, Edward Snowden, Elon Musk, Erik Brynjolfsson, ethereum blockchain, failed state, fiat currency, financial innovation, Firefox, first square of the chessboard, first square of the chessboard / second half of the chessboard, future of work, Galaxy Zoo, George Gilder, glass ceiling, Google bus, Hernando de Soto, income inequality, informal economy, interest rate swap, Internet of things, Jeff Bezos, jimmy wales, Kickstarter, knowledge worker, Kodak vs Instagram, Lean Startup, litecoin, Lyft, M-Pesa, Mark Zuckerberg, Marshall McLuhan, means of production, microcredit, mobile money, Network effects, new economy, Oculus Rift, pattern recognition, peer-to-peer lending, performance metric, Peter Thiel, planetary scale, Ponzi scheme, prediction markets, price mechanism, Productivity paradox, quantitative easing, ransomware, Ray Kurzweil, renewable energy credits, rent-seeking, ride hailing / ride sharing, Ronald Coase, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, seigniorage, self-driving car, sharing economy, Silicon Valley, Skype, smart contracts, smart grid, social graph, social software, Stephen Hawking, Steve Jobs, Steve Wozniak, Stewart Brand, supply-chain management, TaskRabbit, The Fortune at the Bottom of the Pyramid, The Nature of the Firm, The Wisdom of Crowds, transaction costs, Turing complete, Turing test, Uber and Lyft, unbanked and underbanked, underbanked, unorthodox policies, X Prize, Y2K, Zipcar

He also expects to see bitcoin applications in the Metaverse (a virtual world) where you can convert bitcoin into Kongbucks and hire Hiro Protagonist to hack you some data.20 Or jack yourself into the OASIS (a world of multiple virtual utopias) where you actually do discover the Easter egg, win Halliday’s estate, license OASIS’s virtual positioning rights to Google, and buy a self-driving car to navigate Toronto.21 And, of course, there’s the Internet of Things, where we register our devices, assign them an identity (Intel is already doing this), and coordinate payment among them using bitcoin rather than multiple fiat currencies. “You can define all these new business cases that you want to do, and have it interoperate within the network, and use the network infrastructure without having to bootstrap a new blockchain, just for yourself,” said Hill. 22 Unlike fiat currency, each bitcoin is divisible to eight decimal places. It enables users to combine and split value over time in a single transaction, meaning that an input can have multiple outputs over multiple periods of time, which is far more efficient than a series of transactions.

Had Greek citizens known about bitcoin during their country’s economic crash in 2015, they still would’ve been hard-pressed to locate a bitcoin exchange or a bitcoin ATM anywhere in Athens. They wouldn’t have been able to transfer their drachmas into bitcoins to hedge against the plummeting fiat currency. Computer scientist Nick Szabo and information security expert Andreas Antonopoulos both argued that robust infrastructure matters and can’t be bootstrapped during catastrophes. Antonopoulos said that Greece’s blockchain infrastructure was lacking at the time of the crisis, and there was insufficient bitcoin liquidity for an entire population to move its troubled fiat currency into it. On the other hand, the bitcoin blockchain isn’t ready for Greece either. That’s the second facet: it falls short on security controls for such a massive bump in usage. “The system lacks the transactional capacity to on-board ten million people.

Because the infrastructure lacks the much-needed security, we often have little choice but to treat the middlemen as if they were deities. A decade later in 2008, the global financial industry crashed. Perhaps propitiously, a pseudonymous person or persons named Satoshi Nakamoto outlined a new protocol for a peer-to-peer electronic cash system using a cryptocurrency called bitcoin. Cryptocurrencies (digital currencies) are different from traditional fiat currencies because they are not created or controlled by countries. This protocol established a set of rules—in the form of distributed computations—that ensured the integrity of the data exchanged among these billions of devices without going through a trusted third party. This seemingly subtle act set off a spark that has excited, terrified, or otherwise captured the imagination of the computing world and has spread like wildfire to businesses, governments, privacy advocates, social development activists, media theorists, and journalists, to name a few, everywhere.

 

pages: 233 words: 66,446

Bitcoin: The Future of Money? by Dominic Frisby

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3D printing, altcoin, bank run, banking crisis, banks create money, barriers to entry, bitcoin, blockchain, capital controls, Chelsea Manning, cloud computing, computer age, cryptocurrency, disintermediation, ethereum blockchain, fiat currency, friendly fire, game design, Isaac Newton, Julian Assange, litecoin, M-Pesa, mobile money, money: store of value / unit of account / medium of exchange, Occupy movement, Peter Thiel, Ponzi scheme, prediction markets, price stability, quantitative easing, railway mania, Ronald Reagan, Satoshi Nakamoto, Silicon Valley, Skype, slashdot, smart contracts, Snapchat, Stephen Hawking, Steve Jobs, Ted Nelson, too big to fail, transaction costs, Turing complete, War on Poverty, web application, WikiLeaks

Thus modern electronic money – dollars, pounds and euros – is created through lending. Of course, governments create money through such processes as quantitative easing, but, even so, most money is lent into existence. This power to ‘create’ money through lending is what has made the worlds of banking and finance so large, powerful and rich. Modern money could thus be defined as ‘electronic debt-based fiat currency’. Research by UK think tank Positive Money shows that since 1989, money creation has been growing by 11.5% per annum. Compounded over time, the entire money stock doubles every six years and three months. This used to be what we called inflation, but modern measures of inflation now ignore money supply and instead focus on the prices of certain goods. The morals of such a system – where certain privileged groups get to create money – are dubious.

But, because money supply growth is no longer considered important, many of the causes of inequality go undetected, while the proposed cures are misdiagnosed. The shortcomings of our money systems are something that Satoshi was attempting to address when he designed Bitcoin: The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible. 13 Discounting trust, Satoshi set out to design a system of money based on ‘proof instead.’14 Cryptographic proof.

The idea was that you could open an account, buy some gold and then use that gold as means of payment to other E-gold account holders. E-gold was founded in 1996. By 1999 – even though gold itself was right at the bottom of a 20-year bear market – it was already so successful that the Financial Times called it ‘the only electronic currency that has achieved critical mass on the web’.17 Jackson believed his payment system, backed by solid gold, would eventually rival fiat currencies. At its zenith in 2008, E-gold was processing over $2 billion worth of transactions a year with some four million accounts open. The problem was many of these accounts were operated by money-launderers and drug-dealers. It fell victim to hacking, fraud and identity theft. E-gold was already under FBI investigation in 2005. By 2009, it had been shut down. Its founders faced all sorts of legal calamities – and are still dealing with the fall-out.

 

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

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3D printing, agricultural Revolution, Albert Einstein, Asian financial crisis, banking crisis, Berlin Wall, BRICs, business climate, business process, butterfly effect, carbon footprint, Carmen Reinhart, clockwork universe, collapse of Lehman Brothers, complexity theory, conceptual framework, credit crunch, 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, happiness index / gross national happiness, job satisfaction, Marshall McLuhan, microcredit, mobile money, 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, the payments system, too big to fail, transaction costs, trickle-down economics, urban decay, War on Poverty, working poor

In reality, in the money domain, everything starts and ends with government. At the commencement of the process, the government decides what it will accept in payment of taxes. Historically, it has chosen specific commodities, such as wheat or other food products, bronze or copper ingots, beaver pelts, tobacco leaves, or gold or silver bullion. This obligation puts the population to work to find or produce those commodities. Today, with fiat currencies required for the payment of taxes, the population works, trades, and invests in national currencies so they can meet their responsibilities. It’s the same story worldwide. This is true regardless of the country of issuance, the political philosophy (capitalist, communist, socialist, fascist, totalitarian, despotic, or democratic), and the different designations, and despite differences in material composition, shape, or particular motif.

Most people do not consciously agree to use dollars, euros, or yuan, nor do they consider their nature. These currencies are used automatically, as a means of entering into an assumed and unspoken contract. There is, however, a broader context of what money is, as money can be found outside the narrow parameters of legal tender. As shown earlier, contemporary national currencies are all interest-bearing fiat currencies, debt based, created through the fractional banking system. They are designed to facilitate transactions (i.e., as a medium of exchange), used both as units of account and as savings (i.e., as temporary stores of value), and are particularly well adapted for business and industrial applications and settings. As already seen, the use of interest, especially compound interest, has very precise outcomes that do not necessarily benefit society at large.

Inflation is commonly defined by its outcome—higher prices—rather than its cause, which is simply too much money in circulation chasing too few goods and ser vices. Consequently, the introduction of a local cooperative currency could lead some economists and monetary theorists to conclude that a parallel money system would automatically add to inflationary pressures on the economy as a whole. The objection would be valid if, and only if, this second currency were a fiat currency, as is the case for the dollar, the euro, the yen, or any other national money. Local currencies, however, are intrinsically different from fiat money and can be designed specifically to avoid contributing to inflation. The most generally accepted economic insight is that inflation results whenever there are not enough goods and ser vices produced for the quantity of money in circulation: too much money pursuing too few commodities.

 

pages: 361 words: 97,787

The Curse of Cash by Kenneth S Rogoff

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

Alexander’s elegant solution was to simply declare a gold-to-silver value of ten to one, using a mix of stockpiles throughout his empire, and coercion to enforce it.9 Alexander’s approach made Macedonian coinage simple and useful, and a precursor to more modern versions of coinage. Nevertheless, as Sargent and Velde explain in their marvelously titled book The Big Problem of Small Change, it wasn’t really until the nineteenth century, when pure fiat currency became more widespread, that the problem of co-circulation of coins in different metals was truly solved.10 Technology has always played a central role in currency, because of the need to produce monies that are easily seen to be genuine and not counterfeit. Referring once again to William Stanley Jevons’s classic (1875) book on money, it is notable how much attention he gives to making life difficult for counterfeiters, warning that governments need to use sophisticated milling machinery to discourage imitators.

Palmstruch’s experience is a caricature of the history of private banking and provides the kind of rationale governments always use to eventually usurp private monies; governments can have debt crises, but they are far less vulnerable to runs than are private banks.24 A few decades later, in 1694, the Bank of England also issued notes convertible to specie, though it was not yet a true central bank. It was only with the Bank Act of 1844 that the Bank of England’s notes gained the right of legal tender and could thus be used to settle any debt.25 Bragging rights for the first full-fledged modern fiat currency in the West belongs to the enterprising colonists of the young United States. As poor immigrants, the colonial Americans did not possess a significant quantity of British sterling, nor did the early colonies yield discoveries of the precious metals needed to mint their own coins. In early years, the colonists often relied on wampum, fur, tobacco, and other commodities. They also used foreign coins, especially Spanish pieces of eight (peso de ocho), the 8-real silver coin that was the de facto international currency before eventually losing out to British sterling.

The government’s total profit from printing money—including both the inflation tax and the monopoly rents accrued by accommodating greater real demand—is sometimes referred to as “seigniorage,” a term that derives from the old French word seigneur. The word’s origins trace to the days when coins were made of gold, silver, and bronze. The word refers to the difference between the face value of coins minted by the government and the cost of inputs, including both materials and production costs. Unbacked paper fiat currency just takes the practice to a higher level. According to the Federal Reserve, it costs 12.3 cents to make a $100 bill and 4.9 cents to make a $1 bill.1 As seigniorage goes, Marco Polo’s description of paper money creation as alchemy was not far off. Between 2006 and 2015, the US government earned 0.40% of GDP per year by printing new notes and spending them. For 2015, it earned just under $70 billion, right on the 10-year average as a percentage of GDP.

 

pages: 537 words: 144,318

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

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Albert Einstein, Asian financial crisis, asset allocation, asset-backed security, backtesting, banking crisis, Bernie Madoff, Black Swan, Bretton Woods, BRICs, British Empire, business process, capital asset pricing model, capital controls, central bank independence, collateralized debt obligation, Commodity Super-Cycle, commodity trading advisor, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, diversification, diversified portfolio, equity premium, family office, fiat currency, fixed income, follow your passion, full employment, Hyman Minsky, implied volatility, index fund, inflation targeting, interest rate swap, inventory management, invisible hand, London Interbank Offered Rate, Long Term Capital Management, market bubble, market fundamentalism, market microstructure, moral hazard, North Sea oil, open economy, peak oil, pension reform, Ponzi scheme, prediction markets, price discovery process, price stability, private sector deleveraging, profit motive, purchasing power parity, quantitative easing, random walk, reserve currency, risk tolerance, risk-adjusted returns, risk/return, savings glut, Sharpe ratio, short selling, sovereign wealth fund, special drawing rights, statistical arbitrage, stochastic volatility, The Great Moderation, time value of money, too big to fail, transaction costs, unbiased observer, value at risk, Vanguard fund, yield curve

How can you hedge against protectionism? Protectionism causes all risky assets to underperform dramatically. You would want to own the short end of most sovereign bond markets because when you enter into protectionist scenarios, countries will want to ease their monetary conditions and devalue their currency against everyone else. Do fiat currencies inevitably lead to instability? I would not say that instability is inevitable. However, mishandling a fiat currency system like the current one can bring collapse. We did not run our system in a controlled way, but rather allowed the system to get overextended on credit. You could argue that the political logic assumes politicians will bail out the system to save the economy from totally collapsing under their watch, regardless of what the costs are afterwards.

Today the basket consists of specific amounts of the euro, Japanese yen, British pound, and U.S. dollar. The U.S. dollar-value of the SDR is posted daily on the IMF’s Web site. SOURCE: International Monetary Fund (www.imf.org). With a long-term investment horizon, if you had to put all your liquid net worth in one trade for 10 years, what would it be? I would be torn between the deferred gold trade and the deferred oil trade. I do believe in the debasement of fiat currency thesis. When I think about the transfer of risk from the private sector to the public sector, the numbers just don’t work. At some point, the debts will have to be paid or restructured. If you look at the assets and liabilities of the U.S. government in the same way that I look at a company, we would all be short shares of the U.S. government even though they can print money. U.S. dollars are those shares, and in such a scenario, gold becomes interesting as a true reserve asset to replace currencies.

If the extrinsic value is being determined based on gold’s worth as a store of value, there is another dimension. The more the price goes up, the more people believe in its worth as a store of value, particularly when it is appreciating relative to the major currencies of the world. There is a common belief that the gold market cannot be squeezed because there is about 50 years of above-ground supply available. However, in that rare scenario where people’s faith in fiat currency is truly shaken, there may be a shortage of gold that will be lent to the market. Since supply growth is actually negative, lending is a clear balancing mechanism, and its absence would have enormous impact on the gold price. That is potentially a truly asymmetric outcome. (See Figure 9.5.) Figure 9.5 Gold, 2004-2009 SOURCE: Bloomberg. And what about the deferred oil trade? In Drobny parlance, this would be my “favorite trade.”

 

pages: 329 words: 95,309

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

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

But finite currency levels undermine monetary control of days of old, as central banks won’t be able to issue more currency to ease economic issues, such as the Quantitative Easing of Europe and America in recent times. Well, if there’s no central issuing authority to issue more or less money for monetary control, then that’s the real issue. So you can’t address the issues in economies with money, but I would argue ordinary fiat currencies are actually less of a benefit to societies and economies if those currencies can be manipulated. We know corruption in all forms at all levels in all countries is rife. If fiat currencies are corruptible, and by definition all are, then they can do more harm than good. Perhaps there needs to be an evolution of currencies, and there will be a natural selection by the people of the strongest. That might be the dollar or, in the future, Bitcoin. I can send a Bitcoin from anyone to anyone else in the world without impediment, without regulation, without fear that the transfer is going to be stopped or that my account is going to be frozen or that the person I am sending to is going to have problems with their account.

Bitcoin is the world’s first, and so far only, decentralised online currency. Instead of a central bank issuing the currency, Bitcoins are issued by anyone with a computer or smartphone, and are issued using encryption algorithms. In other words, extremely difficult mathematical problems are incorporated into each coin and transactions are cryptographically authenticated. This makes Bitcoins a combination of a commodity and a fiat currency, with the creation of Bitcoin dating back to 2008 when Satoshi Nakamoto published a white paper about a peer-to-peer exchange of value for the internet age. [28] The coins are digital currency designed to be controlled through encryption, rather than a centralised authority, and potentially operate in exactly the same way as cash. Bitcoins are fully exchangeable as an anonymous form of currency in real-time across the internet and Point-of-Sale, with core features that they can be: Sent to anyone with a Bitcoin address; Accessed from anywhere with an Internet connection; Anybody can start buying, selling or accepting Bitcoins regardless of their location; Completely distributed with no bank or payment processor between users (this decentralization is the basis for Bitcoin’s security and freedom); and Transactions are free (for now, this will change).

This cap was introduced in order to act as a currency control mechanism and ensure the stored value exchange would not break. Although there is a limit of 21 million, the coins are infinitely divisible with each Bitcoin potentially divided to up to eight decimal places giving you a total of 2.1 quadrillion units eventually. By August 2013, of the 21 million coins to be issued, just over 11.5 million have been issued. The aim is to limit the number of coins in existence because, unlike fiat currencies issued by government agencies, there is no centralised issuing authority in Bitcoin, just users. This is another reason why the cap exists and is one of the more contentious points of Bitcoin, as those who own a whole Bitcoin today will become billionaires if it becomes a mainstream currency. Is Bitcoin the future of money? Social currencies now have global connectivity via the mobile internet and a common infrastructure through platforms like Facebook and Twitter and many people are talking about Bitcoin being a possible future for money online, overcoming the difficulties achieved in previous attempts by Flooz, Beenz and others (see chapter How does a bank make money out of being social?).

 

pages: 275 words: 82,640

Money Mischief: Episodes in Monetary History by Milton Friedman

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Bretton Woods, British Empire, currency peg, double entry bookkeeping, fiat currency, financial innovation, floating exchange rates, full employment, German hyperinflation, income per capita, law of one price, oil shock, price anchoring, price stability, transaction costs

What happened in the United States—and it was completely outside the range of influence of the policymakers in Chile and Israel—had the effect of rendering one set of policymakers in one of those countries villains, while another set of policymakers in the other country became heroes. Chapter 10 explores the probable consequences of the monetary system that now prevails throughout the world—a system that has no historical precedent. Since the time when President Richard Nixon broke the final tenuous link between the dollar and gold in 1971, no major currency, for the first time in history, has any connection to a commodity. Every currency is now a fiat currency, resting solely on the authorization or sanction of the government. The final chapter is an epilogue that draws a few general lessons from the episodes examined in the preceding chapters. This book provides only small glimpses at the endlessly fascinating monetary gardens that have flourished and decayed in the course of the several millennia since the day when mankind found it useful to separate the act of sale from the act of purchase, when someone decided it was safe to sell a product or service for something—a something that he had no intention of consuming or employing in production but, rather, intended to use as a means to purchase another product or service to be consumed or employed in production.

Very shortly, however, the market ratio rose, conforming with the legal ratio in France of 15.5 to 1. Congress did not heed Hamilton's counsel, but left the legal ratio at 15 to 1 until 1834. As a result, silver became the de facto standard until 1834, when Congress altered the legal ratio to 16 to 1, and gold became the de facto standard from then to the Civil War. In 1862, redemption of currency in specie was suspended, and a pure fiat currency, popularly known as greenbacks, was issued to help finance the war. The 1873 coinage act ended the free coinage of silver and limited its legal-tender status, so that when resumption (the convertibility of legal tender into specie) was achieved in 1879, it was on the basis of gold. That in turn unleashed the free-silver movement of the 1880s and 1890s, which culminated in William Jennings Bryan's 1896 presidential campaign under the flag of 16 to 1.

However, the decline in inflation was a worldwide phenomenon that was by no means limited to members of the EMS. In my view, the explanation for the worldwide decline in inflation is linked to the end of Bretton Woods. That led to the adoption of a world monetary system that has no historical precedent. For the first time in the history of the world, so far as I know, all major currencies are pure fiat currencies—not as a temporary response to a crisis, as often occurred in the past in individual countries, but as a permanent system expected to last. The countries of the world have been sailing uncharted seas. It is understandable that in the first decade of that voyage all sorts of things might happen, and, in particular, a worldwide outburst of inflation did occur. That worldwide outburst of inflation discredited the simpleminded idea that there was any long-term trade-off between inflation and unemployment, reduced the fiscal benefits from inflation, and increased the public's aversion to inflation.

 

pages: 247 words: 81,135

The Great Fragmentation: And Why the Future of All Business Is Small by Steve Sammartino

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3D printing, additive manufacturing, Airbnb, augmented reality, barriers to entry, Bill Gates: Altair 8800, bitcoin, BRICs, Buckminster Fuller, citizen journalism, collaborative consumption, cryptocurrency, Elon Musk, fiat currency, Frederick Winslow Taylor, game design, Google X / Alphabet X, haute couture, helicopter parent, illegal immigration, index fund, Jeff Bezos, jimmy wales, Kickstarter, knowledge economy, Law of Accelerating Returns, market design, Metcalfe's law, Minecraft, minimum viable product, Network effects, new economy, post scarcity, prediction markets, pre–internet, profit motive, race to the bottom, random walk, Ray Kurzweil, recommendation engine, remote working, RFID, self-driving car, sharing economy, side project, Silicon Valley, Silicon Valley startup, skunkworks, Skype, social graph, social web, software is eating the world, Steve Jobs, too big to fail, web application

That is, the government would only release an amount of currency based on its holdings of gold. But today there is not a single government using the gold standard. A curious fact about gold is that it’s had much the same purchasing power when converted into currency for more than 2000 years. It’s been able to buy a handmade robe or a decent suit in perpetuity. The ratio is still on the money, even today, which is something we can’t claim for state-backed or fiat currency because none of the fiat currencies in the world are backed by the gold standard any more. A new globally networked commercial economy needs a currency to match. Step forward crypto currencies such as bitcoin, which are the next evolution in how we trade. Bitcoin Bitcoin was the first fully implemented and distributed crypto currency. It works in much the same way as other emerging crypto currencies. Crypto currencies are simply decentralised electronic cash systems.

Since we progressed beyond the bartering system, new forms of currency have arrived, while others have faded and been replaced. Most often though, we tend to have a number of types and brands of currency in operation at any one time. We’ve used everything from grain receipts, to shark’s teeth, shells, the precious metals, minted coins and convertible notes to government-backed paper currency (or ‘fiat currency’, as it’s known). digital currency: a form of virtual currency or medium of exchange that’s electronically created and stored. Some digital currencies, such as bitcoin, are crypto currencies (Wikipedia) For a long period indeed, currency provided by governments in power would guarantee the amount of currency in circulation by anchoring it to the gold standard, the idea being that a currency is more trustworthy as it’s the representation of a commodity with a known market and intrinsic value.

It makes sense that innovations in the exchange of goods happen. And while it seems foreign to us at the moment, the reality is that crypto currencies are more suited to the way we transact today. While it’s difficult to predict the final and ultimate globally dominant currency, it’s easy to see that these forms of currency are here to stay. And just like all other technology stacks it doesn’t mean that the layer underneath — in this case fiat currency — will disappear overnight. The entire idea of technology stacking is that we need the previous layer to help prop up the new method; it just becomes less visible. There’s a high probability we’ll still need our ‘home market currency’ to convert back to. Just as we’ve seen in the past we’ll have a number of forms of currency that still have value in exchange and widely adopted usage. But it’s hard to see crypto currency as anything but a permanent fixture in the digital financial market.

 

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How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy by Mehrsa Baradaran

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access to a mobile phone, affirmative action, asset-backed security, bank run, banking crisis, banks create money, barriers to entry, British Empire, call centre, Capital in the Twenty-First Century by Thomas Piketty, cashless society, credit crunch, David Graeber, disintermediation, diversification, failed state, fiat currency, financial innovation, financial intermediation, Goldman Sachs: Vampire Squid, housing crisis, income inequality, Internet Archive, invisible hand, Kickstarter, M-Pesa, McMansion, microcredit, mobile money, moral hazard, mortgage debt, new economy, Own Your Own Home, payday loans, peer-to-peer lending, price discrimination, profit maximization, profit motive, quantitative easing, race to the bottom, rent-seeking, Ronald Reagan, Ronald Reagan: Tear down this wall, savings glut, the built environment, the payments system, too big to fail, trade route, transaction costs, unbanked and underbanked, underbanked, union organizing, white flight, working poor

The way to loosen credit would be to establish a national paper currency so that the federal government could fund itself, allowing the federal government to print and sell “greenbacks” to banks and raise the money it needed.50 Up until this time, currency was backed by gold “specie,” and money was exchanged via either gold itself or private “bank notes” backed up by a store of gold somewhere. Specie-backed currency restrained the amount of money available because banks could not lend more than the amount of specie they actually held in reserves. The White House suspended specie currency in favor of the newly minted greenbacks.51 The use of paper “fiat” currency, or legal tender, untethered the monetary supply. But it also heightened the need for trust. The fiat currency Lincoln adopted, which we still use today, only works insofar as the public trusts the government’s ability to make good on the claim. At that time and even today, each unit of paper money represents a promise from the government that it will stand behind it—it is a debt from the government to the holder of the paper money. Merchants and banks will only operate in paper currency if they have faith that the federal government, the issuer of the currency, is solvent and can pay its debts.

When Lincoln accepted the third and final issue of fiat bills, he sent a letter to Congress in which he expressed “sincere regret that it has been found necessary to authorize an additional issue of United States notes.” Wesley C. Mitchell, A History of the Greenbacks (Chicago: University of Chicago Press, 1903), 109. 56. The United States would return to fiat currency from 1914 to 1925 and then again from 1933 to 1945. When the United States returned to specie in 1945, it was essentially fiat currency as far as everyone beyond foreign governments was concerned. 57. Lincoln’s support for national banking started before he became president. When he ran for state legislature in 1832, he said, “My politics are short and sweet, like the old woman’s dance. I am in favor of a national bank … in favor of the internal improvements system and a high protective tariff.”

.… A return to specie payments, however, at the earliest period compatible with due regard to all interests concerned should ever be kept in view.”54 Lincoln was a reluctant adopter of paper currency and was eager to return to the safer and more stable specie currency, which Secretary of State Hugh McCulloch eventually did in 1866 after Lincoln’s assassination.55 It would not be until 1971 and President Nixon’s need to fund the Vietnam War that the United States would go back to fiat currency for good and fully abandon specie-backed currency.56 President Lincoln was, however, an advocate of national banking, which provided a more permanent solution to the nation’s funding problems:57 “Is there, then, any other mode in which the necessary provision for the public wants can be made and the great advantages of a safe and uniform currency secured? I know of none which promises so certain results and is at the same time so unobjectionable as the organization of banking associations, under a general act of Congress, well guarded in its provisions.… The public credit, moreover, would be greatly improved and the negotiation of new loans greatly facilitated by the steady market demand for Government bonds which the adoption of the proposed system would create.”58 The currency debate, which eventually merged into a debate about national banking, was not just a debate about how best to fund a war.

 

pages: 355 words: 92,571

Capitalism: Money, Morals and Markets by John Plender

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

That is, money such as paper currency – or cowrie shells on Pacific islands – that has no intrinsic value, is not backed by any valuable commodity and derives its worth from the conviction of enough people that it has a value. While the cost of producing gold is very high, the marginal cost of producing more paper money is very low. And the outstanding stock of physical gold of around 160,000 tonnes is huge relative to the amount of new gold that can be mined and refined in a given year. So while fiat currency and gold both suffer from the disadvantage that they are always potentially worthless, fiat currencies are invariably more likely to become worthless than gold because central bankers can churn out fiat paper at the turn of a tap, while the supply of gold is heavily restricted. It follows that when countries are fiscally profligate and their governments rack up Godzilla-like quantities of public sector debt, the risk that politicians and central bankers resort to inflation via the printing press increases dramatically.

It feels like the continuation of alchemy by other means, with paper turning into valid money in the same way that alchemists aimed to turn lead into gold. Yet in due course the emperor cannot resist the temptation to flood the country with too much paper. In theory, the currency is backed by all the empire’s gold that has yet to be mined. But the gold is illusory. The reality is that the emperor presides over a fiat currency – that is, one not backed by precious metal. So an excess of paper currency leads to inflation, financial chaos and social strife, as Mephistopheles explains: The Empire sliding into anarchy the while, Strife among great and small on every side, Much brotherly expulsion and homicide, Burgh against burgh, city against city, Guilds feuding with the nobility, The bishop with his chapter and his see, Eyes never meeting but in enmity, Murder in the churches, and on the road No mercy shown to travellers or trade.

S. 1, 2 Elizabeth II 1 Engels, Friedrich 1, 2, 3, 4, 5 Enlightenment 1, 2, 3, 4, 5 Enron 1 entrepreneurs 1 environmental damage 1 Epistle to Allen Lord Bathurst (Alexander Pope) 1 Esterházy, Prince Nikolaus 1 European Monetary Union 1 European Union 1, 2, 3, 4 eurozone 1, 2, 3, 4, 5 Faber, Marc 1 Fable of the Bees, The (Bernard Mandeville) 1, 2, 3, 4, 5, 6 Facebook 1 Faerie Queene, The (Spenser) 1 Fama, Eugene 1, 2, 3, 4, 5 Farmers’ State Alliance (US) 1 fatal embrace 1, 2 Faust (Goethe) 1, 2, 3, 4 Federal Reserve (Fed) 1, 2, 3, 4 Federal Reserve Act (US 1913) 1 Ferguson, Niall 1 feudalism 1, 2, 3 fiat currencies 1 Fidelity Magellan fund 1 financial crisis (2007–08) 1, 2, 3, 4, 5, 6, 7, 8 financial intermediation 1 financial services 1 financial weapons of mass destruction 1 Finley, Moses 1 Fitzgerald, F. Scott 1 Ford, Henry 1, 2 Fors Clavigera (John Ruskin) 1 fractional reserve banking 1 France 1, 2, 3 art market 1 taxation 1, 2, 3, 4 François I of France 1, 2, 3 Frankel, Jeff 1, 2 Franklin, Benjamin 1 Frederick the Great of Prussia 1, 2 Freeland, Chrystia 1 French Revolution 1, 2 Frick, Henry Clay 1, 2 Friedman, Milton 1, 2 Fukushima nuclear spill 1 Fuld, Dick 1 fund managers 1, 2, 3 Fürstenberg, Carl 1 Galbraith, J.

 

pages: 364 words: 99,897

The Industries of the Future by Alec Ross

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23andMe, 3D printing, Airbnb, algorithmic trading, AltaVista, Anne Wojcicki, autonomous vehicles, banking crisis, barriers to entry, Bernie Madoff, bioinformatics, bitcoin, blockchain, Brian Krebs, British Empire, business intelligence, call centre, carbon footprint, cloud computing, collaborative consumption, connected car, corporate governance, Credit Default Swap, cryptocurrency, David Brooks, disintermediation, Dissolution of the Soviet Union, distributed ledger, Edward Glaeser, Edward Snowden, en.wikipedia.org, Erik Brynjolfsson, fiat currency, future of work, global supply chain, Google X / Alphabet X, industrial robot, Internet of things, invention of the printing press, Jaron Lanier, Jeff Bezos, job automation, knowledge economy, knowledge worker, litecoin, M-Pesa, Mark Zuckerberg, Mikhail Gorbachev, mobile money, money: store of value / unit of account / medium of exchange, new economy, offshore financial centre, open economy, peer-to-peer lending, personalized medicine, Peter Thiel, precision agriculture, pre–internet, RAND corporation, Ray Kurzweil, recommendation engine, ride hailing / ride sharing, Satoshi Nakamoto, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart cities, social graph, software as a service, special economic zone, supply-chain management, supply-chain management software, technoutopianism, underbanked, Vernor Vinge, Watson beat the top human players on Jeopardy!, women in the workforce, Y Combinator, young professional

But there is much more to it. Bitcoin has encapsulated many of the contradictions and possibilities of digital currencies in a world still largely defined by national economies and governments. Its origin comes from ideological communities deeply skeptical of governments, traditional financial institutions, and “fiat currency” (money that draws its value from government law). Bitcoin has developed a new community around an online currency trying to circumvent these established institutions. A fiat currency fundamentally depends on trust. People must have a shared belief that the currency is ultimately worth something. The word fiat means “it shall be”: a pronouncement from on high that the currency has value. Bitcoin came about both as a result of declining trust in the traditional financial system during the financial crisis and because of its technological advance in creating a trustable mechanism for monetary exchange online.

On October 31, 2008, a research paper, “Bitcoin: A Peer-to-Peer Electronic Cash System,” was published on a cryptography listserv by a mysterious author identified as “Satoshi Nakamoto” who has kept his/her (their?) identity unknown. It called for the creation of the world’s “first decentralized digital currency.” Satoshi Nakamoto condemned state-based currencies: The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. Bitcoin represented a different effort to rebuild trust in the financial system. In the old model, established institutions functioned as an agent of trust, protecting parties from fraud. Bitcoin comes out of a community that does not trust the old order.

See also eBay Dorsey, Jack, 78, 170, 172, 217, 245 Down syndrome, 56 Dshell, 145–46 DuPont, 9, 163–64, 192 eBay: Bitcoin and, 98–99 coded markets and, 82, 90, 93 digital banking and, 77 evolution of, 96 trust and, 90, 92, 119 see also Donahoe, John Eli Lilly, 54 Enable Talk, 34, 213 Estonia, 5, 140–41, 191, 205–12, 214, 222, 233, 246, 248. See also Ilves, Toomas European Union (EU), 4, 19, 66, 104, 207, 210 extinct animals, 63–64, 240 ExxonMobil, 122 F-Secure, 134 Fatah, 81 Fazio Mechanical, 133 FBI, 109, 131, 173, 193 Federal Election Committee, 114 Federal Reserve, 111 fiat currency, 98–99. See also Bitcoin Fintech, 167 FireEye, 139 Fleming, John Ambrose, 124–25 FLT3, 46 Founder’s Fund, 119 four Ds, 30 Foxconn, 36–37, 41–42 fraud, 6, 99, 101, 103, 105–6, 117, 119, 161, 173–74 gambiarra, 233 Gates, Robert, 53, 127 Genentech, 59 General Motors (GM), 28 genetic testing, 56–58. See also genomics genomics: brain and, 52–56 cancer and, 47–52 developments in research, 49–52 DNA and, 49 entrepreneurship and, 62–64 extinct species and, 63–64 future of, 74–75 global advancements in, 64–69 government investment in, 52 growth of industry surrounding, 48–49 history of, 47 human genome sequencing, 47–48 innovation and, 69–74 liquid biopsy and, 49 PGDx and, 50–51 unintended consequences, 56–61 xenotransplantation, 62–63 see also cancer Genophen, 60–61 geography of future markets: Africa and, 233–39 Belarus and, 208 China and, 216–19 choices, 214–16 cities as innovation hubs, 196–98 digital natives and, 230–33 domain expertise, 187–96 Estonia and, 205–7, 209–12 globalization and, 222–25 India and, 219–22 overview, 186–87 Russia and, 202–4 Ukraine and, 212–14 Waziristan, 199–202 women and, 225–30 Gerdes, Chris, 30 Get Out the Vote, 231 GitHub, 146 Giugale, Marcelo, 237 globalization: blockchain technology and, 104 China and, 233, 249 innovation and, 195, 204, 215, 233, 249 jobs and, 23, 38–39 medicine and, 72 right side of, 11–12 robots and, 42 universal machine translation and, 159 women and, 227 wrong side of, 1–7 Glodek, William, 146 gold, 112, 114, 118 Goldberg, Ken, 27, 33, 35 Goldman Sachs, 113 Goldsmith, Stephen, 197 Goloskokov, Konstantin, 141 Goma, Congo, 83–85, 89 Good2Go, 176, 180–81 Google: 23andMe and, 57–58 acquisitions, 25 Berman, Dror and, 191–92 Car Project, 28–31, 134 China and, 219 coded markets and, 94 cryptocurrencies and, 118–19 cybersecurity and, 143, 149 data and, 169 drones and, 31 Ideas, 174, 243 innovation and, 231 robotics and, 23, 25–26 Songhurst, Charlie and, 94 Translate, 158, 160 Ventures, 93 Wallet, 79 Gorbachev, Mikhail, 204 Gosler, Jim, 135–38, 143, 150, 174 Gou, Terry, 36–37, 41 Grainy Bunch, 235–36 Green Revolution, 162 greenhouse gases, 166 Greenleaf Elementary School, 34 Greenspan, Alan, 111 Grishin Robotics, 26 hacking, 99–103 Hamas, 81–82 Hassabis, Demis, 25 hawala, 119 Hoffman, Reid, 110, 113 Honda, 16–17, 25, 35 HSBC, 167, 170 HTML, 115 Human Genome Project, 62, 65, 67 Human Longevity, Inc.

 

pages: 448 words: 142,946

Sacred Economics: Money, Gift, and Society in the Age of Transition by Charles Eisenstein

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Albert Einstein, back-to-the-land, bank run, Bernie Madoff, big-box store, Bretton Woods, capital controls, clean water, collateralized debt obligation, credit crunch, David Ricardo: comparative advantage, debt deflation, deindustrialization, delayed gratification, disintermediation, diversification, fiat currency, financial independence, financial intermediation, floating exchange rates, Fractional reserve banking, full employment, global supply chain, happiness index / gross national happiness, hydraulic fracturing, informal economy, invisible hand, Jane Jacobs, land tenure, Lao Tzu, liquidity trap, lump of labour, McMansion, means of production, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, new economy, oil shale / tar sands, Own Your Own Home, peak oil, phenotype, Ponzi scheme, profit motive, quantitative easing, race to the bottom, Scramble for Africa, special drawing rights, spinning jenny, technoutopianism, the built environment, Thomas Malthus, too big to fail

The international equivalent is found in countries that adopt a currency board. We call these dollarized economies because they have effectively surrendered any monetary independence. Proxy currencies like BerkShares are useful as a consciousness-raising tool to introduce people to the idea of complementary currencies, but by themselves they are ineffectual in promoting vibrant local economies. Complementary Fiat Currencies More promising are fiat currencies, such as Ithaca Hours, that actually increase the local money supply. Many Depression-era scrips also fall into this category. Essentially, someone simply prints up the money and declares it to have value (e.g., an Ithaca Hour is declared equal to ten U.S. dollars). For it to be money, there must be a community agreement that it has value. In the case of Hours, a group of businesses, inspired by the currency’s founder Paul Glover, simply declared that they would accept the currency, in effect backing it with their goods and services.

In the case of Hours, a group of businesses, inspired by the currency’s founder Paul Glover, simply declared that they would accept the currency, in effect backing it with their goods and services. During the Depression, scrip was often issued by a mainstay local business that could redeem it for merchandise, coal, or some other commodity. In other cases, a city government issued its own currency, backed by acceptability for payment of local taxes and fees. The effect of fiat currencies is much more potent than that of proxy currencies because fiat currencies have the potential of putting money in the hands of those who would otherwise not have it. It is only inflationary if those accessing the money offer no goods or services in return.8 In extreme economic times, it is often the case that there are plenty of people willing to work and plenty of needs to met; only the money to mediate these transactions is missing.

Such currencies are often called complementary because they are separate from, and complementary to, the standard medium of exchange. While they are usually denominated in dollar (or euro, pound, etc.) units, there is no currency board that keeps reserves of dollars to maintain the exchange rate. They are thus similar to a standard sovereign currency with a floating exchange rate. In the absence of local government support, because complementary fiat currencies are not easily convertible into dollars, businesses are generally much less willing to accept them than they are proxy currencies. That is because in the current economic system, there is little infrastructure to source goods locally. Locally owned businesses are plugged into the same global supply chains as everyone else. Regrowing the infrastructure of local production and distribution will take time, as well as a change in macroeconomic conditions driven by the internalization of costs, the end of growth pressure, and a social and political decision to relocalize.

 

pages: 183 words: 17,571

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

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

The world of the 19th century was characterized by a system of free trade, free markets, and sound, noninflationary money anchored by the gold standard. Countries could not 79 80 Chapter 4 |  Life After Finance effectively debase their currencies or generate inflation without having to pony up real money: gold.The only way out was either default or a negotiated restructuring with the bondholders, both wrenchingly embarrassing for any country. With a regime of pure fiat currencies—that is, money that is only worth something because the government says it is worth something and the market has to go along—governments can get away with a lot more. Above all, two global wars in which the government exerted a degree of economic control previously unimaginable has made the publics of all advanced economies amenable to accepting a level of regulation and intervention in financial markets that makes financial repression seem normal.

This gave us 40 years of global economic expansion punctuated by credit bubbles and financial crises as nation states abused their ability to create money out of thin air to finance growth. The timing is now perfect for an epic global debt crisis. In Coggan’s view, which somewhat mirrors Chapter 1 of this book, the selfindulgent “welfare states” of the European Union have arrived at this precipice first and most desperately through the folly of creating a fiat currency without a state or a lender of last resort, in the hope that the pooling of currencies would eventually force a pooling of sovereignty. They may well get the worst of both worlds: more unaccountable power in Brussels and growth-killing austerity in the unlikely event the euro is saved. The situation in the United States is less dire, but only slightly.The United States is trying to catch up with Europe in creating unaffordable social entitlements funded by debt even as the consequences of this for Europe become clearer by the day.

The limits of this export-driven model was clearly recognized in the latest five-year plan, which seeks to rebalance the export-driven growth model that has driven progress up to now, but at an increasing cost to social harmony.The time necessary for the envisioned transition is very limited given the impact of the crisis on Western demand and the shaky position of the Western credit system and fiat currencies, not Broken Markets to mention political support for globalization. Nobody has a bigger stake in the global financial system. But will it take up the role of its hegemon? It is in fact likely that China, despite being the world’s largest exporter and creditor, will for some time at least contrive to avoid the role of hegemon, especially the burden of reserve currency issuer and lender of last resort.

 

pages: 524 words: 143,993

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

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

The problem, in brief, is Germany and – to a far lesser degree, because they are so much smaller – other creditor countries inside the Eurozone. Why this is so is the theme of this section. What to do about it is the theme of the Conclusion. The Eurozone is a large multinational economy – the second biggest economy in the world, after the US. In 2012, for example, Eurozone GDP, at market prices, was a little short of 80 per cent of that of the US. The Eurozone also has a floating fiat currency that no other important country targets (unlike the US dollar). It is reasonable therefore to assume that the external balance is market determined. Moreover, as it happens, since the creation of the Eurozone the external current-account surplus has been a small share of GDP: internal imbalances have been far more significant than external ones, at least until after the crisis (see Figure 34).

One possibility would be to continue to purchase assets from the non-bank private sector, thereby raising the latter’s holdings of cash and increasing the reserves of banks. In order to prevent this from leading to the shrinkage of bank holdings of other assets, the regulator would need to specify that the holding of central-bank reserves does not count against a bank’s capital. This obviously makes sense, since default by the issuer of a fiat currency is inconceivable. Sixth, it is objected that the combination of bail-inable debt (debt that is contractually available for conversion into equity if required) with effective resolution regimes is an adequate substitute for higher capital requirements, while allowing banks to continue to benefit from the tax deductibility of interest. There are at least two general problems with this. The first is that the lower the equity and the more plausible bail-in becomes, the more the bail-inable debt would have the characteristics of equity, in which case it would not be a cheaper alternative for banks, apart from tax deductibility.

On the contrary, the evidence from the recent crisis is that the consequences for financial stability in the US are highly adverse. It seems likely that the Chinese government will have that view of a comparable role for the renminbi. It surely should do so. Maybe, the possibility of a transition to the kind of monetary regime Keynes envisaged may now emerge. It is at least clear that the world of floating fiat currencies, one of which is a reserve currency, is highly unstable. The experience already forced a drastic shift in the policies of emerging and developing countries after 1997, as this book has noted (see Chapter Five). Now the owner of the monetary and financial dog has been bitten too. The system needs to be changed. If it is not, there is a good chance of a real currency war, not a phony one, as countries struggle to gain a share of chronically inadequate global demand.

 

pages: 387 words: 112,868

Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money by Nathaniel Popper

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4chan, Airbnb, Apple's 1984 Super Bowl advert, banking crisis, bitcoin, blockchain, Burning Man, capital controls, Colonization of Mars, crowdsourcing, cryptocurrency, David Graeber, Edward Snowden, Elon Musk, Extropian, fiat currency, Fractional reserve banking, Jeff Bezos, Julian Assange, Kickstarter, life extension, litecoin, lone genius, M-Pesa, Mark Zuckerberg, Occupy movement, peer-to-peer lending, Peter Thiel, Ponzi scheme, price stability, Satoshi Nakamoto, Silicon Valley, Simon Singh, Skype, slashdot, smart contracts, Startup school, stealth mode startup, the payments system, transaction costs, tulip mania, WikiLeaks

But after the first few weeks, Satoshi began emphasizing the broader ideological motivations for the software to help win over a broader audience, and privacy was only a part of it. In a February posting on the website of the P2P Foundation, a group dedicated to decentralized, peer-to-peer technology, Satoshi led off by talking about problems with traditional, or fiat, currencies, a term for money generated by government decree, or fiat. “The root problem with conventional currency is all the trust that’s required to make it work,” Satoshi wrote. “The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.” Currency debasement was not an issue the Cypherpunks had discussed much, but Satoshi made it clear with this posting, and not for the last time, that he had been thinking about more than just the concerns of the Cypherpunks when designing the Bitcoin software.

This was an eminently practical use of Bitcoin to deal with the inflationary mess in Argentina, but it was so practical that it actually swung around into the domain of the ideological ambitions that Satoshi Nakamoto and the Cypherpunks had imagined. The Argentinian hoteliers might not have been libertarians, but they would have easily understood Satoshi’s early writing about Bitcoin, which explained that “the root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.” Mismanagement of currencies was a part of daily life in Argentina. The conference in Argentina attracted many of the more ideologically minded Bitcoin followers from around the world. The old team from BitInstant gathered for a reunion of sorts and the team members were all given prominent speaking spots. They lived it up in Buenos Aires, eating steak, drinking Argentinian wine, and going to a tango performance with the other presenters at the conference.

She told the group of her discovery of Bitcoin in the spring of 2013. At the time she went to her academic colleagues and found that “none of them could wrap their head around it.” That provoked her to look more deeply, and as she did, she slowly came to understand the potentially enormous implications of the technology: “We all hear the store of value. Here’s a way to move money and to buy things outside the law. Maybe it’s a competitor to fiat currency. Is it a disrupter to the traditional banking sector; an enabler of e-commerce and remittances; a superior internal ledger system for multinationals? That’s not what all the reporters are asking about but that’s another possibility that we see. “By the time I felt like I really understood it I was really excited to share that knowledge, and discuss it with a wider audience,” she said. “You want everyone to understand it too so that they’ll really appreciate the really massiveness of this innovation.

 

pages: 466 words: 127,728

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

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

The world of $9,000-per-ounce gold is also the world of $600-per-barrel oil, $120-per-ounce silver, and million-dollar starter homes in mid-America. This new gold standard would not cause inflation, but it would be a candid recognition of the inflation that has already occurred in paper money since 1971. This one-time price jump would be society’s reckoning with the distortions caused by the abuse of fiat currencies in the past forty years. Participating nations would need legislation to nominally adjust fixed-income payments to the neediest in forms such as pensions, annuities, social welfare, and savings accounts up to the insured level. Nominal values of debt would be left unchanged, instantaneously solving the global-sovereign-debt-and-deleveraging conundrum. Banks and rentiers would be ruined—a healthy step toward future growth.

By late 2013, over 11.5 million bitcoins were in circulation, with the number growing steadily. The value of each bitcoin fluctuates based on supply and demand, but it had exceeded $700 per bitcoin in November 2013. Bitcoin’s long-term viability as a virtual currency remains to be seen, but its rapid and widespread adoption can already be taken as a sign that communities around the world are seeking alternatives to the dollar and traditional fiat currencies. Beyond the world of alternative currencies lies the world of transactions without currencies at all: the electronic barter market. Barter is one of the most misunderstood of economic concepts. A large economic literature is devoted to the inefficiencies of barter, which requires the simultaneous coincidence of wants between the two bartering parties. If one party wanted to trade wheat for nails, and the counterparty wanted wheat but had only rope to trade, the first party might accept the rope and go in search of someone with nails who wanted rope.

The causes of declining confidence in the dollar are the dual specter of inflation and deflation, the perception on the part of many that the dollar is no longer a store of value but a lottery ticket, potentially worth far more, or far less, than face value for reasons beyond the holder’s control. Panic gold buying, and the emergency issuance of SDRs to restore liquidity when it comes, will signal the stage of a rapid loss of confidence. Volcker was right in his assertion that confidence is indispensable to the stability of any fiat currency system. Unfortunately, the academics who are now responsible for monetary policy focus exclusively on equilibrium models and take confidence too much for granted. ■ Failure of Imagination Following the 9/11 attacks in New York and Washington, D.C., the U.S. intelligence community was reproached for its failure to detect and prevent the hijacking plots. These criticisms reached a crescendo when it was revealed that the CIA and the FBI had specific intelligence linking terrorists and flying lessons but failed to share the information or connect the dots.

 

pages: 52 words: 13,257

Bitcoin Internals: A Technical Guide to Bitcoin by Chris Clark

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bitcoin, fiat currency, Satoshi Nakamoto, transaction costs, Turing complete

Bitcoin Stack Exchange, May 8, 2012. http://bitcoin.stackexchange.com/questions/3600/why-are-bitcoin-addresses-hashes-of-public-keys [24] Raulo, "Optimal pool abuse strategy," February 4, 2011. http://bitcoin.atspace.com/poolcheating.pdf Notes 1Monetary inflation is a sustained increase in the supply of money, which typically results in price inflation. It is a serious risk factor for fiat currencies because governments often produce money excessively, causing perpetual price inflation. 2The creator of Bitcoin defines a bitcoin as a "chain of digital signatures" in the public ledger known as the block chain.[1] 3The Bitcoin source code can be found at https://github.com/bitcoin/bitcoin 4According to the Bitcoin Wiki, the second biggest bitcoin based company is the underground drug website known as the Silk Road.[3] The sales figures were estimated by Carnegie Mellon computer security professor Nicolas Christin.[4] Six of the other businesses in the top 20 largest are gambling related.[3] 5The chart is from bitcoincharts.com 6See https://en.bitcoin.it/wiki/Tor 7These are foreign exchange fees, not Bitcoin transaction fees (which are much smaller). 8There is a 1 in 4.29 billion chance that a mistyped address passes the checksum test.

 

pages: 700 words: 201,953

The Social Life of Money by Nigel Dodd

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

In a similar vein, the Banco Centro do Brasil includes a detailed account of the barter theory on its website, see http://www.bcb.gov.br/?ORIGINMONEY. Similar examples can be found in Europe. Peter Praet, a member of the European Central Bank’s executive board, gave a speech in October 2012 that included an illustration of the evolution of money in the form of a “linear parable, which leads from a barter economy to a system with commodities as a medium of exchange; and from there to a fiat currency regime”; see http://www.ecb.int/press/key/date/2012/html/sp121010.en.html. There are exceptions, such as the Oesterreichische Nationalbank, whose website includes a page (see http://archive-at.com/page/2043297/2013–05–08/http://www.oenb.at/en/ueber_die_oenb/geldmuseum/allg_geldgeschichte/ursprung/the_origin_of_money.jsp) on the origins of money that references not only Menger but competing theories by Keynes, Knapp, and Laum.

We can transform it and bend it to our own ends and impute our own structures of meaning to its varying forms. This, essentially, is the position taken by Zelizer. Her core thesis about earmarking suggests that all forms of money are differentiated according to use and fungibility in ways that, according to Polanyi, were characteristic of special-purpose monies alone. By contrast, Zelizer argues that all forms of money—primitive and modern, local as well as state fiat currencies, and cash alongside virtual money—are shaped from the inside by the social practices and cultural values of their users. Polanyi represents what she calls the moral critique of the “boundless market” (Steiner 2008: 99). She rejects this critique because in offering no alternative model of the market, it simply reproduces the idea that markets are powerful and autonomous forces that we can only obstruct, not reconfigure.

The common solution had been to rely on a trusted authority, or mint, that would check every transaction. According to Nakamoto, however, the trust-based model for electronic transactions suffers from inherent weaknesses associated with increased transaction costs, e.g., small, casual transactions are discouraged: The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.23 Nakamoto’s proposals sought to get rid of this central authority by using a block chain (shared by all computers or nodes within the network) through which the transaction history of each coin could be publicly known.24 Privacy would be maintained, meanwhile, by encrypting the public keys, ensuring that the history of every “coin” is anonymized.

 

pages: 236 words: 77,735

Rigged Money: Beating Wall Street at Its Own Game by Lee Munson

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affirmative action, asset allocation, backtesting, barriers to entry, Bernie Madoff, Bretton Woods, buy low sell high, California gold rush, call centre, Credit Default Swap, diversification, diversified portfolio, estate planning, fiat currency, financial innovation, fixed income, Flash crash, follow your passion, German hyperinflation, High speed trading, housing crisis, index fund, joint-stock company, moral hazard, passive investing, Ponzi scheme, price discovery process, random walk, risk tolerance, risk-adjusted returns, risk/return, too big to fail, trade route, Vanguard fund, walking around money

Is this just marketing something so Wall Street has a product to pitch to gold bugs and everyone else who wants to dabble in the craze? As contempt for the government and Wall Street continues to grow with every new fiscal bailout or debt crisis, gold will continue to have appeal to those who distrust traditional securities like stocks and bonds or those who just want to protect themselves against fiat currency. Let’s go on a journey, starting with the historical use of gold. Historical Use of Gold There is a fundamental reason gold has been in circulation for so long. It’s a store of wealth that is universal and can’t easily be destroyed. It doesn’t tarnish. You can melt it down to create different quantities. And if the going gets tough, you can run off with it. Before we had the globalized financial system or even a printing press, gold was the easiest way to transfer value from one person to another.

Panic was caused by the realization that the Federal Reserve was simply running out of gold. England had a good system of exchanging real gold coins for paper notes. This made it easier to go off of the standard 15 years later. Once the gold was out of citizen’s pockets, central banks can devalue and control the currency with the wave of a pen. The Gold Reserve Act of 1934 did just this. It changed the price of gold from $20.67 just 34 years earlier to $35 in one day! It takes a fiat currency months, if not years, to lower interest rates, print tons of money, and over-borrow to lose 40 percent of its value. Only a year earlier, Executive Order 6102 had been signed by the Roosevelt White House, forcing citizens to turn in their gold for $20.67 per ounce. The 1934 act, while reiterating the illegality of ownership of gold, changed the price per ounce to a level where it would stay in effect until 1968.

 

pages: 287 words: 81,970

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

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bank run, banking crisis, Ben Bernanke: helicopter money, Berlin Wall, Bernie Madoff, Bretton Woods, British Empire, Buckminster Fuller, California gold rush, currency manipulation / currency intervention, Deng Xiaoping, diversified portfolio, Elliott wave, fiat currency, fixed income, Fractional reserve banking, housing crisis, If something cannot go on forever, it will stop, index fund, Lao Tzu, margin call, market bubble, McMansion, money: store of value / unit of account / medium of exchange, mortgage debt, oil shock, peak oil, pushing on a string, reserve currency, rising living standards, road to serfdom, Ronald Reagan, Saturday Night Live, short selling, Silicon Valley, transaction costs

During the stagnation decade the Fed funds rate was all over the map, from 3.5 percent in 1971 up to 11 percent in 1973; from 13 percent in 1974 back down to 4.75 by 1976; only to head back up to 10 percent in 1978, then to 15.5 percent in 1979, and finally to 20 percent in 1980. Rates changed constantly during the decade—twenty-two times in 1973 alone, twenty-three times in 1978. It was like shaken-business syndrome. The changes were so frequent and violent it is no wonder many small and new businesses couldn’t survive. The volatility can be attributed to a desire to micromanage economic conditions and control the exchange rates of a fiat currency. It almost makes current Fed policy look stable—for now—averaging a mere half-dozen or so rate changes a year. We have already seen evidence of the flailing about by officialdom that will characterize the period ahead. By the time they collect information from the far-flung corners of the real economy, it is obsolete. They can never be ahead of the market. In July 2008, officials were concerned with the highest rate of price increases in seventeen years.

ANSWER: The growing mountains of gold in exchange-traded funds may indeed be an attractive target for government plunder, even though the $35 billion in market capitalization early in 2009 of the two gold ETFs is not enough to make a dent in the government’s financial predicament. But the real motivation for controlling people’s economic behavior is often actually for purposes of social engineering, and not financial at all. Issuers of fiat currencies are always hostile to gold and must suppress it at the first hint of a challenge. If a wholesale abandonment of paper dollars begins to build, it is to be expected that private gold stockpiles would become a target. There is usually plenty of warning before command economies begin wholesale confiscation. In the 1930s gold coins began disappearing from circulation months before they were confiscated.

 

pages: 488 words: 144,145

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

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Albert Einstein, bank run, banking crisis, Black Swan, Bretton Woods, British Empire, California gold rush, Carmen Reinhart, central bank independence, conceptual framework, corporate governance, cuban missile crisis, currency peg, debt deflation, falling living standards, fiat currency, financial deregulation, financial innovation, financial intermediation, floating exchange rates, Fractional reserve banking, full employment, global reserve currency, housing crisis, interchangeable parts, invention of radio, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, means of production, money: store of value / unit of account / medium of exchange, moral hazard, mutually assured destruction, non-tariff barriers, oil shock, payday loans, Plutocrats, plutocrats, price stability, pushing on a string, quantitative easing, rent-seeking, reserve currency, Ronald Reagan, special drawing rights, The Chicago School, The Great Moderation, too big to fail, trade liberalization, transcontinental railway, Upton Sinclair, women in the workforce

But in fact, looking at both the federal and state debts, the United States was a heavily indebted, rapidly developing country with neither organized financial markets nor even a common currency, and with a seriously dysfunctional central government. When the overheated economy and related financial crisis first started to boil over in the late-1830s, many European banks refused to lend further to the U.S. government or the various states, putting intense pressure on the small nation’s liquidity and political unity. This stress was relieved by the issuance of various types of fiat currency and debt securities. In states such as Michigan and Indiana, the number of banks dwindled as first private institutions and eventually the state-chartered banks were wound up and closed. Regarding the financial situation in the Midwest, Willis Dunbar and George May noted in their book, Michigan: A History of the Wolverine State: The speculation in Michigan land values of the early thirties, for example, was fantastic.

The final provisions of the Banking Act of 1935 completed the centralization of the Fed’s Board of Governors. It also expanded the type of loans that the Fed could make, particularly in time of emergency. But in a larger sense, the Banking Act of 1935 completed the transition of the Fed from an institution that at least nominally paid homage to the gold standard and an asset currency, to one that was entirely devoted to a fiat currency that was not convertible into anything. “Currently, the American monetary system is composed of a series of procedures based on statutes and statutes based on procedures, which reflect no integral concept of money but, rather, a series of residual concepts,” wrote Jane D’Arista in The Evolution of U.S. Finance: Federal Reserve Monetary Policy, 1915–1935, “Since at no point is any concept of money firmly repudiated, the system may be said to accommodate a process of selection among alternatives.

When Richard Nixon ended the link between the dollar and gold, the value of the dollar became a function of the political credibility of the United States. But as the growth potential of the U.S. economy wanes and the baby boomers reach retirement age, all the while refusing to rein in their insatiable desire for consumption, the ability of the American economy to fulfill the dreams of workers around the world is in doubt. How we deal with the uniquely American problem of a global fiat currency will define the destiny of America and the world in the next century and beyond. One of the issues raised by the subprime housing crisis of 2007–2009 that is not often discussed in the media or economic circles is how the increasingly hollow U.S. economy will look without the positive effect of a constantly buoyant housing market. Josh Rosner believes that the positive influence of the baby boom in the decades following WWII is now becoming a serious drag on future U.S. economic growth.

 

pages: 710 words: 164,527

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

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Albert Einstein, Asian financial crisis, banks create money, Bretton Woods, British Empire, capital controls, currency manipulation / currency intervention, currency peg, deindustrialization, European colonialism, facts on the ground, fiat currency, financial independence, floating exchange rates, full employment, global reserve currency, imperial preference, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Rogoff, margin call, means of production, money: store of value / unit of account / medium of exchange, Monroe Doctrine, New Journalism, open economy, Potemkin village, price mechanism, price stability, psychological pricing, reserve currency, road to serfdom, seigniorage, South China Sea, special drawing rights, The Great Moderation, the market place, trade liberalization, Works Progress Administration

Such surrenders,” he said, were “utterly inconceivable today in favor of a mere nineteenth century laissez faire, unconcerned with national levels of employment and economic activity.”17 The political stage was now set for a reform to Bretton Woods that could mean all things to all governments, but nothing to the markets. This was the IMF’s Special Drawing Right, or SDR, approved by the fund’s board of governors in 1968.18 For supporters of Keynes’s bancor vision, the SDR was a first small step on the road to a truly international fiat currency. For France and opponents of the dollar-based Bretton Woods system, the new gold-linked instrument was a step toward dethroning the dollar and restoring gold as the primary international reserve. And it was for the United States a means of buying time to halt the drain on American gold reserves—an expedient to supplement the new policy of limiting gold transactions to monetary authorities, which could ostensibly be bullied into not converting dollars for gold.

The dollar still accounts for 60 percent of global foreign exchange reserves (down from 70 percent a decade ago), and even 75 percent of global imports from countries other than the United States.39 During the 2008 financial crisis, the Fed was able to take extraordinary actions to support the domestic credit markets; in contrast, central banks from Sweden to Australia were obliged to sell foreign assets for dollars to do the same.40 At present, the United States has no need to accommodate calls for it to sacrifice its exorbitant privilege to some vague vision of the global good. It will only waver when the market initiates a clear shift toward alternatives. But credible alternatives are in short supply at present. The euro is in the midst of an existential crisis that has fueled grave doubts as to whether supranational fiat currencies of any sort are viable. As for SDRs, they currently represent less than 3 percent of global reserves, and there is no private trade invoicing, borrowing, or lending taking place in them.41 Until that changes, there is little incentive for central banks to hold much more of them. Paradoxically, although it was Keynes who argued for, and White who fiercely resisted, a supranational reserve currency in the run-up to Bretton Woods, such a currency would have far greater viability in a world dominated by state trading—of the sort practiced by the former Soviet Union, and toward which White privately believed the world was moving.

There is, finally, it is worth noting, a small but passionate constituency, curiously based mainly in the United States, for a return to some form of global gold standard. Though there is precious little evidence that any government would, or could, today live by its strictures, which require acceptance of deflation as a natural, and indeed necessary, periodic occurrence, a generalized loss of confidence in fiat currencies could provoke changes in public and private practice. Central banks around the world, in both rich and poor countries, have been reaccumulating gold reserves, reversing the trend of the 1990s, and governments could at some point seek to settle trade balances with it. Gold is used as collateral in derivatives transactions. Private gold “bank” accounts, though still a niche business, have also been proliferating, allowing depositors to make digital transfers across borders using gold as a means of payment.

 

pages: 366 words: 94,209

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

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3D printing, Airbnb, algorithmic trading, Amazon Mechanical Turk, Andrew Keen, bank run, banking crisis, barriers to entry, bitcoin, blockchain, Burning Man, business process, buy low sell high, California gold rush, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, centralized clearinghouse, citizen journalism, clean water, cloud computing, collaborative economy, collective bargaining, colonial exploitation, Community Supported Agriculture, corporate personhood, crowdsourcing, cryptocurrency, disintermediation, diversified portfolio, Elon Musk, Erik Brynjolfsson, ethereum blockchain, fiat currency, Firefox, Flash crash, full employment, future of work, gig economy, Gini coefficient, global supply chain, global village, Google bus, Howard Rheingold, IBM and the Holocaust, impulse control, income inequality, index fund, iterative process, Jaron Lanier, Jeff Bezos, jimmy wales, job automation, Joseph Schumpeter, Kickstarter, loss aversion, Lyft, Mark Zuckerberg, market bubble, market fundamentalism, Marshall McLuhan, means of production, medical bankruptcy, minimum viable product, Naomi Klein, Network effects, new economy, Norbert Wiener, Oculus Rift, passive investing, payday loans, peer-to-peer lending, Peter Thiel, post-industrial society, profit motive, quantitative easing, race to the bottom, recommendation engine, reserve currency, RFID, Richard Stallman, ride hailing / ride sharing, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Snapchat, social graph, software patent, Steve Jobs, TaskRabbit, trade route, transportation-network company, Turing test, Uber and Lyft, Uber for X, unpaid internship, Y Combinator, young professional, Zipcar

It wouldn’t. A gold standard is optimized to address fear that one’s savings are not safe if they’re measured in government-backed dollars. But gold-backed currency would be no better at promoting a peer-to-peer marketplace than gold coins were back in the Middle Ages. It’s biased toward scarcity. Bernard Lietaer, one of the economists who helped design the euro, has been proposing since 1991 that fiat currencies—money declared legal by the government but not backed by a physical commodity—be replaced or at least augmented with currencies that represent a “basket” of commodities.24 His current suggestion is to create a currency that is backed by one third gold, one third forests, and one third highways. The gold is the fixed-commodity component, as there is only so much of it. Forests are the growth component; trees grow.

That’s why from 2012 to 2013, the price of a single bitcoin skyrocketed, from ten dollars in November 2012 to a thousand dollars a year later.35 There are now bitcoin investment funds—one famously started by the Winklevoss twins, known best for hiring college student Mark Zuckerberg to build their social network platform and subsequently losing it to him. They may be missing the nature of this opportunity as well. Bitcoin money is only a utility—not the thing of value in itself. It’s a label. If bitcoins become too precious and scarce, there are always plenty of alternative blockchain currencies to use instead. Unlike the issuers of national fiat currencies, no one—not even the tax authority—is forcing anyone to use bitcoins. So they don’t have the same role as the sort of money that was invented for early Renaissance monarchs to shut down the peer-to-peer marketplace. Amazingly, it’s money people who have the hardest time understanding this part, which is why they are so destined to be burned on their bitcoin investments, however they play this one.

 

pages: 515 words: 142,354

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

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

., 51–57 single currency and, 45–46 economic rents, 226, 280 economics, politics and, 308–18 economic security, 68 economies of scale, 12, 39, 55, 138 economists, poor forecasting by, 307 education, 20, 76, 344 investment in, 40, 69, 137, 186, 211, 217, 251, 255, 300 electricity, 217 electronic currency, 298–99, 389 electronics payment mechanism, 274–76, 283–84 emigration, 4, 68–69 see also migration employment: central banks and, 8, 94, 97 structural reforms and, 257–60 see also unemployment Employment Act (1946), 148 energy subsidies, 197 Enlightenment, 3, 318–19 environment, 41, 257, 260, 323 equality, 225–26 equilibrium, xviii–xix Erasmus program, 45 Estonia, 90, 331, 346 euro, xiv, 325 adjustments impeded by, 13–14 case for, 35–39 creation of, xii, 5–6, 7, 10, 333 creation of institutions required by, 10–11 divergence and, see divergence divorce of, 272–95, 307 economic integration and, 46–47, 268 as entailing fixed exchange rate, 8, 42–43, 46–47, 86–87, 92, 93, 94, 102, 105, 143, 193, 215–16, 240, 244, 249, 252, 254, 286, 297 as entailing single interest rate, 8, 85–88, 92, 93, 94, 105, 129, 152, 240, 244, 249 and European identification, 38–39 financial instability caused by, 131–32 growth promised by, 235 growth slowed by, 73 hopes for, 34 inequality increased by, xviii interest rates lowered by, 235 internal devaluation of, see internal devaluation literature on, 327–28 as means to end, xix peace and, 38 proponents of, 13 referenda on, 58, 339–40 reforms needed for, xii–xiii, 28–31 risk of, 49–50 weakness of, 224 see also flexible euro Eurobond, 356 euro crisis, xiii, 3, 4, 9 catastrophic consequences of, 11–12 euro-euphoria, 116–17 Europe, 151 free trade area in, 44–45 growth rates in, 63–64, 69, 73–74, 74, 75, 163 military conflicts in, 196 social models of, 21 European Central Bank (ECB), 7, 17, 80, 112–13, 117, 144, 145–73, 274, 313, 362, 368, 380 capture of, 158–59 confidence in, 200–201 corporate bonds bought by, 141 creation of, 8, 85 democratic deficit and, 26, 27 excessive expansion controlled by, 250 flexibility of, 269 funds to Greece cut off by, 59 German challenges to, 117, 164 governance and, 157–63 inequality created by, 154–55 inflation controlled by, 8, 25, 97, 106, 115, 145, 146–50, 151, 163, 165, 169–70, 172, 250, 256, 266 interest rates set by, 85–86, 152, 249, 302, 348 Ireland forced to socialize losses by, 134, 156, 165 new mandate needed by, 256 as political institution, 160–62 political nature of, 153–56 quantitative easing opposed by, 151 quantitative easing undertaken by, 164, 165–66, 170, 171 regulations by, 249, 250 unemployment and, 163 as unrepresentative, 163 European Commission, 17, 58, 161, 313, 332 European Court of Human Rights, 45 European Economic Community (EEC), 6 European Exchange Rate Mechanism (ERM), 30, 335 European Exchange Rate Mechanism II (ERM II), 336 European Free Trade Association, 44 European Free Trade Association Court, 44 European Investment Bank (EIB), 137, 247, 255, 301 European Regional Development Fund, 243 European Stability Mechanism, 23, 246, 357 European Union: budget of, 8, 45, 91 creation of, 4 debt and deficit limits in, 87–88 democratic deficit in, 26–27 economic growth in, 215 GDP of, xiii and lower rates of war, 196 migration in, 90 proposed exit of UK from, 4 stereotypes in, 12 subsidiarity in, 8, 41–42, 263 taxes in, 8, 261 Euro Summit Statement, 373 eurozone: austerity in, see austerity banking union in, see banking union counterfactual in, 235–36 double-dip recessions in, 234–35 Draghi’s speech and, 145 economic integration and, xiv–xx, 23, 39–50, 51–57 as flawed at birth, 7–9 framework for stability of, 244–52 German departure from, 32, 292–93 Greece’s possible exit from, 124 hours worked in, 71–72 lack of fiscal policy in, 152 and move to political integration, xvi, 34, 35, 51–57 Mundell’s work on dangers of, 87 policies of, 15–17 possible breakup of, 29–30 privatization avoided in, 194 saving, 323–26 stagnant GDP in, 12, 65–68, 66, 67 structure of, 8–9 surpluses in, 120–22 theory of, 95–97 unemployment in, 71, 135, 163, 177–78, 181, 331 working-age population of, 70 eurozone, proposed structural reforms for, 239–71 common financial system, see banking union excessive fiscal responsibility, 163 exchange-rate risks, 13, 47, 48, 49–50, 125, 235 exchange rates, 80, 85, 288, 300, 338, 382, 389 of China, 251, 254, 350–51 and competitive devaluation, 105–6 after departure of northern countries, 292–93 of euro, 8, 42–43, 46–47, 86–87, 92, 93, 94, 102, 105, 215–16, 240, 244, 249, 252, 254, 286, 297 flexible, 50, 248, 349 and full employment, 94 of Germany, 254–55, 351 gold and, 344–45 imports and, 86 interest rates and, 86 quantitative easing’s lowering of, 151 real, 105–6 and single currencies, 8, 42–43, 46–47, 86–87, 92, 93, 94, 97–98 stabilizing, 299–301 and trade deficits, 107, 118 expansionary contractions, 95–96, 208–9 exports, 86, 88, 97–99, 98 disappointing performance of, 103–5 external imbalances, 97–98, 101, 109 externalities, 42–43, 121, 153, 301–2 surpluses as, 253 extremism, xx, 4 Fannie Mae, 91 farmers, US, in deflation, xii Federal Deposit Insurance Corporation (FDIC), 91 Federal Reserve, US, 349 alleged independence of, 157 interest rates lowered by, 150 mandate of, 8, 147, 172 money pumped into economy by, 278 quantitative easing used by, 151, 170 reform of, 146 fiat currency, 148, 275 and taxes, 284 financial markets: lobbyists from, 132 reform of, 214, 228–29 short-sighted, 112–13 financial systems: necessity of, xix real economy of, 149 reform of, 257–58 regulations needed by, xix financial transaction system, 275–76 Finland, 16, 81, 122, 126, 292, 296, 331, 343 growth in, 296–97 growth rate of, 75, 76, 234–35 fire departments, 41 firms, 138, 186–87, 245, 248 fiscal balance: and cutting spending, 196–98 tax revenue and, 190–96 Fiscal Compact, 141, 357 fiscal consolidation, 310 fiscal deficits, see deficits, fiscal fiscal policy, 148, 245, 264 in center of macro-stabilization, 251 countercyclical, 244 in EU, 8 expansionary, 254–55 stabilization of, 250–52 fiscal prudence, 15 fiscal responsibility, 163 flexibility, 262–63, 269 flexible euro, 30–31, 272, 296–305, 307 cooperation needed for, 304–5 food prices, 169 forbearance, 130–31 forecasts, 307 foreclosure proposal, 180 foreign ownership, privatization and, 195 forestry, 81 France, 6, 14, 16, 114, 120, 141, 181–82, 331, 339–40, 343 banks of, 202, 203, 231, 373 corporate income tax in, 189–90 euro creation regretted in, 340 European Constitution referendum of, 58 extreme right in, xi growth in, 247 Freddie Mac, 91 Freefall (Stiglitz), 264, 335 free mobility of labor, xiv, 26, 40, 125, 134–36, 142–44, 242 Friedman, Milton, 151, 152–53, 167, 339 full employment, 94–97, 379 G-20, 121 gas: import of, 230 from Russia, 37, 81, 93 Gates Foundation, 276 GDP-indexed bonds, 267 German bonds, 114, 323 German Council of Economic Experts, 179, 365 Germany, xxi, 14, 30, 65, 108, 114, 141, 181–82, 207, 220, 286, 307, 331, 343, 346, 374 austerity pushed by, 186, 232 banks of, 202, 203, 231–32, 373 costs to taxpayers of, 184 as creditor, 140, 187, 267 debt collection by, 117 debt in, 105 and debt restructuring, 205, 311 in departure from eurozone, 32, 292–93 as dependent on Russian gas, 37 desire to leave eurozone, 314 ECB criticized by, 164 EU economic practices controlled by, 17 euro creation regretted in, 340 exchange rate of, 254–55, 351 failure of, 13, 78–79 flexible exchange of, 304 GDP of, xviii, 92 in Great Depression, 187 growing poverty in, 79 growth of, 78, 106, 247 hours worked per worker in, 72 inequality in, 79, 333 inflation in, 42, 338, 358 internal solidarity of, 334 lack of alternative to euro seen by, 11 migrants to, 320–21, 334–35, 393 minimum wage in, 42, 120, 254 neoliberalism in, 10 and place-based debt, 136 productivity in, 71 programs designed by, 53, 60, 61, 202, 336, 338 reparations paid by, 187 reunification of, 6 rules as important to, 57, 241–42, 262 share of global employment in, 224 shrinking working-age population of, 70, 78–79 and Stability and Growth Pact, 245 and structural reforms, 19–20 “there is no alternative” and, 306, 311–12 trade surplus of, 117, 118–19, 120, 139, 253, 293, 299, 350–52, 381–82, 391 “transfer union” rejected by, 22 US loans to, 187 victims blamed by, 9, 15–17, 177–78, 309 wages constrained by, 41, 42–43 wages lowered in, 105, 333 global financial crisis, xi, xiii–xiv, 3, 12, 17, 24, 67, 73, 75, 114, 124, 146, 148, 274, 364, 387 and central bank independence, 157–58 and confidence, 280 and cost of failure of financial institutions, 131 lessons of, 249 monetary policy in, 151 and need for structural reform, 214 originating in US, 65, 68, 79–80, 112, 128, 296, 302 globalization, 51, 321–23 and diminishing share of employment in advanced countries, 224 economic vs. political, xvii failures of, xvii Globalization and Its Discontents (Stig-litz), 234, 335, 369 global savings glut, 257 global secular stagnation, 120 global warming, 229–30, 251, 282, 319 gold, 257, 275, 277, 345 Goldman Sachs, 158, 366 gold standard, 148, 291, 347, 358 in Great Depression, xii, 100 goods: free movement of, 40, 143, 260–61 nontraded, 102, 103, 169, 213, 217, 359 traded, 102, 103, 216 Gordon, Robert, 251 governance, 157–63, 258–59 government spending, trade deficits and, 107–8 gravity principle, 124, 127–28 Great Depression, 42, 67, 105, 148, 149, 168, 313 Friedman on causes of, 151 gold standard in, xii, 100 Great Malaise, 264 Greece, 14, 30, 41, 64, 81, 100, 117, 123, 142, 160, 177, 265–66, 278, 307, 331, 343, 366, 367–68, 374–75, 386 austerity opposed by, 59, 60–62, 69–70, 207–8, 392 balance of payments, 219 banks in, 200–201, 228–29, 231, 270, 276, 367, 368 blaming of, 16, 17 bread in, 218, 230 capital controls in, 390 consumption tax and, 193–94 counterfactual scenario of, 80 current account surplus of, 287–88 and debt restructuring, 205–7 debt-to-GDP ratio of, 231 debt write-offs in, 291 decline in labor costs in, 56, 103 ECB’s cutting of funds to, 59 economic growth in, 215, 247 emigration from, 68–69 fiscal deficits in, 16, 186, 215, 233, 285–86, 289 GDP of, xviii, 183, 309 hours worked per worker in, 72 inequality in, 72 inherited debt in, 134 lack of faith in democracy in, 312–13 living standards in, 216 loans in, 127 loans to, 310 migrants and, 320–21 milk in, 218, 223, 230 new currency in, 291, 300 oligarchs in, 16, 227 output per working-age person in, 70–71 past downturns in, 235–36 pensions in, 16, 78, 188, 197–98, 226 pharmacies in, 218–20 population decline in, 69, 89 possible exit from eurozone of, 124, 197, 273, 274, 275 poverty in, 226, 261, 376 primary surplus of, 187–88, 312 privatization in, 55, 195–96 productivity in, 71, 342 programs imposed on, xv, 21, 27, 60–62, 140, 155–56, 179–80, 181, 182–83, 184–85, 187–88, 190–93, 195–96, 197–98, 202–3, 205, 206, 214–16, 218–23, 225–28, 229, 230, 231, 233–34, 273, 278, 308, 309–11, 312, 315–16, 336, 338 renewable energy in, 193, 229 social capital destroyed in, 78 sovereign spread of, 200 spread in, 332 and structural reforms, 20, 70, 188, 191 tax revenue in, 16, 142, 192, 227, 367–368 tools lacking for recovery of, 246 tourism in, 192, 286 trade deficits in, 81, 194, 216–17, 222, 285–86 unemployment in, xi, 71, 236, 267, 332, 338, 342 urgency in, 214–15 victim-blaming of, 309–11 wages in, 216–17 youth unemployment in, xi, 332 Greek bonds, 116, 126 interest rates on, 4, 114, 181–82, 201–2, 323 restructuring of, 206–7 green investments, 260 Greenspan, Alan, 251, 359, 363 Grexit, see Greece, possible exit from eurozone of grocery stores, 219 gross domestic product (GDP), xvii decline in, 3 measurement of, 341 Growth and Stability Pact, 87 hedge funds, 282, 363 highways, 41 Hitler, Adolf, 338, 358 Hochtief, 367–68 Hoover, Herbert, 18, 95 human capital, 78, 137 human rights, 44–45, 319 Hungary, 46, 331, 338 hysteresis, 270 Iceland, 44, 111, 307, 354–55 banks in, 91 capital controls in, 390 ideology, 308–9, 315–18 imports, 86, 88, 97–99, 98, 107 incentives, 158–59 inclusive capitalism, 317 income, unemployment and, 77 income tax, 45 Independent Commission for the Reform of International Corporate Taxation, 376–377 Indonesia, 113, 230–31, 314, 350, 364, 378 industrial policies, 138–39, 301 and restructuring, 217, 221, 223–25 Industrial Revolution, 3, 224 industry, 89 inequality, 45, 72–73, 333 aggregate demand lowered by, 212 created by central banks, 154 ECB’s creation of, 154–55 economic performance affected by, xvii euro’s increasing of, xviii growth’s lowering of, 212 hurt by collective action, 338 increased by neoliberalism, xviii increase in, 64, 154–55 inequality in, 72, 212 as moral issue, xviii in Spain, 72, 212, 225–26 and tax harmonization, 260–61 and tax system, 191 inflation, 277, 290, 314, 388 in aftermath of tech bubble, 251 bonds and, 161 central banks and, 153, 166–67 consequences of fixation on, 149–50, 151 costs of, 270 and debt monetization, 42 ECB and, 8, 25, 97, 106, 115, 145, 146–50, 151, 163, 165, 169–70, 172, 255, 256, 266 and food prices, 169 in Germany, 42, 338, 358 interest rates and, 43–44 in late 1970s, 168 and natural rate hypothesis, 172–73 political decisions and, 146 inflation targeting, 157, 168–70, 364 information, 335 informational capital, 77 infrastructure, xvi–xvii, 47, 137, 186, 211, 255, 258, 265, 268, 300 inheritance tax, 368 inherited debt, 134 innovation, 138 innovation economy, 317–18 inputs, 217 instability, xix institutions, 93, 247 poorly designed, 163–64 insurance, 355–356 deposit, see deposit insurance mutual, 247 unemployment, 91, 186, 246, 247–48 integration, 322 interest rates, 43–44, 86, 282, 345, 354 in aftermath of tech bubble, 251 ECB’s determination of, 85–86, 152, 249, 302, 348 and employment, 94 euro’s lowering of, 235 Fed’s lowering of, 150 on German bonds, 114 on Greek bonds, 4, 114, 181–82 on Italian bonds, 114 in late 1970s, 168 long-term, 151, 200 negative, 316, 348–49 quantitative easing and, 151, 170 short-term, 249 single, eurozone’s entailing of, 8, 85–88, 92, 93, 94, 105, 129, 152, 240, 244, 249 on Spanish bonds, 114, 199 spread in, 332 stock prices increased by, 264 at zero lower bound, 106 intermediation, 258 internal devaluation, 98–109, 122, 126, 220, 255, 388 supply-side effects of, 99, 103–4 International Commission on the Measurement of Economic Performance and Social Progress, 79, 341 International Labor Organization, 56 International Monetary Fund (IMF), xv, xvii, 10, 17, 18, 55, 61, 65–66, 96, 111, 112–13, 115–16, 119, 154, 234, 289, 309, 316, 337, 349, 350, 370, 371, 381 and Argentine debt, 206 conditions of, 201 creation of, 105 danger of high taxation warnings of, 190 debt reduction pushed by, 95 and debt restructuring, 205, 311 and failure to restore credit, 201 global imbalances discussed by, 252 and Greek debts, 205, 206, 310–11 on Greek surplus, 188 and Indonesian crisis, 230–31, 364 on inequality’s lowering of growth, 212–13 Ireland’s socialization of losses opposed by, 156–57 mistakes admitted by, 262, 312 on New Mediocre, 264 Portuguese bailout of, 178–79 tax measures of, 185 investment, 76–77, 111, 189, 217, 251, 264, 278, 367 confidence and, 94 divergence in, 136–38 in education, 137, 186, 211, 217, 251, 255, 300 infrastructure in, xvi–xvii, 47, 137, 186, 211, 255, 258, 265, 268, 300 lowered by disintermediation, 258 public, 99 real estate, 199 in renewable energy, 229–30 return on, 186, 245 stimulation of, 94 in technology, 137, 138–39, 186, 211, 217, 251, 258, 265, 300 investor state dispute settlement (ISDS), 393–94 invisible hand, xviii Iraq, refugees from, 320 Iraq War, 36, 37 Ireland, 14, 16, 44, 113, 114–15, 122, 178, 234, 296, 312, 331, 339–40, 343, 362 austerity opposed in, 207 debt of, 196 emigrants from, 68–69 GDP of, 18, 231 growth in, 64, 231, 247, 340 inherited debt in, 134 losses socialized in, 134, 156–57, 165 low debt in, 88 real estate bubble in, 108, 114–15, 126 surplus in, 17, 88 taxes in, 142–43, 376 trade deficits in, 119 unemployment in, 178 irrational exuberance, 14, 114, 116–17, 149, 334, 359 ISIS, 319 Italian bonds, 114, 165, 323 Italy, 6, 14, 16, 120, 125, 331, 343 austerity opposed in, 59 GDP per capita in, 352 growth in, 247 sovereign spread of, 200 Japan, 151, 333, 342 bubble in, 359 debt of, 202 growth in, 78 quantitative easing used by, 151, 359 shrinking working-age population of, 70 Java, unemployment on, 230 jobs gap, 120 Juncker, Jean-Claude, 228 Keynes, John Maynard, 118, 120, 172, 187, 351 convergence policy suggested by, 254 Keynesian economics, 64, 95, 108, 153, 253 King, Mervyn, 390 knowledge, 137, 138–39, 337–38 Kohl, Helmut, 6–7, 337 krona, 287 labor, marginal product of, 356 labor laws, 75 labor markets, 9, 74 friction in, 336 reforms of, 214, 221 labor movement, 26, 40, 125, 134–36, 320 austerity and, 140 capital flows and, 135 see also migration labor rights, 56 Lamers, Karl, 314 Lancaster, Kelvin, 27 land tax, 191 Latin America, 10, 55, 95, 112, 202 lost decade in, 168 Latvia, 331, 346 GDP of, 92 law of diminishing returns, 40 learning by doing, 77 Lehman Brothers, 182 lender of last resort, 85, 362, 368 lending, 280, 380 discriminatory, 283 predatory, 274, 310 lending rates, 278 leverage, 102 Lichtenstein, 44 Lipsey, Richard, 27 liquidity, 201, 264, 278, 354 ECB’s expansion of, 256 lira, 14 Lithuania, 331 living standards, 68–70 loans: contraction of, 126–27, 246 nonperforming, 241 for small and medium-size businesses, 246–47 lobbyists, from financial sector, 132 location, 76 London interbank lending rate (LIBOR), 131, 355 Long-Term Refinancing Operation, 360–361 Lucas, Robert, xi Luxembourg, 6, 94, 142–43, 331, 343 as tax avoidance center, 228, 261 luxury cars, 265 Maastricht Treaty, xiii, 6, 87, 115, 146, 244, 298, 339, 340 macro-prudential regulations, 249 Malta, 331, 340 manufacturing, 89, 223–24 market failures, 48–49, 86, 148, 149, 335 rigidities, 101 tax policy’s correction of, 193 market fundamentalism, see neoliberalism market irrationality, 110, 125–26, 149 markets, limitations of, 10 Meade, James, 27 Medicaid, 91 medical care, 196 Medicare, 90, 91 Mellon, Andrew, 95 Memorandum of Agreement, 233–34 Merkel, Angela, 186 Mexico, 202, 369 bailout of, 113 in NAFTA, xiv Middle East, 321 migrant crisis, 44 migration, 26, 40, 68–69, 90, 125, 320–21, 334–35, 342, 356, 393 unemployment and, 69, 90, 135, 140 see also labor movement military power, 36–37 milk, 218, 223, 230 minimum wage, 42, 120, 254, 255, 351 mining, 257 Mississippi, GDP of, 92 Mitsotakis, Constantine, 377–78 Mitsotakis, Kyriakos, 377–78 Mitterrand, François, 6–7 monetarism, 167–68, 169, 364 monetary policy, 24, 85–86, 148, 264, 325, 345, 364 as allegedly technocratic, 146, 161–62 conservative theory of, 151, 153 in early 1980s US, 168, 210 flexibility of, 244 in global financial crisis, 151 political nature of, 146, 153–54 recent developments in theory of, 166–73 see also interest rates monetary union, see single currencies money laundering, 354 monopolists, privatization and, 194 moral hazard, 202, 203 mortgage rates, 170 mortgages, 302 multinational chains, 219 multinational development banks, 137 multinationals, 127, 223, 376 multipliers, 211–12, 248 balanced-budget, 188–90, 265 Mundell, Robert, 87 mutual insurance, 247 mutualization of debt, 242–43, 263 national development banks, 137–38 natural monopolies, 55 natural rate hypothesis, 172 negative shocks, 248 neoliberalism, xvi, 24–26, 33, 34, 98–99, 109, 257, 265, 332–33, 335, 354 on bubbles, 381 and capital flows, 28 and central bank independence, 162–63 in Germany, 10 inequality increased by, xviii low inflation desired by, 147 recent scholarship against, 24 Netherlands, 6, 44, 292, 331, 339–40, 343 European Constitution referendum of, 58 New Democracy Party, Greek, 61, 185, 377–78 New Mediocre, 264 New World, 148 New Zealand, 364 Nokia, 81, 234, 297 nonaccelerating inflation rate of unemployment (NAIRU), 379–80 nonaccelerating wage rate of unemployment (NAWRU), 379–80 nongovernmental organizations (NGOs), 276 nonperforming loans, 241 nontraded goods sector, 102, 103, 169, 213, 217, 359 North American Free Trade Agreement (NAFTA), xiv North Atlantic Treaty Organization (NATO), 196 Norway, 12, 44, 307 referendum on joining EU, 58 nuclear deterrence, 38 Obama, Barack, 319 oil, import of, 230 oil firms, 36 oil prices, 89, 168, 259, 359 oligarchs: in Greece, 16, 227 in Russia, 280 optimal currency area, 345 output, 70–71, 111 after recessions, 76 Outright Monetary Transactions program, 361 overregulate, 132 Oxfam, 72 panic of 1907, 147 Papandreou, Andreas, 366 Papandreou, George, xiv, 60–61, 184, 185, 220, 221, 226–27, 309, 312, 366, 373 reform of banks suggested by, 229 paradox of thrift, 120 peace, 34 pensions, 9, 16, 78, 177, 188, 197–98, 226, 276, 370 People’s Party, Portugal, 392 periphery, 14, 32, 171, 200, 296, 301, 318 see also specific countries peseta, 14 pharmacies, 218–20 Phishing for Phools (Akerlof and Shiller), 132 physical capital, 77–78 Pinochet, Augusto, 152–53 place-based debt, 134, 242 Pleios, George, 377 Poland, 46, 333, 339 assistance to, 243 in Iraq War, 37 police, 41 political integration, xvi, 34, 35 economic integration vs., 51–57 politics, economics and, 308–18 pollution, 260 populism, xx Portugal, 14, 16, 64, 177, 178, 331, 343, 346 austerity opposed by, 59, 207–8, 315, 332, 392 GDP of, 92 IMF bailout of, 178–79 loans in, 127 poverty in, 261 sovereign spread of, 200 Portuguese bonds, 179 POSCO, 55 pound, 287, 335, 346 poverty, 72 in Greece, 226, 261 in Portugal, 261 in Spain, 261 predatory lending, 274, 310 present discount value, 343 Price of Inequality, The (Stiglitz), 154 prices, 19, 24 adjustment of, 48, 338, 361 price stability, 161 primary deficit, 188, 389 primary surpluses, 187–88 private austerity, 126–27, 241–42 private sector involvement, 113 privatization, 55, 194–96, 369 production costs, 39, 43, 50 production function, 343 productivity, 71, 332, 348 in manufacturing, 223–24 after recessions, 76–77 programs, 17–18 Germany’s design of, 53, 60, 61, 187–88, 205, 336, 338 imposed on Greece, xv, 21, 27, 60–62, 140, 155–56, 179–80, 181, 182–83, 184–85, 187–88, 190–93, 195–96, 197–98, 202–3, 205, 206, 214–16, 218–23, 225–28, 229, 230, 231, 233–34, 273, 278, 308, 309–11, 312, 315–16, 336, 338 of Troika, 17–18, 21, 155–57, 179–80, 181, 182–83, 184–85, 187–93, 196, 202, 205, 207, 208, 214–16, 217, 218–23, 225–28, 229, 231, 233–34, 273, 278, 308, 309–11, 312, 313, 314, 315–16, 323–24, 346, 366, 379, 392 progressive automatic stabilizers, 244 progressive taxes, 248 property rights, 24 property taxes, 192–93, 227 public entities, 195 public goods, 40, 337–38 quantitative easing (QE), 151, 164, 165–66, 170–72, 264, 359, 361, 386 railroads, 55 Reagan, Ronald, 168, 209 real estate bubble, 25, 108, 109, 111, 114–15, 126, 148, 172, 250, 301, 302 cause of, 198 real estate investment, 199 real exchange rate, 105–6, 215–16 recessions, recovery from, 94–95 recovery, 76 reform, 75 theories of, 27–28 regulations, 24, 149, 152, 162, 250, 354, 355–356, 378 and Bush administration, 250–51 common, 241 corporate opposition to, xvi difficulties in, 132–33 of finance, xix forbearance on, 130–31 importance of, 152–53 macro-prudential, 249 in race to bottom, 131–34 Reinhardt, Carmen, 210 renewable energy, 193, 229–30 Republican Party, US, 319 research and development (R&D), 77, 138, 217, 251, 317–18 Ricardo, David, 40, 41 risk, 104, 153, 285 excessive, 250 risk markets, 27 Rogoff, Kenneth, 210 Romania, 46, 331, 338 Royal Bank of Scotland, 355 rules, 57, 241–42, 262, 296 Russia, 36, 264, 296 containment of, 318 economic rents in, 280 gas from, 37, 81, 93, 378 safety nets, 99, 141, 223 Samaras, Antonis, 61, 309, 377 savings, 120 global, 257 savings and loan crisis, 360 Schäuble, Wolfgang, 57, 220, 314, 317 Schengen area, 44 schools, 41, 196 Schröeder, Gerhard, 254 self-regulation, 131, 159 service sector, 224 shadow banking system, 133 shareholder capitalism, 21 Shiller, Rob, 132, 359 shipping taxes, 227, 228 short-termism, 77, 258–59 Silicon Valley, 224 silver, 275, 277 single currencies: conflicts and, 38 as entailing fixed exchange rates, 8, 42–43, 46–47, 86–87, 92, 93, 94, 97–98 external imbalances and, 97–98 and financial crises, 110–18 integration and, 45–46, 50 interest rates and, 8, 86, 87–88, 92, 93, 94 Mundell’s work on, 87 requirements for, 5, 52–53, 88–89, 92–94, 97–98 and similarities among countries, 15 trade integration vs., 393 in US, 35, 36, 88, 89–92 see also euro single-market principle, 125–26, 231 skilled workers, 134–35 skills, 77 Slovakia, 331 Slovenia, 331 small and medium-sized enterprises (SMEs), 127, 138, 171, 229 small and medium-size lending facility, 246–47, 300, 301, 382 Small Business Administration, 246 small businesses, 153 Smith, Adam, xviii, 24, 39–40, 41 social cohesion, 22 Social Democratic Party, Portugal, 392 social program, 196 Social Security, 90, 91 social solidarity, xix societal capital, 77–78 solar energy, 193, 229 solidarity fund, 373 solidarity fund for stabilization, 244, 254, 264, 301 Soros, George, 390 South Dakota, 90, 346 South Korea, 55 bailout of, 113 sovereign risk, 14, 353 sovereign spreads, 200 sovereign wealth funds, 258 Soviet Union, 10 Spain, 14, 16, 114, 177, 178, 278, 331, 335, 343 austerity opposed by, 59, 207–8, 315 bank bailout of, 179, 199–200, 206 banks in, 23, 186, 199, 200, 242, 270, 354 debt of, 196 debt-to-GDP ratio of, 231 deficits of, 109 economic growth in, 215, 231, 247 gold supply in, 277 independence movement in, xi inequality in, 72, 212, 225–26 inherited debt in, 134 labor reforms proposed for, 155 loans in, 127 low debt in, 87 poverty in, 261 real estate bubble in, 25, 108, 109, 114–15, 126, 198, 301, 302 regional independence demanded in, 307 renewable energy in, 229 sovereign spread of, 200 spread in, 332 structural reform in, 70 surplus in, 17, 88 threat of breakup of, 270 trade deficits in, 81, 119 unemployment in, 63, 161, 231, 235, 332, 338 Spanish bonds, 114, 199, 200 spending, cutting, 196–98 spread, 332 stability, 147, 172, 261, 301, 364 automatic, 244 bubble and, 264 central banks and, 8 as collective action problem, 246 solidarity fund for, 54, 244, 264 Stability and Growth Pact, 245 standard models, 211–13 state development banks, 138 steel companies, 55 stock market, 151 stock market bubble, 200–201 stock market crash (1929), 18, 95 stock options, 259, 359 structural deficit, 245 Structural Funds, 243 structural impediments, 215 structural realignment, 252–56 structural reforms, 9, 18, 19–20, 26–27, 214–36, 239–71, 307 from austerity to growth, 263–65 banking union, 241–44 and climate change, 229–30 common framework for stability, 244–52 counterproductive, 222–23 debt restructuring and, 265–67 of finance, 228–29 full employment and growth, 256–57 in Greece, 20, 70, 188, 191, 214–36 growth and, 232–35 shared prosperity and, 260–61 and structural realignment, 252–56 of trade deficits, 216–17 trauma of, 224 as trivial, 214–15, 217–20, 233 subsidiarity, 8, 41–42, 263 subsidies: agricultural, 45, 197 energy, 197 sudden stops, 111 Suharto, 314 suicide, 82, 344 Supplemental Nutrition Assistance Program (SNAP), 91 supply-side effects: in Greece, 191, 215–16 of investments, 367 surpluses, fiscal, 17, 96, 312, 379 primary, 187–88 surpluses, trade, see trade surpluses “Swabian housewife,” 186, 245 Sweden, 12, 46, 307, 313, 331, 335, 339 euro referendum of, 58 refugees into, 320 Switzerland, 44, 307 Syria, 321, 342 Syriza party, 309, 311, 312–13, 315, 377 Taiwan, 55 tariffs, 40 tax avoiders, 74, 142–43, 227–28, 261 taxes, 142, 290, 315 in Canada, 191 on capital, 356 on carbon, 230, 260, 265, 368 consumption, 193–94 corporate, 189–90, 227, 251 cross-border, 319, 384 and distortions, 191 in EU, 8, 261 and fiat currency, 284 and free mobility of goods and capital, 260–61 in Greece, 16, 142, 192, 193–94, 227, 367–68 ideal system for, 191 IMF’s warning about high, 190 income, 45 increase in, 190–94 inequality and, 191 inheritance, 368 land, 191 on luxury cars, 265 progressive, 248 property, 192–93, 227 Reagan cuts to, 168, 210 shipping, 227, 228 as stimulative, 368 on trade surpluses, 254 value-added, 190, 192 tax evasion, in Greece, 190–91 tax laws, 75 tax revenue, 190–96 Taylor, John, 169 Taylor rule, 169 tech bubble, 250 technology, 137, 138–39, 186, 211, 217, 251, 258, 265, 300 and new financial system, 274–76, 283–84 telecoms, 55 Telmex, 369 terrorism, 319 Thailand, 113 theory of the second best, 27–28, 48 “there is no alternative” (TINA), 306, 311–12 Tocqueville, Alexis de, xiii too-big-to-fail banks, 360 tourism, 192, 286 trade: and contractionary expansion, 209 US push for, 323 trade agreements, xiv–xvi, 357 trade balance, 81, 93, 100, 109 as allegedly self-correcting, 98–99, 101–3 and wage flexibility, 104–5 trade barriers, 40 trade deficits, 89, 139 aggregate demand weakened by, 111 chit solution to, 287–88, 290, 299–300, 387, 388–89 control of, 109–10, 122 with currency pegs, 110 and fixed exchange rates, 107–8, 118 and government spending, 107–8, 108 of Greece, 81, 194, 215–16, 222, 285–86 structural reform of, 216–17 traded goods, 102, 103, 216 trade integration, 393 trade surpluses, 88, 118–21, 139–40, 350–52 discouragement of, 282–84, 299–300 of Germany, 118–19, 120, 139, 253, 293, 299, 350–52, 381–82, 391 tax on, 254, 351, 381–82 Transatlantic Trade and Investment Partnership, xv, 323 transfer price system, 376 Trans-Pacific Partnership, xv, 323 Treasury bills, US, 204 Trichet, Jean-Claude, 100–101, 155, 156, 164–65, 251 trickle-down economics, 362 Troika, 19, 20, 26, 55, 56, 58, 60, 69, 99, 101–3, 117, 119, 135, 140–42, 178, 179, 184, 195, 274, 294, 317, 362, 370–71, 373, 376, 377, 386 banks weakened by, 229 conditions of, 201 discretion of, 262 failure to learn, 312 Greek incomes lowered by, 80 Greek loan set up by, 202 inequality created by, 225–26 poor forecasting of, 307 predictions by, 249 primary surpluses and, 187–88 privatization avoided by, 194 programs of, 17–18, 21, 155–57, 179–80, 181, 182–83, 184–85, 187–93, 196, 197–98, 202, 204, 205, 207, 208, 214–16, 217, 218–23, 225–28, 229, 231, 233–34, 273, 278, 308, 309–11, 312, 313, 314, 315–16, 323–24, 348, 366, 379, 392 social contract torn up by, 78 structural reforms imposed by, 214–16, 217, 218–23, 225–38 tax demand of, 192 and tax evasion, 367 see also European Central Bank (ECB); European Commission; International Monetary Fund (IMF) trust, xix, 280 Tsipras, Alexis, 61–62, 221, 273, 314 Turkey, 321 UBS, 355 Ukraine, 36 unemployment, 3, 64, 68, 71–72, 110, 111, 122, 323, 336, 342 as allegedly self-correcting, 98–101 in Argentina, 267 austerity and, 209 central banks and, 8, 94, 97, 106, 147 ECB and, 163 in eurozone, 71, 135, 163, 177–78, 181, 331 and financing investments, 186 in Finland, 296 and future income, 77 in Greece, xi, 71, 236, 267, 331, 338, 342 increased by capital, 264 interest rates and, 43–44 and internal devaluation, 98–101, 104–6 migration and, 69, 90, 135, 140 natural rate of, 172–73 present-day, in Europe, 210 and rise of Hitler, 338, 358 and single currency, 88 in Spain, 63, 161, 231, 235, 332, 338 and structural reforms, 19 and trade deficits, 108 in US, 3 youth, 3, 64, 71 unemployment insurance, 91, 186, 246, 247–48 UNICEF, 72–73 unions, 101, 254, 335 United Kingdom, 14, 44, 46, 131, 307, 331, 332, 340 colonies of, 36 debt of, 202 inflation target set in, 157 in Iraq War, 37 light regulations in, 131 proposed exit from EU by, 4, 270 United Nations, 337, 350, 384–85 creation of, 38 and lower rates of war, 196 United States: banking system in, 91 budget of, 8, 45 and Canada’s 1990 expansion, 209 Canada’s free trade with, 45–46, 47 central bank governance in, 161 debt-to-GDP of, 202, 210–11 financial crisis originating in, 65, 68, 79–80, 128, 296, 302 financial system in, 228 founding of, 319 GDP of, xiii Germany’s borrowing from, 187 growing working-age population of, 70 growth in, 68 housing bubble in, 108 immigration into, 320 migration in, 90, 136, 346 monetary policy in financial crisis of, 151 in NAFTA, xiv 1980–1981 recessions in, 76 predatory lending in, 310 productivity in, 71 recovery of, xiii, 12 rising inequality in, xvii, 333 shareholder capitalism of, 21 Small Business Administration in, 246 structural reforms needed in, 20 surpluses in, 96, 187 trade agenda of, 323 unemployment in, 3, 178 united currency in, 35, 36, 88, 89–92 United States bonds, 350 unskilled workers, 134–35 value-added tax, 190, 192 values, 57–58 Varoufakis, Yanis, 61, 221, 309 velocity of circulation, 167 Venezuela, 371 Versaille, Treaty of, 187 victim blaming, 9, 15–17, 177–78, 309–11 volatility: and capital market integration, 28 in exchange rates, 48–49 Volcker, Paul, 157, 168 wage adjustments, 100–101, 103, 104–5, 155, 216–17, 220–22, 338, 361 wages, 19, 348 expansionary policies on, 284–85 Germany’s constraining of, 41, 42–43 lowered in Germany, 105, 333 wage stagnation, in Germany, 13 war, change in attitude to, 38, 196 Washington Consensus, xvi Washington Mutual, 91 wealth, divergence in, 139–40 Weil, Jonathan, 360 welfare, 196 West Germany, 6 Whitney, Meredith, 360 wind energy, 193, 229 Wolf, Martin, 385 worker protection, 56 workers’ bargaining rights, 19, 221, 255 World Bank, xv, xvii, 10, 61, 337, 357, 371 World Trade Organization, xiv youth: future of, xx–xxi unemployment of, 3, 64, 71 Zapatero, José Luis Rodríguez, xiv, 155, 362 zero lower bound, 106 ALSO BY JOSEPH E.

., 393 in US, 35, 36, 88, 89–92 see also euro single-market principle, 125–26, 231 skilled workers, 134–35 skills, 77 Slovakia, 331 Slovenia, 331 small and medium-sized enterprises (SMEs), 127, 138, 171, 229 small and medium-size lending facility, 246–47, 300, 301, 382 Small Business Administration, 246 small businesses, 153 Smith, Adam, xviii, 24, 39–40, 41 social cohesion, 22 Social Democratic Party, Portugal, 392 social program, 196 Social Security, 90, 91 social solidarity, xix societal capital, 77–78 solar energy, 193, 229 solidarity fund, 373 solidarity fund for stabilization, 244, 254, 264, 301 Soros, George, 390 South Dakota, 90, 346 South Korea, 55 bailout of, 113 sovereign risk, 14, 353 sovereign spreads, 200 sovereign wealth funds, 258 Soviet Union, 10 Spain, 14, 16, 114, 177, 178, 278, 331, 335, 343 austerity opposed by, 59, 207–8, 315 bank bailout of, 179, 199–200, 206 banks in, 23, 186, 199, 200, 242, 270, 354 debt of, 196 debt-to-GDP ratio of, 231 deficits of, 109 economic growth in, 215, 231, 247 gold supply in, 277 independence movement in, xi inequality in, 72, 212, 225–26 inherited debt in, 134 labor reforms proposed for, 155 loans in, 127 low debt in, 87 poverty in, 261 real estate bubble in, 25, 108, 109, 114–15, 126, 198, 301, 302 regional independence demanded in, 307 renewable energy in, 229 sovereign spread of, 200 spread in, 332 structural reform in, 70 surplus in, 17, 88 threat of breakup of, 270 trade deficits in, 81, 119 unemployment in, 63, 161, 231, 235, 332, 338 Spanish bonds, 114, 199, 200 spending, cutting, 196–98 spread, 332 stability, 147, 172, 261, 301, 364 automatic, 244 bubble and, 264 central banks and, 8 as collective action problem, 246 solidarity fund for, 54, 244, 264 Stability and Growth Pact, 245 standard models, 211–13 state development banks, 138 steel companies, 55 stock market, 151 stock market bubble, 200–201 stock market crash (1929), 18, 95 stock options, 259, 359 structural deficit, 245 Structural Funds, 243 structural impediments, 215 structural realignment, 252–56 structural reforms, 9, 18, 19–20, 26–27, 214–36, 239–71, 307 from austerity to growth, 263–65 banking union, 241–44 and climate change, 229–30 common framework for stability, 244–52 counterproductive, 222–23 debt restructuring and, 265–67 of finance, 228–29 full employment and growth, 256–57 in Greece, 20, 70, 188, 191, 214–36 growth and, 232–35 shared prosperity and, 260–61 and structural realignment, 252–56 of trade deficits, 216–17 trauma of, 224 as trivial, 214–15, 217–20, 233 subsidiarity, 8, 41–42, 263 subsidies: agricultural, 45, 197 energy, 197 sudden stops, 111 Suharto, 314 suicide, 82, 344 Supplemental Nutrition Assistance Program (SNAP), 91 supply-side effects: in Greece, 191, 215–16 of investments, 367 surpluses, fiscal, 17, 96, 312, 379 primary, 187–88 surpluses, trade, see trade surpluses “Swabian housewife,” 186, 245 Sweden, 12, 46, 307, 313, 331, 335, 339 euro referendum of, 58 refugees into, 320 Switzerland, 44, 307 Syria, 321, 342 Syriza party, 309, 311, 312–13, 315, 377 Taiwan, 55 tariffs, 40 tax avoiders, 74, 142–43, 227–28, 261 taxes, 142, 290, 315 in Canada, 191 on capital, 356 on carbon, 230, 260, 265, 368 consumption, 193–94 corporate, 189–90, 227, 251 cross-border, 319, 384 and distortions, 191 in EU, 8, 261 and fiat currency, 284 and free mobility of goods and capital, 260–61 in Greece, 16, 142, 192, 193–94, 227, 367–68 ideal system for, 191 IMF’s warning about high, 190 income, 45 increase in, 190–94 inequality and, 191 inheritance, 368 land, 191 on luxury cars, 265 progressive, 248 property, 192–93, 227 Reagan cuts to, 168, 210 shipping, 227, 228 as stimulative, 368 on trade surpluses, 254 value-added, 190, 192 tax evasion, in Greece, 190–91 tax laws, 75 tax revenue, 190–96 Taylor, John, 169 Taylor rule, 169 tech bubble, 250 technology, 137, 138–39, 186, 211, 217, 251, 258, 265, 300 and new financial system, 274–76, 283–84 telecoms, 55 Telmex, 369 terrorism, 319 Thailand, 113 theory of the second best, 27–28, 48 “there is no alternative” (TINA), 306, 311–12 Tocqueville, Alexis de, xiii too-big-to-fail banks, 360 tourism, 192, 286 trade: and contractionary expansion, 209 US push for, 323 trade agreements, xiv–xvi, 357 trade balance, 81, 93, 100, 109 as allegedly self-correcting, 98–99, 101–3 and wage flexibility, 104–5 trade barriers, 40 trade deficits, 89, 139 aggregate demand weakened by, 111 chit solution to, 287–88, 290, 299–300, 387, 388–89 control of, 109–10, 122 with currency pegs, 110 and fixed exchange rates, 107–8, 118 and government spending, 107–8, 108 of Greece, 81, 194, 215–16, 222, 285–86 structural reform of, 216–17 traded goods, 102, 103, 216 trade integration, 393 trade surpluses, 88, 118–21, 139–40, 350–52 discouragement of, 282–84, 299–300 of Germany, 118–19, 120, 139, 253, 293, 299, 350–52, 381–82, 391 tax on, 254, 351, 381–82 Transatlantic Trade and Investment Partnership, xv, 323 transfer price system, 376 Trans-Pacific Partnership, xv, 323 Treasury bills, US, 204 Trichet, Jean-Claude, 100–101, 155, 156, 164–65, 251 trickle-down economics, 362 Troika, 19, 20, 26, 55, 56, 58, 60, 69, 99, 101–3, 117, 119, 135, 140–42, 178, 179, 184, 195, 274, 294, 317, 362, 370–71, 373, 376, 377, 386 banks weakened by, 229 conditions of, 201 discretion of, 262 failure to learn, 312 Greek incomes lowered by, 80 Greek loan set up by, 202 inequality created by, 225–26 poor forecasting of, 307 predictions by, 249 primary surpluses and, 187–88 privatization avoided by, 194 programs of, 17–18, 21, 155–57, 179–80, 181, 182–83, 184–85, 187–93, 196, 197–98, 202, 204, 205, 207, 208, 214–16, 217, 218–23, 225–28, 229, 231, 233–34, 273, 278, 308, 309–11, 312, 313, 314, 315–16, 323–24, 348, 366, 379, 392 social contract torn up by, 78 structural reforms imposed by, 214–16, 217, 218–23, 225–38 tax demand of, 192 and tax evasion, 367 see also European Central Bank (ECB); European Commission; International Monetary Fund (IMF) trust, xix, 280 Tsipras, Alexis, 61–62, 221, 273, 314 Turkey, 321 UBS, 355 Ukraine, 36 unemployment, 3, 64, 68, 71–72, 110, 111, 122, 323, 336, 342 as allegedly self-correcting, 98–101 in Argentina, 267 austerity and, 209 central banks and, 8, 94, 97, 106, 147 ECB and, 163 in eurozone, 71, 135, 163, 177–78, 181, 331 and financing investments, 186 in Finland, 296 and future income, 77 in Greece, xi, 71, 236, 267, 331, 338, 342 increased by capital, 264 interest rates and, 43–44 and internal devaluation, 98–101, 104–6 migration and, 69, 90, 135, 140 natural rate of, 172–73 present-day, in Europe, 210 and rise of Hitler, 338, 358 and single currency, 88 in Spain, 63, 161, 231, 235, 332, 338 and structural reforms, 19 and trade deficits, 108 in US, 3 youth, 3, 64, 71 unemployment insurance, 91, 186, 246, 247–48 UNICEF, 72–73 unions, 101, 254, 335 United Kingdom, 14, 44, 46, 131, 307, 331, 332, 340 colonies of, 36 debt of, 202 inflation target set in, 157 in Iraq War, 37 light regulations in, 131 proposed exit from EU by, 4, 270 United Nations, 337, 350, 384–85 creation of, 38 and lower rates of war, 196 United States: banking system in, 91 budget of, 8, 45 and Canada’s 1990 expansion, 209 Canada’s free trade with, 45–46, 47 central bank governance in, 161 debt-to-GDP of, 202, 210–11 financial crisis originating in, 65, 68, 79–80, 128, 296, 302 financial system in, 228 founding of, 319 GDP of, xiii Germany’s borrowing from, 187 growing working-age population of, 70 growth in, 68 housing bubble in, 108 immigration into, 320 migration in, 90, 136, 346 monetary policy in financial crisis of, 151 in NAFTA, xiv 1980–1981 recessions in, 76 predatory lending in, 310 productivity in, 71 recovery of, xiii, 12 rising inequality in, xvii, 333 shareholder capitalism of, 21 Small Business Administration in, 246 structural reforms needed in, 20 surpluses in, 96, 187 trade agenda of, 323 unemployment in, 3, 178 united currency in, 35, 36, 88, 89–92 United States bonds, 350 unskilled workers, 134–35 value-added tax, 190, 192 values, 57–58 Varoufakis, Yanis, 61, 221, 309 velocity of circulation, 167 Venezuela, 371 Versaille, Treaty of, 187 victim blaming, 9, 15–17, 177–78, 309–11 volatility: and capital market integration, 28 in exchange rates, 48–49 Volcker, Paul, 157, 168 wage adjustments, 100–101, 103, 104–5, 155, 216–17, 220–22, 338, 361 wages, 19, 348 expansionary policies on, 284–85 Germany’s constraining of, 41, 42–43 lowered in Germany, 105, 333 wage stagnation, in Germany, 13 war, change in attitude to, 38, 196 Washington Consensus, xvi Washington Mutual, 91 wealth, divergence in, 139–40 Weil, Jonathan, 360 welfare, 196 West Germany, 6 Whitney, Meredith, 360 wind energy, 193, 229 Wolf, Martin, 385 worker protection, 56 workers’ bargaining rights, 19, 221, 255 World Bank, xv, xvii, 10, 61, 337, 357, 371 World Trade Organization, xiv youth: future of, xx–xxi unemployment of, 3, 64, 71 Zapatero, José Luis Rodríguez, xiv, 155, 362 zero lower bound, 106 ALSO BY JOSEPH E.

 

pages: 248 words: 57,419

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

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asset-backed security, bank run, banking crisis, banks create money, Ben Bernanke: helicopter money, Bretton Woods, currency manipulation / currency intervention, debt deflation, deindustrialization, diversification, diversified portfolio, fiat currency, financial innovation, Flash crash, Fractional reserve banking, income inequality, inflation targeting, Joseph Schumpeter, laissez-faire capitalism, liquidity trap, market bubble, market fundamentalism, Mexican peso crisis / tequila crisis, money: store of value / unit of account / medium of exchange, mortgage debt, private sector deleveraging, quantitative easing, reserve currency, Ronald Reagan, savings glut, special drawing rights, The Great Moderation, too big to fail, trade liberalization

A bout of hyperinflation could be incorporated into either or both of the above scenarios should governments respond to bank failures and economic contraction with successive rounds of massive fiat money creation, as they would be prone to do. Hyperinflation would not prevent economic collapse, however. It would destroy the savings of the middle class, as it did in Weimar Germany during the 1920s. It would also cause devastatingly high rates of interest. Finally, it would completely destroy the value of the dollar and the value of all the other fiat currencies affected by hyperinflation. Although hyperinflation would not be a solution, if the past is any guide, politicians would resort to it as a desperate expedient nevertheless. Andrew White wrote a fascinating account of the politics and economic consequences of hyperinflation during the French Revolution, which he published as a small book in 1912, Fiat Money Inflation in France. It is well worth a read and available for free download courtesy of the Project Gutenberg (at www.gutenberg.org/ebooks/6949).

 

pages: 161 words: 44,488

The Business Blockchain: Promise, Practice, and Application of the Next Internet Technology by William Mougayar

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Airbnb, airport security, Albert Einstein, altcoin, Amazon Web Services, bitcoin, Black Swan, blockchain, business process, centralized clearinghouse, Clayton Christensen, cloud computing, cryptocurrency, disintermediation, distributed ledger, Edward Snowden, en.wikipedia.org, ethereum blockchain, fault tolerance, fiat currency, global value chain, Innovator's Dilemma, Internet of things, Kevin Kelly, Kickstarter, market clearing, Network effects, new economy, peer-to-peer lending, prediction markets, pull request, ride hailing / ride sharing, Satoshi Nakamoto, sharing economy, smart contracts, social web, software as a service, too big to fail, Turing complete, web application

In a more advanced usage case, the token can be used as a unit of internal value, for example in Distributed Autonomous Organizations (DOAs), a subject that will be covered later in Chapters 5 and 7 of this book. Outside of the blockchain’s operations proper, cryptocurrency is just like any other currency. It can be traded on exchanges, and it can be used to buy or sell goods and services. Cryptocurrency is very efficient inside blockchain networks, but there is friction every time it crosses into the real world of traditional currency (also called “fiat currency”). 2. Decentralized Computing Infrastructure The blockchain can also be seen as a software design approach that binds a number of computers together that commonly obey the same “consensus” process for releasing or recording what information they hold, and where all related interactions are verified by cryptography. From a physical perspective, networked computer servers are what really powers blockchains.

 

pages: 180 words: 61,340

Boomerang: Travels in the New Third World by Michael Lewis

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Berlin Wall, Bernie Madoff, Carmen Reinhart, Celtic Tiger, collapse of Lehman Brothers, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, fiat currency, full employment, German hyperinflation, Irish property bubble, Kenneth Rogoff, offshore financial centre, pension reform, Ponzi scheme, Ronald Reagan, Ronald Reagan: Tear down this wall, South Sea Bubble, tulip mania, women in the workforce

I just hope the U.S. doesn’t collapse first. All my money is bet that it won’t. That’s my biggest fear. That I’m wrong about the chronology of events. But I’m convinced what the ultimate outcome is.” He still owned stacks of gold and platinum bars that had roughly doubled in value, but he remained on the lookout for hard stores of wealth as a hedge against what he assumed was the coming debasement of fiat currency. Nickels, for instance. “The value of the metal in a nickel is worth six point eight cents,” he said. “Did you know that?” I didn’t. “I just bought a million dollars’ worth of them,” he said, and then, perhaps sensing I couldn’t do the math: “twenty million nickels.” “You bought twenty million nickels?” “Uh-huh.” “How do you buy twenty million nickels?” “Actually, it’s very difficult,” he said, and then explained that he had to call his bank and talk them into ordering him twenty million nickels.

 

pages: 225 words: 11,355

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

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asset-backed security, bank run, banking crisis, Bernie Madoff, bonus culture, Bretton Woods, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, disintermediation, diversification, fiat currency, financial deregulation, financial innovation, financial intermediation, fixed income, Francis Fukuyama: the end of history, global reserve currency, Home mortgage interest deduction, Isaac Newton, joint-stock company, liquidity trap, London Interbank Offered Rate, margin call, market clearing, moral hazard, mortgage tax deduction, Northern Rock, offshore financial centre, paradox of thrift, pattern recognition, pension reform, pets.com, Plutocrats, plutocrats, Ponzi scheme, profit maximization, pushing on a string, reserve currency, risk tolerance, risk-adjusted returns, road to serfdom, Ronald Reagan, shareholder value, Silicon Valley, South Sea Bubble, statistical model, The Great Moderation, the payments system, too big to fail, value at risk, very high income, War on Poverty, Y2K, yield curve

The United States severed the link between the dollar and gold by closing the ‘‘gold window’’ that allowed other countries to swap dollars claims for gold bullion. This was without doubt one of the greatest acts of bad faith in all financial history. CURRENCIES FLOAT Without the last remnant of the gold standard, the world’s currencies began to ‘‘float.’’ All countries’ money was now pure ‘‘fiat money,’’ money that was only worth something because of the power of the government over its citizens—a fiat. This meant that fiat currencies were only worth what the foreign exchange—FX in bank-speak— markets centered in London said that they were worth, not in terms of gold or some other commodity ‘‘yardstick’’ but in terms of each other. The FX grew very quickly and became a ‘‘professional market’’ only loosely tied to the real-economy requirement for foreign currency to settle debts. One real-world foreign exchange trade for a company would set off scores of trades between banks.

 

pages: 192 words: 72,822

Freedom Without Borders by Hoyt L. Barber

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accounting loophole / creative accounting, Affordable Care Act / Obamacare, Albert Einstein, banking crisis, diversification, El Camino Real, estate planning, fiat currency, financial independence, fixed income, high net worth, illegal immigration, interest rate swap, obamacare, offshore financial centre, passive income, quantitative easing, reserve currency, road to serfdom, too big to fail

That is a pretty big statement, and, if true, would reverse the global soft-currency trend and harm other currencies. Historically, currencies have shifted between soft-money cycles and hard-money cycles. Soft money is not backed by any real value, such as gold, and permits and tempts those who have the control of the printing presses to produce as much “fiat” or counterfeit currency as they like. With a fiat currency—and that’s what they all are today—the Fed needs to be quite disciplined in managing the money supply through a conservative monetary policy. This policy needs to be followed up by actual sound fiscal practices so that the currency exhibits strength and maybe even appreciates and, in turn, encourages and contributes to building a healthy economy and stable government. Of course, government then also needs to control spending and reduce taxes to stimulate growth.

 

pages: 272 words: 64,626

Eat People: And Other Unapologetic Rules for Game-Changing Entrepreneurs by Andy Kessler

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23andMe, Andy Kessler, bank run, barriers to entry, Berlin Wall, British Empire, business process, California gold rush, carbon footprint, Cass Sunstein, cloud computing, collateralized debt obligation, collective bargaining, computer age, disintermediation, Eugene Fama: efficient market hypothesis, fiat currency, Firefox, Fractional reserve banking, George Gilder, Gordon Gekko, greed is good, income inequality, invisible hand, James Watt: steam engine, Jeff Bezos, job automation, Joseph Schumpeter, knowledge economy, knowledge worker, libertarian paternalism, low skilled workers, Mark Zuckerberg, McMansion, Netflix Prize, packet switching, personalized medicine, pets.com, prediction markets, pre–internet, profit motive, race to the bottom, Richard Thaler, risk tolerance, risk-adjusted returns, Silicon Valley, six sigma, Skype, social graph, Steve Jobs, The Wealth of Nations by Adam Smith, transcontinental railway, transfer pricing, Yogi Berra

Who knows? Economists are notoriously awful at dealing with real numbers. Still, more money needs to be created to fill the bigger bucket. But since no one knows what the velocity of money is, no one knows how much money is needed to keep the economy working just right. So it’s virtually impossible to fill the bucket just up to the rim. The Federal Reserve, the U.S. central bank that creates our fiat currency by allowing fractional reserve banks to operate, just guesses and creates what they think is the right amount of money. As we all know, too much money chasing too few goods creates inflation, a situation where prices go up above and beyond what they normally would if the supply of money and the actual wealth in society were perfectly matched. Too much money means a rising price level. That sucks because you get less stuff for the same unit of work.

 

pages: 218 words: 63,471

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

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

John Law first developed it in 1705. This was not good news for anti-Bullionists, even though they were probably right. Law was soon exiled after winning a duel and lived in Paris. While there, he became buddies with the Duke of Orleans. After the death of Louis XIV, the French monetary system was une mess, and with the Duke’s help, Law volunteered to fix it. He set up Banque Generale, which issued fiat currency, backed by zip. And despite his Real Bills Doctrine, Law issued currency like it was, well, paper. Around the same time, he set up the Mississippi Company, whose stock ballooned concurrent with the English South Sea Company, eventually being worth more than all the gold and silver in France, which from the looks of the reserves of Banque Generale, was FOOL’S GOLD 79 not very much. A bursting of the Mississippi Bubble in 1720 caused a run on the Banque and a depression in France for years to come.

 

pages: 268 words: 74,724

Who Needs the Fed?: What Taylor Swift, Uber, and Robots Tell Us About Money, Credit, and Why We Should Abolish America's Central Bank by John Tamny

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Airbnb, bank run, banks create money, Bernie Madoff, bitcoin, Bretton Woods, Carmen Reinhart, correlation does not imply causation, Credit Default Swap, crony capitalism, crowdsourcing, Donald Trump, Downton Abbey, fiat currency, financial innovation, Fractional reserve banking, full employment, George Gilder, Home mortgage interest deduction, Jeff Bezos, job automation, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, liquidity trap, Mark Zuckerberg, market bubble, moral hazard, mortgage tax deduction, NetJets, offshore financial centre, oil shock, peak oil, Peter Thiel, price stability, profit motive, quantitative easing, race to the bottom, Ronald Reagan, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Steve Jobs, The Wealth of Nations by Adam Smith, too big to fail, Uber for X, War on Poverty, yield curve

It did not matter what the Federal Reserve said.1 In 1933, FDR made the decision to devalue the dollar from 1/20th of an ounce of gold to 1/35th of an ounce.2 Forgetting the lesson of the early 1920s, when the integrity of the dollar was maintained, Roosevelt devalued the dollar and thereby marked the first time the United States defaulted on its debt. As Carmen Reinhart and Kenneth Rogoff describe in This Time Is Different (2009), “The abrogation of the gold clause in the United States in 1933, which meant that public debts would be repaid in fiat currency rather than gold, constitutes a restricting of nearly all the government’s domestic debt.”3 With the United States heavily in debt thanks to spending that was logically failing to stimulate the economy, FDR reduced the value of the dollars being returned to holders of U.S. debt. Importantly, what Roosevelt did was much bigger than a default. I have already said it a number of times, but when investors invest, they are buying future dollar income streams.

 

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

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air freight, airline deregulation, Albert Einstein, asset-backed security, bank run, Berlin Wall, Bretton Woods, business process, call centre, capital controls, central bank independence, collateralized debt obligation, collective bargaining, conceptual framework, Corn Laws, corporate governance, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cuban missile crisis, currency peg, Deng Xiaoping, Dissolution of the Soviet Union, Doha Development Round, double entry bookkeeping, equity premium, everywhere but in the productivity statistics, Fall of the Berlin Wall, fiat currency, financial innovation, financial intermediation, full employment, Gini coefficient, Hernando de Soto, income inequality, income per capita, invisible hand, Joseph Schumpeter, labor-force participation, labour market flexibility, laissez-faire capitalism, land reform, Long Term Capital Management, Mahatma Gandhi, manufacturing employment, market bubble, means of production, Mikhail Gorbachev, moral hazard, mortgage debt, new economy, North Sea oil, oil shock, open economy, pets.com, Potemkin village, price mechanism, price stability, Productivity paradox, profit maximization, purchasing power parity, random walk, reserve currency, risk tolerance, Ronald Reagan, shareholder value, short selling, Silicon Valley, special economic zone, the payments system, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, trade liberalization, trade route, transaction costs, transcontinental railway, urban renewal, working-age population, Y2K

I have always thought that measured inflation at a rate as low as 1 percent cannot be sustained in an economy using a fiat currency in a competitively democratic society with any remnant of populism (is any country immune?). 1 Such a currency, by its very nature, has as the only constraint on its supply the actions of the central bank, and cannot be entirely insulated from political influences. The U.S. inflations of 1946, 1950, and the late 1970s remain too vivid in my memory. (I had that view challenged in 2003 by the Japanese deflation, though, in the end, deflation did not take hold in the United States.) If a typical inflation rate of a democratically mandated fiat currency is north of 1 to 2 percent, what force could keep inflation below that mark as the two major disinflationary forces that I have discussed in this chapter recede?

 

pages: 348 words: 99,383

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

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Affordable Care Act / Obamacare, bank run, banking crisis, Bernie Madoff, clean water, collateralized debt obligation, correlation does not imply causation, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, disintermediation, fiat currency, financial innovation, Fractional reserve banking, full employment, high net worth, housing crisis, invisible hand, life extension, low skilled workers, market bubble, market clearing, minimum wage unemployment, moral hazard, obamacare, price mechanism, price stability, profit maximization, quantitative easing, race to the bottom, reserve currency, risk/return, Robert Shiller, Robert Shiller, The Bell Curve by Richard Herrnstein and Charles Murray, too big to fail, transaction costs, yield curve

The same phenomena have occurred in Europe. Under banking regulatory standards (Basel), banks do not have to hold any capital to support sovereign risk (such as the debt of a euro country). In the United States, banks do not have to hold any capital to support U.S. Treasury bonds. The theory is that if the government goes broke, the banks will inevitably fail (which is certainly true in the United States, where we have fiat currency). In Europe, this regulatory capital standard encouraged banks to purchase large qualities of sovereign debt from Greece, Spain, Italy, Portugal, and other countries that were running large deficits. Of course, in the European system, the strong countries (such as Germany) were not directly guaranteeing the debt of the weak countries. However, the banks in the strong countries could fail (and collapse the economy of the strong country) if Italy, Spain, Greece, or some other country were to default.

 

pages: 262 words: 83,548

The End of Growth by Jeff Rubin

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

The US government used this tactic on two occasions. In the days of the gold standard, paper currency could be physically exchanged for gold bullion. During the American Civil War, the government suspended the convertibility of the American dollar into gold. And during the Great Depression, in 1933, Washington once again stepped into the currency market, reducing the amount of gold that backed each US dollar. In the modern world of fiat currency (the term for the paper money we all know and use), old-time currency debasement has been replaced by exchange rate depreciation. Instead of a sovereign ruler instructing the royal mint to use less gold in each coin, governments now tell central bankers to print more money. A surplus of a currency in the market lowers its value in relation to the currencies of other countries. It’s supply and demand in action.

 

pages: 378 words: 94,468

Drugs 2.0: The Web Revolution That's Changing How the World Gets High by Mike Power

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air freight, banking crisis, bitcoin, blockchain, Buckminster Fuller, Burning Man, cloud computing, credit crunch, crowdsourcing, death of newspapers, double helix, fiat currency, Firefox, Fractional reserve banking, frictionless, Haight Ashbury, Kevin Kelly, means of production, Menlo Park, Mother of all demos, Network effects, packet switching, pattern recognition, pre–internet, RAND corporation, Satoshi Nakamoto, Skype, Stephen Hawking, Steve Jobs, Stewart Brand, trade route, Whole Earth Catalog, Zimmermann PGP

Of course not all of the pennies will be 95 per cent copper, but the portion of 95 per cent copper pennies in the box have the proportional gain,’ he told me. ‘I have to sort the copper pennies from the zinc pennies and I have designed a system to automate the sorting based on pattern recognition of metal composition. So I use technology to sort and reach a scale of efficiency that makes the process profitable. In my opinion, fiat currencies are doomed simply because of the deception involved. As the populace is educated (and it looks like that education is about to be painfully forced on the masses – look at Greece) it will be a force of nature – the destruction of the fiat model. Anonymity or the ability to act anonymously is a critical means to preserving individual freedom in the midst of tyrants. I am a true believer in financial privacy.

 

pages: 370 words: 102,823

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

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

Federal Budget Deficit (% of GDP) 1975 8.5% 3.2% 1992 7.5% 4.4% 1976 7.7% 3.9% 1993 6.9% 3.7% 1982 9.7% 3.8% 2003 6.0% 3.3% 1983 9.6% 5.7% 2004 5.5% 3.4% 1984 7.5% 4.6% 2008 5.8% 3.1% 1985 7.2% 4.9% 2009 9.3% 9.8% 1986 7.0% 4.8% 2010 9.6% 8.7% 1987 6.2% 3.0% 2011 8.9% 8.4% 1990 5.6% 3.7% 2012 8.1% 6.7% 1991 6.9% 4.4% 2013 7.4% 4.0% For some countries, this is easier said than done.53 But for nations that spend, tax and borrow in their own non-convertible fiat currencies, there is the potential for a radical break from the prevailing economic wisdom that promotes shared sacrifice over prosperity-enhancing investments in our people and planet. The case for such a break was laid out most cogently by Abba Lerner,54 who urged policy-makers to abandon the paralysing philosophy of so-called ‘sound finance’ in favour of a mission-oriented approach he dubbed ‘functional finance’.

 

pages: 438 words: 109,306

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

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

The BdL was a national clearinghouse for the banks of the German regional states in the western occupation zone, modeled broadly on the US Federal Reserve. Unlike the Reichsbank, which had been brought under government control, the BdL, which would now represent Germany at the BIS in Basel, had its independence constitutionally guaranteed. Hjalmar Schacht was not impressed with the deutschmark. It was backed neither by gold nor by foreign currency reserves. It was a fiat currency, imposed by the Western authorities. Schacht told Wilhelm Vocke, the president of the new German national bank, that the deutschmark would collapse in six weeks. But Schacht was wrong. The deutschmark was backed, and by assets even more powerful than gold or foreign exchange: public confidence and postwar planning by the Nazi leadership. At the same time, Ludwig Erhard, the economic director of the British and American occupation zones, lifted price restrictions and controls.

 

pages: 298 words: 95,668

Milton Friedman: A Biography by Lanny Ebenstein

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affirmative action, banking crisis, Berlin Wall, Bretton Woods, Deng Xiaoping, Fall of the Berlin Wall, fiat currency, floating exchange rates, Francis Fukuyama: the end of history, full employment, Hernando de Soto, hiring and firing, inflation targeting, invisible hand, Joseph Schumpeter, labour market flexibility, Lao Tzu, liquidity trap, means of production, Mont Pelerin Society, Ponzi scheme, price stability, rent control, road to serfdom, Ronald Coase, Ronald Reagan, school choice, school vouchers, secular stagnation, Simon Kuznets, stem cell, The Chicago School, The Wealth of Nations by Adam Smith, Thorstein Veblen

Germany’s problem, in part, is that it went into the euro at the wrong exchange rate that overvalued the deutsche mark. So you have a situation in the eurozone where Ireland has inflation and rapid expansion while Germany and France have stalled and had the difficulties of adjusting. The euro is going to be a big source of problems, not a source of help. The euro has no precedent. To the best of my knowledge, there has never been a monetary union, putting out a fiat currency, composed of independent states. There have been unions based on gold or silver, but not on fiat money—money tempted to inflation—put out by politically independent entities. At the moment, of course, Germany cannot get out of the euro. What it has to do, therefore, is make the economy more flexible—to eliminate the restrictions on prices, on wages and on employment; in short, the regulations that keep 10 percent of the German workforce unemployed.

 

pages: 467 words: 154,960

Trend Following: How Great Traders Make Millions in Up or Down Markets by Michael W. Covel

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Albert Einstein, asset allocation, Atul Gawande, backtesting, Bernie Madoff, Black Swan, buy low sell high, capital asset pricing model, Clayton Christensen, commodity trading advisor, correlation coefficient, Daniel Kahneman / Amos Tversky, delayed gratification, deliberate practice, diversification, diversified portfolio, Elliott wave, Emanuel Derman, Eugene Fama: efficient market hypothesis, fiat currency, fixed income, game design, hindsight bias, housing crisis, index fund, Isaac Newton, John Nash: game theory, linear programming, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, market fundamentalism, market microstructure, mental accounting, Nash equilibrium, new economy, Nick Leeson, Ponzi scheme, prediction markets, random walk, Renaissance Technologies, Richard Feynman, Richard Feynman, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, shareholder value, Sharpe ratio, short selling, South Sea Bubble, Stephen Hawking, systematic trading, the scientific method, Thomas L Friedman, too big to fail, transaction costs, upwardly mobile, value at risk, Vanguard fund, volatility arbitrage, William of Occam

President, Altegris Investments, 2nd Quarter 2004 Commentary Trend Following (Updated Edition): Learn to Make Millions in Up or Down Markets “Since currency and derivative trading are zero-sum games, every dollar ‘won’ requires that a dollar was ‘lost.’ Haven’t they realized what a losing proposition this has been? What’s more, why do they keep playing at a losing game? The answer is that the losers are all of us. And, while neither rich nor stupid, we’ve been given no choice but to continue to lose. And every time one of these fiat currencies cannot be ‘defended,’ the workers, seniors, and business owners of that country—folks like us—suffer big time. Indeed, as their currencies are devalued, workers’ savings and future payments, such as their pensions, denominated in those currencies lose purchasing power. Interest rates increase. Through no fault of their own, working people lose their jobs in addition to their savings. There have been press reports that, after a lifetime of working and saving, people in Indonesia are eating bark off the trees and boiling grass soup.

 

pages: 464 words: 116,945

Seventeen Contradictions and the End of Capitalism by David Harvey

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accounting loophole / creative accounting, bitcoin, Branko Milanovic, Bretton Woods, BRICs, British Empire, business climate, California gold rush, call centre, central bank independence, clean water, cloud computing, collapse of Lehman Brothers, colonial rule, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Deng Xiaoping, deskilling, 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, global reserve currency, Guggenheim Bilbao, 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, new economy, New Urbanism, Occupy movement, peak oil, phenotype, Plutocrats, plutocrats, Ponzi scheme, quantitative easing, rent-seeking, reserve currency, road to serfdom, Robert Gordon, Ronald Reagan, short selling, Silicon Valley, special economic zone, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, transaction costs, Tyler Cowen: Great Stagnation, wages for housework, Wall-E, women in the workforce, working poor, working-age population

We will return to this when we look at the third foundational contradiction. All these oddities in part arise because the three basic functions of money have quite different requirements if they are to be effectively performed. Commodity moneys are good at storing value but dysfunctional when it comes to circulating commodities in the market. Coins and paper moneys are great as a means or medium of payment but are less secure as a long-term store of value. Fiat currencies issued by the state with compulsory circulation (compulsory because taxes have to be paid in this currency) are subject to the policy whims of the issuing authorities (for example, debts can be inflated away by just printing money). These different functions are not entirely consistent with each other. But nor are they independent. If money cannot store value at all for more than an ephemeral moment, then it would be useless as a medium of circulation.

 

Crisis and Leviathan: Critical Episodes in the Growth of American Government by Robert Higgs, Arthur A. Ekirch, Jr.

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Alistair Cooke, clean water, collective bargaining, credit crunch, declining real wages, endowment effect, fiat currency, full employment, hiring and firing, income per capita, Joseph Schumpeter, laissez-faire capitalism, manufacturing employment, means of production, minimum wage unemployment, Plutocrats, plutocrats, post-industrial society, price discrimination, profit motive, rent control, rent-seeking, Richard Thaler, road to serfdom, Ronald Reagan, Simon Kuznets, strikebreaker, The Wealth of Nations by Adam Smith, total factor productivity, transaction costs, transcontinental railway, union organizing, Upton Sinclair, War on Poverty, Works Progress Administration

Cotton plunged in 1894 to less than five Crisis Under the Old Regime, 1893-1896 87 cents a pound, the lowest price in memory and scarcely half the value obtained in 1892. 30 As the taxes, interest, and prices paid by farmers had not fallen proportionately, agricultural producers found themselves caught in a painful price-cost squeeze. Desperately seeking means of extricating themselves, some of the hardest pressed farmers gave their support to Populist panaceas such as silver-fed inflation or stricter regulation of railroad rates. The Populist platform of 1892 also endorsed a subtreasury plan whereby the federal government, on the security of crop deposits, would make loans of fiat currency to farmers at interest rates below those prevailing in the financial markets. 31 (Four decades later a similar scheme was enacted by Congress, and it has played an important part in the government's subsidization of farmers ever since.) In 1896 a novel proposal to raise the price of wheat appeared from an unexpected source, the Russian minister at Washington. The plan called for the governments of the major wheat-exporting countries to form a cartel to control the international marketing of wheat and maintain its price at a high level.

 

pages: 632 words: 159,454

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

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

It would, in Greenspan’s view, ‘doubtless continue to do so’. But this would risk increasing interest rates (an instance of the old intuitive and observable fact that the more you borrow, the more you have to pay in interest for this privilege). From the point of view of currencies, printing more money could have adverse effects. ‘It is little comfort that the dollar is still the least worst of the major fiat currencies.’ But the gold market suggested a widespread distrust of even the US dollar among international investors. The ‘inexorable rise in the price of gold indicates a large number of investors are seeking a safe haven beyond fiat [paper] currencies’.52 This was palpably true. The average price of gold was $1,227 an ounce during 2010, the year in which he wrote the article, more than four times the average price of $279 in 2000.53 There were undoubtedly other issues driving the gold price, but one of the significant factors had been a loss of confidence in paper money as a store of value.

 

pages: 473 words: 132,344

The Downfall of Money: Germany's Hyperinflation and the Destruction of the Middle Class by Frederick Taylor

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Albert Einstein, anti-communist, banking crisis, Berlin Wall, British Empire, central bank independence, centre right, collective bargaining, falling living standards, fiat currency, full employment, German hyperinflation, housing crisis, Internet Archive, Johann Wolfgang von Goethe, mittelstand, offshore financial centre, Plutocrats, plutocrats, quantitative easing, rent control, risk/return, strikebreaker, trade route

Helfferich’s idea for a so-called ‘Rye Bank’, bizarre as it sounds to our current thinking, represented an attempt to do something that had become vitally necessary, at least at this stage in Germany’s crisis: to decouple the worth of the mark from the credibility of the Reich government. The state’s deficit was now so enormous and, particularly so long as the Ruhr crisis continued, so intractable, that no one had any faith in any fiat currency over which the government – or, for that matter, the Reichsbank, which was widely seen as its instrument – presided. The idea for a rye-backed currency, based on a compulsory mortgage of the assets of German agriculture and industry, was something that, apparently, Helfferich had hit upon while on his regular summer break in the Swiss mountains.2 He had already suggested it to the Cuno cabinet, with whom he and most other nationalists stood on good terms.

 

pages: 426 words: 115,150

Your Money or Your Life: 9 Steps to Transforming Your Relationship With Money and Achieving Financial Independence: Revised and Updated for the 21st Century by Vicki Robin, Joe Dominguez, Monique Tilford

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asset allocation, Buckminster Fuller, buy low sell high, credit crunch, disintermediation, diversification, diversified portfolio, fiat currency, financial independence, fudge factor, full employment, Gordon Gekko, high net worth, index card, index fund, job satisfaction, Menlo Park, Parkinson's law, passive income, passive investing, profit motive, Ralph Waldo Emerson, Richard Bolles, risk tolerance, Ronald Reagan, Silicon Valley, software patent, strikebreaker, Thorstein Veblen, Vanguard fund, zero-coupon bond

Banks are only required to have in the vault a fraction of the cash they lend. The rest is backed by nothing more than the assumption that the economy will keep expanding, allowing people will pay back their loans with interest. Second, the U.S. Treasury has nothing in its vault backing your money. Since Nixon took our currency off the gold standard in 1971 there’s been no gold or any other collateral you can convert your money into. It is “fiat currency”—fiat as in faith. It is held up just by the faith we all have in it being worth something. Because of this, depending solely on the money economy to meet your needs is actually risky business. If we think that money equals wealth or security or success, we are at the mercy of these economic and monetary forces. We are, as one sage said, laying up our treasures where moth and rust corrupt. But those who apply the nine-step program in Your Money or Your Life know otherwise.

 

pages: 1,088 words: 228,743

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

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Andrei Shleifer, asset allocation, asset-backed security, availability heuristic, backtesting, balance sheet recession, bank run, banking crisis, barriers to entry, Bernie Madoff, Black Swan, Bretton Woods, buy low sell high, capital asset pricing model, capital controls, Carmen Reinhart, central bank independence, collateralized debt obligation, commodity trading advisor, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, debt deflation, deglobalization, delta neutral, demand response, discounted cash flows, disintermediation, diversification, diversified portfolio, dividend-yielding stocks, equity premium, Eugene Fama: efficient market hypothesis, fiat currency, financial deregulation, financial innovation, financial intermediation, fixed income, Flash crash, framing effect, frictionless, frictionless market, George Akerlof, global reserve currency, Google Earth, high net worth, hindsight bias, Hyman Minsky, implied volatility, income inequality, incomplete markets, index fund, inflation targeting, interest rate swap, invisible hand, Kenneth Rogoff, laissez-faire capitalism, law of one price, Long Term Capital Management, loss aversion, margin call, market bubble, market clearing, market friction, market fundamentalism, market microstructure, mental accounting, merger arbitrage, mittelstand, moral hazard, New Journalism, oil shock, p-value, passive investing, performance metric, Ponzi scheme, prediction markets, price anchoring, price stability, principal–agent problem, private sector deleveraging, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, random walk, reserve currency, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, riskless arbitrage, Robert Shiller, Robert Shiller, savings glut, Sharpe ratio, short selling, sovereign wealth fund, statistical arbitrage, statistical model, stochastic volatility, systematic trading, The Great Moderation, The Myth of the Rational Market, too big to fail, transaction costs, tulip mania, value at risk, volatility arbitrage, volatility smile, working-age population, Y2K, yield curve, zero-coupon bond

In most countries there were no hyperinflations nor deep depressions. Capitalism, democracy, the rule of law, deregulation, and market-friendly economic policies gained ground across the globe over almost the entire period. No wonder market optimism was rife but, as we know, all did not end well. In contrast, the preceding period involved an increasing role for the state and doubts about capitalism, a shift to fiat currencies, two oil shocks, rising inflation and economic volatility, declining productivity, falling asset valuations, and relatively low realized asset returns. This period of mostly bad news did not last the full 20 years from 1968 to 1987, but essentially came to an end in the summer of 1982 when the massive 1980s’ bull market began. Table 27.1 contrasts the U.S. experience in five areas across the two 20-year periods:• Macroeconomy.