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City for Sale: The Transformation of San Francisco by Chester W. Hartman, Sarah Carnochan
affirmative action, Albert Einstein, Bay Area Rapid Transit, big-box store, business climate, Golden Gate Park, Haight Ashbury, housing crisis, illegal immigration, Loma Prieta earthquake, manufacturing employment, new economy, New Urbanism, profit motive, Ralph Nader, rent control, Ronald Reagan, Silicon Valley, South of Market, San Francisco, strikebreaker, union organizing, urban planning, urban renewal, very high income, young professional
The housing market is as tight as it has ever been.”44 One should not have excessive faith that the business turndown of 2000–2001 will spell much relief for San Francisco’s overburdened housing consumers. But these same forces creating a housing crisis in San Francisco have also produced probably the strongest local housing movement in the nation. San Francisco’s Housing Movement TOOR’s ﬁght against displacement from the South of Market area and related struggles in the Western Addition were the 1960s forerunners of San Francisco’s housing movement. Starting in the early 1970s, the Tenants Ac- Housing Crisis and Housing Movement / 337 tion Group and later the San Francisco Tenants Union45 organized individual buildings around maintenance and repair issues and provided tenants’ rights counseling, mainly in the Haight-Ashbury and Fillmore neighborhoods, via a “hotline” and publication of tenants’ rights handbooks.
In the early eighties, it was reported that “Mayor Feinstein wants to avoid turning the city into what she termed ‘a magnet for the homeless of the entire Bay Area, the state and the U.S.’ ”172 But it is highly unlikely that homeless folks just hanker to live on San Francisco’s streets as opposed to Chicago’s or Atlanta’s. The problem for the most part afﬂicts local residents who, due to poverty, the city’s housing crisis, and, for some, personal issues, are frozen out of the housing market. Sentiments such as those expressed by Feinstein are heard by city ofﬁcials all over America and mask an unwillingness to provide the needed services. Paul Boden, director of the city’s Coalition on Homelessness, accurately notes: “I don’t know of one city in the country that doesn’t say it’s a magnet and that homeless peo- Housing Crisis and Housing Movement / 381 ple come from somewhere else. Fargo, North Dakota, was calling itself a magnet. It’s kind of sad, actually.”173 What is undeniable is the massive gap between need and resources: The city’s now ﬁfteen hundred shelter beds can serve about one-tenth the number of homeless persons on and around the streets.
City for Sale OTHER BOOKS BY CHESTER HARTMAN Between Eminence and Notoriety: Four Decades of Radical Urban Planning Housing: Foundation of a New Social Agenda (with Rachel Bratt and Michael Stone) Challenges to Equality: Poverty and Race in America Double Exposure: Poverty and Race in America Paradigms Lost: The Post Cold War Era (with Pedro Vilanova) Housing Issues of the 1990s (with Sara Rosenberry) Winning America: Ideals and Leadership for the 1990s (with Marcus Raskin) Critical Perspectives on Housing (with Rachel Bratt and Ann Meyerson) The Transformation of San Francisco America’s Housing Crisis: What Is to Be Done? Displacement: How to Fight It (with Dennis Keating and Richard LeGates) Housing and Social Policy Yerba Buena: Land Grab and Community Resistance in San Francisco The World of the Urban Working Class (Marc Fried, with Chester Hartman) Housing Urban America (with Jon Pynoos and Robert Schafer) City for Sale The Transformation of San Francisco R E V I S E D A N D U P D AT E D E D I T I O N CHESTER HARTMAN with Sarah Carnochan University of California Press Berkeley Los Angeles London University of California Press Berkeley and Los Angeles, California University of California Press, Ltd.
The End of the Suburbs: Where the American Dream Is Moving by Leigh Gallagher
Airbnb, big-box store, Burning Man, call centre, car-free, Celebration, Florida, clean water, collaborative consumption, Columbine, crack epidemic, East Village, edge city, Edward Glaeser, extreme commuting, helicopter parent, Home mortgage interest deduction, housing crisis, Jane Jacobs, low skilled workers, Mark Zuckerberg, McMansion, Menlo Park, mortgage tax deduction, New Urbanism, peak oil, Ponzi scheme, Richard Florida, Robert Shiller, Robert Shiller, Sand Hill Road, Seaside, Florida, Silicon Valley, Steve Jobs, Stewart Brand, the built environment, The Death and Life of Great American Cities, Tony Hsieh, transit-oriented development, upwardly mobile, urban planning, urban sprawl, Victor Gruen, walkable city, white flight, young professional, Zipcar
Anyone who has read a newspaper over the past couple of years might reasonably deduce that the suburbs have been in some trouble lately: statistics and articles about the pain being inflicted on our bedroom communities have been appearing almost since the financial crisis began, citing not just the number of foreclosures among American home owners but related issues like the rise in crime and poverty in suburban communities. (“The Death of the Fringe Suburb,” read one recent headline; “Struggling in the Suburbs,” said another; a third declared, “The Housing Crisis Could End Suburbia as We Know It.”) Meanwhile, a cache of articles, papers, and popular books has heralded the resurgence of cities. But what the headlines miss is that while much of the hurt can be blamed on the recent recession and its immediate effects, there are larger trends at work. Many of the suburbs affected by the housing crisis are not experiencing a temporary setback but a permanent one, the result of a powerful tectonic shift whose forces have been grinding away for quite some time. • • • When I set out to write a book in the spring of 2011, I originally planned to explore the future of our economy and how the aftereffects of the financial crisis would bring permanent changes to various aspects of our lives.
Thanks to these efforts, the low pace of new home construction, and the strengthening of the housing market, much of the excess housing inventory has been worked off. As of this writing, we have a 4.4-month supply of existing homes, the lowest housing supply since early 2006. But the migration of wealth from suburb to city started well before Wall Street concocted the no-income, “no-doc” loans that led to the housing crisis. Cities’ renaissance started as early as the mid-1990s, urban housing prices have been rising since 1980, and crime rates have been falling for almost as long. Toll Brothers started moving into the New York City market in 2003. The trend might have been accelerated by the housing crisis, but it was happening already. Home valuations are now reflective of the shift inward. Christopher Leinberger, analyzing data from the online real estate database Zillow, found this to be the case by comparing real estate prices in center cities and inner suburbs with their far-out suburban counterparts in the late 1990s and today.
One of the hottest areas is in multifamily construction—the market for apartment and condo buildings and other structures containing four or more housing units, whether in cities or in suburbs. Construction of this kind of housing has more than doubled since the housing crisis set in. Part of this growth is due to a boom in the market for rental housing. The number of renters surged by more than five million in the 2000s, the largest ten-year increase since World War II. Vacancy rates are down and rents are soaring across the country, even in markets with lots of foreclosures. The vast majority of multifamily housing starts these days are rentals, whereas in the height of the housing crisis they were predominantly condos for sale. Meanwhile, the urbanization of the suburbs has only just begun. It’s not just New Urbanists and other urban or “green” activists that are preaching this idea.
Planet of Slums by Mike Davis
barriers to entry, Branko Milanovic, Bretton Woods, British Empire, Brownian motion, centre right, clean water, conceptual framework, crony capitalism, declining real wages, deindustrialization, Deng Xiaoping, edge city, European colonialism, failed state, Gini coefficient, Hernando de Soto, housing crisis, illegal immigration, income inequality, informal economy, Internet Archive, jitney, Kibera, labor-force participation, land reform, land tenure, low-wage service sector, mandelbrot fractal, market bubble, megacity, microcredit, New Urbanism, Ponzi scheme, RAND corporation, rent control, structural adjustment programs, surplus humans, upwardly mobile, urban planning, urban renewal, War on Poverty, Washington Consensus, working poor
Although the dominant global pattern is the eviction of the poor from the center, some Third World cities reproduce US-style urban segregation, with the postcolonial middle classes fleeing from the core to gated suburbs and so-called "edge cities." This has long been the case in Kingston, where one quarter of a million poor people inhabit the crime-ridden but culturally dynamic Downtown, wThile the middle 40 David Glasser, "The Growing Housing Crisis in Ecuador" in Carl Patton (ed.), Spontaneous Shelter: International Perspectives and Prospects, Philadelphia 1988, p. 150. 41 Oscar Lewis, The Children of Sanche%: Autobiography of a Mexican Family, New York 1961. 42 Kalinga Tudor Silva and Karunarissia Athukorala, The Watta-Dwellers: A Sociological Study of Selected Urban Tow-Income Communities in Sri Tanka, Lanham (Md.) 1991, p. 20. 43 Feng-hsuan Hsueh, Beijing: The Nature and the Planning of the Chinese Capital City, Chichester 1995, pp. 182-84.
Algeria in the early 1980s, for example, began to subdivide urban land reserves into plots, ostensibly for development by housing cooperatives; building materials were furnished at subsidized prices. As architect Djaffar Lesbet observes, however, this theoretically elegant balance between state aid and local initiative did not democratize access to housing: "The building plots have allowed those whom the system privileged to hold onto their lead, to achieve their own housing. They have also helped to reduce the dramatic and political tone of the housing crisis, by transforming this national issue into an individual problem."44 As a result, civil servants and others have acquired subsidized detached homes and villas, while the truly poor have ended up in illegal shacks in bidonvilles. Although lacking the revolutionary elan of Algeria, Tunisia also developed substantial state-subsidized housing, but 75 percent of it was unaffordable by the poor, who instead crowded into Tunis's sprawling slums such as Ettadhamen, Mellassine, and Djebel Lahmar.45 India illustrates the same trend in several different guises.
Most of the site-and-service lots ended up in the hands of state employees and the middle class.12 Planning expert Charles Choguill says this is unsurprising because the minimum savings required by the World Bank to qualify for a construction loan was so high that it automatically excluded most of the squatters.13 Likewise, in another site-and-service scheme in Lusaka, only one fifth went to the target group, and roughly the same dismal result obtained in Dakar.14 Writing in 1993, the ILO's A. Oberai concluded that World Bank slum-upgrading and sites-and-services projects had largely failed to have visible impact on the housing crisis in the Third World: "Despite efforts to make projects replicable, the project approach ties up excessive resources and institutional effort in a few locations and has not been able to achieve the desired level of housing stock. The project approach is therefore unlikely to have a significant impact on solving the problem of shelter in most developing countries."15 Other critics pointed to the programmatic disassociation of housing provision from employment creation, and the inevitable tendency for sites-and-services schemes to be located in peripheries poorly served, if at all, by public transport.16 11 Greg O'Hare, Dina Abbott, and Michael Barke, "A Review of Slum Housing Policies in Mumbai," Gties 15:4 (1998), p. 279. 12 A.
Shaky Ground: The Strange Saga of the U.S. Mortgage Giants by Bethany McLean
The analysis was very similar to that in a paper called “Fannie Mae Insolvency and Its Consequences” that was circulating among senior o∞cials at the National Economic Council and the Treasury. Even the language was similar. “A government seizure is inevitable,” it began. It noted the same accounting concerns, and even ended with a version of the same conclusion: “A fully government owned guarantor of mortgage debt might be exactly what is called for given the current housing crisis . . . without the need to satisfy a ﬁduciary duty to shareholders, BETHANY McLEAN COLUMBIA GLOBAL REPORTS Fannie might ﬁnally be able to perform its a≠ordable housing mission in a helpful and proactive manner.” The Monday a◊er the Barron’s story ran, Fannie’s stock fell 13 percent. Then, in mid-July, stories appeared in both the Wall Street Journal and the New York Times. The Times wrote: “Senior Bush administration o∞cials are considering a plan to have the government take over one or both of the companies and place them in a conservatorship if their problems worsen.”
Later, in a 1936 speech to the National Association of Real Estate Boards—which would become the politically powerful National Association of Realtors—Roosevelt said, “We have not yet found a satisfactory solution to one of the most fundamental of our economic problems—the provision for all American citizens of the kind of homes in which they have a right to live. I know you, with me, will not be content until a sound housing program is established for the whole nation.” 67 SHAKY GROUND 68 CHAPTER FOUR – HOUSING INDUSTRIAL COMPLEX The attempts to ﬁx the housing crisis brought about by the Depression, which became the roots of the housing-ﬁnance system we have today, actually began with President Herbert Hoover. In the summer of 1932, Congress passed the Federal Home Loan Bank Act; the idea was that federally backed regional banks would make cash advances to their local member banks, thereby encouraging those banks to lend. A◊er Roosevelt took o∞ce in 1933, Congress passed the National Housing Act, which created the Federal Housing Administration.
Less than ten minutes later, Geithner ﬁred back a letter saying that the GSEs’ own analysis showed that principal reduction BETHANY McLEAN COLUMBIA GLOBAL REPORTS could help up to half a million borrowers and save several billion dollars. The core di≠erence was in their views of the risk of strategic defaults, which Treasury argued was minimal. “You have the power to help more struggling homeowners and heal the remaining damage from the housing crisis,” Geithner wrote to DeMarco. But DeMarco would not budge. Treasury o∞cials, and at least some of the National Economic Council economists, thought DeMarco’s view was ridiculously narrow. Taxpayers, a◊er all, would benefit from what benefited the broader economy. “The White House couldn’t believe it,” says a former o≠icial. “You’ve got the NEC, HUD, and Treasury saying, ‘These are the numbers,’ and this guy who is not even confirmed is completely blocking us.
$2.00 A Day: Living on Almost Nothing in America by Kathryn Edin, H. Luke Shaefer
Affordable Care Act / Obamacare, clean water, ending welfare as we know it, future of work, Home mortgage interest deduction, housing crisis, impulse control, indoor plumbing, informal economy, low-wage service sector, race to the bottom, randomized controlled trial, Ronald Reagan, War on Poverty, working poor, Works Progress Administration
Since 2000, more and more Americans have found that the price of an apartment is out of their reach. Those concerned about the affordable housing crisis often focus a spotlight on rising rents. Clearly, a few million additional government rental subsidy vouchers would help. In addition, there is a place for investment in the building or rehabbing of more affordable housing. There’s actually already an underutilized mechanism in place at the federal level that could help with this—the National Housing Trust Fund. The NHTF is supposed to act as a pot of money that could be tapped by states to help support the building of affordable housing developments. Yet the recent housing crisis derailed efforts to fully fund the NHTF, and the federal government has yet to build the program up. One idea to fund such an initiative is to limit the home mortgage interest deduction on mortgage values above a certain level, perhaps half a million or a million dollars, in effect shifting a subsidy away from very wealthy families to some of the very poorest ones.
In Chicago, as well as in virtually every other jurisdiction in the country, child welfare officials deem it inappropriate for a brother and sister to sleep in the same bedroom once they reach a certain age. At some point, if the authorities were to find out that Kaitlin and Cole were sharing a room, Jennifer would be at risk of losing custody due to “neglect.” By today’s standards of child well-being, Jennifer can’t move into a studio apartment to help balance her family’s budget. The most obvious manifestation of the affordable housing crisis is in rising rents. Between 1990 and 2013, rents rose faster than inflation in virtually every region of the country and in cities, suburbs, and rural areas alike. But there is another important factor at work here that is an even bigger part of the story than the hikes in rent: a fall in the earnings of renters. Between 2000 and 2012 alone, rents rose by 6 percent. During that same period, the real income of the middling renter in the United States fell 13 percent.
With so many of their citizens cut off from any legitimate access to a cash income, these places may seem unrecognizable as part of “America.” And yet they are America, as much as any other place in the country. Though these forgotten places are indeed a world apart, much of what the extreme poor in other regions experience is reflected in the experiences of these families, too. In the central Delta, welfare is just as dead as it is in the rest of the country, if not more so. The affordable housing crisis and the perils of doubling up are also richly evident in the Delta. So is the stubborn spirit of those with nothing to survive by any means necessary. But a key difference between other places and the economically distressed small towns and rural regions concentrated in the Deep South and Appalachia is the combination of a virtually nonexistent cash safety net and the virtual lack of any formal-sector jobs.
Suburban Nation by Andres Duany, Elizabeth Plater-Zyberk, Jeff Speck
A Pattern Language, big-box store, car-free, Celebration, Florida, City Beautiful movement, desegregation, edge city, Frank Gehry, housing crisis, if you build it, they will come, income inequality, intermodal, Jane Jacobs, jitney, McMansion, New Urbanism, place-making, price mechanism, profit motive, Ralph Nader, Seaside, Florida, Silicon Valley, skinny streets, the built environment, The Death and Life of Great American Cities, The Great Good Place, transit-oriented development, urban planning, urban renewal, urban sprawl, white flight, working poor, Works Progress Administration
But even architects should remain skeptical of the power of well-tested traditional models in the face of extreme social isolation. Diggstown, in Norfolk, Virginia: a neighborhood-style retrofit of a previously distressed inner-city project that epitomizes HUD’s new standards THE MIDDLE-CLASS HOUSING CRISIS Virtually all the thought brought to bear on the housing crisis has been directed toward the urban poor, and rightly so, for they inhabit an environment that most would find unbearable. But the housing crisis is a middle-class issue, too. It has become increasingly difficult for the middle class to own satisfactory housing. In 1970, about 50 percent of all families could afford a median-priced home; by 1990, this number had dropped below 25 percent.4 There are many reasons behind this phenomenon, but the most significant factor is evident in the image on the left.
In recognition of the burdens imposed by multiple automobile ownership, there is now even a new type of loan, a “location-efficient mortgage,” that provides special terms to borrowers purchasing housing in pedestrian-friendly neighborhoods.ad The middle-class housing crisis is not new, and there has been no shortage of ideas designed to make the single-family house more affordable. The building industry and generations of architects have dedicated themselves to the task. The results—plastic plumbing, hollow doors, flimsy walls, vinyl cladding—are very clever, but all of them put together do not generate half the savings that can be achieved by allowing a family to own one car fewer. The problem is not one of architecture but of community planning, and as long as we continue to create places where walking, biking, and transit are pointless, we will continue to exacerbate the middle-class housing crisis. 4 THE PHYSICAL CREATION OF SOCIETY ENVIRONMENTAL CAUSES OF A SOCIAL DECLINE; DRIVERS VERSUS PEDESTRIANS; THE FOUR PREREQUISITES FOR STREET LIFE: MEANINGFUL DESTINATIONS, SAFE STREETS, COMFORTABLE STREETS, AND INTERESTING STREETS The history of a nation is only a history of its villages written large.
TWO WAYS TO GROW THE FIVE COMPONENTS OF SPRAWL A BRIEF HISTORY OF SPRAWL WHY VIRGINIA BEACH IS NOT ALEXANDRIA NEIGHBORHOOD PLANS VERSUS SPRAWL PLANS 2 - THE DEVIL IS IN THE DETAILS WHY TRAFFIC IS CONGESTED WHEN NEARBY IS STILL FAR AWAY THE CONVENIENCE STORE VERSUS THE CORNER STORE THE SHOPPING CENTER VERSUS MAIN STREET THE OFFICE PARK VERSUS MAIN STREET USELESS AND USEFUL OPEN SPACE WHY CURVING ROADS AND CUL-DE-SACS DO NOT MAKE MEMORABLE PLACES 3 - THE HOUSE THAT SPRAWL BUILT THE ODDITY OF AMERICAN HOUSING PRIVATE REALM VERSUS PUBLIC REALM THE SEGREGATION OF SOCIETY BY INCOME TWO ILLEGAL TYPES OF AFFORDABLE HOUSING TWO FORGOTTEN RULES OF AFFORDABLE HOUSING THE MIDDLE-CLASS HOUSING CRISIS 4 - THE PHYSICAL CREATION OF SOCIETY ENVIRONMENTAL CAUSES OF A SOCIAL DECLINE DRIVERS VERSUS PEDESTRIANS PREREQUISITES FOR STREET LIFE 5 - THE AMERICAN TRANSPORTATION MESS THE HIGHWAYLESS TOWN AND THE TOWNLESS HIGHWAY WHY ADDING LANES MAKES TRAFFIC WORSE THE AUTOMOBILE SUBSIDY 6 - SPRAWL AND THE DEVELOPER THE DECLINE OF THE AMERICAN DEVELOPER THE INSIDIOUS INFLUENCE OF THE MARKET EXPERTS QUESTIONABLE CONVENTIONAL WISDOM STRUGGLES WITH THE HOMEBUILDERS A VISIT TO THE NATIONAL ASSOCIATION OF HOME BUILDERS’ ANNUAL CONVENTION 7 - THE VICTIMS OF SPRAWL CUL-DE-SAC KIDS SOCCER MOMS BORED TEENAGERS STRANDED ELDERLY WEARY COMMUTERS BANKRUPT MUNICIPALITIES THE IMMOBILE POOR 8 - THE CITY AND THE REGION THE POSSIBILITY OF GOOD SUBURBS SUBURBS THAT HELP THE CITY THE EIGHT STEPS OF REGIONAL PLANNING THE ENVIRONMENTAL MOVEMENT AS A MODEL 9 - THE INNER CITY THINKING OF THE CITY IN TERMS OF ITS SUBURBAN COMPETITION THE AMENITY PACKAGE CIVIC DECORUM PHYSICAL HEALTH RETAIL MANAGEMENT MARKETING INVESTMENT SECURITY THE PERMITTING PROCESS 10 - HOW TO MAKE A TOWN REASONS NOT TO, AND REASONS TO DO SO ANYWAY REGIONAL CONSIDERATIONS MIXED-USE DEVELOPMENT CONNECTIVITY MAKING THE MOST OF A SITE THE DISCIPLINE OF THE NEIGHBORHOOD MAKING TRANSIT WORK THE STREETS THE BUILDINGS PARKING THE INEVITABLE QUESTION OF STYLE A NOTE FOR ARCHITECTS 11 - WHAT IS TO BE DONE THE VICTORY MYTH THE ROLE OF POLICY MUNICIPAL AND COUNTY GOVERNMENT REGIONAL GOVERNMENT STATE GOVERNMENT FEDERAL GOVERNMENT ARCHITECTS CITIZENS SUBURBAN NATION Acclaim for SUBURBAN NATION APPENDIX A - THE TRADITIONAL NEIGHBORHOOD DEVELOPMENT CHECKLIST APPENDIX B - THE CONGRESS FOR THE NEW URBANISM ACKNOWLEDGMENTS NOTES BIBLIOGRAPHY SOURCES OF ILLUSTRATIONS INDEX Notes Copyright Page PREFACE TO THE 10TH ANNIVERSARY EDITION THE STORY OF SUBURBAN NATION Now that Suburban Nation has managed to stay in print for a decade and sell close to 100,000 copies, it seems excusable to tell the story of how it came to be.
Andrei Shleifer, asset-backed security, balance sheet recession, bank run, banking crisis, Ben Bernanke: helicopter money, Carmen Reinhart, collapse of Lehman Brothers, debt deflation, Edward Glaeser, en.wikipedia.org, financial innovation, full employment, high net worth, Home mortgage interest deduction, housing crisis, Joseph Schumpeter, Kenneth Rogoff, liquidity trap, Long Term Capital Management, market bubble, Martin Wolf, moral hazard, mortgage debt, paradox of thrift, quantitative easing, Robert Shiller, Robert Shiller, school choice, shareholder value, the payments system, the scientific method, tulip mania, young professional
In 2007 Tennessee ranked eleventh in the country in terms of the share of workers producing goods meant to be shipped to areas outside the state they were working in. From 2007 to 2009, one out every six Tennessee workers producing these goods lost their job. The sharp drop in household spending in California, Florida, Nevada, and New York directly affected Tennessee workers. We cannot be certain of the number of jobs in Tennessee that would have been saved by policy efforts to mitigate the housing crisis elsewhere. But the view that helping troubled home owners in California and Florida was “terrible public policy” from the perspective of Tennesseans is suspect. When it comes to problems associated with levered losses, it does not matter where you live. As we’ve said, the ripple effects on the labor market mean that we are all in this together. The previous chapter laid out the levered-losses theory that demonstrates why Senator Corker’s argument is flawed.
Debt forgiveness is exactly one such policy, and arguably the most effective, given its role in reducing foreclosures and the very large differences in MPCs between creditors and debtors.20 One might argue that it is not the job of a private bank to voluntarily write down mortgage principal for the wider good of the public. However, DeMarco’s position as head of the GSEs was different. The GSEs by this time were a public entity and effectively belonged to taxpayers. It was DeMarco’s responsibility to act in the wider interest of the American public and pursue principal write-downs. Unfortunately, that wasn’t the case, and the failure to respond adequately to the housing crisis was likely the biggest policy mistake of the Great Recession. Some have argued that debt restructuring would have had little benefit because spending out of housing wealth, even for indebted households, is too small to have made a significant contribution to GDP.21 This is a narrow view. As we explained in the first part of the book, the collapse in spending by indebted households infected the entire economy through foreclosures and employment.
While such government intervention would have violated the contracts signed between servicers and MBS investors, these contracts were not designed to deal with such a massive rise in mortgage delinquencies and therefore needed to be scrapped anyway. Further, such an intervention would have cost very little taxpayer money—only the trustees would have needed to be compensated. The proposal would have allowed for more efficient renegotiation of mortgages that would have reduced debt and left both home owners and MBS investors better off—at little taxpayer cost. Another proposal put forth at the beginning of the housing crisis was the allowance of mortgage cram-downs by judges in Chapter 13 bankruptcy. In a Chapter 13 bankruptcy, an individual with too much debt submits a debt payback plan to a bankruptcy trustee in order to reduce his overall debt burden.36 Chapter 13 bankruptcy allows people to reduce debt that is not explicitly secured by some collateral. Credit card debt falls into this category. However, in the case of a mortgage on a principal residence, Chapter 13 does not allow for a reduction of the principal balance and does not prevent foreclosures.37 The week before the 2008 election, soon-to-be Vice President Joseph Biden told Floridians, “If we can help Wall Street, folks, we sure can help Silver Springs Boulevard right here in Ocala.
Evicted: Poverty and Profit in the American City by Matthew Desmond
affirmative action, Cass Sunstein, crack epidemic, Credit Default Swap, deindustrialization, desegregation, dumpster diving, ending welfare as we know it, ghettoisation, glass ceiling, housing crisis, informal economy, Jane Jacobs, late fees, New Urbanism, payday loans, price discrimination, profit motive, rent control, statistical model, superstar cities, The Chicago School, The Death and Life of Great American Cities, thinkpad, upwardly mobile, working poor, young professional
The remaining 67 percent—2 of every 3 poor renting families—received no federal assistance.32 This drastic shortfall in government support, coupled with rising rent and utility costs alongside stagnant incomes, is the reason why most poor renting families today spend most of their income on housing.33 Imagine if we didn’t provide unemployment insurance or Social Security to most families who needed these benefits. Imagine if the vast majority of families who applied for food stamps were turned away hungry. And yet this is exactly how we treat most poor families seeking shelter. — A problem as big as the affordable-housing crisis calls for a big solution. It should be at the top of America’s domestic-policy agenda—because it is driving poor families to financial ruin and even starting to engulf families with moderate incomes. Today, over 1 in 5 of all renting families in the country spends half of its income on housing.34 America can and should work to make its cities livable again. Meaningful change comes in various shapes and sizes.
In 2013, the Bipartisan Policy Center estimated that expanding housing vouchers to all renting families below the 30th percentile in median income for their area would require an additional $22.5 billion, increasing total spending on housing assistance to around $60 billion. The figure is likely much less, as the estimate does not account for potential savings the expanded program would bring in the form of preventing homelessness, reducing health-care costs, and curbing other costly consequences of the affordable-housing crisis.56 It is not a small figure, but it is well within our capacity. We have the money. We’ve just made choices about how to spend it. Over the years, lawmakers on both sides of the aisle have restricted housing aid to the poor but expanded it to the affluent in the form of tax benefits for homeowners.57 Today, housing-related tax expenditures far outpace those for housing assistance. In 2008, the year Arleen was evicted from Thirteenth Street, federal expenditures for direct housing assistance totaled less than $40.2 billion, but homeowner tax benefits exceeded $171 billion.
See Philip Tegeler, Michael Hanley, and Judith Liben, “Transforming Section 8: Using Federal Housing Subsidies to Promote Individual Housing Choice and Desegregation,” Harvard Civil Rights–Civil Liberties Law Review 30 (1995): 451–86; Housing and Community Development Act of 1974, Pub. L. No. 93–383, § 101(a)(1), (c)(6), 88 Stat. 633, 633–34. 10. On foreclosures of rental property, see Gabe Treves, California Renters in the Foreclosure Crisis, Third Annual Report (San Francisco: Tenants Together, 2011); Vicki Been and Allegra Glashausser, “Tenants: Innocent Victims of the Foreclosure Crisis,” Albany Government Law Review 2 (2009); Matthew Desmond, “Housing Crisis in the Inner City,” Chicago Tribune, April 18, 2010; and Craig Karmin, Robbie Whelan, and Jeannette Neumann, “Rental Market’s Big Buyers,” Wall Street Journal, October 3, 2012. Real estate investment manuals promoted investing in foreclosed and damaged properties long before the crash. “Distressed properties can literally make you rich,” one advised in 1998. “Banks don’t like foreclosures. But real estate investors do, because foreclosures can be quick bargain buys.”
3D printing, accounting loophole / creative accounting, additive manufacturing, Airbnb, algorithmic trading, Asian financial crisis, asset allocation, bank run, Basel III, bonus culture, Bretton Woods, British Empire, call centre, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, centralized clearinghouse, clean water, collateralized debt obligation, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, crowdsourcing, David Graeber, deskilling, Detroit bankruptcy, diversification, Double Irish / Dutch Sandwich, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial deregulation, financial intermediation, Frederick Winslow Taylor, George Akerlof, gig economy, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, High speed trading, Home mortgage interest deduction, housing crisis, Howard Rheingold, Hyman Minsky, income inequality, index fund, interest rate derivative, interest rate swap, Internet of things, invisible hand, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, knowledge economy, labor-force participation, labour mobility, London Whale, Long Term Capital Management, manufacturing employment, market design, Martin Wolf, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, offshore financial centre, oil shock, passive investing, pensions crisis, Ponzi scheme, principal–agent problem, quantitative easing, quantitative trading / quantitative ﬁnance, race to the bottom, Ralph Nader, Rana Plaza, RAND corporation, random walk, rent control, Robert Shiller, Robert Shiller, Ronald Reagan, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Snapchat, sovereign wealth fund, Steve Jobs, technology bubble, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tobin tax, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, Vanguard fund
You look at the cost-benefit analysis, and my dream is to take this issue, not just from the compassion argument, but to the finance ministers of the world, and say we cannot afford to not invest in the access to adequate, affordable nutrition for all of humanity.”69 It’s a laudable goal. However, tackling it will first require not only compassion from world leaders, but real change in Wall Street’s business model. In the midst of the housing crisis and Great Recession a few years back, I spent a lot of time traveling through the Inland Empire, a large metropolitan area in the middle of Southern California. It stretches an hour or two east of Los Angeles and Orange County, but is about as far away from the tony “OC” lifestyle as you can imagine. Made up primarily of San Bernardino and Riverside counties, the Inland Empire was at the heart of the subprime mortgage crisis and has yet to fully recover.
In the early 2000s, predatory lenders flocked to the area, offering dicey deals to the largely minority and lower-middle-class white populations who, unable to afford housing on the coast, still craved the American Dream of homeownership. It ended, as it did in so many neighborhoods and cities across America, in tears and massive foreclosures, turning entire cities into ghost towns of derelict properties. As recently as 2012, when I visited the Del Rosa neighborhood of San Bernardino, one of the hardest-hit cities in the housing crisis, remaining homeowners’ efforts to keep their properties up were being thwarted left and right. Groups of young men and school-age kids with pit bulls in tow hung out in front of corner bodegas at midday. For every well-kept bungalow with freshly cut grass and potted plants on the porch, there was an abandoned building spray-painted with gang graffiti or strewn with dirty mattresses and empty liquor bottles.
Home values began rebounding from their post-financial-crisis trough in the beginning of 2012, and by July 2015, home sales had increased to their highest pace in eight and a half years.6 But the percentage of Americans who can call themselves homeowners is still declining from its peak in 2004, and many experts expect it to fall further as credit continues to be tight, young people struggle with higher-than-average levels of unemployment, and baby boomers begin moving into retirement housing.7 Fixing this housing crisis, as Warren Buffett once told me, is a fundamental prerequisite for fixing our economy. And yet, nearly eight years after the crisis of 2008, we aren’t there yet. The national housing market is in recovery, but like the larger economic recovery, it is incredibly bifurcated. Sections of Washington, D.C., and Los Angeles are booming, while Detroit, Atlanta, and California’s Inland Empire are still coping with foreclosures and mortgages that are underwater.
Made to Break: Technology and Obsolescence in America by Giles Slade
Albert Einstein, Alexey Pajitnov wrote Tetris, Apple's 1984 Super Bowl advert, Buckminster Fuller, Cass Sunstein, Douglas Engelbart, global village, housing crisis, indoor plumbing, invention of radio, Joseph Schumpeter, Marshall McLuhan, Mikhail Gorbachev, more computing power than Apollo, mutually assured destruction, Ralph Nader, rent control, Ronald Reagan, Silicon Valley, Steve Jobs, the market place, the medium is the message, Thorstein Veblen, unemployed young men, upwardly mobile, Vladimir Vetrov: Farewell Dossier, women in the workforce
More than a thousand urban residential foreclosures occurred every day.23 Throughout America, the homeless and unemployed collected in tent cities,hobo jungles,and Hoover Heights. World War II improved the situation greatly, as 16 million young service men and women shipped out to the European and Pacifi theaters. But this improvement was only temporary. After demobilization, the situation worsened again. In Chicago in 1946, for example, the housing crisis was so bad that over 100,000 veterans—mostly unemployed young men—were homeless.24 In their book Picture Windows: How the Suburbs Happened, Rosalyn Baxandall and Elizabeth Ewen eloquently illustrate just how acute the housing crisis had become:“In Atlanta,2,000 people answered an advertisement for one vacancy. A classifie ad in Omaha newspaper read, ‘Big Ice Box 7 by 17 feet. Could be fi ed up to live in.’”25 In 1933, under FDR, the federal government responded to the crisis with a series of experimental moves that would ultimately render old techniques and styles of housing construction obsolete.
They were one example of what the sociologist Sharon Zukin calls liminal spaces—public areas for meeting, mixing, and transit.33 For low-income inner-city tenants, these liminal spaces, including front stoops, hallways, parks, sidewalks, squares, bus stops, and train terminals, can be sites of uncomfortable interactions—elevator silences, excessive noise, physical aggression. Especially during a depression or other housing crisis, liminal spaces are always overcrowded. Unemployed adults spend long hours there, as do children, poor relatives, and newlyweds forced to bunk-in with family members because they cannot afford their own apartment. The appeal of the porchless suburban house was the escape it offered from intense, overcrowded interaction with one’s neighbors.34 Contrary to popular myth, the urban working class was not driven to Levittown by crime; it was lured there by the promise of space and privacy offered by a detached home.
There was no communal path, no common service area.”35 Alfred, who was the exact opposite of his gregarious brother, was obsessed with privacy in housing design and expressed his belief that it could be made compatible with the mass production of homes. “Without even a trial balloon you guess in advance just how far you could push and persuade [people] to take either open planning or living in a fis bowl until the landscaping grows to give them privacy.”36 After 1948,when the housing crisis eased somewhat,the Levitts committed themselves to constructing detached housing for veterans. They could hardly lose. The government guaranteed veterans’ mortgages and made them available without any down payment at all. So, just as competition was entering the Levitts’ new downscale market, Alfred redesigned the Cape Cod to make it attractive to a middle-class clientele. His newest design featured a ranch-style home available in four basic models.
Chavs: The Demonization of the Working Class by Owen Jones
Asperger Syndrome, banking crisis, Berlin Wall, British Empire, call centre, collapse of Lehman Brothers, credit crunch, deindustrialization, Etonian, facts on the ground, falling living standards, first-past-the-post, ghettoisation, Gini coefficient, hiring and firing, housing crisis, Hugh Fearnley-Whittingstall, illegal immigration, income inequality, informal economy, low skilled workers, low-wage service sector, Occupy movement, pension reform, place-making, Plutocrats, plutocrats, race to the bottom, rising living standards, The Bell Curve by Richard Herrnstein and Charles Murray, The Spirit Level, too big to fail, unpaid internship, upwardly mobile, We are the 99%, Winter of Discontent, women in the workforce, working-age population
After long arguing 'we're all middle class', the media and politicians started talking about the working class again, but in a racialized form. The problems of the 'white working class' were ascribed to their whiteness, rather than their class. argued against this false portrait. Indeed, working-class communities and workplaces are more likely to be ethnically diverse than their middle-class counterparts. Problems faced by working-class people who are white-s-like the housing crisis, the lack of good jobs, poor rights at work, declining living standards, safe communities--are to do with class, not race. These are problems shared by working-class people of all ethnic backgrounds. Where race does come into it is the fact that working-class people from ethnic minority backgrounds suffer from other forms of oppression and exploitation. The majority of British Bangladeshis and Pakistanis, for example, live in poverty, while black people are far more likely to be stopped by the police.
For the last thirty years, the dominant mantra has been that 'the market knows best', but the state's retreat from meeting the nation's housing needs in favour of market forces has shown how absurd this quasi-religious belief can be. Aside from the millions who are spending years of their lives on waiting lists, the number of people in temporary accommodation soared by a stunning 135 per cent between 2001 and 2008. And the government might not be spending much on social housing, but instead it spends £21 billion a year on housing benefit, much of which ends up subsidizing private landlords. With the housing crisis worsening year by year, and with accommn, dation so central to people's lives, why did a Labour government leave the whole policy to go to rot? I asked Hazel Blears, whose fonner department when in the Cabinet included responsibility for housing. She accepted that New Labour had failed to build sufficient capaciry.L but with caveats. 'I think that there needed to be a housing programme. I've never been entirely convinced that it should be a council house building programme.
There are some alienated, angry young people out there who take out some of their frustrations in anti-social ways. Things like crime and drug addiction are more common in working- class areas than in the average middle-class suburb. A working-class teenager is considerably more likely to give birth than her middle-class peer. But the reality is rather different from the vicious generalizations and victim-blaming that accompanies chav-hare. Poverty, unemploy- ment and a housing crisis provide fertile ground for a range of social problems. These are working-class communities that took the brunt of a class war first unleashed by Thatcher three decades ago. Indeed, it would be far more startling if life had gone on, much like before, even as the pillars of the community collapsed one by one. * * * Proclaiming that people are responsible for their situation makes it easier to oppose the social reforms that would otherwise be necessary to help them.
Endless Money: The Moral Hazards of Socialism by William Baker, Addison Wiggin
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
It sounds unthinkable, but the few who are beginning to do this will be better off than those who reach out for the government lifeline, prolonging high payments for 30 years. The outcome would be a shorter recession, for the housing market would quickly readjust rather than suffer from the agonizing slow-motion erosion in prices and perpetually high inventories that are occurring today. Socialism’s solution to the housing crisis is reminiscent of the Japanese perpetual recession, where a bear market in equities has run 19 years and counting. The moral hazard that has been built into the nation’s mortgage market is a function of the structure of the system, something that the liberal Keynesian economist Paul Krugman drives home in his nostalgic plea to return to a simpler, 1950s-style banking system. While this is true, it demotes the importance of Democrat-inspired programs that tilted the playing field to incentivize origination of mortgages on behalf of those with poor credit, and it also ignores the role of wrapping a government guarantee around this compromised product.
Copies circulate on various Internet sites, including http://www. berniemadoffsec.com/the-worlds-largest-hedge-fund-is-a-fraud.html. 13. Nassim Nicholas Taleb, The Black Swan:The Impact of the Highly Improbable (New York: Random House, 2007), 229–252. A sprightly discussion of this is in The Black Swan’s Chapter 15: “The Bell Curve, That Great Intellectual Fraud.” Notes 383 14. Zillow, The Majority of U.S. Homeowners Thinks Their Home is Insulated From the Housing Crisis (August 6, 2008), http://zillow.mediaroom.com/index. php?s=159&item=64. Chapter 3: The Rise and Fall of Hard Money 1. Laurence H. Meyer, Remarks by Governor Laurence H. Meyer, December 5, 2001, www.federalreserve.gov/boarddocs/speeches/2001/20011205/default. htm. 2. Murray N. Rothbard, The Case Against the Fed (Auburn, AL: Ludwig von Mises Institute, 1994), 42. 3. Ibid., 30. 4. Michael David Bordo, “The Classical Gold Standard: Some Lessons for Today,” Federal Reserve Bank of St.
., 202, 339–340 Business as a System of Power (Brady), 178 Butler, Robert, 335 Butler, Smedley, 86–88 Byrne, Patrick, 140 Caesar, Julius, 248 Caligula, 258–259 Calomiris, Charles, 212 Campos, Roel, 329 Capital Asset Pricing Model (CAPM), 72 Capitalism: democracy as threat: and economic stress, 233–235 overview, 232–233 Roman Empire as example, 235–236 evolution of, 241–243 INDEX Roman Empire as example building wealth, 243–245 collectivism, 252–256 money supply, 245–249 squandering wealth, 249–252 See also Roman Empire, decline of Carnegie Foundation, 178 Carter, Jimmy, 221, 230–231 The Case Against the Fed (Rothbard), 354 Cassidy, John, 118, 119 Cato Institute, 336 Catsoulis, Jeannette, 335 Center for a Responsible Budget (CFRB), 226–227 Center for Responsible Politics (CRP), 184–185, 186 Chavez, Hugo, 365 Chemical Bank, 55, 56 Choudhri, Ehsan, 94–95, 96, 98, 99 Chrysler, 235 Citibank, 124 Citicorp, 211 Citigroup, 57 Clifford Chance LLP, 318 Clinton, Bill, 186, 201, 330, 340 Clinton, Hilary, 202 Coleman, Thomas, 311 Community Reinvestment Act (CRA), 127, 147, 149, 212 Conant, Charles, 62, 280 Conda, Cesar, 160 Considius, Q., 248 Conspiracy of Fools (Eichenwald), 223 Council on Foundations, 176 Counterfeiting, 38, 53 Countrywide Financial, 212, 214 Cramer, Jim, 141–142, 143, 145–146, 289, 303 Crawford, Michael, 246 Credit Crisis of 2008–2009: forced lending, 128–133 Index overview, 116–121 “too big to fail” policy, 121–128 See also Housing Crisis Crispus, Gaius Sallustius, 248 Culture of irresponsibility: chilling of inquiry, 293–296 moral vacuum, 296–299 morality, 290–292 overview, 277–281 rationality, 285–290 secular society, 281–285 See also Moral hazard; Self-indulgence Cuneo, Jonathan W., 326–327 “Curveball,” 363 Damn Yankees, 303 Dawes Plan, 62 The Debt Deflation Theory of Great Depressions (Fisher), 131 Deflation: Making Sure “It” Doesn’t Happen Here (Bernanke), 117 Democracy Alliance, 185 Derivatives, 22.
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
See Treasury bonds Deflation bailout, effects on economic impact of myths about “pushing on a string” argument De Gaulle, Charles Deng Xiaoping Digital gold currencies GoldMoney Dollar as currency reserves deterioration, and oil-pricing alternatives devaluation and Fed overseas holdings Dollar standard benefits to U.S. global dumping of Economic collapse, signs of Economic crisis (2008- ) bailouts command economy threat credit crisis and dollar standard federal debt government actions. See Federal Reserve housing crisis impact of and interest rate cuts Iraq war, cost of and job losses See also specific topics e-gold Elements ETNs Emergency Economic Stabilization Act (2008), operation of Energy independence, myth of Energy trusts, recommendations Enerplus Resources Fund Trust (ERF) Engelhard England coinage debasement, impact of goldsmith as banker inflation and paper money See also Great Britain Erhard, Ludwig Ethanol Euros euro ETF (FXE) replace dollar Exchange-traded funds (ETFs) bond cautions about commodities-based foreign currency-based gold-based nationalization risk oil-based silver-based trading/operation of Exchange-traded notes (ETNs) commodities-based Elements ETNs Fannie Mae China/Japan holdings Federal debt amount of (2009) debt ceiling, increase foreign holders of hidden debt infinite horizon discounted value concept inflation as remedy interest expense on Medicare Part D, unfunded liability example monetizing debt percentage of GDP in trillions Federal deposit insurance Federal Reserve auditing of bailout funds cooling economy, actions for criticisms of system and debt monetization and devaluation of dollar federal funds rate fractional reserve banks inflation, creating by interest rate cuts and monetary policy and mortgage meltdown open market operations and Plunge Protection Team and politicized money public/private nature of secrecy related to stimulating economy, actions for as unconstitutional Federal Reserve Act (1913) Federal Reserve Notes Fiscal policy, defined Fisher, Richard Florin Food production demand, future view See also Commodities as investment Ford, Gerald Foreign currency, hard currencies Foreign currency as investment digital gold currencies exchange-traded funds (ETFs) speculative nature of Foster, Richard S.
., historical view Goldman Sachs GoldMoney Gold Reserve Act (1934) Goldsmiths, as bankers Gold standard abandoned, United States Bretton Woods agreement Grant, James Great Britain gold standard nationalization oil reserves of Great Depression Greenbacks Greenspan, Alan on dollars held abroad on housing bubble interest rate cuts on WIN program Gresham’s law Gross domestic product (GDP), federal debt in Gulf War Hard Assets Producer (HAP) fund Hard currencies Hayek, F.A. He Fan Hickey, Fred Hitler, Adolf Housing crisis and Fed and interest rate cuts jingle mail Hunt, Bunker Hunt, Herbert al-Husseini, Sadad Hyperinflation and “crack-up boom,” features of Israel past periods of political implication of Index-type fund, gold-based India, poverty, decline of Indian rupee ETF (ICN) Infinite horizon discounted value Inflation as alternative to taxation and coinage debasement core inflation rate and distortion of market double-digit.
He Fan Hickey, Fred Hitler, Adolf Housing crisis and Fed and interest rate cuts jingle mail Hunt, Bunker Hunt, Herbert al-Husseini, Sadad Hyperinflation and “crack-up boom,” features of Israel past periods of political implication of Index-type fund, gold-based India, poverty, decline of Indian rupee ETF (ICN) Infinite horizon discounted value Inflation as alternative to taxation and coinage debasement core inflation rate and distortion of market double-digit. See Hyperinflation Federal Reserve, creation of historical view inflationary recession and malinvestment as monetary phenomenon official explanations of persistence of and price ceilings and price increases as remedy to debt as remedy to inflation and stagflation as theft Interest rate cuts economic impact of and housing crisis to stimulate economy Interest rates and bond prices raising, to cool economy and stagflation Investment recommendations bonds commodities foreign currencies gold gold/silver ratio information/resources for investors oil silver Iran, oil, pricing in euros Iraq war cost of and global rejection of America nonsupporting countries IRS bank transactions, reporting to financial behavior, reporting to See also Taxation Isaac, William iShares COMEX Gold Trust (IAU) iShares Silver Trust (SLV) Israel, hyperinflation James II, King of England Japan Fannie and Freddie holdings yen payable Treasuries, call for Japanese yen ETF (FXY) Johnson, Chalmers Johnson, Lyndon B.
Affordable Care Act / Obamacare, asset-backed security, bank run, banking crisis, banks create money, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, conceptual framework, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, Detroit bankruptcy, diversification, double entry bookkeeping, eurozone crisis, facts on the ground, financial innovation, fixed income, friendly fire, full employment, hiring and firing, housing crisis, Hyman Minsky, illegal immigration, inflation targeting, interest rate swap, Isaac Newton, Kenneth Rogoff, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, market bubble, market clearing, market fundamentalism, McMansion, moral hazard, naked short selling, new economy, Nick Leeson, Northern Rock, Occupy movement, offshore financial centre, price mechanism, quantitative easing, Ralph Waldo Emerson, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, short selling, South Sea Bubble, statistical model, the payments system, time value of money, too big to fail, working-age population, yield curve, Yogi Berra
As we shall see, these three problems—plus a myriad of details—made mortgage modifications look economically difficult, legally problematic, and politically toxic. HAVEN’T WE SEEN THIS MOVIE BEFORE? Once before in history, America experienced the frightening double whammy of a megarecession coupled with sharp declines in home prices. That was during the Great Depression. Back then, President Franklin Roosevelt and Congress reacted to the housing crisis with a burst of policy activism that put the governments of 2007–2010 to shame. The New Deal housing programs included establishing the FHA to insure home mortgages, Fannie Mae (then the FNMA, a government agency) to create a secondary market in mortgages, the Federal Home Loan Banks to provide funds to mortgage lenders, and the Federal Savings and Loan Insurance Corporation to insure deposits at thrift institutions.
And I sketched a back-of-the-envelope calculation suggesting that the new HOLC, like the original, could turn a modest profit in the end. I was not alone in doing so. Economists Paul Davidson and Alex Pollock had the idea of reviving the HOLC before I did, and Senator Chuck Schumer (D-NY) advocated something similar. By coincidence, a few days later I attended a meeting of House Democratic leaders where the then-budding housing crisis was on the agenda. My HOLC idea came up in passing—but, believe me, only in passing. It was rejected instantly as being wildly too expensive. At that stage, the TARP was still eight months away, and neither politicians nor their constituents were thinking about committing hundreds of billions of dollars of public money. I often muse about how much better things might have been had Congress revived the HOLC idea back in 2008, when the foreclosure problem was much smaller than it subsequently, and predictably, became.
A highly publicized settlement with major banks over irregularities in the foreclosure process in February 2012 ironically increased the number of foreclosures, at least for a while, by breaking the legal logjam. The banking plan that Treasury Secretary Geithner sketched in his first major speech on February 10, 2009, had four main components. One of them was the bank stress tests. Two others were new programs meant to accomplish the original stated purposes of the TARP: buying troubled assets. The fourth was, in Geithner’s words, “a comprehensive plan to address the housing crisis.” Unfortunately, he also added, “We will announce the details of this plan in the next few weeks,” which led all hell to break loose in the jittery financial markets. After all, the new administration had been in office for three weeks already, and their plan was not complete! It took Geithner only eight more days to finish the job. The housing plan, ungrammatically named Making Home Affordable, was announced by the president in a February 18 speech.
Vertical: The City From Satellites to Bunkers by Stephen Graham
1960s counterculture, Berlin Wall, Buckminster Fuller, Chelsea Manning, Commodity Super-Cycle, deindustrialization, Edward Glaeser, Edward Snowden, energy security, Frank Gehry, ghettoisation, Google Earth, high net worth, housing crisis, Howard Zinn, illegal immigration, Indoor air pollution, Jane Jacobs, late capitalism, means of production, megacity, megastructure, mutually assured destruction, new economy, New Urbanism, nuclear winter, oil shale / tar sands, planetary scale, Plutocrats, plutocrats, post-industrial society, Project Plowshare, rent control, Richard Florida, Ronald Reagan, Skype, South China Sea, the built environment, The Death and Life of Great American Cities, trickle-down economics, urban decay, urban planning, urban renewal, urban sprawl, white flight, WikiLeaks
As in Manhattan, many of them are holding properties for large investments, and these sites will rarely, if ever, be inhabited by people at all. Such properties, the Observer’s Alex Preston argues, ‘have become lavishly upholstered safety deposit boxes’66 – buildings that consume iconic views for largely absentee owners while appreciating vast speculative profits. As in Vancouver and New York, many will remain unoccupied, their darkened façades and empty rooms looming arrogantly and absurdly over a population experiencing its worst housing crisis in living memory. London also provides a classic example of the ways in which simplistic critiques and representations of the supposed failures of vertically built mass social housing have paved the way for the proliferation of towers for the super-rich. Speaking of one of the forty-three-floor elite housing towers in Stratford, one legacy of London’s Olympics-based ‘regeneration’ in 2012, architecture critic Juston McGuirk ponders that the building is the ‘sort of high-rise that was supposed to be unpopular in this country [the UK], discredited architecturally and politically, at least when it was called council [social] housing.’67 In 2013, 85 per cent of all housing purchases in inner London – largely those in the higher and ‘super-high’ price brackets – were being snapped up by non-UK nationals (mainly nationals from China, Singapore, Malaysia, Russia and Hong Kong, places where London real estate agents hold lavish prebuild sales events).68 Such frenzied speculation, often as a means of anonymously recycling money derived from corruption in a city now widely regarded as the world capital of money laundering,69 is pushing already-astronomical prices further ‘into the stratosphere’.70 Startlingly, as in New York, the numbers of residential super-high towers in London are rapidly overtaking the more traditional towers of corporate and banking headquarters.
The report estimated that, for every floor upwards in London, market values for elite residential apartments per square foot increase by 1.5 per cent.74 Adding the name of a famous architect and fitting the unit out with balconies, exceptional space standards and super-high-end bathrooms, floors, kitchens and technology further compounds such increased profitability. Meanwhile, the totally inadequate production of affordable or social housing means that London’s poorer and middle-class populations are either displaced altogether or squeezed into ever more overcrowded and overpriced accommodation within the rest of London’s housing stock. Between 2012 and 2015, over 50,000 low-income families were physically displaced from inner London because of the housing crisis combined unprecedented cuts in welfare funding.75 Many low-wage workers who remain are pivotal to the functioning of the city, but are crammed into tiny, illegally rented and often dangerous spaces in attics, basements, sheds and garages. Often highly overcrowded, with no provision for decent sanitation or fire escapes, and with no official record on maps and statistical registers, such improvised dwellings become extremely vulnerable to fires.
See Danny Dorling, ‘How the Super Rich Got Richer: 10 Shocking Facts about Inequality’, Guardian, 15 September 2014. 66Alex Preston, ‘Room at the Top: London’s Super-Prime Housing Market’, Observer, 6 April, 2014. 67Justin McGuirk, ‘Unreal Estate’, Domus, 30 July 2012. 68Ed Hammond, ‘Foreigners Buy Nearly 75 per cent of Property in Inner London’, Financial Times, 3 August 2013. 69John Armitage, ‘London Property Boom Built on Dirty Money’, Independent, 4 March 2015. 70Preston, ‘Room at the Top’. 71Duncan Bowie quoted in Dave Hill, ‘Glistening Towers Can Beguile But Won’t Provide the Homes London Most Needs’, Guardian, 16 March 2014. 72Hillary Osborne, ‘New London Housing “Aimed at Wealthy” Creates Widening Affordability Gap’, Guardian, 11 November 2013. 73Sam Pizzigati, ‘Can a Great City Overdose on Billionaires?’, Too Much, 14 March 2014. 74Knight Frank, ‘Tall Towers’, London, 2012. See knightfrank.co.uk/research/tall-towers-2012-1101.aspx. 75Daniel Douglas, ‘Over 50,000 Families Shipped Out of London Boroughs in the Past Three Years due to Welfare Cuts and Soaring Rents’, Independent, 29 April 2015. 76Antonio Olivo, ‘Housing Crisis Drives Families into Overcrowded Living Conditions’, Chicago Tribune, 28 March 2010. 77Rowan Moore, ‘London Is Being Transformed with 230 Towers: Why the Lack of Consultation?’ Observer, 29 March 2014. 78Mira Bar-Hillel, ‘What Does the Skyrocketing Price of Property in the Capital Mean for Society?’ Independent, 1 June 2014. 79Ian Steadman, ‘Look to the Heygate Estate for What’s Wrong with London’s Housing’, New Statesman, 6 November 2013. 80Eddy Frankel, ‘The Changing Fortunes of the Balfron Tower’, Time Out, 26 May 2015. 81Ibid. 82Owen Hatherley, ‘Keep Calm and Carry On: The Sinister Message behind the Slogan That Seduced the Nation’, Guardian, 8 January, 2016. 83As we see in chapter 10, the marketing for the tower also stresses that the higher residents live in the tower, the cooler the prevailing air temperature. 84Quoted in Nauzer K.
Dreaming in Public: Building the Occupy Movement by Amy Lang, Daniel Lang/levitsky
Bay Area Rapid Transit, bonus culture, British Empire, clean water, cognitive dissonance, collective bargaining, corporate governance, corporate personhood, crowdsourcing, David Graeber, deindustrialization, facts on the ground, glass ceiling, housing crisis, Kibera, late capitalism, Naomi Klein, Occupy movement, oil shale / tar sands, out of africa, Plutocrats, plutocrats, Port of Oakland, Rosa Parks, Saturday Night Live, Slavoj Žižek, structural adjustment programs, the medium is the message, too big to fail, trade liberalization, union organizing, upwardly mobile, urban renewal, War on Poverty, We are Anonymous. We are Legion, We are the 99%, white flight, working poor
Hungry and a bit drunk, he’d walked by at two in the morning, surprised to see the kitchen open and a cook making flapjacks. Oscar is living with friends, so the idea of escaping a full house and staying with the Ogawa community for the night was appealing. Though he didn’t think that there were very many people there in the same position as he, he did feel very welcome and at home. Oscar had been out of work since the housing crisis began three years ago. Though he considered Occupy Oakland a good start, he was skeptical about whether the system could be changed at all. He wasn’t sure if he would stay another night, though I did see him there later after sunset setting up a tent. The space had attracted some homeless people as well who seemed to have a mixture of practical and political reasons for being there. Kali, who was in his late thirties, boasted that he’d been the first person at Occupy Oakland; he’d been sleeping on a park bench on Broadway in front of the park on Sunday night anyway.
One of the speakers representing Move On, Charles Davidson, was someone I had interviewed in April at the US Uncut tax day demonstration.2 I remembered that at that time he expressed frustration at the national Move On organization, and was dissatisfied with some of their capitulations and their retreat on US wars and occupations. I asked him via email if he had a statement about the issue. Davidson wrote that the march was focused on budget cuts on healthcare, social programs and infrastructure, and on pressuring Congress to create jobs and address the housing crisis. Davidson also stressed that he did not trust the Democratic Party, and that he didn’t support Move On’s alliances with the party in general, but that he did support certain progressive Democrats such as Barbara Lee and Dennis Kucinich. He also stressed that there were many Move On members who’d been involved in political activism for years, and that the Occupy movement should try to embrace, rather than alienate, them and the union members that would be involved in the event.
Once again, we don’t look at the problem and blame the victims. People are living too long There have also been a rash of stories recently in the UK, scapegoating old people for just about every economic woe we have. First, there are too many pensioners and we can’t afford them – so they need to pay more, work for longer and get less.6 Then, a report by the Intergenerational Foundation told us that the housing crisis was down to these pesky old-timers living in houses that were ‘too big’ and were therefore off limits to young families.7 That’s right, it’s not a property bubble. It’s not that all the council houses were sold off to bribe some working-class people into thinking they were Tories. It’s nothing to do with extortionate house prices and unachievable deposits. No. As people get to the age where they have worked for perhaps 50 years, they are overnight made redundant.
3D printing, Airbnb, Atul Gawande, barriers to entry, big-box store, business process, call centre, carbon footprint, citizen journalism, corporate social responsibility, crowdsourcing, disintermediation, Elon Musk, Firefox, glass ceiling, greed is good, housing crisis, informal economy, Jane Jacobs, jimmy wales, Khan Academy, Kickstarter, Lean Startup, means of production, new economy, pattern recognition, Peter Singer: altruism, Peter Thiel, Ray Oldenburg, remote working, Richard Feynman, Ronald Reagan, sharing economy, Silicon Valley, Silicon Valley startup, Steve Jobs, TaskRabbit, Tony Hsieh, too big to fail, underbanked, women in the workforce, young professional, Zipcar
Whereas the Baby Boomers and Gen X “divorced” their professional lives from personal and civic arenas, Millennials have blurred the line between professional development and personal self-expression (for example, using social media to deliberately leverage their individuality) and eagerly seek out to reconcile their personal values and desire to serve others in a professional setting. Millennials were raised to believe that “they can be whatever they want to be” and don’t want to settle for a less-than-meaningful life. In a major study of Millennials, the Pew Research Center recently concluded: “Whatever toll a recession, a housing crisis, a financial meltdown and a pair of wars may have taken on the national psyche in the past few years, it appears to have hit the old harder than the young.…Millennials [are] confident, self-expressive, liberal, upbeat and open to change.”4 Millennials were not only born into a world of much more perceived affluence than prior generations, but also into one in which these values and aspirations were gaining traction.
Hurricanes Katrina and Sandy, the Deep Horizon oil spill, the visible campaigns against modern-day slavery, and the terrifying news of the rapidly melting polar ice caps have made the fragility of our planet painfully clear. The threat is no longer distant; we no longer look outside our immediate communities to see people suffering devastating consequences from our warming climate, the scarcity of freshwater, or the infiltration of our reservoirs by toxic wastes. The threats are omnipresent. The economic disaster and housing crisis of 2008—the “Great Recession”—has also forced many people and companies to change their behavior as consumers and employers. The impact of this recession still isn’t entirely clear, but Millennials, who came of age in this reality, developed a different set of priorities in response to this new context. Visa reported that the use of debit cards has surpassed that of credit cards, indicating a shifting comfort with debt from previous generations.
Global Financial Crisis by Noah Berlatsky
accounting loophole / creative accounting, asset-backed security, banking crisis, Bretton Woods, capital controls, Celtic Tiger, centre right, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, Doha Development Round, energy security, eurozone crisis, financial innovation, Food sovereignty, George Akerlof, Gordon Gekko, housing crisis, illegal immigration, income inequality, market bubble, market fundamentalism, moral hazard, new economy, Northern Rock, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, South China Sea, structural adjustment programs, too big to fail, trade liberalization, transfer pricing, working poor
THE GLOBAL FINANCIAL CRISIS The Global Financial Crisis Other Books of Related Interest: At Issue Series The American Housing Crisis Introducing Issues with Opposing Viewpoints Series Globalization Opposing Viewpoints Series Consumerism Debt The Global Financial Crisis Noah Berlatsky, Book Editor Christine Nasso, Publisher Elizabeth Des Chenes, Managing Editor © 2010 Greenhaven Press, a part of Gale, Cengage Learning Gale and Greenhaven Press are registered trademarks used herein under license. For more information, contact: Greenhaven Press 27500 Drake Rd. Farmington Hills, MI 48331-3535 Or you can visit our Internet site at gale.cengage.com ALL RIGHTS RESERVED. No part of this work covered by the copyright herein may be reproduced, transmitted, stored, or used in any form or by any means graphic, electronic, or mechanical, including but not limited to photocopying, recording, scanning, digitizing, taping, Web distribution, information networks, or information storage and retrieval systems, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the publisher.
The Weakness of Banking Regulations Caused the Crisis Vince Cable Some British banks have grown too big to fail, and perhaps too big for regulators to handle. Yet they want freedom from regulation and freedom to persue high risk investments. But the British taxpayer should not be responsible for ﬁnancial risks taken outside the nation’s borders. 42 5. Low Interest Rates Caused the Crisis Tito Boeri and Luigi Guiso 53 The housing crisis was fueled by the actions of the chairman of the Federal Reserve, Alan Greenspan, who kept interest rates low. These circumstances encouraged people to borrow too much to pay for homes they could not afford. 6. Abandoning the Gold Standard Caused the Crisis Dominic Lawson 59 If currency is not backed by gold, politicians and bankers will simply print money, resulting in inﬂation and a cycle of boom and bust.
Meltdown: How Greed and Corruption Shattered Our Financial System and How We Can Recover by Katrina Vanden Heuvel, William Greider
Asian financial crisis, banking crisis, Bretton Woods, capital controls, carried interest, central bank independence, centre right, collateralized debt obligation, conceptual framework, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, declining real wages, deindustrialization, Exxon Valdez, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, fixed income, floating exchange rates, full employment, housing crisis, Howard Zinn, Hyman Minsky, income inequality, kremlinology, Long Term Capital Management, margin call, market bubble, market fundamentalism, McMansion, mortgage debt, Naomi Klein, new economy, offshore financial centre, payday loans, pets.com, Plutocrats, plutocrats, Ponzi scheme, price stability, pushing on a string, race to the bottom, Ralph Nader, rent control, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, sovereign wealth fund, structural adjustment programs, The Great Moderation, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, wage slave, Washington Consensus, women in the workforce, working poor, Y2K
More than half of all refinance loans made to African-Americans in 2006 were subprime, according to an analysis by the advocacy group ACORN. That’s nearly twice the rate among white borrowers. Among low-income black borrowers, 62 percent of refinance loans were subprime, more than twice the rate among low-income whites. “It actually started in communities like Atlanta,” says Nikitra Bailey, a Center for Responsible Lending researcher who has studied the Southeastern U.S. housing crisis. “A lot of our older African-Americans were house rich but cash poor. So lenders came up with these scams to siphon the wealth away.” It’s a loss black America can scarcely afford, because black wealth has long been enormously dependent on home equity. In 1967, the year before the Mitchells bought their house, homes accounted for 67 percent of black wealth, compared with 40 percent of white wealth.
They will reach fruition when politicians and other leaders swallow their bruised egos and rethink their supine posture, arm in arm with Wall Street. That looks improbable at the moment. But voters can help them change their minds. The Suicide Solution B A R B A R A E H R E N R E I C H July 28, 2008 Afew days beforeCongress passed its housing bill,Car-lene Balderrama of Taunton, Massachusetts, found her own solution to the housing crisis. Just a little over two hours in advance of the time her mortgage company, PHH Corporation—may its name live in infamy—was to auction off her home, Balderrama killed herself with her husband’s rifle. This is not the kind of response to hard times that James Grant had in mind when he wrote his July 19 Wall Street Journal essay titled “Why No Outrage?” “One might infer from the lack of popular anger,” the famed Wall Street contrarian wrote, “that the credit crisis was God’s fault rather than the doing of the bankers and the rating agencies and the government’s snoozing watchdogs.”
Nickel and Dimed: On (Not) Getting by in America by Barbara Ehrenreich
This seems like a prudent and thrifty decision at the moment, but it turns out to be a major mistake. I decide there must be something I am doing wrong, some cue I am missing. Budgie's owners had been confident that Apartment Search would find me a place. When I call another friend of a friend, a professor at a college in St. Paul who has briefed me on the Twin Cities' industrial history, he concedes to being aware of an affordable-housing “crisis” but has no idea what I should do. Those rental agents who are kind enough to talk to me all recommend the same thing: find a motel that rents by the week and stay there until something opens up. So, through multiple calls, I arrive at a list of eleven motels in the Twin Cities area, all of them of the non-brand-name variety, offering weekly rates. The rates, though, are not anybody's definition of “affordable,” ranging from $200 a week at the Hill View in Shakopee to $295 at the Twin Lakes in southern Minneapolis, and many of these places are full.
But rents were also skyrocketing in the touristically challenged city of Minneapolis, where the last bits of near-affordable housing lie deep in the city, while job growth has occurred on the city's periphery, next to distinctly unaffordable suburbs. Insofar as the poor have to work near the dwellings of the rich—as in the case of so many service and retail jobs—they are stuck with lengthy commutes or dauntingly expensive housing. If there seems to be general complacency about the low-income housing crisis, this is partly because it is in no way reflected in the official poverty rate, which has remained for the past several years at a soothingly low 13 percent or so. The reason for the disconnect between the actual housing nightmare of the poor and “poverty,” as officially defined, is simple: the official poverty level is still calculated by the archaic method of taking the bare-bones cost of food for a family of a given size and multiplying this number by three.
Private Island: Why Britain Now Belongs to Someone Else by James Meek
Affordable Care Act / Obamacare, Berlin Wall, business continuity plan, call centre, clean water, Deng Xiaoping, Etonian, HESCO bastion, housing crisis, illegal immigration, Martin Wolf, medical bankruptcy, Mikhail Gorbachev, post-industrial society, pre–internet, price mechanism, risk tolerance, road to serfdom, Ronald Reagan, Skype, sovereign wealth fund, Washington Consensus, working poor
Thatcher and her successors have done all they can to sell off the nation’s bricks and mortar, only to be forced to rent it back, at inflated prices, from the people they sold it to. Before Right to Buy, the government spent a pound on building homes for every pound it spent on rent subsidies. Now, for every pound it spends on housing benefit, it puts five pence towards building. The response of the current government to the housing crisis is to try to make it worse. It is taking steps to increase house prices, without taking steps to increase supply. The coalition’s two most explicit interventions in the housing market have been to restrict supply and raise prices: the first when it cut, by two-thirds, the grant given to housing associations to build new homes, and the second with its mocking parody of Right to Buy, ‘Help to Buy’, offering already well-off people cheap loans to overbid for overpriced houses they couldn’t otherwise afford.
To settle for history as wheel rather than ascent, in which it will eventually be time for Dickens to come around again. There is a substantive obstacle in the way of that descent back into squalor: there is no neat way to separate the shortage of social housing from the shortage of housing in general. The government is pulling back in the face of a market that is failing across the board. Matt Griffith, author of an incisive paper for the think tank IPPR about the housing crisis, We Must Fix It, points out that the interconnecting problems afflicting the private housebuilding industry do not reflect a deeper economic malaise; they are the deeper economic malaise. Britain’s established housebuilders, Griffith reckons, no longer have housebuilding as their primary function. They’ve essentially become dealers in land. Griffith estimates British housebuilders have enough land to build 1.5 million houses.
Albert Einstein, Atul Gawande, Benoit Mandelbrot, big-box store, Black Swan, Checklist Manifesto, Clayton Christensen, Daniel Kahneman / Amos Tversky, Exxon Valdez, Gordon Gekko, housing crisis, Isaac Newton, Long Term Capital Management, Mahatma Gandhi, mandelbrot fractal, NetJets, pattern recognition, pre–internet, random walk, Ronald Reagan, South Sea Bubble, Steve Jobs, winner-take-all economy, young professional
During the tech bubble of the late 1990s, lousy companies were talked up and sold to an unsuspecting public. For example, analysts like Henry Blodget at Merrill Lynch were wildly bullish about Internet stocks, dressing up pigs with lipstick. Years later, the same thing happened at credit-rating agencies where analysts issued blindly positive ratings for the CMOs and CDOs that would ultimately lead to the housing crisis. As for me, my 18 gut-wrenching months at D. H. Blair had destroyed my clean copybook and brought my career to an absolute low. The résumé and reputation I had built for myself at Oxford and Harvard had been reduced to dust. And reputation in business—especially the investing world—is everything. For years after I left D. H. Blair, I felt so sullied by the experience that it was as if I couldn’t wash the dirt off my hands.
., 149, 157–60 Fabozzi, Frank, 18–19 Fairfax Financial Holdings, 35, 140 Fannie Mac, 53–5 Farmer Mac, 53–7 fee structures, hedge fund, 46–7, 67, 73–4, 79–80 Feldman, Andrew, 23 financial crisis of 2008–2009, 21, 57, 101 and addiction to Bloomberg, 118 and Aquamarine Fund, 86–99, 192 and behavioral finance, 107–9 and finding balance, 121–2 and inner scorecard, 80 and redemption policies, 47 Fooled by Randomness (Taleb), 136 Ford, Henry, 45 Fortescue Metals Group, 97 Fosha, Diana, 17 Freddie Mac, 53–5, 90 Gabelli, Mario, 73 Gage, Phineas, 102 Gates, Bill, 61, 78–9, 83, 124, 176 Gawande, Atul, 151–4 GEICO, 38, 164 Girard, Joe, 61 GLIDE Foundation, 69–70, 75–6, 175 Goldman Sachs, 7–8, 30–1 Gotham Partners, 54 Graham, Benjamin, 1, 18–19, 30, 36–7, 50, 79, 106, 146 greed, 3, 8, 16, 50, 112, 189, 193 Green, William, 85, 195 Greenblatt, Joel, 53, 106 Greene, Robert, 171 Guerin, Rick, 82, 93 Hamlet (Shakespeare), 5 Harvard Business School (HBS), 5–7, 9, 21–2, 28–9, 42, 49, 128, 130, 184 Hawkins, David, 66 Hemingway, Ernest, 17 heroes, modeling habits of, 39–40, 46, 67, 71, 96, 113, 115–16, 176–7 Hill, Napoleon, 35 Hindi, Orly, 180 Hohn, Chris, 49–50, 51, 144 Hölldobler, Bert, 104 housing crisis, 17, 90. See also financial crisis of 2008–2009 How I Raised Myself from Failure to Success in Selling (Bettger), 6 How to Win Friends and Influence People (Carnegie), 35 Hughes, Stephen, 167–9 Influence: Science and Practice (Cialdini), 148 Influence: The Psychology of Persuasion (Cialdini), 60 inner growth and meaning, 187–94 Intelligent Investor, The (Graham), 1, 19, 30, 79 investing checklist for, 151–70 as a game, 123–32 guideline for checking stock prices, 135–7 guideline for researching, 140 guideline for responding to sales pitches, 137–9 guideline for talking to management, 139–40 guidelines for buying and selling, 145–8 guidelines for discussing, 144–5, 148–50 rules and tools for, 133–50 use of the phrase “value investing,” 187 See also value investing IPOs (initial public offerings), 9–10, 129, 138–9 J.
accounting loophole / creative accounting, bank run, banking crisis, Bernie Madoff, Black Swan, capital controls, central bank independence, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Brooks, diversification, financial deregulation, financial innovation, helicopter parent, Home mortgage interest deduction, housing crisis, Howard Zinn, Hyman Minsky, Isaac Newton, Joseph Schumpeter, Long Term Capital Management, market bubble, Martin Wolf, Mexican peso crisis / tequila crisis, millennium bug, moral hazard, mortgage tax deduction, Naomi Klein, new economy, Northern Rock, Own Your Own Home, price stability, Ronald Reagan, savings glut, short selling, Silicon Valley, South Sea Bubble, The Wealth of Nations by Adam Smith, too big to fail
Fannie hoped that, by buying such mortgages, it would encourage other banks and mortgage institutions to lend more and more along similar lines. The project would be launched nationally in the spring. In the same year, Fannie set itself the goal of doubling its profits in five years, and its employees were rewarded with stock options when that goal was achieved. In 1999, Steven Holmes noted in the New York Times that, by pushing through such projects, the administration could cause a repeat of the housing crisis of the 1980s: In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980s.24 But there was nothing tentative about the actions of Fannie Mae.
See also discrimination against minorities multiple purchases, 7, 9 second mortgages, 6-7 See also housing policy Hoover, Herbert, 101-5, 109 New Deal policies and policies of, 106 Hortlund, Per, 143 Housing and Urban Development (HUD), lending expansion under Cisneros, 29-36 housing bubble, 5-10, 17-18, 113 riding the bubble, 55-58, 134-35 warning signs of impending trouble, 40-43, 70-75 housing crisis of 1980s, 33 housing policy Cisneros and, 23-25 Community Reinvestment Act and, 26-28 expanded homeownership, 23-28 exposure to risk, 24-25, 29-30, 40-43 geographic variations, 7-9 government homeownership projects, 25-28 lending community and, 25-28 monitoring of loans made, 34 ownership society and, 24, 36-40 stretching HUD rules and requirements, 29-36 subprime mortgages and, 24, 29-36 warning signs of impending trouble, 40-43 housing prices, 8, 9-10 HUD.
Inflated: How Money and Debt Built the American Dream by R. Christopher Whalen
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
Rising prices and falling purchasing power forced many American households to use the power of two wage earners to make the purchase of a home a reality. And many Americans through the mid-1990s through 2007 saw the value of their homes rise dramatically, in some cases more than 100 percent over that period, leading to many people thinking of homes as speculative investment vehicles instead of a place to live. But the most striking fact coming out of the housing crisis for this author is that despite the 25 to 35 percent drop in value for many homes in major metropolitan areas, the cost of replacing many existing homes is above the current market value—grim testament to the reality of the underlying rate of inflation in the United States. The Greenspan Legacy Contemporary observers writing accounts of the collapse of the subprime debt bubble blame Greenspan and the members of the Federal Open Market Committee for the crisis.
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. He explains: There are three issues or “headwinds” as I like to describe them, factors that were once positives for the economy or tailwinds, but are now a drag on the economy.
Stevenson, Adlai Stewart, John Fat Years and the Lean Stewart, William Silver Knight (pamphlet) Stillman, James Stock investment New Era theory perspective, change Stock markets human nature, impact purchases (financing), short-term loans (usage) Stocks, decline Strong, Benjamin Bankers Trust Company exit Delano/House meeting Morgan control replacement Strong, William Subprime debt bubble, blame Subprime Debt Crisis (2008) Subprime debt crisis, Fed/Treasury assistance Subprime financial crisis, perspective (Raynes) Subprime housing crisis (2007-2009), issues Suez Canal, closing (1956) Sugar Equalization Board Summers, Larry Swanberg, W.A. Sylla, Richard Systemic risk, moral dilemma Szymczak, M.S. Taft, William Howard government debt Taleb, Nassim Tammany Hall Roosevelt, impact Tansil, Charles Callan America Goes to War Tariffs competitiveness, FDR promise FDR maintenance imposition increase protection, increase reduction FDR endorsement Hoover opposition Republican party position Tariffs for revenue only Taxes FDR increase reduction, passage Tennessee Iron & Coal Company U.S.
Affordable Care Act / Obamacare, algorithmic trading, Amazon Mechanical Turk, asset-backed security, Atul Gawande, bank run, barriers to entry, Berlin Wall, Bernie Madoff, Black Swan, bonus culture, Brian Krebs, call centre, Capital in the Twenty-First Century by Thomas Piketty, Chelsea Manning, cloud computing, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crowdsourcing, cryptocurrency, Debian, don't be evil, Edward Snowden, en.wikipedia.org, Fall of the Berlin Wall, Filter Bubble, financial innovation, Flash crash, full employment, Goldman Sachs: Vampire Squid, Google Earth, Hernando de Soto, High speed trading, hiring and firing, housing crisis, informal economy, information retrieval, interest rate swap, Internet of things, invisible hand, Jaron Lanier, Jeff Bezos, job automation, Julian Assange, Kevin Kelly, knowledge worker, Kodak vs Instagram, kremlinology, late fees, London Interbank Offered Rate, London Whale, Mark Zuckerberg, mobile money, moral hazard, new economy, Nicholas Carr, offshore financial centre, PageRank, pattern recognition, precariat, profit maximization, profit motive, quantitative easing, race to the bottom, recommendation engine, regulatory arbitrage, risk-adjusted returns, search engine result page, shareholder value, Silicon Valley, Snapchat, Spread Networks laid a new fibre optics cable between New York and Chicago, statistical arbitrage, statistical model, Steven Levy, the scientific method, too big to fail, transaction costs, two-sided market, universal basic income, Upton Sinclair, value at risk, WikiLeaks
As information technology improved, lobbyists could tell a seductive story: regulators were no longer necessary. Sophisticated investors could vet their purchases.20 Computer models could identify and mitigate risk. But the replacement of regulation by automation turned out to be as fanciful as flying cars or space colonization. 106 THE BLACK BOX SOCIETY Machine Dreams Consider the role of computer models in a critical part of the housing crisis: mortgage-backed securities. While investors may not be interested in any one particular mortgagor’s stream of payments, an aggregation of such payments can be marketed as a far more stable income source (or security) than, say, any one loan. Think, for instance, of the stream of payments coming out of a small city. It might seem risky to give any one household a loan; the breadwinner might fall ill, they might declare bankruptcy, they may hit the lottery and pay off the loan tomorrow (denying the investor a steady stream of interest payments).
to Matt Taibbi’s coruscating outrage in Griftopia, the genre has reflected the manners and mores of the time. Journalists and legal scholars help the persistent to peer into fi nance’s black box. They need a stronger voice in a regulatory process too often dominated by the few who profit from opacity. To be sure, there are many conscientious souls working on Wall Street. But their voices and values matter little if they can be summarily overruled by their bosses. The aftermath of the housing crisis has exposed a critical mass of unethical and hugely costly deals. It has created a presumption of suspicion for large firms—particularly those that now enjoy “too big to fail” status. Black box finance ranges from the crude to the cunning, the criminal to the merely complex. Countless narratives and analyses of the crisis have tried to pin down whether bankers, mortgage brokers, regulators, and insurers knew or should have known that the mortgage industrial complex was building a house of cards.
They should not be afraid to alert regulators when such liabilities appear to be too interconnected or destabilizing. Although 50 separate states run Medicaid programs, antifraud programs appear to be unifying these once-disparate sources of data. The data miners can also compare findings of noteworthy activity in the Medicare program across states.159 Functionality of this kind, spotting repeated patterns of mortgage fraud around the country, would have been very helpful in the run-up to the housing crisis. Just as a network of fusion centers can readily transmit suspicious patterns of criminal intelligence horizontally (to other state- or local-level agencies) or vertically (to national agencies), state Medicaid Integrity Programs both empower and are empowered by rapid data flows.160 The Medicare-Medicaid Data Match Program breaks down the barriers between the surveillance and analysis done by each program.161 Its successes should be a model for the entities now comprising the Financial Stability Oversight Council (FSOC), which may be able to find efficiencies (and new insights) by sharing data.
Stress Test: Reflections on Financial Crises by Timothy F. Geithner
Affordable Care Act / Obamacare, asset-backed security, Atul Gawande, bank run, banking crisis, Basel III, Bernie Madoff, Bernie Sanders, Buckminster Fuller, Carmen Reinhart, central bank independence, collateralized debt obligation, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, David Brooks, Doomsday Book, eurozone crisis, financial innovation, Flash crash, Goldman Sachs: Vampire Squid, housing crisis, Hyman Minsky, illegal immigration, implied volatility, London Interbank Offered Rate, Long Term Capital Management, margin call, market fundamentalism, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, moral hazard, mortgage debt, Nate Silver, Northern Rock, obamacare, paradox of thrift, pets.com, price stability, profit maximization, pushing on a string, quantitative easing, race to the bottom, RAND corporation, regulatory arbitrage, reserve currency, Saturday Night Live, savings glut, short selling, sovereign wealth fund, The Great Moderation, The Signal and the Noise by Nate Silver, Tobin tax, too big to fail, working poor
And by ensuring the system could sustain depression-like losses, we thought we could make a depression less likely. But I wasn’t ready to provide much detail yet. We hadn’t figured out how the stress test would work. And the rest of my speech was just as vague. I would announce a new program to buy some of the distressed assets that were weighing down banks, while acknowledging that it wasn’t ready. I would promise “a comprehensive plan to address the housing crisis,” with little further explanation. And I would signal that we would not allow any more Lehman-style failures, a crucial commitment designed to prevent an even more chaotic run, but that line was hedged and buried in my twenty-sixth paragraph. As the President had promised, this would be my moment in the sun. The world wanted to see American leadership. The markets wanted to see a credible plan.
I wanted him to be able to do big things, too, but my immediate ambitions were narrower, dominated by the imperatives of the crisis. We needed to design a strategy to fix the broken financial system and a large fiscal stimulus package to arrest the economic free fall. We had to figure out a way to save the dying U.S. auto industry in order to prevent a regional depression in the industrial Midwest. We had to devise a plan to deal with the escalating housing crisis in order to protect millions of families at risk of foreclosure. At a time when the federal deficit was soaring past $1 trillion for the first time, we would also have to send Congress a budget laying out our tax and spending priorities, and demonstrating how we intended to limit the red ink once the economy recovered. Presidential transitions are usually a confused mess of jockeying for jobs and groping for ideas, but this one would be consumed by the economic emergency.
At my farewell dinner at the Fed, Jeff Lacker had quipped that my colleagues had considered giving me one of our Maiden Lane vehicles as a going-away present, since they probably wouldn’t exceed the Fed’s $25 gift limit. At the time, those assets were distressed enough to make the joke funny. The markets had welcomed TARP, but they no longer believed that TARP was big enough to fill the system’s capital hole. The President had pledged to use at least $50 billion to address the housing crisis, so we now had about $300 billion left to repair the financial system. Fortunately, we wouldn’t need TARP money to recapitalize Fannie and Freddie, because the separate authority Hank had gotten to put capital into them was essentially unlimited; otherwise, they were hemorrhaging so badly they could have drained most of the cash we had left. But the rest of the financial system was bleeding, too.
accounting loophole / creative accounting, asset-backed security, bank run, banking crisis, Black-Scholes formula, Bretton Woods, business climate, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, easy for humans, difficult for computers, financial innovation, fixed income, housing crisis, interest rate derivative, interest rate swap, locking in a profit, Long Term Capital Management, McMansion, mortgage debt, North Sea oil, Northern Rock, Renaissance Technologies, risk tolerance, Robert Shiller, Robert Shiller, short selling, sovereign wealth fund, statistical model, The Great Moderation, too big to fail, value at risk, yield curve
This stuff could go up in smoke!” King was not particularly surprised by the intervention. After all, Dimon was a hands-on manager with strong knowledge of the market, who had no qualms about disturbing his employees’ holidays if he considered a matter urgent. And by the autumn of 2006, Dimon thought the housing sector was becoming just that. In the spring of 2006, national house prices had started to slide. “A housing crisis approaches,” a column in Barron’s magazine boldly declared by August, pointing out that the median price of new homes had dropped almost 3 percent in the previous eight months, while sales of new homes had fallen 10 percent, leaving new home inventories at record levels. “The national median price of housing will probably fall by close to 30 percent in the next three years [based on] simple reversion to the mean,” it added, meaning that the fast-rising home prices of the past few years were the result of a bubble.
See also Hughes, Chris, Simonian, Haig, and Thal-Larsen, Peter, “Corroded to the Core: How a Staid Swiss Bank Let Ambitions Lead It into Folly,” Financial Times (April 21, 2008). “In the world I operate in”: Interview with Blythe Masters, February 2007, on womenworking2000.com. No author cited. http://www.womenworking2000.com/feature/index.php?id=94. Ten: Tremors In October 2006, Bill King, the man: Tully, Shawn, “Jamie Dimon’s Swat Team,” Fortune (September 15, 2008). Supplemented with author interviews. “A housing crisis approaches”: Witter Lon, “The No-Money-Down Disaster,” Barron’s (August 21, 2006). “Builders that built speculative homes”: Editorial comment, “Pop! Goes the U.S. Real Estate Bubble,” Toronto Star (September 6, 2006). “When even Toll Brothers, the high-end builder”: Shilling, A. Gary, “Implosion: When Even Toll Brothers, the High-end Builder, Suffers Cancelations, You Know the Real Estate Boom Is Over,” Forbes (June 19, 2006).
2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, Airbnb, American Society of Civil Engineers: Report Card, asset-backed security, Bakken shale, banking crisis, BRICs, British Empire, business process, business process outsourcing, call centre, Carmen Reinhart, clean water, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, currency manipulation / currency intervention, demand response, Donald Trump, Frederick Winslow Taylor, high net worth, housing crisis, hydraulic fracturing, If something cannot go on forever, it will stop, illegal immigration, index fund, intermodal, inventory management, Kenneth Rogoff, labor-force participation, LNG terminal, low skilled workers, Mark Zuckerberg, Martin Wolf, Maui Hawaii, McMansion, mortgage debt, Network effects, new economy, obamacare, oil shale / tar sands, oil shock, peak oil, Plutocrats, plutocrats, price stability, quantitative easing, race to the bottom, reserve currency, reshoring, Richard Florida, rising living standards, risk tolerance, risk/return, Silicon Valley, Silicon Valley startup, six sigma, Skype, sovereign wealth fund, Steve Jobs, superstar cities, the High Line, transit-oriented development, Wall-E, Yogi Berra, Zipcar
Indeed there are signs that progress is already being made in tackling some of the most thorny problems America faces—without explosive, fundamental change. Take housing. Falling house prices, excess supply, and the mortgage mess have been a millstone around the economy’s neck since 2007. The crisis has destroyed household wealth, ravaged banks’ balance sheets, and sapped consumers of their desire and ability to consume, borrow, and invest. The housing crisis turned out to be like Hanukkah: we were told it was going to last for a year, but it will probably last a good eight years. Residential investment morphed from a force that supercharged growth between 2001 and 2006 to one that sandbagged it. In its reports the Commerce Department points out how much each sector contributed to or detracted from growth. In 2008 declining residential investment reduced growth by 1.62 percent, and in 2009 the reduction was 0.72 percent.
., 1, 54, 99–100, 104, 120, 122, 125, 219 Commercial Paper Funding Facility, 34 Committee on Foreign Investment in the United States, 96 competition, 3, 19, 21, 23, 80, 83, 106–7, 167, 194, 204, 228 efficiency economy and, 62, 68, 77 efficient consumers and, 193, 196 inports and, 131–32, 137, 141 North Dakota and, 148, 161 and reshoring and insourcing, 169, 179 Congress, U.S., 14, 19, 23–24, 125, 146 deficits and, 221–22 economic decline and, 3, 10 health care reform and, 5–6 U.S. credit rating and, 1–2 Congressional Budget Office, 31 Connecticut, 50, 86, 105, 140, 146, 151, 161–62, 212 efficient consumers and, 187–88 Conservation and Recreation Department, Mass., 66 construction, 174 efficient consumers and, 190–91 housing crisis and, 219–20 infrastructure and, 205–6, 209, 211, 213 North Dakota and, 152–53, 155–56 Consumer Price Index, 187 consumers, consumerism, consumption, 2, 25, 28, 81, 101, 111, 216, 219 coal and, 102–3 economic pessimism and, 22–23 efficiency economy and, 64–65, 68, 73–75, 78, 223–24 exports and, 98–99, 104–5, 107, 110, 119, 128, 130–31, 147, 154, 164 FDI and, 83, 89–90, 92–93 indebtedness and, 9–10, 53–57 inports and, 131–32, 136–37, 141, 143, 147, 227 North Dakota and, 151, 153–54 and reshoring and insourcing, 169, 172, 175, 177 restructuring and, 44–45, 53–59 supersizing and, 202, 204, 209 see also efficient consumers Cooper, Bill, 105 Cooper, Stephen, 44 CoreLogic, 190 corporations, 1, 9–10, 60, 139–43, 163–67, 169–85, 192–206, 225 comparisons between consumers and, 181, 185, 189, 195 and costs of labor, 164–67 economic optimism and, 23–24 economic pessimism and, 22–23 efficiency economy and, 63–68, 71, 75–76, 80–81, 158, 172, 223 efficient consumers and, 181–85, 192–96 exports and, 98, 103, 108–10, 112–14, 116–17, 131, 177 FDI and, 82–96 global, 22, 24, 71, 95 inports and, 132, 135–37, 139–42, 144, 146–47, 202–3, 227 job growth and, 218–19 North Dakota and, 152–53, 155, 157–60 recoveries and, 17–18, 21, 215 and reshoring and insourcing, 167, 169–79 restructuring and, 44–45, 47–49, 52–53, 57–58, 81, 166 supersizing and, 199–206, 209–10 taxes on, 146–47, 163 timely policy decisions and, 28, 30, 34 U.S. economic importance and, 227–28 Costner, Kevin, 129–30 Coty, 71 Coulomb Technologies, 211 Council of Economic Advisers, 31 Cowan, Lynn, 203 Creation Technologies, 67 credit, 32–36, 94, 194 booms in, 21, 29, 56, 62 crisis in, 2, 4, 23, 26, 48, 53 exports and, 112–13 restructuring and, 49, 51, 53–56, 58 timely policy decisions and, 29, 32–33, 35–36, 42–43 credit cards, 34, 183–85 restructuring and, 54–56 credit ratings, 1–2, 11, 52 Credit Suisse, 137, 223 Davis, Fred, 90–91 debt, 1, 19–20, 23–24, 60, 185 CIT Group and, 48–49 consumers and, 9–10, 53–57 crises and, 6, 29, 216 efficiency economy and, 62–63, 72, 78 efficient consumers and, 181, 189, 193, 196 Erie Canal and, 205–6 FDI and, 82, 94 national, 2, 5, 11, 217 North Dakota and, 155–56 restructuring and, 45–59, 78 strengthening recovery and, 215–16 timely policy decisions and, 32–34, 36, 39, 42 see also loans, lending, lenders debt ceiling extensions, 2, 217 Dedrick, Jason, 140 Defense Department, U.S., 109 deficits: budget, 2, 6, 10, 64–65, 217, 221–22 efficiency economy and, 64–65 trade, 102, 107, 168, 221–22 Delphi, 46 demand, 18, 31, 45, 57, 101, 132, 178, 221 efficiency economy and, 60, 62, 72–74, 223 exports and, 99, 104, 107–10, 116, 119 North Dakota and, 153–54, 159 supersizing and, 206, 208 Deming, W.
Networks of Outrage and Hope: Social Movements in the Internet Age by Manuel Castells
access to a mobile phone, banking crisis, call centre, centre right, citizen journalism, cognitive dissonance, collective bargaining, conceptual framework, crowdsourcing, currency manipulation / currency intervention, disintermediation, en.wikipedia.org, housing crisis, income inequality, microcredit, Mohammed Bouazizi, Occupy movement, offshore financial centre, Port of Oakland, social software, statistical model, We are the 99%, web application, WikiLeaks, World Values Survey, young professional
They were unanimously opposed to the government’s budget cuts, and asked instead for taxation of the rich and of the corporations. There was widespread denunciation of the unemployment of millions of young people who had no prospects of finding a decent job. On April 7, 2011, thousands of youth had demonstrated in Madrid following the call of “Youth Without a Future,” an Internet-based campaign to defend their rights to education, work and housing. There had also been a protest against the housing crisis in general and against the shortage of affordable housing for young people in particular. One important contingent of the 15-M movement came from the youth involved in the “V as Vivienda (Housing)” campaign in the months preceding the movement. There were particularly virulent protests against mortgage foreclosures and evictions of elderly and families in need, who had been trapped by the banks in subprime loans that they would have to continue to pay for the rest of their lives, even after having lost their homes.
There were multiple proposals of various natures, voted on in the General Assemblies, but little effort to translate them into a policy campaign going beyond combating the effects of mortgage foreclosures or financial abuses on borrowers and consumers. The list of most frequently mentioned demands debated in various occupations hints at the extraordinary diversity of the movement’s targets: controlling financial speculation, particularly high frequency trading; auditing the Federal Reserve; addressing the housing crisis; regulating overdraft fees; controlling currency manipulation; opposing the outsourcing of jobs; defending collective bargaining and union rights; reducing income inequality; reforming tax law; reforming political campaign finance; reversing the Supreme Court’s decision allowing unlimited campaign contributions from corporations; banning bailouts of companies; controlling the military-industrial complex; improving the care of veterans; limiting terms for elected politicians; defending freedom on the Internet; assuring privacy on the Internet and in the media; combating economic exploitation; reforming the prison system; reforming health care; combating racism, sexism, and xenophobia; improving student loans; opposing the Keystone pipeline and other environmentally predatory projects; enacting policies against global warming; fining and controlling BP and similar oil spillers; enforcing animal rights; supporting alternative energy sources; critiquing personal leadership and vertical authority, beginning with a new democratic culture in the camps; and watching out for co-optation in the political system (as happened with the Tea Party).
Who Stole the American Dream? by Hedrick Smith
Affordable Care Act / Obamacare, airline deregulation, anti-communist, asset allocation, banking crisis, Bonfire of the Vanities, British Empire, business process, clean water, cloud computing, collateralized debt obligation, collective bargaining, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, David Brooks, Deng Xiaoping, desegregation, Double Irish / Dutch Sandwich, family office, full employment, global supply chain, Gordon Gekko, guest worker program, hiring and firing, housing crisis, Howard Zinn, income inequality, index fund, informal economy, invisible hand, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, laissez-faire capitalism, late fees, Long Term Capital Management, low cost carrier, manufacturing employment, market fundamentalism, Maui Hawaii, mortgage debt, new economy, Occupy movement, Own Your Own Home, Peter Thiel, Plutonomy: Buying Luxury, Explaining Global Imbalances, Ponzi scheme, Ralph Nader, RAND corporation, Renaissance Technologies, reshoring, rising living standards, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, shareholder value, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Steve Jobs, The Chicago School, The Spirit Level, too big to fail, transaction costs, transcontinental railway, union organizing, Unsafe at Any Speed, Vanguard fund, We are the 99%, women in the workforce, working poor, Y2K
They knew I could not afford that loan. —ELISEO GUARDADO, subprime borrower The banks are playing to brokers who specialize in driving people into loans that people don’t understand…. They take a product that was exotic and move it to the category of a weapon—seriously. These loans go from being an exotic product to a hand grenade…. —KATHRYN KELLER, mortgage broker WHEN YOU THINK OF THE HOUSING CRISIS and millions of Americans being foreclosed out of their homes, you don’t imagine a bright, successful thirty-year-old like Bre Heller. When I met her, Heller was still reeling from the forced sale of her home in Orlando, Florida, stuck with a mountain of debt and furious at her bank. She didn’t seem like a typical victim. She’s street smart, quick as a whip with numbers, and a picture of cool composure.
They filed suit, but with WaMu gone, there was no one to pay. The terms of JPMorgan Chase’s buyout barred lawsuits against either WaMu or JPMorgan Chase. The same happened to several pension funds for police and teachers in Detroit, Ontario, and Pompano Beach, Florida, which had invested in WaMu and were stuck with millions of shares of worthless WaMu common stock and bonds. Fraud but Almost No Prosecution What is striking about the housing crisis is that unlike the savings and loan scandal of the 1980s, where hundreds of bank officials and board members went to jail on felony charges, only relatively low-level officers have been criminally prosecuted in the housing bust. Only belatedly have a few high-level government officials even acknowledged massive deception. Late in 2010, Alan Greenspan conceded that fraud had played a central role in the crisis, though he did not say whether the Fed’s lax oversight had contributed.
For what folks in this state have been spending on the Iraq war, we could be giving health care to nearly 450,000 of your neighbors, hiring nearly 30,000 new elementary school teachers, and making college more affordable for over 300,000 students.” Clinton spelled out the benefits nationwide for average Americans if $1 trillion spent on Iraq went instead to domestic programs. “That is enough,” Clinton declared, “to provide health care for all 47 million uninsured Americans and quality pre-kindergarten for every American child, solve the housing crisis once and for all, make college affordable for every American student, and provide tax relief to tens of millions of middle-class families.” Increasingly, members of Congress have been pressing Obama to apply this economic logic to Afghanistan. Tea Party Republicans in the House have joined liberal Democrats in calling for defense cuts and faster withdrawal from Afghanistan. Several national security experts have offered a foreign policy rationale: Reverse mission creep and go back to the original anti-terrorism mission in Afghanistan and forget about building Afghan democracy.
asset-backed security, bank run, barriers to entry, Bretton Woods, card file, central bank independence, computer age, corporate governance, credit crunch, declining real wages, deindustrialization, diversified portfolio, financial independence, financial innovation, Gini coefficient, Home mortgage interest deduction, housing crisis, income inequality, invisible hand, late fees, London Interbank Offered Rate, market fundamentalism, means of production, mortgage debt, mortgage tax deduction, p-value, pattern recognition, profit maximization, profit motive, risk/return, Ronald Reagan, Silicon Valley, statistical model, technology bubble, the built environment, transaction costs, union organizing, white flight, women in the workforce, working poor
For Great Society policymakers and promoters, the problems of inequality were framed as a problem of credit access rather than job access. More credit, and not higher wages, would be enough to solve the problems of America’s cities. Toward that end, federal policy fashioned the financial innovation that made possible America’s debt explosion—the asset-backed security—that expanded well beyond its original purpose. Solving the urban crisis would require solving the housing crisis. But to fix the housing crisis, radical financial innovation would have to occur to maintain the capital flows into mortgages. As the urban riots became the urban crisis, however, mortgage markets had a crisis of their own. American mortgage markets had abruptly frozen—the so-called Credit Crunch of 1966—as investors rapidly withdrew their deposits from banks and put their money in the securities markets. Stocks and bonds offered greater returns than the Federal Reserve–regulated rates available at banks3 Without these deposits, banks could not lend mortgage money.
Capital markets became a central source of funds, as the older institutional investor and small depositor arrangements had collapsed in the face of rising interest rates and shifting savings practices. By 1970, withdrawals at savings and loan institutions exceeded deposits nearly every month.43 The president of the Mortgage Bankers of America, Robert Pease, declared at their annual convention that, “except for FNMA, there is almost no money available for residential housing. We are in a real honest-to-goodness housing crisis!”44 On average in 1971, $50 million worth of mortgages flowed from the capital markets through mortgage-backed securities into American housing each month. SECURING DEBT 233 In both the cities and suburbs, mortgage-backed securities provided new sources of mortgage funds. While direct mortgage assignment collapsed, mortgage-backed securities provided the financing to dramatically increase the new housing programs in America’s cities.
The Crisis of Crowding: Quant Copycats, Ugly Models, and the New Crash Normal by Ludwig B. Chincarini
affirmative action, asset-backed security, automated trading system, bank run, banking crisis, Basel III, Bernie Madoff, Black-Scholes formula, buttonwood tree, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, corporate governance, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, delta neutral, discounted cash flows, diversification, diversified portfolio, family office, financial innovation, financial intermediation, fixed income, Flash crash, full employment, Gini coefficient, high net worth, hindsight bias, housing crisis, implied volatility, income inequality, interest rate derivative, interest rate swap, labour mobility, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low skilled workers, margin call, market design, market fundamentalism, merger arbitrage, Mexican peso crisis / tequila crisis, moral hazard, mortgage debt, Northern Rock, Occupy movement, oil shock, price stability, quantitative easing, quantitative hedge fund, quantitative trading / quantitative ﬁnance, Ralph Waldo Emerson, regulatory arbitrage, Renaissance Technologies, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, Sharpe ratio, short selling, sovereign wealth fund, speech recognition, statistical arbitrage, statistical model, systematic trading, The Great Moderation, too big to fail, transaction costs, value at risk, yield curve, zero-coupon bond
The housing market collapse, the collapse of Bear Stearns, Lehman Brothers, many commercial banks, and Freddie and Fannie badly disrupted capital markets. Funds in the business of providing leveraged liquidity were in the thick of the storm. JWMP was no exception. The troubling signs began early in 2008. January and February are typically good for fixed-income relative-value funds, because banks window-dress their balance sheets near the fiscal year’s end in November and December.2 The housing crisis made 2008 an exception. JWMP started the year with its worst-ever monthly return: −4.14% in January 2008. February was even worse, at −5.25%. By the end of February, JWMP began to unwind some of its risk. The Bear and the Gorilla Attack Then came the institutional bank run on Bear Stearns in March 2008. Bear Stearns, a major prime broker and liquidity provider for hedge funds, was heading for bankruptcy.
In the case of a defaulted home loan, if the loan was originally for $600,000 and the borrower defaulted with 0% down, then the bank presumably should value the loan at the home’s value, which in a declining real estate market might be much less than $600,000. These writeoffs will lower the bank’s capital ratio and if large enough, will wipe out their equity making the bank insolvent (that is, assets are worth less than liabilities). Simple Answer to Puzzles Some people have proposed that to solve the banking and housing crisis, the U.S. government should simply have all banks renegotiate every mortgage to the current value of housing and have the government reimburse them. How much might this cost? Take a home owner who took out a home loan of $600,000 at 6% interest rates and the monthly mortgage payment was $3,597.40. Let’s suppose that this particular home owner cannot afford the monthly payment any longer. Thus, one option to the government is to rewrite the interest amount on the loan to something like 2% below market rates.
“The Credit Rating Agencies.” Journal of Economic Perspectives, Spring 2010. Woodward, Susan E. and Robert E. Hall. “Consumer Confusion in the Mortgage Market: Evidence of Less than a Perfectly Transparent and Competitive Market.” American Economic Review, May 2010. Wuffli, Peter. “Salomon Global Banking Conference.” UBS Presentation by CFO, October 28, 1998. Young, Ashley N. “The Real Estate Agent’s Role in the Housing Crisis: A Proposal for Ethical Reform.” Georgetown Journal of Legal Ethics, Summer 2011. Zingales, Luigi. “Overall Impact of TARP on Financial Stability.” Oral Testimony before the Congressional Oversight Panel, March 4, 2011. Zuckerman, G., J. Hagerty, and D. Gauthier-Villars. “Impact of Mortgage Crisis Spreads; Dow Tumbles 2.8% as Fallout Intensifies; Moves by Central Banks.” Wall Street Journal, August 10, 2007.
Handbook of Modeling High-Frequency Data in Finance by Frederi G. Viens, Maria C. Mariani, Ionut Florescu
algorithmic trading, asset allocation, automated trading system, backtesting, Black-Scholes formula, Brownian motion, business process, continuous integration, corporate governance, discrete time, distributed generation, fixed income, Flash crash, housing crisis, implied volatility, incomplete markets, linear programming, mandelbrot fractal, market friction, market microstructure, martingale, Menlo Park, p-value, pattern recognition, performance metric, principal–agent problem, random walk, risk tolerance, risk/return, short selling, statistical model, stochastic process, stochastic volatility, transaction costs, value at risk, volatility smile, Wiener process
While we have tested for unit root nonstationarity in Table 6.5 and that hypothesis was rejected we cannot guarantee that the data does not possess other types of nonstationarity. There is currently no other type of nonstationarity that may be tested. Second, looking at several years for which we have an idea of what the results should look like we notice that our hypotheses were conﬁrmed. Speciﬁcally, in 2001 and partially in 2002, we expect to see high parameter values due to the end of the dot-com bubble. Again in 2008, we expect to see high values due to the housing crisis and the subsequent market crash in September 2008. Surprisingly, the most reliable conﬁrmation is in the Levy Flight parameter values, they are all much smaller than 2.0 ‘‘the normal behavior’’ parameter value. 137 6.4 Results and Discussions 3.2 3 2.8 2.6 2.4 2.2 2 1.8 1.6 1 1.5 2 2.5 3 3.5 4 3.5 3 2.5 2 1.5 1 1 1.5 2 2.5 3 3.5 4 3.5 3 2.5 2 1.5 1 1 1.5 2 2.5 3 3.5 4 −1 −1.2 −1.4 −1.6 −1.8 −2 −2.2 −2.4 −2.6 −2.8 −3 −1 −1.2 −1.4 −1.6 −1.8 −2 −2.2 −2.4 −2.6 −2.8 −3 −1 −1.2 −1.4 −1.6 −1.8 −2 −2.2 −2.4 −2.6 −2.8 −3 1 1.5 2 2.5 3 3.5 4 1 1.5 2 2.5 3 3.5 4 1 1.5 2 2.5 3 3.5 4 FIGURE 6.3 Hurst and DFA regression plots for a sample of three stocks.
See also Value at risk (VaR) High parameter values, 136 High trading activity, 42 Hilbert space, 387 Hillebrand, Eric, xiii, 75 HL estimator, 263. See also VaRHL Hölder constants, 358 Hölder continuous real-valued function, 350 Hölder continuous real-valued function with exponent δ, 351 Hölder’s inequality, 391, 395 Hölder spaces, 349, 355, 367, 388–390, 411 Homotopy perturbation method, 379–380 Housing crisis, 136 Hu–Kercheval method, 164 Hull–White process, 400 Hurst analysis, 130–131, 132 results of, 141 Hurst exponent, 125, 126, 132 values of, 138 Hurst index, 221. See also Implied Hurst index Hurst index estimation, Whittle-based approach for, 225–226 Hurst parameter(s), 121–122, 125, 135, 220, 221 Hurst parameter analysis, 136 Hurst parameter estimates, 132 Hurst parameter estimators, 229 Hurst regression plots, 137 Hyperbolic distributions, 171 IBM DFA and Hurst methods applied to, 147 Lévy ﬂight parameter for, 343 IBM time series, 257 i.i.d. data, 172.
The Establishment: And How They Get Away With It by Owen Jones
anti-communist, Asian financial crisis, bank run, battle of ideas, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, British Empire, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, centre right, citizen journalism, collapse of Lehman Brothers, collective bargaining, don't be evil, Edward Snowden, Etonian, eurozone crisis, falling living standards, Francis Fukuyama: the end of history, full employment, glass ceiling, hiring and firing, housing crisis, inflation targeting, investor state dispute settlement, James Dyson, laissez-faire capitalism, market fundamentalism, Monroe Doctrine, Mont Pelerin Society, moral hazard, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, open borders, Plutocrats, plutocrats, profit motive, quantitative easing, race to the bottom, rent control, road to serfdom, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, stakhanovite, statistical model, The Wealth of Nations by Adam Smith, transfer pricing, union organizing, unpaid internship, Washington Consensus, Winter of Discontent
There was little sense of this in the media portrayal: it was as though his triumph was somehow illegitimate because it depended on the votes of trade-union members. Quite how intolerable the Establishment regarded any deviation from the political consensus was illustrated by the reaction to three commitments Ed Miliband made in September 2013 that went against the political grain. Responding to a housing crisis that had left 5 million people on waiting lists and house-building at a record low, Miliband pledged action against construction firms that hoarded land while waiting for it to increase in value. Next, in a reversal of New Labour and the Conservatives’ commitment to ever-lower corporation tax, he promised a tax hike on big companies, which would go to fund tax breaks for struggling small businesses.
While these non-government organizations could previously spend up to £989,000 a year before a general election, it was now to be slashed to £390,000, and would include everything from staff costs to public meetings. But the definition of ‘non-party campaigning’ was so vague that it covered pretty much any issue, ranging from calling for more resources for treating cancer to dealing with the affordable-housing crisis. Charity trustees, known to be fearful of anything with legal implications – they are, after all, saddled with strict legal obligations they have to abide by19 – would move to stop campaigns that scrutinize power. The Trades Union Congress suggested this could make organizing their 2014 annual congress or holding a demonstration in election year a criminal offence. Because of fears that political blogs could be affected by the Bill, even the right-wing Guido Fawkes blog came out in opposition.
The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters by Gregory Zuckerman
American energy revolution, Asian financial crisis, Bakken shale, Bernie Sanders, Buckminster Fuller, corporate governance, credit crunch, energy security, Exxon Valdez, housing crisis, hydraulic fracturing, LNG terminal, margin call, Maui Hawaii, North Sea oil, oil rush, oil shale / tar sands, oil shock, peak oil, Peter Thiel, reshoring, self-driving car, Silicon Valley, sovereign wealth fund, Steve Jobs, urban decay
Wall Street was in its death throes at the time, so few paid much attention to the Statoil deal, but it was one more sign that global energy companies were becoming convinced the shale revolution was for real. For McClendon, the Statoil agreement was reassurance that all was well with his company. “Everything except macro events” was “really going our way,” according to McClendon.1 But Chesapeake shares kept falling, setting off alarm bells at the banks that had lent McClendon hundreds of millions of dollars. During the first week of October, as an intensifying housing crisis seemed likely to lead to a U.S. recession and pressure energy prices, Chesapeake tumbled to just twenty-two dollars a share. The lenders decided they needed to act. Late in the afternoon of October 8, a Goldman Sachs executive in the firm’s private wealth group called McClendon, reaching him in his Oklahoma City office. The Goldman manager relayed disturbing news: The Chesapeake shares that McClendon had used as collateral had dropped so dramatically that they no longer held enough value to back the approximately $300 million that McClendon had borrowed from the investment bank.
Articulate and outgoing, she made an annual salary of nearly $120,000 in the years leading up to 2008. That year, as she turned thirty-four years old, she had seven employees reporting to her and she seemed on the fast track at work. Liz and her husband, Matthew, a truck driver, bought a home in a nearby town for $365,000 dollars. It featured fruit and magnolia trees and was across the street from the elementary school their two daughters attended. Then the housing crisis hit. As the local real estate market crumbled, Irish’s income evaporated. She made less than $40,000 in 2009. By the summer of 2010, she had earned less than $5,000 that entire year. Liz and her husband had neglected to build much of a nest egg and ran into trouble paying their bills. Soon they lost their home and faced thousands of dollars of additional bills. “Everything I had done in my adult life was in real estate,” Liz says.
The Euro: How a Common Currency Threatens the Future of Europe by Joseph E. Stiglitz, Alex Hyde-White
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
A German bank may lend to a party in a third country, and some (possibly other) party in that third country lends to Spain. 45 ILO data for 2015. See ILO, World Employment Social Outlook—Trends 2016, available at http://www.ilo.org/global/research/global-reports/weso/2016/WCMS_443480/lang--en/index.htm. This situation, where there has been a deficiency of aggregate demand, has persisted for a long time. Indeed, one of the reasons that the Fed encouraged the reckless lending that led to the housing crisis was to make up for what would otherwise have been a weak aggregate demand within the United States. Ben Bernanke, former chairman of the Federal Reserve, referred to the situation as a “savings glut.” See “The Global Saving Glut and the U.S. Current Account Deficit,” Remarks by Governor Ben S. Bernanke at the Sandridge Lecture, Virginia Association of Economists, Richmond, Virginia, March 10, 2005, available at http://www.federalreserve.gov/boardDocs/Speeches/2005/200503102/default.htm.
Though central banks are only supposed to lend to solvent but illiquid institutions, necessarily, in doing so, they are putting their judgment against that of the market. 27 In the United States, almost all of the hundreds of billions of bailout dollars went to help the banks and their bondholders and shareholders. A negligible amount went to help homeowners, even though the crisis had begun as a housing crisis. The administration and the Fed believed in trickle-down economics: throw enough money at the banks, and the whole economy will benefit. It would have been far better for the economy had they tried a larger dose of trickle-up economics: help the homeowners, and everyone will benefit. 28 The Troika, in effect, threatened to bankrupt Ireland if the government tried to make bondholders bear some of the costs of bank restructuring.
How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy by Mehrsa Baradaran
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
He argued in 2000 at the Cato institute that “study after study has shown that Fannie Mae and Freddie Mac are failing to do even as much as banks and S&Ls in providing financing for affordable housing, including minority and low income housing.” Mike Konczal, “No, Marco Rubio, Government Did Not Cause the Housing Crisis,” Washington Post: Wonkblog, February 13, 2003, accessed March 17, 2015, www.washingtonpost.com/blogs/wonkblog/wp/2013/02/13/no-marco-rubio-government-did-not-cause-the-housing-crisis/. 76. Elizabeth Laderman and Carolina Reid, “CRA Lending during the Subprime Meltdown,” Federal Reserve Bank of San Francisco, February 2009, 115, accessed March 17, 2015, www.frbsf.org/community-development/files/cra_lending_during_subprime_meltdown.pdf. 77. Timothy F. Geithner, Stress Test: Reflections on a Financial Crisis (New York: Crown, 2014) 391–392.
bank run, barriers to entry, bash_history, Bernie Madoff, Flash crash, housing crisis, index fund, locking in a profit, London Whale, market microstructure, merger arbitrage, prediction markets, price discovery process, Sergey Aleynikov, Spread Networks laid a new fibre optics cable between New York and Chicago, transaction costs, zero day
When Lewis tells us “the price volatility within each trading day in the U.S. stock market between 2010 and 2013 was nearly 40 percent higher than the volatility between 2004 and 2006,” it’s not clear what data source he is using. But it is clear that these are cherry-picked statistics: Why 2004 to 2006? Why not include 2003? And why compare to 2010, 2011, and 2012, with the European debt crisis threatening to blow apart Europe in a way that the U.S. housing crisis couldn’t? The answer is that the data fits his argument best when you slice it this way. The period from 2004 to 2006 comprises the quietest years on record – there were absolutely zero days where the market dropped by 2% or more, and only two days in those three years where the market rose by 2%. For contrast, in 2003 alone the market had 15 days where it rose or fell more than 2%. In 2002, there were more than 50 such days.
How to Be Black by Baratunde Thurston
affirmative action, carbon footprint, Columbine, dark matter, desegregation, housing crisis, phenotype, Plutocrats, plutocrats, Rosa Parks, shareholder value, supply-chain management, the scientific method, transatlantic slave trade
The subsequent state-sponsored or -supported discrimination and terrorism—I’m thinking environmental racism, police brutality, lynchings, separate and unequal schooling, neighborhood redlining, et cetera—have also cast a long shadow over the current black experience in the United States. One in fifteen black male adults is behind bars (compared to one in a hundred U.S. adults overall);* black household wealth averages just one-twentieth that of whites,* having fallen precipitously after the housing crisis; black people in Texas have a habit of finding themselves under the wheels of trucks driven by racists; and then there’s BET. There is no shortage of issues for which a black person in America can justifiably get mad. The Angry Negro is the personification of that Black Rage. As The Angry Negro, you are committing yourself to a life of hate. You are agreeing to be always disagreeable. You are shameless.
American Society of Civil Engineers: Report Card, Bernie Madoff, Bernie Sanders, call centre, carried interest, citizen journalism, clean water, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, extreme commuting, Exxon Valdez, full employment, greed is good, housing crisis, immigration reform, invisible hand, knowledge economy, laissez-faire capitalism, late fees, market bubble, market fundamentalism, Martin Wolf, medical bankruptcy, microcredit, new economy, New Journalism, offshore financial centre, Ponzi scheme, Report Card for America’s Infrastructure, Richard Florida, Ronald Reagan, Rosa Parks, single-payer health, smart grid, The Wealth of Nations by Adam Smith, too big to fail, transcontinental railway, trickle-down economics, winner-take-all economy, working poor, Works Progress Administration
The void is filled by the fear that America is becoming a nation of haves and have-nots—and that millions are in danger of becoming permanent members of the have-nots. Forget Freddy Krueger. The real nightmare is not happening on Elm Street. It’s happening on Main Street. And it’s not scantily clad teens being slashed—it’s jobs and incomes and stability and quality of life.1 It’s our future. And we’re afraid—very afraid—that the worst may not be over, and that the real economy, as opposed to the one on Wall Street, is still melting down. The housing crisis is still raging. The first run of foreclosures was because of subprime loans; the second run is because of people thrown out of work. And the government’s loan modification programs won’t be of any help with this round of foreclosures. As Newsweek’s Nancy Cook pointed out, “If you’re unemployed, you don’t qualify for a loan modification.” And then there is the coming commercial property crisis and a potential credit card meltdown.
I.O.U.: Why Everyone Owes Everyone and No One Can Pay by John Lanchester
asset-backed security, bank run, banking crisis, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black-Scholes formula, Celtic Tiger, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, diversified portfolio, double entry bookkeeping, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial innovation, fixed income, George Akerlof, greed is good, hindsight bias, housing crisis, Hyman Minsky, interest rate swap, invisible hand, Jane Jacobs, John Maynard Keynes: Economic Possibilities for our Grandchildren, laissez-faire capitalism, liquidity trap, Long Term Capital Management, loss aversion, Martin Wolf, mortgage debt, mortgage tax deduction, mutually assured destruction, new economy, Nick Leeson, Northern Rock, Own Your Own Home, Ponzi scheme, quantitative easing, reserve currency, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, South Sea Bubble, statistical model, The Great Moderation, the payments system, too big to fail, tulip mania, value at risk
When houses are completely unoccupied and can be broken into, they are an immediate magnet for vandals, crack smokers, firebugs, you name it; sometimes the power is cut off, sometimes the water, and sometimes one but not the other, leading to a simple and easy and devastating form of havoc for happy vandals—just turn on a tap and walk away. I came to Baltimore because it is the subject of the only sustained work of art I’ve seen attempting to describe the lives lead in this urban desolation: David Simon’s HBO series The Wire. From the point of view of writing about the housing crisis, it was almost an arbitrary choice. All across America a boom turned into a bust; foreclosures on housing loans are a pandemic. (The difference between a pandemic and an epidemic: a pandemic is everywhere at the same time.) This is one form of “deleveraging”: the withdrawal of credit from people who often weren’t in a position to repay it in the first place. It hit everywhere: Rust Belt cities, which had been struggling against population decline and associated problems for decades; Sunbelt areas, which had experienced sharp population growth in the new millennium, much of it from new migrants—the highest rate of repossession filings in the United States in the first six months of 2009 was in Nevada; exurbs sprawling out from urban areas all over the country; traditional boom-and-bust hot spots such as Florida.
algorithmic trading, automated trading system, Bernie Madoff, Bernie Sanders, Bretton Woods, buttonwood tree, credit crunch, Credit Default Swap, financial innovation, Flash crash, High speed trading, housing crisis, index arbitrage, locking in a profit, Long Term Capital Management, margin call, market bubble, market fragmentation, market fundamentalism, naked short selling, pattern recognition, Ponzi scheme, quantitative trading / quantitative ﬁnance, Renaissance Technologies, Ronald Reagan, Sergey Aleynikov, short selling, Small Order Execution System, statistical arbitrage, technology bubble, transaction costs, Vanguard fund, Y2K
In fact, their buying portended the end of the recession three months later. The actual nature of a recovery was a matter of intense debate among bulls, bears, and super bears even before many recognized that the recession had ended. The most optimistic economists, and there were not many of them, predicted a V-shaped economic rebound, meaning that economic activity would pick up as quickly as it had come down in 2007 and 2008 during the credit and housing crisis. In their view, the market rally reflected this outcome and thus was behaving rationally by bouncing back up like a super ball. The conventional view was a pessimistic one. This broad camp argued that the recovery would be U-shaped, with slow gross domestic product (GDP) growth and high unemployment into the early years of the next decade. In their view, the stock markets were prematurely optimistic, the result of wishful thinking as opposed to solid earnings.
Rigged Money: Beating Wall Street at Its Own Game by Lee Munson
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
The expansion had not only been occurring for several years, but the standards were being lowered too, so the mortgage people could keep making money. Loan officers were not given pink slips and let go, more were hired! Instead of the realization as in 1994 that there were simply not enough people who could put 5 percent down, we just started doing cash out loans for 125 percent of the already over-inflated value of houses. It was so far removed from the days I worked at the mortgage company that year that the news describing the housing crisis was simply unrecognizable from that awesome year driving around California in a yellow moving truck. As a postscript, the credit card I still have from that company was sold this year to another firm. Clearly, my old place didn’t want anything to do with credit cards in the end. What can we learn from this and how do we play it? Higher-than-market interest rates were a teaser to increase deposits.
Affordable Care Act / Obamacare, bank run, big-box store, bonus culture, collateralized debt obligation, collective bargaining, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Deng Xiaoping, financial innovation, housing crisis, invisible hand, Naomi Klein, obamacare, payday loans, profit maximization, profit motive, road to serfdom, Ronald Reagan, shareholder value, strikebreaker, The Chicago School, The Myth of the Rational Market, Thorstein Veblen, too big to fail, union organizing, Washington Consensus, white flight, Works Progress Administration
Republican Party elections of 1994 and elections of 2008 and elections of 2010 and expectations of, in 2008 TARP and Tea Party and revival of Return of Depression Economics, The (Krugman) Rivera, David Road to Serfdom, The (Hayek) Romer, Christina Romney, Mitt Roosevelt, Franklin Beck and “forgotten man” and Obama and RFC and Ryan and Rothenberg, Stu Rubin, Robert Rules for Radical Conservatives (“Kahane”) “ruling class” Rush Limbaugh Is a Big Fat Idiot (Franken) Ryan, Paul same-sex marriage Samuelson, Robert Santelli, Rick Saving Freedom (DeMint) Schlesinger, Arthur Schwarzenegger, Arnold Schweikert, David Schweitzer, Mark Securities and Exchange Commission (SEC) Seldes, Gilbert Sex Pistols Shane, Scott Shlaes, Amity shock therapy Slouching Towards Gomorrah (Bork) “Small Business Bill of Rights” small business. See also entrepreneurship bailouts and Democrats failure to capture outrage of failure and as front for big business health reform and housing crisis and job creation and as ordinary Americans populist heroism and regulation and Small Business Week social classes. See also Country Class; “Ruling Class” class war and Depression and obfuscation of social insurance socialism socialist realism Social Security software industry Soros, George Soviet Union Spread This Wealth (Duke) “Star Spangled Banner” Steinbeck, John Stewart, Jon stimulus Strange Death of Republican America, The (Blumenthal) strikes Summers, Larry supply-side revolution Susman, Warren Swados, Harvey Sweden Taibbi, Matt TARP.
Albert Einstein, banking crisis, Berlin Wall, Bretton Woods, business climate, David Ricardo: comparative advantage, delayed gratification, experimental economics, financial independence, Financial Instability Hypothesis, full employment, Hernando de Soto, housing crisis, Hyman Minsky, inflation targeting, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, laissez-faire capitalism, liquidity trap, means of production, microcredit, minimum wage unemployment, open economy, paradox of thrift, price stability, pushing on a string, rent control, Richard Thaler, rising living standards, road to serfdom, Robert Shiller, Robert Shiller, rolodex, Ronald Coase, Ronald Reagan, school choice, secular stagnation, Simon Kuznets, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, Tobin tax, unorthodox policies
In her work about Soviet Russia in the 1930s entitled Everyday Stalinism, Sheila Fitzpatrick countered the old conventional view held by Sidney and Beatrice Webb and George Bernard Shaw that the Soviet system during the 1930s was a glorious "new civilization." On the contrary, Fitzpatrick wrote, "With the abolition of the market, shortages of food, clothing, and all kinds of consumer goods became endemic. As peasants fled the collective villages, major cities were soon in the grip of an acute housing crisis, with families jammed for decades in tiny single rooms in communal apartments. ... It was a world of privation, overcrowding, endless queues, and broken families, in which the regime's promises of future socialist abundance rang hollow. . . . Government bureaucracy often turned everyday life into a nightmare" (Fitzpatrick 1999, dustjacket). Nations Grow Faster Under Economic Freedom In addition, recent studies comparing the economic growth of nations and their degree of freedom have confirmed Mises's thesis.
Affordable Care Act / Obamacare, algorithmic trading, Andrei Shleifer, asset-backed security, availability heuristic, bank run, banking crisis, Black-Scholes formula, bonus culture, Bretton Woods, call centre, Carmen Reinhart, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, David Graeber, diversification, diversified portfolio, Edmond Halley, Edward Glaeser, Eugene Fama: efficient market hypothesis, eurozone crisis, family office, financial deregulation, financial innovation, fixed income, Flash crash, Google Glasses, Gordon Gekko, high net worth, housing crisis, Hyman Minsky, implied volatility, income inequality, index fund, Innovator's Dilemma, interest rate swap, Kenneth Rogoff, Kickstarter, late fees, London Interbank Offered Rate, Long Term Capital Management, loss aversion, margin call, Mark Zuckerberg, McMansion, mortgage debt, mortgage tax deduction, Network effects, Northern Rock, obamacare, payday loans, peer-to-peer lending, Peter Thiel, principal–agent problem, profit maximization, quantitative trading / quantitative ﬁnance, railway mania, randomized controlled trial, Richard Feynman, Richard Feynman, Richard Thaler, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Shiller, short selling, Silicon Valley, Silicon Valley startup, Skype, South Sea Bubble, sovereign wealth fund, statistical model, transaction costs, Tunguska event, unbanked and underbanked, underbanked, Vanguard fund, web application
Add in persistently low interest rates, which have eaten into banks’ net interest margins, and Oliver Wyman, a consultancy, has estimated that US banks lose money on 37 percent of consumer accounts. The rich will still pay their way in this sort of environment, thanks to larger account balances and the prospect of higher-margin activities such as investment advice. But the economics of banking the poor is far less attractive than it was. And, of course, there is the hangover from the housing crisis. Just as entrepreneurs could use their houses as collateral to fund their businesses, the poor could use housing to gain access to credit. According to the Federal Reserve Bank of New York, between 1999 and the end of the third quarter of 2008, when Lehman Brothers imploded, American consumers went from owing their creditors $4.6 trillion to owing them $12.7 trillion. Mortgages and home equity lines of credit accounted for $6.7 trillion of this increase.3 Money washed toward less creditworthy borrowers in particular.
Affordable Care Act / Obamacare, Bernie Madoff, big data - Walmart - Pop Tarts, call centre, carried interest, cloud computing, collateralized debt obligation, correlation does not imply causation, Credit Default Swap, credit default swaps / collateralized debt obligations, crowdsourcing, Emanuel Derman, housing crisis, illegal immigration, Internet of things, late fees, medical bankruptcy, Moneyball by Michael Lewis explains big data, new economy, obamacare, Occupy movement, offshore financial centre, payday loans, peer-to-peer lending, Peter Thiel, Ponzi scheme, prediction markets, price discrimination, quantitative hedge fund, Ralph Nader, RAND corporation, recommendation engine, Sharpe ratio, statistical model, Tim Cook: Apple, too big to fail, Unsafe at Any Speed, Upton Sinclair, Watson beat the top human players on Jeopardy!, working poor
The operations we performed on numbers translated into trillions of dollars sloshing from one account to another. At first I was excited and amazed by working in this new laboratory, the global economy. But in the autumn of 2008, after I’d been there for a bit more than a year, it came crashing down. The crash made it all too clear that mathematics, once my refuge, was not only deeply entangled in the world’s problems but also fueling many of them. The housing crisis, the collapse of major financial institutions, the rise of unemployment—all had been aided and abetted by mathematicians wielding magic formulas. What’s more, thanks to the extraordinary powers that I loved so much, math was able to combine with technology to multiply the chaos and misfortune, adding efficiency and scale to systems that I now recognized as flawed. If we had been clear-headed, we all would have taken a step back at this point to figure out how math had been misused and how we could prevent a similar catastrophe in the future.
banking crisis, Bernie Madoff, Bernie Sanders, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, facts on the ground, financial deregulation, housing crisis, invisible hand, Long Term Capital Management, mortgage debt, new economy, Ponzi scheme, profit motive, Ralph Nader, Ronald Reagan, too big to fail, trickle-down economics
Key to its effectiveness was the seemingly simple wall it erected between the commercial banks entrusted with depositors’ funds—and insured by the government’s Federal Deposit Insurance Corporation (FDIC), the agency created by Glass-Steagall—and the wilder antics of basically unregulated Wall Street investment banks like Goldman Sachs. In 1982, Reagan signed the Garn-St. Germain Depository Institutions Act, easing regulation of savings and loans and, in the eyes of critics such as Paul Krugman, paving the way for the S&L collapse in the 1980s as well as the subprime housing crisis decades later. Nevertheless, Reagan made clear even then that this was not the biggest target on his list:Unfortunately, this legislation does not deal with the important question of delivery of other services, including securities activities by banks and other depository institutions. But I’m advised that many in the Congress want to put this question at the top of the banking deregulatory agendas next year, and I would strongly endorse such an initiative and hope that at the same time, the Congress will consider other proposals for more comprehensive deregulation which the administration advanced during the 97th Congress.
Borrow: The American Way of Debt by Louis Hyman
asset-backed security, barriers to entry, big-box store, cashless society, collateralized debt obligation, credit crunch, deindustrialization, deskilling, diversified portfolio, financial innovation, Ford paid five dollars a day, Home mortgage interest deduction, housing crisis, income inequality, market bubble, McMansion, mortgage debt, mortgage tax deduction, Network effects, new economy, Plutocrats, plutocrats, price stability, Ronald Reagan, statistical model, technology bubble, transaction costs, women in the workforce
Banks offering such loans collapsed at twice the rate of banks that did not.28 Locales with the highest proportion of lending—in Texas, for instance, mortgage bonds backed 53 percent of all loans—were hardest hit.29 Luckily for banks, the bulk of that lending was insured, which, even if it doomed the insurance companies, saved the banks. President Herbert Hoover launched a group to study the housing crisis in 1931, the White House Conference on Home Building and Home Ownership, whose ideas would provide the seedbed for many ideas we usually attribute to the New Deal. Hoover inaugurated the conference by reminding the attendees about the meaning of housing: “Those immortal ballads, Home, Sweet Home; My Old Kentucky Home; and the Little Gray Home in the West, were not written about tenements or apartments.
airport security, availability heuristic, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, big-box store, Black Swan, Broken windows theory, Carmen Reinhart, Claude Shannon: information theory, Climategate, Climatic Research Unit, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, computer age, correlation does not imply causation, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, Daniel Kahneman / Amos Tversky, diversification, Donald Trump, Edmond Halley, Edward Lorenz: Chaos theory, en.wikipedia.org, equity premium, Eugene Fama: efficient market hypothesis, everywhere but in the productivity statistics, fear of failure, Fellow of the Royal Society, Freestyle chess, fudge factor, George Akerlof, haute cuisine, Henri Poincaré, high batting average, housing crisis, income per capita, index fund, Internet Archive, invention of the printing press, invisible hand, Isaac Newton, James Watt: steam engine, John Nash: game theory, John von Neumann, Kenneth Rogoff, knowledge economy, locking in a profit, Loma Prieta earthquake, market bubble, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, Monroe Doctrine, mortgage debt, Nate Silver, new economy, Norbert Wiener, PageRank, pattern recognition, pets.com, prediction markets, Productivity paradox, random walk, Richard Thaler, Robert Shiller, Robert Shiller, Rodney Brooks, Ronald Reagan, Saturday Night Live, savings glut, security theater, short selling, Skype, statistical model, Steven Pinker, The Great Moderation, The Market for Lemons, the scientific method, The Signal and the Noise by Nate Silver, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, too big to fail, transaction costs, transfer pricing, University of East Anglia, Watson beat the top human players on Jeopardy!, wikimedia commons
There was a failure on the part of the ratings agencies, as well as by banks like Lehman Brothers, to understand how risky mortgage-backed securities were. Contrary to the assertions they made before Congress, the problem was not that the ratings agencies failed to see the housing bubble. Instead, their forecasting models were full of faulty assumptions and false confidence about the risk that a collapse in housing prices might present. There was a widespread failure to anticipate how a housing crisis could trigger a global financial crisis. It had resulted from the high degree of leverage in the market, with $50 in side bets staked on every $1 that an American was willing to invest in a new home. Finally, in the immediate aftermath of the financial crisis, there was a failure to predict the scope of the economic problems that it might create. Economists and policy makers did not heed Reinhart and Rogoff’s finding that financial crises typically produce very deep and long-lasting recessions.
The confidence that the banks had in Moody’s and S&P’s ability to rate mortgage-backed securities may have been based on the fact that the agencies had generally performed competently in rating other types of financial assets. However, the ratings agencies had never before rated securities as novel and complex as credit default options. The confidence that economists had in the ability of the financial system to withstand a housing crisis may have arisen because housing price fluctuations had generally not had large effects on the financial system in the past. However, the financial system had probably never been so highly leveraged, and it had certainly never made so many side bets on housing before. The confidence that policy makers had in the ability of the economy to recuperate quickly from the financial crisis may have come from their experience of recent recessions, most of which had been associated with rapid, “V-shaped” recoveries.
accounting loophole / creative accounting, banking crisis, banks create money, barriers to entry, Benoit Mandelbrot, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, butterfly effect, capital asset pricing model, cellular automata, central bank independence, citizen journalism, clockwork universe, collective bargaining, complexity theory, correlation coefficient, credit crunch, David Ricardo: comparative advantage, debt deflation, diversification, double entry bookkeeping, en.wikipedia.org, Eugene Fama: efficient market hypothesis, experimental subject, Financial Instability Hypothesis, Fractional reserve banking, full employment, Henri Poincaré, housing crisis, Hyman Minsky, income inequality, invisible hand, iterative process, John von Neumann, laissez-faire capitalism, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, market clearing, market microstructure, means of production, minimum wage unemployment, open economy, place-making, Ponzi scheme, profit maximization, quantitative easing, RAND corporation, random walk, risk tolerance, risk/return, Robert Shiller, Robert Shiller, Ronald Coase, Schrödinger's Cat, scientific mainstream, seigniorage, six sigma, South Sea Bubble, stochastic process, The Great Moderation, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, total factor productivity, tulip mania, wage slave
A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data available eISBN 9781780322209 CONTENTS Tables, figures and boxes Preface to the second edition Preface to the first edition 1 Predicting the ‘unpredictable’ 2 No more Mr Nice Guy Part 1 Foundations: the logical flaws in the key concepts of conventional economics 3 The calculus of hedonism 4 Size does matter 5 The price of everything and the value of nothing 6 To each according to his contribution Part 2 Complexities: issues omitted from standard courses that should be part of an education in economics 7 The holy war over capital 8 There is madness in their method 9 Let’s do the Time Warp again 10 Why they didn’t see it coming 11 The price is not right 12 Misunderstanding the Great Depression and the Great Recession Part 3 Alternatives: different ways to think about economics 13 Why I did see ‘It’ coming 14 A monetary model of capitalism 15 Why stock markets crash 16 Don’t shoot me, I’m only the piano 17 Nothing to lose but their minds 18 There are alternatives Bibliography Index TABLES, FIGURES AND BOXES Tables 2.1 Anticipations of the housing crisis and recession 3.1 ‘Utils’ and change in utils from consuming bananas 3.2 Utils arising from the consumption of two commodities 3.3 The commodities in Sippel’s ‘Revealed Preference’ experiment 4.1 Demand schedule for a hypothetical monopoly 4.2 Costs for a hypothetical monopoly 4.3 Sales and costs determine the level of output that maximizes profit 4.4 Cost and revenue for a ‘perfectly competitive’ industry identical in scale to hypothetical monopoly 5.1 Input and output data for a hypothetical firm 5.2 Cost drawings for the survey by Eiteman and Guthrie 5.3 Empirical research on the nature of cost curves 7.1 Sraffa’s hypothetical subsistence economy 7.2 Production with a surplus 7.3 Relationship between maximum and actual rate of profit and the wage share of surplus 7.4 The impact of the rate of profit on the measurement of capital 10.1 Anderson’s ranking of sciences 12.1 The alleged Money Multiplier process 13.1 A hypothetical example of the impact of decelerating debt on aggregate demand 13.2 The actual impact of decelerating debt on aggregate demand 14.1 A pure credit economy with paper money 14.2 The dynamics of a pure credit economy with no growth 14.3 Net incomes 14.4 A growing pure credit economy with electronic money 15.1 Von Neumann’s procedure for working out a numerical value for utility 15.2 The Allais ‘Paradox’ 15.3 The Allais ‘Paradox’ Part 2 16.1 The solvability of mathematical models 17.1 Marx’s unadjusted value creation table, with the rate of profit dependent upon the variable-to-constant ratio in each sector 17.2 Marx’s profit distribution table, with the rate of profit now uniform across sectors 17.3 Steedman’s hypothetical economy 17.4 Steedman’s physical table in Marx’s value terms 17.5 Steedman’s prices table in Marx’s terms 17.6 Profit rate and prices calculated directly from output/wage data 17.7 Marx’s example where the use-value of machinery exceeds its depreciation Figures 2.1 US inflation and unemployment from 1955 2.2 Bernanke doubles base money in five months 2.3 Private debt peaked at 1.7 times the 1930 level in 2009 3.1 Rising total utils and falling marginal utils from consuming one commodity 3.2 Total utils from the consumption of two commodities; 3.3 Total ‘utils’ represented as a ‘utility hill’ 3.4 The contours of the ‘utility hill’ 3.5 Indifference curves: the contours of the ‘utility hill’ shown in two dimensions 3.6 A rational consumer’s indifference map 3.7 Indifference curves, the budget constraint, and consumption 3.8 Deriving the demand curve 3.9 Upward-sloping demand curve 3.10 Separating out the substitution effect from the income effect 3.11 Engel curves show how spending patterns change with increases in income 3.12 A valid market demand curve 3.13 Straight-line Engel ‘curves’ 3.14 Economic theory cannot rule out the possibility that a market demand curve may have a shape like this, rather than a smooth, downward-sloping curve 4.1 Leijonhufvud’s ‘Totems’ of the Econ tribe 4.2 Stigler’s proof that the horizontal firm demand curve is a fallacy 4.3 Profit maximization for a monopolist: marginal cost equals marginal revenue, while price exceeds marginal cost 4.4 Profit maximization for a perfectly competitive firm: marginal cost equals marginal revenue, which also equals price 4.5 A supply curve can be derived for a competitive firm, but not for a monopoly 4.6 A competitive industry produces a higher output at a lower cost than a monopoly 4.7 The standard ‘supply and demand’ explanation for price determination is valid only in perfect competition 4.8 Double the size, double the costs, but four times the output 4.9 Predictions of the models and results at the market level 4.10 Output behavior of three randomly selected firms 4.11 Profit outcomes for three randomly selected firms 4.12 Output levels for between 1- and 100-firm industries 5.1 Product per additional worker falls as the number of workers hired rises 5.2 Swap the axes to graph labor input against quantity 5.3 Multiply labor input by the wage to convert Y-axis into monetary terms, and add the sales revenue 5.4 Maximum profit occurs where the gap between total cost and total revenue is at a maximum 5.5 Deriving marginal cost from total cost 5.6 The whole caboodle: average and marginal costs, and marginal revenue 5.7 The upward-sloping supply curve is derived by aggregating the marginal cost curves of numerous competitive firms 5.8 Economic theory doesn’t work if Sraffa is right 5.9 Multiple demand curves with a broad definition of an industry 5.10 A farmer who behaved as economists advise would forgo the output shown in the gap between the two curves 5.11 Capacity utilization over time in the USA 5.12 Capacity utilization and employment move together 5.13 Costs determine price and demand determines quantity 5.14 A graphical representation of Sraffa’s (1926) preferred model of the normal firm 5.15 The economic theory of income distribution argues that the wage equals the marginal product of labor 5.16 Economics has no explanation of wage determination or anything else with constant returns 5.17 Varian’s drawing of cost curves in his ‘advanced’ microeconomics textbook 6.1 The demand for labor curve is the marginal revenue product of labor 6.2 The individual’s income–leisure trade-off determines how many hours of labor he supplies 6.3 An upward-sloping individual labor supply curve 6.4 Supply and demand determine the equilibrium wage in the labor market 6.5 Minimum wage laws cause unemployment 6.6 Demand management policies can’t shift the supply of or demand for labor 6.7 Indifference curves that result in less work as the wage rises 6.8 Labor supply falls as the wage rises 6.9 An individual labor supply curve derived from extreme and midrange wage levels 6.10 An unstable labor market stabilized by minimum wage legislation 6.11 Interdependence of labor supply and demand via the income distributional effects of wage changes 7.1 The standard economic ‘circular flow’ diagram 7.2 The rate of profit equals the marginal product of capital 7.3 Supply and demand determine the rate of profit 7.4 The wage/profit frontier measured using the standard commodity 9.1 Standard neoclassical comparative statics 9.2 The time path of one variable in the Lorenz model 9.3 Structure behind the chaos 9.4 Sensitive dependence on initial conditions 9.5 Unstable equilibria 9.6 Cycles in employment and income shares 9.7 A closed loop in employment and wages share of output 9.8 Phillips’s functional flow block diagram model of the economy 9.9 The component of Phillips’s Figure 12 including the role of expectations in price setting 9.10 Phillips’s hand drawing of the output–price-change relationship 9.11 A modern flow-chart simulation program generating cycles, not equilibrium 9.12 Phillips’s empirically derived unemployment–money-wage-change relation 10.1 Hicks’s model of Keynes 10.2 Derivation of the downward-sloping IS curve 10.3 Derivation of the upward-sloping LM curve 10.4 ‘Reconciling’ Keynes with ‘the Classics’ 10.5 Unemployment–inflation data in the USA, 1960–70 10.6 Unemployment–inflation data in the USA, 1950–72 10.7 Unemployment–inflation data in the USA, 1960–80 10.8 The hog cycle 11.1 Supply and demand in the market for money 11.2 The capital market line 11.3 Investor preferences and the investment opportunity cloud 11.4 Multiple investors (with identical expectations) 11.5 Flattening the IOC 11.6 How the EMH imagines that investors behave 11.7 How speculators actually behave 12.1 Inflation and base money in the 1920s 12.2 Inflation and base money in the post-war period 12.3 Bernanke’s massive injection of base money in QE1 12.4 Change in M0 and unemployment, 1920–40 12.5 Change in M1 and unemployment, 1920–40 12.6 Change in M0 and M1, 1920–40 12.7 M0–M1 correlation during the Roaring Twenties 12.8 M0–M1 correlation during the Great Depression 12.9 Bernanke’s ‘quantitative easing’ in historical perspective 12.10 The volume of base money in Bernanke’s ‘quantitative easing’ in historical perspective 12.11 Change in M1 and inflation before and during the Great Recession 12.12 The money supply goes haywire 12.13 Lindsey, Orphanides, Rasche 2005, p. 213 12.14 The empirical ‘Money Multiplier’, 1920–40 12.15 The empirical ‘Money Multiplier’, 1960–2012 12.16 The disconnect between private and fiat money during the Great Recession 13.1 Goodwin’s growth cycle model 13.2 My 1995 Minsky model 13.3 The vortex of debt in my 1995 Minsky model 13.4 Cyclical stability with a counter-cyclical government sector 13.5 Australia’s private debt-to-GDP ratio, 1975–2005 13.6 US private debt to GDP, 1955–2005 13.7 Aggregate demand in the USA, 1965–2015 13.8 US private debt 13.9 The change in debt collapses as the Great Recession begins 13.10 The Dow Jones nosedives 13.11 The correlation of debt-financed demand and unemployment 13.12 The housing bubble bursts 13.13 The Credit Impulse and change in employment 13.14 Correlation of Credit Impulse and change in employment and GDP 13.15 Relatively constant growth in debt 13.16 The biggest collapse in the Credit Impulse ever recorded 13.17 Growing level of debt-financed demand as debt grew faster than GDP 13.18 The two great debt bubbles 13.19 Change in nominal GDP growth then and now 13.20 Real GDP growth then and now 13.21 Inflation then and now 13.22 Unemployment then and now 13.23 Nominal private debt then and now 13.24 Real debt then and now 13.25 Debt to GDP then and now 13.26 Real debt growth then and now 13.27 The collapse of debt-financed demand then and now 13.28 Debt by sector – business debt then, household debt now 13.29 The Credit Impulse then and now 13.30 Debt-financed demand and unemployment, 1920–40 13.31 Debt-financed demand and unemployment, 1990–2011 13.32 Credit Impulse and change in unemployment, 1920–40 13.33 Credit Impulse and change in unemployment, 1990–2010 13.34 The Credit Impulse leads change in unemployment 14.1 The neoclassical model of exchange as barter 14.2 The nature of exchange in the real world 14.3 A nineteenth-century private banknote 14.4 Bank accounts 14.5 A credit crunch causes a fall in deposits and a rise in reserves in the bank’s vault 14.6 A bank bailout’s impact on loans 14.7 A bank bailout’s impact on incomes 14.8 A bank bailout’s impact on bank income 14.9 Bank income grows if debt grows more rapidly 14.10 Unemployment is better with a debtor bailout 14.11 Loans grow more with a debtor bailout 14.12 Profits do better with a debtor bailout 14.13 Bank income does better with a bank bailout 14.14 Modeling the Great Moderation and the Great Recession – inflation, unemployment and debt 14.15 The Great Moderation and the Great Recession – actual inflation, unemployment and debt 14.16 Modeling the Great Moderation and the Great Recession – output 14.17 Income distribution – workers pay for the debt 14.18 Actual income distribution matches the model 14.19 Debt and GDP in the model 14.20 Debt and GDP during the Great Depression 15.1 Lemming population as a constant subject to exogenous shocks 15.2 Lemming population as a variable with unstable dynamics 17.1 A graphical representation of Marx’s dialectics Boxes 10.1 The Taylor Rule 13.1 Definitions of unemployment PREFACE TO THE SECOND EDITION Debunking Economics was far from the first book to argue that neoclassical economics was fundamentally unsound.
(Bezemer 2009: 7) Bezemer came up with twelve names: myself and Dean Baker, Wynne Godley, Fred Harrison, Michael Hudson, Eric Janszen, Jakob Brøchner Madsen and Jens Kjaer Sørensen, Kurt Richebächer, Nouriel Roubini, Peter Schiff, and Robert Shiller. He also identified four common aspects of our work: 1 a concern with financial assets as distinct from real-sector assets, 2 with the credit flows that finance both forms of wealth, 3 with the debt growth accompanying growth in financial wealth, and 4 with the accounting relation between the financial and real economy. (Ibid.: 8) TABLE 2.1 Anticipations of the housing crisis and recession If you have never studied economics before, this list may surprise you: don’t all economists consider these obviously important economic issues? As you will learn in this book, the answer is no. Neoclassical economic theory ignores all these aspects of reality – even when, on the surface, they might appear to include them. Bezemer gives the example of the OECD’s ‘small global forecasting’ model, which makes forecasts for the global economy that are then disaggregated to generate predictions for individual countries – it was the source of Cotis’s statement ‘Our central forecast remains indeed quite benign’ in the September 2007 OECD Economic Outlook.
Carjacked: The Culture of the Automobile and Its Effect on Our Lives by Catherine Lutz, Anne Lutz Fernandez
barriers to entry, car-free, carbon footprint, collateralized debt obligation, failed state, feminist movement, fudge factor, Gordon Gekko, housing crisis, illegal immigration, income inequality, inventory management, market design, market fundamentalism, mortgage tax deduction, Naomi Klein, Nate Silver, New Urbanism, oil shock, peak oil, Ralph Nader, Ralph Waldo Emerson, ride hailing / ride sharing, Thorstein Veblen, traffic fines, Unsafe at Any Speed, urban planning, white flight, women in the workforce, working poor, Zipcar
Eerily echoing the reviled Gordon Gekko of Oliver Stone’s morality tale Wall Street, Ray Diallo, founder of hedge fund Bridgewater Associates, noted, “The money that’s made from manufacturing stuff is a pittance in comparison to the amount of money made from shuffling money around.” 2007 was the year many first learned 124 Carjacked the terms “predatory lending” and “hedge fund,” both of which have come to hit American car owners, not just home owners, with a vengeance. The housing crisis grabbed the headlines beginning in 2007, but auto loans played a meaningful role in the CDO market that helped precipitate the crisis. CDOs are collateralized debt obligations, also known as credit derivatives, a financial instrument dating back to the early 1990s that is essentially the securitization of risk. When an investor, such as a bank or hedge fund, purchases a credit derivative, he is buying not a bundle of home or auto loans but a portion or all of the risk of that bundle.
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
Doing anything to slow lending to the low-income market would be ethically unacceptable. Second, Freddie and Fannie were huge contributors to both political parties. Between 1998 and 2008, Freddie Mac spent $94.9 million and Fannie Mae spent $79.5 million to lobby Congress.5 They also provided many intangible benefits to various members of Congress. The individuals who are most responsible for the collapse of Freddie and Fannie and the related housing crisis are Congressman Barney Frank and Senator Chris Dodd. They both had the information to know that something needed to be done and refused to do it. I particularly blame Barney Frank. Most of the members of Congress involved simply were not intellectual enough to understand the fundamental issue. However, Barney is smart. He could see the issues, and he still refused to act—a classic example of evasion.
In FED We Trust: Ben Bernanke's War on the Great Panic by David Wessel
Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Berlin Wall, Black Swan, central bank independence, credit crunch, Credit Default Swap, crony capitalism, debt deflation, Fall of the Berlin Wall, financial innovation, financial intermediation, full employment, George Akerlof, housing crisis, inflation targeting, London Interbank Offered Rate, Long Term Capital Management, market bubble, moral hazard, mortgage debt, new economy, Northern Rock, price stability, quantitative easing, Robert Shiller, Robert Shiller, Ronald Reagan, Saturday Night Live, savings glut, Socratic dialogue, too big to fail
Now, two years later, the hangover from the Greenspan years was giving his successors a massive and growing headache. The formal topic was timely and reinforced the pain: housing and housing finance. This year, a revisionist account of the Greenspan years began to take hold inside the fraternity. John Taylor, the noted Stanford monetary expert, indicted Greenspan for having created the current housing crisis by keeping interest rates too low too long earlier in the decade. Taylor believed that government economic policy worked best when the people who made policies publicly described the rules that governed their decision making. He was famous among central bankers around the world for “the Taylor rule,” a simple formula for setting interest rates that depended on where inflation was versus the Fed’s goal for it, how far from full employment the economy was, and what the short-term interest rate should be when the economy was perking along.
What's Next?: Unconventional Wisdom on the Future of the World Economy by David Hale, Lyric Hughes Hale
affirmative action, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Berlin Wall, Black Swan, Bretton Woods, capital controls, Cass Sunstein, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, debt deflation, declining real wages, deindustrialization, diversification, energy security, Erik Brynjolfsson, Fall of the Berlin Wall, financial innovation, floating exchange rates, full employment, Gini coefficient, global reserve currency, global village, high net worth, Home mortgage interest deduction, housing crisis, index fund, inflation targeting, invisible hand, Just-in-time delivery, Kenneth Rogoff, labour market flexibility, labour mobility, Long Term Capital Management, Mahatma Gandhi, Martin Wolf, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, mortgage tax deduction, Network effects, new economy, Nicholas Carr, oil shale / tar sands, oil shock, open economy, passive investing, payday loans, peak oil, Ponzi scheme, post-oil, price stability, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, reserve currency, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, sovereign wealth fund, special drawing rights, technology bubble, The Great Moderation, Thomas Kuhn: the structure of scientific revolutions, Tobin tax, too big to fail, total factor productivity, trade liberalization, Washington Consensus, women in the workforce, yield curve
These include: • Developing Country Debt Crisis (1983) • US Savings and Loan Crisis (1980s) • Resolution Trust Company, which created REITS (Real Estate Investment Trusts) (late 1980s) • The 1988 Basel Capital Accord (1988) • The beginning of derivatives (early 1990s) • Proliferation of derivatives and Special Purpose Entities (SPEs) (1990s) • Asian Financial Crisis (1997–1998) • Collapse of Long-Term Capital Management (LTCM) (1998) • The repeal of Glass-Steagall (1999) and the adoption of Gramm-Leach-Bliley Financial Modernization Act (GLBA) (1998) • The failure of dot-coms (2000) Causes of the Global Financial Crisis after SOX and Prior to September 18, 2008 It is also important to understand the events and economic climate after the July 31, 2002, passage of SOX and prior to September 18, 2008. These events include: • The increasing complexity of derivative products, including CDSs (Credit Default Swaps) and CDOs (Collateralized Debt Obligations)4 • The ascendancy of rating agencies • Alt-A subprime lending • Basel II (2005–2006) • The subprime housing crisis in the United States, including the rise of “NINJA” (no income, no jobs, no assets) financing • The rise of hedge funds • The oil crisis (2008) • The collapse of Bear Stearns, Fannie Mae, Freddie Mac, and Lehman Brothers (2008) Understanding the causes of the global financial crisis will go hand in hand with regulatory reform and increasing targeted global compliance and ethics programs.5 Why SOX Failed SOX was supposed to remedy the financial improprieties and excesses that existed prior to July 31, 2002.
The Price of Everything: And the Hidden Logic of Value by Eduardo Porter
Asian financial crisis, Ayatollah Khomeini, banking crisis, barriers to entry, Berlin Wall, British Empire, capital controls, Carmen Reinhart, Cass Sunstein, clean water, Credit Default Swap, Deng Xiaoping, Edward Glaeser, European colonialism, Fall of the Berlin Wall, financial deregulation, Ford paid five dollars a day, full employment, George Akerlof, Gordon Gekko, guest worker program, happiness index / gross national happiness, housing crisis, illegal immigration, immigration reform, income inequality, income per capita, informal economy, invisible hand, Jean Tirole, John Maynard Keynes: technological unemployment, Kenneth Rogoff, labor-force participation, laissez-faire capitalism, loss aversion, low skilled workers, Martin Wolf, means of production, Menlo Park, Mexican peso crisis / tequila crisis, new economy, New Urbanism, pension reform, Peter Singer: altruism, pets.com, placebo effect, price discrimination, price stability, rent-seeking, Richard Thaler, rising living standards, risk tolerance, Robert Shiller, Robert Shiller, Ronald Reagan, Silicon Valley, stem cell, Steve Jobs, Stewart Brand, superstar cities, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade route, transatlantic slave trade, transatlantic slave trade, ultimatum game, unpaid internship, urban planning, women in the workforce, World Values Survey, Yom Kippur War, young professional
WHEN PRICES GO OFF THE RAILS The housing bubble might be the most painful case of financial excess in recent memory, but it surely isn’t the only one. Through the ages, virtually every potentially profitable new frontier opened up to investment has led to a speculative bubble, as investors have scrambled to tap into its promise only to stampede in retreat a few years later. A decade before the housing crisis we experienced the dot-com bubble. The NASDAQ index, heavy with technology stocks, quadrupled between 1996 and March of 2000. Drunk on information technology’s promise, people poured retirement savings into companies like Pets.com, which achieved fame, though never profit, on the strength of a cute ad with a sock puppet. In 2000, AOL could use its pricey stock to take over media goliath Time Warner, which had more than five times its revenue.
The End of Growth by Jeff Rubin
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
Economic growth is only one measure of well-being. And since it often comes at the cost of endangering our own survival, there are other standards we should take into account. The surprising thing is that if we look at it through a different lens, the end of growth will leave us all richer than we ever may have thought. [ SOURCE NOTES ] INTRODUCTION this page: A copious amount of ink has been spilled dissecting the US housing crisis and subsequent stock market crash in 2008. For a particularly lively account of the bubble that developed for collateralized debt obligations and the emergence of the credit default swap market, see The Big Short (2010) by Michael Lewis. CHAPTER 1: CHANGING THE ECONOMIC SPEED LIMIT this page: For a broader take on how Reaganomics fostered the culture of deregulation that still persists in the United States, see The Price of Civilization: Economics and Ethics After the Fall (2011) by Jeffrey Sachs, director of the Earth Institute at Colombia University.
3D printing, Airbnb, Albert Einstein, Berlin Wall, Black Swan, clean water, collapse of Lehman Brothers, Credit Default Swap, crony capitalism, crowdsourcing, Danny Hillis, declining real wages, demographic dividend, Elon Musk, en.wikipedia.org, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, follow your passion, game design, housing crisis, Hyman Minsky, industrial robot, invisible hand, James Dyson, Jane Jacobs, Jeff Bezos, jimmy wales, John Gruber, Joseph Schumpeter, Kickstarter, lone genius, manufacturing employment, Mark Zuckerberg, Martin Wolf, new economy, Paul Graham, Peter Thiel, race to the bottom, reshoring, Richard Florida, Ronald Reagan, shareholder value, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, six sigma, Skype, Steve Ballmer, Steve Jobs, Steve Wozniak, supply-chain management, Tesla Model S, The Chicago School, The Design of Experiments, the High Line, The Myth of the Rational Market, thinkpad, Tim Cook: Apple, too big to fail, tulip mania, We are the 99%, Y Combinator, young professional, Zipcar
Goizueta, Coca-Cola Chairman Noted for Company Turnaround, Dies at 65,” New York Times, October 19, 1997, accessed September 13, 2012, http://www.nytimes.com/1997/10/19/us/ roberto-c-goizueta-coca-cola-chairman-noted-for-company-turnaround-dies-at-65.html. 231 After talking to Wall Street: interview with Professor Ho at a copresentation she gave with Gillian Tett of the Financial Times, March 10, 2010, at Columbia University; Karen Ho, Liquidated: An Ethnography of Wall Street (Durham, NC: Duke University Press, 2009). 231 The value of millions of houses remains: Binyamin Appelbaum, “Cautious Moves on Foreclosures Haunting Obama,” New York Times, August 19, 2012, accessed September 14, 2012, http://www.nytimes.com/2012/08/20/business/economy/ slow-response-to-housing-crisis-now-weighs-on-obama.html; Les Christie, “Troubled Homeowners Get a Lifeline,” CNN Money, October 24, 2011, accessed September 14, 2012, http://money.cnn.com/2011/10/24/real_estate/ housing_refinance/index.htm. 231 Interest rates, zero for many: David Shulman, “The Downside of the Fed’s Zero Rate Policy,” US News and World Report, April 30, 2012, accessed September 14, 2012, http://www.usnews.com/opinion/blogs/ economic-intelligence/2012/04/30/the-downside-of-the-feds-zero-interest-rate-policy. 231 the volatility of the markets: Tami Luhby, “Credit Freeze and Your Paycheck,” CNN Money, September 28, 2008, accessed September 14, 2012, http://money.cnn.com/2008/09/28/news/economy/ main_street_impact/index.htm?
Bricks & Mortals: Ten Great Buildings and the People They Made by Tom Wilkinson
Berlin Wall, British Empire, cuban missile crisis, Donald Trump, double helix, experimental subject, false memory syndrome, financial independence, Ford paid five dollars a day, Frederick Winslow Taylor, Google Glasses, housing crisis, Mahatma Gandhi, megacity, neoliberal agenda, New Urbanism, traveling salesman, trickle-down economics, Upton Sinclair, urban planning
Trick or not, this structure helped usher in a craze for the industrial aesthetic. So too did Le Corbusier’s faux-industrial villas – also made of brick. Le Corbusier chose to carefully render his walls, painting them white to achieve the appearance of concrete. He said he wanted houses to be made ‘on the same principles as the Ford car’, and proposed a mass-produced system of reinforced concrete construction. War-ravaged Europe was suffering an unprecedented housing crisis, and industrial prefabrication offered hope of homes for all. This hope turned out to be unjustified, but if houses couldn’t yet be made that way, they could at least be made to look that way. Real and illusory high-tech Americanismus: a Mercedes advertisement shot outside Le Corbusier’s brick and stucco house for the Werkbund exhibition, Stuttgart (1927) Albert Kahn, however, did not share the modernists’ enthusiasm for the industrial look: I can see a very close analogy between the modern industrial building and the modern box-like, flat-roofed house, so many of which are erected today.
Death of the Liberal Class by Chris Hedges
1960s counterculture, Albert Einstein, Berlin Wall, call centre, clean water, collective bargaining, Columbine, corporate governance, deindustrialization, desegregation, Donald Trump, Fall of the Berlin Wall, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, hive mind, housing crisis, Howard Zinn, illegal immigration, Jane Jacobs, Jaron Lanier, Lao Tzu, post scarcity, profit motive, Ralph Nader, Ronald Reagan, strikebreaker, the scientific method, The Wisdom of Crowds, Tobin tax, union organizing, Unsafe at Any Speed, Upton Sinclair, WikiLeaks, working poor, Works Progress Administration
“The most unique achievement of Federal Theatre, and the one that paradoxically was most responsible for its demise, was the creation of the Living Newspaper,” said playwright and director Karen Malpede,an indigenous form of documentary drama dramatizing hot-button subjects of national debate. Triple-A Plowed Under, Power, One-Third of a Nation, Spirochete, were researched by journalists, written by dramatists, acted by huge casts with full orchestras and explored the struggle of farmers, the debate over the Tennessee Valley Association’s plan to bring subsidized electricity to the rural South; the reasons behind the housing crisis—“One-third of the nation is ill-housed, ill-fed,” President Roosevelt had said—the race for the cure for syphilis. Labor intensive, provocative, using and inventing all sorts of non-realistic acting and staging techniques, the Living Newspapers, a new form of theater, were precursors of American 1960s experimentalism, documentary and collectively created political theater.32 The Living Newspapers were wildly popular.
The End of Men: And the Rise of Women by Hanna Rosin
affirmative action, call centre, cognitive dissonance, David Brooks, delayed gratification, edge city, facts on the ground, financial independence, hiring and firing, housing crisis, income inequality, informal economy, job satisfaction, low skilled workers, manufacturing employment, meta analysis, meta-analysis, new economy, New Urbanism, Northern Rock, postindustrial economy, purchasing power parity, Results Only Work Environment, Silicon Valley, Steven Pinker, union organizing, upwardly mobile, women in the workforce, young professional
“It’s like someone just turned the spigot off and we couldn’t figure out how to turn it back on,” said Mary Shockley, who works at Russell Medical Center. What dried up was a path to the middle class and all the familiar landmarks that went along with it. I visited Alexander City in the aftermath, when the town was still trying to make sense of what had happened. The town was in the same situation as any number of American suburbs near Las Vegas or Houston or Fort Lauderdale, where the recession and the housing crisis had ripped the roots out of the middle class. But here the effect was concentrated and stark, and you could see more clearly what had been lost, and also what was rising up in its place. In the last decade or so, the broad middle swath of America has become unrecognizable, with a rapid decline in marriage and a rapid increase in divorce and single motherhood. The men destined to be breadwinners have lost their way, causing a sudden upending of the rules for sex, marriage, politics, religion, and the future aspirations of young people in places like Benjamin Russell High School.
The Precariat: The New Dangerous Class by Guy Standing
8-hour work day, banking crisis, barriers to entry, Bertrand Russell: In Praise of Idleness, call centre, Cass Sunstein, centre right, collective bargaining, corporate governance, crony capitalism, deindustrialization, deskilling, fear of failure, full employment, hiring and firing, Honoré de Balzac, housing crisis, illegal immigration, immigration reform, income inequality, labour market flexibility, labour mobility, land reform, libertarian paternalism, low skilled workers, lump of labour, marginal employment, Mark Zuckerberg, means of production, mini-job, moral hazard, Naomi Klein, nudge unit, pensions crisis, placebo effect, post-industrial society, precariat, presumed consent, quantitative easing, remote working, rent-seeking, Richard Thaler, rising living standards, Ronald Coase, Ronald Reagan, science of happiness, shareholder value, Silicon Valley, The Market for Lemons, The Nature of the Firm, The Spirit Level, Tobin tax, transaction costs, universal basic income, unpaid internship, winner-take-all economy, working poor, working-age population, young professional
Obama won against weak Republican opposition, in the midst of a disastrous war and an economy on the edge of meltdown. He could have risked attacking the neo-liberal project. Instead he backed the International Monetary Fund, which had been a primary culprit in its hubris, bailed out the banks and appointed Larry Summers as his principal economic adviser, the man who devised the policy responsible for the sub-prime housing crisis. Obama never tried to reach out to the precariat, even though many in it had been hopeful that he would do so. The social democratic imagination could not empathise with real predicaments. In the United States and elsewhere, anger grew at some of the corrupt aspects of the globalisation era. Recall the systemic use of subsidies. Naomi Klein among others has called the globalisation era ‘crony capitalism’, revealing itself not as a huge ‘free market’ but as a system in which politicians hand over public wealth to private players in exchange for political support.
Inventing the Future: Postcapitalism and a World Without Work by Nick Srnicek, Alex Williams
3D printing, additive manufacturing, air freight, algorithmic trading, anti-work, back-to-the-land, banking crisis, battle of ideas, blockchain, Bretton Woods, call centre, capital controls, carbon footprint, Cass Sunstein, centre right, collective bargaining, crowdsourcing, cryptocurrency, David Graeber, decarbonisation, deindustrialization, deskilling, Doha Development Round, Elon Musk, Erik Brynjolfsson, Ferguson, Missouri, financial independence, food miles, Francis Fukuyama: the end of history, full employment, future of work, gender pay gap, housing crisis, income inequality, industrial robot, informal economy, intermodal, Internet Archive, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, late capitalism, low skilled workers, manufacturing employment, market design, Martin Wolf, means of production, minimum wage unemployment, Mont Pelerin Society, neoliberal agenda, New Urbanism, Occupy movement, oil shale / tar sands, oil shock, patent troll, pattern recognition, post scarcity, postnationalism / post nation state, precariat, price stability, profit motive, quantitative easing, reshoring, Richard Florida, rising living standards, road to serfdom, Robert Gordon, Ronald Reagan, Second Machine Age, secular stagnation, self-driving car, Slavoj Žižek, social web, stakhanovite, Steve Jobs, surplus humans, the built environment, The Chicago School, Tyler Cowen: Great Stagnation, universal basic income, wages for housework, We are the 99%, women in the workforce, working poor, working-age population
Yet these real successes are overwhelmed by larger plans to gut and privatise the National Health Service. Similarly, recent anti-fracking movements have been able to stop test drilling in various localities – but governments nevertheless continue to search for shale gas resources and provide support for companies to do so.7 In the United States, various movements to stop evictions in the wake of the housing crisis have made real gains in terms of keeping people in their homes.8 Yet the perpetrators of the subprime mortgage debacle continue to reap the profits, waves of foreclosures continue to sweep across the country, and rents continue to surge across the urban world. Small successes – useful, no doubt, for instilling a sense of hope – nevertheless wither in the face of overwhelming losses. Even the most optimistic activist falters in the face of struggles that continue to fail.
The Great Inversion and the Future of the American City by Alan Ehrenhalt
anti-communist, big-box store, British Empire, crack epidemic, David Brooks, deindustrialization, Edward Glaeser, Frank Gehry, haute cuisine, Honoré de Balzac, housing crisis, illegal immigration, Jane Jacobs, manufacturing employment, McMansion, New Urbanism, postindustrial economy, Richard Florida, The Chicago School, The Death and Life of Great American Cities, too big to fail, transit-oriented development, upwardly mobile, urban decay, urban planning, urban renewal, walkable city, white flight, working poor, young professional
One study by a real estate consulting firm in 2009 reported that only 17 percent of Generation Y (the “millennials,” born roughly between 1980 and 1995) expressed a preference for urban living, most likely a rental apartment, over a suburban mode of life. But there are equally compelling, and strikingly different, results on the other side. A competing study by the consulting firm RCLCO, in 2008, revealed an almost precisely opposite result: 77 percent of Generation Y wanted to live some variant of the urban life. “Generation Y’s attitudes toward home ownership have been changed by the housing crisis and the recession,” the Urban Land Institute found in commenting on the RCLCO study. “The number of people trapped by underwater homes that cannot be sold and the millions of foreclosures are tempering their interest in buying their own homes and they will be renters by necessity rather than by choice for years ahead.” In many if not most cases, that means urbanized rather than traditional suburban rentals.
The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead by David Callahan
1960s counterculture, affirmative action, corporate governance, David Brooks, deindustrialization, East Village, forensic accounting, full employment, game design, greed is good, high batting average, housing crisis, illegal immigration, income inequality, job satisfaction, market fundamentalism, McMansion, microcredit, moral hazard, new economy, New Urbanism, offshore financial centre, oil shock, Plutocrats, plutocrats, postindustrial economy, profit maximization, profit motive, RAND corporation, Ray Oldenburg, rolodex, Ronald Reagan, shareholder value, Silicon Valley, Steve Jobs, The Bell Curve by Richard Herrnstein and Charles Murray, The Chicago School, Thorstein Veblen, War on Poverty, winner-take-all economy, World Values Survey, young professional
If you run a business that generates waste, you might be more tempted to spoil the environment because you know that strapped EPA enforcers aren't going to bother with you—or because a friendly administration has changed the law in your favor. If you're selling power during an energy crunch, you might be tempted to manipulate the energy market and artificially drive up electricity prices in order to make a killing. Why? Because you can—because deregulated energy markets and unsophisticated enforcers allow you to get away with profiteering. If you're a landlord in New York City, with its perpetual housing crisis, you'll be tempted to cut all sorts of corners because you know that these days the city has the resources to send out investigators only if there's a flood or a collapse, leaving much illegal behavior unpunished. If you're Wal-Mart, America's biggest company, you'll be tempted to continue the pervasive practice of forcing workers in your stores to put in overtime without paying them for it or using illegal immigrants.
air freight, Al Roth, Bernie Madoff, Burning Man, butterfly effect, Cass Sunstein, collateralized debt obligation, computer vision, corporate governance, credit crunch, Daniel Kahneman / Amos Tversky, David Brooks, delayed gratification, endowment effect, financial innovation, fudge factor, Gordon Gekko, greed is good, housing crisis, invisible hand, lake wobegon effect, late fees, loss aversion, market bubble, Murray Gell-Mann, payday loans, placebo effect, price anchoring, Richard Thaler, second-price auction, Silicon Valley, Skype, The Wealth of Nations by Adam Smith, Upton Sinclair
If banks understood this, they undoubtedly would not have left it up to individuals to figure out the right amount for themselves. In the absence of such an understanding, however, the banks tempted individuals to borrow more than they could possibly afford. Sure, the banks could threaten borrowers with the financial equivalent of breaking legs, but they didn’t help borrowers do what’s best for the banks—or themselves. It’s no wonder that, when the housing crisis finally hit, both banks and their customers wound up with broken legs. Now, let’s say that after all is said and done, the banks finally wise up and decide to conduct empirical studies that examine how people might go about computing the ideal loan amount. Assuming their data reveal the same results as my small study (that people simply borrow to the maximum), the bankers might then realize that it is in their best interest to help borrowers make better decisions.
The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism by Arun Sundararajan
3D printing, additive manufacturing, Airbnb, Amazon Mechanical Turk, autonomous vehicles, barriers to entry, bitcoin, blockchain, Burning Man, call centre, collaborative consumption, collaborative economy, collective bargaining, corporate social responsibility, cryptocurrency, David Graeber, distributed ledger, employer provided health coverage, Erik Brynjolfsson, ethereum blockchain, Frank Levy and Richard Murnane: The New Division of Labor, future of work, George Akerlof, gig economy, housing crisis, Howard Rheingold, Internet of things, inventory management, invisible hand, job automation, job-hopping, Kickstarter, knowledge worker, Kula ring, Lyft, megacity, minimum wage unemployment, moral hazard, Network effects, new economy, Oculus Rift, pattern recognition, peer-to-peer lending, profit motive, purchasing power parity, race to the bottom, recommendation engine, regulatory arbitrage, rent control, Richard Florida, ride hailing / ride sharing, Robert Gordon, Ronald Coase, Second Machine Age, self-driving car, sharing economy, Silicon Valley, smart contracts, Snapchat, social software, supply-chain management, TaskRabbit, The Nature of the Firm, total factor productivity, transaction costs, transportation-network company, two-sided market, Uber and Lyft, Uber for X, universal basic income, Zipcar
Others were concerned that Airbnb rentals might further restrict an already constrained residential rental environment if landlords or enterprising New Yorkers started renting out units on Airbnb instead of allowing them to be rented by long-term residents.3 A coalition of legislators and homeowner associations called “Share Better” launched in 2014 to generate grassroots opposition to Airbnb. The organization’s website proclaims: “Far from being a harmless service where New York City residents can share their homes with guests to the City, Airbnb enables New York City tenants to break the law and potentially violate their leases, it exacerbates the affordable housing crisis in our neighborhoods, and it poses serious public safety concerns for Airbnb guests, hosts and their neighbors.”4 In May 2014, Airbnb agreed to hand over anonymized data on its New York City users, but only after a judge ruled that Schneiderman’s initial subpoena to access information on hosts across the state was too broad. Shortly thereafter, Schneiderman and his office issued a report, “Airbnb in the City.”
Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism by George A. Akerlof, Robert J. Shiller
affirmative action, Andrei Shleifer, asset-backed security, bank run, banking crisis, collateralized debt obligation, conceptual framework, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, Deng Xiaoping, Donald Trump, Edward Glaeser, en.wikipedia.org, experimental subject, financial innovation, full employment, George Akerlof, housing crisis, Hyman Minsky, income per capita, inflation targeting, invisible hand, Isaac Newton, Jane Jacobs, Jean Tirole, job satisfaction, Joseph Schumpeter, Long Term Capital Management, loss aversion, market bubble, market clearing, mental accounting, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, new economy, New Urbanism, Plutocrats, plutocrats, price stability, profit maximization, purchasing power parity, random walk, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, South Sea Bubble, The Chicago School, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, working-age population, Y2K, Yom Kippur War
Just as families sometimes cohere and at other times argue, are sometimes happy and at other times depressed, are sometimes successful and at other times in disarray, so too do whole economies go through good and bad times. The social fabric changes. Our level of trust in one another varies. And our willingness to undertake effort and engage in self-sacrifice is by no means constant. The idea that economic crises, like the current financial and housing crisis, are mainly caused by changing thought patterns goes against standard economic thinking. But the current crisis bears witness to the role of such changes in thinking. It was caused precisely by our changing confidence, temptations, envy, resentment, and illusions—and especially by changing stories about the nature of the economy. These intangibles were the reason why people paid small fortunes for houses in cornfields; why others financed those purchases; why the Dow Jones average peaked above 14,000 and a little more than a year later fell below 7,500; why the U.S. unemployment rate has risen by 2.5 percentage points in the past twenty-four months, with the end of this rise not yet in sight; why Bear Stearns, one of the world’s leading investment banks, was only (and barely) saved by a Federal Reserve bailout, and why later in the year Lehman Brothers collapsed outright; why a large fraction of the world’s banks are underfunded; and why, as we write, some of them are still tottering on the brink, even after a bailout, and may yet be the next to go.
The Big Short: Inside the Doomsday Machine by Michael Lewis
Asperger Syndrome, asset-backed security, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, diversified portfolio, facts on the ground, financial innovation, fixed income, forensic accounting, Gordon Gekko, high net worth, housing crisis, illegal immigration, income inequality, index fund, interest rate swap, London Interbank Offered Rate, Long Term Capital Management, medical residency, moral hazard, mortgage debt, pets.com, Ponzi scheme, Potemkin village, quantitative trading / quantitative ﬁnance, short selling, Silicon Valley, too big to fail, value at risk, Vanguard fund
Back in July 2003, he'd written them a long essay on the causes and consequences of what he took to be a likely housing crash: "Alan Greenspan assures us that home prices are not prone to bubbles--or major deflations--on any national scale," he'd said. "This is ridiculous, of course.... In 1933, during the fourth year of the Great Depression, the United States found itself in the midst of a housing crisis that put housing starts at 10% of the level of 1925. Roughly half of all mortgage debt was in default. During the 1930s, housing prices collapsed nationwide by roughly 80%." He harped on the same theme again in January 2004, then again in January 2005: "Want to borrow $1,000,000 for just $25 a month? Quicken Loans has now introduced an interest only adjustable rate mortgage that gives borrowers six months with both zero payments and a 0.03% interest rate, no doubt in support of that wholesome slice of Americana--the home buyer with the short term cash flow problem."
asset-backed security, bank run, banking crisis, Bretton Woods, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, Doha Development Round, fear of failure, financial innovation, housing crisis, income inequality, London Interbank Offered Rate, Long Term Capital Management, margin call, moral hazard, Northern Rock, price discovery process, price mechanism, regulatory arbitrage, Ronald Reagan, Saturday Night Live, short selling, sovereign wealth fund, technology bubble, too big to fail, trade liberalization, young professional
The next morning, Ben and I briefed Senate Banking Committee chair Chris Dodd on the markets. Dodd had interrupted his presidential campaign for what appeared to be a publicity event. I was new enough to Washington to be put off by this request, and I was also frustrated that GSE reform had been held up during the year. Ben and I met with Dodd in his office at the Russell Senate Office Building, discussing the markets and the housing crisis. The affable Dodd was friendly but criticized me to reporters afterward, questioning whether I understood the importance of the subprime mortgage problem. In fact, I was watching the mortgage market more closely than the senator realized. It was becoming increasingly clear that the housing problems had crossed into the financial system, producing the makings of a much more ominous crisis. The sooner the housing correction ran its course, the sooner the credit markets would also stabilize.
Take the money and run: sovereign wealth funds and the demise of American prosperity by Eric Curt Anderson
asset allocation, banking crisis, Bretton Woods, business continuity plan, business intelligence, business process, collective bargaining, corporate governance, credit crunch, currency manipulation / currency intervention, currency peg, diversified portfolio, floating exchange rates, housing crisis, index fund, Kenneth Rogoff, open economy, passive investing, profit maximization, profit motive, random walk, reserve currency, risk tolerance, risk-adjusted returns, risk/return, Ronald Reagan, sovereign wealth fund, the market place, The Wealth of Nations by Adam Smith, too big to fail, Vanguard fund
Of note, the Washington Post went on to state the sovereign wealth funds engaged in the commodity trading were not from oilproducing countries; instead, the bulk of the activity appeared to originate with Asian-based government investment vehicles.47 What are we to make of these two stories? The item from the New York Post would appear to indicate at least one sovereign wealth fund is looking to proﬁt from the U.S. housing crisis. While we can bemoan the mean-spirited nature of this investment, the properties clearly cannot be removed from the United States and are, therefore, likely to eventually once again land in American hands. My vote is that it is proﬁt-motivated behavior.48 Now, what about the commodities speculation? This story is a more difﬁcult read. I can understand how some readers would argue this is a case of strategic investment—governments using sovereign wealth funds to purchase future rights to scarce resources.
The Right to Earn a Living: Economic Freedom and the Law by Timothy Sandefur
barriers to entry, big-box store, Cass Sunstein, clean water, collective bargaining, corporate governance, corporate social responsibility, Edward Glaeser, housing crisis, joint-stock company, Joseph Schumpeter, labour mobility, minimum wage unemployment, positional goods, price stability, profit motive, race to the bottom, Ralph Nader, RAND corporation, rent control, Silicon Valley, The Wealth of Nations by Adam Smith, trade route, transaction costs, Upton Sinclair, urban renewal
According to California’s Department of Housing and Community Development, the state “leads the nation in imposing fees on new residential development . . . which vary widely from jurisdiction to jurisdiction, often with no explicit rationale. They average $20,000 to $30,000 per unit and account for more than 15 percent of new home prices in jurisdictions providing substantial shares of affordable housing.” State of California Little Hoover Commission, “Rebuilding the Dream: Solving California’s Affordable Housing Crisis,” Report no. 165, May 2002, p. 39, http://www. lhc.ca.gov/studies/165/report165.pdf. 89. Marla Dresch and Steven M. Sheffrin, Who Pays for Development Fees and Exactions? (Sacramento: Public Policy Institute of California, June 1997), p. v, http://www. ppic.org/content/pubs/report/R_697SSR.pdf. 90. Ibid., p. 51. 91. California Department of Housing and Community Development, “Pay to Play: Residential Development Fees in California Cities and Counties,” Sacramento, August 2001, p. 2, http://www.hcd.ca.gov/hpd/pay2play/fee_rpt.pdf. 92.
Trend Following: How Great Traders Make Millions in Up or Down Markets by Michael W. Covel
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
Consider Vandergrift’s explanation about trading “hogs” (see Chart 4.9): “The Hog position was one of the most beautiful trends that I’ve seen in years. As the U.S. dollar rallied, nearly every commodity tied to the dollar moved violently. Although our larger portfolio gains happened in October, this position profited throughout the fall of 2008.” Sure, we all focus on “stocks,” but what about lumber? Vandergrift explained his lumber trade (see Chart 4.10): “Lumber was another great market over the fall of 2008. Lumber fell due to the housing crisis in the U.S. Lower demand means lower lumber prices. We sold the market short in the late summer and held the position until mid-November. However, it is important to keep in mind that we went short based off of price action, not fundamentals.” 133 134 This evidence of structure in stock prices suggests alluring possibilities in the way of forecasting. In fact, many professional speculators, including in particular exponents of the socalled Dow Theory widely publicized by popular financial journals, have adopted systems based in the main on the principle that it is advantageous to swim with the tide.
Portfolio Design: A Modern Approach to Asset Allocation by R. Marston
asset allocation, Bretton Woods, capital asset pricing model, capital controls, carried interest, commodity trading advisor, correlation coefficient, diversification, diversified portfolio, equity premium, Eugene Fama: efficient market hypothesis, family office, financial innovation, fixed income, German hyperinflation, high net worth, hiring and firing, housing crisis, income per capita, index fund, inventory management, Long Term Capital Management, mortgage debt, passive investing, purchasing power parity, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, Sharpe ratio, Silicon Valley, superstar cities, transaction costs, Vanguard fund
In the case of all c11 P2: c/d QC: e/f JWBT412-Marston T1: g December 20, 2010 17:3 Printer: Courier Westford 227 Real Assets—Real Estate Case-Shiller FHFA 7% 6.1% 6% 5.3% Percent per Annum P1: a/b 5% 4% 4.4% 4.7% 4.5% 3.8% 3.7% 4.9% 5.1% 4.8% 4.6% 3.9% 3.5% 3.4% 3% 2% 1% 0% NYC LA Chicago Miami Wash DC Boston San F FIGURE 11.7 Nominal Rates of House Appreciation from 1987 to 2009, Case-Shiller and FHFA Indexes Data Sources: FHFA and S&P Case-Shiller. seven cities examined, the nominal appreciation for the FHFA index exceeds that of the Case-Shiller index. In the case of Los Angeles, the average rate of appreciation is 4.7 percent for the Case-Shiller index, but it is 0.6 percent faster for the government series. The gap between the two indexes is largely due to price changes since the housing crisis began. If rates of appreciation are compared over the period from 1987 to 2006 (prior to the crisis), they are much more similar.18 Figure 11.8 shows the cumulative fall in prices over the 36 months starting in January 2007. In the case of Los Angeles, for example, the Case-Shiller index fell 36.5 percent over this period, while the FHFA index falls only 28.2 percent. The gap is even larger for San Francisco.
When the Iron Lady Ruled Britain by Robert Chesshyre
Berlin Wall, Big bang: deregulation of the City of London, British Empire, deskilling, Etonian, Fall of the Berlin Wall, financial deregulation, full employment, housing crisis, manufacturing employment, means of production, North Sea oil, oil rush, Plutocrats, plutocrats, Ronald Reagan, school choice, Silicon Valley, the market place, trickle-down economics, union organizing, young professional
On this occasion, there appeared to be a direct link between inflammatory press coverage and intimidation on the ground. Headlines from one paper were daubed on an Asian-owned Tower Hamlets newsagent’s shop. The story was the flavour of the week in mid-October 1986. The headlines cited by Jubo Barta included: ‘THEY’RE STILL FLOODING IN’ – London Standard; ‘3,000 ASIANS FLOOD BRITAIN’ – the Sun; ‘IMMIGRANTS PARALYSE HEATHROW’ – Daily Mail; ‘ASIANS START HOUSING CRISIS’ – Daily Mail. The Star commented: ‘Britain finally began to drop the portcullis and raise the drawbridge against the alien hordes.’ The Sun, under the banner headline ‘THE LIARS’, reported ‘the 1,001 lies used by immigrants to cheat their way into Britain’. One pop paper wrote: ‘Remember too that every male immigrant to this country represents either an addition to the dole queues, or a job lost to a native Briton, or both.
The American Way of Poverty: How the Other Half Still Lives by Sasha Abramsky
2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, bank run, big-box store, collective bargaining, deindustrialization, Francis Fukuyama: the end of history, full employment, ghettoisation, Gini coefficient, housing crisis, illegal immigration, immigration reform, income inequality, indoor plumbing, job automation, Mark Zuckerberg, Maui Hawaii, microcredit, mortgage debt, mortgage tax deduction, new economy, Occupy movement, offshore financial centre, payday loans, Plutocrats, plutocrats, Ponzi scheme, Potemkin village, profit motive, Ronald Reagan, school vouchers, upwardly mobile, War on Poverty, Washington Consensus, women in the workforce, working poor, working-age population, Works Progress Administration
You have scrappers coming in large trucks looking for metal. They’d go into houses and strip out the wire, pull it out through the ceilings. They take every last single thing you could think of. Leaving the houses with holes, basically nothing inside there. Every last thing down to the light bulbs. We’re talking toilets, every fixture you can think of, the lamps, the microwaves. In Tucson, Arizona, the housing crisis was taking down owners and renters alike. Homeowners unable to pay the monthly bills were losing their homes; renters in foreclosed homes were being evicted. And others, not in foreclosed homes, were losing their jobs, falling behind on their monthly payments and also ending up without roofs over their heads. Air force veteran Mark Williams, his wife Theresa, and their three young kids were one of these families falling behind.
Happy City: Transforming Our Lives Through Urban Design by Charles Montgomery
2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, agricultural Revolution, American Society of Civil Engineers: Report Card, Bernie Madoff, British Empire, Buckminster Fuller, car-free, carbon footprint, centre right, City Beautiful movement, clean water, congestion charging, correlation does not imply causation, East Village, edge city, energy security, Enrique Peñalosa, experimental subject, Frank Gehry, Google Earth, happiness index / gross national happiness, Home mortgage interest deduction, housing crisis, income inequality, income per capita, invisible hand, Jane Jacobs, license plate recognition, McMansion, means of production, megacity, Menlo Park, meta analysis, meta-analysis, mortgage tax deduction, New Urbanism, peak oil, Ponzi scheme, rent control, ride hailing / ride sharing, risk tolerance, science of happiness, Seaside, Florida, Silicon Valley, the built environment, The Death and Life of Great American Cities, the High Line, The Spirit Level, The Wealth of Nations by Adam Smith, trade route, transit-oriented development, upwardly mobile, urban planning, urban sprawl, wage slave, white flight, World Values Survey, Zipcar
, and Richard M. Ryan, “The ‘What’ and ‘Why’ of Goal Pursuits: Human Needs and the Self-Determination of Behavior,” Psychological Inquiry, 2000: 227–68. activity is its own reward: Frey, Happiness: A Revolution, 130. freshmen at Harvard: Baker, Meredith C., and Cara K. Fahey, “The Housing Market, 2009: Mather House,” Harvard Crimson, March 9, 2009, www.thecrimson.com/article/2009/3/15/the-housing-crisis-mather-house (accessed January 9, 2011). concrete tower of Mather House: “Dictionary of Harvardisms from A to Z: The Vocabulary You Need to Get Through Your Life at Harvard,” Harvard Crimson, August 24, 2009, www.thecrimson.com/article/2009/8/24/dictionary-of-harvardisms-2-am-1 (accessed January 9, 2011). were they right?: Dunn, Elizabeth W., and Timothy D. Wilson, “Location, Location, Location: The Misprediction of Satisfaction in Housing Lotteries,” Personality and Social Psychology Bulletin, 2003: 1421–32.
The Everything Store: Jeff Bezos and the Age of Amazon by Brad Stone
3D printing, airport security, AltaVista, Amazon Mechanical Turk, Amazon Web Services, bank run, Bernie Madoff, big-box store, Black Swan, book scanning, Brewster Kahle, call centre, centre right, Clayton Christensen, cloud computing, collapse of Lehman Brothers, crowdsourcing, cuban missile crisis, Danny Hillis, Douglas Hofstadter, Elon Musk, facts on the ground, game design, housing crisis, invention of movable type, inventory management, James Dyson, Jeff Bezos, Kevin Kelly, Kodak vs Instagram, late fees, loose coupling, low skilled workers, Maui Hawaii, Menlo Park, Network effects, new economy, optical character recognition, pets.com, Ponzi scheme, quantitative hedge fund, recommendation engine, Renaissance Technologies, RFID, Rodney Brooks, search inside the book, shareholder value, Silicon Valley, Silicon Valley startup, six sigma, skunkworks, Skype, statistical arbitrage, Steve Ballmer, Steve Jobs, Steven Levy, Stewart Brand, Thomas L Friedman, Tony Hsieh, Whole Earth Catalog, why are manhole covers round?
We were starting to compete with the very best in the business and they had a lot of arrows in their quiver to make life painful. The last thing we wanted to do was to sell. It was mortifying.” Hsieh wanted to keep going but even he came to acknowledge that Amazon could be a good home for Zappos. One of the factors he considered was that Zappos employees in Las Vegas and near its distribution center in Kentucky lived at ground zero of the housing crisis. Many had seen the value of their homes plummet, and the only valuable thing they owned was Zappos stock. Hsieh saw that the acquisition could offer a sizable payout for employees at a moment when many desperately needed it. The Zappos board ultimately decided to sell to Amazon; the vote was bittersweet but unanimous. Over the next few months, Alfred Lin negotiated the deal with Peter Krawiec, Amazon’s vice president of corporate development.
Framing Class: Media Representations of Wealth and Poverty in America by Diana Elizabeth Kendall
Bernie Madoff, blue-collar work, Bonfire of the Vanities, call centre, David Brooks, declining real wages, Donald Trump, employer provided health coverage, ending welfare as we know it, framing effect, Georg Cantor, Gordon Gekko, greed is good, haute couture, housing crisis, illegal immigration, income inequality, lump of labour, mortgage tax deduction, new economy, payday loans, Ponzi scheme, Ray Oldenburg, Richard Florida, Ronald Reagan, Saturday Night Live, telemarketer, The Great Good Place, Thorstein Veblen, trickle-down economics, union organizing, upwardly mobile, urban planning, working poor
About $70,000 is a typical annual household income for people in this segment of the middle class. In the past, middle-class occupations were considered relatively secure and thought to provide opportunities for advancement if people worked hard, increased their level of education, and gained more experience on the job. Today, however, a number of factors—including the recession of the 2000s, the housing crisis and high mortgage-foreclosure rates, occupational insecurity and long-term job loss, and the continual cost-of-living squeeze—are subjects of major concern and increasing analysis in various media sources. The working class (about 30 percent of the U.S. population) comprises semiskilled workers such as machine operators in factories (blue-collar jobs) and some service-sector workers, including clerks and salespeople whose jobs involve routine, mechanized tasks that require little skill beyond basic 9781442202238.print.indb 15 2/10/11 10:46 AM 16 Chapter 1 literacy and brief on-the-job training.
algorithmic trading, Berlin Wall, bonus culture, BRICs, business process, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, disintermediation, diversification, Emanuel Derman, financial innovation, fixed income, friendly fire, Goldman Sachs: Vampire Squid, high net worth, housing crisis, London Whale, Long Term Capital Management, merger arbitrage, new economy, passive investing, performance metric, risk tolerance, Ronald Reagan, Saturday Night Live, shareholder value, short selling, sovereign wealth fund, The Nature of the Firm, too big to fail, value at risk
The Washington Post states that one of Goldman’s 2006 mortgage deals, the GSAMP Trust 2006-S3, may actually be “the worst deal … floated by a top-tier firm.”2 (One in every six of the 8,274 mortgages bundled in GSAMP Trust 2006-S3 would be in default eighteen months later. People who bought the S3 bonds either had to take a 100 percent loss or sell it at a heavy discount.) In December, anticipating a housing crisis, Goldman takes a negative stance on the mortgage market but does not announce this publicly. Head of the Special Situations proprietary trading area in FICC, who reportedly was paid a $70 million bonus (larger than the CEO’s reported $53 million), leaves Goldman—supposedly because he was frustrated by the bureaucracy at Goldman and because the group was not compensated like a hedge fund or private equity firm for the reported $4 billion in profits the group generated (O).
Disaster Capitalism: Making a Killing Out of Catastrophe by Antony Loewenstein
Affordable Care Act / Obamacare, anti-communist, Asian financial crisis, British Empire, Capital in the Twenty-First Century by Thomas Piketty, Chelsea Manning, clean water, collective bargaining, colonial rule, corporate social responsibility, Edward Snowden, facts on the ground, failed state, falling living standards, Ferguson, Missouri, financial independence, full employment, Goldman Sachs: Vampire Squid, housing crisis, illegal immigration, immigration reform, income inequality, Julian Assange, market fundamentalism, Naomi Klein, neoliberal agenda, obamacare, Occupy movement, offshore financial centre, open borders, private military company, profit motive, Ralph Nader, Ronald Reagan, Scramble for Africa, Slavoj Žižek, stem cell, the medium is the message, trade liberalization, WikiLeaks
This situation was repeated across the country, with few of the asylum seekers having a chance to be heard. The media was largely uninterested, and the Home Office and charity bureaucracy resented having to talk to journalists and migrants at all. Activists and immigrants all told me that the system was close to useless. This reality of privatized housing for refugees was linked to the country’s housing crisis, both for asylum seekers and for the general population, but not for the reasons its defenders claimed. It had not brought greater freedom in the market; it had simply allowed profiteers to thrive, because the mantra of “self-reliance” for the poor—another term for hanging the underclass out to dry —had become official government policy. A select few companies —G4S, Taylor Wimpey, Barratt Homes, Persimmon, Bellway, Redrow, Bovis, Crest Nicholson—had captured the market.
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
This benefits the middle classes to the same extent as it injures them, for house property was the safest method of investing savings before the war, and, owing to the drastic regulations controlling profiteering on the part of landlords, many retired couples, owners of considerable property containing residential flats, are today on the brink of starvation. The new statutes provide for an increase in rents all over the country of 300 per cent on pre-war figures. Building a house containing twelve to twenty such flats has thus become the latest form of profitable investment.28 The other fashionable speculative object was furniture. That was being hoarded, too, on the basis of the same hopes that the housing crisis would ease in a year or two, as would the inflation, and suddenly people would need to furnish new homes. The trend had been clear for years. Now, for those who could manage it, the headlong flight into ‘things’ had begun. 18 Kicking Germany When She’s Down On 22 November 1922, four years and eleven days after the armistice that ended the First World War, President Ebert undertook what appeared to be a desperate throw of the dice for the Republic to which he had been midwife in those dark days of defeat.
asset-backed security, bank run, banking crisis, big-box store, call centre, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, housing crisis, Maui Hawaii, mortgage debt, naked short selling, NetJets, shareholder value, short selling, Skype, too big to fail, Y2K
Not long before the shareholder meeting, McMurray made a presentation to WaMu’s board of directors, outlining an even bleaker situation than shareholders read about in the year-end report. Killinger allowed him to deliver his thoughts, but he preceded McMurray’s report with a preemptive explanation of the bank’s position. For perhaps the first time, the board saw, in detail, WaMu’s perilous concentration of mortgages in the states hit hardest by the housing crisis. McMurray included a series of charts and graphs illustrating home appreciation in different California markets growing sharply, then falling. In one breathtaking slide, he showed that WaMu’s home equity loans represented 1,366 percent of the bank’s total equity. That startling percentage was colored red. And 90 percent of those loans, although it wasn’t mentioned in McMurray’s presentation or WaMu’s annual report, were made to borrowers who didn’t provide income documentation.
algorithmic trading, asset-backed security, bank run, banking crisis, Bernie Madoff, Black Swan, Bretton Woods, BRICs, British Empire, collateralized debt obligation, computer age, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency peg, diversification, Doha Development Round, energy security, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, George Gilder, housing crisis, Hyman Minsky, imperial preference, income inequality, index arbitrage, index fund, interest rate derivative, interest rate swap, Joseph Schumpeter, Kenneth Rogoff, large denomination, Long Term Capital Management, market bubble, Martin Wolf, Menlo Park, mobile money, Monroe Doctrine, moral hazard, mortgage debt, new economy, oil shale / tar sands, oil shock, peak oil, Plutocrats, plutocrats, Ponzi scheme, profit maximization, Renaissance Technologies, reserve currency, risk tolerance, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, The Chicago School, Thomas Malthus, too big to fail, trade route
Presumably, their ire will grow if future CPI clarifications retrospectively show that inflation was considerably worse than the government acknowledged, confirming that many Americans were shortchanged for many years in their cost-of-living adjustments to wages and Social Security payments. But that same grassroots America will be even more aroused should the values of their homes drop by 8-10 percent or even 15-20 percent over a year or two. This could occur if Alan Greenspan’s prophecy about malfunctioning CDOs quoted at the beginning of this chapter proves correct, and the connections to unworkable securitization deepen and prolong the mortgage and housing crisis. Then the Wall Street financial architects who packaged mortgage-backed securities or structured CDOs to include subprime exposure might come to realize that they should have thought more broadly: not just about the difficulty of tracing where the original mortgage made in Cleveland or San Diego eventually wound up, or anticipating blowback over the subprime content of the CDOs sold to dummkopf provincial bankers in Germany, but also about domestic political backlash—the prospect that aroused homeowners in Hackerville or Warrentown might begin to take their first serious look at the new U.S. financial sector and what it has become.
Breakout Nations: In Pursuit of the Next Economic Miracles by Ruchir Sharma
3D printing, affirmative action, Albert Einstein, American energy revolution, anti-communist, Asian financial crisis, banking crisis, Berlin Wall, BRICs, British Empire, business climate, business process, business process outsourcing, call centre, capital controls, Carmen Reinhart, central bank independence, centre right, cloud computing, collective bargaining, colonial rule, corporate governance, crony capitalism, deindustrialization, demographic dividend, Deng Xiaoping, eurozone crisis, Gini coefficient, global supply chain, housing crisis, income inequality, indoor plumbing, inflation targeting, informal economy, Kenneth Rogoff, knowledge economy, labor-force participation, labour market flexibility, land reform, M-Pesa, Mahatma Gandhi, market bubble, megacity, Mexican peso crisis / tequila crisis, new economy, oil shale / tar sands, oil shock, open economy, Peter Thiel, planetary scale, quantitative easing, reserve currency, Robert Gordon, Shenzhen was a fishing village, Silicon Valley, software is eating the world, sovereign wealth fund, The Great Moderation, Thomas L Friedman, trade liberalization, Watson beat the top human players on Jeopardy!, working-age population
Much of the country’s government debt is held at home by older Italians, who have created a political constituency that is content with the status quo. Italy and Japan share membership in the small and undesirable club of rich nations with a ratio of public debt to GDP in the triple digits, and the politics of both Rome and Tokyo have been shaped by a recent succession of leaders who make vague noises about change and then leave only a vague impression on the system. Spain, on the other hand, has suffered real drama and pain, with a deep housing crisis, but it is now moving more aggressively in the right direction, including serious labor market reform to deal with its high unemployment rate. Between these two southern rivals, Spain is more likely to bounce high off a hard landing, with a chance to become a breakout nation in the coming decade. One way to gauge the impact of the crisis in Europe is through some simple comparisons to the Asian crisis of 1998.
affirmative action, Asian financial crisis, Berlin Wall, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Fall of the Berlin Wall, fear of failure, fixed income, Goldman Sachs: Vampire Squid, housing crisis, indoor plumbing, invisible hand, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, Mikhail Gorbachev, moral hazard, NetJets, Northern Rock, oil shock, paper trading, risk tolerance, rolodex, Ronald Reagan, savings glut, shareholder value, short selling, sovereign wealth fund, supply-chain management, too big to fail, value at risk, éminence grise
He also wanted Alan Greenspan’s advice, and after some confusion about tracking down Greenspan’s home phone number, Paulson and a half dozen staff members huddled over the Polycom on his desk to hear the former Fed chairman’s faint voice through the speaker. Rattling off reams of housing data, Greenspan described how he considered the crisis in the markets to be a once-in-a-hundred-year event and how the government might have to take some extraordinary measures to stabilize it. The former Fed chairman had long been a critic of Fannie and Freddie but now realized that they needed to be shored up. He did have one suggestion about the housing crisis, but it was a rhetorical flourish befitting his supply-and-demand mind-set: He suggested that there was too much housing supply and that the only real way to really fix the problem would be for the government buy up vacant homes and burn them. After the call, Paulson, with a laugh, told his staff: “That’s not a bad idea. But we’re not going to buy up all the housing supply and destroy it.” 078 As Paulson took a seat in the small conference room next to his office to begin breakfast with Ben Bernanke, he was flushed and scarcely able to eat.
The Unwinding: An Inner History of the New America by George Packer
Affordable Care Act / Obamacare, Apple's 1984 Super Bowl advert, bank run, big-box store, citizen journalism, cleantech, collateralized debt obligation, collective bargaining, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, diversified portfolio, East Village, El Camino Real, Elon Musk, family office, financial independence, financial innovation, Flash crash, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, housing crisis, income inequality, informal economy, Jane Jacobs, life extension, Long Term Capital Management, low skilled workers, margin call, Mark Zuckerberg, market bubble, market fundamentalism, Maui Hawaii, Menlo Park, new economy, New Journalism, obamacare, Occupy movement, oil shock, peak oil, Peter Thiel, Ponzi scheme, Richard Florida, Ronald Reagan, Ronald Reagan: Tear down this wall, shareholder value, side project, Silicon Valley, Silicon Valley startup, single-payer health, smart grid, Steve Jobs, strikebreaker, The Death and Life of Great American Cities, the scientific method, too big to fail, union organizing, urban planning, We are the 99%, We wanted flying cars, instead we got 140 characters, white flight
People there began telling him about an epidemic of foreclosures around the country. They warned him not to buy real estate until 2009 at the earliest. Biden was running for president again, and Connaughton joined the campaign and traveled to Des Moines, where a city councilman told him that one of the top three issues in Iowa was foreclosures. Connaughton relayed the message to a Biden staffer: the growing housing crisis should be a focus. (In the seventies, when Biden was still a freshman senator, Hubert Humphrey advised him, “You have to pick an issue that becomes yours. You should become Mr. Housing. Housing is the future.”) The idea went nowhere. The candidates weren’t talking about foreclosures. Connaughton ignored the warnings, too. In the fall of 2007, at the top of the market, he closed on the Costa Rican lots for almost a million dollars.
Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, Bretton Woods, Brownian motion, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, facts on the ground, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, full employment, George Akerlof, Goldman Sachs: Vampire Squid, Hernando de Soto, housing crisis, Hyman Minsky, illegal immigration, income inequality, incomplete markets, invisible hand, Jean Tirole, joint-stock company, Kenneth Rogoff, knowledge economy, l'esprit de l'escalier, labor-force participation, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, payday loans, Ponzi scheme, precariat, prediction markets, price mechanism, profit motive, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, school choice, sealed-bid auction, Silicon Valley, South Sea Bubble, Steven Levy, technoutopianism, The Chicago School, The Great Moderation, the map is not the territory, The Myth of the Rational Market, the scientific method, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, War on Poverty, Washington Consensus, We are the 99%, working poor
Some economists who had been strong advocates of behavioral approaches prior to the crash, such as Robert Shiller and Robert Frank, leaped in with op-eds essentially blaming the entire crisis on native cognitive weaknesses of market participants.37 This line became entrenched with the appearance of George Akerlof and Robert Shiller’s Animal Spirits: displaying an utter contempt for the history of economic thought, they “reduced” the message of Keynes’s General Theory to the proposition that people get a little irrational from time to time, and thus push the system away from full neoclassical general equilibrium.38 They wrote: The idea that economic crises, like the current financial and housing crisis, are mainly caused by changing thought patterns goes against standard economic thinking. But current crisis bears witness to the role of such changes in thinking. It was caused precisely by our changing confidence, temptations, envy, resentment, and illusions . . . In Keynes’ view these animal spirits are the main cause for why the economy fluctuates the way it does. They are also the main cause of involuntary unemployment.39 Nevertheless, in the few instances when journalists actually read the book, the first thing they noticed is that it said very little that was substantive about the current crisis, for much of it had been written well before 2008.
affirmative action, Affordable Care Act / Obamacare, anti-communist, Bakken shale, bank run, battle of ideas, Berlin Wall, Capital in the Twenty-First Century by Thomas Piketty, carried interest, centre right, clean water, Climategate, Climatic Research Unit, collective bargaining, crony capitalism, David Brooks, desegregation, diversified portfolio, Donald Trump, energy security, estate planning, Fall of the Berlin Wall, George Gilder, housing crisis, hydraulic fracturing, income inequality, invisible hand, job automation, low skilled workers, market fundamentalism, Mont Pelerin Society, More Guns, Less Crime, Nate Silver, New Journalism, obamacare, Occupy movement, offshore financial centre, oil shale / tar sands, oil shock, Plutocrats, plutocrats, Ralph Nader, Renaissance Technologies, road to serfdom, Ronald Reagan, school choice, school vouchers, The Bell Curve by Richard Herrnstein and Charles Murray, The Chicago School, the scientific method, University of East Anglia, Unsafe at Any Speed, War on Poverty, working poor
Soon politicians backed by the same conservative donors who funded the think tanks were echoing the “big lie.” Marco Rubio, a rising Republican star from Florida, for instance, who had defeated a moderate in the 2010 Republican Senate primary with the help of forty-nine donors from the June 2010 Koch seminar, soon proclaimed, “This idea—that our problems were caused by a government that was too small—it’s just not true. In fact, a major cause of our recent downturn was a housing crisis created by reckless government policies.” Against this backdrop, on April 15, 2011, Ryan’s budget plan, now packaged as “The Path to Prosperity,” came up for a vote in the House of Representatives. In the past, its prospects had been uncertain at best. Not just Democrats but many Republicans had deemed previous versions too harsh. A year earlier, Speaker of the House John Boehner had given it only lukewarm support.
The Rough Guide to Florence & the Best of Tuscany by Tim Jepson, Jonathan Buckley, Rough Guides
Its tenure was brief: in 1870 the Papal State was at last absorbed into the kingdom of Italy, and the following year Rome duly became its capital. Yet during this short period a radical transformation of Florence was begun, following a masterplan conceived by engineer-architect Giuseppe Poggi (1811–1901). So great was the impact of Poggi’s scheme that the present-day appearance of Florence owes more to him than to any architect of the Renaissance. The housing crisis Aerial view of Piazza Beccaria Porta San Gallo, Piazza della Libertà In 1865 Florence had a population of 150,000, so an influx of twenty thousand government employees plus their families created an immediate strain. Finding offices wasn’t a problem – while the parliament moved into the Palazzo Vecchio, the ministries requisitioned buildings such as the Uffizi and the Palazzo Medici. But housing had to be built quickly, both for the newcomers and for the Florentines who found themselves priced out of the city centre as rents soared.
3D printing, Affordable Care Act / Obamacare, airline deregulation, airport security, Apple II, barriers to entry, big-box store, blue-collar work, Capital in the Twenty-First Century by Thomas Piketty, clean water, collective bargaining, computer age, deindustrialization, Detroit bankruptcy, discovery of penicillin, Donner party, Downton Abbey, Edward Glaeser, en.wikipedia.org, Erik Brynjolfsson, everywhere but in the productivity statistics, feminist movement, financial innovation, full employment, George Akerlof, germ theory of disease, glass ceiling, high net worth, housing crisis, immigration reform, impulse control, income inequality, income per capita, indoor plumbing, industrial robot, inflight wifi, interchangeable parts, invention of agriculture, invention of air conditioning, invention of the telegraph, invention of the telephone, inventory management, James Watt: steam engine, Jeff Bezos, jitney, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, labor-force participation, Loma Prieta earthquake, Louis Daguerre, Louis Pasteur, low skilled workers, manufacturing employment, Mark Zuckerberg, market fragmentation, Mason jar, McMansion, Menlo Park, minimum wage unemployment, mortgage debt, mortgage tax deduction, new economy, Norbert Wiener, obamacare, occupational segregation, oil shale / tar sands, oil shock, payday loans, Peter Thiel, pink-collar, Productivity paradox, Ralph Nader, Ralph Waldo Emerson, refrigerator car, rent control, Robert X Cringely, Ronald Coase, school choice, Second Machine Age, secular stagnation, Skype, stem cell, Steve Jobs, Steve Wozniak, Steven Pinker, The Market for Lemons, Thomas Malthus, total factor productivity, transaction costs, transcontinental railway, traveling salesman, Triangle Shirtwaist Factory, Unsafe at Any Speed, Upton Sinclair, upwardly mobile, urban decay, urban planning, urban sprawl, washing machines reduced drudgery, Washington Consensus, Watson beat the top human players on Jeopardy!, We wanted flying cars, instead we got 140 characters, working poor, working-age population, Works Progress Administration, yield management
“Urban Wastewater Management in the United States: Past, Present, and Future,” Journal of Urban Technology 7, no. 3: 33–62. Burns, George. (1988). Gracie: A Love Story. New York: Putnam. Bushway, Shawn D., and Stoll, Michael A., and Weiman, David, eds. (2007). Barriers to Reentry? The Labor Market for Released Prisoners in Post-Industrial America. New York: Russell Sage Foundation. Butkiewicz, James L. (2009). “Fixing the Housing Crisis,” Forbes, April 30, p. 26. Caillau, Robert. (1995). “A Little History of the World Wide Web,” World Wide Web Consortium, www.w3.org/History.html. Cain, Louis P., and Paterson, Donald G. (2013). “Children of Eve: Population and Well-being in History,” Population and Development Review 39, no. 3. Calder, Lendol. (1999). Financing the American Dream: A Cultural History of Consumer Credit. Princeton, NJ: Princeton University Press.