market fundamentalism

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pages: 484 words: 136,735

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

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bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Black Swan, bonus culture, Bretton Woods, BRICs, Carmen Reinhart, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, Edward Glaeser, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, F. W. de Klerk, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, global rebalancing, Hyman Minsky, income inequality, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, laissez-faire capitalism, Long Term Capital Management, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, moral hazard, mortgage debt, new economy, Northern Rock, offshore financial centre, oil shock, paradox of thrift, peak oil, pets.com, Ponzi scheme, post-industrial society, price stability, profit maximization, profit motive, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, The Chicago School, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Washington Consensus

The chief theorists and political leaders of this forty-year period assumed that market forces were often wrong and that the single most important function of government was to manage the economy, by taming and controlling unstable market forces. Capitalism 3, the Thatcher-Reagan monetarist counterrevolution that culminated in the Bush-Greenspan market fundamentalism described in this book as Capitalism 3.3, adopted the opposite approach. Instead of treating economics as a branch of politics, it treated politics as a branch of economics. Its most important leaders believed that governments were usually wrong and always inefficient; therefore markets should be empowered wherever possible to discipline and control venal politicians. Assuming that the era of market fundamentalism ended with the 2007-09 crisis, what should we expect as the defining characteristic of Capitalism 4? It will probably be a recognition that governments and competitive markets can both be wrong and that the world is too unpredictable and complex to be managed by any immutable institutional structure.

Bank of American Banking crises overview Sweden (1990s) See also Financial crisis of 2007-09 Banking/financial markets accounting bonuses capital structures guarantees and as indispensable in new economy regulation taxpayer protection and Bankruptcy, national defaults developing countries (1980s) myth on Russia Barro, Robert Bear Stearns sale/effects Behavioral finance (boom-bust cycle theory) Beijing Consensus Berlin Wall dismantling Bernanke, Ben Friedman tribute Great Moderation speech market fundamentalism talk vs. actions TARP and Berners-Lee, Tim Bevan, Aneurin Bismarck Black Swan, The (Taleb) Blair, Tony Blanchard, Olivier Blankfein, Lloyd Blinder, Alan Bonuses, financial institutions Boom-bust cycles change vs. repetition emotions at top/bottom examples greed/fear and misinterpreting theories See also Financial crises; specific cycles Bretton Woods international currency system about breakdown/effects Brittan, Samuel Brown, Gordon Buchanan, James Burns, Arthur Bush, George W./administration crisis of 2007 and dollar decline and health care issues market fundamentalism oil prices/shock and policy “names,” See also Paulson, Henry/financial crisis (2007-09) Caballero, Ricardo Calvinist ideology and capitalism Capitalism adaptation and adaptation time and competition principle and crises of/in capitalism economics transformations and requirements solving social problems stages summary survival needs term timing of transitions transitions overview Western/Asian values rivalry Capitalism 1 overview Capitalism 2 overview Capitalism 3.3 summary description overview labor militancy See also Thatcher-Reagan revolution Capitalism beginnings of complexity of world and description summary economic “laws” and experimentation and finance/banking pessimism and skepticism and uncertainty/unpredictability and See also Economy of future Capitalism 4.0/economic policy ambiguity and big government and complexity and global growth rebalancing government debt crisis and managing banking crises multiple targets of nominal GDP and OPEC/oil protectionism/global competition public debt reduction stagflation unions/wages See also Macroeconomics Capitalism 4.0/global consequences business interests and currencies/financial relations environment and global governance limits to growth/physical resources prosperity without growth trade/industrial structures U.S.

./ administration; Lehman Brothers collapse Pension/health entitlements People’s Daily, China Personalities importance Petronius, Gaius Phelps, Edmund Planck, Max Platform Companies (Platco) Plato “Policy Ineffectiveness Proposition” (Sargent/Wallace) Prince, Charles Protectionism Protestant Ethic and the Spirit of Capitalism, The (Weber) Public Choice theory Rajan, Ranghuram Ramo, Joshua Rand, Ann Rational Expectations Hypothesis (REH) Rationality concept Reagan, Ronald See also Thatcher-Reagan revolution Reflexivity description See also Theory of Reflexivity Reich, Robert Reinhart, Carmen Ricardian Equivalence theory, Barro Ricardo, David Robinson, Joan Rogoff, Kenneth Roosevelt, Franklin Rowthorn, Robert Rumsfeld, Donald Samuelson, Paul Sargent, Thomas Sarkozy, Nicolas Savings Schumpeter, Joseph Seabright, Paul Sen, Amartya Shakespeare Shiller, Robert Short sellers Simon, Herbert Simon, John Singh, Jaswant Skidelsky, Robert Slaughter, Anne-Marie Smith, Adam Capitalism 1 and ideas/impact “invisible hand” of competitive markets concept Smith, Vernon Solow, Robert Sorkin, Andrew Ross Soros, George boom-bust cycles and boom-bust cycles/Theory of Reflexivity “market fundamentalism” term/concept South Sea Bubble/effects Sovereign wealth funds Specialization Spence, Michael Stagflation 1970s causes/conditions for description threat of Stiglitz, Joe Stimulus. See Government stimulus, postcrisis Structure of Scientific Revolutions, The (Kuhn) Summers, Lawrence Sunset clauses Taleb, Nassim TARP (Troubled Asset Relief Program) Taxes conservatives vs. the Left increases and oil use/industry progressive income tax beginnings progressive taxation effects structure issues Tea Party demonstrations Tett, Gillian Thatcher, Margaret Thatcher-Reagan revolution 1970s challenges and 2007-09 crisis and about failures of narrative of See also Capitalism Market fundamentalism; Monetarism Theory of Moral Sentiments (Smith) Theory of Reflexivity Thrift paradox Tobin, James Toffler, Alvin Trillion Dollar Meltdown, The (Morris) Tulipmania/effects Turner, Adair Unemployment central bankers and demand management and labor unions and monetarists and “natural-rate hypothesis,” targeted levels Value chain Viniar, David Volcker, Paul Federal Funds rate on finances inflation and monetarism Voltaire , Wachovia Wallace, Neil Washington Consensus Washington Mutual Watson, Thomas J.

 

pages: 105 words: 18,832

The Collapse of Western Civilization: A View From the Future by Naomi Oreskes, Erik M. Conway

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anti-communist, correlation does not imply causation, en.wikipedia.org, energy transition, invisible hand, laissez-faire capitalism, market fundamentalism, means of production, oil shale / tar sands, road to serfdom, Ronald Reagan, stochastic process, the built environment, the market place

Many scientists, to their credit, recognized the difficulties they were facing, and grappled with how to communicate their knowledge effectively.4 Some tried to create institutional structures to support less reductionist modes of inquiry that analyzed broad patterns and the interactions between natural and social systems. While they were making some headway, a large part of Western society was rejecting that knowledge in favor of an empirically inad-equate yet powerful ideological system. Even at the time, some recognized this system as a quasi-religious faith, hence the label market fundamentalism. 38 M a r k e t F a i l u r e Market fundamentalism—and its various strands and interpretations known as free market fundamentalism, neoliberalism, laissez-faire economics, and laissez-faire capitalism—was a two-pronged ideological system. The first prong held that societal needs were served most efficiently in a free market economic system. Guided by the “invisible hand” of the marketplace, individuals would freely respond to each other’s needs, establishing a net balance between solutions (“supply”) and needs (“demand”).

L e x i c o n o f A r c h A i c T e r m s 59 invisible hand A form of magical thinking, popularized in the eighteenth century, that economic markets in a capitalist system were “balanced” by the actions of an unseen, immaterial power, which both ensured that markets functioned efficiently and that they would address human needs. Belief in the invisible hand (sometimes also called the invisible hand of the marketplace) formed a kind of quasi-religious foundation for capitalism (see capitalism; external costs; market failure; market fundamentalism). market failure The social, personal, and environmental costs that market economies imposed on individuals and societies were referred to as “market failures.” The concept of market failure was an early recognition of the limits of capitalist theory (see external costs; invisible hand ). market fundamentalism A quasi-religious dogma (see invisible hand) promoting unregulated markets over all other forms of human socioeconomic organization. During the Penumbra, market fundamentalists tended to deny the existence of market failure, thus playing a key role in the denial of the changes that were already under way and therefore in the catastrophes that ensued.

Historical analysis also shows that Western civilization had the technological know-how and capability to effect an orderly transition to renewable energy, yet the available technologies were not implemented in time.1 As with all great historical events, there is no easy answer to the question of why this catastrophe occurred, but key factors stand out. The thesis of this analysis is that Western civilization became trapped in the grip of two inhibiting ideologies: positivism and market fundamentalism. Twentieth-century scientists saw themselves as the descendants of an empirical tradition often referred to as positivism—after the nineteenth-century French philosopher, Auguste Comte, who developed the concept of “positive” knowledge (as in, “absolutely, positively true”)—but 36 M a r k e t F a i l u r e the overall philosophy is more accurately known as Baconianism. This philosophy held that through experience, observation, and experiment, one could gather reliable knowledge about the natural world, and that this knowledge would empower its holder.

 

pages: 515 words: 142,354

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

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

Moreover, the founders of the euro were guided by a set of ideas, notions about how economies function, that were fashionable at the time but that were simply wrong.12 They had faith in markets and lacked an understanding of the limitations of markets and what was required to make them work. The unwavering faith in markets is sometimes referred to as market fundamentalism, sometimes as neoliberalism.13 Market fundamentalists believed, for instance, that if only the government would ensure that inflation was low and stable, markets would ensure growth and prosperity for all. While in most of the world, market fundamentalism has been discredited, especially in the aftermath of the 2008 global financial crisis, those beliefs survive and flourish within the eurozone’s dominant power, Germany. They are held with such conviction and certainty, immune to new contrary evidence, that these beliefs are rightly described as an ideology.

We will explain in chapter 8 how current reforms in the banking system may actually exacerbate the problem of economic divergence noted earlier. THE UNDERLYING PROBLEM: MARKET FUNDAMENTALISM—IDEOLOGY RULES The problem is not only the lack of broad consensus as to what is required to ensure the healthy functioning of an economy and the eurozone. The problem is that Germany has used its economic dominance to impose its own views, and those views are not only rejected by large parts of the eurozone but also by the majority of economists. Of course, in some areas—like seeing the coming of the 2008 crisis—the majority of economists did not do well. But later in this book, I explain why they were especially right about the effects of austerity.32 Market fundamentalism, to which we referred earlier, assumed that markets on their own are efficient and stable. Adam Smith, often viewed as the godfather of this perspective, actually argued to the contrary: that there was an important role for government.

Research in economics over the past half-century has shown that not only is there a presumption that markets are not efficient and stable; it has also explained why that is so and what governments can do to improve societal well-being.33 Today, even market fundamentalists (sometimes also referred to as “neoliberals”) admit that there is a need for government intervention to maintain macro-stability—though they typically argue that government interventions should be limited to a rules-based monetary policy focused on price stability—and to ensure property rights and contract enforcement. Otherwise, regulations and restrictions should be stripped away. There was no economic rationale for this conclusion—it flies in the face of a huge body of economic research showing that there is a need for a wider role for government. The world has paid a high price for this devotion to the religion of market fundamentalism/neoliberalism, and now it’s Europe’s turn. In later chapters, we will see the role that these misguided ideas played in shaping the structure of the eurozone; in the design of policy responses to the crisis as it evolved and to the imbalances and distortions that arose before 2008. The eurozone embedded many of these neoliberal ideas into the currency’s “constitution”—without providing for enough flexibility to respond to changing circumstances or revised understandings of how economies function.

 

Global Financial Crisis by Noah Berlatsky

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accounting loophole / creative accounting, asset-backed security, banking crisis, Bretton Woods, capital controls, Celtic Tiger, centre right, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, Doha Development Round, energy security, eurozone crisis, financial innovation, Food sovereignty, George Akerlof, Gordon Gekko, housing crisis, illegal immigration, income inequality, market bubble, market fundamentalism, moral hazard, new economy, Northern Rock, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, South China Sea, structural adjustment programs, too big to fail, trade liberalization, transfer pricing, working poor

Markets Must Be Regulated The crisis has shattered all the myths associated with the neoliberal paradigm [arguments that stress the benefits of unregulated markets]. It has provided fundamental lessons for Africa and the global South. These lessons should lead to one simple conclusion: a rejection of failed and discredited neoliberal policies and the institutions that promoted them over the last three decades, namely the IMF [International Monetary Fund] and the World Bank. 1) The collapse of market fundamentalism. The first important lesson is the collapse of market fundamentalism. The crisis shows that the emperor has no clothes anymore. Market fundamentalists claim that markets should 187 The Global Financial Crisis be left to their own devices because whatever happens, they have self-correcting mechanisms and that market failures are less costly than state failures. But the reality shows otherwise. The devastations caused by the financial crisis are staggering, as evidenced by the trillions of dollars needed to clean up the mess they spread to the entire globe.

What was the estimated value of the trade between Africa and China in 2008, according to the author? Demba Moussa Dembele, “The Global Financial Crisis: Lessons and Responses from Africa,” Pambazuka News, March 19, 2009. Reproduced by permission. 186 Solutions to the Global Financial Crisis T he international financial crisis reflects the collapse of laissez-faire economics and the growing discredit of market fundamentalism. What was being hailed yesterday as the only road to ‘growth and prosperity’ is now under fierce attack by the same countries and institutions that promoted it for years. In leading developed countries, states have drawn up massive rescue plans to bail out industries or nationalise banks and financial institutions. Markets Must Be Regulated The crisis has shattered all the myths associated with the neoliberal paradigm [arguments that stress the benefits of unregulated markets].

And these costs will be ultimately borne by the taxpayer, that is, the state. Even the most zealous market fundamentalists must have lost their illusions about the ability of markets to discipline themselves and correct their own mistakes. Markets are not impersonal forces, believed to be all powerful and placed above human beings. They are man-made forces whose decisions are ultimately influenced by selfish vested interests. With the collapse of market fundamentalism, it is the legitimacy of the entire neoliberal system that is being questioned. Even some of its most fervent ideologues are now in disarray. Some of its most sacred myths and dogmas are falling apart. Things that were unthinkable just a few months ago have become a daily reality. Nationalisations of banks and financial institutions, rescue plans for industrial companies, strong state intervention everywhere and attacks against ‘unbridled capitalism’; all this is being observed in Europe and even in the United States. . . .

 

pages: 281 words: 95,852

The Googlization of Everything: by Siva Vaidhyanathan

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1960s counterculture, AltaVista, barriers to entry, Berlin Wall, borderless world, Burning Man, Cass Sunstein, choice architecture, cloud computing, computer age, corporate social responsibility, correlation does not imply causation, data acquisition, death of newspapers, don't be evil, Firefox, Francis Fukuyama: the end of history, full text search, global village, Google Earth, Howard Rheingold, informal economy, information retrieval, Joseph Schumpeter, Kevin Kelly, knowledge worker, libertarian paternalism, market fundamentalism, Marshall McLuhan, means of production, Mikhail Gorbachev, Naomi Klein, Network effects, new economy, Nicholas Carr, PageRank, pirate software, Ray Kurzweil, Richard Thaler, Ronald Reagan, side project, Silicon Valley, Silicon Valley ideology, single-payer health, Skype, social web, Steven Levy, Stewart Brand, technoutopianism, The Nature of the Firm, The Structural Transformation of the Public Sphere, Thorstein Veblen, urban decay, web application

The Internet in the late twentieth century was too global, too messy, and too gestational to justify national or international regulation.49 Some illiberal states, such as the People’s Republic of China, chose to step in and aggressively perform those regulatory duties either through direct action or through proxies in the quasi-private sector.50 In the more liberal world of the United States and—to a lesser extent— Europe, a presumption that market forces can best solve problems and build structures so dominated political debate from about 1981 onward that even considering the possibility of state involvement in something so delicate and new as the Internet was implausible.51 After the recent collapse of the corrupt and disastrous command-and-control economies of Eastern Europe, it was difficult to propose a way of doing things 40 R END E R UNTO CAESA R that fell between the poles of triumphant market fundamentalism and incompetent, overbearing state control. Of course the market had survived and thrived. There seemed to be no other mechanism that could deliver positive results to a diverse, connected world.52 The notion of gentle, creative state involvement to guide processes toward the public good was impossible to imagine, let alone propose. This vision was known as neoliberalism. Although Ronald Reagan and Margaret Thatcher championed it, Bill Clinton and Tony Blair mastered it. It had its roots in two prominent ideologies: techno-fundamentalism, an optimistic belief in the power of technology to solve problems (which I describe fully in chapter 3), and market fundamentalism, the notion that most problems are better (at least more efficiently) solved by the actions of private parties rather than by state oversight or investment.53 And it was not just a British and American concept.

See financial status, Google’s East Germany, 108, 112, 113, 121, 123 economic relations: in China, 119, 124–25; and corporate responsibility, 42–44; and 259 free rider problem, 31; and Google’s profitability during downturn, 17–18; and market failure, 40–41; and market fundamentalism, 39–40, 43; and neoliberalism, 40; and public failure, 40–42; state intervention in, 39–40, 43, 44 Egypt, 47, 143 Eldritch Press, 157 e-mail service, Google’s. See Gmail employees, Google’s: and attitudes toward company, 72–74, 75; layoffs experienced by, 18; number of, 18; as technocrats, 67–71 encryption, 116, 125, 126 England. See United Kingdom English-language Web sites, 141, 142 eschatology, techno-fundamentalist, 55 Europe: Google Books challenged in, 153; Google News content aggregation challenged in, 32; Google Street View in, 102, 104–8, 237n24; government regulation in, 47; market fundamentalism in, 39, 40; privacy policy in, 87 European Union, 25, 115 Excite (Internet portal), 56 Facebook, 16, 43, 82, 90–92, 99, 112, 116, 118 fair use: and European law, 32; and Google Books project, 153, 160–61, 162, 165–66, 168–70, 172; and YouTube, 38 faith in Google, users’, xii, xiii, xiv, 2–5, 50, 53, 55, 59–60, 75, 77, 80; dangers of, 5–6, 77–81.

I saw my great hopes for an open and free Internet corrupted by the simultaneous pressures of inadequate security (in the form of fraud, spam, viruses, and malware) and the attempts at a corporate lockdown of culture and technology.2 I saw that the resistance to openness, transparency, accountability, and democracy was stronger than I had imagined and present in parts of the world—including my own— where I thought the forces of light had triumphed long ago.3 I worried that the environment generated by the global reach of the Internet was pulling us in opposite directions—toward both anarchy and oligarchy— and draining the institutions and environments that would foster more P RE FAC E xiii reasonable, republican virtues, such as measured deliberation, critical thought, and mutual respect.4 I noted the ways in which those who promoted the digitization and networking of all things reverted to simplistic and wrongheaded views of how technology works in society.5 I grew weary of others’ attempts to describe technology as an irresistible force that young people have mastered and old people must conform to or wither away trying to resist.6 And I had an intellectual allergic reaction to the growing notion that one company—Google—could or would solve some of the greatest and most complex human problems simply by applying the principles of engineering.7 So I sought a way to explore both my disenchantment with and my approval of changes in our global information ecosystem. I wanted to embrace and champion values and goals such as liberty, creativity, and democracy while offering criticisms of trends and trajectories that I consider harmful or dangerous, such as blind faith in technology and market fundamentalism. And Google exemplifies all these trends. Because books move more slowly than large, rich Internet companies, I have not attempted to catalog or analyze the company’s recent initiatives. Instead, I have tried to discern broad and significant themes and patterns that should hold constant for some years. If Google has dramatically changed course between the date that I finished this text and the date you begin reading it, I apologize in advance.

 

pages: 717 words: 150,288

Cities Under Siege: The New Military Urbanism by Stephen Graham

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airport security, anti-communist, autonomous vehicles, Berlin Wall, call centre, carbon footprint, clean water, congestion charging, credit crunch, DARPA: Urban Challenge, defense in depth, deindustrialization, edge city, energy security, European colonialism, failed state, Food sovereignty, Gini coefficient, global supply chain, Google Earth, illegal immigration, income inequality, knowledge economy, late capitalism, loose coupling, market fundamentalism, McMansion, megacity, mutually assured destruction, Naomi Klein, New Urbanism, offshore financial centre, pattern recognition, peak oil, planetary scale, private military company, RAND corporation, RFID, Richard Florida, Scramble for Africa, Silicon Valley, smart transportation, surplus humans, The Bell Curve by Richard Herrnstein and Charles Murray, urban decay, urban planning, urban renewal, urban sprawl, Washington Consensus, white flight

SAPs have thus worked in many cases to ‘decimate public employment, destroy import-substitution industries, and displace tens of thousands of rural producers unable to complete against the heavily subsidized agri-capitalism of the rich countries.’12 Such processes have been a key driving force behind the global ratcheting-up of inequality within the past three decades. Across the world, social fissures and extreme polarization – intensified by the global spread of neoliberal capitalism and market fundamentalism – have tended to concentrate most visibly and densely in burgeoning cities. The urban landscape is now populated by a few wealthy individuals, an often precarious middle class, and a mass of outcasts. Almost everywhere, it seems, wealth, power and resources are becoming ever more concentrated in the hands of the rich and the super-rich, who increasingly sequester themselves within gated urban cocoons and deploy their own private security or paramilitary forces for the tasks of boundary enforcement and access control.

At the same time, according to Philip Bond in the Independent, ‘the speculative capital that could be deployed or invested by the bottom 50 per cent of the British population fell from 12 per cent to just 1 per cent’.24 1.3 Radical growth in income inequality in the UK between 1961 and 2002/3 for income before housing costs (BHC) and after housing costs (AHC), as measured by the Gini coefficient. The imposition of market fundamentalism had particularly spectacular effects on the ex-Communist Comecon block after the collapse of communism in the late 1980s. Not only did this create a handful of billionaires and oligarchs but, at the same time, it increased the number of people living in poverty and deep insecurity from three million in 1988 to 170 million in 2004.25 Globally, by 2007, well over a billion people – a third of all urban dwellers – were leading a highly precarious existence in fast-growing slums and informal settlements.26 Increasingly, the developing world has come to be dominated by immiserized shanty-town populations whose daily insecurities encourage a receptivity to radical, violently anti-Western ideologies and movements.

In this sense, all are imagined as combatants and all terrain the site of battle.’87 In the case of the United States, for example, this process allows the nation’s military to overcome traditional legal obstacles to deployment within the nation itself.88 As a consequence, the US military’s PowerPoint presentations talk of urban operations in Mogadishu, Fallujah or Jenin in the same breath as those during the Los Angeles riots, the anti-globalization confrontations in Seattle or Genoa, or the devastation of New Orleans by Hurricane Katrina. Such a paradigm permits a host of transnational campaigns and movements – for social justice or ecological sustainability, against state oppression or the devastating effects of market fundamentalism – to be rendered as forms of ‘netwar’, in effect turning the ideas of the Zapatistas into the equivalent of the radical and murderous Islamism of al-Qaeda.89 Finally, this blurring means that the militarization and walling of national borders, such as that between the US and Mexico, not only involve the same techniques and technologies as the walling-off of neighbourhoods in Baghdad or Gaza, but sometimes actually involve lucrative contracts being awarded to the same military and technology corporations.

 

Making Globalization Work by Joseph E. Stiglitz

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affirmative action, Andrei Shleifer, Asian financial crisis, banking crisis, barriers to entry, Berlin Wall, business process, capital controls, central bank independence, corporate governance, corporate social responsibility, currency manipulation / currency intervention, Doha Development Round, Exxon Valdez, Fall of the Berlin Wall, Firefox, full employment, Gini coefficient, global reserve currency, happiness index / gross national happiness, illegal immigration, income inequality, income per capita, incomplete markets, Indoor air pollution, informal economy, inventory management, invisible hand, Kenneth Rogoff, low skilled workers, manufacturing employment, market fundamentalism, Martin Wolf, microcredit, moral hazard, North Sea oil, offshore financial centre, oil rush, open borders, open economy, price stability, profit maximization, purchasing power parity, quantitative trading / quantitative finance, race to the bottom, reserve currency, rising living standards, risk tolerance, Silicon Valley, special drawing rights, statistical model, the market place, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, trickle-down economics, union organizing, Washington Consensus

East Asia had learned that while globalization, well managed, had brought them enormous prosperity, globalization—when it meant opening themselves up to destabilizing speculative flows—had also brought economic devastation. As officials there reflect on the lessons of that brutal experience, they have come to reject even more firmly the Washington Consensus market fundamentalism which opened their countries to the ravages of the speculators. And they have put more emphasis on equity and on policies to help the poor. Growth has recovered, but these students of the "class of '97" have not forgotten the lessons. Latin America East Asia demonstrated the success of a course markedly different from the Washington Consensus, with a role for government far larger than the minimalist role allowed by market fundamentalism. Meanwhile, Latin America embraced the Washington Consensus policies more wholeheartedly than any other region (indeed, the term was first coined with reference to policies advocated for that region).

When I came to the World Bank, I was troubled by what I saw: the Bank—and, even more, the IMF—pushing conservative economic policies (such as the privatization of social security) that were exactly the opposite of those for which I had fought so hard when I was at the White House. Worse, they were using models that my theoretical work had done so much to discredit. (I was, of course, XIII these policies.) My economic research had shown the deep underlying flaws in IMF economics, in "market fundamentalism," the belief that markets by themselves lead to economic efficiency. Intellectual consistency—consistency with my earlier academic work—impelled me to voice my concerns that the policies which they were pushing in, for instance, East Asia, might only make matters worse. To do any less would have been a dereliction of my responsibilities. What we had fought for while I was in the Clinton administration was relevant, not just to Americans but to the rest of the world as well.

Even if they could admit that markets, by themselves, might not engender a socially acceptable distribution of income, they argued that issues of efficiency and equity should be separated. In this conservative view, economics is about efficiency, and issues of equity (which, like beauty, so often lies in the eyes of the beholder) should be left to politics. Today, the intellectual defense of market fundamentalism has largely disappeared.2 My research on the economics of information showed that whenever information is imperfect, in particular when there are information asymmetries—where some individuals know something that others do not (in other words, always)—the reason that the invisible hand seems invisible is that it is not there.3 Without appropriate government regulation and intervention, markets do not lead to economic efficiency.'

 

pages: 543 words: 147,357

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

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

When viewed in these terms, the mind-boggling scale and cost of the credit crunch – in total governments worldwide have so far spent $14 trillion on supporting their banking systems – is almost as big a crisis for market fundamentalism and financial capitalism as the collapse of the Soviet Union was for economic planning and communism. What happened between 1989 and 1992 did not just represent the triumph of liberal capitalism; it was claimed as the triumph of the market fundamentalist ideologues who believed that they had engineered it. If communism was the logical conclusion of left thinking, it had collapsed. Some twenty years later the same can be said of market fundamentalism, the logical conclusion of right thinking. The extremes of left and right alike have both been tried – and found wanting. Both Labour and the Conservatives have thus lost their moral and ideological moorings.

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

But for more than twenty years, since the Berlin Wall came down and communism collapsed in Eastern Europe, Britain has been in the vanguard of building a civilisation consecrated to business and the ideals of a particular kind of capitalism – one in which financial values and the interests of big finance rule supreme. To prosper in the economic sphere, human beings must put aside their instincts for morality and living a meaningful life. Instead, they must embrace self-interest and whatever response is forced on them by impersonal market judgements. Conservatives have been at the forefront of championing this amoral market fundamentalism. In this universe morality becomes a personal matter of conscience. It has no role in the economic sphere, and in social and interpersonal relationships individuals must accept personal responsibility. We are no longer social animals; to do things together collectively denies our essential individualism. These propositions are wrapped up in the rhetoric of freedom. It may be a highly partial and indeed incorrect view of human nature, but at least it has a moral message: do right by yourself and your individual conscience.

 

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

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

These then are the basic roles of government in a free society: to provide a means whereby we can modify the rules, to mediate differences among us on the meaning of the rules, and to enforce compliance with the rules on the part of those few who would otherwise not play the game" (Friedman [1962], 25). s The claims of the American business model are of four kinds: self-interest rules-self-regarding materialism governs our economic lives. · market fundamentalism-markets should operate freely, and attempts to regulate them by social or political action are almost always undesirable. the minimal state-the economic role of government should not extend much beyond the enforcement of contracts and private property rights. Government should not itself provide goods and services, or own productive assets. low taxation-while taxation is necessary to finance these basic functions of the minimal state, tax rates should be as low as possible and the tax system should not seek to bring about redistribution of income and wealth. Among those sympathetic to the ABM, there are two views of how market fundamentalism is to be reconciled with the minimal state. Some proponents believe an antitrust policy is needed to preserve competitive markets.

Some supporters of the ABM see government action in economic matters as an attack on liberty, an improper use of the coercive power of the state. Freedom of contract requires a minimal state; market fundamentalism and low taxation are immediate corollaries. Although people who believe this mostly also believe that the ABM is economically efficient, presumably they would still favor it if it were not. If it could be shown that some regulation of markets would make everyone, or very many, people better off, they would still judge it wrong for government to implement it. Others find the premise of self-interested motivation morally repugnant. Even if it is true, it ought not to be true, and social institutions should restrain greed rather than accommodate it. The accountability of democracy is preferable to the anonymity of markets. If market fundamentalism, the minimal state, and low taxation are necessary for economic efficiency, material sacrifices must be made to secure a just society.

Nor, for that matter, does the United States-in fact, it has the most powerful government in the history of the world and is less and less embarrassed to remind people of that. Norway and Denmark also have high tax rates, some of the highest found anywhere. Taxes are lower in Switzerland, but the Swiss have a structure of government like no other: hugely {16} John Kay powerful and massively decentralized. Whatever else is true of Denmark, Norway, and Switzerland, they are not societies characterized by unrestrained greed, market fundamentalism, and a minimal state. Denmark, Norway, and Switzerland are small countries whose total population is less than that of California. But it may not be an accident that many prosperous societies are very small. 8 A small state with open borders can combine social cohesion with a dynamic economy in a manner that larger states find difficult to emulate. And it can sustain its idiosyncratic identity.

 

pages: 394 words: 85,734

The Global Minotaur by Yanis Varoufakis, Paul Mason

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

It is clear that the brief moment when Wall Street was weak enough to be forced into significant concessions had passed. The Minotaur’s most unsightly handmaiden had been emancipated. The question that now remains is: how will it manage without the Global Minotaur? We shall leave such speculation to the end of the book. The return of predatory governance, vacuous economics and the curious tragedy of market fundamentalism Free market fundamentalism, at the levels both of political ideas and of economic theory, has already featured as one of our Minotaur’s handmaidens (see chapter 5, Toxic theory, parts A and B). In a sense, it functioned in ways not much different from the way in which Marxism was employed under the Soviet regime: more honoured in the breach than in the observance. In both cases, lofty ideals, underpinned by fascinating economic treatises, were utilized for baser purposes: to legitimize a particular social group’s usurpation of power and wealth.

The top earners, the parts of American society that worked in or around the financial institutions, the fossil fuel industry, the industrial sectors attached to the military-industrial complex (mainly the electronics, IT-related, aeronautical and mechanical engineering sectors). It also benefited those lucky enough to own a part of Walmart-type, highly exploitative firms. The Minotaur worked for them. And free market fundamentalism was its ideological handmaiden. As for the actual ideals underpinning free market fundamentalism, their fate was identical to that of Marxism in Moscow: they became the first victims of its political champions’ rise to power. Indeed, when, in 1981, Ronald Reagan entered the White House, he spoke the language of supply-side economics, balanced budgets, the withering of big government (ironically, an expression first coined by Marx), etc.

., 82 Elizabeth II, Queen, 4, 5 ERAB (Economic Recovery Advisory Board), 180, 181 ERM (European Exchange Rate Mechanism), 197 EU (European Union): economies within, 196; EFSF, 174; European Financial Stability Mechanism, 174; financial support for the US, 216; origins, 73, 74, 75; SPV, 174 euro see eurozone eurobonds, toxic, 175–7 Europa myth, 201 Europe: aftermath of Crash of 2008, 162; bank bail-outs, 203–5; Crash of 2008, 2–3, 12–13, 183; end of Bretton Woods system, 95; eurozone problems, 165; Geithner–Summers Plan, 174–7; oil price rises, 98; unemployment, 164 see also specific countries European Central Bank see ECB European Coal and Steel Community (ECSC), 74, 75–6 European Commission, 157, 203, 204 European Common Market, 195 European Exchange Rate Mechanism (ERM), 197 European Financial Stability Facility (EFSF), 174, 207, 208–9 European Financial Stability Mechanism, 174, 175–7 European Investment Bank (EIB), 210 European Recovery Progam see Marshall Plan European Union see EU eurozone, 61, 62, 156, 164; crisis, 165, 174, 204, 208–9, 209–11; European banks’ exposure to, 203; formation of, 198, 202; France and, 198; Germany and, 198–201; and Greek crisis, 207 exchange rate system, Bretton Woods, 60, 63, 67 falsifiability, empirical test of, 221 Fannie Mae, 152, 166 Fed, the (Federal Reserve): aftermath of Crash of 2008, 159; Crash of 2008, 148, 149, 151, 153, 155, 156, 157; creation, 40; current problems, 164; Geithner–Summers Plan, 171–2, 173, 230; Greenspan and, 3, 10; interest rate policy, 99; sub-prime crisis, 147, 149; and toxic theory, 15 feudalism, 30, 31, 64 Fiat, 159 finance: as a pillar of industry, 31; role of, 35–8 Financial Crisis Inquiry Commission, 166 financialization, 30, 190, 222 First World War, Gold Standard suspension, 44 food: markets, 215; prices, 163 Ford, Henry, 39 formalist economic model, 139–40 Forrestal, James, 68 Fortis, 153 franc, value against dollar, 96 France: aid for banks, 157; colonialism criticized, 79; EU membership, 196; and the euro, 198; gold request, 94; Plaza Accord, 188; reindustrialization of Germany, 74; support for Dexia, 154 Freddie Mac, 152, 166 free market fundamentalism, 181, 182 French Revolution, 29 G7 group, 151 G20 group, 159, 163–4 Galbraith, John Kenneth, 73 GATT (General Agreement on Tariffs and Trade), 78 GDP (Gross Domestic Product): Britain, 4–5, 88, 158; eurozone, 199, 204; France, 88; Germany, 88, 88; Japan, 88, 88; US, 4, 72, 73, 87, 88, 88, 161; world, 88 Geithner–Summers Plan, 159, 169–83; in Europe, 174–7; results, 178–81; in the US, 169–74, 170, 230 Geithner, Timothy, 170, 173, 230 General Motors (GM), 131–2, 157–8, 160 General Theory (Keynes), 37 geopolitical power, 106–8 Germany: aftermath of the Second World War, 68, 73–4; competition with US, 98, 103; current importance, 251; and Europe, 195–8; and the eurozone, 198–201, 211; global capital, 115–16; Global Plan, 69, 70; Greek crisis, 206; house prices, 129; Marshall Plan, 73; reunification, 201–3; support for Hypo Real Estate, 155; trade surplus, 251; trade surpluses, 158 Giscard d’Estaing, Valery, 93 Glass–Steagall Act (1933), 10, 180 global balance, 22 global imbalances, 251–2 Global Plan: appraisal, 85–9; architects, 68; end of, 100–1, 182; geopolitical ideology, 79–82; Germany, 75; Marshall Plan, 74; origins, 67–71; real GDP per capita, 87; unravelling of, 90–4; US domestic policies, 82–5 global surplus recycing mechanism see GSRM global warming, 163 globalization, 12, 28, 125 GM (General Motors), 131–2, 157–8, 160 gold: prices, 96; rushes, 40; US reserves, 92–3 Gold Exchange Standard, collapse, 43–5 Goodwin, Richard, 34 Great Depression, 55, 58, 59, 80 Greece: currency, 205; debt crisis, 206–8 greed, Crash of 2008, 9–12 Greek Civil War, 71, 72, 79 Greenspan, Alan, 3, 10–11 Greenwald, Robert, 125–6 Gross Domestic Product see GDP GSRM (global surplus recycling mechanism), 62, 66, 85, 90, 109–10, 222, 223, 224, 248, 252–6 HBOS, 153, 156 Heath, Edward, 94 hedge funds, 147, 204; LTCM, 2, 13; toxic theory, 15 hedging, 120–1 history: consent as driving force, 29; Marx on, 178; as undemocratic, 28 Ho Chi Minh, 92 Holland, 79, 120, 155, 196, 204 home ownership, 12, 127–8; reposessions, 161 Homeownership Preservation Foundation, 161 Hoover, Herbert, 42–3, 44–5, 230 House Committee on Un-American Activities, 73 house prices, 12, 128–9, 129, 138; falling, 151, 152 human nature, 10, 11–12 humanity, in the workforce, 50–2, 54 Hypo Real Estate, 155 Ibn Khaldun, 33 IBRD (International Bank for Reconstruction and Development) see World Bank Iceland, 154, 155, 156, 203 ICU (International Currency Union) proposal, 60–1, 66, 90, 251 IMF (International Monetary Fund): burst bubbles, 190; cost of the credit crunch, 151; Crash of 2008, 155–6, 156, 159; demise of social services, 163; on economic growth, 159; European banking crisis, 208; G20 support for, 163–4; Greek crisis, 207; origins, 59; South East Asia, 192, 193; Third World debt crisis, 108; as a transnational institution, 253, 254 income: distribution, 64; national, 42; US national, 43 India: Britain’s stance criticized, 79; Crash of 2008, 163; suicides of farmers, 163 Indochina, and colonization, 79 Indonesia, 79, 191 industrialization: Britain, 5; Germany, 74–5; Japan, 89, 185–6; roots of, 27–8; South East Asia, 86 infinite regress, 47 interest rates: CDOs, 7; post-Global Plan, 99; prophecy paradox, 48; rises in, 107 International Bank for Reconstruction and Development (IBRD) see World Bank International Currency Union (ICU) proposal, 60–1, 66, 90, 253 International Labour Organisation, 159 International Monetary Fund see IMF Iran, Shah of, 97 Ireland: bankruptcy, 154, 156; EFSF, 175; nationalization of Anglo Irish Bank, 158 Irwin, John, 97 Japan: aftermath of the Second World War, 68–9; competition with the US, 98, 103; in decline, 186–91; end of Bretton Woods system, 95; financial support for the US, 216; global capital, 115–16; Global Plan, 69, 70, 76–8, 85–6; house prices, 129; labour costs, 105; new Marshall Plan, 77; Plaza Accord, 188; post-war, 185–91; post-war growth, 185–6; relations with the US, 187–8, 189; South East Asia, 91, 191–2; trade surpluses, 158 joblessness see unemployment Johnson, Lyndon B.: Great Society programmes, 83, 84, 92; Vietnam War, 92 JPMorgan Chase, 151, 153 keiretsu system, Japan, 186, 187, 188, 189, 191 Kennan, George, 68, 71 Kennedy, John F., New Frontier social programmes, 83, 84 Keynes, John Maynard: Bretton Woods conference, 59, 60, 62, 109; General Theory, 37; ICU proposal, 60, 66, 90, 109, 254, 255; influence on New Dealers, 81; on investment decisions, 48; on liquidity, 160–1; trade imbalances, 62–6 Keynsianism, 157 Kim Il Sung, 77 Kissinger, Henry, 94, 98, 106 Kohl, Helmut, 201 Korea, 91, 191, 192 Korean War, 77, 86 labour: as a commodity, 28; costs, 104–5, 104, 105, 106, 137; hired, 31, 45, 46, 53, 64; scarcity of, 34–5; value of, 50–2 labour markets, 12, 202 Labour Party (British), 69 labourers, 32 land: as a commodity, 28; enclosure, 64 Landesbanken, 203 Latin America: effect of China on, 215, 218; European banks’ exposure to, 203; financial crisis, 190 see also specific countries lead, prices, 96 Lebensraum, 67 Left-Right divide, 167 Lehman Brothers, 150, 152–3 leverage, 121–2 leveraging, 37 Liberal Democratic Party (Japan), 187 liberation movements, 79, 107 LIBOR (London Interbank Offered Rate), 148 liquidity traps, 157, 190 Lloyds TSB, 153, 156 loans: and CDOs, 7–8, 129–31; defaults on, 37 London School of Economics, 4, 66 Long-Term Capital Management (LTCM) hedge fund collapse, 13 LTCM (Long-Term Capital Management) hedge fund collapse, 2, 13 Luxembourg, support for Dexia, 154 Maastricht Treaty, 199–200, 202 MacArthur, Douglas, 70–1, 76, 77 machines, and humans, 50–2 Malaysia, 91, 191 Mao, Chairman, 76, 86, 91 Maresca, John, 106–7 Marjolin, Robert, 73 Marshall, George, 72 Marshall Plan, 71–4 Marx, Karl: and capitalism, 17–18, 19, 34; Das Kapital, 49; on history, 178 Marxism, 181, 182 Matrix, The (film), 50–2 MBIA, 149, 150 McCarthy, Senator Joseph, 73 mercantilism, in Germany, 251 merchant class, 27–8 Merkel, Angela, 158, 206 Merrill Lynch, 149, 153, 157 Merton, Robert, 13 Mexico: effect of China on, 214; peso crisis, 190 Middle East, oil, 69 MIE (military-industrial establishment), 82–3 migration, Crash of 2008, 3 military-industrial complex mechanism, 65, 81, 182 Ministry for International Trade and Industry (Japan), 78 Ministry of Finance (Japan), 187 Minotaur legend, 24–5, 25 Minsky, Hyman, 37 money markets, 45–6, 53, 153 moneylenders, 31, 32 mortgage backed securities (MBS) 232, 233, 234 NAFTA (North American Free Trade Agreement), 214 National Bureau of Economic Research (US), 157 National Economic Council (US), 3 national income see GDP National Security Council (US), 94 National Security Study Memorandum 200 (US), 106 nationalization: Anglo Irish Bank, 158; Bradford and Bingley, 154; Fortis, 153; Geithner–Summers Plan, 179; General Motors, 160; Icelandic banks, 154, 155; Northern Rock, 151 NATO (North Atlantic Treaty Organization), 76, 253 negative engineering, 110 negative equity 234 neoliberalism, 139, 142; and greed, 10 New Century Financial, 147 New Deal: beginnings, 45; Bretton Woods conference, 57–9; China, 76; Global Plan, 67–71, 68; Japan, 77; President Kennedy, 84; support for the Deutschmark, 74; transfer union, 65 New Dealers: corporate power, 81; criticism of European colonizers, 79 ‘new economy’, 5–6 New York stock exchange, 40, 158 Nietzsche, Friedrich, 19 Nixon, Richard, 94, 95–6 Nobel Prize for Economics, 13 North American Free Trade Agreement (NAFTA), 214 North Atlantic Treaty Organization (NATO), 76 North Korea see Korea Northern Rock, 148, 151 Obama administration, 164, 178 Obama, Barack, 158, 159, 169, 180, 230, 231 OECD (Organisation for Economic Co-operation and Development), 73 OEEC (Organisation for European Economic Co-operation), 73, 74 oil: global consumption, 160; imports, 102–3; prices, 96, 97–9 OPEC (Organization of the Petroleum Exporting Countries), 96, 97 paradox of success, 249 parallax challenge, 20–1 Paulson, Henry, 152, 154, 170 Paulson Plan, 154, 173 Penn Bank, 40 Pentagon, the, 73 Plaza Accord (1985), 188, 192, 213 Pompidou, Georges, 94, 95–6 pound sterling, devaluing, 93 poverty: capitalism as a supposed cure for, 41–2; in China, 162; reduction in the US, 84; reports on global, 125 predatory governance, 181 prey–predator dynamic, 33–5 prices, flexible, 40–1 private money, 147, 177; Geithner–Summers Plan, 178; toxic, 132–3, 136, 179 privatization, of surpluses, 29 probability, estimating, 13–14 production: cars, 70, 103, 116, 157–8; coal, 73, 75; costs, 96, 104; cuts in, 41; in Japan, 185–6; processes, 30, 31, 64; steel, 70, 75 production–distribution cycle, 54 property see real estate prophecy paradox, 46, 47, 53 psychology, mass, 14 public debt crisis, 205 quantitative easing, 164, 231–6 railway bubbles, 40 Rational Expectations Hypothesis (REH), 15–16 RBS (Royal Bank of Scotland), 6, 151, 156; takeover of ABN-Amro, 119–20 Reagan, Ronald, 10, 99, 133–5, 182–3 Real Business Cycle Theory (RBCT), 15, 16–17 real estate, bubbles, 8–9, 188, 190, 192–3 reason, deferring to expectation, 47 recession predictions, 152 recessions, US, 40, 157 recycling mechanisms, 200 regulation, of banking system, 10, 122 relabelling, 14 religion, organized, 27 renminbi (RMB), 213, 214, 217, 218, 253 rentiers, 165, 187, 188 representative agents, 140 Reserve Bank of Australia, 148 reserve currency status, 101–2 risk: capitalists and, 31; riskless, 5, 6–9, 14 Roach, Stephen, 145 Robbins, Lionel, 66 Roosevelt, Franklin D., 165; attitude towards Britain, 69; and bank regulation, 10; New Deal, 45, 58–9 Roosevelt, Theodore (‘Teddy’), 180 Royal Bank of Scotland (RBS), 6, 151, 156; takeover of ABN-Amro, 119–20 Rudd, Kevin, 212 Russia, financial crisis, 190 Saudi Arabia, oil prices, 98 Scandinavia, Gold Standard, 44 Scholes, Myron, 13 Schopenhauer, Arthur, 19 Schuman, Robert, 75 Schumpter, Joseph, 34 Second World War, 45, 55–6; aftermath, 87–8; effect on the US, 57–8 seeds, commodification of, 163 shares, in privatized companies, 137, 138 silver, prices, 96 simulated markets, 170 simulated prices, 170 Singapore, 91 single currencies, ICU, 60–1 slave trade, 28 SMEs (small and medium-sized enterprises), 186 social welfare, 12 solidarity (asabiyyah), 33–4 South East Asia, 91; financial crisis, 190, 191–5, 213; industrialization, 86, 87 South Korea see Korea sovereign debt crisis, 205 Soviet Union: Africa, 79; disintegration, 201; Marshall Plan, 72–3; Marxism, 181, 182; relations with the US, 71 SPV (Special Purpose Vehicle), 174 see also EFSF stagflation, 97 stagnation, 37 Stalin, Joseph, 72–3 steel production, in Germany, 70 Strauss-Kahn, Dominique, 60, 254, 255 Summers, Larry, 230 strikes, 40 sub-prime mortgages, 2, 5, 6, 130–1, 147, 149, 151, 166 success, paradox of, 33–5, 53 Suez Canal trauma, 69 Suharto, President of Indonesia, 97 Summers, Larry, 3, 132, 170, 173, 180 see also Geithner–Summers Plan supply and demand, 11 surpluses: under capitalism, 31–2; currency unions, 61; under feudalism, 30; generation in the EU, 196; manufacturing, 30; origin of, 26–7; privatization of, 29; recycling mechanisms, 64–5, 109–10 Sweden, Crash of 2008, 155 Sweezy, Paul, 73 Switzerland: Crash of 2008, 155; UBS, 148–9, 151 systemic failure, Crash of 2008, 17–19 Taiwan, 191, 192 Tea Party (US), 162, 230, 231, 281 technology, and globalization, 28 Thailand, 91 Thatcher, Margaret, 117–18, 136–7 Third World: Crash of 2008, 162; debt crisis, 108, 219; interest rate rises, 108; mineral wealth, 106; production of goods for Walmart, 125 tiger economies, 87 see also South East Asia Tillman Act (1907), 180 time, and economic models, 139–40 Time Warner, 117 tin, prices, 96 toxic theory, 13–17, 115, 133–9, 139–42 trade: balance of, 61, 62, 64–5; deficits (US), 111, 243; global, 27, 90; surpluses, 158 trades unions, 124, 137, 202 transfer unions, New Deal, 65 Treasury Bills (US), 7 Treaty of Rome, 237 Treaty of Versailles, 237 Treaty of Westphalia, 237 trickle-down, 115, 135 trickle-up, 135 Truman Doctrine, 71, 71–2, 77 Truman, Harry, 73 tsunami, effects of, 194 UBS, 148–9, 151 Ukraine, and the Crash of 2008, 156 UN Security Council, 253 unemployment: Britain, 160; Global Plan, 96–7; rate of, 14; US, 152, 158, 164 United States see US Unocal, 106 US economy, twin deficits, 22–3, 25 US government, and South East Asia, 192 US Mortgage Bankers Association, 161 US Supreme Court, 180 US Treasury, 153–4, 156, 157, 159; aftermath of the Crash of 2008, 160; Geithner–Summers Plan, 171–2, 173; bonds, 227 US Treasury Bills, 109 US (United States): aftermath of the Crash of 2008, 161–2; assets owned by foreign state institutions, 216; attitude towards oil price rises, 97–8; China, 213–14; corporate bond purchases, 228; as a creditor nation, 57; domestic policies during the Global Plan, 82–5; economy at present, 184; economy praised, 113–14; effects of the Crash of 2008, 2, 183; foreign-owned assets, 225; Greek Civil War, 71; labour costs, 105; Plaza Accord, 188; profit rates, 106; proposed invasion of Afghanistan, 106–7; role in the ECSC, 75; South East Asia, 192 value, costing, 50–1 VAT, reduced, 156 Venezuela, oil prices, 97 Vietnamese War, 86, 91–2 vital spaces, 192, 195, 196 Volcker, Paul: 2009 address to Wall Street, 122; demand for dollars, 102; and gold convertibility, 94; interest rate rises, 99; replaced by Greenspan, 10; warning of the Crash of 2008, 144–5; on the world economy, 22, 100–1, 139 Volcker Rule, 180–1 Wachowski, Larry and Andy, 50 wage share, 34–5 wages: British workers, 137; Japanese workers, 185; productivity, 104; prophecy paradox, 48; US workers, 124, 161 Wal-Mart: The High Cost of Low Price (documentary, Greenwald), 125–6 Wall Street: Anglo-Celtic model, 12; Crash of 2008, 11–12, 152; current importance, 251; Geithner–Summers Plan, 178; global profits, 23; misplaced confidence in, 41; private money, 136; profiting from sub-prime mortgages, 131; takeovers and mergers, 115–17, 115, 118–19; toxic theory, 15 Wallace, Harry, 72–3 Walmart, 115, 123–7, 126; current importance, 251 War of the Currents, 39 Washington Mutual, 153 weapons of mass destruction, 27 West Germany: labour costs, 105; Plaza Accord, 188 Westinghouse, George, 39 White, Harry Dexter, 59, 70, 109 Wikileaks, 212 wool, as a global commodity, 28 working class: in Britain, 136; development of, 28 working conditions, at Walmart, 124–5 World Bank, 253; origins, 59; recession prediction, 149; and South East Asia, 192 World Trade Organization, 78, 215 written word, 27 yen, value against dollar, 96, 188, 193–4 Yom Kippur War, 96 zombie banks, 190–1

 

pages: 226 words: 59,080

Economics Rules: The Rights and Wrongs of the Dismal Science by Dani Rodrik

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airline deregulation, Albert Einstein, bank run, barriers to entry, Bretton Woods, butterfly effect, capital controls, Carmen Reinhart, central bank independence, collective bargaining, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Edward Glaeser, Eugene Fama: efficient market hypothesis, Fellow of the Royal Society, financial deregulation, financial innovation, floating exchange rates, fudge factor, full employment, George Akerlof, Gini coefficient, Growth in a Time of Debt, income inequality, inflation targeting, informal economy, invisible hand, Jean Tirole, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, liquidity trap, loss aversion, low skilled workers, market design, market fundamentalism, minimum wage unemployment, oil shock, open economy, price stability, prisoner's dilemma, profit maximization, quantitative easing, randomized controlled trial, rent control, rent-seeking, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, school vouchers, South Sea Bubble, spectrum auction, The Market for Lemons, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, trade liberalization, trade route, ultimatum game, University of East Anglia, unorthodox policies, Washington Consensus, white flight

The agenda reflected an urge to unshackle these economies from the restraints of government regulation. The policy economists in Latin America and their advisers in Washington were convinced that government intervention had crushed growth and brought about the debt crisis of the 1980s. The remedy could be summarized in three words: “stabilize, privatize, and liberalize.” Williamson would frequently protest that his own list had described modest reforms that fell far short of “market fundamentalism,” the blanket term for the view that markets are the solution to all public policy problems. But the term “Washington Consensus” fit the zeitgeist of the era only too well. Advocates of the Washington Consensus—whether in its original or expanded versions—presented it as good economics. For them, the policies reflected what sound economics teaches: Free markets and competition enable the efficient allocation of scarce resources.

As three economists, themselves critics, put it, standard accounts “tend to miss the diversity that exists within the profession, and the many new ideas that are being tried out,” and they often overlook the reality that “one can be part of the mainstream and yet not necessarily hold ‘orthodox’ ideas.”1 The critics do have a point when they say economists act in ways that suggest otherwise, by preaching universal solutions or market fundamentalism. But critics also need to understand that economists who do this are, in fact, not being true to their own discipline. Such economists deserve their fellow economists’ rebuke as much as outsiders’ reproach. Once this point is recognized, many of the standard criticisms are nullified or lose their bite. Reconsidering the Usual Criticisms We have seen some of the leading criticisms under various guises in earlier chapters,.

Arthur, 32–33 “Life among the Econ” (Leijonhufvud), 9–10 Lincoln, Abraham, 52 Lipsey, Richard, 59 liquidity, 134–35, 155, 185 liquidity traps, 130 locational advantages, 108 London, England, congestion pricing and, 3 Lucas, Robert, 130, 131–32, 134–36 “Machiavelli’s Mistake: Why Good Laws Are No Substitute for Good Citizens” (Bowles), 71n macroeconomics, 39–40, 87, 102, 107, 143, 157n, 181 business cycles and, 125–37 capital flow and, 165–66 classical questions of, 101 demand-side view of, 128–30, 136–37 globalization and, 165–66 Madison, James, 187 Mäki, Uskali, 22n malaria, randomized testing and, 106, 204 Malthus, Thomas, 118 Manchester University, 197 Mankiw, Greg, 149, 150, 171n, 197 manufacturing: economic growth and, 163–64 exchange rate and, 100, 163 income inequality and, 141 marginal costs, 121, 122 marginalist economics, 119–22 marginal productivity, 120–21, 122–25 marginal utility, 121, 122 Mariel boatlift (1980), 57 market design models, 5 “Market for ‘Lemons’, The” (Akerlof), 69n market fundamentalism, 160, 178 markets: asymmetric information in, 68–69, 70, 71 behavioral economics and, 69–71, 104–7, 202–4 economic models and, see models economics courses and, 198 economists’ bias toward, 169–71, 182–83 efficiency in, xiii, 14, 21, 34, 48, 50, 51, 67, 98, 125, 147, 148, 150, 156–58, 161, 165, 170, 192–95, 196 general-equilibrium interactions in, 41, 56–58, 69n, 91, 120 in Great Recession, 156–59 imperfectly competitive types of, 67–69, 70, 136, 150, 162 incentives in, 7, 170, 172, 188–92 institutions and, 98, 161, 202 likely outcomes in, 17–18 multiple equilibria in, 16–17 perfectly competitive types of, 21, 27, 28, 47, 69n, 71, 122, 180 prisoners’ dilemma in, 14–15, 20, 21, 61–62, 187, 200 self-interest in, 21, 104, 158, 186–88, 190 social cooperation in, 195–96 supply and demand in, 13–14, 20, 99, 119, 122, 128–30, 136–37, 170 values in, 186–96 Washington Consensus and, 159–67, 169 Marshall, Alfred, 13n, 32, 119 “Marshallian Cross Diagrams and Their Uses before Alfred Marshall: The Origins of Supply and Demand Geometry” (Humphrey), 13n Marx, Groucho, 26 Marx, Karl, xi, 31, 116, 118 Massachusetts, University of (Amherst), 77 Massachusetts Institute of Technology (MIT), 107, 108, 165, 206 mathematical economics, 35 mathematical optimization, 30, 101, 202–3 mathematics: economic models and, 29–37, 47 social sciences and, 33–34 Maxwell’s equations, 66n Meade, James, 58 methodological individualism, 181 Mexico: antipoverty programs in, 3–4, 105–6 globalization and, 141, 166 microeconomics, 125–26, 131 microfounded models, 101 Miguel, Ted, 106–7 Milan, Italy, congestion pricing and, 3 Milgrom, Paul, 36n minimum wages, employment and, 17–18, 28n, 114, 115, 124, 143, 150, 151 Minnesota, University of, 131 Mishel, Lawrence, 124n models: authority and criticism of, 76–80 big data and, 38–39, 40 causal factors and, 40–41, 85–86, 99–100, 114–15, 179, 184, 200, 201, 204 coherent argument and clarity in, 80–81 common sense in, 11 comparative advantage principle and, 52–55, 58n, 59–60, 139, 170 compensation for risk and, 110 computers and, 38, 41 contextual truth in, 20, 174 contingency and, 25, 145, 173–74, 185 coordination and, 16–17, 42, 200 critical assumptions in, 18, 26–29, 94–98, 150–51, 180, 183–84, 202 criticisms of, 10–11, 178, 179–85 decision trees and, 89–90, 90 diagnostic analysis and, 86–93, 90, 97, 110–11 direct implications and, 100–109 dual economy forms of, 88 efficient-markets hypothesis and, 156–58 empirical method and, xii, 7, 46, 65, 72–76, 77–78, 137, 173–74, 183, 199–206 endogenous growth types of, 88 experiments compared with, 21–25 fables compared with, 18–21 field experiments and, 23–24, 105–8, 173, 202–5 general-equilibrium interactions and, 41, 56–58, 69n, 91, 120 goods and services and, 12 Great Recession and, 155–59 horizontal vs. vertical development and, 64n, 67, 71 hypotheses and, 46, 47–56 imperfectly competitive markets and, 67–69, 70, 136, 150, 162 incidental implications and, 109–11 institutions and, 12, 98, 202 intuition and, 46, 56–63 Keynesian types of, 40, 88, 101, 102, 127–30, 131, 133–34, 136–37 knowledge and, 46, 47, 63–72 main elements of, 31 mathematics and, 29–37, 47 neoclassical types of, 40, 88, 90–91, 121, 122 new classical approach to, 130–34, 136–37 parables and, 20 partial-equilibrium analysis and, 56, 58, 91 perfectly competitive markets and, 21, 27, 28, 47, 69n, 71, 122, 180 predictability and, 26–28, 38, 40–41, 85, 104, 105, 108, 115, 132, 133, 139–40, 184–85, 202 principle-agent types of, 155 questions and, 114–16 rationality postulate and, 202–3 real world application of, 171–72 rules of formulation in, 199–202 scale economy vs. local advantage in, 108 scientific advances by progressive formulations of, 63–72 scientific character of, 45–81 second-best theory and, 58–61, 163–64, 166 selection of, 83–112, 136–37, 178, 183–84, 208 simplicity and specificity of, 11, 179–80, 210 simplicity vs. complexity of, 37–44 social reality of, 65–67, 179 static vs. dynamic types of, 68 strategic interactions and, 61–62, 63 of supply and demand, 3, 13–14, 20, 99, 119, 122, 128–30, 136–37 theories and, 113–45 time-inconsistent preferences in, 62–63 tipping points arising from, 42 in trade agreements, 41 unrealistic assumptions in, 25–29, 180–81 validity of, 23–24, 66–67, 112 variety of, 11, 12–18, 26, 68, 72, 73, 114, 130, 198, 202, 208, 210 verbal vs. mathematical types of, 34 verification in selection of, 93–112 see also economics; macroeconomics; markets “Models Are Experiments, Experiments are Models” (Mäki), 22n monetary policies, 87 monopolies, 161 in imperfectly competitive markets, 67–68 in perfectly competitive markets, 122 price controls and, 28, 94–97, 150 Montesquieu, Charles-Louis de Secondat, Baron de La Brède et de, 196 mortality rates, 206 mortgage-backed securities, 155 mortgage finance, 39, 155 mosquito nets, randomized testing of, 106, 204 “Mr.

 

pages: 829 words: 229,566

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

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1960s counterculture, 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, Internet Archive, invention of the steam engine, invisible hand, Isaac Newton, James Watt: steam engine, market fundamentalism, moral hazard, Naomi Klein, new economy, Nixon shock, Occupy movement, offshore financial centre, oil shale / tar sands, open borders, patent troll, 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

* * * Join our mailing list and get updates on new releases, deals, bonus content and other great books from Simon & Schuster. CLICK HERE TO SIGN UP or visit us online to sign up at eBookNews.SimonandSchuster.com CONTENTS * * * Epigraph Introduction  One Way or Another, Everything Changes PART ONE BAD TIMING 1. The Right Is Right: The Revolutionary Power of Climate Change 2. Hot Money: How Free Market Fundamentalism Helped Overheat the Planet 3. Public and Paid For: Overcoming the Ideological Blocks to the Next Economy 4. Planning and Banning: Slapping the Invisible Hand, Building a Movement 5. Beyond Extractivism: Confronting the Climate Denier Within PART TWO MAGICAL THINKING 6. Fruits, Not Roots: The Disastrous Merger of Big Business and Big Green 7. No Messiahs: The Green Billionaires Won’t Save Us 8.

The three policy pillars of this new era are familiar to us all: privatization of the public sphere, deregulation of the corporate sector, and lower corporate taxation, paid for with cuts to public spending. Much has been written about the real-world costs of these policies—the instability of financial markets, the excesses of the super-rich, and the desperation of the increasingly disposable poor, as well as the failing state of public infrastructure and services. Very little, however, has been written about how market fundamentalism has, from the very first moments, systematically sabotaged our collective response to climate change, a threat that came knocking just as this ideology was reaching its zenith. The core problem was that the stranglehold that market logic secured over public life in this period made the most direct and obvious climate responses seem politically heretical. How, for instance, could societies invest massively in zero-carbon public services and infrastructure at a time when the public sphere was being systematically dismantled and auctioned off?

Instead, large parts of the climate movement wasted precious decades attempting to make the square peg of the climate crisis fit into the round hole of deregulated capitalism, forever touting ways for the problem to be solved by the market itself. (Though it was only years into this project that I discovered the depths of collusion between big polluters and Big Green.) But blocking strong climate action wasn’t the only way that the triumph of market fundamentalism acted to deepen the crisis in this period. Even more directly, the policies that so successfully freed multinational corporations from virtually all constraints also contributed significantly to the underlying cause of global warming—rising greenhouse gas emissions. The numbers are striking: in the 1990s, as the market integration project ramped up, global emissions were going up an average of 1 percent a year; by the 2000s, with “emerging markets” like China now fully integrated into the world economy, emissions growth had sped up disastrously, with the annual rate of increase reaching 3.4 percent a year for much of the decade.

 

The Smartest Investment Book You'll Ever Read: The Simple, Stress-Free Way to Reach Your Investment Goals by Daniel R. Solin

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asset allocation, corporate governance, diversification, diversified portfolio, index fund, market fundamentalism, passive investing, prediction markets, random walk, risk tolerance, risk-adjusted returns, risk/return, transaction costs, Vanguard fund

Chapter 1: An Unbelievable Chimp Story Information about the Financial Times contest was reported in the Sunday Mail (Queensland, Australia), March 17, 2002. Commenting on her stunn ing victory over the highly credentialled "independent analyst," the five-year-old, Tia Roberts, thought it was "wicked." She has a point there. Studies thar show the merit, or Jack of merit, of analyst recommendations are nicely summarized in a paper entitled "An Empirical Model of Stock Analysts' Recommendations: Market Fundamentals, Conflicts of Interest, and Peer Effects," written by Patrick Bajari and John Krainer. You can find this paper online at http://ideas.repcc.orglp/nbrlnbenvo/t0665.html. Chapter 2: An Unbelievable True Story An anicle written by Jonathan C hevreau in the Financial Post on November 5, 2005. stated mat $554 billion was invested in all murual funds in Canada as of September 2005. Of that amount, $ 124 million was invested in Canadian equity funds.

Security Analyst Recommendations and Stock Returns," by Brad Barber, Reuvan Lehavy, Maureen McNichols and Brett Trueman, Graduate School of Business, Stanford University, available at https:11 gsba pps.stanford.ed ul researchpapers/Li brary/RP 154 1. pd f#search ",' anal ys t%2 0 recom m enda t i a ns% 20 under perform%20market. The study by Patrick Bajari and John Krainer is "An Empirical Model of Stock Analysts' Recommendations: Market Fundamentals, Conflicts of lmercst, and Peer Effects." This paper is available at htrp:llideas.repec.orglp/nbrlnberwol I0665.html. 158 The Real Way Smart In~·estors Beat 95%of the ·Pros· Chapter 16: Nobody Can Pick "Hot" Fund Managers The shon holding periods of investors in hyperactivcly traded mutual funds has been noted in a series of private studies done by Dalbar, Inc. A summary of these studies can be found at: http://www.latrobefinancialmanagemenLcom/2006%20 Research%20PDF/Chasing%20Mutual%20Fund%ZOInvestors %20 Earn%20 Lcss%20 In flation. pdf.

 

pages: 233 words: 75,712

In Defense of Global Capitalism by Johan Norberg

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Asian financial crisis, capital controls, clean water, correlation does not imply causation, Deng Xiaoping, Edward Glaeser, Gini coefficient, half of the world's population has never made a phone call, Hernando de Soto, illegal immigration, income inequality, informal economy, Joseph Schumpeter, Kenneth Rogoff, land reform, Lao Tzu, manufacturing employment, market fundamentalism, Mexican peso crisis / tequila crisis, Naomi Klein, new economy, open economy, profit motive, race to the bottom, rising living standards, school vouchers, Silicon Valley, Simon Kuznets, structural adjustment programs, The Wealth of Nations by Adam Smith, Tobin tax, trade liberalization, trade route, transaction costs, trickle-down economics, union organizing

We find political theorist John Gray, for example, describing the spread of free-market policies as a virtual coup d’etat staged by ‘‘radical’’ ideologues who manage to ‘‘infiltrate’’ government. ‘‘The goal of this revolution,’’ according to Gray, ‘‘was to insulate neo-liberal policy irreversibly from democratic accountability in political life.’’4 Some pundits—among them Robert Kuttner, editor of The American Prospect, and economist Joseph Stiglitz—even characterize free-market advocacy as a kind of quasireligious cult, which they call ‘‘market fundamentalism.’’ Deregulation, privatization, and trade liberalization, however, were not invented by ultra-liberal ideologues. True, there were political leaders—Reagan and Thatcher, for instance—who had been inspired by economic liberalism. But the biggest reformers were communists in China and the Soviet Union, protectionists in Latin America, and nationalists in Asia. In many other European countries, the progress has been spurred by Social Democrats.

See Economic free zones Export subsidies, 159 Facilitating economic change, 141–42 Famine disasters, 33–34 Financial crises. See Economic and financial crises Financial markets, 240–48 attention to government finance management, 271 Tobin tax and, 256 Finland, employment, 137 Food production, employment example, 137–38 Foreign direct investment, Tobin tax and, 256 Foreign Policy magazine, 89 Forest acreage increase, 232 Frankel, Jeffrey, 132 Fraser Institute, 107 Free markets, 17 democracy and, 268–76 ‘‘market fundamentalism’’ and, 15 See also Capital markets Free movements of capital determinant of equality, 89 economic growth and, 248 enabling the poor, 90 investment and, 244–48 See also Capital controls Free trade benevolent attitude and, 201–2 ‘‘catch-22’’ for developing countries, 194–96, 197 determinant of equality, 89 developing countries, 169–72 employment and, 136–44 enabling the poor, 90 growth benefits of, 128–35 immigration/emigration and, 145–50 important imports, 120–27 information sharing and, 128–29 innovation and, 128–29 job creation/dissolution and, 136–44 mutual benefit, 114–19 rules governing genuine free trade, 192–93 skepticism of, 192–93 See also specific countries Freedom China, 47, 290–91 of choice, 11, 13–14, 18, 23, 278–85, 285.

See Freedom; Individual liberty Libya, human rights violations, 40 Life expectancy average, 28–29, 75f East Asian countries, 100 South Asian girls’, 46 women in developing countries, 46 Lim, Linda, 219 Liquidity shortage, 262 Literacy/illiteracy, 14, 36, 37f, 53 illiteracy, 60 Lomborg, Bjørn, 230–35 Mad cow disease crisis, 238 Malaysia absolute poverty, 100 Asian crisis and, 260 Berg in, 29 capital regulation, 249–50 government intervention, 100 growth and income differences, 86 labor-intensive industries, 172 ‘‘open’’ economy, 103 Mankind and human relations, creativity and man’s capacity to achieve great things, 17 Manufactured goods, versus raw materials exports alone, 169–72 Market economy, versus market society, 17 ‘‘Market fascism,’’ 268 ‘‘Market fundamentalism,’’ 15 Material development/materialism, 17–18, 27 Mauritius free trade, 109–10 growth and income differences, 86 Meat production and subsidies, European Union, 237–38 Mechanization, change brought about by, 200 Media, changing people, 22 Medicine, developing countries and, 186–89 Mercantilism, 120 Merck Corporation, free medicine, 187 Messerlin, Patrick, 160 Mexico air pollution control, 228 dictatorships, 269 environmental regulations, 224–25 equality in, 86 321 exchange rate crisis, 267 free trade policy and exports, 171–72 ‘‘Tequila crisis,’’ 252 Middle East, 269 girls attending school, 45 hunger, 31 See also specific countries Milken Institute, Capital Access Index, 247–48 Mill, James, 120 Mill, John Stuart, 82 Mismanaged policy, 251 Mixed economy, 17 Mobility physical.

 

pages: 248 words: 57,419

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

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

Wealth Preservation through Diversification The hard truth is that it is not easy to preserve wealth. If it were, the families who were wealthy 200 years ago would still be wealthy today—and generally, they are not. In the very harsh economic environment that is likely to prevail over the next ten years, it is likely that a great deal of wealth is going to be destroyed. The economic system is in crisis and government policy, rather than market fundamentals, will determine the direction of asset prices. If the government fails to borrow and spend enough, the economy will collapse into a deflationary spiral. If it borrows, prints, and spends too much, there will be very high rates of inflation. Future government policy simply cannot be foretold with any degrees of precision. Active wealth managers will have to rapidly adjust their portfolios in response to changes in policy.

Should they cease altogether, there would be a horrible debt-deflation similar—in cause and consequence—to that which occurred during the Great Depression. Government attempts to prevent that outcome, or political developments that drive policy in a harmful direction, could go astray and produce the opposite effect, very high rates of inflation. Given that the price level could either collapse or surge higher, it is necessary to be prepared for either scenario. It is also important to keep in mind that “market fundamentals” are no longer the only determinants of price movements. In the twenty-first century, various forms of government intervention frequently have an even greater impact. Supply and demand are still the ultimate arbitrators of value. Today, however, governments often have an extraordinary influence on both. Notes 1. From The Constitution of Liberty (Chicago: University of Chicago Press, 1960), p. 338. 2.

 

pages: 237 words: 50,758

Obliquity: Why Our Goals Are Best Achieved Indirectly by John Kay

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Andrew Wiles, Asian financial crisis, Berlin Wall, bonus culture, British Empire, business process, Cass Sunstein, computer age, credit crunch, Daniel Kahneman / Amos Tversky, discounted cash flows, discovery of penicillin, diversification, Donald Trump, Fall of the Berlin Wall, financial innovation, Gordon Gekko, greed is good, invention of the telephone, invisible hand, Jane Jacobs, Long Term Capital Management, Louis Pasteur, market fundamentalism, Nash equilibrium, pattern recognition, purchasing power parity, RAND corporation, regulatory arbitrage, shareholder value, Simon Singh, Steve Jobs, The Death and Life of Great American Cities, The Predators' Ball, The Wealth of Nations by Adam Smith, ultimatum game, urban planning, value at risk

The eclecticism of his knowledge and the breadth of his interests made him the finest commentator on economics and finance of the twentieth century. Keynes resisted any attempt to explain social and economic phenomena with one big idea. In Keynes’s lifetime the one big idea most commonly used by hedgehogs to provide a unified explanation of economic and political events was Marxist socialism. Later in the century, as the appeal of socialism crumbled with the failed regimes that claimed to implement it, other ideologies, such as market fundamentalism and environmentalism, arose to fill the gap. But as Keynes emphasized in his exchange with Planck, most useful economic and political knowledge is simply not of this simple, universal kind. Churchill, the hedgehog, won his place in history by being presciently and ultimately triumphantly right about one big thing—perhaps the biggest thing of the twentieth century. But on other matters his judgment was poor, the causes he pursued to the point of failure misconceived: the ill-fated Gallipoli expedition of 1915 and the disastrous return to the gold standard ten years later, his quixotic support of the deposed Edward VIII in 1936 and his stubborn resistance to Indian independence.

leprosy Levitt, Theodore Lewis, Michael Liar’s Poker (Lewis) life expectancy Lincoln, Abraham Lindblom, Charles literacy rate Litton Industries Lives of the Painters (Vasari) loans lobsters local goals logic London Business School London Underground Long-Term Capital Management McDonnell Douglas Machiavelli, Niccolò MacIntyre, Alasdair McKeen, John McNamara, Robert Maginot Line Malaya Mallory, George Malthusianism management management consultants man-and-dog problem manuals maps market capitalization market economies market fundamentalism market research market segments Marks, Simon Marks & Spencer marriage Marxism mass production materialism mathematics Mean Business (Dunlap) Merck Merck, George Merton, Robert C. Messner, Reinhold metaphors Microsoft military affairs military contracts milk Mill, John Stuart misers mission statements Mobutu Sese Seko monetary targets monocultures “moral algebra” Morita, Akio mortgages Moses, Robert motorcycles mountain climbing Mount Everest “muddling through” Munger, Charles Munich Agreement (1938) music nail factories Napoleon I, emperor of France Nash equilibrium National Park Service, U.S.

 

pages: 1,088 words: 228,743

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

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

Recent criticism of the EMH Besides “anomalies” (patterns of return predictability that are not easily explained by rational models), the crash of 1987, the 1999–2002 tech bubble and bust, and the 2006–2009 boom–bust period have been major challenges to the EMH. In 2008–2009 some critics went further and blamed the EMH for being one cause of the crisis. They blamed widespread belief in the EMH, and more loosely “market fundamentalism”, for the laissez faire attitude of policymakers and regulators: letting leverage and asset booms grow unchecked and allowing ever more complex financial instruments and questionable sales practices flourish without restraint, under the cover that the market would inevitably get the prices of these securities right. Other criticisms come as though out of a scattergun: some attack the classical notion that competitive markets are inherently self-stabilizing, others blame the Fed’s asymmetric policy responses, while others fault the use of normal distribution and VaR-based risk management in a world where fat tails dominate.

That is how reflexivity gives rise to initially self-fulfilling but eventually self-defeating prophesies and processes” (Soros, 2003, p. 5). Soros (2008) argues that 2007–2008 is not only an end to a cyclical housing bubble but also to a more secular super-bubble—decades-long trends of credit creation, globalization of finance, and deregulation—whose underlying misconception was excessive reliance on the market mechanism (“market fundamentalism”). When Soros’s The Alchemy of Finance was first published in 1987, academics ignored or dismissed the reflexivity idea, partly because the practitioner-oriented book was written “in a different language”. Yet, it has found a large following among investors and it may have also influenced later academic work on positive-feedback trading and on bubbles. Other research also confirms that fast credit growth and financial deregulation /innovation are common characteristics of major booms that end in tears.

For example, the Treasury bond market apparently underpredicted inflation in the 1960s and 1970s (it was repeatedly surprised by higher inflation) and then overpredicted inflation in the 1980s and 1990s (it made the opposite systematic forecasting errors). With hindsight, we know that the inflation process underwent a structural change (higher, more volatile, more persistent inflation) and that the process was later reversed, but real-time bond investors could only learn about this development gradually. The long bull trend in emerging market assets amidst a gradual improvement in emerging market fundamentals is another example where data are consistent with investor irrationality as well as rational learning. Peso problems and learning stories help in interpreting past return predictability but contain no lessons about future profit opportunities. Market frictions Most academic predictability evidence is presented without taking into account trading costs and other market frictions. It is not surprising, then, that paper profits tend to be most consistent in illiquid assets (e.g., small-cap stocks) or in trading styles that involve high turnover (e.g., short-term reversal).

 

pages: 278 words: 82,069

Meltdown: How Greed and Corruption Shattered Our Financial System and How We Can Recover by Katrina Vanden Heuvel, William Greider

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Asian financial crisis, banking crisis, Bretton Woods, capital controls, carried interest, central bank independence, centre right, collateralized debt obligation, conceptual framework, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, declining real wages, deindustrialization, Exxon Valdez, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, fixed income, floating exchange rates, full employment, housing crisis, Howard Zinn, Hyman Minsky, income inequality, kremlinology, Long Term Capital Management, margin call, market bubble, market fundamentalism, McMansion, mortgage debt, Naomi Klein, new economy, offshore financial centre, payday loans, pets.com, Plutocrats, plutocrats, Ponzi scheme, price stability, pushing on a string, race to the bottom, Ralph Nader, rent control, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, sovereign wealth fund, structural adjustment programs, The Great Moderation, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, wage slave, Washington Consensus, women in the workforce, working poor, Y2K

A lame-duck President Bush even felt compelled to offer a defense of the system of free-market capitalism, as he shoveled taxpayer cash out the door as fast as he could to bail out the people he once called his “base,” the rich. This collection, compiled from articles published in the magazine and on thenation.com, proceeds from the roots of crisis through its early stages to its alarming escalation, and it concludes with a series of pieces that tackle that age-old question, What is to be done? As none other than Milton Friedman, the father of free-market fundamentalism, once wrote, “Only a crisis—actual or perceived—produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.” Friedman was right that ideas are important, but actions depend even more on who controls the levers of power, which segments of society they represent and what kind of pressure can be brought to bear on them from the outside.

We just wish that the Men in Black would draw inspiration from something besides the anachronistic language of the Gold Reserve Act of 1934, which tried to make Treasury’s decisions about the Exchange Stabilization Fund unreviewable by anyone else. (See the new plan’s incredible Section 8, something you would think only Dick Cheney could love.) And who can deny it? All the “Comrade Paulson” jokes should at least be good for a decent respite from Market Fundamentalism—the notion that unregulated markets automatically give you full employment and economic stability. Right now every individual financial institution is deleveraging—that is, reducing its use of borrowed money—at a terrifying pace. Financial houses are trying to recapitalize themselves by gouging depositors, borrowers, investors and credit card holders. As a group, they cannot succeed. They are collectively digging themselves into a black hole in which the gain of one is the loss of another, unless somebody from outside puts in new money.

 

pages: 300 words: 78,475

Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream by Arianna Huffington

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American Society of Civil Engineers: Report Card, Bernie Madoff, Bernie Sanders, call centre, carried interest, citizen journalism, clean water, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, extreme commuting, Exxon Valdez, full employment, greed is good, housing crisis, immigration reform, invisible hand, knowledge economy, laissez-faire capitalism, late fees, market bubble, market fundamentalism, Martin Wolf, medical bankruptcy, microcredit, new economy, New Journalism, offshore financial centre, Ponzi scheme, Report Card for America’s Infrastructure, Richard Florida, Ronald Reagan, Rosa Parks, single-payer health, smart grid, The Wealth of Nations by Adam Smith, too big to fail, transcontinental railway, trickle-down economics, winner-take-all economy, working poor, Works Progress Administration

Along the way, the social contract—especially the subsections protecting workers, poor people, and our air, water, and oceans—was fed into a shredder. Starting with the New Deal, we began constructing a social safety net to help the most vulnerable among us. But who needed a safety net when the laws of supply and demand were there to protect us, when the trickle-down theory would provide sustenance for us all? The missing tenet in this new free-market fundamentalism was the recognition, central to capitalism, that businessmen have responsibilities above and beyond the bottom line. Alfred Marshall, one of the founding fathers of modern capitalism, in an address to the British Economics Association in 1890, called it “economic chivalry.”15 He explained that “the desire of men for approval of their own conscience and for the esteem of others is an economic force of the first order of importance.”

Given how close we were in 2008 to the complete collapse of our economic and financial system, anyone who continues to make the case that markets do best when left alone should be laughed off his bully pulpit.17 Despite the fact that many banks, car companies, and so on would be defunct without government intervention, the free-market fundamentalists continue to live in denial, trying to convince the world that if only left alone, free markets would right themselves. Free-market fundamentalism didn’t fail because our leaders didn’t execute it well enough. In fact, during his time in office (until the economic house of cards finally collapsed at the end of his presidency), President George W. Bush and his team did a bang-up job executing a defective theory. The problem isn’t just the bathwater; the baby itself is rotten. William Seidman, the longtime GOP economic adviser who oversaw the savings and loan bailout in 1991, cuts to the chase: “[The Bush] administration made decisions that allowed the free market to operate as a barroom brawl instead of a prize fight.18 To make the market work well, you have to have a lot of rules.”

 

pages: 310 words: 82,592

Never Split the Difference: Negotiating as if Your Life Depended on It by Chris Voss, Tahl Raz

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banking crisis, Black Swan, clean water, cognitive bias, Daniel Kahneman / Amos Tversky, Donald Trump, framing effect, friendly fire, iterative process, loss aversion, market fundamentalism, price anchoring, telemarketer, ultimatum game, uranium enrichment

After discussing the deal and the market, my student and his boss decided that the asking price of $4.3 million was about $450,000 too high. At that point, my student called the broker again to discuss pricing and next steps. After initial pleasantries, the broker asked my student what he thought of the property. “It looks like an interesting property,” he said. “Unfortunately, we don’t know the market fundamentals. We like downtown and King Street in particular, but we have a lot of questions.” The broker then told him that he had been in the market for more than fifteen years, so he was well informed. At this point, my student pivoted to calibrated “How” and “What” questions in order to gather information and judge the broker’s skills. “Great,” my student said. “First and foremost, how has Charleston been affected by the economic downturn?”

If it were such a cash cow, why would someone sell a 100 percent occupied building located next to a growing campus in an affluent city? That was irrational by any measure. A little befuddled but still in the negotiation mindset, my student constructed a label. Inadvertently he mislabeled the situation, triggering the broker to correct him and reveal a Black Swan. “If he or she is selling such a cash cow, it seems like the seller must have doubts about future market fundamentals,” he said. “Well,” he said, “the seller has some tougher properties in Atlanta and Savannah, so he has to get out of this property to pay back the other mortgages.” Bingo! With that, my student had unearthed a fantastic Black Swan. The seller was suffering constraints that, until that moment, had been unknown. My student put the broker on mute as he described other properties and used the moment to discuss pricing with his boss.

 

pages: 467 words: 154,960

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

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

I hope that after reading Trend Following, the confusion and hesitation associated with making money in down markets, markets that are dropping or crashing, will dissipate. 7 Trend followers are traders, so I generally use the word “trader” instead of “investor” throughout. Fundamental Versus Technical There are two basic theories that are used to trade in the markets. The first theory is fundamental analysis. It is the study of external factors that affect the supply and demand of a particular market. Fundamental analysis uses factors such as weather, government policy, domestic and foreign political and economic events, price-earnings ratios, and balance sheets to make buy and sell decisions. By monitoring “fundamentals” for a particular market, one can supposedly predict a change in market direction before that change has been reflected in the price of the market with the belief that you can then make money from that knowledge.

Trend followers are the group of technical traders who use reactive technical analysis. Instead of trying to predict a market direction, their strategy is to react to the market’s movements whenever they occur. This enables them to focus on the market’s actual moves and not get emotionally involved with trying to predict direction or duration. Chapter 1 • Trend Following 11 One trend follower summarized the conundrum: “I could not analyze 20 markets fundamentally and make money. One of the reasons [trend following] works is because you don’t try to outthink it. You are a trend follower, not a trend predictor.”14 Discretionary Versus Mechanical I have established the concept that you can be an investor or trader. I have established that trading can be fundamentally or technically based. Further, technical trading can be predictive or reactive. And I’ve explained how trend followers are traders who use a reactive technical approach based on price.

Ride the bucking bronco, baby…or you can always accept the fake security of buy and hold investing. Trend Following Critics My interviews with the top traders confirmed what I have always believed and repeatedly say to be the primary reason people After word are confused about trend following. Their confusion is linked directly to a trading and investing culture familiar and therefore comfortable with only one approach to the markets: fundamental analysis (buy and hold, long only, etc.). Fundamental traders and investors think the only way to beat the market is to gather all the information you can find. They want news, they want CNBC, they want Jim Cramer, they want crop reports, they want OPEC rumors, they want Bernanke’s shoe size—they believe extraneous information will help them to make profitable trading decisions. Trend followers, on the other hand, say, “Enough!”

 

pages: 621 words: 157,263

How to Change the World: Reflections on Marx and Marxism by Eric Hobsbawm

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anti-communist, banking crisis, battle of ideas, Berlin Wall, British Empire, currency manipulation / currency intervention, deindustrialization, discovery of the americas, experimental subject, Fall of the Berlin Wall, full employment, labour market flexibility, market fundamentalism, means of production, new economy, Simon Kuznets, Thorstein Veblen, Upton Sinclair, upwardly mobile

This attempt to hand over human society to the (allegedly) self-controlling and wealth- or even welfare-maximising market, populated (allegedly) by actors in rational pursuit of their interests, had no precedent in any earlier phase of capitalist development in any developed economy, not even the USA. It was a reductio ad absurdum of what its ideologists read into Adam Smith, as the correspondingly extremist 100% state-planned command economy of the USSR was of what the Bolsheviks read into Marx. Not surprisingly, this 10 Marx Today ‘market fundamentalism’, closer to theology than economic reality, also failed. The disappearance of the centrally planned state economies and the virtual disappearance of a fundamentally transformed society from the aspirations of the demoralised social-democratic parties have eliminated much of the twentieth-century debates on socialism. They were some way from Karl Marx’s own thinking, though very largely inspired by him and conducted in his name.

The Soviet-type model of socialism – the only attempt to build a socialist economy so far – no longer exists. On the other hand there has been an enormous and accelerating progress of globalisation and the sheer wealth-generating capacity of humans. This has reduced the power and scope of economic and social action by nation-states and therefore the classical policies of social-democratic movements, which depended primarily on pressing reforms on national governments. Given the prominence of market fundamentalism it has also generated extreme economic inequality within countries and between regions and brought back the element of catastrophe to the basic cyclical 11 How to Change the World rhythm of the capitalist economy, including what became its most serious global crisis since the 1930s. Our productive capacity has made it possible, at least potentially, for most human beings to move from the realm of necessity into the realm of affluence, education and unimagined life choices, although most of the world’s population have yet to enter it.

For almost twenty years after the end of the Soviet system its ideologists believed that they had achieved ‘the end of history’, ‘an unabashed victory of economic and political liberalism’ (Fukuyama), 2 growth in a definitive and permanent, self-stabilising social and political world order of capitalism, unchallenged and unchallengeable both in theory and practice. None of this is tenable any longer. The twentieth-century attempts to treat world history as an economic zero-sum game between private and public, pure individualism and pure collectivism, have not survived the manifest bankruptcy of the Soviet economy and of the economy of ‘market fundamentalism’ between 1980 and 2008. Nor is a return to the one more possible than a return to the other. Since the 1980s it has been evident that the socialists, Marxist or otherwise, were left without their traditional alternative to capitalism, at least unless or until they rethought what they meant by ‘socialism’ and abandoned the presumption that the (manual) working class would necessarily be the chief agent of social transformation.

 

pages: 379 words: 114,807

The Land Grabbers: The New Fight Over Who Owns the Earth by Fred Pearce

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Asian financial crisis, banking crisis, big-box store, blood diamonds, British Empire, Cape to Cairo, carbon footprint, clean water, credit crunch, Deng Xiaoping, Elliott wave, en.wikipedia.org, energy security, farmers can use mobile phones to check market prices, index fund, Jeff Bezos, land reform, land tenure, Mahatma Gandhi, market fundamentalism, megacity, Mohammed Bouazizi, Nikolai Kondratiev, offshore financial centre, out of africa, quantitative easing, race to the bottom, Ronald Reagan, smart cities, structural adjustment programs, too big to fail, urban planning, urban sprawl, WikiLeaks

Department of Agriculture echoed the common view of experts that “this kind of price spike happens only once in every three decades or so. It’s highly unlikely a price spike will be repeated especially in the next four to five years.” Around the same time, the UN’s food trade guru Hafez Ghanem insisted that “the market fundamentals are sound and very different from 2007–2008 . . . We don’t believe we are headed for a new food crisis.” But by the end of the year, prices were surging all over again. So if the “market fundamentals” were sound, what was the problem? Perhaps it was the markets themselves. For a while, some economists had been arguing that the freer markets that Zoellick saw as the solution to high food prices were in fact part of the problem. They were saying that speculation had played a big role in the price spikes of 2008.

So “greater powers need to be given to international institutions to prevent trade restrictions at times of crisis.” In an aside, he agreed that “empirical evidence” does not allow him to assess the importance of market speculators in pushing up prices during those dangerous months. But he absolves them anyway, by concluding that “improving the functioning of commodity markets can reduce the element of volatility that does not reflect underlying market fundamentals.” As we saw in chapter 2, not many people in the financial markets seem to agree with the professor’s sanguine assessment of how more and freer international trade will stabilize prices and feed the world. Several said so in their responses to Beddington’s report. “In reality, open markets do not necessarily deliver either affordability or balance to the market for food,” said Nick Tapp, the head of agribusiness at Bidwells, the London-based international property consultants.

 

pages: 512 words: 162,977

New Market Wizards: Conversations With America's Top Traders by Jack D. Schwager

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backtesting, Benoit Mandelbrot, Berlin Wall, Black-Scholes formula, butterfly effect, commodity trading advisor, Elliott wave, fixed income, full employment, implied volatility, interest rate swap, Louis Bachelier, margin call, market clearing, market fundamentalism, paper trading, pattern recognition, placebo effect, prediction markets, Ralph Nelson Elliott, random walk, risk tolerance, risk/return, Saturday Night Live, Sharpe ratio, the map is not the territory, transaction costs, War on Poverty

I think, however, despite my having had no background in the business, I was able to ask intelligent questions and respond appropriately. However, there was one exception. [He laughs at the recollection.] I was probably one of the only candidates who knew virtually nothing about Richard Dennis. Although I didn’t know it, Richard Dennis was famous for being one of the world’s great technical traders. During the interview I asked, “Do you trade the markets fundamentally or technically?” That got a good chuckle. He answered, “We trade technically.” I responded by asking, “Is fundamental analysis dead?” Dennis answered, with a smile, “We certainly hope not.” Obviously your lack of experience didn’t hurt you. As it turned out, of the thirteen people selected, one-third had no experience, one-third had significant experience, and the remaining one-third had a little bit of experience.

However, for any individual trader, the definition can be made mathematically precise. In other words, chart traders are artists until they mathematically define their patterns—say, as part of a system structure—at which time they become scientists. Why have you chosen a purely technical approach in favor of one that also employs fundamentals? Many economists have tried to trade the commodity markets fundamentally and have usually ended up losing. The problem is that the markets operate more on psychology than on fundamentals. For example, you may determine that silver should be priced at, say, $8, and that may well be an accurate evaluation. However, under certain conditions—for example, a major inflationary environment—the price could temporarily go much higher. In the commodity inflation boom that peaked in 1980, silver reached a high of $50—a price level that was out of all proportion to any true fundamental value.

The ratio of alternate numbers in the sequence (for example, 21 and 55) converges to 0.382 as the numbers get larger. These two ratios—0.618 and 0.382—are commonly used to project retracements of prior price swings. Floor trader. A member of the exchange who trades on the floor for personal profit. Frontrunning. The unethical—and in some cases illegal—practice of a broker placing his own order in front of a customer order that he anticipates will move the market. Fundamental analysis. The use of economic data to forecast prices. For example, fundamental analysis of a currency might focus on such items as relative inflation rates, relative interest rates, relative economic growth rates, and political factors. Futures. See “Futures—Understanding the Basics.” Gann analysis. Market analysis based on a variety of technical concepts developed by William Gann, a famous stock and commodity trader during the first half of the twentieth century.

 

pages: 501 words: 134,867

A Line in the Tar Sands: Struggles for Environmental Justice by Tony Weis, Joshua Kahn Russell

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Bakken shale, bilateral investment treaty, call centre, carbon footprint, clean water, colonial exploitation, conceptual framework, corporate social responsibility, decarbonisation, Deep Water Horizon, en.wikipedia.org, energy security, energy transition, Exxon Valdez, failed state, global village, guest worker program, happiness index / gross national happiness, hydraulic fracturing, immigration reform, investor state dispute settlement, invisible hand, LNG terminal, market fundamentalism, means of production, Naomi Klein, new economy, Occupy movement, oil shale / tar sands, peak oil, profit maximization, race to the bottom, smart grid, special economic zone, working poor

And while the Chinese government is certainly attempting to secure energy supplies by investing in the tar sands, the list of profiteers extracting bitumen is full of the names of US, Canadian, and European corporations, like Suncor/PetroCanada, Syncrude, Shell, Chevron, ConocoPhillips, Imperial Oil, TOTAL, and ExxonMobil, that receive Western state support. All of these companies are driving tar sands projects. China, Canada, and much of the rest of the world are in the grip of market fundamentalism—the promotion of economic growth, and the relentless pursuit of profits. This has led corporations to secure ideal investment climates by any means necessary. When the Free Trade Area of the Americas was defeated, national governments pursued bilateral trade agreements on behalf of their corporate sponsors. And when bilateral agreements were not enough, Special Economic Zones (SEZs) have been established, where corporations write their own labour laws, environmental regulations, and taxation regimes.

The lives of two Chinese migrant workers who died working in the tar sands in 2007 serve as a stark reminder of how the demonization of people of colour and other nationalities assists in creating brutally unsafe working environments that would be deemed unsuitable for Canadian workers. With the economic recession and a documented rise in white supremacist and neo-Nazi organizations throughout the West, any legitimacy given to these polarizing attitudes is extremely worrying. It seems that market fundamentalism and extreme racism have been making inroads together. How should we understand statements about how Canada is for sale? Public institutions, such as the health care system and water infrastructure, are threatened with privatization; international investors want in. While people resist the dictates of global finance to privatize the public, we must also recognize that the establishment of the Canadian state itself is based on one of the largest acts of violence and land grabs.

See also treaty rights Indigenous Tar Sands Campaign, 74 industrial genocide, 64, 69 “in situ extraction,” 9 “insourcing,” 84 institutional disruption, 293–94 institutional ecology, 298, 353n3; “green jobs” and, 301–4 Intergovernmental Panel on Climate Change (IPCC), 218 International Energy Agency (IEA), 27, 28, 101, 304 International Labour Organization, 303, 335n13, 353n10; Convention 169: 251 International Transport Workers’ Federation, 307 Inuit, 258, 316 Iraq: oil imports from, 31; US invasion of, 99 Israel: “extreme” tar sands extraction in, 105–7; trade agreement with, 93; Zionism in, 105–7 Israel Chemicals, 106 Israel Energy Initiatives (IEI), 105–7 Italy, 102 Jacobsen, David, 56 Jewish National Fund (JNF), 106–7 Jimisawaabandaaming, 237 Johanson, Reg, 163 Jonas, Howard, 107 Jones, Van, 244, 284 Jordan, “extreme” tar sands extraction in, 107–8 Jordan Energy and Mines Limited, 108 Journal of Power Sources, 283 jurisdictional contestation, 295–96; Indigenous form of, 295 Kalamazoo (Michigan), 116, 137, 182; Enbridge pipeline spill in, 195–206 Kalamazoo River, 17 Karak International Oil, 108 kerogen-infused oil shale, 105–7 kerogen shale, 6, 100–101 Keynesianism, 298, 302 Keystone XL (KXL) pipeline, 5, 12, 17, 18, 30, 41, 62–63, 77–79, 91, 102, 116, 149, 162, 165, 204–5, 232–36, 250, 282, 314, 315; direct action at White House to stop, 166–80, 279–81, 284, 312; Gulf Coast resistance to, 181–94; jobs and energy security brought by, 233; labour movement and, 219–23 Kihci Pikiskwewin (Speaking the Truth), 118–26 Kinder Morgan, 11, 116, 160, 260; Trans Mountain Pipeline, 11, 91, 95, 125, 149, 162 Klamath River Native organizing, 168 Klare, Michael, 313 Klein, Naomi, 170, 173, 246, 284 Klein, Ralph, 38, 51 Kluane people (Yukon), 153 Kyoto Protocol, 29, 53, 124, 218 La Boétie, Étienne de, 286 Laborers’ International Union of North America (LIUNA), 220–22 Labor Network for Sustainability, 220 Laboucan-Massimo, Melina, 209, 248 labour, intersection of with colonialism, the state, capital, and impoverishment, 87 labour movement, 287; and climate change, 217–25, 244; and environmental movement, 86, 88, 90 Lac-Méantic (Quebec), 81, 182 LaDuke, Winona, 246 Lakehead pipelines, 231 Lakota Nation, 235–36 Lameman, Alphonse, 122 Lax Kw’alaams Nation, 264 lead, 136 learning disabilities, 140 Leclerc, Christine, 163–64 Leduc #1, 40 Leggett, Sheila, 148–49, 156 Lenape people, 253 Lepine, Lionel, 208, 248 Levant, Ezra, 50–51 Lickers, Amanda, 265 Liepert, Ron, 56 Life of Mine permit, 169 liquefied natural gas (LNG), 241 Little Village Environmental Justice Organization, 280 Lockridge, Ada, 144 logging, protection of forests from industrial, 70 London Rising Tide, 209 Louisiana, 102, 183 Lovins, Amory, 356n25 Low Carbon Fuel Standard (LCFS), 60–62 Lubicon Cree: land settlement agreement, 115; struggle of, 113–17; undermining sovereignty of, 114 Lukacs, Martin, 57 LyondellBasell, 189 Mabee, Holly Spiro, 71–72 Machado, Antonio, 75 Mackenzie Basin, 33 Madagascar, “extreme” tar sands extraction in, 104–5 Madagascar Oil, 104–5 Maisonneuve magazine, 60 Malaysia, 102 Manitoba: destruction of treaty lands in, 125; soil and lake acidification in, 33 Marathon, 60 Marcellus Shale formation, 283, 314–15 “market ecology,” 46, 298, 302, 304, 309; green growth and, 300–301 market fundamentalism, 95 Marois, Pauline, 82 Marx, Karl: Grundrisse, 309 Masten, Scott, 202 Mathias Colomb Cree Nation (Pukatawagan), 74 Matthews, Hans, 149 Mayflower (Arkansas), 17, 182, 189 McKibben, Bill, 169, 170, 173, 220, 311 McMichael, Philip, 68 “megaload” corridor, 11 Mercredi, Mike, 248 mercury, 136, 254 methane, 15, 241, 324n33 Métis people, 4, 128, 131, 254, 258 Mexico, poverty in, 89 Meyer, John M., 316 Michif people, 253, 259 Michigan.

 

pages: 269 words: 104,430

Carjacked: The Culture of the Automobile and Its Effect on Our Lives by Catherine Lutz, Anne Lutz Fernandez

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barriers to entry, car-free, carbon footprint, collateralized debt obligation, failed state, feminist movement, fudge factor, Gordon Gekko, housing crisis, illegal immigration, income inequality, inventory management, market design, market fundamentalism, mortgage tax deduction, Naomi Klein, Nate Silver, New Urbanism, oil shock, peak oil, Ralph Nader, Ralph Waldo Emerson, ride hailing / ride sharing, Thorstein Veblen, traffic fines, Unsafe at Any Speed, urban planning, white flight, women in the workforce, working poor, Zipcar

Frank and his ilk aside, many people see solving car-related problems as an engineering issue alone, not a cultural or political challenge, requiring behavioral changes or social innovations. They are the many, many “irrational futurists,” in the words of one iconoclastic GM executive, people who assume that science will solve, and the market will commercialize, technical solutions to the problems of pollution, congestion, or highway fatalities.25 After years of market fundamentalism—or the belief that the market is the mechanism that, if left alone, will produce the best outcome for the most people—as the credo of government 36 Carjacked and media, people generally assume the market will make happen the things that need to happen. Many, especially the young, are convinced that global warming, in part caused by auto emissions, will be reversed by the invention of a nonpolluting fuel or superlight materials for car manufacture.

See also Buick; Cadillac; Chevrolet; Hummer; Pontiac; Saab; Saturn ghost items, 70 Glassner, Barry, 152 global warming, xii-xiii, 36, 161, 173–4, 209, 224, 228 Gore, Al, xiii, 150 GPS systems, 34, 42, 119, 156, 194, 222 graduated licensing systems, 193, 243–4n13 greenwashing, 89 GTO, 25 Hannity, Sean, 150 Harrison, Darryll, 43 Hartmann, Paul, 58, 62–3 Harvey, Steve, 151 health issues: asthma, 161, 167, 171–4 cancer, 161, 167–70, 172, 174, 192 251 heart attack and stroke, 161, 165, 167–8, 172, 184 obesity, 136, 161–4 stress, 155–7 workers in car-related fields and, 169–71 hedge funds, 123–4 Herbie (film), 7 Heritage Foundation of Franklin and Williamson County, 129–30 high-consideration products, 40, 46 Hill, Kevin, 40–1, 43 Hoffman, Dustin, 14 Hollywood, 7, 14, 18–9, 22, 33–4, 51, 113, 185, 200 Honda, 16, 19, 39, 43–4, 48, 53, 55–6, 60, 66–8, 73–4, 88, 206, 216 Houston, Douglas, 168 Hudson, Mike, 117–8 Hughes, Cheyenne, 112–3 Hulfish, Holly, 144 Hummer, 3, 42, 51, 76, 120, 199 Hurricane Katrina, 114, 173 hybrid cars, xiii, 49, 55, 65–7, 83, 88–90, 215 Hyundai, 75, 108, 124, 166 I Am Legend (film), 34 Illich, Ivan, 125 individualism, 47, 146–7, 203 Infiniti, 77, 156–7 Iraq War, 17, 35, 96–7, 181, 189 Iron Man (film), 13–4 Isuzu, 16 Italian Job, The (film), 51 J. D. Byrider, 108 Jaguar, 74 James, Leon, 157–8 Jeep Wrangler, 16, 65 Johnson, Stephen L., 175 Joyner, Tom, 151 Katz, Jack, 153–5 Kia, 2 Klare, Michael T., 89–90 Klein, Naomi, 10 Krugman, Paul, 126 Land Rover, 16, 27 Lexus, 54, 74, 125, 165 Limbaugh, Rush, 149–50 Lincoln, 16, 75, 143 Live Free or Die Hard (film), 7 London, 134, 225 252 Carjacked Ludwig, Art, 99 luxury, 74–8 market fundamentalism, 35–6 marketing strategies: auto shows and, 48–9 car regulation and, 18 of Chevrolet, 178 children and, 50–2 credit and, 84–7 emotions and, 40–6 of Ford, 42 of Honda, 44, 48, 55 interactive, 40 luxury and, 74–8 niche, 32 of Nissan, 43–5 progress and, 34 safety and, 203 self-expression and, 56–7 Sloan’s GM, 64 status and, 57–60 SUVs and, 73, 89, 199 teenagers and, 2, 51–4, 59 of Volkswagen, 27–8 mass transit.

 

pages: 385 words: 111,807

A Pelican Introduction Economics: A User's Guide by Ha-Joon Chang

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Affordable Care Act / Obamacare, Albert Einstein, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collateralized debt obligation, colonial rule, Corn Laws, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, discovery of the americas, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Akerlof, Gini coefficient, global value chain, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Haber-Bosch Process, happiness index / gross national happiness, high net worth, income inequality, income per capita, interchangeable parts, interest rate swap, inventory management, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, laissez-faire capitalism, land reform, manufacturing employment, Mark Zuckerberg, market clearing, market fundamentalism, Martin Wolf, means of production, Mexican peso crisis / tequila crisis, Northern Rock, obamacare, offshore financial centre, oil shock, open borders, post-industrial society, precariat, principal–agent problem, profit maximization, profit motive, purchasing power parity, quantitative easing, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, Scramble for Africa, shareholder value, Silicon Valley, Simon Kuznets, sovereign wealth fund, spinning jenny, structural adjustment programs, The Great Moderation, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Washington Consensus, working-age population, World Values Survey

Unless we recognize this critical point, we will not be able to reap the full benefits that international economic integration can bring us. Further Reading H.-J. CHANG Bad Samaritans: Rich Nations, Poor Policies and the Threat to the Developing World (London: Random House, 2007). P. HIRST, G. THOMPSON AND S. BROMLEY Globalization in Question, 3rd edition (Cambridge: Polity, 2009). R. KOZUL-WRIGHT AND P. RAYMENT The Resistible Rise of Market Fundamentalism: Rethinking Development Policy in an Unbalanced World (London: Zed Books and Third World Network, 2007). W. MILBERG AND D. WINKLER Outsourcing Economics: Global Value Chains in Capitalist Development (Cambridge and New York: Cambridge University Press, 2013). D. RODRIK The Globalization Paradox (Oxford: Oxford University Press, 2011). J. STIGLITZ Making Globalization Work (London and New York: W.

A more detailed definition is provided by the UNCTAD (United Nations Conference on Trade and Development) at: http://unctad.org/en/Pages/DIAE/Foreign-Direct-Investment-(FDI).aspx. 12. The figures were 63 per cent for Liberia, 50 per cent for Haiti and 42 per cent for Kosovo. 13. All the FDI flow figures cited below are inflow figures. In theory, inflows and outflows of FDI on the world scale should be the same, but the actual data always show discrepancies. 14. Calculation based on World Bank data. 15. See R. Kozul-Wright and P. Rayment, The Resistible Rise of Market Fundamentalism: Rethinking Development Policy in an Unbalanced World (London: Zed Books and Third World Network, 2007), Chapter 4, for an excellent review of the evidence. 16. On tax havens, see N. Shaxson, Treasure Islands: Tax Havens and the Men Who Stole the World (London: Vintage, 2012), and the website of Tax Justice Network, www.taxjustice.net. At the time of writing (autumn 2013), there has been a lot of talk of a clamp-down on tax havens, especially through the G20, but no concrete action has been taken. 17.

 

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, 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, joint-stock company, Kenneth Rogoff, labour market flexibility, labour mobility, land reform, Long Term Capital Management, low skilled workers, margin call, market bubble, market fundamentalism, Martin Wolf, 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, 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

Economists use a variety of frameworks to analyze the world, some of which favor free markets and some of which don’t. Much of economic research is in fact devoted to understanding the types of government intervention that can improve economic performance. Non-economic motives and socially cooperative behavior are increasingly part of what economists study. The problem is not that economists are high priests of free market fundamentalism, but that they suffer from the same heuristic biases as regular people. They tend to exhibit groupthink and overconfidence, relying excessively on those pieces of evidence that support their preferred narrative of the moment, while dismissing others that don’t fit as neatly. They follow fads and fashion, promoting different sets of ideas at different times. They place too much weight on recent experience and too little weight on more distant history.

Developing nations sought to become export platforms and became increasingly willing to submit themselves to such rules in their drive to attract foreign investment. Entangled with these changes was an important ideological transformation. The 1980s were the decade of the Reagan-Thatcher revolutions. Free market economics was in the ascendancy, producing what has been variously called the Washington Consensus, market fundamentalism, or neoliberalism. Whatever the appellation, this belief system combined excessive optimism about what markets could achieve on their own with a very bleak view of the capacity of governments to act in socially desirable ways. Governments stood in the way of markets instead of being indispensable to their functioning, and accordingly had to be cut down to size. This new vision elevated the simplistic case for trade—the one that economics professors dole out to journalists—over the appropriately qualified version.

 

pages: 353 words: 88,376

The Investopedia Guide to Wall Speak: The Terms You Need to Know to Talk Like Cramer, Think Like Soros, and Buy Like Buffett by Jack (edited By) Guinan

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Albert Einstein, asset allocation, asset-backed security, Brownian motion, business process, capital asset pricing model, clean water, collateralized debt obligation, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, discounted cash flows, diversification, diversified portfolio, dividend-yielding stocks, equity premium, fixed income, implied volatility, index fund, interest rate swap, inventory management, London Interbank Offered Rate, margin call, market fundamentalism, mortgage debt, passive investing, performance metric, risk tolerance, risk-adjusted returns, risk/return, shareholder value, Sharpe ratio, short selling, statistical model, time value of money, transaction costs, yield curve, zero-coupon bond

It is difficult to predict changes in the markets, especially when one considers investor psychology and speculation, which play a major role. The terms “bull” and “bear” come from the way each animal attacks its opponents. A bull thrusts its horns up into the air, whereas a bear swipes its paws down. These actions are metaphors for the movement in a market. When the trend is up, it’s a bull market; when the trend is down, it’s a bear market. Related Terms: • Bear Market • Fundamental Analysis • Uptrend • Downtrend • January Barometer Business Cycle What Does Business Cycle Mean? The recurring and fluctuating levels of economic activity that an economy experiences over a long period; the five business cycles are growth (expansion), peak, recession (contraction), trough, and recovery. At one time business cycles were thought to occur on a regular and predictable basis, but today they are thought of as being more irregular, varying in frequency, magnitude, and duration.

Related Terms: • Common Stock • Marketable Security • New York Stock Exchange—NYSE • Stock • Stock Market D dead cat bounce What Does Dead Cat Bounce Mean? A temporary recovery that occurs during a prolonged decline (bear market); after the bounce, the market continues to fall. Investopedia explains Dead Cat Bounce Remember the following saying: “Even a dead cat will bounce if dropped from high enough!” Related Terms: • Bear Market • Fundamental Analysis • Trend Analysis • Bull Market • Quantitative Analysis debenture What Does Debenture Mean? A debt instrument that is not secured by a physical asset or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond to secure capital. Like other types of bonds, debentures are documented in an indenture. 65 66 The Investopedia Guide to Wall Speak Investopedia explains Debenture Debentures have no collateral.

 

pages: 318 words: 85,824

A Brief History of Neoliberalism by David Harvey

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affirmative action, Asian financial crisis, Berlin Wall, Bretton Woods, business climate, capital controls, centre right, collective bargaining, crony capitalism, debt deflation, declining real wages, deglobalization, deindustrialization, Deng Xiaoping, Fall of the Berlin Wall, financial deregulation, financial intermediation, financial repression, full employment, George Gilder, Gini coefficient, global reserve currency, illegal immigration, income inequality, informal economy, labour market flexibility, land tenure, late capitalism, Long Term Capital Management, low-wage service sector, manufacturing employment, market fundamentalism, means of production, Mexican peso crisis / tequila crisis, Mont Pelerin Society, mortgage tax deduction, neoliberal agenda, new economy, phenotype, Ponzi scheme, price mechanism, race to the bottom, rent-seeking, reserve currency, Ronald Reagan, Silicon Valley, special economic zone, structural adjustment programs, the built environment, The Chicago School, transaction costs, union organizing, urban renewal, urban sprawl, Washington Consensus, Winter of Discontent

These orders were, some argued, in violation of the Geneva and Hague Conventions, since an occupying power is mandated to guard the assets of an occupied country and not sell them off.4 Some Iraqis resisted the imposition of what the London Economist called a ‘capitalist dream’ regime upon Iraq. A member of the US-appointed Coalition Provisional Authority forcefully criticized the imposition of ‘free market fundamentalism’, calling it ‘a flawed logic that ignores history’.5 Though Bremer’s rules may have been illegal when imposed by an occupying power, they would become legal if confirmed by a ‘sovereign’ government. The interim government, appointed by the US, that took over at the end of June 2004 was declared ‘sovereign’. But it only had the power to confirm existing laws. Before the handover, Bremer multiplied the number of laws to specify free-market and free-trade rules in minute detail (on detailed matters such as copyright laws and intellectual property rights), expressing the hope that these institutional arrangements would ‘take on a life and momentum of their own’ such that they would prove very difficult to reverse.6 According to neoliberal theory, the sorts of measures that Bremer outlined were both necessary and sufficient for the creation of wealth and therefore for the improved well-being of the population at large.

The Reagan administration, which had seriously thought of withdrawing support for the IMF in its first year in office, found a way to put together the powers of the US Treasury and the IMF to resolve the difficulty by rolling over the debt, but did so in return for neoliberal reforms. This treatment became standard after what Stiglitz refers to as a ‘purge’ of all Keynesian influences from the IMF in 1982. The IMF and the World Bank thereafter became centres for the propagation and enforcement of ‘free market fundamentalism’ and neoliberal orthodoxy. In return for debt rescheduling, indebted countries were required to implement institutional reforms, such as cuts in welfare expenditures, more flexible labour market laws, and privatization. Thus was ‘structural adjustment’ invented. Mexico was one of the first states drawn into what was going to become a growing column of neoliberal state apparatuses worldwide.24 What the Mexico case demonstrated, however, was a key difference between liberal and neoliberal practice: under the former, lenders take the losses that arise from bad investment decisions, while under the latter the borrowers are forced by state and international powers to take on board the cost of debt repayment no matter what the consequences for the livelihood and well-being of the local population.

 

pages: 297 words: 91,141

Market Sense and Nonsense by Jack D. Schwager

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asset allocation, Bernie Madoff, Brownian motion, collateralized debt obligation, commodity trading advisor, conceptual framework, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, fixed income, high net worth, implied volatility, index arbitrage, index fund, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, market fundamentalism, merger arbitrage, pattern recognition, performance metric, pets.com, Ponzi scheme, quantitative trading / quantitative finance, random walk, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, Sharpe ratio, short selling, statistical arbitrage, statistical model, transaction costs, two-sided market, value at risk, yield curve

Schwager Hedge Fund Market Wizards: How Winning Traders Win Market Wizards: Interviews with Top Traders The New Market Wizards: Conversations with America’s Top Traders Stock Market Wizards: Interviews with America’s Top Stock Traders Schwager on Futures: Technical Analysis Schwager on Futures: Fundamental Analysis Schwager on Futures: Managed Trading: Myths & Truths Getting Started in Technical Analysis A Complete Guide to the Futures Markets: Fundamental Analysis, Technical Analysis, Trading, Spreads, and Options Study Guide to Accompany Fundamental Analysis (with Steven C. Turner) Study Guide to Accompany Technical Analysis (with Thomas A. Bierovic and Steven C. Turner) Cover design: John Wiley & Sons, Inc. Copyright © 2013 by Jack D. Schwager. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada.

Clarity Portfolio Viewer Closet benchmarker Closet index fund CNBC Coincident negative return (CNR) matrix Collateralized debt obligations (CDOs) vs. commercial paper Commercial paper, vs. collateralized debt obligations (CDOs) Commodity Futures Trading Commission (CFTC) Commodity prices Commodity trading advisors (CTAs) Comparison pitfalls markets strategy style time period Conservative investment Contango Contrarian indicator Convergence strategies Convertible arbitrage Convertible bond prices Correlation among managers and beta beyond coefficient of determination definition down months focus linear relationships to managers misconceptions about plus beta within portfolios spurious Correlation assumptions Correlation coefficient Correlation matrix Correlations going to one event Costs Countertrend strategies Countrywide Cramer, Jim Credit arbitrage Credit default swaps Credit hedge funds Credit quality Credit rating agencies Credit risk Credit spreads Critical financial applications CTA approaches The Daily Show Data relevance Default risk Deficient market hypothesis. See also Efficient market hypothesis (EMH) about beating the market fundamentals vs. price moves hedgers and governments human emotions investment insights luck vs. skill market collapse information negative value assets the price in not always right Delta hedging Direct investments in hedge funds Directional biases Distress investments Diversification amount of benefits of in funds of funds portfolio effects qualification regarding top down approach in traditional funds Diversification benefits in hedge funds Diversified hedge funds investment Diversified portfolio of hedge funds Dollar flow Dot-com mania Double fee structure Dow Theory Downside deviation Drawdowns Druckenmiller, Stanley Efficient market hypothesis (EMH) and empirical evidence flaws future world view Emerging market funds Emotional price distortion Emotion-driven bubble Emotions and fundamentals and reason Engelberg, Joseph Equity hedge funds Equity investors Equity market neutral funds Equity prices Equity trader ESW (Joseph Engelberg, Caroline Sasseville, and Jared Williams) Event driven funds Event risk Exchange rate mechanism Expert advice Comedy Central vs.

 

pages: 580 words: 168,476

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

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affirmative action, Affordable Care Act / Obamacare, airline deregulation, Andrei Shleifer, banking crisis, barriers to entry, Basel III, battle of ideas, Berlin Wall, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collapse of Lehman Brothers, collective bargaining, colonial rule, corporate governance, Credit Default Swap, Daniel Kahneman / Amos Tversky, Dava Sobel, declining real wages, deskilling, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, framing effect, full employment, George Akerlof, Gini coefficient, income inequality, income per capita, indoor plumbing, inflation targeting, invisible hand, John Harrison: Longitude, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, labour market flexibility, London Interbank Offered Rate, lone genius, low skilled workers, Mark Zuckerberg, market bubble, market fundamentalism, medical bankruptcy, microcredit, moral hazard, mortgage tax deduction, obamacare, offshore financial centre, paper trading, patent troll, payday loans, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, shareholder value, short selling, Silicon Valley, Simon Kuznets, spectrum auction, Steve Jobs, technology bubble, The Chicago School, The Fortune at the Bottom of the Pyramid, The Myth of the Rational Market, The Spirit Level, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, trickle-down economics, ultimatum game, uranium enrichment, very high income, We are the 99%, women in the workforce

It seemed curious that the ECB was apparently willing to delegate authority to a private institution, operating in secret, on what was or was not an acceptable restructuring. So much for democratic accountability. 39. The term “Chicago school” has come to refer to Milton Friedman and his disciples who believed in market fundamentalism, the idea that unfettered markets are always efficient even in the absence of government regulation. Milton Friedman taught for many years at the University of Chicago. But, of course, many economists who teach there do not subscribe to market fundamentalism—and many economists at other schools do. See chapter 3 for a longer discussion. 40. See the website of the Board of Governors of the Federal Reserve for the most up-to-date balance sheet figures, http://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm. 41.

If the leaders of the Fed hadn’t been so wedded to the notion that there were no bubbles, it would have been obvious to them (as it was to economists like Robert Shiller, of Yale, one of the country’s leading experts on housing),54 that the unprecedented rise in housing prices relative to incomes almost surely represented a bubble. In addition, the Fed didn’t have to rely on interest rate changes to dampen the bubble—it could have increased down payment requirements or tightened lending standards. Congress had given the Fed authority to do so in 1994. The Fed in its allegiance to market fundamentalism had tied its own hands. Economists have, similarly, provided the Fed with reasons not to attempt to address unemployment. People in a dynamic economy have to move from job to job, and that takes time, which creates a natural rate of unemployment. To push the economy beyond that natural rate pushes the economy to ever-accelerating inflation (in this view). As the unemployment rate falls even briefly below the natural rate, inflation increases; but then market participants come to expect that rate of inflation, and so they build that into their wage and price increases.

 

pages: 903 words: 235,753

The Stack: On Software and Sovereignty by Benjamin H. Bratton

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1960s counterculture, 3D printing, 4chan, Ada Lovelace, additive manufacturing, airport security, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, algorithmic trading, Amazon Mechanical Turk, Amazon Web Services, augmented reality, autonomous vehicles, Berlin Wall, bioinformatics, bitcoin, blockchain, Buckminster Fuller, Burning Man, call centre, carbon footprint, carbon-based life, Cass Sunstein, Celebration, Florida, charter city, clean water, cloud computing, connected car, corporate governance, crowdsourcing, cryptocurrency, dark matter, David Graeber, deglobalization, dematerialisation, disintermediation, distributed generation, don't be evil, Douglas Engelbart, Edward Snowden, Elon Musk, en.wikipedia.org, Eratosthenes, ethereum blockchain, facts on the ground, Flash crash, Frank Gehry, Frederick Winslow Taylor, future of work, Georg Cantor, gig economy, global supply chain, Google Earth, Google Glasses, Guggenheim Bilbao, High speed trading, Hyperloop, illegal immigration, industrial robot, information retrieval, intermodal, Internet of things, invisible hand, Jacob Appelbaum, Jaron Lanier, Jony Ive, Julian Assange, Khan Academy, linked data, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, Masdar, McMansion, means of production, megacity, megastructure, Menlo Park, Minecraft, Monroe Doctrine, Network effects, new economy, offshore financial centre, oil shale / tar sands, packet switching, PageRank, pattern recognition, peak oil, performance metric, personalized medicine, Peter Thiel, phenotype, place-making, planetary scale, RAND corporation, recommendation engine, reserve currency, RFID, Sand Hill Road, self-driving car, semantic web, sharing economy, Silicon Valley, Silicon Valley ideology, Slavoj Žižek, smart cities, smart grid, smart meter, social graph, software studies, South China Sea, sovereign wealth fund, special economic zone, spectrum auction, Startup school, statistical arbitrage, Steve Jobs, Steven Levy, Stewart Brand, Stuxnet, Superbowl ad, supply-chain management, supply-chain management software, TaskRabbit, the built environment, The Chicago School, the scientific method, Torches of Freedom, transaction costs, Turing complete, Turing machine, Turing test, universal basic income, urban planning, Vernor Vinge, Washington Consensus, web application, WikiLeaks, working poor, Y Combinator

It is a state within a state, albeit one largely financed by another state, that has not seceded from its host nation but controls large swaths with last-instance sovereignty. On purely formal terms, how would organizational apparatuses such as these compare to corporations that have, at least in the United States, been granted the constitutional protections of private religious belief? (Here market fundamentalism collaborates directly in desecularization.) We can easily imagine scenarios in which theologically programmatic Cloud platforms might compose their City, Address, Interface, and User layers as something that resembles Hezbollah at least as much as a mid-twentieth-century corporation. 40.  It is clearly not the annulment of dissensus, because in the absence of real politicization of fundamental conflict and the proliferation of incompatible and often unredeemable cosmographies, the only positions of dissent end up being those of the irredentist, the humanist, and the fundamentalist.

Back in the city, people may assault other people wearing Google Glass on behalf of evicted renters, imagining their acts as those of popular refusal and resistance to the tyranny of calculative vision. Others draw embarrassing dichotomies between “poetry” and “finance” as the key to unlocking a new society. However, others provide durable critiques of how the algorithmic geopolitics is currently configured, and how its dangerous naturalization by market fundamentalism is not only legible in certain philosophical trends but naturalized by them. Others have accomplished a powerful politics of open, reprogrammable computational infrastructures that has had a direct and positive on how global systems are developed, though not nearly enough, and battles won may be reversed. Still others have articulated, from the disciplinary margins, a visionary and proactive leftist futurism that makes a native comfort with techniques of comprehensive abstraction a central tenet of post-neoliberal economics.

See also borders; grids of communication, 205 of demarcation, international law, 32 geopolitical effects, 39–40 inside and outside of, 23–28 land versus sea, 19, 26–28, 30, 113, 150 nomos of the Cloud, 28–31 reversibility, 22, 150 subdividing Earth, 21–24, 193, 195 liquefaction and solidification, 355, 379n9 liquefaction of self, 71 live-work-sleep factory cities, 130–131 living beings-subjects-apparatuses, 272, 279 Llull, Ramon, 77 localism, 104, 143 logistical aesthetics, 178, 230–235, 243 logistics, defined, 422n28 London, US embassy in, 322 Longo, Giuseppe, 389n12 loop topology, 24, 84, 373 Los Angeles, 320 Lovelace, Ada Byron, 42, 79 Lucretius, 77, 192 Luhmann, Niklas, 385n25 machine-as-state, 7–13, 34, 40, 65, 373 machine-human distinction, 164–165 machine owners, rights of, 285 machines agency of, 348 of governance, 173–174 innate capacities of, 273 intelligence of, 78, 81, 262, 362 real versus artificial, 358 subjectification of, 272–273 machine-to-machine (M2M) communication, 137 machine-to-machine (M2M) connoisseurship, 226 machine User, 279–284 machinic prostheticization theory, 273 Madison, James, 109 Mad Max, 319 Maidan Square protests, Ukraine, 347 Malle, Louis, 429n62 malware, 202, 346 Manson, Charles, 293 manufacturing electronics, ecology of, 82–83 maps cartographic function of the state, 109, 119 Europe by energy polities, 99 geolocative Apps, 236, 243 of global address space, 208 Google Maps, 9, 120, 144, 242, 265, 431n70 modern nation-state, 24 Nicaragua-Costa Rica border conflict, 9, 120, 144 personal mapping technologies, 86, 236, 243, 431n70 as precomputational interfaces, 429n61 remapping war, 17, 242, 247–248 of sovereignty, 53–54 subdividing Earth, 195, 413n5 of territorial expansion, 120 Marcus, Gary, 283–284 Marcuse, Herbert, 328 market fundamentalism, 446n39 market governance, 310, 329–330 market sovereignty, 21, 105, 285, 329 Marramao, Giacomo, 381n24 Marx, Karl, 52, 77, 212, 328 Masdar City, Abu Dhabi (Foster), 179, 181–182, 281 Massumi, Brian, 101 material cosmopolitanism, 257 materialism, 131, 212 mathematical space, 337, 352 mathematics, universal laws of, 134 Matta-Clark, Gordon, 37, 53 Matter and Memory (Bergson), 191 May Fools (Malle), 429n62 Mayne, Thom, 323 McHale, John, 435n38 McLuhan, Marshall, 219, 251, 273 mechanical images, growth in, 225–226 Mechanical Turk (Amazon), 278–279, 308 media computational, 198 digital, 55 global, 55 Media Lab, MIT, 201, 226 mediascape, 148 medicine, hyperilluminated, 267–269 megacities, 162–163, 182, 312 megastructures accidental, 5, 8–17, 54, 61, 64, 72, 303, 367 architecture of, 154, 183–187, 296, 320 atmospheric, 195 cities infolded in, 155 Cloud platform, 183–189 computational, 336 corporate campuses, 183–187, 320 feudal, 311 geoepidermal, 90 inclusion and exclusion in, 311–312 intimate pairing of international, 189 inverting, 160 mediation of humans, 188 purpose of, 154–155 Stack as, 197 synthetic, 162–163 as utopia, 176–183 Megaupload raids, 399n34 mega-utopianism, architectural, 179 Meillassoux, Quentin, 358 membranes.

 

pages: 662 words: 180,546

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

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Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, Bretton Woods, Brownian motion, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, facts on the ground, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, full employment, George Akerlof, Goldman Sachs: Vampire Squid, Hernando de Soto, housing crisis, Hyman Minsky, illegal immigration, income inequality, incomplete markets, invisible hand, Jean Tirole, joint-stock company, Kenneth Rogoff, knowledge economy, l'esprit de l'escalier, labor-force participation, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, payday loans, Ponzi scheme, precariat, prediction markets, price mechanism, profit motive, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, school choice, sealed-bid auction, Silicon Valley, South Sea Bubble, Steven Levy, technoutopianism, The Chicago School, The Great Moderation, the map is not the territory, The Myth of the Rational Market, the scientific method, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, War on Poverty, Washington Consensus, We are the 99%, working poor

The point of all this: When I argue that we now live in a postneoliberal world, I do not mean that its practices or program have ceased (Ireland, Greece, and Portugal make it loud and clear that it’s alive and kicking), but that the narrative of the market’s universality is no longer unchallenged. The market is not the one and all; it has an outside, it has a limit.14 Just so it doesn’t appear that I am unfairly taking advantage of a certain class of people who might have been overly inclined to jump the gun, let’s sample some people closer to the orthodoxy in American economics like, say, Joseph Stiglitz: Neo-liberal market fundamentalism was always a political doctrine serving certain interests. It was never supported by economic theory. Nor, it should now be clear, is it supported by historical experience. Learning this lesson may be the silver lining in the cloud now hanging over the global economy.15 In an interview with the Berliner Zeitung, Stiglitz was quoted as saying, “Neoliberalism like the Washington Consensus is dead in most western countries.

Nevertheless, it was a sociological thought collective that eventually produced a relatively shared ontology concerning the world coupled with a more-or-less shared set of propositions about markets and political economy. These propositions are, of necessity, a central focus of a book on the relationship of neoliberals to the crisis. It should be very important to have some familiarity with these ideas, if only to resist simple-minded characterizations of the neoliberal approach to the crisis as some evangelical “market fundamentalism.” Although it is undeniably the case that all manner of secondhand purveyors of ideas on the right would wish to crow that “market freedom” promotes their own brand of religious righteousness, or maybe even the converse, it nonetheless debases comprehension to conflate the two by disparaging both as “fundamentalism”—a sneer unfortunately becoming commonplace on the left. It seems very neat and tidy to assert that neoliberals operate in a modus operandi on a par with religious fundamentalists: just slam The Road to Serfdom (or if you are really Low-to-No Church, Atlas Shrugged) on the table along with the King James Bible, and then profess to have unmediated personal access to the original true meaning of the only (two) book(s) you’ll ever need to read in your lifetime.

While Stiglitz has certainly earned his Nobel, he has not effectively staunched the intellectual trend of treating markets as prodigious information processors; nor has he provided a knock-down refutation of the EMH. This has led to the distressing spectacle of Stiglitz, the great hope of the “legitimate left,” openly defending the neoclassical approach to the crisis, while not really changing it all that much. Stiglitz has admitted that his mission all along was to undermine free-market fundamentalism from within: [I]t seemed to me the most effective way of attacking the paradigm was to keep within the standard framework as much as possible . . .While there is a single way in which information is perfect, there are an infinite number of ways that information can be imperfect. One of the keys to success was formulating simple models in which the set of relevant information could be fully specified . . . the use of highly simplified models to help clarify thinking about quite complicated matters.70 The way he sought to do this is to produce little stripped-down models that maximize standard utility or production functions, with a glitch or two inserted up front in the setup.

 

pages: 471 words: 124,585

The Ascent of Money: A Financial History of the World by Niall Ferguson

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Admiral Zheng, Andrei Shleifer, Asian financial crisis, asset allocation, asset-backed security, Atahualpa, bank run, banking crisis, banks create money, Black Swan, Black-Scholes formula, Bonfire of the Vanities, Bretton Woods, BRICs, British Empire, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collateralized debt obligation, colonial exploitation, Corn Laws, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, deglobalization, diversification, diversified portfolio, double entry bookkeeping, Edmond Halley, Edward Glaeser, Edward Lloyd's coffeehouse, financial innovation, financial intermediation, fixed income, floating exchange rates, Fractional reserve banking, Francisco Pizarro, full employment, German hyperinflation, Hernando de Soto, high net worth, hindsight bias, Home mortgage interest deduction, Hyman Minsky, income inequality, interest rate swap, Isaac Newton, iterative process, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour mobility, London Interbank Offered Rate, Long Term Capital Management, market bubble, market fundamentalism, means of production, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, mortgage tax deduction, Naomi Klein, Nick Leeson, Northern Rock, pension reform, price anchoring, price stability, principal–agent problem, probability theory / Blaise Pascal / Pierre de Fermat, profit motive, quantitative hedge fund, RAND corporation, random walk, rent control, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, seigniorage, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spice trade, structural adjustment programs, technology bubble, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, too big to fail, transaction costs, value at risk, Washington Consensus, Yom Kippur War

Already in 2007, Asian and Middle Eastern sovereign wealth funds had moved to invest in Western financial companies, including Barclays, Bear Stearns, Citigroup, Merrill Lynch, Morgan Stanley, UBS and the private equity firms Blackstone and Carlyle. For a time it seemed as if the sovereign wealth funds might orchestrate a global bail-out of Western finance; the ultimate role reversal in financial history. For the proponents of what George Soros has disparaged as ‘market fundamentalism’, here was a painful anomaly: among the biggest winners of the latest crisis were state-owned entities.bi And yet there are reasons why this seemingly elegant, and quintessentially Chimerican, resolution of the American crisis has failed to happen. Part of the reason is simply that the initial Chinese forays into US financial stocks have produced less than stellar results.bj There are justifiable fears in Beijing that the worst may be yet to come for Western banks, especially given the unknowable impact of a US recession on outstanding credit default swaps with a notional value of $62 trillion.

securitization 4 of debt 10 federal government and 260 perils of 261 private bond insurers and 260 segregation 250-51 Self, Beanie 268 Senegal Company 141 Serbia 2 sexual language 351 shadow banking see banks Shakespeare, William, The Merchant of Venice 33-4 Shanghai 303 shanty towns 274 shares (or stocks or equities): as collateral 132 displacement 143-4 features of 120-26 Law’s System and 143 shareholders’ meetings 120 and First World War 302 see also options; stock markets Sharpe, William 323 Shaw-Stewart, Patrick 302 shells 30 Shettleston 38-40 Shiller, Robert 281 Shining Path 276 ships/shipping 127-8. see also marine insurance short positions 316 short selling 137 Shylock 33-5 sidecars 227 Siena 69 Silicon Valley see dot.com silver 19-26 and Mississippi Bubble 149-50 Spanish and 1 Simons, James 330 Singapore 337n. SIVs see structured investment vehicles Skilling, Jeffrey K. 169 slavery: and home ownership 267 Rothschilds and 93 slave trading 25 Sloan, Alfred 160 Slovenia 2 Smith, Adam 53 socialists: and bond markets 89-90 and liberalization 312 and welfare state 200-202 Socialist Standard 17-18 Song Hongbing 86 Soros, George 314-19 income 2 on ‘market fundamentalism’ 337 Sourrouille, Juan 112 South America 18-26 gas pipelines 119 property law 274-6 see also Latin America Southern Rhodesia 295 South Korea 233 South Sea Bubble see bubbles sovereign wealth funds 9 Soviet-style economics 213 Soviet Union see Russia/USSR Spain 36 declining empire 26 and gold and silver 1 property price boom 10 royal funding 52 Spanish Succession, War of the 156 special-purpose entitities (SPEs) 172-3 speciation 53 speculators 122. see also futures contracts Spencer, Herbert 351 spices 127 spreads 241 squatters 276-7 squirrel skins 25 Sri Lanka 134 stagflation 211 Standard and Poor’s (S&P) 268 Standard and Poor’s 500: 124n.

 

pages: 499 words: 152,156

Age of Ambition: Chasing Fortune, Truth, and Faith in the New China by Evan Osnos

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conceptual framework, crony capitalism, currency manipulation / currency intervention, David Brooks, Deng Xiaoping, East Village, financial independence, Gini coefficient, income inequality, indoor plumbing, land reform, Lao Tzu, low skilled workers, market fundamentalism, Mohammed Bouazizi, Plutocrats, plutocrats, rolodex, Silicon Valley, South China Sea, sovereign wealth fund, special economic zone, Steve Jobs, transcontinental railway, Washington Consensus, Xiaogang Anhui farmers, young professional

In reality, many people swept into the current of China’s transformation found they had no choice but to plunge in and swim as fast as possible, with only the vaguest sense of what might lie on the other side. On paper, China remained suspicious of the individual; even after reforms were under way, the 1980 edition of the country’s authoritative dictionary, The Sea of Words, defined individualism as “the heart of the Bourgeois worldview, behavior that benefits oneself at the expense of others.” And nothing was more abhorrent to the Communist Party than the language of Thatcherist free-market fundamentalism. But China was enacting some of its most basic ideas: the retreat of public services, hostility to trade unions, national and military pride. All over China, people were embarking on journeys, joining the largest migration in human history. China’s extraordinary growth relied on a combination of abundant cheap labor and a surge of investment in factories and infrastructure—a recipe that uncorked economic energy stored up during the years of turmoil under Mao.

Cixi, Empress Dowager class Class: A Guide Through the American Status System (Fussell) Clinton, Hillary CNN Coca-Cola Cohen, Jerome Cohen, Joan Lebold Cold War college admissions Colombia color revolution COMDEX Communist Party, Chinese; alleged virtue of; censorship by; Central Committee of; Charter 08 denounced by; class opposed by; corruption in; culture planned by; dissidents contained by; Eighteenth Party Congress of; free market fundamentalism disdained by; land reform of; membership of; as “Party in Power”; propaganda studied by; Seventeenth National Congress of; on values; and Wenzhou train crash Communist Youth League concubines Confucianism Confucius Confucius Institute Confucius Temple Congress, U.S. Congressional-Executive Commission on China, U.S. Conrad, Joseph Corak, Miles Corallo, Mark corruption; as anarchic; in art; growth and; plans for rooting out; punishment of; see also bribes Cosmopolitan Cotter, Holland Cotton Flower Alley Crazy English Crédit Mobilier CTGZ Cui Tiankai cults Cultural Revolution currency, China’s alleged manipulation of cushion hypothesis Dalai Lama Daley, Richard M.

 

pages: 566 words: 155,428

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

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

An even stronger form of efficiency holds that market prices do not react to irrelevant news. If this were so, prices would ignore will-o’-the-wisps, unfounded rumors, the madness of crowds, and other extraneous factors—focusing at every moment on the fundamentals. In that case, prices would never deviate from fundamental values; that is, market prices would always be “right.” Under that exaggerated form of market efficiency, which critics sometimes deride as “free-market fundamentalism,” there would never be asset-price bubbles. Almost no one takes the strong form of the efficient markets hypothesis (EMH) as the literal truth, just as no physicist accepts Newtonian mechanics as 100 percent accurate. But, to extend the analogy, Newtonian physics often provides excellent approximations of reality. Similarly, economists argue over how good an approximation the EMH is in particular applications.

See Regulation; Regulatory failure Financial Services Authority (FSA), 124 Financial Stability Oversight Council (FSOC), 301, 316 First Franklin, 151 Fiscal cliff, causes of, 360 Fisher, Richard, 383–84 Fitch, 400 rating failures, 79–81 Fixed-income securities bonds, 40–41 default risk, 41–42 Fleming, Greg, 150, 152 Foreclosure mitigation, 320–42 barriers to, 322–23, 337–42 Home Affordable programs, 334–37 initial failed attempts, 327–32, 432 New Deal solutions, 324–25 Rick Santelli rant, 338–40 and TARP funds, 179, 332–33 Foreclosures ARMs, default in design of, 70–71, 321–22 bank lawsuits/settlements, 334, 432 causes of, 321–22 and subprime mortgages, 57, 70–71, 84 Fortis, decline and bailout of, 169 Frank, Barney, 140, 183, 188, 201, 225. See also Dodd-Frank Act of 2010 profile of, 304–5 Franken, Al, 286 Fraud, 354–56 Freddie Mac. See Fannie Mae/Freddie Mac Free-market fundamentalism, 65 Free-riding, 285–86 Friedman, Milton, 110 Friedman, Thomas, 440 Fromer, Kevin, 184 Frum, David, 432 Fuld, Richard “Dick,” on Lehman collapse, 120 Fundamentals, defined, 29 Fundamental value bubble as deviation from, 29–31, 39 of home, 30 of stock/dividends, 29 Geanakopolos, John, 329 Geithner, Timothy and AIG bailout, 134–35, 138, 140 and bailouts, 110 housing plan of, 334, 338 and Lehman collapse, 123–24 on stress tests, 257–59 and TARP, 191–92, 200–201 as Treasury secretary, 165, 205, 214, 216–17 on Volcker Rule, 311–12 and Wachovia/Wells merger, 158–61 on Washington Mutual decision, 156–57 General Motors (GM), 212–13 General Motors Acceptance Corporation (GMAC), 259 Germany and European crisis, 169–70, 410–11 as finance leader, 417–19 Gingrich, Newt, 439 Glass-Steagall Act (1933) Dodd-Frank on, 307 repeal of, 266–67, 294 Global financial crisis.

 

pages: 606 words: 157,120

To Save Everything, Click Here: The Folly of Technological Solutionism by Evgeny Morozov

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3D printing, algorithmic trading, Amazon Mechanical Turk, Andrew Keen, augmented reality, Automated Insights, Berlin Wall, big data - Walmart - Pop Tarts, Buckminster Fuller, call centre, carbon footprint, Cass Sunstein, choice architecture, citizen journalism, cloud computing, cognitive bias, crowdsourcing, data acquisition, Dava Sobel, disintermediation, East Village, en.wikipedia.org, Fall of the Berlin Wall, Filter Bubble, Firefox, Francis Fukuyama: the end of history, frictionless, future of journalism, game design, Gary Taubes, Google Glasses, illegal immigration, income inequality, invention of the printing press, Jane Jacobs, Jean Tirole, Jeff Bezos, jimmy wales, Julian Assange, Kevin Kelly, Kickstarter, license plate recognition, lone genius, Louis Pasteur, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, Narrative Science, Nicholas Carr, packet switching, PageRank, Paul Graham, Peter Singer: altruism, Peter Thiel, pets.com, placebo effect, pre–internet, Ray Kurzweil, recommendation engine, Richard Thaler, Ronald Coase, Rosa Parks, self-driving car, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, Skype, Slavoj Žižek, smart meter, social graph, social web, stakhanovite, Steve Jobs, Steven Levy, Stuxnet, technoutopianism, the built environment, The Chicago School, The Death and Life of Great American Cities, the medium is the message, The Nature of the Firm, the scientific method, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, transaction costs, urban decay, urban planning, urban sprawl, Vannevar Bush, WikiLeaks

Using games to get people to take their medications or quite smoking or go to school is not all that different from paying them to do so: in both cases, the effects go far beyond considerations of efficiency. Is it so unreasonable to assume that a kid who is paid to read books will think about reading differently than a kid who comes to enjoy reading for its own sake? As philosopher Michael Sandel points out in What Money Can’t Buy, his critique of market fundamentalism, “What begins as a market mechanism becomes a market norm,” transforming our attitudes to the good in question—whether it’s education or health—and such transformations are not always for the better. Gamification is no different; a project that enlists citizens into helping science by relying on game mechanics rather than by appealing to higher values will eventually come to transform how citizens relate to science.

Mad Men, Faded Denims, and Real Phonies All these attempts to fix the human condition—to reduce our biases by quantifying everything, to circumvent the frailties of our memory by recording everything, to rid us of our lowly, provincial interests by getting technology companies to serve us a more nutritious information diet, to get us to do the right thing by turning everything in life into a game—are indicative of Silicon Valley’s unease with imperfection as well as its glorification of the powerful tools at its disposal. Our geek kings do not realize that inefficiency is precisely what shelters us from the inhumanity of Taylorism and market fundamentalism. When inefficiency is the result of a deliberative commitment by a democratically run community, there is no need to eliminate it, even if the latest technologies can accomplish that in no time. Silicon Valley’s greatest ambition, though, is to ensure that all our social interactions—and even ourselves—exist under the yoke of authenticity. The fear of appearing inauthentic, of being a fake, has propelled nearly as much technological innovation as pornography.

 

Hopes and Prospects by Noam Chomsky

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Albert Einstein, banking crisis, Berlin Wall, Bretton Woods, British Empire, capital controls, colonial rule, corporate personhood, Credit Default Swap, cuban missile crisis, David Ricardo: comparative advantage, deskilling, en.wikipedia.org, energy security, failed state, Fall of the Berlin Wall, financial deregulation, Firefox, Howard Zinn, Hyman Minsky, invisible hand, market fundamentalism, Martin Wolf, Mikhail Gorbachev, Monroe Doctrine, moral hazard, new economy, nuremberg principles, open borders, Plutonomy: Buying Luxury, Explaining Global Imbalances, Ralph Waldo Emerson, RAND corporation, Ronald Reagan, structural adjustment programs, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, trade liberalization, uranium enrichment, Washington Consensus

Stephen Zunes, one of the leading scholarly analysts of these matters, points out that “at a critical point in the nation’s effort to become more self-sufficient [in the early 1950s], the U.S. government forced Bolivia to use its scarce capital not for its own development, but to compensate the former mine owners and repay its foreign debts.”1 The economic policies forced on Bolivia in those years were a precursor of the structural adjustment programs imposed on the continent thirty years later, under the terms of the neoliberal “Washington consensus,” which has generally had harmful effects wherever its strictures have been observed. By now, the victims of neoliberal market fundamentalism are coming to include the rich countries, where financial liberalization is bringing about the worst financial crisis since the Great Depression of the 1930s and leading to massive state intervention in a desperate effort to rescue collapsing financial institutions. We should note that this is a regular feature of contemporary state capitalism, though the scale today is unprecedented. A study by two international economists fifteen years ago found that at least twenty companies in the Fortune 100 would not have survived if they had not been saved by their respective governments, and that many of the rest gained substantially by demanding that governments “socialize their losses.”

See security “national treatment,” right of, 31 nationalism, 25 Native Americans. See American Indians “natural growth exceptions” to policy opposing new settlements, 186 natural resources, limited access to, 167 Necessary Illusions (Chomsky), 313n15 Negbi, Moshe, 155 Negroponte, John, 264 neoliberal globalization, financialization of economy in era of, 94 neoliberal market fundamentalism, 105 neoliberal market “reforms,” 100 neoliberalism, 53, 70, 75, 79, 81–84 central doctrine of, 93 Chile and, 92 vs. democracy, 91 and development, 75–76 See also financial liberalization Neoliberalismo y Globalización, vii Netanyahu, Binyamin, 178, 180, 186, 189, 201, 234 New Deal, 38, 77 “new initiative” for Middle East peace, 182, 201, 203 New Nationalism, 25 Nicaragua, 46, 275 9/11 terrorist attacks, 26–28, 266–67 “war on drugs” and, 57 Nixon, Richard M., 37, 42, 61, 116 Noble, David, 88 Non-Aligned Movement, 135, 196 Norris, John, 287n23 North American Free Trade Agreement (NAFTA), 29, 35–36, 69, 69, 91, 215–16, 270 North Atlantic Treaty Organization (NATO), 65, 171, 238, 248, 278 East German territories and, 171, 173, 279–80 expansion, 65, 136, 173–74, 223, 279–80 Gorbachev and, 136, 171, 279 “NATO response force,” 223–24 “responsibility to protect” and, 185 North Korea, 137–40 Nuclear Non-Proliferation Treaty (NPT), 194–97 Iran and, 135, 169, 196, 197, 199, 249, 250 Israel and, 194, 195 Obama and, 165–66, 194, 196, 197, 199, 249, 250 Pakistan and, 240 Reagan and, 240 United States and, 136 nuclear weapons, 166, 174 Diego Garcia and, 168 eliminating/ending the threat of, 136, 65–67 India and, 194–95 Iran and, 135, 169, 188, 194, 196–200, 249 Iraq and, 128, 198 Israel and, 194, 196, 197, 199, 249 Lee Butler on, 165 NATO and, 171 no-first-use policy, 166, 171 North Korea and, 137–39 Obama and, 165–66, 194–96, 249 Pakistan and, 169, 194, 196, 198, 210, 240, 249 Russia and, 168, 171 Saddam and, 127–28, 139, 197, 198 See also ballistic missile defense (BMD) programs; missile defense programs; weapons of mass destruction nuclear weapons programs, U.S. allies with extensive, 249 nuclear weapons–free zones (NWFZs), 63, 135, 167–69, 171, 173, 250.

 

The Great Turning: From Empire to Earth Community by David C. Korten

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Albert Einstein, banks create money, big-box store, Bretton Woods, British Empire, clean water, colonial rule, Community Supported Agriculture, death of newspapers, declining real wages, European colonialism, Francisco Pizarro, full employment, George Gilder, global supply chain, global village, Hernando de Soto, Howard Zinn, informal economy, invisible hand, joint-stock company, land reform, market bubble, market fundamentalism, Monroe Doctrine, Naomi Klein, neoliberal agenda, new economy, peak oil, planetary scale, Plutocrats, plutocrats, Ronald Reagan, Rosa Parks, South Sea Bubble, stem cell, structural adjustment programs, The Chicago School, trade route, Washington Consensus, World Values Survey

There was a troubling sense in the air, particularly among self-identified conservatives, that the moral and social foundations of society were disintegrating. The uncertainty and resentment created fertile ground for the demagogues of Empire. Renewing the Historic Alliance Historically, rejection of the democratic ideal in America has coalesced around one or both of two fundamentalisms. Plutocrats, heirs to the vision of Alexander Hamilton, embrace a market fundamentalism that legitimates unaccountable rule by persons of financial means. Theocrats, heirs to the Calvinist vision of John Winthrop, embrace a religious fundamentalism that legitimates unaccountable rule by those of a prescribed faith and celebrates wealth and power as a mark of God’s favor. Although plutocrats give priority to material values and theocrats to spiritual values, their shared drive for dominator power and aversion to democracy make them allies of convenience.

See also legal issues/legislation law of entropy, 271 life, 271–273 religious, 162 of thermodynamics, 273–274 Laws and Liberties of Massachusetts, 162 leaders, New Right, 336 leadership Aristotle on choice of, 154–155 dilemma of (ancient Athenian), 148–153 390 INDE X leadership (continued) feminine, 95, 99, 107, 323–324 from below, 13, 73, 87–88, 179, 315–326 social movement, 9, 55, 82, 195, 315–316, 353 strategies for, 316–318 leaders of twentieth century, 315–316 League of Nations, 81 learning, challenges of early human, 93 Left Behind series (LaHaye and Jenkins), 260 legal issues/legislation Alien Act, 189 American Indian Religious Freedom Act, 205 charters, 191 Civil Rights Act, 203 Clean Air Act, 228 Climate Protection Agreement, 320–321 Endangered Species Act, 228 labor laws, 209 Revenue Act, 175 Sedition Act, 189 share ownership by corporations, 192 Stamp Act, 175, 176 Supreme Court, 186, 207, 209, 211 Tea Act, 175 Liberator, The, 202 liberty, U.S. declaration of, 159 life as capacity to choose, 270–271 forest ecosystems, 275–278 human body, 278–280 as mutual empowerment, 274–275 as struggle, 271–273 life cycle, human, 288–289, 289–290 life satisfaction scores, 299–300 life stages, 288–289 lifestyle improvements, 297, 332 Liliuokalani, Queen, 193 limbic brain, 283–284, 285 Limits to Growth (Club of Rome), 218 living a lie, 355–356 living cultures, 349–352 living economies, 14–15, 319–320, 342–345 living indicators, 343–344 Living Planet Index (World Wildlife Fund), 59, 61 living politics, 345–349 living systems, 274 loans, 137–138, 138–139, 198 local living economies, 14–15, 343 local preference, 343 Locke, John, 153, 155 Long Emergency, The (Kunstler), 62–63 Louisiana Purchase, 190 love, tension between fear and, 34 low-income countries, 136–137, 227 Lukensmeyer, Carolyn, 346 Luoma, Jon R., 275–278 Luther, Martin, 116 Macy, Joanna, 18 Madison, James, 187 Mafia, 211 Magical Consciousness, 43, 49, 52, 56, 328 magical consequences, 49 Maguire, Daniel, 51 majoritarian political base, 317–318 Mander, Jerry, 15 manufacturing production, 208 Marcos, Ferdinand, 196 Margulis, Lynn, 270, 272–273, 291 market capitalization, 68 market economies, 15, 345 market fundamentalism, 219, 239 markets, responsive, 304, 344 Marshall, John, 189 masculine principles, 105 Maslow, Abraham, 42 Mason, George, 185 Massachusetts Bay Colony, 172 Massachusetts Supreme Court, 176 material mechanism, 14, 255, 256, 265, 280 mature citizenship, politics of, 339 mature society, creating, 48–49 May, Rollo, 43 meaning, finding, 311–312 meaning stories, 246–247, 249, 257, 308–310 Mechanics’ Union of Trade Associations, 207 mechanism, science of, 264 media, 82–83, 348 independent, 346–347 Memorandum E-B34, 194 men.

 

pages: 258 words: 63,367

Making the Future: The Unipolar Imperial Moment by Noam Chomsky

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Albert Einstein, Berlin Wall, Bretton Woods, British Empire, capital controls, collective bargaining, corporate governance, corporate personhood, deindustrialization, energy security, failed state, Fall of the Berlin Wall, financial deregulation, Frank Gehry, full employment, Howard Zinn, Joseph Schumpeter, kremlinology, Long Term Capital Management, market fundamentalism, Mikhail Gorbachev, Occupy movement, oil shale / tar sands, precariat, RAND corporation, Ronald Reagan, structural adjustment programs, The Great Moderation, too big to fail, uranium enrichment, Washington Consensus, WikiLeaks, working poor

As international affairs scholar Stephen Zunes points out, in the early 1950s, “at a critical point in the nation’s effort to become more self-sufficient, the U.S. government forced Bolivia to use its scarce capital not for its own development, but to compensate the former mine owners and repay its foreign debts.” The economic policies forced on Bolivia at that time were a precursor of the structural-adjustment programs imposed on the continent thirty years later, under the terms of the neoliberal “Washington consensus,” which has generally had disastrous effects wherever its strictures have been observed. By now, the victims of neoliberal market fundamentalism are coming to include the rich countries, where the curse of financial liberalization has helped to bring about the worst financial crisis since the Great Depression. The traditional modalities of imperial control—violence and economic war—are weakening. Latin America has real choices. Washington well understands that these choices threaten not only its domination of the hemisphere, but also its global dominance.

 

The Corporation: The Pathological Pursuit of Profit and Power by Joel Bakan

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Berlin Wall, Cass Sunstein, corporate governance, corporate personhood, corporate social responsibility, energy security, Exxon Valdez, IBM and the Holocaust, joint-stock company, laissez-faire capitalism, market fundamentalism, Naomi Klein, new economy, race to the bottom, Ralph Nader, Ronald Reagan, shareholder value, South Sea Bubble, The Wealth of Nations by Adam Smith, Triangle Shirtwaist Factory, urban sprawl

Inevitably, people will debate the extent to which such groups and interests should be immune to corporate exploitation, the kinds of measures that should be used to protect them, and what groups and interests should be protected-children's minds and imaginations , schools, universities, cultural institutions, water and power utilities, health and welfare services, police, courts, prisons, firefighters, parks, nature reserves, genes and other biological materials, and public space are all likely candidates-but these are healthy debates to have, far healthier than the increasingly prevalent presumption that no public interest exists beyond the accumulated financial interests of individual corporations, consumers, and shareholders . Page 164 ', JOEL BAKAN CHALLENGE INTERNATIONAL NEOLIBERALISM. Nations should work together to shift the ideologies and practices of international institutions, such as the WTO, IMF, and World Bank, away from market fundamentalism and its facilitation of deregulation and privatization. The current ideological biases of these institutions are not [and] develop the capacity to unite, to organize, and to recover our faith in ourselves and in others." That is what Olivera and the people of Cochabamba recently did." It all began when the Bolivian government, under pressure from the World Bank to privatize water utilities, contracted with Aguas del Tunari, the major shareholder of which is Bechtel subsidiary International Water Ltd., to run the water system of Cochabamba, a water- starved region in central Bolivia.

 

pages: 172 words: 54,066

The End of Loser Liberalism: Making Markets Progressive by Dean Baker

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Asian financial crisis, banking crisis, Bernie Sanders, collateralized debt obligation, collective bargaining, corporate governance, currency manipulation / currency intervention, Doha Development Round, financial innovation, full employment, Home mortgage interest deduction, income inequality, inflation targeting, invisible hand, manufacturing employment, market clearing, market fundamentalism, medical residency, patent troll, pets.com, pirate software, price stability, quantitative easing, regulatory arbitrage, rent-seeking, Robert Shiller, Robert Shiller, Silicon Valley, too big to fail, transaction costs

How could any believer in the virtue of free markets support the existence of large financial institutions that borrow at a lower cost than their competitors because of an implicit guarantee from the government? The fact that most of those claiming to be “free marketers” have overwhelmingly been on the side of the too-big-to-fail banks tells the world as clearly as possible that their motivations have nothing to do with a commitment to market fundamentalism and everything to do with a commitment to serving the interests of the rich and powerful. This is disguised as a commitment to the market for the obvious reason that doing things out of a commitment to free market principles sounds better than explicitly claiming to pursue policies that redistribute income from the vast majority of the population to the rich. Patent and copyright protection Patents and copyrights offer another example of how conservatives quietly support massive intervention by the government.

 

pages: 225 words: 61,388

Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa by Dambisa Moyo

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affirmative action, Asian financial crisis, Bretton Woods, colonial rule, correlation does not imply causation, credit crunch, diversification, diversified portfolio, en.wikipedia.org, European colonialism, failed state, financial innovation, financial intermediation, Hernando de Soto, income inequality, invisible hand, M-Pesa, market fundamentalism, Mexican peso crisis / tequila crisis, microcredit, moral hazard, Ponzi scheme, rent-seeking, Ronald Reagan, sovereign wealth fund, The Chicago School, trade liberalization, transaction costs, trickle-down economics, Washington Consensus, Yom Kippur War

While it is true that the Asian crisis of 1997, the Russian debacle in 1998 and the Argentinian default of 2001 all led to a sudden outflow of capital from the emerging markets, these proved to be hiccups in what has been a strong and growing trend of emerging-market interest. And even in those countries where money flowed out on the back of crises, in just one decade investor money has returned. The reasons for the rapidly growing interest in emerging economies are threefold: For one thing, investors are always looking for the next, best opportunity. And emerging-market fundamentals make a strong case for being some of the best opportunities around. Countries that exhibit strong economic performance and are seen to be on a sound and credible footing will be rewarded. At a minimum, foreign investors will be willing to lend the country the cash. However, the beauty with bonds is that their very existence lends further credibility to the country seeking funds, thereby encouraging a broader range of high-quality private investment.

 

pages: 257 words: 13,443

Statistical Arbitrage: Algorithmic Trading Insights and Techniques by Andrew Pole

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algorithmic trading, Benoit Mandelbrot, Chance favours the prepared mind, constrained optimization, Dava Sobel, Long Term Capital Management, Louis Pasteur, mandelbrot fractal, market clearing, market fundamentalism, merger arbitrage, pattern recognition, price discrimination, profit maximization, quantitative trading / quantitative finance, risk tolerance, Sharpe ratio, statistical arbitrage, statistical model, stochastic volatility, systematic trading, transaction costs

An important lesson from this history is that there was not a single condition or set of conditions that abruptly Preface xvii changed in 2000 and thereby eliminated forecast performance of statistical arbitrage models. What a story that would be! Far more dramatic than the prosaic reality, which is a complex mix of multiple causes and timings. All the familiar one liners, including decimalization, competition, and low volatility, had (and have) their moment, but none individually, nor the combination, can have delivered a blow to financial markets. Fundamentally altering the price dynamics of markets in ways that drastically diminish the economic potential in reversion schemes, mining value across the spectrum from the very high frequency hare of intra-day to the venerable tortoise of a month or more, requires a more profound explanation. Change upon change upon change cataloged in Chapter 9 is at the root of the dearth of return to statistical arbitrage in 2002–2004.

 

pages: 280 words: 73,420

Crapshoot Investing: How Tech-Savvy Traders and Clueless Regulators Turned the Stock Market Into a Casino by Jim McTague

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algorithmic trading, automated trading system, Bernie Madoff, Bernie Sanders, Bretton Woods, buttonwood tree, credit crunch, Credit Default Swap, financial innovation, Flash crash, High speed trading, housing crisis, index arbitrage, locking in a profit, Long Term Capital Management, margin call, market bubble, market fragmentation, market fundamentalism, naked short selling, pattern recognition, Ponzi scheme, quantitative trading / quantitative finance, Renaissance Technologies, Ronald Reagan, Sergey Aleynikov, short selling, Small Order Execution System, statistical arbitrage, technology bubble, transaction costs, Vanguard fund, Y2K

The machines looked at historic price discrepancies and bought stock on that basis. The machines didn’t care what the name of the underlying company was or what its future growth potential was. Machines did not discriminate on that basis. The machine merely tried to predict if a stock would go up or down over the next several minutes. And it wasn’t just the machines that had lost touch with market fundamentals. Those retail investors who stayed in the market were playing the momentum game, not investing. They wanted to go with the flow, to ride the trend. Thus, they were inclined to buy stock-index futures, options, and ETFs that mimicked the S&P 500 or specific sectors of the economy. As far as the small investor was concerned, the classic buy-and-hold strategy had been a big bust. The market was a lightning-fast roller coaster, and you had to sell at the top of the hill before the market took you screaming to the bottom.

 

pages: 208 words: 67,582

What About Me?: The Struggle for Identity in a Market-Based Society by Paul Verhaeghe

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Berlin Wall, call centre, cognitive dissonance, deskilling, epigenetics, Fall of the Berlin Wall, Francis Fukuyama: the end of history, income inequality, invisible hand, jimmy wales, job satisfaction, knowledge economy, knowledge worker, Louis Pasteur, market fundamentalism, Milgram experiment, new economy, post-industrial society, Richard Feynman, Richard Feynman, Silicon Valley, stem cell, The Spirit Level, ultimatum game, working poor

Culture needs to be broadly interpreted here, because this narrative has meanwhile taken over all sectors of society, from science and education to health care and the media. I shall not discuss the broader historic background of neo-liberalism.* Hans Achterhuis has described this very well, and Kapitalisme zonder remmen: opkomst en ondergang van het marktfundamentalisme (Capitalism without Brakes: the rise and fall of market fundamentalism) by the historian Maarten van Rossem makes the link with the current economic crisis crystal-clear. A number of important points emerge from their analyses. Throughout history, economies have always been embedded in religious, ethical, and social structures. This no longer applies in the case of neo-liberalism. On the contrary, religion, ethics, and society are subservient to ‘the market’.

 

pages: 193 words: 63,618

The Fair Trade Scandal: Marketing Poverty to Benefit the Rich by Ndongo Sylla

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British Empire, carbon footprint, corporate social responsibility, David Ricardo: comparative advantage, deglobalization, Doha Development Round, Food sovereignty, global value chain, illegal immigration, income inequality, income per capita, invisible hand, Joseph Schumpeter, labour mobility, land reform, market fundamentalism, means of production, Mont Pelerin Society, Naomi Klein, non-tariff barriers, offshore financial centre, open economy, Plutocrats, plutocrats, price mechanism, purchasing power parity, Ronald Reagan, Scientific racism, structural adjustment programs, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, transatlantic slave trade, trickle-down economics, Washington Consensus

We should be grateful to Sushil Mohan (2010) for being one of the rare authors to have understood that Fair Trade is a logical continuation of free trade and not an alternative to it: 101 Sylla T02779 01 text 101 28/11/2013 13:04 the fair trade scandal It is wrong to consider Fair Trade as a development of a market that is different from the ‘free market’. All that is happening is that Fair Trade opens up an alternative speciality trading channel within the free market. The market fundamentals, the demand, supply and market competitiveness conditions for Fair Trade products, follow conventional trade practices. Fair Trade works not because it subsidises goods no one wants, but because some free market consumers are willing to support it. Whether they are ‘objectively’ right to do so is important but irrelevant to this particular line of argument – Fair Trade fulfils a subjective preference.

 

The Techno-Human Condition by Braden R. Allenby, Daniel R. Sarewitz

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airport security, augmented reality, carbon footprint, clean water, cognitive dissonance, conceptual framework, Credit Default Swap, decarbonisation, facts on the ground, friendly fire, invisible hand, Isaac Newton, Jane Jacobs, land tenure, life extension, Long Term Capital Management, market fundamentalism, mutually assured destruction, nuclear winter, Peter Singer: altruism, planetary scale, prediction markets, Ralph Waldo Emerson, Ray Kurzweil, Silicon Valley, smart grid, stem cell, Stewart Brand, technoutopianism, the built environment, The Wealth of Nations by Adam Smith, transcontinental railway, Whole Earth Catalog

lo Participants in the transhumanism debates have interpreted particular religious traditions or worldviews to require the banning of certain kinds of research and development, as if the connection from lab bench to moral spillover in society were knowable in advance. Any moral framework is incoherent if it seeks simply to extend existing ethical systems into more complex domains by, for example, making individual engineers or scientists personally responsible for the behavior of the larger technological systems on which they work. On the other hand, market fundamentalism, which posits (impossibly) that all economic transactions should be unencumbered by government interference, has become a Level III moral framework that acts in opposition to the above examples, as if unfettered permissiveness in the pursuit of technological innovation automatically leads to morally optimal outcomes. 182 Chapter 8 Ethical frameworks that link Level I moral behavior to Level III knowledge assume not only that future technological paths can be predicted, but that single worldviews and belief systems are adequate to frame the ethical implications of complex adaptive Earth systems.

 

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, Flash crash, illegal immigration, labour market flexibility, labour mobility, 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

As one observer of EU summits noted, everybody always stopped to listen to Merkel; nobody paid any attention when Hollande took the floor, instead fiddling with their BlackBerries and iPhones. The marginalisation of France is also denting public opinion in that country, which is increasingly turning against both the euro and the EU. The French industry minister, Arnaud Montebourg, has taken to attacking the EU for its “free-market fundamentalism”. Another striking example even among the pro-European elite was a 2013 book by François Heisbourg, from the Foundation for Strategic Research, in which he argued that the euro should be scrapped in order to preserve the European Union.7 Angela alone In effect, Europe once again has what historians have called a German problem (with plenty of reason to hope that the solution will be more peaceful than in the past).

 

pages: 598 words: 172,137

Who Stole the American Dream? by Hedrick Smith

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Affordable Care Act / Obamacare, airline deregulation, anti-communist, asset allocation, banking crisis, Bonfire of the Vanities, British Empire, business process, clean water, cloud computing, collateralized debt obligation, collective bargaining, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, David Brooks, Deng Xiaoping, desegregation, Double Irish / Dutch Sandwich, family office, full employment, global supply chain, Gordon Gekko, guest worker program, hiring and firing, housing crisis, Howard Zinn, income inequality, index fund, informal economy, invisible hand, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, laissez-faire capitalism, late fees, Long Term Capital Management, low cost carrier, manufacturing employment, market fundamentalism, Maui Hawaii, mortgage debt, new economy, Occupy movement, Own Your Own Home, Peter Thiel, Plutonomy: Buying Luxury, Explaining Global Imbalances, Ponzi scheme, Ralph Nader, RAND corporation, Renaissance Technologies, reshoring, rising living standards, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, shareholder value, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Steve Jobs, The Chicago School, The Spirit Level, too big to fail, transaction costs, transcontinental railway, union organizing, Unsafe at Any Speed, Vanguard fund, We are the 99%, women in the workforce, working poor, Y2K

The political influence of the business community had become so weak, Powell contended, that the business executive had become “truly the ‘forgotten man.’ ” In a tone of exasperation, he chided America’s corporate leaders for bowing to mainstream middle-of-the-road policies and for adopting a strategy of “appeasement, ineptitude and ignoring the problem.” The time has come, he insisted, for Corporate America to adopt “a more aggressive attitude” and to change Washington’s policies through “confrontation politics.” Political mutiny had been brewing for some time. By the early 1970s, the free market fundamentalism of economist Milton Friedman, a Nobel laureate from the University of Chicago, was giving new legitimacy to pro-business laissez-faire economics in academic circles. William Buckley’s National Review and Irving Kristol’s Public Interest were challenging the long-accepted governmental activism of the welfare state, as it was then called. The “movement conservatism” spawned by the 1964 presidential candidacy of Senator Barry Goldwater, with its ardent anti-union, anti-government ideology, had growing appeal in Sun Belt business circles.

Economic revisionists like Clyde Prestowitz, the Reagan administration’s chief trade negotiator for Asia, dispute the old orthodox argument, contending that it denies reality and defies common sense. “For some time now our ‘best and brightest’ have been invoking false doctrines that are systematically undermining American prosperity,” Prestowitz wrote. “Leading among these is the economic orthodoxy of market fundamentalism, simplistic pure free trade….” Former IBM vice president Ralph Gomory contended, in testimony to Congress, that Ricardo’s nearly two-hundred-year-old theory does not match modern conditions. What America has lost to China, Gomory asserted, is not just a shift in production, but a shift in productivity, which puts the United States on the defensive. “When the U.S. trades semiconductors for Asian T-shirts, for example, that is trade in the narrow sense.

 

pages: 593 words: 189,857

Stress Test: Reflections on Financial Crises by Timothy F. Geithner

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Affordable Care Act / Obamacare, asset-backed security, Atul Gawande, bank run, banking crisis, Basel III, Bernie Madoff, Bernie Sanders, Buckminster Fuller, Carmen Reinhart, central bank independence, collateralized debt obligation, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, David Brooks, Doomsday Book, eurozone crisis, financial innovation, Flash crash, Goldman Sachs: Vampire Squid, housing crisis, Hyman Minsky, illegal immigration, implied volatility, London Interbank Offered Rate, Long Term Capital Management, margin call, market fundamentalism, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, moral hazard, mortgage debt, Nate Silver, Northern Rock, obamacare, paradox of thrift, pets.com, price stability, profit maximization, pushing on a string, quantitative easing, race to the bottom, RAND corporation, regulatory arbitrage, reserve currency, Saturday Night Live, savings glut, short selling, sovereign wealth fund, The Great Moderation, The Signal and the Noise by Nate Silver, Tobin tax, too big to fail, working poor

We failed to prevent the worst financial crisis and the deepest recession in generations. I had the dubious distinction of being in charge of the New York Fed when Wall Street imploded. The crisis later inspired a lot of commentary suggesting that the Fed was a reluctant regulator—and that I was too close to Wall Street, too confident in the competence and integrity of bankers, too devoted to the free-market fundamentalism I supposedly inherited from Rubin, Summers, and Greenspan. I was routinely described as a tool of the industry, bent by the banks. Even critics who didn’t suggest I was corrupt assumed I was captured by the establishment’s finance-friendly view of the world. So before I explain what we did at the New York Fed and why, as well as what we missed and why, I want to describe my attitudes toward the financial world when I started the job.

He consistently expressed concern about excessive leverage, although he was also skeptical of government’s ability to do much about it. Larry’s view of the world fell somewhere in between, probably closer to Greenspan’s at the time. I didn’t have the strength of any of their convictions, but by disposition, my view was closer to Rubin’s. My formative exposure to finance was the emerging-market crises, which were not attractive advertisements for free-market fundamentalism. My responsibilities at Treasury in the 1990s covered international issues, so I was mostly a bystander during the Clinton administration’s debates over financial regulation, and I didn’t have strong views about them at the time. I played no role in the noble but futile efforts to rein in Fannie and Freddie. I also had no involvement in the central battle of the time, the bipartisan effort to formally end the Depression-era “Glass-Steagall” legal boundaries between commercial banking and other financial activities, boundaries that had already been substantially eroded by changes in regulation and financial innovations.

 

pages: 272 words: 19,172

Hedge Fund Market Wizards by Jack D. Schwager

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asset-backed security, backtesting, banking crisis, barriers to entry, Bernie Madoff, Black-Scholes formula, British Empire, Claude Shannon: information theory, cloud computing, collateralized debt obligation, commodity trading advisor, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, delta neutral, diversification, diversified portfolio, family office, financial independence, fixed income, Flash crash, hindsight bias, implied volatility, index fund, James Dyson, Long Term Capital Management, margin call, market bubble, market fundamentalism, merger arbitrage, oil shock, pattern recognition, pets.com, Ponzi scheme, private sector deleveraging, quantitative easing, quantitative trading / quantitative finance, risk tolerance, risk-adjusted returns, risk/return, riskless arbitrage, Sharpe ratio, short selling, statistical arbitrage, Steve Jobs, systematic trading, technology bubble, transaction costs, value at risk, yield curve

Contents Foreword Preface Acknowledgments Part One: Macro Men Chapter 1: Colm O’Shea Addendum: Ray Dalio’s Big Picture View Chapter 2: Ray Dalio Chapter 3: Larry Benedict Chapter 4: Scott Ramsey Chapter 5: Jaffray Woodriff Part Two: Multistrategy Players Chapter 6: Edward Thorp Chapter 7: Jamie Mai Chapter 8: Michael Platt Part Three: Equity Traders Chapter 9: Steve Clark Chapter 10: Martin Taylor Chapter 11: Tom Claugus Chapter 12: Joe Vidich Chapter 13: Kevin Daly Chapter 14: Jimmy Balodimas Chapter 15: Joel Greenblatt Conclusion Epilogue Appendix A Appendix B About the Author Index Other Books by Jack D. Schwager A Complete Guide to the Futures Markets: Fundamental Analysis, Technical Analysis, Trading, Spreads, and Options Getting Started in Technical Analysis Market Wizards: Interviews with Top Traders The New Market Wizards: Conversations with America’s Top Traders Stock Market Wizards: Interviews with America’s Top Stock Traders Schwager on Futures: Fundamental Analysis Schwager on Futures: Managed Trading Myths & Truths Schwager on Futures: Technical Analysis Study Guide to Accompany Fundamental Analysis (with Steven C.

See Taylor, Martin EBIT EBITDA Economics, teaching of Education reform Efficient market hypothesis (EMH) Electronic trading, changes brought about by Emerging markets funds Enterprise value (EV) Entry size Equal-weighted indexes Euphoria, avoiding Eurobonds Euro Disney European debt crisis of 2011 European sovereign debt Exchange Rate Mechanism (ERM) Exiting trades False breakouts Fibonacci retracements Financial bubble of 2005–2007. See also Subprime mortgages/bonds Financial crisis beginning in 2007 Colm O’Shea on determining start of Michael Platt on Steve Clark on First New York Securities. See also Balodimas, Jimmy Fiscal policy Five Corners Partners, LP Five-phase cycle Flexibility Forward conversions Forward pricing Free cash flow (FCF) Free markets Fundamental analysis. See also Taylor, Martin Fund asset size Fund capacity Futures traders. See Commodity Trading Advisors (CTAs) Gain to Pain ratio Gambling baccarat system blackjack system compared to investing roulette system Gate provision Gating Geismar, Michael Gerard, Ralph Giuliani, Rudolph Gold Goldman Sachs Goldstein, Rob Goodyear Google Gotham Capital. See also Greenblatt, Joel Graham, Ben Grantham, Jeremy Great Depression Greenblatt, Joel on education reform Magic Formula Value and Special Situation Investing course Value Investors Club Halcyon Investments Hand, Eddie Hedge funds Banyan Equity Management (see also Benedict, Larry) Baring Asset Management BlueCrest (see Platt, Michael) Bridgewater (see Dalio, Ray) Denali Asset Management (see Ramsey, Scott) Gotham Capital (see also Greenblatt, Joel) LTCM (Long Term Capital Management) Manalapan Oracle Capital Management (see also Vidich, Joe) Nevsky Fund (see also Taylor, Martin) Omni Global Fund (see Clark, Steve) Princeton Newport Partners (PNP) (see Thorp, Edward) Ridgeline Partners High-conviction trades Hockett, Ben Horizon Lines Host Marriott House, Gerry Housing bubble.

 

pages: 558 words: 168,179

Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right by Jane Mayer

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affirmative action, Affordable Care Act / Obamacare, anti-communist, Bakken shale, bank run, battle of ideas, Berlin Wall, Capital in the Twenty-First Century by Thomas Piketty, carried interest, centre right, clean water, Climategate, Climatic Research Unit, collective bargaining, crony capitalism, David Brooks, desegregation, diversified portfolio, Donald Trump, energy security, estate planning, Fall of the Berlin Wall, George Gilder, housing crisis, hydraulic fracturing, income inequality, invisible hand, job automation, low skilled workers, market fundamentalism, Mont Pelerin Society, More Guns, Less Crime, Nate Silver, New Journalism, obamacare, Occupy movement, offshore financial centre, oil shale / tar sands, oil shock, Plutocrats, plutocrats, Ralph Nader, Renaissance Technologies, road to serfdom, Ronald Reagan, school choice, school vouchers, The Bell Curve by Richard Herrnstein and Charles Murray, The Chicago School, the scientific method, University of East Anglia, Unsafe at Any Speed, War on Poverty, working poor

While the group’s title evoked the Founding Fathers, its chief executive officer was a Wisconsin investor named Eric O’Keefe who had been involved with the Kochs since his days as a young volunteer in David Koch’s Libertarian Party campaign for vice president. O’Keefe eventually became the national director of the Libertarian Party. By 1983, however, like the Kochs, he had moved on to promoting free-market fundamentalism through other means, often joining forces with the brothers through their donor seminars and other ventures. Influenced as a child by The Wall Street Journal and the Conservative Book Club, O’Keefe, as The Washington Post wrote, “had money. He grew up with some and made a lot more as an investor, allowing him to devote decades to a series of ambitious political crusades, nearly all of them failures.”

The think tanks, advocacy groups, and talking heads on the right sprang into action, shaping a political narrative that staved off the kind of course correction that might otherwise have been expected. A key skirmish in this battle was the reframing of the history of the 2008 economic crash. From an empirical standpoint, it was hard to see it as anything other than a wipeout for the proponents of free-market fundamentalism and an argument for stronger government regulations. Like the Great Depression, it might have been expected to produce a backlash against those seen as irresponsible profiteers, resulting in more government intervention and a fairer tax system. Joseph Stiglitz, the liberal economist, described the 2008 financial meltdown as the equivalent for free-market advocates to the fall of the Berlin Wall for Communists.

 

pages: 351 words: 96,780

Hegemony or Survival: America's Quest for Global Dominance by Noam Chomsky

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anti-communist, Berlin Wall, Bretton Woods, British Empire, capital controls, cuban missile crisis, declining real wages, Doomsday Clock, facts on the ground, Fall of the Berlin Wall, invisible hand, market fundamentalism, Monroe Doctrine, RAND corporation, Ronald Reagan, Search for Extraterrestrial Intelligence, Thomas L Friedman, uranium enrichment

It is therefore rational to destroy the possibility for decent survival for our grandchildren, if by so doing we can maximize our own “wealth”—which means a particular perception of self-interest constructed by vast industries devoted to implanting and reinforcing it. The threats to survival are currently being enhanced by dedicated efforts not only to weaken the institutional structures that have been developed to mitigate the harsh consequences of market fundamentalism, but also to undermine the culture of sympathy and solidarity that sustains these institutions. All of this is another prescription for disaster, perhaps in the not very distant future. But again, it has a certain rationality within prevailing structures of doctrine and institutions. It would be a great error to conclude that the prospects are uniformly bleak. Far from it. One very promising development is the slow evolution of a human rights culture among the general population, a tendency that accelerated in the 1960s, when popular activism had a notable civilizing effect in many domains, extending significantly in the years that followed.

 

pages: 337 words: 103,273

The Great Disruption: Why the Climate Crisis Will Bring on the End of Shopping and the Birth of a New World by Paul Gilding

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airport security, Albert Einstein, BRICs, carbon footprint, clean water, cleantech, Climategate, corporate social responsibility, decarbonisation, energy security, Exxon Valdez, failed state, fear of failure, income inequality, Joseph Schumpeter, market fundamentalism, Naomi Klein, new economy, nuclear winter, oil shock, peak oil, Ponzi scheme, purchasing power parity, Ronald Reagan, shareholder value, The Spirit Level, The Wealth of Nations by Adam Smith, union organizing, University of East Anglia

So growth gives us a high when it’s happening and a nasty crash when it’s not. It’s an addictive cycle that will be hard to kick. Our addiction to growth is a complex phenomenon, one that can’t be blamed on a single economic model or philosophy. It is not the fault of capitalism or Western democracy, and it is not a conspiracy of the global corporate sector or of the rich. It is not a bad idea that emerged in economics, and it is not the result of free market fundamentalism that emerged in the 1980s with globalization. While each of those factors is involved, it is too simple and convenient to blame any of them as the main driver. Growth goes to the core of the society we have built because it is the result of who we are and what we have decided to value. So the fact that it is finished, at least in its current material form and indeed in any form for some decades to come, is going to strike at the heart of modern society.

 

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, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, diversified portfolio, financial deregulation, George Akerlof, illegal immigration, income inequality, inflation targeting, Jean Tirole, job satisfaction, Joseph Schumpeter, knowledge worker, labour market flexibility, law of one price, Long Term Capital Management, low skilled workers, market bubble, market clearing, market fundamentalism, means of production, minimum wage unemployment, moral hazard, new economy, obamacare, open economy, 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, working-age population, World Values Survey

In the next chapter, we will examine how a particularly powerful set of economic agents, those controlling the financial industry, have always used and still use their power to extract high profits to the detriment of ordinary citizens and of industries further down the hierarchy, while a biased economic mainstream pretended it was free competitive forces at work. Chapter 2 MONEY IS POWER An open, competitive, and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than governmental intervention. —Hank Paulson, 2007 Market fundamentalism has served well the interests of the owners and the managers of financial capital… Deregulation of financial transactions also served the interests of the managers of financial capital. The financial industry grew to a point there it represented 25 percent of the stock market capitalization of the United States. —George Soros, 2009 Shortly before the subprime crisis, US treasury secretary Hank Paulson insisted that it is best to leave the financial sector alone to do its work.

 

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, capital controls, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, 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, interest rate derivative, interest rate swap, Kenneth Rogoff, laissez-faire capitalism, late fees, Long Term Capital Management, market bubble, market fundamentalism, Martin Wolf, moral hazard, mortgage tax deduction, Ponzi scheme, price stability, profit maximization, race to the bottom, regulatory arbitrage, rent-seeking, Robert Shiller, Robert Shiller, Ronald Reagan, Saturday Night Live, sovereign wealth fund, The Myth of the Rational Market, too big to fail, transaction costs, value at risk, yield curve

There is no powerful constituency for far-reaching structural reform of the financial system. But on the other hand, the fight is far from over. The Dodd-Frank Act, though imperfect, marked the end of over three decades of deregulation and nonregulation of the financial sector. As with the Sherman Antitrust Act of 1890, legislation can play a significant role in changing the mainstream consensus. Wall Street’s apologists still sing the praises of free market fundamentalism and unfettered financial innovation, but their accustomed air of inevitability and triumphalism is gone. The American public has become deeply skeptical of financial machinations they cannot understand, and many of them have invested untold hours in learning how the financial system works and whom it benefits. We are perhaps at a pivotal moment in the battle between Jefferson and Hamilton.

 

pages: 279 words: 87,910

How Much Is Enough?: Money and the Good Life by Robert Skidelsky, Edward Skidelsky

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banking crisis, Bertrand Russell: In Praise of Idleness, Bonfire of the Vanities, call centre, David Ricardo: comparative advantage, death of newspapers, financial innovation, Francis Fukuyama: the end of history, full employment, happiness index / gross national happiness, income inequality, income per capita, informal economy, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, lump of labour, market clearing, market fundamentalism, profit motive, purchasing power parity, Ralph Waldo Emerson, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, Tobin tax, union organizing, University of East Anglia, wage slave, World Values Survey

As we showed in Chapter 2, the assumption of abundance, and consequent revulsion against technology and psychological distancing from the world of work, was the imaginative backdrop of the American utopian movements of the 1960s. The question is: why did the perception of imminent Bliss of the 1960s lead to the restoration of Darwinian capitalism in the 1980s? What brought Reagan and Thatcher to power and led to the renewal of free-market fundamentalism? It is easy to see that, in the form in which the followers of Marcuse imagined it, Bliss was an illusion. For reasons analyzed in Chapter 1, richer societies are likely to become more, rather than less, acquisitive, as the power of relative wants grows. But this secular trend does not explain the sudden collapse of the system of political economy that had brought the rich part of the world to the dawn of universal abundance.

 

pages: 334 words: 98,950

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

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

If a TNC that has bought up, rather than newly created, a company is practising transfer pricing, the firm that has now become a TNC subsidiary could be paying less tax than it used to when it was a domestic firm. 27 The data are from UNCTAD (United Nations Conference on Trade and Development). 28 Especially when it comes to FDI by collective investment funds (see notes 5 and 22), this may be the sensible strategy, as they do not have the industry-specific knowhow to improve the productive capabilities of the firms they buy up. 29 R. Kozul-Wright & P. Rayment (2007), The Resistible Rise of Market Fundamentalism: Rethinking Development Policy in an Unbalanced World (Zed Books, London), chapter 4. Also, see Kose et al. (2006), pp. 27–30. 30 The measures include: requirements for joint ventures, which increases the chance of technology transfer to the local partner; explicit conditions concerning technology transfer; local contents requirements, which forces the TNC to transfer some technology to the supplier; and export requirements, which force the TNC to use up-to-date technology in order to be competitive in the world market. 31 Sanjaya Lall, the late Oxford economist and one of the leading scholars on TNCs, once put this point well: ‘while having more FDI, on the margin, may usually (if not always) bring net benefits to the host country, there still is a question of choosing between different strategies regarding the role of FDI in long-term development’.

 

pages: 364 words: 99,613

Servant Economy: Where America's Elite Is Sending the Middle Class by Jeff Faux

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back-to-the-land, Bernie Sanders, Black Swan, Bretton Woods, BRICs, British Empire, call centre, centre right, cognitive dissonance, collateralized debt obligation, collective bargaining, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, David Brooks, David Ricardo: comparative advantage, falling living standards, financial deregulation, financial innovation, full employment, hiring and firing, Howard Zinn, Hyman Minsky, illegal immigration, indoor plumbing, informal economy, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, lake wobegon effect, Long Term Capital Management, market fundamentalism, Martin Wolf, McMansion, medical malpractice, mortgage debt, Naomi Klein, new economy, oil shock, Plutocrats, plutocrats, price mechanism, price stability, private military company, Ralph Nader, reserve currency, rising living standards, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, school vouchers, Silicon Valley, single-payer health, South China Sea, statistical model, Steve Jobs, Thomas L Friedman, Thorstein Veblen, too big to fail, trade route, Triangle Shirtwaist Factory, union organizing, upwardly mobile, urban renewal, War on Poverty, We are the 99%, working poor, Yogi Berra, Yom Kippur War

Our condition, he said, was “a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age.”3 Unlike George W. Bush, Obama seemed to understand the basic economic imperative. In March 2008, as Wall Street was beginning to feel the tremors of the coming financial earthquake, his speech to the Economic Club of New York competently analyzed the flaws in the free-market fundamentalism of the past decades. He reminded his audience that at the beginning of the republic, the Founding Fathers had recognized the need for government to set the rules of the marketplace. He was specific; he condemned the repeal of the Glass-Steagall Act and said it was aimed more at “facilitating mergers than creating an efficient regulatory framework.” It was not simply some policy mistake, he noted.

 

pages: 276 words: 82,603

Birth of the Euro by Otmar Issing

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accounting loophole / creative accounting, Bretton Woods, business climate, capital controls, central bank independence, currency peg, financial innovation, floating exchange rates, full employment, inflation targeting, labour market flexibility, labour mobility, market fundamentalism, moral hazard, oil shock, open economy, price anchoring, price stability, purchasing power parity, reserve currency, Y2K, yield curve

Only with a flexible (floating) exchange rate is the central bank able to achieve a domestic objective (generally speaking, the objective of price stability).32 The choice of exchange rate regime is of central importance for monetary policy and also for the place of the central bank in the macroeconomic policy framework. If a fixed exchange rate system is chosen, this ultimately means no less than that, even if it may continue to exist de jure, the independence of the central bank exists de facto only on paper, in that its obligation to intervene in the foreign exchange market fundamentally robs the central bank of its sovereignty over monetary policy-making.33 The same considerations as for an individual country also apply to the currency and the central bank of a monetary union. Hence, as regards the position of the ECB and its monetary policy, a pivotal role is played by the arrangements governing exchange rate policy responsibility, and in particular by the exchange rate regime.

 

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, 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, illegal immigration, income inequality, income per capita, invisible hand, Jane Jacobs, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour market flexibility, low skilled workers, market bubble, market design, market fundamentalism, megacity, Network effects, new economy, night-watchman state, Northern Rock, oil shock, principal–agent problem, profit motive, purchasing power parity, railway mania, rising living standards, Ronald Reagan, 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

As this kind of restructuring involves changes in everyday social relationships and habits, great strides in economic potential often feel uncomfortable. There has been a long tradition of cultural and social opposition to these effects of capitalism, as described in chapter 1. The shape the opposition takes will change with the times. Certainly, the absence of communism and socialism as credible alternative systems makes current distaste for “market fundamentalism” very different in flavor compared with previous periods such as the 1930s and 1960s when the pendulum of opinion has swung that same way. Be that as it may, the crisis of recent years has certainly reinforced the view that markets have—in some way—gone too far. But is the antimarket backlash any more than an emotional outburst before the bankers return to business as usual? After all, there were good reasons capitalism triumphed over communism in the Cold War.

 

pages: 355 words: 92,571

Capitalism: Money, Morals and Markets by John Plender

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

There is, in fact, something curiously Manichean about the way the capitalist political economy works, as the chapters that follow will show. Things that are in themselves a benefit to society – banking, debt, speculation, animal spirits – become damaging when taken to excess. And excess seems to be a recurring feature of economic cycles and of capitalism itself. After the long period of market fundamentalism introduced by Ronald Reagan and Margaret Thatcher, and after the worst recession since the 1930s, people are understandably resentful of huge boardroom pay awards, fat bank bonuses and rising inequality. How far society’s waning tolerance of these excesses will lead to a much more heavily regulated, lower growth form of capitalism turns heavily on these difficult issues about the moral character of money.

 

pages: 347 words: 99,317

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

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

If a TNC that has bought up, rather than newly created, a company is practising transfer pricing, the firm that has now become a TNC subsidiary could be paying less tax than it used to when it was a domestic firm. 27 The data are from UNCTAD (United Nations Conference on Trade and Development). 28 Especially when it comes to FDI by collective investment funds (see notes 5 and 22), this may be the sensible strategy, as they do not have the industry-specific knowhow to improve the productive capabilities of the firms they buy up. 29 R. Kozul-Wright & P. Rayment (2007), The Resistible Rise of Market Fundamentalism: Rethinking Development Policy in an Unbalanced World (Zed Books, London), chapter 4. Also, see Kose et al. (2006), pp. 27–30. 30 The measures include: requirements for joint ventures, which increases the chance of technology transfer to the local partner; explicit conditions concerning technology transfer; local contents requirements, which forces the TNC to transfer some technology to the supplier; and export requirements, which force the TNC to use up-to-date technology in order to be competitive in the world market. 31 Sanjaya Lall, the late Oxford economist and one of the leading scholars on TNCs, once put this point well: ‘while having more FDI, on the margin, may usually (if not always) bring net benefits to the host country, there still is a question of choosing between different strategies regarding the role of FDI in long-term development’.

 

pages: 368 words: 32,950

How the City Really Works: The Definitive Guide to Money and Investing in London's Square Mile by Alexander Davidson

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

The other case for a boom in commodities – less fashionable at this time – is that they are supply led. One indication of a shortage of supply is decreasing LME stocks in some metals. In April 2007, copper, lead and nickel were particularly low, although they had been lower in the past. ‘But LME warehouse stocks constantly change as material comes on and off warrant, and stock levels and trends will differ according to the metal and its particular market fundamentals,’ a spokesman said. Cycle theory suggests that commodities have outperformed stocks in a regular 18-year cycle, and in mid-2007, there was much talk that commodities were in a super-cycle, which perhaps the market had discounted. But if there have been cycles in the past, it does not in itself mean they recur in the same form. Regulation By the time this second edition of the book is in your hands, the Markets in Financial Instruments Directive (MiFID), implemented from 1 November 2007 (see Chapter 22), will have introduced for the first time a legislative regime for some firms trading commodity derivatives.

 

pages: 391 words: 102,301

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

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

Early in his bestselling book Globalization and Its Discontents, he acknowledges that “because of globalization many people in the world now live longer than before and their standard of living is far better.”7 His anger and condemnation are focused on specific aspects of the process, in particular that policies advocated by the International Monetary Fund in response to the crises in Asia and Russia were, in his view, wrongheaded, biased toward the interests of Western banks, and caused unnecessary misery. Stiglitz’s work was an attack on what he regarded as “market fundamentalism” leading to premature liberalization of trade and foreign exchange regimes. Yet while the globalization consensus wobbled after the Asian, Russian, and Latin American crises, it fundamentally stayed in place. Open economies in a globalized world were clearly vulnerable to sudden financial crises, but turning your back on the world was not an attractive or practical remedy. South Korea and Thailand were two of the biggest victims of the Asian economic crisis, but the South Koreans only had to look across the border to North Korea to be reminded that economic isolation offered far worse and more devastating prospects.

 

pages: 452 words: 110,488

The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead by David Callahan

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1960s counterculture, affirmative action, corporate governance, David Brooks, deindustrialization, East Village, forensic accounting, full employment, game design, greed is good, high batting average, housing crisis, illegal immigration, income inequality, job satisfaction, market fundamentalism, McMansion, microcredit, moral hazard, new economy, New Urbanism, offshore financial centre, oil shock, Plutocrats, plutocrats, postindustrial economy, profit maximization, profit motive, RAND corporation, Ray Oldenburg, rolodex, Ronald Reagan, shareholder value, Silicon Valley, Steve Jobs, The Bell Curve by Richard Herrnstein and Charles Murray, The Chicago School, Thorstein Veblen, War on Poverty, winner-take-all economy, World Values Survey, young professional

It is worth adding that every past popular revolt against laissez-faire excesses has come on the heels of a Republican presidency in which the White House was widely seen as too cozy with big business. We can only hope that George W. Bush's presidency—a presidency made possible by money from corporations and the superwealthy, and largely geared toward serving these constituencies—will also go down in the history books as the last stand of a deeply corrupt social order. Banishing the latest plague of market fundamentalism from U.S. society, forging a new social contract, reforming business and professions, teaching integrity to the young—these are the changes needed to dismantle the cheating culture. Some of us are positioned to be actively involved in such reform efforts;all of us can work as individuals, in our daily lives, to strengthen the moral fabric of U.S. society. Yes, the cheating epidemic writ large can be traced back to large-scale shifts in America over recent decades, but that doesn't mean that as individuals we're not responsible for our actions.

 

pages: 320 words: 86,372

Mythology of Work: How Capitalism Persists Despite Itself by Peter Fleming

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1960s counterculture, anti-work, call centre, clockwatching, corporate social responsibility, David Graeber, Etonian, future of work, Goldman Sachs: Vampire Squid, illegal immigration, late capitalism, Mark Zuckerberg, market bubble, market fundamentalism, means of production, neoliberal agenda, Parkinson's law, post-industrial society, profit maximization, profit motive, quantitative easing, Results Only Work Environment, shareholder value, The Chicago School, transaction costs, working poor

First, while companies are proclaiming the virtues of their ethicality on a scale never before seen (no large firm will omit a ‘social accounting report’ on its website), the ‘business as usual’ mentality now feels completely entrenched and immovable. The financial crisis might have opened up new ways of approaching the nature of economic activity, especially in terms of more progressive and imaginative alternative organizational forms. However, market fundamentalism has emerged from the 2008 meltdown in an almost unassailable hegemonic position, despite the growth of ‘green’ think tanks, sustainable economic practice reports, and the like. The second dimension of this contradiction at the heart of CSR pertains to the abiding legitimacy crisis of big business in much of the Western world. At the very time that the basic creditability of capitalism’s commitment to social responsibility has reached a new ebb, we see the very discourse of ‘ethics’, ‘shared value’ and ‘giving back’ burgeon in scale, scope and ambition.

 

pages: 366 words: 94,209

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

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

Young professionals understand that they’re playing a game, competing against one another in the marketplace of jobs as well as that of retirement strategies. As the United States’ manufacturing base declines, fewer young workers expect old-fashioned, long-term guarantees such as pensions, anyway.12 The rise of the 401(k) and concurrent decline in pensions emerged at a propitious moment in American history, when a strain of “free market” fundamentalism had seeped from the Goldwater and Friedman fringes of the Republican Party into the technolibertarian mainstream. The long boom of the 1990s, and its accompanying corporate focus on lean management and cost cutting, only amplified that trend.13 This confluence of circumstances—the invention of individual, tax-deferred savings instruments, the decline in American manufacturing, the rise of ultrafree-market ideology, the growing power of finance as a PR and lobbying force, and the availability of online trading tools—created a feedback loop in which each element further exaggerates and entrenches the others.

 

pages: 389 words: 109,207

Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street by William Poundstone

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Albert Einstein, anti-communist, asset allocation, Benoit Mandelbrot, Black-Scholes formula, Brownian motion, buy low sell high, capital asset pricing model, Claude Shannon: information theory, computer age, correlation coefficient, diversified portfolio, en.wikipedia.org, Eugene Fama: efficient market hypothesis, high net worth, index fund, interest rate swap, Isaac Newton, Johann Wolfgang von Goethe, John von Neumann, Long Term Capital Management, Louis Bachelier, margin call, market bubble, market fundamentalism, Marshall McLuhan, New Journalism, Norbert Wiener, offshore financial centre, publish or perish, quantitative trading / quantitative finance, random walk, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, short selling, speech recognition, statistical arbitrage, The Predators' Ball, The Wealth of Nations by Adam Smith, transaction costs, traveling salesman, value at risk, zero-coupon bond

The “semistrong form” says that you can’t beat the market by using any public information whatsoever. Public information includes not only past stock prices but also every press release, balance sheet, Bloomberg wire story, analyst’s report, and pundit comment. No matter how intently you follow the news, and no matter how good you are at drawing conclusions from news, by gut instinct or fancy software, you can’t beat the market. Fundamental analysis (the study of company finances and other business and economic factors) is worthless, too. Finally, the “strong form” adds private information to the mix. It says that you can’t beat the market even if you have access to company news that has not yet been made public. “Insider trading” is worthless! Fama was not going quite that far. He was just laying out the logical possibilities.

 

pages: 391 words: 22,799

To Serve God and Wal-Mart: The Making of Christian Free Enterprise by Bethany Moreton

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affirmative action, anti-communist, Berlin Wall, big-box store, Bretton Woods, Buckminster Fuller, collective bargaining, corporate personhood, deindustrialization, desegregation, Donald Trump, estate planning, Fall of the Berlin Wall, Frederick Winslow Taylor, George Gilder, global village, informal economy, invisible hand, market fundamentalism, Mont Pelerin Society, mortgage tax deduction, Naomi Klein, new economy, New Urbanism, post-industrial society, postindustrial economy, prediction markets, price anchoring, Ralph Nader, RFID, road to serfdom, Ronald Reagan, Silicon Valley, Stewart Brand, strikebreaker, The Wealth of Nations by Adam Smith, union organizing, walkable city, Washington Consensus, white flight, Whole Earth Catalog, Works Progress Administration

It understands the market to operate by natural laws that will, if left to their own devices, optimize the conditions of human existence. In this logic, there is no such thing as society or community, only individuals; the commons are a crime against efÂ�fiÂ� ciency; and government action intrudes illegitimately on the sovereign territory of economics, to the detriment of all. Since in practice neoliberal restructuring redistributed wealth upward, the rise of this “free-market fundamentalism” after the early 1970s left some observers demanding to know what was the matter with Kansas; why did those who lost out under the model’s prescriptions continue to enable them politically? In much of the world, the free-market vision spent those decades as a contested ideology, subjected to debate and often found wanting. But for most Americans, it acquired over thirty-five years the status of common sense—a fact of nature as self- 126 MAKING CHRISTIAN BUSIN E S S M EN evident as gravity and considerably more certain than evolution.

 

pages: 483 words: 141,836

Red-Blooded Risk: The Secret History of Wall Street by Aaron Brown, Eric Kim

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Albert Einstein, algorithmic trading, Asian financial crisis, Atul Gawande, backtesting, Basel III, Benoit Mandelbrot, Bernie Madoff, Black Swan, capital asset pricing model, central bank independence, Checklist Manifesto, corporate governance, credit crunch, Credit Default Swap, disintermediation, distributed generation, diversification, diversified portfolio, Emanuel Derman, Eugene Fama: efficient market hypothesis, experimental subject, financial innovation, illegal immigration, implied volatility, index fund, Long Term Capital Management, loss aversion, margin call, market clearing, market fundamentalism, market microstructure, money: store of value / unit of account / medium of exchange, moral hazard, natural language processing, open economy, pre–internet, quantitative trading / quantitative finance, random walk, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Robert Shiller, shareholder value, Sharpe ratio, special drawing rights, statistical arbitrage, stochastic volatility, The Myth of the Rational Market, too big to fail, transaction costs, value at risk, yield curve

Remember that the expensive bulbs fell only 16 percent; they were still valued more highly than they had been in 1635. Fundamentals were pulling the prices down and, as often happens in markets, there was a sudden adjustment triggered by minor news. The inexpensive bulbs and futures contracts on bulbs are a different story. I’ve claimed that these had monetized, and their increase in value from 1635 to 1637 was based on their value as money, not on tulip market fundamentals. In the initial phase, when physical bulbs were traded, they were like precious metal money—total supply was limited. The introduction of futures contracts removed that limitation. However, no bank or clearinghouse existed to make the contracts into true paper money. I do not believe people used futures on inexpensive tulip bulbs to speculate on tulips. I think they used them for money, transacting only with counterparties they believed to be financially solid, and holding roughly equal long and short balances so they had small net exposure to the value of tulip bulbs.

 

pages: 543 words: 157,991

All the Devils Are Here by Bethany McLean

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Asian financial crisis, asset-backed security, bank run, Black-Scholes formula, call centre, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Exxon Valdez, fear of failure, financial innovation, fixed income, high net worth, Home mortgage interest deduction, interest rate swap, laissez-faire capitalism, Long Term Capital Management, margin call, market bubble, market fundamentalism, Maui Hawaii, moral hazard, mortgage debt, Northern Rock, Own Your Own Home, Ponzi scheme, quantitative trading / quantitative finance, race to the bottom, risk/return, Ronald Reagan, Rosa Parks, shareholder value, short selling, South Sea Bubble, statistical model, telemarketer, too big to fail, value at risk

On baa2 [the second lowest rung], I’m open to some sharing to the extent that it keeps these customers engaged with us.” It is also clear from internal e-mails that by 2006 there were Goldman traders—not all of them, but some—who viewed some of their subprime holdings as junk. One trader described a Goldman mortgage-backed security this way: “It stinks.... I don’t want it in our book.” Swenson later wrote in a self-review that “during the early summer of 2006, it was clear that the market fundamentals in subprime and the highly levered nature of CDOs was going to have a very unhappy ending.” The year 2006 was when Dan Sparks became the head of the mortgage desk. Sparks, an intense Texan who had joined Goldman as an analyst in 1989 after graduating from Texas A&M, spent his early years at the firm helping the Resolution Trust Corporation dispose of assets from the S&L crisis. He made partner in 2002.

 

pages: 532 words: 155,470

One Less Car: Bicycling and the Politics of Automobility by Zack Furness, Zachary Mooradian Furness

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active transport: walking or cycling, affirmative action, American Society of Civil Engineers: Report Card, back-to-the-land, Build a better mousetrap, Burning Man, car-free, carbon footprint, clean water, colonial rule, conceptual framework, dumpster diving, Enrique Peñalosa, European colonialism, feminist movement, ghettoisation, Golden Gate Park, interchangeable parts, intermodal, Internet Archive, Jane Jacobs, market fundamentalism, means of production, Naomi Klein, New Urbanism, peak oil, place-making, post scarcity, race to the bottom, Ralph Nader, ride hailing / ride sharing, Ronald Reagan, Silicon Valley, sustainable-tourism, the built environment, The Death and Life of Great American Cities, Thomas L Friedman, Thorstein Veblen, urban planning, Whole Earth Catalog, Whole Earth Review, working poor, Yom Kippur War

Tourism is another option, though it similarly requires the importation of tourists as well as the creation of an industry in which workers must cater to tourists’ fluctuating travel budgets, their fickle desires for Third World authenticity, or their collective nostalgia for an exoticized past in which the “other” comes to life in a diorama of his or her natural habitat.100 The remedy for poverty prescribed by the newest wave of Western doctors (of economics) necessitates micro-lending schemes aimed at providing small loans to so-called barefoot bankers and others who lack access to credit, as well as the revitalization of the social mobility narrative—most commonly framed in terms of entrepreneurialism. pedals for progress, for example, aims to provide the people of less economically developed countries with bicycles in order to “unleash their entrepreneurial spirit,” just as World Bicycle relief positions the bicycle as a technological catalyst capable of fueling an individual’s “entrepreneurial drive.”101 One of the main reasons why an “entrepreneurial spirit,” as well as “cleverness,” “creativity,” “ingenuity,” and “innovation,” are so highly valued within this framework is because these characteristics are seen as the tools with which individuals can purportedly pursue individual solutions to a set of historically shaped, economically rooted, culturally entrenched, and otherwise social problems; it is the classic Horatio alger story modified for the postindustrial, buzz-word-chirping “creative class” in the United States.102 in conjunction with the Great Man interpretation of history, this mythos of bootstrap capitalism enables someone like Schweidenbach to seriously and uncritically proclaim: “The elimination of poverty is never a governmental affair; the elimination of poverty is a personal issue.”103 The overarching theme promulgated by most, but certainly not all, microenterprise advocates differs little from the core philosophy of market fundamentalism, save their emphasis on the inherent goodness of social entrepreneurialism and the value of helping people in poverty. Conveniently, the latter position shields such antidemocratic impulses from judgment inasmuch as a critique of their free market ideology is easily and mistakenly construed as a critique of aid itself. When in fact, social entrepreneurialism—regardless of its success stories—is simply a privatized business paradigm in which the good intentions of businesspersons or, alternatively, the good vibes of former-hippie CEOs like Whole Foods’ John Mackey, are meant to replace social movement activism and the mechanisms of democratic accountability required to genuinely empower populations.

 

pages: 525 words: 116,295

The New Digital Age: Transforming Nations, Businesses, and Our Lives by Eric Schmidt, Jared Cohen

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3D printing, access to a mobile phone, additive manufacturing, airport security, Amazon Mechanical Turk, Amazon Web Services, anti-communist, augmented reality, Ayatollah Khomeini, barriers to entry, bitcoin, borderless world, call centre, Chelsea Manning, citizen journalism, clean water, cloud computing, crowdsourcing, data acquisition, Dean Kamen, Elon Musk, failed state, fear of failure, Filter Bubble, Google Earth, Google Glasses, hive mind, income inequality, information trail, invention of the printing press, job automation, Julian Assange, Khan Academy, Kickstarter, knowledge economy, Law of Accelerating Returns, market fundamentalism, means of production, mobile money, mutually assured destruction, Naomi Klein, offshore financial centre, peer-to-peer lending, personalized medicine, Peter Singer: altruism, Ray Kurzweil, RFID, self-driving car, sentiment analysis, Silicon Valley, Skype, Snapchat, social graph, speech recognition, Steve Jobs, Steven Pinker, Stewart Brand, Stuxnet, The Wisdom of Crowds, upwardly mobile, Whole Earth Catalog, WikiLeaks, young professional, zero day

All it takes is a bit of creativity, plenty of bandwidth and the will to innovate. 1 These difficulties were compounded by the fact that the United States set up operational headquarters in Saddam Hussein’s former palaces, which had been turned into electronically shielded bunkers by the paranoid dictator. 2 We take these duties from a list of the ten functions of the state in the book Fixing Failed States, by Clare Lockhart and Ashraf Ghani, the founders of the Institute for State Effectiveness. 3 The journalist Naomi Klein famously called these actors “disaster capitalists” in her provocative book The Shock Doctrine. Klein argues that neo-liberal economics advocates seek to exploit a postcrisis environment to impose free-market ideals, usually to the detriment of the existing economic order. Like psychological shock therapy, this free-market fundamentalism uses the appearance of a “blank slate” to violently reshape the economic environment. 4 Estimates on the death toll of the Haitian earthquake vary widely. The Haitian government believes 316,000 people were killed, while a leaked memo from the U.S. government put the figure somewhere between 46,190 and 84,961. Conclusion As we look into the future—its promises and its challenges—we are facing a brave new world, the most fast-paced and exciting period in human history.

 

pages: 504 words: 143,303

Why We Can't Afford the Rich by Andrew Sayer

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accounting loophole / creative accounting, Albert Einstein, asset-backed security, banking crisis, banks create money, Bretton Woods, British Empire, call centre, capital controls, carbon footprint, collective bargaining, corporate social responsibility, credit crunch, Credit Default Swap, crony capitalism, David Graeber, David Ricardo: comparative advantage, debt deflation, decarbonisation, declining real wages, deglobalization, deindustrialization, delayed gratification, demand response, don't be evil, Double Irish / Dutch Sandwich, en.wikipedia.org, Etonian, financial innovation, financial intermediation, Fractional reserve banking, full employment, Goldman Sachs: Vampire Squid, high net worth, income inequality, investor state dispute settlement, Isaac Newton, James Dyson, job automation, Julian Assange, labour market flexibility, laissez-faire capitalism, low skilled workers, Mark Zuckerberg, market fundamentalism, Martin Wolf, means of production, moral hazard, mortgage debt, neoliberal agenda, new economy, New Urbanism, Northern Rock, Occupy movement, offshore financial centre, oil shale / tar sands, patent troll, payday loans, Plutocrats, plutocrats, predatory finance, price stability, pushing on a string, quantitative easing, race to the bottom, rent-seeking, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, Steve Jobs, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transfer pricing, trickle-down economics, universal basic income, unpaid internship, upwardly mobile, Washington Consensus, Winter of Discontent, working poor, Yom Kippur War

Where parts of the public sector can’t be privatised, league tables should be established and individuals, schools, universities, hospitals, museums, and so on should be made to compete for funds and be rewarded or penalised according to their placing. Democracy needs to be reined in because the ballot box can’t match markets in governing complex economies; people can express themselves better through what they buy and sell. Unsurprisingly, neoliberals keep their anti-democracy agenda under wraps. 2. The rise of neoliberalism also involves a political and cultural shift compatible with its market fundamentalism. Through a host of small changes in everyday life, we are increasingly nudged towards thinking and acting in ways that fit with a market rationality. More and more, the media address us as self-seeking consumers, savvy investors, ever pursuing new ways of supplementing our incomes through ‘smart investments’. Risk and responsibility are transferred to the individual. Job shortages are no longer acknowledged, let alone seen as a responsibility of the state: there are just inadequate individuals unable to find work: ‘skivers’, ‘losers’.

 

pages: 490 words: 117,629

Unconventional Success: A Fundamental Approach to Personal Investment by David F. Swensen

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asset allocation, asset-backed security, capital controls, cognitive dissonance, corporate governance, diversification, diversified portfolio, fixed income, index fund, law of one price, Long Term Capital Management, market bubble, market clearing, market fundamentalism, passive investing, pez dispenser, price mechanism, profit maximization, profit motive, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Shiller, shareholder value, Silicon Valley, Steve Ballmer, technology bubble, the market place, transaction costs, Vanguard fund, yield curve

Buying high and selling low provides a poor recipe for investment success. Even though the primary motivation for rebalancing concerns fidelity to the risk-and-return profile of long-term policy asset-allocation targets, in markets characterized by excess volatility rebalancing holds the potential to boost returns. When security prices fluctuate more than necessary to reflect changes in market fundamentals, investors enjoy the opportunity to buy low and sell high, enhancing overall portfolio results. As part of a quarterly, semiannual, or annual portfolio review, sensible investors consider rebalancing requirements and opportunities. The requirements stem from market-induced changes in allocations. The opportunities arise from tax-loss creation, tax-deferred account trading, and cash-flow allocations.

 

pages: 442 words: 39,064

Why Stock Markets Crash: Critical Events in Complex Financial Systems by Didier Sornette

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Asian financial crisis, asset allocation, Berlin Wall, Bretton Woods, Brownian motion, capital asset pricing model, capital controls, continuous double auction, currency peg, Deng Xiaoping, discrete time, diversified portfolio, Elliott wave, Erdős number, experimental economics, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, global village, implied volatility, index fund, invisible hand, John von Neumann, joint-stock company, law of one price, Louis Bachelier, mandelbrot fractal, margin call, market bubble, market clearing, market design, market fundamentalism, mental accounting, moral hazard, Network effects, new economy, oil shock, open economy, pattern recognition, Paul Erdős, quantitative trading / quantitative finance, random walk, risk/return, Ronald Reagan, Schrödinger's Cat, short selling, Silicon Valley, South Sea Bubble, statistical model, stochastic process, Tacoma Narrows Bridge, technological singularity, The Coming Technological Singularity, The Wealth of Nations by Adam Smith, Tobin tax, total factor productivity, transaction costs, tulip mania, VA Linux, Y2K, yield curve

Identifying a speculative bubble is very difficult because there are several conceptual problems that obscure the economic interpretation of bubbles, starting with the absence of a general definition: bubbles are model specific and generally defined from a rather restrictive framework [1]. It is therefore difficult to avoid a subjective bias, especially since the very existence of bubbles is still hotly debated [459, 411, 229, 144, 120, 342, 108, 187, 109, 359, 453, 185, 320]. A major problem with arguments in favor of bubbles is also that apparent evidence for bubbles can be reinterpreted in terms of market fundamentals that are unobserved by the researcher [120, 135, 185]. We have thus taken a pragmatic and very straightforward approach consisting in selecting “bubbles” based on the following three criteria: the existence of a sharp peak in the spirit of [348], the existence of a preceding period of increasing price that extends over at least six months and that should preferably be comparable with those of the larger crashes discussed in chapter 7, 286 chapter 8 the existence of a fast price decrease following the peak over a time interval much shorter than the accelerating period.

 

Commodity Trading Advisors: Risk, Performance Analysis, and Selection by Greg N. Gregoriou, Vassilios Karavas, François-Serge Lhabitant, Fabrice Douglas Rouah

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Asian financial crisis, asset allocation, backtesting, capital asset pricing model, collateralized debt obligation, commodity trading advisor, compound rate of return, constrained optimization, corporate governance, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, discrete time, distributed generation, diversification, diversified portfolio, dividend-yielding stocks, fixed income, high net worth, implied volatility, index arbitrage, index fund, interest rate swap, iterative process, linear programming, London Interbank Offered Rate, Long Term Capital Management, market fundamentalism, merger arbitrage, Mexican peso crisis / tequila crisis, p-value, Ponzi scheme, quantitative trading / quantitative finance, random walk, risk-adjusted returns, risk/return, Sharpe ratio, short selling, stochastic process, systematic trading, technology bubble, transaction costs, value at risk

Previous empirical studies related to the market behavior and impact of hedge funds and CTAs can be divided into three groups. The first set of studies focuses on the issue of “herding,” which can be defined as a group of traders taking similar positions simultaneously or following one another (Kodres 1994). This type of trading behavior can be destabilizing if it is not based on information about market fundamentals, but instead is based on a common “noise factor” (De Long, Schleifer, Summers, and Waldman 1990). Kodres and Pritsker (1996) and Kodres (1994) investigate herding behavior on a daily basis for large futures market traders, including hedge funds and CTAs, in 11 financial futures markets. Weiner (2002) analyzes 1See Eichengreen and Mathieson (1998) for a thorough overview of the hedge fund industry.

 

pages: 423 words: 118,002

The Boom: How Fracking Ignited the American Energy Revolution and Changed the World by Russell Gold

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accounting loophole / creative accounting, American energy revolution, Bakken shale, Bernie Sanders, Buckminster Fuller, clean water, corporate governance, energy security, energy transition, hydraulic fracturing, margin call, market fundamentalism, Mason jar, North Sea oil, oil shale / tar sands, oil shock, peak oil, Project Plowshare, risk tolerance, Ronald Reagan, shareholder value, Silicon Valley, Upton Sinclair

US Senator Bernie Sanders, an independent from Vermont, pulled the curtain back when he released a confidential list of futures market speculators compiled by the US Commodity Futures Trading Commission, a disclosure that sent futures traders into conniptions. The list of who held the natural gas contracts was a who’s who of global capitalism and energy. In descending order, they were BP, Barclays, Morgan Stanley, JPMorgan, and Shell. The sixth largest was the reclusive Tulsa billionaire George Kaiser, who owns a private gas exploration company, and who lent money to McClendon and often talked to him about market fundamentals. The eighth largest was John Arnold’s Centaurus Advisors, a major Houston hedge fund in which McClendon had invested. Chesapeake Energy held gas contracts to make it the seventeenth-largest participant in the futures markets, by far the largest position for an energy company of its size. Only a few individuals made the list. After George Kaiser, there was T. Boone Pickens (number 12). The next individual on the list was Aubrey McClendon, followed by his longtime business partner Tom Ward (numbers 52 and 53).

 

pages: 464 words: 121,983

Disaster Capitalism: Making a Killing Out of Catastrophe by Antony Loewenstein

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Affordable Care Act / Obamacare, anti-communist, Asian financial crisis, British Empire, Capital in the Twenty-First Century by Thomas Piketty, Chelsea Manning, clean water, collective bargaining, colonial rule, corporate social responsibility, Edward Snowden, facts on the ground, failed state, falling living standards, Ferguson, Missouri, financial independence, full employment, Goldman Sachs: Vampire Squid, housing crisis, illegal immigration, immigration reform, income inequality, Julian Assange, market fundamentalism, Naomi Klein, neoliberal agenda, obamacare, Occupy movement, offshore financial centre, open borders, private military company, profit motive, Ralph Nader, Ronald Reagan, Scramble for Africa, Slavoj Žižek, stem cell, the medium is the message, trade liberalization, WikiLeaks

After all, many UK local councils are now wholly privatized, operated by companies with no knowledge about the regional area.11 It is a cold process that has unfolded without public consent. The challenges remain profound. While former British prime minister Margaret Thatcher, a key architect of today’s neoliberal destruction of the public sector, died in April 2013, mass privatization, market fundamentalism, and support for dictatorships friendly to the West, which were championed by her and like-minded capitalists, continue to thrive. Both main parties in British politics still subscribe to private contracting as a responsible way to manage the state. But opinion polling consistently shows that the British public much prefer services run by the public sector. The challenge is transforming that attitude into action.

 

pages: 388 words: 125,472

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

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

According to the Office of Rail Regulation in 2013, when it came to taxpayers’ money the publicly owned East Coast mainline was the most efficient rail company, receiving far less public money than any of the UK’s fifteen privately run rail franchises. Just 1 per cent of East Coast’s income was a government subsidy, compared to up to 36 per cent for privately owned companies. But the Establishment’s free-market fundamentalism does not work pragmatically on the basis of ‘what works’, and the government planned to sell off the franchise to private owners by 2015. Labour’s Tom Watson tells me of a former transport minister who said to him: ‘These train operating companies are the nearest thing we’ve got to rogues and vagabonds in commerce and regulatory arrangements are completely inadequate.’ The state was not just there for the private rail companies.

 

Trade Your Way to Financial Freedom by van K. Tharp

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asset allocation, commodity trading advisor, compound rate of return, computer age, Elliott wave, high net worth, margin call, market fundamentalism, pattern recognition, prediction markets, random walk, risk tolerance, short selling, statistical model, transaction costs

Floor Trader Person who trades on the floor of a commodities exchange. Locals tend to trade their own account, while pit brokers tend to trade for a brokerage company or a large firm. Forex Stands for Foreign Exchange. A huge market in foreign currencies made by large banks worldwide. Fundamental Analysis Analysis of the market to determine the supply and demand characteristics. In equities markets, fundamental analysis determines the value, the earnings, the management, and the relative data of a particular stock. Futures When commodity exchanges added stock index contracts and currency contracts, the term “futures” was developed to be more inclusive. Gambler’s Fallacy The belief that a kxs is due after a string of winners and/or that a gain is due after a string of losers. Hit Rate The percentage of winners you have in your trading or investing.

 

pages: 537 words: 144,318

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

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

See Maximum Sharpe Ratio Multiyear horizons NASDAQ (1995-2003) index (1994-2003) mispricing Negative carry Negative skew risk New Deal New York Mercantile Exchange (NYMEX) Nikkei (1980-1998) Nominal GDP Non-Accelerating Inflation Rate of Unemployment (NAIRU) Nonconstant volatility, presence Nonequity assets, inclusion Nongovernmental organizations (NGOs), data Normal backwardation North Sea crude Notre Dame (university endowment) Ohio, pension fund loss Oil (1986-2009) Oil (1998-2009) Oil fields, Commodity Investor purchase 1% effect One time stimulus programs Optimal portfolio construction, real money funds failure Optionality, usage Options markets, day-to-day liquidity Options, usage Orange County pension fund, problem Outcomes, positive asymmetry (achievement) Overnight index, geometric average Overnight indexed swap (OIS) spreads (2006-2008) Overvaluation zones, examination Overvalued assets (portfolio ownership), diversification (absence) Oxford Endowment, asset management Passive asset mix, importance Passive commodity indices, avoidance Paulson, Henry Peak oil, belief Pension Benefit Guaranty Corporation (PBGC), corporation pension fund guarantees Pensioner, The CalPERS control, example dollar notional thinking illiquid asset avoidance illiquidity premium measurement process illiquidity risk, hedge process interview investment scenario lessons leverage, usage performance, compounding cost post-crash investment, peer performance returns, targeting risk management risk premiums, specification risk/return approach 60-40 policy, standardization Pension funds allocation base currency commodity investment reasons constraint increase investment implementation, changes talent, quality long-term investment horizon real risk swaps/futures, usage Pensions assets, conservative management cash level change contributions, delay funding levels plans, constraints profits structure, impact systems, demographic challenges (impact) underfunding, shortfall Perfection, paradox Personal budgets, problems Philippines, peso (1993-1994) Philosopher, The Physical commodities, front contract advantage Pioneering Portfolio Management (Swensen) Plan assets, value (estimate) Plasticine™ Plasticine Macro Trader, The China perspective commodities, ownership complacency context, creation contrarian perspective diversification interpretation equities, delusion Favorite Trade format disapproval,–370368 hedge funds usage ideas, generation (global macro perspective) information, filtration interview investment safety investment storm investor letter, impact Japan bullishness liquidity, importance long-only community, adaptation long-only investment market behavior entry, awareness irrationality, relationship mentor lessons pension fund portfolio management performance portfolio construction, rethinking creation operation predictability, degree risk management evolution importance lessons success, consideration trade development ideas, importance problem theses, development trading decisions trend, anticipation P&L trading Popper, Karl Portable alpha allocation Portfolio Commodity Hedger construction construction guidelines rethinking diversification risk diversity Equity Trader construction illiquid assets, leverage illiquidity level, risk management levering, risk collars (usage) liquidity management, difficulty management investor approach recipe marginal trade optimization P&L volatility, limits policy activity, increase (impact) real money manager construction replication/modeling risks concentration, increase management size, reduction stress tests, conducting structure Portfolio-level expected alpha Positioning, understanding Positions notional value oversizing running scaling Positive asymmetry, achievement Potash Corporation of Saskatchewan (2008) Precommitments, method Predator, The bearishness, development CalPERS operation inflection points, awareness information collection examination process interview lessons liquidity, valuation macro overlay, profitability markets fundamentals/psychology, impact psychology, understanding mental flexibility optimist, perspective risk management stock market increase, nervousness stocks long position picking, profitability style, evolution tactical approach time horizon trade problem quality trading ideas, origination uniqueness Premium. See Risk premia payment Price/earnings (P/E) multiples, exchange rate valuation (relationship) Primary Dealer Credit Facility, placement Prime broker risk Princeton University (endowment) Private equity cash flow production tax shield/operational efficiency arguments Private sector debt, presence Private-to-public sector risk Probability, Bayesian interpretation Professor, The bubble predication capital loss, avoidance capital management cataclysms, analysis crowding factor process diversification efficient markets, disbelief fiat money, cessation global macro fund manager hedge fund space historical events, examination idea generation inflation/deflation debate interview investment process lessons LIBOR futures ownership liquidity conditions, change importance market entry money management, quality opportunities personal background, importance portfolio construction management positioning process real macro success, personality traits/characteristics (usage) returns, generation risk aversion rules risk management process setback stocks, purchase stop losses time horizon Titanic scenario threshold trades attractiveness, measurement process expression, options (usage) personal capital, usage quality unlevered portfolio Property/asset boom Prop shop trading, preference Prop trader, hedge fund manager (contrast) Protectionism danger hedge process Public college football coach salary, public pension manager salary (contrast) Public debt, problems Public pensions average wages to returns endowments impact Q ratio (Tobin) Qualitative screening, importance Quantitative easing (QE) impact usage Quantitative filtering Random walk, investment Real annual return Real assets Commodity Hedger perspective equity-like exposure Real estate, spread trade Real interest rates, increase (1931) Real macro involvement success, personality traits/characteristics (usage) Real money beta-plus domination denotation evolution flaws hedge funds, differentiation impacts, protection importance investors commodity exposure diversification, impact macro principles management, change weaknesses Real money accounts importance long-only investment focus losses (2008) Real money funds Commodity Hedger operation Equity Trader management flexibility frontier, efficiency illiquid asset avoidance importance leverage example usage management managerial reserve optimal portfolio construction failure portfolio management problems size Real money managers Commodity Investor scenario liquidity, importance long-term investor misguidance poor performance, usage (excuse) portfolio construction valuation approach, usage Real money portfolios downside volatility, mitigation leverage, amount management flaws Rear view mirror investment process Redemptions absence problems Reflexivity Rehypothecation Reichsmarks, foreign holders (1922-1923) Relative performance, inadequacy Reminiscences of a Stock Operator (Lefèvre) Renminbi (2005-2009) Repossession property levels Republic of Turkey examination investment rates+equities (1999-2000) Reserve currency, question Resource nationalism Returns forecast generation maximization momentum models targets, replacement Return-to-worst-drawdown, ratios (improvement) Reward-to-variability ratio Riksbank (Sweden) Risk amount, decision aversion rules capital, reduction collars function positive convexity framework, transition function global macro manager approach increase, leverage (usage) measurement techniques, importance parameters Pensioner management pricing reduction system, necessity Risk-adjusted return targets, usage Risk assets, decrease Risk-free arbitrage opportunities Risk management Commodity Hedger process example game importance learning lessons portfolio level process P&L, impact tactic techniques, importance Risk premia annualization earning level, decrease specification Risk/reward trades Risk-versus-return, Pensioner approach Risk-versus-reward characteristics opportunities Roll yield R-squared (correlation) Russia crisis Russia Index (RTSI$) (1995-2002) Russia problems Savings ratio, increase Scholes, Myron Sector risk, limits Securities, legal lists Self-reinforcing cycles (Soros) Sentiment prediction swings Seven Sisters Sharpe ratio increase return/risk Short-dated assets Short selling, ban Siegel’s Paradox example Single point volatility 60-40 equity-bond policy portfolio 60-40 model 60-40 portfolio standardization Smither, Andrew Socialism, Equity Trader concern Society, functioning public funds, impact real money funds, impact Softbank (2006) Soros, George self-reinforcing cycles success Sovereign wealth fund Equity Trader operation operation Soybeans (1970-2009) Special drawing rights (SDR) Spot price, forward price (contrast) Spot shortages/outages, impact Standard deviation (volatility) Standard & Poor’s 500 (S&P500) (2009) decrease Index (1986-1995) Index (2000-2009) Index (2008) shorting U.S. government bonds, performance (contrast) Standard & Poor’s (S&P) shorts, coverage Stanford University (endowment) State pension fund Equity Trader operation operation Stochastic volatility Stock index total returns (1974-2009) Stock market increase, Predator nervousness Stocks hedge funds, contrast holders, understanding pickers, equity index futures usage shorting/ownership, contrast Stops, setting Stress tests, conducting Subprime Index (2007-2009) Sunnies, bidding Super Major Survivorship bias Sweden AP pension funds government bond market Swensen, David equity-centric portfolio Swiss National Bank (SNB) independence Systemic banking crisis Tactical asset allocation function models, usage Tactical expertise Tail hedging, impact Tail risk Take-private LBO Taleb, Nassim Tax cut sunset provisions Taxes, hedge Ten-year U.S. government bonds (2008-2009) Theta, limits Thundering Herd (Merrill Lynch) Time horizons decrease defining determination shortening Titanic funnel, usage Titanic loss number Titanic scenario threshold Topix Index (1969-2000) Top-line inflation Total credit market, GDP percentage Total dependency ratio Trade ideas experience/awareness, impact generation process importance origination Traders ability Bond Trader hiring characteristics success, personality characteristics Trades attractiveness, measurement process hurdle money makers, percentage one-year time horizon selection, Commodity Super Cycle (impact) time horizon, defining Trading decisions, policy makers (impact) floor knowledge noise level ideas, origination Tragedy of the commons Transparency International, Corruption Perceptions Index Treasury Inflation-Protected Securities (TIPS) trade Triangulated conviction Troubled Asset Relief Program (TARP) Turkey economy inflation/equities (1990-2009) investment rates+equities (1999-2000) stock market index (ISE 100) Unconventional Success (Swensen) Underperformance, impact Undervaluation zones, examination United Kingdom (UK), two-year UK swap rates (2008) United States bonds pricing debt (1991-2008) debt (2000-2008) home prices (2000-2009) hyperinflation listed equities, asset investment long bonds, market pricing savings, increase stocks tax policy (1922-1936) trade deficit, narrowing yield curves (2004-2006) University endowments losses impact unlevered portfolio U.S.

 

pages: 584 words: 187,436

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

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

Amaranth had allowed him to ramp up his positions in a niche market: By the end of February, Hunter held an astonishing 70 percent of the natural-gas futures contracts for November 2006 delivery on the New York Mercantile Exchange and about 60 percent of the contracts for January 2007. By means of this enormous position, Hunter was betting that November gas would fall in value and that January would rise; and so long as he added aggressively to his wager, his view was likely to be self-fulfilling. After all, it was not clear that his strategy was making money because market fundamentals were on his side. By early 2006, gas output had recovered from the devastation of the hurricanes, and mild winter weather was reducing gas demand, so that by April the quantity of gas held in storage was nearly 40 percent above the previous five-year average. Under these circumstances, the success of Hunter’s bet on summer/winter spreads seemed hard to explain—except when you looked at the astonishing growth in his positions.

 

pages: 741 words: 179,454

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

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

He believed that any attempt to improve public policy was doomed to failure: The probability of the people in power being individuals who dislike the possession and exercise of power is on a level with the probability that an extremely tender-hearted person would get the job of whipping master in a slave plantation.24 New Old Deal Politicians and governments, irrespective of ideology, accepted market fundamentalism. Free markets were considered better at regulating competing forces, allocating resources, and meeting consumer demand. The role of government was to remove impediments to and ensure the proper institutional framework for free and competitive markets. Harvard economist and U.S. Treasury Secretary Lawrence Summers “tried to leave [his] students with...the view that the invisible hand is more powerful than the [un]hidden hand.

 

pages: 559 words: 169,094

The Unwinding: An Inner History of the New America by George Packer

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Affordable Care Act / Obamacare, Apple's 1984 Super Bowl advert, bank run, big-box store, citizen journalism, cleantech, collateralized debt obligation, collective bargaining, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, diversified portfolio, East Village, El Camino Real, Elon Musk, family office, financial independence, financial innovation, Flash crash, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, housing crisis, income inequality, informal economy, Jane Jacobs, life extension, Long Term Capital Management, low skilled workers, margin call, Mark Zuckerberg, market bubble, market fundamentalism, Maui Hawaii, Menlo Park, new economy, New Journalism, obamacare, Occupy movement, oil shock, peak oil, Peter Thiel, Ponzi scheme, Richard Florida, Ronald Reagan, Ronald Reagan: Tear down this wall, shareholder value, side project, Silicon Valley, Silicon Valley startup, single-payer health, smart grid, Steve Jobs, strikebreaker, The Death and Life of Great American Cities, the scientific method, too big to fail, union organizing, urban planning, We are the 99%, We wanted flying cars, instead we got 140 characters, white flight

Your story has been one of incredible, unrelenting progress for sixty years. Most people who are sixty years old in the U.S.—not their story at all.” The establishment had been coasting for a long time and was out of answers. Its failure pointed to new directions, maybe Marxist, maybe libertarian, along a volatile trajectory that it could no longer control. Thiel’s argument ran into resistance across the political spectrum. On the right, market fundamentalism took the place of serious thinking about innovation (that was why Romney hadn’t understood Thiel’s point at their breakfast meeting). On the left, there was an official smugness about innovation—just spend more money—while deep down lurked an unspoken pessimism. President Obama probably believed that there wasn’t much to be done about decline except manage it, but he couldn’t give another “malaise” speech (after what happened to Jimmy Carter, no one ever would again), so his picture of the future remained strangely empty.

 

pages: 823 words: 206,070

The Making of Global Capitalism by Leo Panitch, Sam Gindin

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

No conspiracy is needed to explain a pattern of co-operation when there is so evident a confluence of interests.75 As the policies that had come to define structural adjustment in the 1980s became ever more elaborated in the 1990s, and as it became more difficult to differentiate between their economic and their social, political, and even cultural dimensions, the term “good governance” was increasingly adopted to cover states’ institutional, administrative, and legal capacities as well as their relations to “civil society.” The World Bank tentatively began to rearticulate structural adjustment in these terms as early as 1989, partly in response to anti-IMF riots (such as the one that erupted in Caracas that year); but it was only with its 1997 report The State in a Changing World that the Bank came out clearly as bidding to displace the “free market fundamentalism” of the Washington Consensus, which the report suggested had led many countries to “overshoot the mark.”76 Echoing the kind of “third way” arguments that had been current in social-democratic intellectual circles for the better part of a decade, the Bank now explicitly advocated a large role for the state in protecting and correcting markets. The main message was that “globalization begins at home,” and the main goal was to shift “attention from the sterile debate of state and market to the more fundamental crisis of state effectiveness.”

 

Debtor Nation: The History of America in Red Ink (Politics and Society in Modern America) by Louis Hyman

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asset-backed security, bank run, barriers to entry, Bretton Woods, card file, central bank independence, computer age, corporate governance, credit crunch, declining real wages, deindustrialization, diversified portfolio, financial independence, financial innovation, Gini coefficient, Home mortgage interest deduction, housing crisis, income inequality, invisible hand, late fees, London Interbank Offered Rate, market fundamentalism, means of production, mortgage debt, mortgage tax deduction, p-value, pattern recognition, profit maximization, profit motive, risk/return, Ronald Reagan, Silicon Valley, statistical model, technology bubble, the built environment, transaction costs, union organizing, white flight, women in the workforce, working poor

Though many people left the crowded cities through the FHA, others, denied access to federal mortgages, were left behind. Through the attempts to stabilize a faltering economy, New Deal housing programs radically changed existing consumer and business practices of debt. Borrowers enthusiastically took longer mortgages as large institutional lenders enjoyed insured investments. These radical interventions in mortgage markets fundamentally altered the ways in which Americans borrowed. The short-term loan that was barely tolerated socially became, by government policy, an encouraged long-term debt, partially because the government language reframed mortgages not as a heavy debt, but as responsible long-term investments for the borrower. Americans were encouraged to become comfortable with long-term debt in a way they never had before.

 

pages: 701 words: 199,010

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

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affirmative action, asset-backed security, automated trading system, bank run, banking crisis, Basel III, Bernie Madoff, Black-Scholes formula, buttonwood tree, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, corporate governance, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, delta neutral, discounted cash flows, diversification, diversified portfolio, family office, financial innovation, financial intermediation, fixed income, Flash crash, full employment, Gini coefficient, high net worth, hindsight bias, housing crisis, implied volatility, income inequality, interest rate derivative, interest rate swap, labour mobility, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low skilled workers, margin call, market design, market fundamentalism, merger arbitrage, Mexican peso crisis / tequila crisis, moral hazard, mortgage debt, Northern Rock, Occupy movement, oil shock, price stability, quantitative easing, quantitative hedge fund, quantitative trading / quantitative finance, Ralph Waldo Emerson, regulatory arbitrage, Renaissance Technologies, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, Sharpe ratio, short selling, sovereign wealth fund, speech recognition, statistical arbitrage, statistical model, systematic trading, The Great Moderation, too big to fail, transaction costs, value at risk, yield curve, zero-coupon bond

—Parkcentral Global Fund Quarter Review, first quarter 2008 JWMP and PGAM had learned from the LTCM crisis. Both funds lowered their risk and used more rigorous stress tests. But JWMP and PGAM had levered positions in fixed-income markets, including mortgages, that deteriorated enormously and caused massive losses. Market insanity ruled the day in 2008. As the real estate market collapsed, financial instruments’ prices changed not according to market fundamentals, but according to the crowd’s movements. The fixed-income markets took much larger shocks than in previous crises, including that of 1998. Market movements were approximately 2.5 times as large as in 1998, though this varied by sector. Lehman’s failure created a huge market imbalance. The prices of many financial securities moved in opposite directions from how they might normally react.