light touch regulation

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pages: 543 words: 147,357

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

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

Debt and debt-related activity – construction and real estate services – had propelled half the growth since Labour had come to power, while manufacturing’s share of output had shrunk by two-fifths (to around 12 per cent) over the same period, a faster decline than in any other leading industrialised country.1 The politicians were enthusiastic cheerleaders throughout all of this. Finance was where innovation and entrepreneurship flowered, Prime Minister Blair and Chancellor Brown jointly proclaimed in a competition with the then Conservative opposition to fête the City of London. The factors that helped financial services – light-touch regulation, low taxes and labour market flexibility – allegedly helped all business. Governments should limit their intervention. Nor should they or society be concerned about City pay that was rising beyond the dreams of avarice because that was merely the price of global success. In the glory days of the boom, Britain was urged to enjoy the spiralling property prices and the rising consumption that came in the wake of the City’s credit creation and wheeler-dealing.

British bankers took the opportunity afforded by the abolition of exchange and capital controls, globalisation, Britain’s historic strength in financial services and the prevailing free-market ideology to build a position of influence in the British state that was much more formidable than any that had been enjoyed by the trade unions. The City reclaimed ancient privileges to restore its nineteenth-century position as an international financial centre, although this was now built upon proprietary trading in financial derivatives and securitisation. This was the purposeful, positive use of power to achieve a feasible aim – a dominant City of London. Light-touch regulation became as important a mantra to the City as free collective bargaining had been to the unions. Equally, the freedom to exploit tax havens and relieve foreign nationals from their tax obligations was as pivotal to City power as the unions’ insistence on legal immunity from damages in industrial disputes had been to theirs. Just as the unions portrayed themselves as essential to the construction of a Britain in which working-class interests would be enshrined, so the City portrayed itself as essential to a post-industrial Britain in which financial services would be in the vanguard of national wealth generation.

In this respect, the 1992 defeat overshadowed the next decade and a half in much the same way as 1945’s and 1979’s victories had. This meant that New Labour in office did not have the ideological conviction or the political will to check the increasingly reckless expansion of British finance and the City of London. Indeed, by 2007, City Minister Ed Balls and Chancellor Gordon Brown had become articulate advocates of ‘light-touch regulation’ and ‘financial innovation’, regarding finance as a sector in which Britain had an apparent comparative advantage that the state should actively promote. After 1992, Labour politicians were convinced that while they might win a mandate for social investment, notably in health and education, no mandate could be won for social democratic intervention in the economy. In any case, they had stopped believing in the intellectual argument for such an intervention.


pages: 160 words: 46,449

The Extreme Centre: A Warning by Tariq Ali

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

Tony Blair prancing about in his shirtsleeves while his spin doctor, Alastair Campbell, organized the Kosovans to chant ‘Tony, Tony, Tony’ was one of the more grotesque footnotes to this unnecessary tragedy. In reality, Britain had little independence. Its main function was to provide mercenaries to buttress US hegemony. There, in a nutshell, was the grim reality of New Labour Britain. Thatcherite ‘modernization’ was thus nurtured by Blair and refined by Brown into the creation of an overblown financial sector, a City of London protected by ‘light-touch’ regulation. It is shocking to note that there were fewer regulators for the whole of Britain than for the insurance industry alone in the United States. This, in turn, produced huge salaries and bonuses for the top layers and a few crumbs for the former industrial regions of the country. Blair’s subsequent electoral triumphs were used to cement the New Labour project. But the political geography, when decoded, told a different story.

Since British economic and foreign policies are now in tandem with those of its imperial master, British leaders sometimes attempt to stand out by pre-empting US decisions and posturing as being tougher on assorted ‘enemies’ than Washington itself.1 As Edward Snowden has revealed, British intelligence-gathering outposts like GCHQ operate with impunity. The relative autonomy they enjoy – with less restraints than the NSA – is extremely useful for the latter, which treats GCHQ as a valued surrogate. Similarly, till 2008, British politicians liked to boast that the local ‘light-touch regulation’ put the City of London well ahead of Wall Street, as Britain’s current standing as a virtual tax haven still does, approaching Luxembourg levels if not yet those of the Cayman islands. Given this reality, the right-wing obsession with the European Union seems a bit misplaced. It’s with Washington (not Brussels) that London has long been stuck in the dog-like coital lock sometimes described as a ‘special relationship’.


pages: 182 words: 53,802

The Production of Money: How to Break the Power of Banks by Ann Pettifor

Ben Bernanke: helicopter money, Bernie Madoff, Bernie Sanders, bitcoin, blockchain, borderless world, Bretton Woods, capital controls, Carmen Reinhart, central bank independence, clean water, credit crunch, Credit Default Swap, cryptocurrency, David Graeber, David Ricardo: comparative advantage, debt deflation, decarbonisation, distributed ledger, Donald Trump, eurozone crisis, fiat currency, financial deregulation, financial innovation, financial intermediation, financial repression, fixed income, Fractional reserve banking, full employment, Hyman Minsky, inflation targeting, interest rate derivative, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Rogoff, light touch regulation, London Interbank Offered Rate, market fundamentalism, Martin Wolf, mobile money, Naomi Klein, neoliberal agenda, offshore financial centre, Paul Samuelson, Ponzi scheme, pushing on a string, quantitative easing, rent-seeking, Satyajit Das, savings glut, secular stagnation, The Chicago School, the market place, Thomas Malthus, Tobin tax, too big to fail

Greenspan later went on to explain, ‘[I had] found a flaw in the model that I perceived as the critical functioning structure that defines how the world works, so to speak … That’s precisely the reason I was shocked, because I had been going for forty years or more with very considerable evidence that it was working exceptionally well.’ Over this period, and thanks to the pervasive influence of the economic orthodoxy espoused by Mr Greenspan and others, western governments used markets as ‘the unrivalled way to organise economies’. ‘Light-touch regulation’, ‘outsourcing’, ‘globalisation’ and other policy changes were cheered on as ways to effectively transfer control of the public good that is the monetary system to private wealth. The orthodoxy conceded two great powers to private bankers and financiers: first, the ability to create, price and manage credit without effective supervision or regulation; second, the ability to ‘manage’ global financial flows across borders – and to do so out of sight of the regulatory authorities.

Third, despite denying the ‘primitive commodity view of money’ classical economists think of the supply of money as potentially scarce or excessive, just as there can be gluts and shortages of commodities.16 Benes and Kumhof explain that bankers’ behaviour can lead to an ‘excess or shortage’ of the money supply which in turn leads to either inflation or deflation. By focusing on the behavior of bankers, they ignore the regulatory context: the easy ‘light-touch regulation’ under which public authorities permit banks to lend. They ignore, too, the willingness or reluctance to borrow by firms or individuals, and their role in expanding or contracting the money supply. And nor do they discuss or analyse the wider economic conditions under which bankers lend. This approach of focusing narrowly on the money supply ignores what money is lent for. Instead it is assumed that the supply and contraction of credit is simply a matter of wilful choice by bankers.


pages: 193 words: 11,060

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

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

The US Financial Crisis Inquiry Commission blamed failures in regulation; breakdowns in corporate governance, including financial firms acting recklessly; excessive borrowing and risk by households and Wall Street; policymakers ill-prepared for the crisis; and systematic breakdown in accountability and ethics.1 The UK’s Independent Commission on Banking cited factors including “global imbalances, loose monetary policy, light-touch regulation, declining under-writing standards, widespread mis-pricing of risk, a vast expansion of banks’ balance sheets, rapid growth in securitized assets”.2 The UK economist Roger Bootle diagnosed the crisis in a more straightforward way in his 2009 book The Trouble with Markets: “greedy bankers and naive borrowers, mistaken central banks and inept regulators, insatiable Western consumers and over-thrifty Chinese savers”.3 Others have also directly cited bankers’ greed.

., 107 deontological ethics, 34–6 stockholders, 41–2 trust, 40–1 derivative, 27, 30 dharma, 63–4 Dharma Indexes, 57 discounted cash flow (DCF), 27 discount rate, 27 discriminatory behaviour, 129–31 distribution, 15, 35, 66 Dodd–Frank Wall Street Reform and Consumer Protection Act, 25 dotcom crisis, 94 dotcom stocks, 17 Dow Jones, 55–6 downgrade credit, 17, 76 defined, 76 multi-notch, 17, 76 duties, see rights vs. duties duty-based ethics, 66–8 duty of care, 105 Dynegy, 8 Earnings Before Interest Tax Depreciation and Amortisation (EBITDA), 27 economic free-ride, 5, 21 economic reality, 137 effective tax rate (ETR), 140 emissions trading, 14 employees, compensation for, 135 Encyclical, 52 engagement letters, 122–3, 159 Enron, 8, 12, 17, 20, 76 enterprise value (EV), 27 entertainment adult, 56 corporate, 128–9, 159 sexist, 159 equity deferred, 5 private, 2–3, 12, 110 equity research, 88–9, 113–15 insider dealing and, 83–4 ethical behaviour, 38–9 Ethical Investment Advisory Group (EIAG), 53, 58 ethical investment banking, 145–7 ethical standards, 47 Index ethics consequentialist, 36–7, 42 deontological, 34–6 duty-based, 66–8 exceptions and, effects of, 89–90 financial crisis and, 4–8 in investment banking, 1 in moral philosophy, 1 performance and, 8–10 rights-based, 66–8 virtue, 37–8, 43–4 see also business ethics; Code of Ethics Ethics Helpline, 48 Ethics of Executive Remuneration: a Guide for Christian Investors, The, 135 European Commission, 89 European Exchange Rate Mechanism (ERM), 17 exceptions, 89 external regulations, 19, 31 fair dealing, 45 Fannie Mae, 43 Federal Home Loan Mortgage Corporation, 43 Federal National Mortgage Association, 43 fees, 115–18 advisory, 107, 116 restructuring of, 121–2 2 and 20, 13 fiduciary duties, 27–8 financial advisers, 109 Financial Conduct Authority (FCA), 26 financial crisis, business ethics during CDOs during, 90 CDSs during, 90 ethics during, 4–8, 12–34 investment banking and, necessity of, 14–15 market capitalism, 12–14 necessity of, 14–15 non-failure of, 21 positive impact of, 18 problems with, 15–17 reality of, 16 speculation in, 91 173 Financial Crisis Inquiry Commission, 76 Financial Policy Committee (FPC), 25 financial restructuring, 119–20 Financial Services Modernization Act, 19 Financial Stability Oversight Council, 25 firm price, 67 Four Noble Truths, 57 Freddie Mac, 43 free-ride defined, 26 economic, 5, 21 in investment banking, 24 FTSE, 55 Fuhs, William, 8 General Board of Pension and Health Benefits, 54, 59 German FlowTex, 12 Gift Aid, 141 Glass–Steagall Act, 19 Global Settlement, 113 golden parachute arrangements, 133 Golden Rule, 35, 150 Goldman Sachs, 7, 16, 45, 63 Business Principles, 45–6 charges against, 78 Code of Business Conduct and Ethics, 45, 68 Code of Ethics for, 47–8 Goldsmith, Lord, 27 government, 59 business ethics within, 60 guarantees of, 24 intervention by, 22–3 government bonds, 23 greed, 4–5 Green, Stephen, 8–9 gross revenues, 59 Hedge fund behaviour of, 12 failure of, 21 funds for, raising, 2 investment fund, as type of, 3 rules for, 133 174 Index Hennessy, Peter, 42 Her Majesty’s Revenue and Customs (HMRC), 140–1 high returns, 28, 110 Hinduism, 56–7 Hobbes, Thomas, 36 hold-out value, 120–1 honesty, see trust hospitality, 128–9 hot IPOs, 94 hot-stock IPOs, 94 HSBC, 9, 28, 152 Ijara, 55 implicit government guarantee, 22–3 Independent Commission on Banking, 25 inequitable rewards, 6 informal authorisation, 81, 98 Initial Public Offering (IPO), 7 of dotcom stocks, 17 hot, allocation of, 94 hot-stock, 94 insider dealings, 83–4, 155 equity research and, 83–4 ethics of, 66, 70 laws on, 84 legal prohibition on, 82 legal restrictions on, 10 legal status of, 82 legislation on, 74 restrictions on, 83 rules of, 82, 90 securities, 70 insider trading, 12 insolvency, 24–5 institutional greed, 4 integrated bank, 28 integrated investment banking, 2, 30, 67, 106, 108 interest payments, 59–60 interest rate, 60 internal ethical issues, 126–43 abuse of resources, 127–8 corporate entertainment, 128–9 discriminatory behaviour, 129–31 hospitality, 128–9 management behaviour, 131–2 remuneration, 132–9 tax, 139–41 internal review process, managing, 134 investment banking, 94 casino capitalism in, 3 Code of Ethics in, 47–9 commercial and, convergence of, 20–1 defined, 2 ethics in, 1 free-ride in, 24 integrated, 2, 30, 67, 108, 112 in market position, role of, 65–6 moral reasoning and, 38 necessity of, 14–15 non-failure of, 19–20 positive impact of, 18 recommendations in, 94–7 sector exclusions for, 58–9 investment banking adviser, 121 investment banking behaviours, 3 investment banking ethics committee, 151–3 investment bubbles, 95 investment fund, 3 investment grade bonds, 118 investment grade securities, 76 investment recommendations, 94 investments personal account, 128, 156 principal, 15, 28 proprietary, 29 IRS, 140 Islam, 54–5 Islamic banking, 6, 54–5 Jewish Scriptures, 34 Joint Advisory Committee on the Ethics of Investment (JACEI), 54 JP Morgan, 16 Judaism, 56 junior bankers, 139 junior debt, 118 junk bond, 118 “just war” approach, 38 Index Kant, Immanuel, 35, 69 karma, 57 Kerviel, Jérôme, 44, 80 Krishna, 57 Law Society, 19 Lazard International, 9 leading adviser, 41 Leeson, Nick, 12, 44, 81 legislative change, 25–6 Lehman Brothers, 5–6, 15, 21, 23, 31, 43, 76 lenders, 26, 131 lending, 59–60 leverage levels of, 25 over, 75, 80, 119 Levin, Carl, 17, 63–4, 68 light-touch regulations, 4 liquidity market, 95 orderly, 25 withdrawal of, 24 loan-to-own, 80 Locke, John, 34 London Inter-Bank Offered Rate (LIBOR), 23 London School of Economics, 43 London Stock Exchange, 65, 71, 84 long-term values, 147 Lords Grand Committee, 27 LTCM, 23 lying, 101 MacIntyre, Alasdair, 38 management behaviour, 131–2 margin-calls, 121 market abuse, 14, 70, 75, 86–8, 155 market announcements, 88 market behaviours, 74 market capitalism, 12–14 market communications, 88 market liquidity, 95 market maker defined, 65–7 investment bank as, 66 primary activities of, 65 175 market manipulation, 75 market position, role of, 104 market rate, 117 markets advisory, 73 capital, 73, 117–18, 158 communication within, 88 duties to support, 71–2 primary, 103 qualifying, 70, 82 secondary, 103 market trading, 41 Maxwell, Robert, 12 Meir, Asher, 56 mergers and acquisitions (M&As), 41, 79 Merkel, Angela, 93 Merrill Lynch, 8, 16 Methodism, 53 Methodist Central Finance Board, 59 Methodist Church, 54 Midrash, 56 Milken, Michael, 12 Mill, John Stuart, 36 Mirror Newspaper Group, 12 misleading behaviours, 86, 105 mis-selling of goods and services, 77–9, 155 modern capitalism, 54 moral-free zones, 31 moral hazard, 22, 70 moral philosophy, 1 moral reasoning, 38 moral relativism, 38–9, 49, 68 Morgan Stanley, 47 multi-notch downgrade, 17, 79 natural law, 34, 37 natural virtues, 37 necessity of investment banking, 14–15 New York Stock Exchange (NYSE), 65, 71 New York Times, 8 Noble Eightfold Path, 57 Nomura Group Code of Ethics, 47 normal market trading, 71 Northern Rock, 43 176 Index offer price, 64 off-market trading, 71–3, 90, 155 Olis, Jamie, 8 on-market trading, 70–1 oppressive regimes, 61 option value, 121 Orderly Liquidation Authority, 25 orderly liquidity, 25 out-of-pocket expenses, 127–8 over-leverage, 75, 80, 119, 158 overvalued securities, 155 patronage culture, 131, 142 Paulson, Henry M., 86 Paulson & Co., 78 “people-based” activity, 67 P:E ratio, 27 performance, 8–10 personal abuse, 159 personal account investments, 128, 156 personal account trading, 128 personal conflicts of interest, 45 pitching, 102, 159 Plato, 37 practical issues, 110–15 competitors, relationships with, 113 equity research, 113–15 pitching, 111 sell-side advisers, 111–13 pre-IPO financing, 110 prescriptive regulations, 31, 145 price tension, 79, 113 primary market, 103 prime-brokerage, 2 principal investment, 15, 28 private equity, 2–3, 12, 110 private trading, 94 Project Merlin, 133, 141 promises, 100–1 proprietary investment, 29 proprietary trading, 15, 25, 66, 150, 155 Prudential Regulation Authority (PRA), 26 public ownership, bonus pools in, 136–9 “pump and dump” strategy, 86 qualifying instruments, 70, 87 qualifying markets, 70, 82 quality-adjusted life year (QALY), 36 Quantitative Easing (QE), 23 Queen Elizabeth II, 42 Qu’ran, 54 rated debt, 77 rates attrition, 132 discount, 27 interest, 60 market, 117 tax, 140 rating agencies, 76 Rawls, John, 35, 136 recognised exchanges, 71 Regal Petroleum, 84 regulations banking, 16 compliance with, 28 external, 19, 31 light-touch, 4 prescriptive, 31, 145 regulatory changes and, 18–20 securities, 114 self, and impact on legislation, 19 regulatory compliance, 18 religion, business ethics in, 51–62 Buddhism, 56 Christianity, 52–4 Governments, 59 Hinduism, 56–7 interest payments, 59–60 Islam, 54–5 Judaism, 56 lending, 59–60 thresholds, 60 usury, 59–60 remuneration, 132–9 bonus pools in public ownership and, 136–9 claiming credit, 134 ethical issues with, 142–3 internal review process, managing, 134 1 Timothy 6:10, 135–6 Index research, 156 resources, abuse of, 127–8 restricted creditors, 120 restructuring of fees, 121–2 financial, 119–20 syndication and, 118–22 retail banks, 16 returns, 28, 156 Revised Code of Ethics, 47 right livelihood, 57 rights-based ethics, 66–8 rights vs. duties advisory vs. trading/capital markets, 73 conflict between, reconciling, 68–70 duty-based ethics, 66–8 off-market trading, ethical standards to, 71–2 on-market trading, ethical standards in, 70–1 opposing views of, 63–74 reconciling conflict between, 68–70 rights-based ethics, 66–8 Roman Catholic Church, 52 Royal Dutch Shell, 85 Sarbanes–Oxley Act, 20 Schwarzman, Stephen, 20 scope of ethical issues, 7–8 secondary market, 103 sector exclusions for investment banking, 58–9 securities investment grade, 76 issuing, 103–5 overvalued, 155 Securities and Exchange Commission (SEC), 7, 16 Goldman Sachs, charges against, 78 rating agencies, review by, 77 short-selling, review of, 96–7 securities insider dealing, 70 securities mis-selling, 77–9 securities regulations, 114 self-regulation, 19 sell recommendation, 115 177 sell-side advisers, 107, 111–13 Senate Permanent Subcommittee on Investigations, 46 senior debt, 118 sexist entertainment, 159 shareholders, 27–9 shares, deferred, 133 Shariah finance, 55 short-selling, 94–7, 154–5 Smith, Adam, 14, 35–6 social cohesion, 53 socially responsible investment (SRI), 56 Société Générale, 44, 80 solidarity, 53 Soros, George, 17 South Sea Bubble, 90 sovereign debt, 17 speculation, 91–4, 155 in financial crisis, 93 traditional views of, 91–3 speculative casino capitalism, 16, 91 spread, 21 stabilisation, 89 stock allocation, 94–7 stockholders, 41–2 stocks, dotcom, 17 Strange, Susan, 43 strategic issues with business ethics, 30–1 syndication, 119 and restructuring, 118–22 systemic risk, 24–5 Takeover Panel, 109 Talmud, 56 taxes, 139–41 tax optimisation, 158 tax rates, 140 tax structuring, 140 Terra Firma Capital Partners, 79, 112 Theory of Moral Sentiments, The (Smith), 14 3iG FCI Practitioners’ Report, 51 thresholds, 60 1 Timothy 6:10, 135–6 178 Index too big to fail concept, 21–7 ethical duties, and implicit Government guarantee, 22–3 ethical implications of, 26–7 in government, 22–3 insolvency, systemic risk and, 24–5 legislative change, 25–6 Lehman, failure of, 23 systemic risk, 24–5 toxic financial products, 5 trading abusive, 93 emissions, 14 insider, 12 market, 41 normal market, 71 off-market, 71–83, 90, 155 on-market, 70–1 personal account, 128 private, 94 proprietary, 15, 25, 66, 150, 155 unauthorised, 7 “trash and cash” strategy, 86 Travellers, 19 Treasury Select Committee, 26 Trinity Church, 53 Trouble with Markets, The (Bootle), 4 trust, 40, 53 trusted adviser, 108–9, 125 truth, 101–5 bait and switch, 102–3 misleading vs. lying, 101 securities, issuing, 103–5 2 and 20 fee, 13 UBS Investment Bank, 9 unauthorised trading, 7, 80–1, 155 unethical behaviour, 68 UK Alternative Investment Market, 89 UK Business Growth Fund, 133 UK Code of Practice, 141 UK Independent Banking Commission, 4, 22 United Methodist Church, 54, 59 United Methodist Investment Strategy Statement, 59 US Federal Reserve, 24, 25 US Financial Crisis Inquiry Commission, 4 US Open, 126 US Senate Permanent Subcommittee on Investigations, 64, 73 US Treasury Department, 132 universal banks, 2, 21, 28, 67 untoward movement, 85 usury, 59–60 utilitarian, 84 utilitarian ethics, 49, 84, 139 values, 9, 46, 119–21, 148 Vedanta, 57 victimless crime, 82 virtue ethics, 37–8, 43–4 virtues, 9, 34 virtuous behaviours, 37 Vishnu, 57 Volcker, Paul, 25 Volcker Rule, 2, 25 voting shareholders, 29 Wall Street, 12, 19, 53 Wall Street Journal, 20 Wealth of Nations, The (Smith), 14 Wesley, John, 53 Wharf, Canary, 18 Williams, Rowan, 53 Wimbledon, 127 WorldCom, 12, 17, 20, 76 write-off, 80 zakat, 55 zero-sum games, 118–22


pages: 82 words: 21,414

The Myth of Meritocracy: Why Working-Class Kids Still Get Working-Class Jobs (Provocations Series) by James Bloodworth

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Berlin Wall, Bernie Sanders, Bob Geldof, cognitive dissonance, Downton Abbey, gender pay gap, glass ceiling, income inequality, light touch regulation, precariat, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, unpaid internship, upwardly mobile, We are the 99%, zero-sum game

The excesses of the rich during the Blair and Brown years have made it fashionable to retrospectively dismiss the New Labour project as a pale imitation of the Conservative Party. With respect to the poor, such arguments do not stand up to even a modicum of scrutiny. Under Blair and Brown there was a serious drive to improve the lot of Britain’s most economically vulnerable citizens. New Labour spent significant sums of money on public services and on policies such as tax credits for low-paid workers. Light-touch regulation of the banks was accompanied by Sure Start Centres for underprivileged children and record spending on the National Health Service. As a result of these spending priorities, both absolute and relative income poverty fell significantly among both children and pensioners between 1997 and 2010. This was not simply the fruit of a booming economy, but the result of deliberate spending decisions taken by successive New Labour governments.


pages: 481 words: 120,693

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

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

Thanks to this mind-set, Martin and his team had the self-confidence to opt out of what became the international contest to create the most attractive haven for global capital. Canada raised its capital requirements as they were lowered in other parts of the world. “I think one of the things that happened was the great competition between New York and London pushed the two into more of a light touch in terms of regulation,” Martin recalled. “I remember talking to [the regulator] and we agreed that we were not prepared to take that approach. Light-touch regulation in an industry that was so dependent on liquidity didn’t make any sense.” One Bay Street financier summed it up more saltily: “Canadian regulators didn’t have penis envy.” With hindsight, that decision seems brilliant. At the time, though, to many it seemed, well, limp. One measure of how strongly the tide of world opinion was running against the Canucks is that the International Monetary Fund, meant to be the stern guardian of the global economy, chided Canada for not doing enough to promote securitization in its mortgage market—one of the American financial innovations that contributed to the crisis.

This cultural Serrata matters because it increases the political myopia of the plutocrats. Add to that ordinary greed and a society that has turned its capitalists into popular heroes and you have an economic elite primed to repeat the mistake of the Venetian merchants—to drink its own Kool-Aid (or maybe prosecco is the better metaphor) and to conflate its own self-interest with the interests of society as a whole. Low taxes, light-touch regulation, weak unions, and unlimited campaign donations are certainly in the best interests of the plutocrats, but that doesn’t mean they are the right way to maintain the economic system that created today’s super-elite. Elites don’t sabotage the system that created them on purpose. But even smart, farsighted plutocrats can be betrayed by their own short-term self-interest into undermining the foundations of their own society’s prosperity.


pages: 393 words: 115,263

Planet Ponzi by Mitch Feierstein

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

We may not get the lost output back for very many years, if ever.’2 It’s also inevitably true that the cost of fiscal austerity falls far more on the poor than on the rich.3 Mervyn King’s ‘lost output’ will be causing pain in Tottenham and Toxteth for years and probably decades after those in Chelsea and Cheltenham have forgotten about it. Because these things are now well known, I won’t labor the point further. What I would add, however, is that the problems of lobbying are as entrenched in the UK as they are in the US‌—‌arguably more so. The Labour Party of Tony Blair and Gordon Brown was notoriously banker-friendly. The ‘light touch regulation’ on which those politicians prided themselves ended up doing unspeakable damage to the national finances. Yet the contemporary Conservative Party is more or less owned by the finance industry. According to the Bureau of Investigative Journalism, the financial sector is the source of more than half the Tory party’s political funding. If anything, that ratio has been increasing. Unsurprisingly, and according to the same source, the Tory-led coalition’s first year in office has seen a slew of tax changes all intended to help the most prosperous individuals in society.4 This shouldn’t come as any surprise.

For thirty years, and through administrations of both political colors, politicians allowed Ponzi-ish thinking to creep into every aspect of British economic life. Government debt stayed stubbornly high, when it should have all but disappeared. Household debt became excessive. Property became (and still is) bubblicious. The City of London came to rival Wall Street as a manufacturing center for financial WMDs. The regulators actively boasted of their ‘light touch’ regulation. That thirty-year road has now come to an end. Politics and the economy are in clear-up mode, much like London after the riots. There’s broken glass everywhere‌—‌broken glass and shattered businesses. But the clear-up is, in a strange way, inspirational. Tough political decisions can be made. Politicians can be honest. Voters can be trusted to understand what has to be done. The lobbying power of the banking industry can be kept at bay.


pages: 387 words: 120,155

Inside the Nudge Unit: How Small Changes Can Make a Big Difference by David Halpern

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Affordable Care Act / Obamacare, availability heuristic, carbon footprint, Cass Sunstein, centre right, choice architecture, cognitive dissonance, collaborative consumption, correlation does not imply causation, Daniel Kahneman / Amos Tversky, endowment effect, happiness index / gross national happiness, hindsight bias, illegal immigration, job satisfaction, Kickstarter, libertarian paternalism, light touch regulation, market design, meta analysis, meta-analysis, Milgram experiment, nudge unit, peer-to-peer lending, pension reform, presumed consent, QR code, quantitative easing, randomized controlled trial, Richard Feynman, Richard Thaler, Right to Buy, Ronald Reagan, Rory Sutherland, Simon Kuznets, skunkworks, the built environment, theory of mind, traffic fines, World Values Survey

The argument also wasn’t helped by big tobacco companies, who moved from being bemused and slightly hostile observers, to becoming actively interested in the products and even, it was rumoured, buying up some of the e-cig companies. Furthermore, the slightly dubious behaviour of some e-cig companies in some countries, with rumours that they were being sold outside schools, didn’t help their cause much either. By the time the proposals came back from the MHRA, they didn’t look quite like the light-touch regulation we had in mind. The issue was also becoming a European matter, with many countries arguing for a ban, or at least very heavy regulation. Faced with the backlash in the public health sector, one of the UK’s largest retailers withdrew e-cigs from its shelves. Despite our early efforts, we were losing the battle. We were heading towards heavy restriction of e-cigs in Europe, where they might only be available from pharmacies, and possibly only on prescription.

But the evidence still suggested that this was still better than just smoking, and more importantly, the rising quit rate strongly suggested that the overall effect was positive. We took the evidence back to the PM and the Cabinet Secretary. As it happens, David Cameron was one of the only people in No. 10 who had been a smoker, and had once even tried an e-cig (he wasn’t especially impressed). We took the decision to stick to our line: to ensure that, for now at least, e-cigs should be widely available; to push for light-touch regulation to ensure that they were free of other toxins but had enough nicotine to satisfy smokers’ cravings; and to legislate to ensure that they were not to be sold to under-18s. Available, but safe, was to be our line. Based on behavioural and other evidence, and with the help of a new Public Health Minister and our European and Global Issues Secretariat (EGIS), this is the line we took and pushed and more or less secured in the UK and Europe.


pages: 414 words: 121,243

What's Left?: How Liberals Lost Their Way by Nick Cohen

anti-communist, Ayatollah Khomeini, Berlin Wall, Boycotts of Israel, British Empire, centre right, Etonian, failed state, Fall of the Berlin Wall, Farzad Bazoft, feminist movement, haute couture, kremlinology, liberal world order, light touch regulation, mass immigration, moral hazard, Naomi Klein, Plutocrats, plutocrats, post-industrial society, profit motive, Ralph Nader, road to serfdom, Ronald Reagan, Scientific racism, sensible shoes, the scientific method, union organizing, upwardly mobile, Yom Kippur War

And it ends at the juncture where even in the transgressive, liberated West, where so much blood had been spilt for Freedom, where rebellion is the conformist style and playing the dissenter the smart career move in the arts and media, you can write a book and end up destroyed or dead. Buy the ebook here BY THE SUMMER of 2007, Britain was close to crashing. A few onlookers realised the danger, but Britain's political leaders were not among them. Politicians and civil servants boasted that the City's economy was booming because of their 'light-touch regulation' of workers in financial services whose number included potential frauds. Curiously, they never argued that the inner-city economy might boom if there was 'light touch regulation' of workers in the ghettos whose number included potential drug dealers. And artists produced works to match the times. On the same day that Lehman Brothers went bankrupt, the genial Damien Hirst auctioned at Sotheby's pieces he admitted had been mass produced in his studios and buyers still gave him £100 million.


pages: 515 words: 142,354

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

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bank run, banking crisis, barriers to entry, battle of ideas, Berlin Wall, Bretton Woods, capital controls, Carmen Reinhart, cashless society, central bank independence, centre right, cognitive dissonance, collapse of Lehman Brothers, collective bargaining, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, currency peg, dark matter, David Ricardo: comparative advantage, disintermediation, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial innovation, full employment, George Akerlof, Gini coefficient, global supply chain, Growth in a Time of Debt, housing crisis, income inequality, incomplete markets, inflation targeting, information asymmetry, investor state dispute settlement, invisible hand, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour market flexibility, labour mobility, light touch regulation, manufacturing employment, market bubble, market friction, market fundamentalism, Martin Wolf, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, neoliberal agenda, new economy, open economy, paradox of thrift, pension reform, pensions crisis, price stability, profit maximization, purchasing power parity, quantitative easing, race to the bottom, risk-adjusted returns, Robert 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

Indeed, especially before the 2008 global financial crisis, each country faced pressures to reduce regulations. Financial firms threatened that they would leave unless regulations were reduced.14 This regulatory race to the bottom would have existed within Europe even without the euro. Indeed, the winners in the pre-2008 contest were Iceland and the UK, neither of which belong to the eurozone (and Iceland doesn’t even belong to the EU). The UK prided itself on its system of light regulation, which meant essentially self-regulation, an oxymoron. The bank managers put their own interests over those of shareholders and bondholders, and the banks as institutions put their interests over those of their clients. The UK’s Barclays bank confessed to having manipulated the market for LIBOR, the London interbank lending rate upon which some $350 trillion of derivatives and other financial products are based.15 Still, the eurozone was designed with the potential to make all of this worse.

Somehow, the banks’ money makes their arguments seem more cogent, in spite of the historical record showing the adverse consequences of underregulated banks—up to and including the 2008 crisis.18 This political influence on regulatory reform in Europe and the United States has meant that the reforms have almost surely not been sufficient to prevent another crisis; in certain areas, such as the shadow banking system, there has been little progress, and in other areas, such as derivatives, what progress there has been has been significantly reversed, at least in the United States.19 Fixing the problem The threat of a regulatory race to the bottom is why there has to be strong regulation at the European level. But under Europe’s current governance structure, this will prove even more difficult than getting good regulation within a country. The UK has been vigorously defending its system of light regulation. It may have cost its taxpayers hundreds of billions of pounds, yet today policymakers focus on the potential loss of profits, taxes, and jobs from downsizing (or rightsizing) the financial sector. The losses of a few years ago seem ancient history, not to be mentioned in any polite conversation of regulatory reform. There is a second problem with Europe-wide financial regulation and supervision—can it be sufficiently sensitive to the circumstances of the different countries?

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


pages: 322 words: 77,341

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

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asset-backed security, bank run, banking crisis, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black-Scholes formula, Celtic Tiger, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, diversified portfolio, double entry bookkeeping, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial innovation, fixed income, George Akerlof, greed is good, hindsight bias, housing crisis, Hyman Minsky, intangible asset, interest rate swap, invisible hand, Jane Jacobs, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, laissez-faire capitalism, light touch regulation, liquidity trap, Long Term Capital Management, loss aversion, Martin Wolf, money market fund, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, negative equity, new economy, Nick Leeson, Norman Mailer, Northern Rock, Own Your Own Home, Ponzi scheme, quantitative easing, reserve currency, Right to Buy, 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

The institution carried the watermark of its origins, as institutions tend to do: it wasn’t proactive in its view of the industry and didn’t see itself as looking at the operation of the business from the outside. Regulatory bodies should have access to the perspective of outsiders looking in at the industry from its periphery and prepared to ask obvious, which sometimes means obviously unpopular, questions. The FSA wasn’t like that: it didn’t have somebody saying “I don’t understand, please explain.” It was dedicated to what was often called the principle of “light touch” regulation. As Adair Turner, the head of the FSA, said in his postcrash report: An underlying assumption of financial regulation in the US, the UK and across the world, has been that financial innovation is by definition beneficial, since market discipline will winnow out any unnecessary or value destructive innovations. As a result, regulators have not considered it their role to judge the value of different financial products, and they have in general avoided direct product regulation, certainly in wholesale markets with sophisticated investors.4 This didn’t mean that nobody at the FSA, the Bank, or the Treasury—the third pillar of the “tripartite” regulatory system supposed to run the British financial system—had a clue what was happening.


pages: 183 words: 17,571

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

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

Governments of both the center-left and center-right embraced the financedriven economy because it delivered the goods in the form of economic growth and job creation.The so-called Anglo-Saxon economies with their dynamic capital markets and global investment banks outpaced other developed economies in Europe and Asia. Bill Clinton and Tony Blair both enjoyed long periods in office and in return delivered “light-touch” regulation to the bankers who were among their largest financial supporters. In Financial Market Meltdown (Praeger, 2009) I basically update the great Victorian banker and journalist Walter Bagehot, who wrote the great financial classic Lombard Street (1873), which tells the lay reader how finance works. I will not repeat myself here, but two points Bagehot insisted on remain true: First, banks need to be cautious and dull because they deal in other people’s money, and an optimistic and complacent banker is more dangerous than an outright fraudster.


pages: 257 words: 71,686

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

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

We never forget. We’re very powerful, though we can be somewhat clumsy. We’re not predators but, when you hear us coming, you pay attention … I suppose the elephants.’ The regulators attract very bright people from the top universities, he insisted, referring to the trader’s ‘idiots’ comment. What’s more, he continued: ‘Banks have been so wrong about their risks. There was a clamour for light-touch regulation, to leave the industry in peace, because they knew best. People blame the regulators for missing all sorts of things in years past, and there were regulatory failures. But the senior management and risk people inside the banks should have caught them in the first place. Then again, those risk officers who did issue warnings in those years may have been let go.’ Since the crash, the regulators were ‘losing people at all levels’, he said.

Unhappy Union by The Economist, La Guardia, Anton, Peet, John

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

The move was co-ordinated and subject to EU state-aid rules, but each country would still have to clean up its own banking mess. The hyperactive Sarkozy then flew off to Camp David (taking along the president of the European Commission, José Manuel Barroso) to persuade President George Bush to call a global summit on the financial crisis (it would become the G20 summit). Under the Irish single-market commissioner, Charlie McCreevy, the Commission had hitherto favoured light-touch regulation of finance. But in October Barroso enlisted a former IMF boss and French central-bank governor, Jacques de Larosière, to produce a report on how to tighten control over the financial sector. It was delivered within three months. After much resistance from the UK, the report would lead to the creation in 2011 of four new European financial supervisory bodies: three new regulators for banks, insurance and markets, and the European Systemic Risk Board to monitor threats to the overall financial system.


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

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

Overnight, Thatcher cleared the way for retail banks to set up integrated investment banks that could make markets, advise clients, sell them securities and place their own side bets, all under one roof. She also removed obstacles to foreign banks taking over U.K. firms, leading to an influx of big U.S. and international lenders that brought with them a more aggressive, cutthroat ethos. The advent of light-touch regulation, with markets more or less left to police themselves, made London a highly attractive place to do business. The market for derivatives, bonds and syndicated loans exploded. Beware of Greeks Bearing Gifts 17 By the 1990s, Libor was baked into the system as the benchmark for everything from mortgages and student loans to swaps. However, it was its adoption by the Chicago Mercantile Exchange (CME) as the reference rate for eurodollar futures contracts that cemented its position at the heart of the financial markets.


pages: 726 words: 172,988

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

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

An anti-regulation ideology helped as well.49 Prior to the financial crisis, regulators failed to set proper rules and supervisors failed to enforce the rules in place so as to prevent the reckless behavior of bankers.50 In the United States, for example, Alan Greenspan (chairman of the Federal Reserve), Arthur Levitt (chairman of the Securities and Exchange Commission [SEC]), and Robert Rubin (Treasury secretary) prevented an initiative in 1998–2000 that would have imposed more transparency on derivatives markets. Such transparency was sorely missing in the run-up to the financial crisis.51 A 2004 ruling of the SEC allowed U.S. investment banks to determine their regulatory capital on the basis of their own risk assessments, and this enabled Lehman Brothers and other investment banks to become highly indebted and vulnerable.52 The United Kingdom also insti-tuted so-called light-touch regulation in order to expand its role as a major financial center.53 An important factor in explaining the financial crisis of 2007–2009 is the failure of regulators and supervisors in the United States and in Europe to set and enforce proper rules to prevent the reckless behavior of bankers.54 Supervisors in the United States and Europe allowed banks to circumvent capital requirements by creating various entities that did not appear on the banks’ balance sheets.

., 309n50, 335n46 Levitt, Arthur, 204 Lewis, Michael, 60, 240n4, 253n38, 253n42, 259n29, 259n34, 261n51, 262n53, 282n14, 285n37, 290n27, 297n33, 300n49, 320n17, 329n6, 329n8, 331n20 liabilities, in balance sheets, 48, 48f, 248n4 liability: for covered bonds versus mortgage-backed securities, 254n48; extended, 31; limited, 25–26, 30–31, 240n10; unlimited, 30–31, 153 LIBOR (London interbank offered rate): definition of, 208, 256n13, 328n2; in financial crisis of 2007–2009, 256n13; scandal involving manipulation of, 208, 209, 215, 276n5, 328n2, 328n4 light-touch regulation, in UK, 204 Liikanen Commission, 90, 270nn34–35 limited-liability businesses, 25–26; banks as, 30–31; versus extended liability, 31; forms of, 240n10; rise of, 30; versus unlimited liability, 30–31. See also corporation(s) Lincoln Savings and Loan Association, 252n35 liquid assets, definition of, 295n24; in liquidity regulations, 92–93, 272nn44–45 liquidation(s): versus bankruptcy, 37; as normal in market economies, 38 liquidity: central banks’ role in, 39–40, 63, 179, 256n13; creation of, by banks, 154, 295n23; definition of, 250n17; “need” for, 153–58; in plumbing metaphor, 210; transformation of, by banks, 155–56, 158–59, 250n17, 296n31 liquidity coverage ratio, 92–93 liquidity problems (illiquidity), 38–40; approaches to controlling, 92–94; in bank runs, 52, 93; capital regulation’s impact on, 95; central banks’ support in, 39–40, 63, 179, 256n13; contagion mechanisms in, 63; definition of, 38; in financial crisis of 2007-2009, 40, 209–12, 238n46, 246n15; guarantees and, 93–94; in maturity transformation, 159; money creation and, 158; in money market fund runs, 63; of mortgage-related securities, 156–57, 297n34; narrative of, 209–12, 330nn12–13, 330n18; pure (temporary), 32, 38–39; reserve requirements and, 92, 272n41, 272n43; safety nets for, 39–40, 93, 210–11; versus solvency problems, dangers of, 93, 152 liquidity transformation, 155–56, 158–59, 250n17, 296n31 living wills, for financial institutions, 77, 263n65 loans.


pages: 223 words: 10,010

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

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

In opposition, Tony Blair had, for a time, been Labour’s spokesman on the City while Brown immersed himself in the detail of banking. In power, the political love-affair with the City launched by the Conservatives continued. Brown and Blair struck a Faustian pact with the City. The new government wanted finance to continue to play the vanguard role in the economy. To help make finance the engine of growth and prosperity, Labour promised to continue the policy of light touch regulation and turn a blind eye to some of the seedier activities of the business elite. New Labour embraced the new market experiment launched by Mrs Thatcher more or less in full. The government introduced some changes to moderate the more extreme aspects of the labour market—with measures such as the minimum wage and greater workplace protection. Despite this, a decade later, according to the OECD, Britain continued to have one of the least regulated labour markets of all developed economies.137 Labour was also relaxed about the greater concentration of income and wealth that had occurred under the Conservatives.


pages: 523 words: 111,615

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

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

A whole generation of policy makers has been mesmerized by Wall Street, always and utterly convinced that whatever the banks said was true.24 John Kay, another eminent economist, made a similar point about the UK government in a Financial Times column, “Investment bankers had become the most powerful political lobby in the country and there was no vestige of political support for action to restrain City excess. Light touch regulation was not just a matter of policy but a matter of pride. . . . Little has changed. The government continues to see financial services through the eyes of the financial services industry, for which the priority is to restore business as usual.”25 The failures of government go wider, however. Public services are lagging in their productivity and failing to deliver what citizens want. The public sector faces a huge challenge in trying to improve when government budgets will have to be slashed by far, far more than any time since before the Second World War.


pages: 355 words: 92,571

Capitalism: Money, Morals and Markets by John Plender

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

It would make Dodd–Frank look like a warm-up Act.51 There has been a similar escalation in the number of watchdogs. In the same paper, Haldane and Madouros point out that in the UK, for example, there was one regulator in 1980 for roughly every 11,000 people employed in the UK financial sector. By 2011, there was one for every 300 people employed in finance. This manic escalation in regulatory enthusiasm – nonetheless referred to as ‘light-touch’ regulation before 2007 – was wholly ineffective in preventing the financial crisis. It also leads to manic escalation in the number of bankers engaged in compliance activities. In September 2013, Jamie Dimon, chief executive of JPMorgan Chase, America’s biggest bank, sent a memo to staff revealing that the bank had added a whopping 3,000 employees to bolster controls, devoted 500 people to fulfilling the Federal Reserve’s stress tests, and given staff 750,000 hours of training on compliance matters.


pages: 376 words: 109,092

Paper Promises by Philip Coggan

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

Preventing recessions may be a little like the old practice of preventing even small fires in national forests; the effect is to allow a lot of brushwood to build up so that when a fire does happen, it is catastrophically big. None of this would have happened under the gold standard or the Bretton Woods system. Under the former, the US reserves would have run out long before China had built up such huge surpluses; under the latter, trade deficits could not last for ever (indeed that is why the system broke down). REGULATION This ‘markets are right’ philosophy was also reflected in light-touch regulation. It was assumed that the private sector would act to regulate itself. It would not lend money to those who might not pay it back; it would not take risks that might destroy its balance sheet. After all, the executives of banks were also shareholders. Why should they risk the loss of their fortunes? This assumption was proved spectacularly wrong in 2007 and 2008. Why did the bankers get it so wrong?


pages: 207 words: 86,639

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

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

These distortions stem from the lack of competition regulation at global level, but they are also a symptom of the blind eye being turned to monopolies by national regulators, forced to accept them because other countries accept them. Worse, the regulators have castrated themselves because they perceive an unspoken message from their governments that they prefer a handful of whales, which they believe they can influence and draw on for economic muscle, to having to deal with a multiplicity of sprats. Our governments have lost faith in genuinely open markets, while protecting free markets for the wealthy alone. Light touch regulation of the financial sector is now seen as a major factor leading up to the global economic crash of 2008. 86 THE NEW ECONOMICS But money itself is a measuring tool that also encourages monoculture. Different currencies might measure a variety of assets differently, but since they are all increasingly linked, so the yardstick they use is increasingly the same. The results are everywhere: the impoverished local economies, the emptying of the great harbours and rivers that have bustled for a thousand years, the weed-covered farming communities, even the great corporations – whatever else we may think of them – shedding all the real work until they are just shells that deliver only financial services.


pages: 327 words: 90,542

The Age of Stagnation by Satyajit Das

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9 dash line, accounting loophole / creative accounting, additive manufacturing, Airbnb, Albert Einstein, Alfred Russel Wallace, Anton Chekhov, Asian financial crisis, banking crisis, Berlin Wall, bitcoin, Bretton Woods, BRICs, British Empire, business process, business process outsourcing, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Clayton Christensen, cloud computing, collaborative economy, colonial exploitation, computer age, creative destruction, cryptocurrency, currency manipulation / currency intervention, David Ricardo: comparative advantage, declining real wages, Deng Xiaoping, deskilling, disintermediation, Downton Abbey, Emanuel Derman, energy security, energy transition, eurozone crisis, financial innovation, financial repression, forward guidance, Francis Fukuyama: the end of history, full employment, gig economy, Gini coefficient, global reserve currency, global supply chain, Goldman Sachs: Vampire Squid, happiness index / gross national happiness, Honoré de Balzac, hydraulic fracturing, Hyman Minsky, illegal immigration, income inequality, income per capita, indoor plumbing, informal economy, Innovator's Dilemma, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, John Maynard Keynes: technological unemployment, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, labour mobility, light touch regulation, liquidity trap, Long Term Capital Management, low skilled workers, Lyft, Mahatma Gandhi, margin call, market design, Marshall McLuhan, Martin Wolf, Mikhail Gorbachev, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, oil shale / tar sands, oil shock, old age dependency ratio, open economy, passive income, peak oil, peer-to-peer lending, pension reform, Plutocrats, plutocrats, Ponzi scheme, Potemkin village, precariat, price stability, profit maximization, pushing on a string, quantitative easing, race to the bottom, Ralph Nader, Rana Plaza, rent control, rent-seeking, reserve currency, ride hailing / ride sharing, rising living standards, risk/return, Robert Gordon, Ronald Reagan, Satyajit Das, savings glut, secular stagnation, seigniorage, sharing economy, Silicon Valley, Simon Kuznets, Slavoj Žižek, South China Sea, sovereign wealth fund, TaskRabbit, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the market place, the payments system, The Spirit Level, Thorstein Veblen, Tim Cook: Apple, too big to fail, total factor productivity, trade route, transaction costs, unpaid internship, Unsafe at Any Speed, Upton Sinclair, Washington Consensus, We are the 99%, WikiLeaks, Y2K, Yom Kippur War, zero-coupon bond, zero-sum game

HSBC, another British bank, has set aside US$700 million against potential fines payable to US authorities for similar offenses. The transactions had no American nexus in many cases, other than US dollar payments made via New York. The UK argues that allegations of banking misconduct are designed to tarnish the integrity of London and its status as one of the world's major financial centers. The US argues that the problems relate to the laxity of Britain's famous light-touch regulations, which have been a factor in the rise of London as a global finance hub. Europeans argue that the prosecution of BNP Paribas was related to US opposition to the French sale of two helicopter assault ships for €1.2 billion to Russia, or to General Electric's unsuccessful bid for Alstom, manufacturer of France's TGV high-speed train. The use of banking laws in this way does not improve the safety of the financial system or facilitate international cooperation.


pages: 289 words: 77,532

The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders by Kate Kelly

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Bakken shale, bank run, Credit Default Swap, diversification, fixed income, Gordon Gekko, index fund, light touch regulation, locking in a profit, London Interbank Offered Rate, Long Term Capital Management, margin call, paper trading, peak oil, Ponzi scheme, risk tolerance, Ronald Reagan, side project, Silicon Valley, Sloane Ranger, sovereign wealth fund, supply-chain management, the market place

A strong believer in the importance of government service, Francesca, whose father had been at Pearl Harbor, had encouraged Gensler to leave the private sector and had helped him compose a letter to Robert Rubin, the fellow Goldman alum who was then treasury secretary, inquiring about a post. Gensler had already made a lot of money at Goldman, and a job at Treasury seemed worth uprooting their lives for. It was an era of light regulation in Washington, and it was the dot-com boom: Internet companies like Netscape, Yahoo, and Amazon were hitting the public markets with wild success, and small investors were shifting in mass numbers into stocks. Under the guidance of the conservative Fed chairman Alan Greenspan and, later, Rubin’s successor at Treasury, Lawrence Summers, officials were beating back attempts to curb trading in off-exchange commodities and other risky contracts—including a notable push by Brooksley Born, the female lawyer who was chair of the CFTC.


pages: 304 words: 80,965

What They Do With Your Money: How the Financial System Fails Us, and How to Fix It by Stephen Davis, Jon Lukomnik, David Pitt-Watson

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activist fund / activist shareholder / activist investor, Admiral Zheng, banking crisis, Basel III, Bernie Madoff, Black Swan, centralized clearinghouse, clean water, computerized trading, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crowdsourcing, David Brooks, Dissolution of the Soviet Union, diversification, diversified portfolio, en.wikipedia.org, financial innovation, financial intermediation, fixed income, Flash crash, income inequality, index fund, information asymmetry, invisible hand, Kenneth Arrow, light touch regulation, London Whale, Long Term Capital Management, moral hazard, Myron Scholes, Northern Rock, passive investing, performance metric, Ponzi scheme, principal–agent problem, rent-seeking, Ronald Coase, shareholder value, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical model, Steve Jobs, the market place, The Wealth of Nations by Adam Smith, transaction costs, Upton Sinclair, value at risk, WikiLeaks

Don’t Bank on It Critics of current remuneration practices often identify “misaligned incentives” as the root of the problem. But let’s put it more plainly: boards are paying CEOs to do the wrong things, and those compensation packages were deeply implicated in the financial crisis. The official Financial Crisis inquiry commission in the United States concluded, “Compensation systems—designed in an environment of cheap money, intense competition, and light regulation—too often rewarded the quick deal, the short-term gain—without proper consideration of long-term consequences. Often, those systems encouraged the big bet—where the payoff on the upside could be huge and the downside limited.”28 Yet the same compensation systems continue today, and banks are no different from other corporations. The many articles written about compensation all agree on two things: first, pay incentives really do affect how executives and companies act, and second, the bigger the company, the more the executives are paid.29 As Harvard professor Lucian Bebchuk and Cornell professor Yaniv Grinstein note, “The association we find between CEOs’ compensation and firm-expanding decisions undertaken earlier during their service could provide CEOs with incentives to expand firm size.”30 It is therefore no surprise that the banks that got into the greatest trouble in the financial crisis were often those that had most aggressively pursued growth.31 Growth is good, so long as it is sustainable.


pages: 524 words: 143,993

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

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

On the contrary, it is perfectly possible to imagine that it would recur. This, then, is the topic of Chapter Nine. 6 Orthodoxy Overthrown The message London’s success sends out to the whole British economy is that we will succeed if like London we think globally. Move forward if we are not closed but open to competition and to new ideas. Progress if we invest in and nurture the skills of the future, advance with light touch regulation, a competitive tax environment and flexibility. Grow even stronger if this is founded on a strong domestic market built on the foundation of stability. And whether it be in advanced high value-added manufacturing, our creative industries, pharmaceuticals, digital electronics, in fast-growing education exports, I believe, just as you have done in financial services, we can demonstrate that just as in the 19th century industrialization was made for Britain, in the twenty-first century globalization is made for Britain too.


pages: 478 words: 126,416

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

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

The public applauds not the cautious captain who escapes the storm but the heroic seaman who, like McWhirr, battles successfully through. Some regulators were essentially placemen, put there by the industry and its political cronies to represent the interests of the businesses over which they exerted nominal oversight. But others were honest and committed public servants: they were, however, constantly aware of the political influence of the industry. ‘Light touch regulation’ was the product not of idle regulators but of the demands of the industry transmitted through the political process. Compare the remarks of Gordon Brown (Chapters 1 and 9) with those of Theodore (Chapter 1) and Franklin (frontispiece) Roosevelt. In northern Europe and North America there is little evidence of overt corruption in regulatory agencies, or at the senior levels of politics, finance and business.


pages: 388 words: 125,472

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

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anti-communist, Asian financial crisis, bank run, battle of ideas, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, British Empire, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, centre right, citizen journalism, collapse of Lehman Brothers, collective bargaining, don't be evil, Edward Snowden, Etonian, eurozone crisis, falling living standards, Francis Fukuyama: the end of history, full employment, G4S, glass ceiling, hiring and firing, housing crisis, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, James Dyson, laissez-faire capitalism, light touch regulation, market fundamentalism, mass immigration, Monroe Doctrine, Mont Pelerin Society, moral hazard, Neil Kinnock, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, old-boy network, open borders, Plutocrats, plutocrats, popular capitalism, 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, wealth creators, Winter of Discontent

They [HMRC] would base the way they dealt with large companies on trust, on building a partnership, a relationship, with “customer relationship managers” instead of case directors.’ Brooks sums up this new attitude pithily: ‘It became one of essentially believing what you were told.’ This outlook is wholly consistent with the prevailing laissez-faire ideology of the Establishment. ‘It was all entirely in keeping with the ascendancy of light-touch regulation,’ Brooks says. ‘They took this light touch to a ridiculous extreme.’ Those in the HMRC who opposed this new approach faced being written off in the same way as other opponents of the Establishment. ‘If you challenged it,’ he recalls, ‘you were made out like a dinosaur, an opponent of modernization. There was a way of communicating to show you were part of the new creed – management speak and so on – and if you don’t fit that mould, you’re sidelined.


pages: 528 words: 146,459

Computer: A History of the Information Machine by Martin Campbell-Kelly, William Aspray, Nathan L. Ensmenger, Jeffrey R. Yost

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Ada Lovelace, air freight, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, Apple's 1984 Super Bowl advert, barriers to entry, Bill Gates: Altair 8800, borderless world, Buckminster Fuller, Build a better mousetrap, Byte Shop, card file, cashless society, cloud computing, combinatorial explosion, computer age, deskilling, don't be evil, Donald Davies, Douglas Engelbart, Douglas Engelbart, Dynabook, fault tolerance, Fellow of the Royal Society, financial independence, Frederick Winslow Taylor, game design, garden city movement, Grace Hopper, informal economy, interchangeable parts, invention of the wheel, Jacquard loom, Jacquard loom, Jeff Bezos, jimmy wales, John Markoff, John von Neumann, light touch regulation, linked data, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, Menlo Park, natural language processing, Network effects, New Journalism, Norbert Wiener, Occupy movement, optical character recognition, packet switching, PageRank, pattern recognition, Pierre-Simon Laplace, pirate software, popular electronics, prediction markets, pre–internet, QWERTY keyboard, RAND corporation, Robert X Cringely, Silicon Valley, Silicon Valley startup, Steve Jobs, Steven Levy, Stewart Brand, Ted Nelson, the market place, Turing machine, Vannevar Bush, Von Neumann architecture, Whole Earth Catalog, William Shockley: the traitorous eight, women in the workforce, young professional

On 30 April 1995, the old NSFnet backbone was shut down, ending altogether US government ownership of the Internet’s infrastructure. The explosive growth of the Internet was in large part due to its informal, decentralized structure; anyone was free to join in. However, the Internet could not function as a commercial entity in a wholly unregulated way—or chaos and lawlessness would ensue. The minimal, light-touch regulation that the Internet pioneers evolved was one of its most impressive features. A good example of this is the domain-name system. Domain names—such as amazon.com, whitehouse.gov, and princeton.edu—soon became almost as familiar as telephone numbers. In the mid-1980s the Internet community adopted the domain-name system devised by Paul Mockapetris of the Information Sciences Institute at the University of Southern California.


pages: 475 words: 155,554

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

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

It is clear that Northern Rock and the FSA initially believed that funding markets would never close; even if they did, the Bank of England would be there as the UK’s lender of last resort. Northern Rock’s mortgages, profits and bonuses were all built on the backstop of the Bank of England. With my own eyes, on the first day of the Northern Rock run, I saw one of Britain’s top regulators struggling with the reality that the glory days of light-touch regulation were over. ‘We’ve got to allow innovation,’ he repeatedly insisted, his face contorted with fear. It was as if he could not quite bring himself to utter the unspoken question: ‘Don’t we?’ Those that work inside Northern Rock point out that holders of Granite bonds have not lost even a penny (although any investors who sold at the bottom of the market did lose their shirts). Credit quality held up sufficiently, even on the high-risk ‘Together’ mortgages.


pages: 772 words: 203,182

What Went Wrong: How the 1% Hijacked the American Middle Class . . . And What Other Countries Got Right by George R. Tyler

8-hour work day, active measures, activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, bank run, banking crisis, Basel III, Black Swan, blood diamonds, blue-collar work, Bolshevik threat, bonus culture, British Empire, business process, capital controls, Carmen Reinhart, carried interest, cognitive dissonance, collateralized debt obligation, collective bargaining, commoditize, corporate governance, corporate personhood, corporate raider, corporate social responsibility, creative destruction, credit crunch, crony capitalism, crowdsourcing, currency manipulation / currency intervention, David Brooks, David Graeber, David Ricardo: comparative advantage, declining real wages, deindustrialization, Diane Coyle, Double Irish / Dutch Sandwich, eurozone crisis, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, full employment, George Akerlof, George Gilder, Gini coefficient, Gordon Gekko, hiring and firing, income inequality, invisible hand, job satisfaction, John Markoff, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, labour market flexibility, laissez-faire capitalism, lake wobegon effect, light touch regulation, Long Term Capital Management, manufacturing employment, market clearing, market fundamentalism, Martin Wolf, minimum wage unemployment, mittelstand, moral hazard, Myron Scholes, Naomi Klein, Northern Rock, obamacare, offshore financial centre, Paul Samuelson, pension reform, performance metric, pirate software, Plutocrats, plutocrats, Ponzi scheme, precariat, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, reshoring, Richard Thaler, rising living standards, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, Sand Hill Road, shareholder value, Silicon Valley, South Sea Bubble, sovereign wealth fund, Steve Ballmer, Steve Jobs, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transcontinental railway, transfer pricing, trickle-down economics, tulip mania, Tyler Cowen: Great Stagnation, union organizing, Upton Sinclair, upwardly mobile, women in the workforce, working poor, zero-sum game

Even now, there isn’t a major power in the world that wouldn’t happily change places with the United States.”14 With American wages stagnant for a generation, productivity growth poor, and investment weak, this sort of economic jingoism is dismissed by economists, such as these at the OECD: “It has been claimed by some that only countries which emphasize market-oriented policies (limited welfare benefits, light regulation) may enjoy both successful employment performance and strong labour productivity growth simultaneously…. This claim is not supported by the evidence in this chapter, however. Indeed the chapter finds that other successful employment performers (which combine strong work incentives with generous welfare protection and well-designed regulation) had, on average over the past decade, similar GDP per capita growth to that recorded in more market-reliant counties.”15 Moreover, most voters in Australia or northern Europe would find risible the notion of switching places with the 95 percent of Americans whose wages have stagnated for a generation.

Indeed, more respondents believed that income differences are a source of conflict (66 percent) than believe the nation is divided instead by immigrants versus native born (62 percent) or on questions of race (38 percent).12 These polling results, coupled with financial crises and weak economic recovery, have led some to conclude that reform is inevitable. Here is Financial Times journalist Francesco Guerrera writing during the depths of the stock market decline in March 2009 about corporate governance reforms: “Long-held tenets of corporate faith—the pursuit of shareholder value, the use of stock options to motivate employees, and a light regulator touch allied with board oversight of management—are being blamed for the turmoil and look likely to be overhauled…. As a result, the composition of boards is likely to change dramatically.”13 Mutual fund manager John P. Hussman is similarly optimistic: “Economies that generate high profits, weak wage gains, and low capital accumulation are like old-style monopolies that … fail to produce long-term prosperity or growth.


pages: 261 words: 103,244

Economists and the Powerful by Norbert Haring, Norbert H. Ring, Niall Douglas

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accounting loophole / creative accounting, Affordable Care Act / Obamacare, Albert Einstein, asset allocation, bank run, barriers to entry, Basel III, Bernie Madoff, British Empire, central bank independence, collective bargaining, commodity trading advisor, corporate governance, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, diversified portfolio, financial deregulation, George Akerlof, illegal immigration, income inequality, inflation targeting, information asymmetry, Jean Tirole, job satisfaction, Joseph Schumpeter, Kenneth Arrow, knowledge worker, labour market flexibility, law of one price, light touch regulation, Long Term Capital Management, low skilled workers, mandatory minimum, market bubble, market clearing, market fundamentalism, means of production, minimum wage unemployment, moral hazard, new economy, obamacare, old-boy network, open economy, Pareto efficiency, Paul Samuelson, pension reform, Ponzi scheme, price stability, principal–agent problem, profit maximization, purchasing power parity, Renaissance Technologies, rolodex, Sergey Aleynikov, shareholder value, short selling, Steve Jobs, The Chicago School, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, ultimatum game, union organizing, Vilfredo Pareto, working-age population, World Values Survey

This led the OECD, in its 2004 employment outlook, to downgrade their own assessment of negative effects of high minimum wages to a “plausibility” and to admit that the evidence is fragile. By 2007 the attitude of the organization had changed even further. According to the OECD’s new assessment, empirical evidence does not support the claim that only countries that emphasize market-oriented policies, characterized by limited welfare benefits and light regulation, 204 ECONOMISTS AND THE POWERFUL can have low unemployment with strong labor productivity growth. The OECD stressed that the labor market institutions of various lowunemployment countries in Europe differed a great deal. This implies that there is no unambiguous right or wrong with regard to achieving a low rate of unemployment. Stringent employment protection for regular contracts is now considered to have only a small negative impact on long-run productivity, while higher minimum wages and a more generous level and duration of unemployment policies have a positive impact (OECD 2007).


pages: 430 words: 109,064

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

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Andrei Shleifer, Asian financial crisis, asset-backed security, bank run, banking crisis, Bernie Madoff, Bonfire of the Vanities, bonus culture, break the buck, capital controls, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, commoditize, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Edward Glaeser, Eugene Fama: efficient market hypothesis, financial deregulation, financial innovation, financial intermediation, financial repression, fixed income, George Akerlof, Gordon Gekko, greed is good, Home mortgage interest deduction, Hyman Minsky, income per capita, information asymmetry, interest rate derivative, interest rate swap, Kenneth Rogoff, laissez-faire capitalism, late fees, light touch regulation, Long Term Capital Management, market bubble, market fundamentalism, Martin Wolf, money market fund, moral hazard, mortgage tax deduction, Myron Scholes, Paul Samuelson, Ponzi scheme, price stability, profit maximization, race to the bottom, regulatory arbitrage, rent-seeking, Robert Bork, Robert Shiller, Robert Shiller, Ronald Reagan, Saturday Night Live, Satyajit Das, sovereign wealth fund, The Myth of the Rational Market, too big to fail, transaction costs, value at risk, yield curve

As it turned out, the original Federal Reserve lacked the modern regulatory powers necessary to constrain the banks. In addition, the first president of the powerful Federal Reserve Bank of New York was none other than Benjamin Strong, J. P. Morgan’s lieutenant and the ultimate Wall Street insider. As a result, the initial “solution” to the problem revealed by the Panic of 1907 would prove to be anything but. Instead, light regulation and cheap money would encourage banks to take on enough speculative risk to threaten the entire economy. Theodore Roosevelt was able to curtail the growth of industrial trusts and shift the mainstream consensus so that large concentrations of economic power came to be seen by most people as dangerous to society.74 But despite this success against the trusts, the movement to constrain the power of big banks failed, even with one of its leading advocates, Louis Brandeis, as an adviser to President Wilson.


pages: 356 words: 103,944

The Globalization Paradox: Democracy and the Future of the World Economy by Dani Rodrik

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affirmative action, Asian financial crisis, bank run, banking crisis, bilateral investment treaty, borderless world, Bretton Woods, British Empire, capital controls, Carmen Reinhart, central bank independence, collective bargaining, colonial rule, Corn Laws, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, Doha Development Round, en.wikipedia.org, endogenous growth, eurozone crisis, financial deregulation, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, George Akerlof, guest worker program, Hernando de Soto, immigration reform, income inequality, income per capita, industrial cluster, information asymmetry, joint-stock company, Kenneth Rogoff, labour market flexibility, labour mobility, land reform, liberal capitalism, light touch regulation, Long Term Capital Management, low skilled workers, margin call, market bubble, market fundamentalism, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, microcredit, Monroe Doctrine, moral hazard, night-watchman state, non-tariff barriers, offshore financial centre, oil shock, open borders, open economy, Paul Samuelson, price stability, profit maximization, race to the bottom, regulatory arbitrage, savings glut, Silicon Valley, special drawing rights, special economic zone, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tobin tax, too big to fail, trade liberalization, trade route, transaction costs, tulip mania, Washington Consensus, World Values Survey

Consider a typical conflict in a developing economy: foreign bankers prefer high interest rates and an appreciated currency while domestic exporters prefer low interest rates and a cheaper currency. Which of these two outcomes should monetary and fiscal institutions be designed to deliver? More often than not, exporters’ preferences will do the most good for the economy as a whole, and hence the economies where finance does not have the upper hand politically will prosper. More generally, banking interests tend to have a preference for very light regulation regardless of the implications for the rest of the economy. Their influence can have quite a corrupting effect on politics and institutions when it goes unchallenged by others. Indeed, the mortal blow to the “collateral benefits” argument was struck by the subprime mortgage meltdown, which demonstrated finance’s remarkable ability to undermine governance—and to do so in the richest and oldest democracy in the world.


pages: 394 words: 85,734

The Global Minotaur by Yanis Varoufakis, Paul Mason

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

While President Obama’s administration was busily accepting the Wall Street mantra about no full-blown nationalizations (i.e. the bogus argument that recapitalizing banks by means of temporary nationalizations, as in Sweden in 1993, would quash the public’s confidence in the financial system, thus creating more instability, which might in turn jeopardize any eventual recovery), Wall Street’s banks were already plotting against the administration, intent on using their renewed financial vigour to promote Obama’s political opponents (who offered them promises of offensively light regulation). This twist assumed added significance in January 2010, when the US Supreme Court, by a 5-4 vote, overturned the Tillman Act of 1907, which President Teddy Roosevelt had passed in a bid to ban corporations from using their cash to buy political influence. On that fateful Thursday, the floodgates of Wall Street money were flung open as the court ruled that the managers of a corporation can decide, without consulting with anyone, to write out a cheque to the politician who offers them the best deal, especially regarding regulation of the financial sector in the aftermath of 2008.


pages: 443 words: 98,113

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

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

This meant the liberalisation of markets, the commodification and privatisation of everything that could be commodified and privatised and the systematic dismantling of all institutions of social solidarity that protected people from ‘market forces’. Regulations were justifiable only if they promoted economic growth; if not, they had to go. The agenda involved strict re-regulation of labour markets and only light regulation of financial markets. The argument was that, if left alone, financial markets would reward efficient firms and punish inefficient ones, which would go out of business; meanwhile, financiers could help with mergers and transfers of ownership to the more efficient. This reasoning also bolstered demands for the privatisation of state enterprises, which was soon embraced with almost as much enthusiasm by social democratic parties as by their right-wing opponents – witness the French socialist government of Lionel Jospin and the New Labour government of Tony Blair.


pages: 341 words: 116,854

The Devil's Playground: A Century of Pleasure and Profit in Times Square by James Traub

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Anton Chekhov, Broken windows theory, Buckminster Fuller, delayed gratification, Donald Trump, fear of failure, intangible asset, Jane Jacobs, jitney, light touch regulation, megastructure, New Urbanism, Peter Eisenman, Plutocrats, plutocrats, price mechanism, rent control, Ronald Reagan, upwardly mobile, urban planning, urban renewal

It quickly found the latter in Lehman Brothers, which had lost its headquarters, in the World Financial Center. In early October, Lehman bought the building, for $700 million. The sign, which had been four years in the making, was an afterthought. By the time Lehman formally took title, in early December, three of the six segments were up and running, but Lehman had suspended work on the rest. In order to comply with the Times Square lighting regulations, Lehman continued to run the sign, but it kept only the most literal-minded images—the suspension bridge and the gallery of pedestrians— and ran them over and over until it was difficult to remember why the sign had been worth caring about in the first place. It was understandable that after the tremendous shock of 9/11, and the sheer logistical challenge of moving, reprogramming the sign was not exactly a top priority.


pages: 613 words: 151,140

No Such Thing as Society by Andy McSmith

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anti-communist, Ayatollah Khomeini, Berlin Wall, Big bang: deregulation of the City of London, Bob Geldof, British Empire, Brixton riot, call centre, cuban missile crisis, Etonian, F. W. de Klerk, Farzad Bazoft, feminist movement, fixed income, Francis Fukuyama: the end of history, friendly fire, full employment, glass ceiling, God and Mammon, greed is good, illegal immigration, index card, John Bercow, liberal capitalism, light touch regulation, Live Aid, loadsamoney, long peace, means of production, Mikhail Gorbachev, mortgage debt, mutually assured destruction, negative equity, Neil Kinnock, North Sea oil, Northern Rock, old-boy network, popular capitalism, Right to Buy, Ronald Reagan, Rubik’s Cube, Sloane Ranger, South Sea Bubble, spread of share-ownership, strikebreaker, The Chicago School, union organizing, upwardly mobile, urban decay, Winter of Discontent, young professional

The slush fund that the British contractor BAE set aside in Swiss and Panamanian bank accounts to pay commissions, or bribes, to various middlemen involved in the arms deal is thought to have been more than three times the amount raised by Live Aid.6 Geldof, to his credit, was quick to realize that if he was to take famine relief seriously he would have to immerse himself in the politics of world trade, because all the energy and goodwill of that summer’s day hardly made a ripple on Africa’s problems. Even so, Live Aid was one of the greatest displays of generosity that Britain has ever seen, and it is the single most lasting image of Britain in the 1980s – which might seem odd, because the decade is not thought of as a charitable one. In the USA, the 1980s is known as the ‘decade of greed’ because of the way light regulation and tax changes allowed money to pour into the bank accounts of those who were already wealthy, creating a culture in which the corrupt investor Ivan Boesky told an audience in California that ‘you can be greedy and still feel good about yourself’.7 There was a similar phenomenon in 1980s Britain, though the phrase used to sum it up was not coined by an investor but by a satirical stand-up comic, Harry Enfield.

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

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

Since much of what was previously borrowed was stolen or wasted, this may be a good rather than a bad outcome. 8 The difference between rich and poor states is the result of differ- Culture and Prosperity { 355} ences in the quality of their economic institutions. After four disappointing decades, development agencies have recognized this and used their authority to demand reforms. But the prescriptions have often been facile. What was offered to Russia was not American institutions, but the nostrums of the American business model. The institutions of the market-secure property rights, minimal government economic intervention, light regulation-were supposed to be simple and universal. If these prescriptions were implemented, growth would follow. But the truth about markets is far more complex. Rich states are the product of-literally-centuries of coevolution of civil society, politics, and economic institutions. A coevolution that we only partially understand and cannot transplant. In the only successful examples of transplantation-the Western offshoots-entire populations, and their institutions, were settled in almost empty countries.


pages: 385 words: 118,901

Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street by Sheelah Kolhatkar

Bernie Madoff, Donald Trump, family office, fear of failure, financial deregulation, hiring and firing, income inequality, light touch regulation, locking in a profit, margin call, medical residency, mortgage debt, p-value, pets.com, Ponzi scheme, rent control, Ronald Reagan, short selling, Silicon Valley, Skype, The Predators' Ball

The big banks, for the most part, understood what was legal and what wasn’t and had compliance departments in place to make sure they didn’t run too far afoul of the law. The SEC knew what it was supposed to be looking for when it monitored them. Over the previous ten years, however, billions of dollars had moved out of the heavily regulated big banks and into hedge funds, which were aggressive investment vehicles promising enormous returns. Hedge funds were subject to only light regulation, and most operated behind a veil of secrecy. “When you look at the nature of the regulatory cases that have been brought against the big banks—I’m not saying the conduct wasn’t bad,” Bowe told Kang. “But a lot of the cases involved stepping over a line that was far away from the type of stuff going on at the hedge funds.” Look at it in practical terms, Bowe said. Many of the people working at these funds had unconventional backgrounds; their main qualification might be that they were buddies with the fund manager, and they couldn’t have gotten a job at Goldman Sachs if they’d tried.


pages: 829 words: 229,566

This Changes Everything: Capitalism vs. The Climate by Naomi Klein

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1960s counterculture, activist fund / activist shareholder / activist investor, battle of ideas, Berlin Wall, big-box store, bilateral investment treaty, British Empire, business climate, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, clean water, Climategate, cognitive dissonance, colonial rule, Community Supported Agriculture, complexity theory, crony capitalism, decarbonisation, deindustrialization, dematerialisation, Donald Trump, Downton Abbey, energy security, energy transition, equal pay for equal work, Exxon Valdez, failed state, Fall of the Berlin Wall, feminist movement, financial deregulation, food miles, Food sovereignty, global supply chain, hydraulic fracturing, ice-free Arctic, immigration reform, income per capita, Intergovernmental Panel on Climate Change (IPCC), Internet Archive, invention of the steam engine, invisible hand, Isaac Newton, James Watt: steam engine, light touch regulation, market fundamentalism, moral hazard, Naomi Klein, new economy, Nixon shock, Occupy movement, offshore financial centre, oil shale / tar sands, open borders, patent troll, Pearl River Delta, planetary scale, post-oil, profit motive, quantitative easing, race to the bottom, Ralph Waldo Emerson, Rana Plaza, Ronald Reagan, smart grid, special economic zone, Stephen Hawking, Stewart Brand, structural adjustment programs, Ted Kaczynski, the scientific method, The Wealth of Nations by Adam Smith, trade route, transatlantic slave trade, transatlantic slave trade, trickle-down economics, Upton Sinclair, uranium enrichment, urban planning, urban sprawl, wages for housework, walkable city, Washington Consensus, Whole Earth Catalog, WikiLeaks

And yet as Hertsgaard acknowledges, the kind of policies that would be enough “seem preposterous to the political and economic status quo.”43 This state of affairs is, of course, yet another legacy of the free market counterrevolution. In virtually every country, the political class accepts the premise that it is not the place of government to tell large corporations what they can and cannot do, even when public health and welfare—indeed the habitability of our shared home—are clearly at stake. The guiding ethos of light-touch regulation, and more often of active deregulation, has taken an enormous toll in every sector, most notably the financial one. It has also blocked commonsense responses to the climate crisis at every turn—sometimes explicitly, when regulations that would keep carbon in the ground are rejected outright, but mostly implicitly, when those kinds of regulations are not even proposed in the first place, and so-called market solutions are favored for tasks to which they are wholly unequipped.


pages: 777 words: 186,993

Imagining India by Nandan Nilekani

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affirmative action, Airbus A320, BRICs, British Empire, business process, business process outsourcing, call centre, clean water, colonial rule, corporate governance, cuban missile crisis, deindustrialization, demographic dividend, demographic transition, Deng Xiaoping, digital map, distributed generation, farmers can use mobile phones to check market prices, full employment, ghettoisation, glass ceiling, global supply chain, Hernando de Soto, income inequality, informal economy, Intergovernmental Panel on Climate Change (IPCC), joint-stock company, knowledge economy, labour market flexibility, land reform, light touch regulation, LNG terminal, load shedding, Mahatma Gandhi, market fragmentation, mass immigration, Mikhail Gorbachev, Network effects, new economy, New Urbanism, open economy, Parag Khanna, pension reform, Potemkin village, price mechanism, race to the bottom, rent control, rolodex, Ronald Reagan, school vouchers, Silicon Valley, smart grid, special economic zone, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, transaction costs, trickle-down economics, unemployed young men, upwardly mobile, urban planning, urban renewal, women in the workforce, working poor, working-age population

This sector may also be the hardest for the government to let go of, considering the central role universities are seen to play in shaping a country’s ideas, and the power that reservation has in whipping up electorates into a frenzy. But the market economy is nevertheless pushing relentlessly against old systems, urging them toward reform, and penalizing policies that fail. The question remains, however, whether we can enable reform fast enough to leverage the opportunities we now have both domestically and globally. Reform requires key, controversial steps: we need to move toward a model of light regulation, where we have an independent regulator distanced from government. The oversight of educational institutions must be transparent and allow new institutions to enter easily. An open system that welcomes private investment both from India and from abroad is essential to create institutions with ambitions to be world-class. Investments without reforms will do nothing to counter the distortions that we see today.


pages: 870 words: 259,362

Austerity Britain: 1945-51 by David Kynaston

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

Down to last nappy but managed to get more dry between 12 and 2 and after 4. We froze up again. (Judy Haines) 14 February. Long queues for potatoes . . . Reduced clothing coupon 14 allowances. No wonder people steal coupons and clothes . . . Blackout so batteries for torches are scarce. (Gladys Langford) 16 February. Restrictions and arctic conditions persist . . . Several people here ignore lighting regulations and use lamps & radios at forbidden hours. (Gladys Langford) 18 February. Yesterday Selfridge’s was packed as though there was a bargain sale there. ‘Nothing else to do, nowhere to go,’ we heard a man say, obviously one of the nearly 3½ millions stood off through the fuel crisis. Today we saw men carrying their wives’ shopping baskets. (Florence Speed) 19 February. In addition to my usual winter apparel, am now wearing four woollen pullovers (three sleeveless ones under my waistcoat, one with sleeves over it).