oil shock

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pages: 258 words: 83,303

Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization by Jeff Rubin

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air freight, banking crisis, big-box store, BRICs, carbon footprint, collateralized debt obligation, collective bargaining, credit crunch, David Ricardo: comparative advantage, decarbonisation, energy security, food miles, hydrogen economy, illegal immigration, immigration reform, invisible hand, James Watt: steam engine, Just-in-time delivery, market clearing, megacity, North Sea oil, oil shale / tar sands, oil shock, peak oil, profit maximization, reserve currency, South Sea Bubble, the market place, The Wealth of Nations by Adam Smith, trade liberalization

Those questions have me flipping the channel every time I hear the pundits explaining how the world economy’s problems are about financial markets and subprime mortgages. Forget Lehman Brothers. There is something bigger going on. OIL SHOCKS HAVE ALWAYS CAUSED RECESSION Here’s a clue. Soaring oil prices caused four of the last five global recessions. The only one that wasn’t caused by oil prices, the Asian meltdown of 1998, never even washed ashore in the major oil-consuming economies of the world like the United States and Western Europe. By contrast, two of the largest recessions in the postwar period came directly after the last two OPEC oil shocks. The second OPEC shock actually reverberated into two back-to-back recessions. A decade later, another oil shock, this time caused by Iraq’s invasion of Kuwait and subsequent torching of many of its oil wells, also produced a fairly deep recession in 1991.

Just look what happened in 2008. Gasoline prices in the United States rose from around $1.80 per gallon in 2004 to over $4 per gallon in mid-2008, an increase that now dwarfs even the price hikes motorists had to contend with during the OPEC oil shocks. The run-up since 2002 is almost four times as great as the increase following the Iranian Revolution. Even in inflation-adjusted terms (or “constant dollars,” as economists call them), the price of gasoline climbed to levels greater than when cursing 1970s American motorists had to line up at gas stations due to fuel shortages. Suddenly, the OPEC oil shocks that had seemed like a worst-case scenario don’t look so bad. In fact, the process of having our world shrink promises to be much more wrenching this time around, if only because it has got so much bigger since the last energy crisis.

And what about America’s rivals in the auto sector? In Japan, where production lines are slowing and workers being sent home, sales are down 32 percent, to 35-year lows. German car sales are the worst since reunification—down 14 percent in January. Still, the US has been hit particularly hard. Sales in February fell by 41 percent compared to 2008. Oil shocks have always turned the rugged capitalists of Detroit into big-time Keynesians. Following the second OPEC oil shock, Lee Iacocca went begging to Washington to save Chrysler from bankruptcy. Then in 2008, taxpayers again heard Detroit’s all-too-familiar refrain, “Brother, can you spare a dime?” And Congress voted 370–58 to approve a $25 billion bailout package for the auto industry. Not to be outdone, the European carmakers turned right around and asked for €40 billion from the European Union to level the playing field, and manufacturers in Canada set their caps out begging for billions of their own and talked openly of moving thousands of jobs south of the border if they didn’t get what they wanted.

 

The Power Surge: Energy, Opportunity, and the Battle for America's Future by Michael Levi

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American energy revolution, Berlin Wall, British Empire, Carmen Reinhart, crony capitalism, deglobalization, energy security, Exxon Valdez, full employment, global supply chain, hiring and firing, hydraulic fracturing, Kenneth Rogoff, manufacturing employment, oil shale / tar sands, oil shock, peak oil, RAND corporation, Ronald Reagan, Silicon Valley, South China Sea

There THE CAR OF THE FUTURE • 131 is good reason to believe that, this time, better oil efficiency will really pay off. Nevertheless, it’s possible to overstate the value of using less oil. Oil shocks typically precede recessions, but after forty years of careful studies economists still can’t agree on whether oil shocks actually cause big economic downturns. (One economist I know likes to quip that oil price spikes have preceded six of the last three recessions.) Even studies of the biggest oil spike of them all—the result of the 1973 Arab embargo—aren’t conclusive when it comes to how much of the ensuing recession should be pinned on oil. Scholars have thrown every model and statistical technique in the book at the problem but haven’t yet come to definitive conclusions. Food prices were rising rapidly around the same time the oil shock occurred, hurting the U.S. economy, and it’s difficult to disentangle that from the impact oil prices had at the same time.

They just disagree, often vehemently, about what matters most and the best way to deliver it. These fundamentals of the fight over the future of American energy aren’t new. Many of the details are novel, but the roots of the basic conflicts stretch back to the first modern oil crisis, which rocked the world in the autumn of 1973, and its aftermath. It is no exaggeration to claim that most of the battle lines defining today’s clashes were first drawn decades ago. The oil shock that struck on October 16, 1973, came at a time of enormous change and uncertainty for the United States. The Paris Peace Accords, signed in January of that year, had begun to end the Vietnam War, but Americans remained torn by the conflict. The Watergate scandal, which would eventually end Richard Nixon’s presidency, was slowly coming to light. In 1971, the United States had abandoned the gold standard, ending the system of global controls on money and investment that had marked the decades since the end of World War II.

Two lasting changes that would help the United States over the next decade eventually emerged, though neither was without controversy.11 The first was the opening of the Trans-Alaskan Pipeline, a ten-billion-dollar, two-million-barrel-a-day behemoth running from Prudhoe Bay on the North Slope of Alaska to the Pacific port of Valdez. The pipeline had been on the table before the energy crisis but stalled in the face of hostility to its construction from environmental and Native American groups. The oil shock quickly broke down the opposition, and on November 16, 1973, Nixon signed broadly supported legislation moving the pipeline forward. By the end of the 1970s, it would allow previously landlocked oil to flow to the lower forty-eight states, reversing the earlier decline in U.S. crude production. American output bottomed out in 1976, and U.S. production would remain above its 1976 level until 1989.

 

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

Second, and more important, the market price can and should be altered if good reasons exist to do this—whether these reasons reflect political objectives, such as the desire to reduce oil revenues available to Middle Eastern terrorists, or economic ones, such as the desire to avoid another recession-inducing oil shock. Between them, these two observations point to some obvious solutions to the long-term challenges of climate change and oil depletion—taxing oil or carbon, subsidizing alternative energy, redirecting public research funding, and offering cheap government insurance against the risks and decommissioning costs of nuclear power. The long-term response of Capitalism 4.0 to these issues is discussed at greater length in Chapter 19. But what could Western governments have done in the short-term to prevent the 2008 oil shock and the subsequent financial disaster—and what might governments do in the near future if another surge in the oil price to $150 a barrel were to threaten the global economy in the next few years?

But what could Western governments have done in the short-term to prevent the 2008 oil shock and the subsequent financial disaster—and what might governments do in the near future if another surge in the oil price to $150 a barrel were to threaten the global economy in the next few years? The fundamentalist view that market prices always reflect all possible information and lead to the best possible allocation of resources blinded governments and regulators to a crucial difference between the 2008 oil shock and the ones that occurred in 1974, 1979, and 1990. All earlier oil shocks were caused by geopolitical disruptions or deliberate OPEC actions that reduced the supply of oil. The surge in oil prices in 2008 was different. It was caused not by a shortfall in supply but an increase in demand. However, this demand was not due, as widely reported, to increased Chinese consumption. China’s growing use of oil was more than offset, even before the recession, by declining demand from America and Europe, as confirmed by statistics from the International Energy Agency, OPEC, and private oil companies, all of which showed almost zero growth in the world’s total use of oil in 2008 and a decline in 2009.11 What, then, caused the extra demand that drove up the oil price to $150?

Micawber and Mad Max CHAPTER TWO - Political Economy and Evolution CHAPTER THREE - The Four Ages of Capitalism Part II - The Arrow and the Ring CHAPTER FOUR - Annus Mirabilis CHAPTER FIVE - The Four Megatrends CHAPTER SIX - The Great Moderation The Platform Company: A New Business Model The Reinvention of Demand Management CHAPTER SEVEN - The Financial Revolution Megatrends in Housing and Finance CHAPTER EIGHT - The Ring of Finance CHAPTER NINE - Boom and Bust Forever The Theories of Boom-Bust Cycles Why Finance Is Different from Every Other Business Part III - Market Fundamentalism Self-Destructs CHAPTER TEN - The Economic Consequences of Mr. Paulson CHAPTER ELEVEN - There Is No Can Opener The First Era of Economics The Second Era: Keynes’s Government-Led Economics The Third Era: The Triumph of Rational and Efficient The Next Transition CHAPTER TWELVE - Toward a New Economics Part IV - The Great Transition CHAPTER THIRTEEN - The Adaptive Mixed Economy Energy Policy and the 2008 Oil Shock CHAPTER FOURTEEN - Irresistible Force Meets Immoveable Object CHAPTER FIFTEEN - What—Me Worry? Will Rising Interest Rates Choke Off Economic Recovery? Will Printing Money Unleash Inflation? Will the Dollar Collapse? Part V - Capitalism 4.0 and the Future CHAPTER SIXTEEN - Economic Policy in Capitalism 4.0 Will There Be a Government Debt Crisis? The Myth of National Bankruptcy The Myth of Burdening Our Grandchildren The Real Case for Tackling Deficits Japanese-Style Paralysis and Zombie Banks The Great Rebalancing of Global Growth Stagflation CHAPTER SEVENTEEN - Politics in Capitalism 4.0 Conservatives Will Keep Winning Until Progressives Find a Narrative More Government Means Smaller Government Democracy Means Less Power for Public Opinion Bigger Deficits Are Necessary but Impossible Priorities: Less Spending and More Taxes International Experience: Learning from Others’ Mistakes Commanding Heights: As Socialism Has Retreated, It Has Won Health Reform: More Government and More Market Health Care Reform Will Become a Conservative Issue Progressives Will Fight for Less Progressive Taxes CHAPTER EIGHTEEN - Finance and Banking in Capitalism 4.0 Finance Is Indispensable Uncertainty and Guarantees Regulation Capital Structures Accounting Credit Ratings and Macroeconomic Assumptions Mortgage Market Reform Fiduciary Duty and Government as a Silent Partner Bankers’ Earnings and Bank Profits Talent and Plunder CHAPTER NINETEEN - The World of Capitalism 4.0 Global Competition between the United States and China Convergence between the United States and Europe The Rivalry of Western and Asian Values Business Interests Will Embrace the New Model Trade and Industrial Structures Limits to Growth and Physical Resources The Environment Can Become a Positive Economic Story Prosperity without Growth Currencies and Financial Relations: Will There Be a New Bretton Woods?

 

pages: 262 words: 83,548

The End of Growth by Jeff Rubin

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

The problems may take different guises, such as stagflation in the 1970s or the financial market meltdown in 2008. Regardless of what story made the most headlines at the time, oil prices were lurking at the root of the problem. Consider the first oil shock, created by the Organization of Petroleum Exporting Countries (OPEC) following the Yom Kippur War in 1973. Set off by this Arab-Israeli conflict, OPEC’s Arab members turned off the taps on roughly 8 percent of the world’s oil supply by cutting shipments to the United States and other Israeli allies. Crude prices spiked, and by 1974 real GDP in the United States had shrunk by 2.5 percent. The second OPEC oil shock happened during Iran’s revolution and the subsequent war with Iraq. Disruptions to Iranian production during the revolution sent crude prices higher, pushing the North American economy into a recession for the first half of 1980.

I’m betting some of them will be big enough to change the way we judge this new world. The stakes are high, and we can’t afford to lose, but we also have much to gain. [ CHAPTER 1 ] CHANGING THE ECONOMIC SPEED LIMIT THOSE WHO WERE AROUND IN THE 1970s will remember when speed limits were lowered in an attempt to stop drivers from burning so much gasoline. In the United States, the first OPEC oil shock spooked the president so much that he established a national speed limit of fifty-five miles per hour through the Emergency Energy Conservation Act. A slower speed limit didn’t win Richard Nixon any fans among car-loving voters, but his hand was forced by oil prices that were punishing the US economy. Well, speed limits aren’t the only thing that can change when crude prices go up. Today’s oil prices are changing the speed at which economies can grow.

Guess what oil prices were doing in 2008 when the world fell into the deepest recession since the 1930s? From trading around $30 a barrel in 2004, oil prices marched steadily higher before hitting a peak of $147 a barrel in the summer of 2008. Unlike past oil price shocks, this time there wasn’t even a supply disruption to blame. The spigot was wide open. The problem was, we could no longer afford to buy what was flowing through it. There are many ways an oil shock can deep-six an economy. When prices spike, most of us have little choice but to open our wallets and shell out more for what we burn. Unless we want to stop driving our cars or burning heating oil, what else can we do? Something has to give. Paying more for oil means we have less cash to spend on food, shelter, furniture, clothes, travel and pretty much anything else you can think of. A poll by the American Automobile Association in 2011 found that motorists still planned to hit the road for summer vacations, despite pump prices close to $4 a gallon.

 

pages: 372 words: 107,587

The End of Growth: Adapting to Our New Economic Reality by Richard Heinberg

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3D printing, agricultural Revolution, back-to-the-land, banking crisis, banks create money, Bretton Woods, carbon footprint, Carmen Reinhart, clean water, cloud computing, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, David Graeber, David Ricardo: comparative advantage, dematerialisation, demographic dividend, Deng Xiaoping, Elliott wave, en.wikipedia.org, energy transition, falling living standards, financial deregulation, financial innovation, Fractional reserve banking, full employment, Gini coefficient, global village, happiness index / gross national happiness, I think there is a world market for maybe five computers, income inequality, invisible hand, Isaac Newton, Kenneth Rogoff, late fees, money: store of value / unit of account / medium of exchange, mortgage debt, naked short selling, Naomi Klein, Negawatt, new economy, Nixon shock, offshore financial centre, oil shale / tar sands, oil shock, peak oil, Ponzi scheme, post-oil, price stability, private military company, quantitative easing, reserve currency, ride hailing / ride sharing, Ronald Reagan, short selling, special drawing rights, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, trade liberalization, tulip mania, working poor

But the impact of the collapse of the housing market could only have been amplified by an inability to increase the rate of supply of depleting petroleum. Hamilton again: “At a minimum it is clear that something other than [I would say: “in addition to”] housing deteriorated to turn slow growth into a recession. That something, in my mind, includes the collapse in automobile purchases, slowdown in overall consumption spending, and deteriorating consumer sentiment, in which the oil shock was indisputably a contributing factor.” Moreover, Hamilton notes that there was “an interaction effect between the oil shock and the problems in housing.” That is, in many metropolitan areas, house prices in 2007 were still rising in the zip codes closest to urban centers but already falling fast in zip codes where commutes were long.34 FIGURE 27. Real Oil Prices and Recessions. Rising oil prices bring economic instability. Almost every peak in oil price correlates with an economic downturn.

Reuters.com, posted November 8, 2010. 6. Charles Maxwell, quoted in Wallace Forbes, “Bracing For Peak Oil Production by Decade’s End,” Forbes.com, posted September 13, 2010; Eoin O’Carroll, “Pickens: Oil Production Has Peaked,” The Christian Science Monitor, posted June 18, 2008. 7. Clint Smith, “New Zealand Parliament Peak Oil Report: The Next Oil Shock?” Energy Bulletin, posted October 1, 2010, energybulletin.net/stories/2010-10-14/next-oil-shock; Stefan Schultz, “Military Study Warns of a Potentially Drastic Oil Crisis,” Spiegel Online, posted September 1, 2010; UK Industry study; US Joint Forces Command, The Joint Operating Environment 2010 (Suffolk, VA: USJFCOM, 2010). 8. See, for example, peakoil.net/headline-news/toyota-we-must-address-the-inevitability-of-peak-oil. 9. Ben German, “The Other Peak Oil: Demand From Developed World Falling,” Scientific American.

In its authoritative 2010 World Energy Outlook, the IEA announced that total annual global crude oil production will probably never surpass its 2006 level.2 However, the agency fudged the question a bit by declaring that the peak was not due to geological constraints, and that total volumes of liquid fuels (including crude oil, biofuels, synthetic oil from tar sands and coal, and natural gas liquids like butane and propane) will continue to grow — just a bit — until 2035. In discussing the IEA report, a few analysts declared that these latter claims were essentially just efforts to avoid panicking the markets.3 BOX 3.1 Oil Shock 2011? In the early months of 2011 street demonstrations erupted in Iraq, Iran, Tunisia, Egypt, Bahrain, Yemen, Libya, and Algeria. Libya became mired in civil war, and its rate of oil exports fell from 1.3 million barrels per day to a small fraction of that amount. In Saudi Arabia, banned opposition groups threatened a “day of rage.” In response to these events, the world oil price — already in the $90 range — shot up to $120.

 

pages: 257 words: 94,168

Oil Panic and the Global Crisis: Predictions and Myths by Steven M. Gorelick

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California gold rush, carbon footprint, energy security, energy transition, flex fuel, income per capita, invention of the telephone, meta analysis, meta-analysis, North Sea oil, oil shale / tar sands, oil shock, peak oil, price stability, profit motive, purchasing power parity, RAND corporation, statistical model, Thomas Malthus

Third, a school of economic thought claims that there was a historical break in the effects of oil price shocks on economies such that subsequent oil shocks are not likely to be inflationary or cause a recession. Reasons for this break include decreased energy-use intensity, deregulation of key energy-producing and energy-consuming industries, and governmental monetary policy changes that have encouraged a low-inflation environment. However, as with many 6 Gasoline cost as a percent of 4 disposable income 2 0 1950 1970 1990 Figure 4.54 The cost of US gasoline consumption relative to personal disposable income. (Data: gasoline prices, EIA; US income, US Bureau of Economic Affairs) 2010 156 Counter-Arguments to Imminent Global Oil Depletion economic theories, it is not conclusive that any of these links is responsible for the relative insensitivity of the US economy to oil shocks.131,132 Myth VI: There Are No Substitutes for Oil Oil is different because there are no substitutes.

In inflation-adjusted terms, the price increased fivefold during the Counter-Arguments to Imminent Global Oil Depletion 155 period 1973 to 1980 (from $15 to $93 per barrel (2007$)). Recessionary pressures diminished only when the price of oil dropped during the 1980s, falling by nearly half from 1985 to 1986 ($27.56 to $14.43 per barrel). Although the spot price of oil in 2008 exceeded $145 per barrel, the 2008 average oil price took five years to double in inflation-adjusted terms; the price rise was much slower than during the 1970s’ oil shock. In terms of speed and magnitude, the oil price rise of 2008 itself was well tolerated by the economies of the world. It was the global financial crisis that began in 2008 that overwhelmed the world economy. Consequently demand and price dropped precipitously. Historically, the oil price increases of the 1860s, 1910s, and 1970s were each followed by a decade of declining oil prices.130 Before the economic crisis that began in 2008, the US economy stood up well to high oil prices for several reasons.

World Development Indicators database, World Bank, 1 July 2008; http://siteresources.worldbank.org/DATASTATISTICS/Resources/GDP.pdf and www.cia.gov/library/publications/the-world-factbook/geos/xx.html#Econ International Monetary Fund World Economic Outlook, 2006, Chapter II, Oil Prices and Global Imbalances, p. 73. www.globalfinancialdata.com/articles/Oil_Is_History_Repeating_Itself.doc (2006). Hooker, M. A. (2002). “Are oil shocks inflationary? Asymmetric and nonlinear specifications versus change in regime,” Journal of Money, Credit, and Banking, 34(2), May 2002: 540–61. Walton, D. (2006). “Has oil lost the capacity to shock?” Oxonomics, 1(2006): 9–12. Kirkemo, H., W. L. Newman, and R. P. Ashley (1997). “Gold,” US Geological Survey Report. World Gold Council, gold.org/discover www.usgs.gov/faq/list_faq_by_category/get_answer.asp?

 

pages: 363 words: 101,082

Earth Wars: The Battle for Global Resources by Geoff Hiscock

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Admiral Zheng, Asian financial crisis, Bakken shale, Bernie Madoff, BRICs, butterfly effect, clean water, cleantech, corporate governance, demographic dividend, Deng Xiaoping, Edward Lorenz: Chaos theory, energy security, energy transition, eurozone crisis, Exxon Valdez, flex fuel, global rebalancing, global supply chain, hydraulic fracturing, Long Term Capital Management, Malacca Straits, Masdar, megacity, Menlo Park, Mohammed Bouazizi, new economy, oil shale / tar sands, oil shock, Panamax, purchasing power parity, Ralph Waldo Emerson, RAND corporation, Shenzhen was a fishing village, Silicon Valley, smart grid, South China Sea, sovereign wealth fund, special economic zone, spice trade, trade route, uranium enrichment, urban decay, working-age population, Yom Kippur War

Long History on the Nuclear Road Japan had been travelling the nuclear road for 40 years, having opened the Fukushima plant in March 1971 in response to environmental concerns and the 1967 oil export embargo imposed by some Arab producers following the Six-Day War between Israel and its Arab neighbours. That brief embargo was followed by the much more severe “oil shock” of 1973–1974, when Arab producers within the Organization of Petroleum Exporting Countries (OPEC) declared sharp price rises, production cuts, and an oil embargo targeting the United States and some other Western nations over their support for Israel in its October 1973 Yom Kippur War with Syria and Egypt. This second oil shock encouraged Japan and other advanced economies to further embrace the nuclear option. A third oil shock came in 1979, when the Iranian Revolution disrupted production there, sending global oil prices higher. That spurred increased oil production from a variety of new, non-OPEC sources in the 1980s, which, combined with energy conservation and slower economic growth, meant oil prices declined sharply from the mid-1980s.

Japanese electronics and precision equipment makers in particular are heavily reliant on rare earths. Although they are able to recycle some from discarded computers, mobile phones, and other electronic detritus, they get most of their supply from China. In fact, between 50 and 60 percent of China’s rare earth exports go to Japanese buyers. But in September 2010, the buyers suffered something akin to a mini “oil shock.” Their supplies from China slowed to a crawl, tied down by the sort of bureaucratic double-shuffling that the Japanese themselves once employed as a nontariff barrier against unwanted imports. There was no export ban, the Chinese declared, but the result was the same: shipments ground to a halt, and the Japanese electronics industry got very nervous. Japan’s crime was to arrest the skipper of a Chinese fishing boat that collided with two Japanese coast guard vessels near a group of uninhabited islands in the East China Sea.

France, the Nuclear Champion France is unique in the nuclear power world. Its 58 reactors, operated by state majority-owned nuclear power utility Electricite de France (EDF), produce 75 percent of its electricity, and the country has so much spare capacity that EDF exports more than 10 percent of its output to neighbours such as Germany, Italy, Spain, Switzerland, Belgium, and the United Kingdom. Energy independence, a policy pursued by France since the oil shocks of the 1970s, is at the heart of nuclear power’s prominence in France, and even with the inroads made by renewable energy sources and cheaper gas, nuclear is unlikely to lose much ground. France actively champions its nuclear capabilities. Areva, another state-owned (90 percent) entity, is the world’s largest nuclear company, and has multiple agreements and joint ventures around the world aimed at securing uranium supplies, processing deals, technology development—such as with Siemens in Germany—and customers for its nuclear reactors.

 

pages: 851 words: 247,711

The Atlantic and Its Enemies: A History of the Cold War by Norman Stone

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affirmative action, anti-communist, Ayatollah Khomeini, bank run, banking crisis, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, British Empire, central bank independence, Deng Xiaoping, desegregation, Dissolution of the Soviet Union, European colonialism, facts on the ground, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, illegal immigration, income per capita, interchangeable parts, Jane Jacobs, Joseph Schumpeter, labour mobility, land reform, means of production, Mikhail Gorbachev, new economy, North Sea oil, oil shock, Ponzi scheme, price mechanism, price stability, RAND corporation, rent-seeking, Ronald Reagan, Silicon Valley, special drawing rights, Steve Jobs, strikebreaker, The Death and Life of Great American Cities, trade liberalization, trickle-down economics, V2 rocket, War on Poverty, Washington Consensus, Yom Kippur War, éminence grise

The oil producers, left to themselves, would have been far too disunited for common action, and their common strategy at OPEC did not in fact last for very long. But the fall of the dollar in 1971 pushed them together: why accept valueless paper dollars? The same was true, though not to the same extent, for producers of other raw materials - coffee, tobacco, copper, rubber, iron ore, meat as well - and prices shot up, even in 1971, two years before the oil shock. The problem was symbolized by the Brazilian city of Manaos, deep in the jungle. There, once upon a time, rubber had appeared, and the place became opulent: famously Dame Adeline Patti, the great opera singer of the 1890s, appeared there. Then rubber was produced elsewhere, and Manaos relapsed back into semi-jungle. Now, the Middle East was becoming a huge Manaos. At least in the epoch of Manaos, there was one commodity that ruled everything else, including money: gold.

In 1972 the floating of the pound allowed inflows from abroad, and new credit-giving institutions were allowed to emerge, offering and taking loans in conditions no longer subject to the controls of the past. For a time, this seemed to work. Unemployment did indeed fall to 500,000, but this was classic fool’s gold. The ‘fringe banks’ for a time did well out of property prices, which had a dangerously more important role in England than elsewhere, and unlovely concrete spread and spread and spread. But then came the oil shock. Even food prices trebled by 1974 as against 1971, and the bubble burst in November 1973, when the minimum lending rate was pushed up to 13 per cent while public spending was cut back by £12bn. One of the new banks could not obtain credit, and the other banks had to set up a ‘lifeboat’. It was not enough. The Bank of England itself had to move in, in the winter of 1974-5, and a well-connected bucket shop concern, Slater Walker Securities, had to be rescued in 1975.

That is the history of the last twenty years.’ By 1976 the Treasury itself was somewhat converted to the idea of monetarism, a limitation of the quantity of money such that inflation could be contained. But the conversion was not enthusiastic. The Bank (and the City) expressed greater enthusiasm. It was an unhappy time, the country winding down, and a slow crisis started. In 1976-7 the world economy did pick up, as the oil-shock money was recycled back to the industrial and exporting countries (which grew overall at 5 per cent). But the British economy was by now too fragile to gain much more than a respite, and inflation still ran high - 25 per cent in 1975, 16 per cent in 1976 and in 1977 (earnings keeping apace until 1977). As the pound was now a petrol currency, it naturally rose; keeping it down meant selling it, and that made for inflationary pressures, compounded by the inrush of Arab money.

 

pages: 632 words: 159,454

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

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

The mood throughout the mid- to late 1970s was gloomy and depressed. Contemporaries spoke of the ‘Great Recession’. It was recalled that the ‘price of oil had actually been falling through most of the postwar period, both absolutely and in relation to other world prices’.17 The oil shock of 1973 led to ‘visions of financial disaster for the west’. The spike in oil prices had increased all costs in the Western economies, which were heavily dependent on oil. ‘Prices were higher and employment lower’ as a consequence of the oil shock.18 Despite the arguments of a later generation of economists, contemporaries were very clear about the direct causal link between higher oil prices, increased inflation and stagnant economies. The Harvard economist Otto Eckstein wrote in 1978 that the ‘erosion of purchasing power caused by higher energy prices affected all categories of consumer spending’.

The Saudis had bought ‘all over the world and they sent the goods home’, but then they ‘couldn’t get anything off the ships and into use’.26 Increased revenues, which flowed into the treasuries of the oil-exporting countries, altered the international economic environment. David Rockefeller, scion of the wealthy dynasty and Chairman of the Chase Manhattan Bank, recalled that the ‘most immediate effect of the oil shock was the surge in the flow of dollars from oil-importing nations into OPEC’s coffers. Between 1973 and 1977, the earnings of the oil-exporting nations expanded 600 percent, to US$140 billion.’ There lay the problem confronting the world monetary system. The enormous dollar reserves acquired by the oil exporters needed to find some outlet. Rockefeller, somewhat self-importantly, remembered that the ‘task of recycling [these] dollars and maintaining the system of global trade and finance fell to the major international commercial banks, including Chase’.

The Kuwaitis, ‘less conservative’, invested ‘most of their revenues in the US and European money and stock markets’.28 Meanwhile both the Shah of Iran and Saddam Hussein, the Iraqi Vice President, used their new oil revenues to build infrastructure, to invest in education and, more ominously, to buy military hardware.29 Chase Manhattan and its American competitor banks were active in recycling the so-called ‘petrodollars’, the dollars earned by oil exports, as loans to foreign businesses. Loans were also extended to Latin America, Africa, East Asia and other parts of the developing world.30 Other American bankers and senior officials began to express anxiety about the political and economic outlook. Paul Volcker, the future Chairman of the Federal Reserve, remembered that by mid-decade the ‘combination of accelerating inflation and the oil shock late in 1973’ went far in ‘establishing floating currencies as the . . . international monetary system’. The mid-1970s were marked by ‘what was then the most serious of the postwar recessions’ and by ever-higher inflation. Floating currencies, and the end of any link to gold, were a novel feature of the period. It had been assumed that ‘both exchange rates and economies would stabilize as the world gained experience’ with floating rates.

 

pages: 311 words: 17,232

Living in a Material World: The Commodity Connection by Kevin Morrison

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barriers to entry, Berlin Wall, carbon footprint, clean water, commodity trading advisor, diversified portfolio, Doha Development Round, Elon Musk, energy security, European colonialism, flex fuel, food miles, Hernando de Soto, Hugh Fearnley-Whittingstall, hydrogen economy, Long Term Capital Management, new economy, North Sea oil, oil rush, oil shale / tar sands, oil shock, out of africa, peak oil, price mechanism, Ronald Coase, Ronald Reagan, Silicon Valley, sovereign wealth fund, the payments system, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, uranium enrichment, young professional

I wanted to write a book about the connection between the consumer and the raw materials we use every day and to link the chain from the businesses that extract the materials, the governments that set the laws and the commodity markets where raw material prices are determined. In the simplest of acts we take raw materials for granted; like switching on a light or turning up the heating. I wanted to show T 2 | LIVING IN A MATERIAL WORLD how commodities are relevant to every body, every day – and how they are more relevant now than they have been at any time since the last oil shock nearly three decades ago (my memories of which include going to bed by candlelight during the energy rationing and three-day weeks of the 1970s). Everything we consume – whether through buying something, eating or even our physical actions – involves, at some level, the use of metals, fossil fuels or agricultural produce, which we take from planet Earth and use to make our lives more comfortable, more productive or more manageable.

The rise in living standards has come at a time of unparalleled population growth, technological and scientific breakthroughs, political upheaval and economic and trade liberalization. Economic growth in developing countries has accelerated global growth at a faster pace than at any time since the 1960s. In the 1950s and 1960s, the world economy rose by 5 % due to the reconstruction of Europe and Japan, as well as the economic competition between the US and the Soviet Union. The two oil shocks in the 1970s slowed growth to about 4 %, and then to 3 %, which became the average economic growth rate of the 1980s and 1990s. Higher oil and food prices together with the credit crisis in the US have prompted economists to cut global economic growth rates to around 3 % for 2008. Some experts cite this as the start of a prolonged downturn in the global economy. Others take the view that the build up in sovereign funds in China along with Middle Eastern and other Asian countries, accumulated on the back of higher energy prices, 6 | LIVING IN A MATERIAL WORLD will see more reliance on the developing world as the engine of global growth.

It is not the first financial meltdown we have seen towards the end of a decade in recent times: the Asian currency crisis and the Russian default came in the late 1990s and the stock market crash in the late 1980s, when companies who had over-borrowed were hit by rising interest rates. The credit crisis of 2007 followed a prolonged period of loose money supply where interest rates were kept below their long-term average. The combination of easy credit and high oil prices is eerily similar to the economic conditions in the early and late 1970s at the time of the world’s first two oil shocks, both of which were followed by recessions.3 The 1970s was the last time the world was seriously concerned about the supply and price of raw materials, and I refer to this period throughout the book.4 In December 1976, the US government issued a report on resource availability by the National Commission on Supplies and Shortages,5 8 | LIVING IN A MATERIAL WORLD which looked at the issue of whether the US was running out of resources and whether the country was dependent on importing raw materials from foreign countries (Eckes, 1978).

 

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

The end of the Golden Age was marked by the First Oil Shock in 1973, in which oil prices rose fourfold overnight, thanks to the price collusion of the cartel of the oil-producing countries, OPEC (Organization of Petroleum Exporting Countries). Inflation had been slowly increasing in many countries since the late 1960s but, following the Oil Shock, it shot up. More importantly, the next several years were characterized by stagflation. This newly coined term referred to the breakdown of the age-long economic regularity that prices fall during a recession (or stagnation) and rise during a boom. Now, the economy was stagnating (albeit not exactly in a prolonged recession, like during the Great Depression) but prices were rising fast, at 10, 15 or even 25 per cent per year.27 The Second Oil Shock in 1979 finished off the Golden Age by bringing about another bout of high inflation and helping neo-liberal governments come to power in the key capitalist countries, especially in Britain and the US.

Capitalism falters: growth slows down and socialism outperforms capitalism The turmoil of the 1914–45 period reached its peak with the outbreak of the Second World War, which killed tens of millions of people, both soldiers and civilians (higher estimates put the death toll at 60 million). The war resulted in the first reversal in the acceleration in economic growth since the early nineteenth century.19 1945–73: The Golden Age of Capitalism Capitalism performs well on all fronts: growth, employment and stability The period between 1945, the end of the Second World War, and 1973, the first Oil Shock, is often called the ‘Golden Age of capitalism’. The period really deserves the name, as it achieved the highest growth rate ever. Between 1950 and 1973, per capita income in Western Europe grew at an astonishing rate of 4.1 per cent per year. The US grew more slowly, but at an unprecedented rate of 2.5 per cent. West Germany grew at 5.0 per cent, earning the title of the ‘Miracle on the Rhine’, while Japan grew even faster at 8.1 per cent, starting off the chain of ‘economic miracles’ in East Asia in the next half a century.

The Third World debt crisis and the end of the Third World Industrial Revolution The most lasting legacy of the high interest rate policy in the US in the late 1970s and the early 1980s – sometimes called the Volcker Shock, named after the then chairman of the US central bank (the Federal Reserve Board) – was not in the US but in the developing countries. Most developing countries had borrowed heavily in the 1970s and the early 1980s, partly to finance their industrialization and partly to pay for the more expensive oil, following the Oil Shocks. When the US interest rates doubled, so did international interest rates, and this led to a widespread default on foreign debts by developing nations, starting with the default of Mexico in 1982. This is known as the Third World Debt Crisis, thus known because the developing world was then called the Third World, after the First World (the advanced capitalist world) and the Second World (the socialist world).

 

pages: 378 words: 110,518

Postcapitalism: A Guide to Our Future by Paul Mason

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Alfred Russel Wallace, bank run, banking crisis, banks create money, Basel III, Bernie Madoff, Bill Gates: Altair 8800, bitcoin, Branko Milanovic, Bretton Woods, BRICs, British Empire, business process, butterfly effect, call centre, capital controls, Claude Shannon: information theory, collaborative economy, collective bargaining, Corn Laws, corporate social responsibility, credit crunch, currency manipulation / currency intervention, currency peg, David Graeber, deglobalization, deindustrialization, deskilling, discovery of the americas, Downton Abbey, en.wikipedia.org, energy security, eurozone crisis, factory automation, financial repression, Firefox, Fractional reserve banking, Frederick Winslow Taylor, full employment, future of work, game design, income inequality, inflation targeting, informal economy, Internet of things, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kevin Kelly, knowledge economy, knowledge worker, late capitalism, low skilled workers, market clearing, means of production, Metcalfe's law, money: store of value / unit of account / medium of exchange, mortgage debt, Network effects, new economy, Norbert Wiener, Occupy movement, oil shale / tar sands, oil shock, payday loans, post-industrial society, precariat, price mechanism, profit motive, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, RFID, Richard Stallman, Robert Gordon, secular stagnation, sharing economy, Stewart Brand, structural adjustment programs, supply-chain management, the scientific method, The Wealth of Nations by Adam Smith, Transnistria, union organizing, universal basic income, urban decay, urban planning, wages for housework, women in the workforce

The break occurs at the end of the First World War; the 1930s Depression, followed by the destruction of capital during the Second World War terminate the downswing. Late-1940s–2008: In the fourth long cycle transistors, synthetic materials, mass consumer goods, factory automation, nuclear power and automatic calculation create the paradigm – producing the longest economic boom in history. The peak could not be clearer: the oil shock of October 1973, after which a long period of instability takes place, but no major depression. In the late–1990s, overlapping with the end of the previous wave, the basic elements of the fifth long cycle appear. It is driven by network technology, mobile communications, a truly global marketplace and information goods. But it has stalled. And the reason it has stalled has something to do with neoliberalism and something to do with the technology itself.

America’s economy shrank by 6.5 per cent between January 1974 and March 1975,23 Britain’s by 3.4 per cent. Even Japan – which had averaged growth rates close to 10 per cent in the post-war period – went briefly negative.24 The crisis was unique because in the worst-hit countries falling growth coincided with high inflation. By 1975, inflation in Britain reached 20 per cent, and 11 per cent in the USA. The word ‘stagflation’ hit the headlines. Yet even at the time it was obvious that the oil shock was merely the trigger. The upswing had already been stuttering. In each developed country, growth in the late 1960s seemed beset by national or local problems: inflation, labour troubles, productivity concerns and flurries of financial scandal. But 1973 was the watershed, the point where the energy driving the fourth wave upwards caused it to peak and then invert. What made it happen is a question that has defined modern economics.

With this change, each stricken country was temporarily free to solve the underlying problems of productivity and profitability in ways the old system had made impossible: with higher state spending and lower interest rates. The years 1971–3 were lived in a kind of nervous euphoria. The inevitable stock market crash hit Wall Street and London in January 1973, triggering the collapse of several investment banks. The oil shock of October 1973 was the final straw. CARRY ON KEYNES By 1973, every aspect of the unique regime that had sustained the long boom was broken. But the crisis looked accidental: low input prices destroyed by OPEC; global rules ripped up by Richard Nixon; profits eroded by that figure of loathing, the ‘greedy worker’. The iconic British Carry On movie franchise chose this moment to switch from ludicrous historical parodies to an attempt at razor-sharp social commentary.

 

pages: 1,445 words: 469,426

The Prize: The Epic Quest for Oil, Money & Power by Daniel Yergin

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anti-communist, Ayatollah Khomeini, bank run, Berlin Wall, British Empire, colonial exploitation, Columbine, cuban missile crisis, energy security, European colonialism, Exxon Valdez, financial independence, fudge factor, informal economy, joint-stock company, land reform, megacity, Mikhail Gorbachev, Monroe Doctrine, new economy, North Sea oil, oil rush, oil shale / tar sands, oil shock, postnationalism / post nation state, price stability, RAND corporation, rent-seeking, Ronald Reagan, shareholder value, Thomas Malthus, Yom Kippur War

All were swept up in it; nothing and no one escaped. When the wave finally spent its fury two years later, the survivors would look around and find themselves beached on a totally new terrain. Everything was different; relations among all of them were altered. The wave would generate the Second Oil Shock, carrying prices from thirteen to thirty-four dollars a barrel, and bringing massive changes not only in the international petroleum industry but also, for the second time in less than a decade, in the world economy and global politics. The new oil shock passed through several stages. The first stretched from the end of December 1978, when Iranian oil exports ceased, to the autumn of 1979. The loss of Iranian production was partly offset by increases elsewhere. Saudi Arabia pushed up production from its self-imposed ceiling of 8.5 million barrels per day to 10.5 by the end of 1978.

Not only were those developing nations hit by the same recessionary and inflationary shocks, but the price increases also crippled their balance of payments, constraining their ability to grow, or preventing growth altogether. They suffered further from the restrictions on world trade and investment. The way out for some was to borrow, and therefore, a goodly number of those OPEC surplus dollars were "recycled" through the banking system to these developing countries. Thus, they coped with the oil shock by the expedient of going into debt. But a new category also had to be invented—the "fourth world"—to cover the lower tier of developing countries, which were knocked flat on their backs and whose poverty was reinforced. The new and very difficult problems of the developing countries put the oil exporters into an awkward, even embarrassing situation. After all, they, too, were developing countries, and they now proclaimed themselves as the vanguard of the "South," the developing world, in its efforts to end the "exploitation" by the North, the industrial world.

Certainly, by 1978, such a consensus could be observed throughout the community of oil forecasters and among those who made decisions based on those forecasts: While Alaska, Mexico, and the North Sea would together add six to seven million barrels per day to world markets by the early or mid-1980s, those new sources were expected to serve only as a supplement and a sort of modern-day Fabius, holding off and postponing, but not decisively banishing the inevitable day of shortage and reckoning. For, most forecasters agreed, another oil crisis was highly probable a decade or so hence, in the second half of the 1980s, when demand would once again be at the very edge of available supply. The result, in popular parlance, was likely to be an "energy gap," a shortage. In economic terms, any such imbalance would be resolved by another major price increase, a second oil shock, as had happened in the early 1970s. Though variations were to be found among the forecasts, there was considerable unanimity on the central themes, whether the source was the major oil companies, the CIA, Western governments, international agencies, distinguished independent experts, or OPEC itself. Not only were the forecasters convinced, so were the decisionmakers who relied on the forecasts to make their policies and investments and choose their course of action.

 

pages: 332 words: 89,668

Two Nations, Indivisible: A History of Inequality in America: A History of Inequality in America by Jamie Bronstein

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Affordable Care Act / Obamacare, back-to-the-land, barriers to entry, Bernie Sanders, big-box store, blue-collar work, Branko Milanovic, British Empire, Capital in the Twenty-First Century by Thomas Piketty, clean water, cognitive dissonance, collateralized debt obligation, collective bargaining, Community Supported Agriculture, corporate personhood, crony capitalism, deindustrialization, desegregation, Donald Trump, ending welfare as we know it, Frederick Winslow Taylor, full employment, Gini coefficient, income inequality, interchangeable parts, invisible hand, job automation, John Maynard Keynes: technological unemployment, labor-force participation, land reform, land tenure, low skilled workers, low-wage service sector, minimum wage unemployment, moral hazard, mortgage debt, New Urbanism, non-tariff barriers, obamacare, occupational segregation, Occupy movement, oil shock, Plutocrats, plutocrats, price discrimination, race to the bottom, rent control, road to serfdom, Ronald Reagan, Scientific racism, Simon Kuznets, single-payer health, strikebreaker, too big to fail, trade route, transcontinental railway, Triangle Shirtwaist Factory, trickle-down economics, universal basic income, Upton Sinclair, upwardly mobile, urban renewal, wage slave, War on Poverty, women in the workforce, working poor, Works Progress Administration

During the Nixon administration, the President’s Commission on Income Maintenance recommended a basic income guarantee for low-income Americans, the Family Assistance Plan. The plan was never enacted, although the Earned Income Tax Credit had its origin in this idea. When the Family Assistance Plan stalled and died, the political will to broaden the social safety net evaporated under economic pressure. Stagflation, the oil shocks of the 1970s, and deindustrialization brought malaise to the United States. These conditions enabled widespread acceptance of an alternative theory of prosperity, discussed in Chapter 7. Divorced from both equality of condition and equality of opportunity, Ronald Reagan’s tax cuts, military spending, safety-net slashing, and “trickle-down” economics promoted the idea that the freest markets were most efficient, and the most efficient markets produced the most prosperity.

Although the plan was never enacted, the Earned Income Tax Credit (1975), a tax refund for low-income working families, had its origin in this idea.6 During the 1970s, philosophers as well as politicians struggled with ideas of fairness. The philosophers John Rawls’s A Theory of Justice (1971) and Robert Nozick’s Anarchy, State, and Utopia (1974) set out important interpretations of fair property-holding and distribution that have influenced divergent policies to this day. By the late 1970s, prosperity was lagging under the pressure of two oil shocks, unprecedented combined inflation and unemployment, and increasing American deindustrialization. The population shifted, following military bases and factories to southern states where unions were weaker or nonexistent and workers could be paid less. In the Rust Belt, the automobile factories that drove American prosperity furloughed workers.7 In the midst of this malaise, new voices began to blame the economic slowdown on Keynesian economics, taxation, and government economic regulation.

In the worst formulation, they described the poor as devious “welfare queens.”100 As the next chapter will show, Ronald Reagan, long an opponent of welfare programs, made those associations and claims central tenets of his administration. Under the pressure of neoliberalism, the Great Compression quickly began to unravel. CHAPTER 7 The Triumph of Neoliberalism: 1979–1999 Stagflation and the oil shocks of the 1970s had brought economic malaise to the United States, setting the stage for widespread acceptance of a new, “neoliberal” theory of prosperity, divorced from both equality of condition and equality of opportunity. Over the course of the next decade, Ronald Reagan’s severe tax cuts and George H. W. Bush’s “trickle-down” economics promoted the idea that Americans should nurture and cultivate “job creators,” the wealthiest Americans, who, it was assumed, would reinvest in the economy and cause growth that would benefit all.

 

The Geography of Nowhere: The Rise and Decline of America's Man-Made Landscape by James Howard Kunstler

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A Pattern Language, blue-collar work, California gold rush, car-free, City Beautiful movement, corporate governance, Donald Trump, financial independence, Ford paid five dollars a day, Frank Gehry, germ theory of disease, indoor plumbing, jitney, land tenure, means of production, megastructure, Menlo Park, new economy, oil shock, place-making, Plutocrats, plutocrats, postindustrial economy, Potemkin village, Ronald Reagan, urban planning, urban renewal, urban sprawl, Whole Earth Review, working poor, Works Progress Administration

Work on the interstate highway system progressed despite the costs of the Vietnam War and by the early 1970s the system was all but completed. As expected, the new expressways promoted an ever-farther-flung subur­ ban expansion. A new merchandising gimmick called the shopping mall began to sprout up around the highway interchanges, offering a syn­ thetic privatized substitute for every Main Street in America. A golden age of ever-greater profit seemed to beckon . . . but then the first of the oil shocks struck: the so-called Arab Oil Embargo. Whether any actual oil shortage existed during those autumn weeks of 1973 is arguable, but the distribution and pricing apparatus certainly went amok at the threat of one. Since World War II, America's oil use had shot up so steeply that by the seventies many old American oil J O Y R I D E fields were pumped dry, and nearly half of our petroleum was coming from overseas.

Lines formed at pumps every­ where, people panicked, fistfights broke out, work schedules were disrupted, vacations were canceled, and nobody knew if the country would be able to carry on as before. A longer-term result was the rising cost of practically everything, otherwise known as inflation, since the . e of all commodi . _ods wer�_�Ilke�-,_ th��g� _manufact� ri!1..8 or distri utron, to the price�e oil shock also temporarily dis­ -;;ur;gea more mlgraffoi-it'o the new outer limits of the urban fringe. For instance, the trip from Mira Lorna to downtown Los Angeles might take only fifty minutes, but who was crazy enough to move that far when an Arab cartel could shut the oil spigot any time they pleased ? In short, the Great Enterprise of continued suburban expansion suddenly lost its plausibility. And the whole economy went to hell-in a strange new way.

The known global reserves of petroleum are expected to last roughly another thirty years. This means that in the lifetimes of most Ameri­ cans living today, the essential fuel that has powered the suburban1 1 1 ... T HE GE O G R A P H Y O F N O W HE RE , consumer way of life will no longer be available. Ii will not be necessary to run out of petroleum in order to fatally disrupt a petroleum­ dependent economy. As the 1970s oil shocks demonstrated, all that it takes to mess things up is some instability of supply and price, and surely we will reach that stage before the wells run dry. Despite a lot of wishful thinking, and a near-religious belief in the "magic of technol­ ogy," there is no alternative in sight to the internal combustion engine that the masses of Illotorists cO!lld aHord. C' ;��:��-y- In any case, by the late 1980s the Great Enterprise of an endless suburban expansion finally crashed up against the ultimate natural limit: Researchers discovered that the burning of fossil fuels was alter­ ing the earth's atmosphere so drastically that a projected "global warm­ ing" effect could melt the polar ice caps, flood low-lying areas where most of the world's population lived, and destroy world agriculture by disrupting weather patterns, all within the next sixty years.

 

pages: 275 words: 82,640

Money Mischief: Episodes in Monetary History by Milton Friedman

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

The sharp rise in the price of oil in the 1970s lowered the quantity of goods and services that was available for people to use because everyone had to export more abroad to pay for oil. This reduction in output raised the price level. But that was a once-for-all effect. It did not produce any longer-lasting effect on the rate of inflation. In the five years after the 1973 oil shock, inflation in both Germany and Japan declined, in Germany from about 7 percent a year to less than 5 percent, in Japan from over 30 percent to less than 5 percent. In the United States, inflation peaked a year after the oil shock at about 12 percent, declined to 5 percent in 1976, and then rose to over 13 percent in 1979. How can these very different experiences be explained by an oil shock that was common to all countries? Germany and Japan are 100 percent dependent on imported oil, yet they did better at cutting inflation than did either the United States, which is only 50 percent dependent on imported oil, or the United Kingdom, which has become a major producer of oil.

 

pages: 204 words: 67,922

Elsewhere, U.S.A: How We Got From the Company Man, Family Dinners, and the Affluent Society to the Home Office, BlackBerry Moms,and Economic Anxiety by Dalton Conley

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3D printing, call centre, clean water, dematerialisation, demographic transition, Edward Glaeser, extreme commuting, feminist movement, financial independence, Firefox, Frank Levy and Richard Murnane: The New Division of Labor, Home mortgage interest deduction, income inequality, informal economy, Jane Jacobs, John Maynard Keynes: Economic Possibilities for our Grandchildren, knowledge economy, knowledge worker, labor-force participation, late capitalism, low skilled workers, manufacturing employment, McMansion, mortgage tax deduction, new economy, oil shock, PageRank, Ponzi scheme, positional goods, post-industrial society, Post-materialism, post-materialism, principal–agent problem, recommendation engine, Richard Florida, rolodex, Ronald Reagan, Silicon Valley, Skype, statistical model, The Death and Life of Great American Cities, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, transaction costs, women in the workforce, Yom Kippur War

First from Japan; then from Taiwan and South Korea. And finally, from China and Southeast Asia. If it weren’t for death by a thousand imports, the Treaty of Detroit would have rotted from within, since—devoid of real competition—the system would have devolved into a Sovietlike goldbricking system of low-productivity work. Wages and prices would feed into the vicious circle of inflation, or rather stagflation (which, in fact, sparked by the oil shock of 1973, did befall us). Those generous provisions for health care and retirement have meant that American car companies (and other manufacturers) had little fat they could trim. Rather than give up defined benefit (i.e., guaranteed) pensions and health insurance for retirees, autoworkers clung to their hard-won gains—in part because union leaders are almost always closer to retirement than the rank-and-file workers they are meant to represent.

I am picking on cars to illustrate the point, but the story is no different in the rest of the manufacturing sector. The auto industry, if anything, has been spared the worst of it since there is somehow symbolic importance to “buying American” (whatever that means) to many U.S. citizens, especially veterans and politicians. The point is: Don’t blame the Asians; our midcentury system of wage growth and relative equality was going to collapse one way or another. The oil shock of 1973—when the members of OPEC took the position that they would no longer ship oil to nations that supported Israel in the Yom Kippur War, curtailing production and thereby raising prices—makes as good a marker as any for the beginning of the end. Urban manufacturing declined just as our borders were opening up. Thanks to the Hart-Cellar Act of 1965, which abolished national quotas in favor of a more flexible family reunification approach to admission, new immigrants began pouring into U.S. cities and suburbs.

Someone may counter that while prices have fallen for some goods in real terms for the average family, wages at the bottom have been stuck for most of the last four decades. Stagnant wage growth has been a mantra of Democratic politicians and labor activists for the past two decades. Yes, it is true that if you track median wages and plot them against price rises based on the official inflation rate—the consumer price index (CPI)— then it does look like real wages have stagnated for the bottom half for most of the period since the oil shock of 1973.10 However, as my graduate school economics professor pithily stated: “Inflation is a great measure in the short run; but it’s a lousy measure over longer periods.” That’s the case mainly because of the way it’s calculated. Basically, the U.S. Bureau of Labor Statistics takes a common “basket of goods” and tracks the changes in prices of those goods from one time period to the next. (This is an oversimplification, of course, but mostly true.)

 

pages: 222 words: 70,559

The Oil Factor: Protect Yourself-and Profit-from the Coming Energy Crisis by Stephen Leeb, Donna Leeb

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Buckminster Fuller, diversified portfolio, fixed income, hydrogen economy, income per capita, index fund, mortgage debt, North Sea oil, oil shale / tar sands, oil shock, peak oil, profit motive, reserve currency, rising living standards, Ronald Reagan, shareholder value, Silicon Valley, Vanguard fund, Yom Kippur War, zero-coupon bond

In the pages ahead we explain why we think we are on the cusp of a major transition that, revolving around oil, will dominate the investment picture for many years to come. And we tell investors exactly how they best can deal with this challenging new environment so as to come out winners. We hope you find it provocative, informative, and helpful. Introduction At various moments in the past thirty-plus years, oil has thrust itself front and center into our consciousness. The first oil shock came during the Arab oil embargo of 1973, when oil prices rose precipitously and filling up our tanks at the local gas station became a major ordeal. A few years later during the revolution in Iran, and then in 1991 prior to the first Gulf War, prices also soared. During these times, everyone fretted about oil. When oil prices came down, though, as they always seemed to do, most of us once again were happy to take oil for granted.

In a free market system, price is always going to be the chief determining factor. Until oil prices rise sufficiently, we’re going to keep putting off facing reality. And that could be exceedingly dangerous. One reason for a sense of urgency about zeroing in on alternative energies as rapidly as possible, rather than dragging out the process by efforts at conservation, is that we can never know when we will experience a sudden oil shock that will abruptly choke off supplies. Unlike thirty years ago, when worldwide oil supplies were more abundant, we’re too close to the edge now to be sure we can survive such a blow. And with the world as fragile as it is, with most oil concentrated in politically hostile or unstable countries, it obviously would be naive to say that such a shock won’t happen. Whatever your view of the primary motives behind our unprecedented initiation of the war in Iraq, this reality—the importance of securing world oil supplies—surely wasn’t entirely absent from the minds of our leaders.

Whatever your view of the primary motives behind our unprecedented initiation of the war in Iraq, this reality—the importance of securing world oil supplies—surely wasn’t entirely absent from the minds of our leaders. In later chapters we talk about how our vulnerability to oil shortages makes it essential that we continue to build up our military might. But trying to police the oil-producing world through our soldiers and weapons will never be a hundred percent foolproof—oil shocks can still occur—and efforts to do so obviously are fraught with a great many risks and problems. The only long-term answer is to develop acceptable and viable alternative forms of energy, and the sooner we do it, the better. So yes, it does seem disgraceful that the average mileage achieved by cars has been dropping significantly, one of the statistics frequently pointed out by pro-conservationists.

 

pages: 268 words: 74,724

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

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

With the dollar weak in the malaise-ridden 1970s, oil was expensive in dollars. For now, what the falling price of oil indicates is the irrelevance of the Organization of the Petroleum Exporting Countries (OPEC) to the price of oil. Lest we forget, OPEC formed in the 1960s but had no impact on the per barrel price. Furthermore, the oil “shocks” of the early and late 1970s similarly had nothing to do with OPEC. As Robert Bartley, the late editorial-page editor of the Wall Street Journal, explained in his spectacular 1992 book about the Reagan revival, The Seven Fat Years (in which he put “oil shocks” in mocking quotes): “The real shock was that the dollar was depreciating against oil, against gold, against foreign currencies and against nearly everything else.”13 Bartley pointed out, “In the confusion of the 1970s, no one noticed that OPEC officials told us plainly what was going to happen after the closing of the gold window.”

It also presumes that they coincidentally became “greedy” again in the 2000s based on oil’s spike. In truth, U.S. presidents, once again, get the dollar they want. Reagan and Bill Clinton were strong-dollar presidents as the low prices of gold and oil revealed in living color. George W. Bush got the weak dollar he wanted, as evidenced by the spike in the prices of gold and oil since 2001. We didn’t suffer “oil shocks” in the 2000s; we suffered the weak-dollar policies of President Bush, and during his first term, of President Barack Obama. In a replay of modern history, Bartley added, “When the price of oil shot up, the most fashionable sectors of American opinion persuaded themselves the world was running out of energy.” We heard much the same in the 2000s as the silly notion of “peak oil” became popular.

 

pages: 603 words: 182,781

Aerotropolis by John D. Kasarda, Greg Lindsay

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3D printing, air freight, airline deregulation, airport security, Akira Okazaki, Asian financial crisis, back-to-the-land, barriers to entry, Berlin Wall, big-box store, blood diamonds, borderless world, British Empire, call centre, carbon footprint, Clayton Christensen, cleantech, cognitive dissonance, conceptual framework, credit crunch, David Brooks, David Ricardo: comparative advantage, Deng Xiaoping, deskilling, edge city, Edward Glaeser, failed state, food miles, Ford paid five dollars a day, Frank Gehry, fudge factor, full employment, future of work, Geoffrey West, Santa Fe Institute, George Gilder, global supply chain, global village, gravity well, Haber-Bosch Process, Hernando de Soto, hive mind, if you build it, they will come, illegal immigration, inflight wifi, interchangeable parts, intermodal, invention of the telephone, inventory management, invisible hand, Jane Jacobs, Jeff Bezos, Kangaroo Route, knowledge worker, kremlinology, labour mobility, Marshall McLuhan, Masdar, McMansion, megacity, Menlo Park, microcredit, Network effects, New Economic Geography, new economy, New Urbanism, oil shale / tar sands, oil shock, peak oil, Peter Thiel, pets.com, pink-collar, pre–internet, RFID, Richard Florida, Ronald Coase, Ronald Reagan, savings glut, Seaside, Florida, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Skype, smart cities, smart grid, South China Sea, South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, spinning jenny, stem cell, Steve Jobs, supply-chain management, sustainable-tourism, telepresence, the built environment, The Chicago School, The Death and Life of Great American Cities, The Nature of the Firm, thinkpad, Thomas L Friedman, Thomas Malthus, Tony Hsieh, trade route, transcontinental railway, transit-oriented development, traveling salesman, trickle-down economics, upwardly mobile, urban planning, urban renewal, urban sprawl, walkable city, white flight, Yogi Berra

The problem in this case is sharply curtailing CO2 emissions globally, which means the answer might not necessarily be found at Heathrow. The aftermath of previous oil shocks suggests efficiency is winning the argument. In the 1970s, when oil prices were the pressing issue instead of climate change, petroleum was hastily replaced wherever alternatives existed. Coal, natural gas, and nuclear power were pressed into service for heating homes, powering factories, and generating electricity. What we couldn’t phase out was gasoline—which continues to fuel 95 percent of all vehicles—although consumers rushed to embrace fuel-efficient Japanese imports, just as they do now. As a consequence, transportation’s oil consumption grew by about 1.3 percent per year between the first oil shock of 1973 and the 2008 peak. But residential uses fell 2.1 percent, commercial uses 2.4 percent, and power generation 4.8 percent.

(Then the crash and the law of large numbers kicked in.) The number of passengers in the United States this year is expected to hover around seven hundred million, 10 percent off its peak but still triple what it was in 1980. It’s grown five times faster than population since then. In thirty years, the number of miles flown by Americans dipped only once before our current crisis, in the wake of 9/11. Neither the early eighties oil shocks nor the first Gulf War slowed us down. Air travel follows the money. It’s a leading indicator of economic health, flying higher when times are good and falling faster when they turn bad. As it is, six hundred thousand Americans hopped a flight last week, more than the population of Milwaukee. Hubs are easily the world’s most central places, concentrating us like nowhere else. DFW annually handles some sixty million passengers, equal to one in five Americans.

The United Arab Emirates possesses a full twelfth of the world’s proven oil reserves, enough to keep pumping for a century. But almost all of that lies under Abu Dhabi; Dubai is running dry. This was hardly unexpected—Sheikh Mohammed’s father, Sheikh Rashid, knew it not long after oil was discovered in the 1960s. The knowledge defined Dubai, forcing its rulers to diversify and imagineer. While Abu Dhabi threw up topaz and tourmaline towers Dallas-style in the 1970s, Sheikh Rashid plowed his oil-shock profits into infrastructure. It was during his reign that Dubai built its ports, airport, drydocks, World Trade Center, and the first banks and hotels to cater to traders like Marwan Bibi. His greatest legacy was Jebel Ali, the largest man-made harbor ever created, carved from a stretch of empty beach. “I’m building this port now,” Sheikh Rashid told his son, “because there will come a time when you won’t be able to afford it.”

 

pages: 554 words: 168,114

Oil: Money, Politics, and Power in the 21st Century by Tom Bower

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Ayatollah Khomeini, banking crisis, bonus culture, corporate governance, credit crunch, energy security, Exxon Valdez, falling living standards, fear of failure, forensic accounting, index fund, interest rate swap, kremlinology, LNG terminal, Long Term Capital Management, margin call, Mikhail Gorbachev, millennium bug, new economy, North Sea oil, offshore financial centre, oil shale / tar sands, oil shock, passive investing, peak oil, Piper Alpha, price mechanism, price stability, Ronald Reagan, shareholder value, short selling, Silicon Valley, sovereign wealth fund, transaction costs, transfer pricing, éminence grise

Rich would claim that he, like his rivals, had exploited a loophole in badly drafted regulations. However, he had set himself apart from other traders by ostensibly operating from Switzerland, in order to evade American taxes. That might have been ignored if he had not planned to profit by exploiting a crisis in Iran, where oil workers were striking to topple the Shah, disrupting supplies. Oil prices in Rotterdam rose by 150 percent, the harbinger of what would be called the second oil shock. Anticipating the shortage, Rich had again purchased oil for storage from corrupt Iranian officials. Among his customers was BP, the former owner of the Iranian oilfields, which was anxious to keep its refineries operating. BP’s reliance on Rich increased after the Shah was ousted from Tehran in January 1979 and replaced by the Islamic fundamentalist Ayatollah Khomeini. Fears of an oil embargo pushed prices further up.

The volatility of prices caused OPEC and most of the major oil companies concern, but BP seemed well placed to profit from the new uncertainty. Unlike other traders, Hall noticed that besides the increasing amounts of oil being imported by the USA and the simplicity of trading tankers of crude oil on the daily Rotterdam spot market, there was an opportunity to speculate about future prices by using schemes devised in the financial markets. The rapid changes in prices made those profits potentially lucrative. The second oil shock had hastened the development of speculation. The impetus for the change was BP’s discovery of oil in the North Sea. Before the discovery of the Forties field in 1970, few experts had believed that any riches would be found under the gray water. The surprise breakthrough fired a stampede, akin to a gold rush. Among the biggest reservoirs was “Brent,” discovered in 1971 beneath 460 feet of water, which would provide 13 percent of Britain’s oil and 10 percent of its gas.

The fear of oil shortages, rising imports and soaring prices symbolized by Jimmy Carter wearing a cardigan and declaring it was “the moral equivalent of war” to cut consumption had been forgotten. Size rather than the environment was again fashionable. Economy cars had been abandoned, and nearly a fifth of American motorists drove gas-guzzling SUVs, the biggest of which ran at four miles a gallon. Although oil imports were predicted by the US Government Accountability Office to rise to 60 percent by 2015, there was no fear of an oil shock. Smart technology that enabled drills to turn corners in rocks miles beneath the surface could be relied upon to produce more oil, and oil’s contribution to industrial production was diminishing. Raymond’s sense of certainty enhanced Exxon’s stature. He and Rex Tillerson were guided by their desire to satisfy their shareholders. They appeared to have no fear of failure. Exxon’s reserves, compared to those of their competitors, were enormous.

 

pages: 415 words: 103,231

Gusher of Lies: The Dangerous Delusions of Energy Independence by Robert Bryce

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Berlin Wall, Colonization of Mars, decarbonisation, en.wikipedia.org, energy security, energy transition, financial independence, flex fuel, hydrogen economy, Just-in-time delivery, new economy, oil shale / tar sands, oil shock, peak oil, price stability, rolodex, Ronald Reagan, Silicon Valley, Stewart Brand, Thomas L Friedman, Whole Earth Catalog, X Prize, Yom Kippur War

Mills, writer of the Forbes column “Energy Intelligence,” and co-author of The Bottomless Well: The Twilight of Fuel, the Virtue of Waste, and Why We Will Never Run Out of Energy “In Gusher of Lies Robert Bryce does political leaders around the world an enormous favor by debunking in its entirety the myth that anymajor energy-consuming countrywith flat or declining energysupplies can ever achieve the utopia called ‘energy independence.’ He also lucidly spells outexactly whyAmerica is the least likely country even to come close.” —Matthew Simmons, chairman of the Houston-based investment banking firm Simmons & Company International, and author of Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy “He blasts Republicans, Democrats, the presidential candidates, Al Gore, Robert Redford, environmentalists, and energy analysts for misleading the public about our energy needs. . . . Meticulously researched with copious facts—nearly all footnoted—this illuminating and sometimes witty work offers another view of the current state of energy.” —Library Journal “Veteran energy analyst Robert Bryce challenges what has become a policy axiom of the American political establishment . . .

After more than 300 pages of a mostly clear-eyed survey of the global energy business, he concludes that every year that goes by is “another year in which our unstable energy economy moves so much closer to the point of no return.”56 While there is much to recommend in Roberts’s book, he fails to provide readers with an understanding of the rapid globalization of the energy business. Instead, he sticks with a U.S.-centric approach, and in doing so, he implies that America holds the keys to the global energy future. That’s no longer true. Another notable book that raised anxiety about future oil production was Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, written by Matthew Simmons, the founder and chairman of the Houston-based investment banking firm Simmons & Co. International. Published in 2005, the book gained particular attention because Simmons is a Republican and was an adviser to George W. Bush on energy issues. Simmons’s book claims that Saudi Arabia has been obscuring the problems in its oil fields and that the kingdom will not be able to significantly boost its oil output.

Prindle, David E. Petroleum Politics and the Texas Railroad Commission. Austin: University of Texas Press, 1981. Roberts, Paul. The End of Oil: On the Edge of a Perilous New World. New York: Houghton Mifflin, 2004. Sifry, Micah L., and Christopher Cerf. The Iraq War Reader: History, Documents, Opinions. New York: Touchstone, 2003. Bibliography 375 Simmons, Matthew. Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy. Hoboken, N.J.: John Wiley & Sons, 2005. Smil, Vaclav. Energy at the Crossroads: Global Perspectives and Uncertainties. Cambridge: MIT Press, 2003. Stagliano, Vito A. A Policy of Discontent: The Making of a National Energy Strategy. Tulsa, Okla.: PennWell, 2001. Woodward, Bob. Plan of Attack. New York: Simon & Schuster, 2004. This page intentionally left blank INDEX Abqaiq, 30–31 Adams, John, 58 Adams, Samuel, 58 ADM.

 

pages: 421 words: 120,332

The World in 2050: Four Forces Shaping Civilization's Northern Future by Laurence C. Smith

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Bretton Woods, BRICs, clean water, Climategate, colonial rule, deglobalization, demographic transition, Deng Xiaoping, energy security, flex fuel, global supply chain, Google Earth, guest worker program, Hans Island, hydrogen economy, ice-free Arctic, informal economy, invention of agriculture, invisible hand, land tenure, Martin Wolf, megacity, Mikhail Gorbachev, New Urbanism, oil shale / tar sands, oil shock, peak oil, purchasing power parity, Ronald Reagan, Ronald Reagan: Tear down this wall, side project, Silicon Valley, smart grid, sovereign wealth fund, special economic zone, The Wealth of Nations by Adam Smith, Thomas Malthus, trade liberalization, trade route, UNCLOS, UNCLOS, urban planning, Washington Consensus, Y2K

Even if total world oil production can be increased, if production cannot keep up with demand, that is still a supply decline. Disturbing twenty-first-century scenarios of intense competition for oil—even to the point of economic collapse and violent warfare—are described in the books Out of Gas by David Goodstein, Resource Wars and Rising Powers, Shrinking Planet: The New Geopolitics of Energy by Michael Klare, and Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy by Matt Simmons.111 These authors are neither hacks nor alarmists. Simmons is a lifelong Republican and oil industry insider, and is widely respected as one of the smartest data analysts in the business. Goodstein is a Caltech physicist, and Klare has long experience in military policy. “Of all the resources discussed in this book,” writes Klare in Resource Wars, “none is more likely to provoke conflict between states in the twenty-first century than oil.”

Andrews, “Mineral Resources, Economic Growth, and World Population,” Science 185 (1974): 13-10. 100 For more on this discussion of mineral exhaustion and the perils of a fixed-stock approach to resource assessment, see John E. Tilton, On Borrowed Time? Assessing the Threat of Mineral Depletion (Washington, D.C.: RFF Press, 2002), 160 pp. 101 Matthew R. Simmons, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy (Hoboken, N.J.: John Wiley & Sons, 2005), 428 pp. 102 A very detailed analysis comes from the National Institute for Materials Science in Tsukuba, Japan. The authors use the Goldman Sachs BRICs and G6 economic projections discussed in Chapter 2 to project future demand for twenty-two metals. K. Halada, M. Shimada, K. Ijima, “Forecasting of the Consumption of Metals up to 2050,” Materials Transactions 49, no. 3 (2008): 402-410. 103 J.

World Energy Outlook 2008, OECD/IEA (2008), 578 pp. 111 D. Goodstein, Out of Gas: The End of the Age of Oil (New York: W. W. Norton & Company, 2005), 148 pp.; M. Klare, Resource Wars: The New Landscape of Global Conflict (New York: Holt Paperbacks, 2002), 304 pp.; and Rising Powers, Shrinking Planet: The New Geopolitics of Energy, reprint ed. (New York: Holt Paperbacks, 2009), 352 pp.; M. Simmons, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy (Somerset, N.J.: John Wiley & Sons, 2005), 428 pp. 112 On average, postpeak oil field decline rates are 3.4% for supergiant fields, 6.5% for giant fields, and 10.4% for large fields, World Energy Outlook 2008, OECD/IEA (2008), 578 pp. 113 A successful Al Qaeda attack on the Abqaia facilities would have shocked world oil markets, as it handles two-thirds of the Saudi Arabian oil supply.

 

pages: 422 words: 113,830

Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism by Kevin Phillips

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algorithmic trading, asset-backed security, bank run, banking crisis, Bernie Madoff, Black Swan, Bretton Woods, BRICs, British Empire, collateralized debt obligation, computer age, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency peg, diversification, Doha Development Round, energy security, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, George Gilder, housing crisis, Hyman Minsky, imperial preference, income inequality, index arbitrage, index fund, interest rate derivative, interest rate swap, Joseph Schumpeter, Kenneth Rogoff, large denomination, Long Term Capital Management, market bubble, Martin Wolf, Menlo Park, mobile money, Monroe Doctrine, moral hazard, mortgage debt, new economy, oil shale / tar sands, oil shock, peak oil, Plutocrats, plutocrats, Ponzi scheme, profit maximization, Renaissance Technologies, reserve currency, risk tolerance, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, The Chicago School, Thomas Malthus, too big to fail, trade route

Between January 1969 and October 1970, the twenty-eight largest hedge funds saw 70 percent of their assets disappear; and between November 1969 and November 1970, roughly a hundred brokerage and financial firms were acquired or disappeared. Indexes cobbled together by Dun’s Review around the ten leading conglomerates and parallel tensomes for technology and computers tumbled between 77 percent and 86 percent. 3 Those excesses, by and large, were purged. The seventies were a confused era, marked by two major oil-price shocks (1973-74 and 1979-80) that bred a pair of serious stagflationary recessions in more or less the oil-shock time frames. However, mortgage debt expanded like gangbusters as housing prices soared between 1976 and 1979, letting owners refinance and tap spendable funds. Alan Greenspan, who was chairman of President Gerald Ford’s Council of Economic Advisers, would keep those supportive precedents in mind almost thirty years later as Fed chairman. And 1979 also brought the first leveraged buyout of a public company, Houdaille Industries, by a private equity firm, Kohlberg Kravis Roberts & Company, although the real LBO tide would await the more exuberant eighties.

Wheat, grains in general, and other produce are all climbing in price. Besides droughts that may be linked to climate change, experts cite new demand for foodstuffs from India, China, and the rest of Asia, as well as from the biofuels industry’s pursuit of corn for ethanol. One senior government minister in Australia raised the possibility of a global “food shock” to match the already obvious “oil shock.”14 The Russian government imposed retail price controls on some basic foodstuffs, Germany buzzed with newspaper headlines about milk and vegetable prices, and the director-general of the United Nations Food and Agricultural Organization noted in late 2007 that food prices in developing countries were up about 11 percent in the past year, spurring concern about food riots.15 In the United States, food represents 14 percent of the consumer price index, but the ratio is much higher in China (33 percent) and India (46 percent).

www.rgemonitor.com, November 15, 2007. 58 “How Jay-Z, Bundchen Got the Jump on Hedge Funds,” Bloomberg News, November 16, 2007. 59 “EU Says Oil Could One Day Be Priced in Euros,” Reuters, June 16, 2003. 60 “Iran Asks Japan to Pay Yen for Oil,” Bloomberg News, July 13, 2007. 61 “More Japanese Oil Firms Pay in Yen,” Iran Daily, October 10, 2007. 62 “Iran Presses Oil Customers to Pay in Currencies Other Than Dollars,” Reuters, March 27, 2007. 63 “Petroleos de Venezuela to Convert Accounts Away from Dollars,” Bloomberg News, September 17, 2007. 64 “Venezuela’s Oil Minister: OPEC Leaders May Discuss Creation of a Currency Basket to Price Crude,” Associated Press, November 16, 2007. 65 “St. Petersburg Bourse Selected as Trading Floor for Oil Prices,” RIA Novosti, November 14, 2007. 66 “Mansoor Mohi-uddin, “View of the Day: US Dollar,” Financial Times, September 11, 2007. 67 Phillips, American Theocracy, p. 87. 68 Ibid. 69 Ibid., p. 95. 70 Ibid. 71 Ibid., p. 96. 72 Ibid., p. 95. 73 Matthew Simmons, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy (New York: Wiley, 2005). 74 Michael T. Klare, “Beyond the Age of Petroleum,” Nation, November 12, 2007. 6. THE POLITICS OF EVASION: DEBT, FINANCE, AND OIL 1 Mancur Olson, The Rise and Decline of Nations (New Haven, Conn.: Yale University Press, 1984). 2 Mother Jones, September-October 2002, p. 64. 3 Grover Norquist, “A Dynastic Disease in American Politics,” Financial Times, November 20, 2007. 4 Carl Bernstein, A Woman in Charge: The Life of Hillary Rodham Clinton (New York: Knopf, 2006); Jeff Gerth and Don Van Natta Jr., Her Way: The Hopes and Ambitions of Hillary Rodham Clinton (New York: Little Brown, 2006). 5 Cullen Murphy, Are We Rome?

 

pages: 309 words: 91,581

The Great Divergence: America's Growing Inequality Crisis and What We Can Do About It by Timothy Noah

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autonomous vehicles, blue-collar work, Bonfire of the Vanities, Branko Milanovic, call centre, collective bargaining, computer age, corporate governance, Credit Default Swap, David Ricardo: comparative advantage, Deng Xiaoping, Erik Brynjolfsson, feminist movement, Frank Levy and Richard Murnane: The New Division of Labor, Gini coefficient, income inequality, industrial robot, invisible hand, job automation, Joseph Schumpeter, low skilled workers, lump of labour, manufacturing employment, moral hazard, oil shock, pattern recognition, performance metric, positional goods, post-industrial society, postindustrial economy, purchasing power parity, refrigerator car, rent control, Richard Feynman, Richard Feynman, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, Stephen Hawking, Steve Jobs, The Spirit Level, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, union organizing, upwardly mobile, very high income, War on Poverty, We are the 99%, women in the workforce, Works Progress Administration, Yom Kippur War

But while the economics profession isn’t much better at soothsaying than any other, it performs an enormously valuable, greatly underappreciated service in documenting and interpreting the past. Economic trends are hard to interpret in real time because doing so requires data, and the best and most complete data sets often aren’t available for five or ten years. By the time they are available, the world has moved on to fretting about newer trends. As a result, when the day arrives for us to understand better, say, the oil shocks of 1973, or the recession of 1982–83, we are preoccupied with trying to figure out the tech boom of the late 1990s or the housing bubble of the aughts. By “we,” I mean all of American society but especially my own fraternity of political and policy-wonk journalists. History isn’t news. But the Great Divergence has been going on for so long that it manages to be both. It’s history because it began when Jimmy Carter was in the White House.

But it didn’t contribute as much as is often supposed. The Trinity University economist Barry Hirsch calculated in a 2007 paper that if the only change between 1983 and 2002 had been the shift in where the jobs were, private-sector union density would have fallen by less than two percentage points. Instead, it fell by eight.12 Many of the calamitous economic conditions of the 1970s were not unique to the United States. The oil shocks affected all industrialized nations, similar productivity declines were observed elsewhere, and the very nature of global competition is that it’s, well, global. But in other industrialized nations, the effects were quite different. Union density actually increased in most industrialized countries during the 1970s even as it was decreasing in the United States. (Since then union density has tended to decrease in other industrialized countries, but not nearly so dramatically as in the United States.)

Everybody remembers the 1973 oil embargo and the clout enjoyed by the newly potent OPEC cartel, but few people remember the accompanying food shock of that same year, which saw a 20 percent increase in U.S. food prices. The latter was caused partly by rising food consumption in more prosperous economies abroad and partly by a deliberate policy by the Nixon administration to reduce domestic agricultural production (and thereby increase food prices) to court the farm vote in 1972. 9. Frank Levy, interview with author, Apr. 22, 2011. 10. The disruptive oil shocks of the 1970s—in 1973 and 1974 alone oil prices quadrupled—likely played a significant role. 11. William J. Baumol and Alan S. Blinder, Macroeconomics: Principles and Policy (Mason, OH: South-Western College Publishing, 2010), 145; Paul Krugman and Robin Wells, Macroeconomics (New York: Worth, 2009), 233; Susan Fleck, John Glaser, and Shawn Sprague, “The Compensation-Productivity Gap: A Visual Essay,” Monthly Labor Review, Jan. 2011, 57–69. 12.

 

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 relationship between industry supply and market prices is not an assumption, but a result that follows from the assumptions, in particular, that demand curves slope downward and that market prices are determined by equating the quantities demanded and supplied. In our oil example, this is a fairly innocuous mechanism that passes the verification test comfortably. The relationship between quantities supplied and prices makes sense intuitively, and there are plenty of real-world examples in which shocks to supply have had observable effects on prices in the hypothesized direction; consider the oil shock of 1973–74, for example. We do not need to have seen a demand curve or know what the technical definition of a market equilibrium is—both abstract concepts that do not have physical counterparts—to believe that the mechanism the model relies on is reasonable. But in other cases, the mechanism may result from more complicated behavior and may require greater justification. When the justification is weak, we should be concerned about whether the model in question really applies.

In the absence of either, the government has to act: fiscal spending must be raised to make up for lack of private demand. This demand-side view of macroeconomics prevailed pretty much through the 1970s. It was elaborated in models of increasing variety and spawned large-scale computerized versions that could generate quantitative forecasts of major macroeconomic aggregates such as employment levels and capacity utilization rates. Then two things happened: the oil shock and Robert Lucas. The oil crisis of 1973, precipitated by the embargo applied by the Organization of the Petroleum Exporting Countries (OPEC), fomented a new set of economic circumstances that had not been on economists’ radar screen: recession and inflation at the same time, or “stagflation.” Demand-side models wouldn’t be much help in the face of what was patently a supply-side shock. Of course, the Keynesian model could be tweaked to accommodate the effect of a rise in input prices.

 

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

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

I was convinced that the answer would not lie in big, hasty, expensive gestures. It's typical that in times of great national urgency, every congressman feels he has to put out a bill; presidents feel the pressure to act too. Under those conditions you can get shortsighted, ineffective, often counterproductive policies, like the gasoline rationing that President Nixon imposed during the first OPEC oil shock in 1973. (That policy caused gas lines in some parts of the country that fall.) But with fourteen years under my belt as Fed chairman, I'd seen the economy pull through a lot of crises—including the largest one-day crash in the history of the stock market, which happened five weeks after I took the job. We'd survived the real-estate boom and bust of the 1980s, the savings and loan crisis, and the Asian financial upheavals, not to mention the recession of 6 More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright.

The Category 5 kind happens when demand itself collapses—when consumers stop spending and businesses stop investing. As we talked through the possibilities, President Ford worried that America would find itself trapped in a vicious circle of falling demand, layoffs, and gloom. Since none of the forecasting models could deal with the circumstances we were facing, we were flying blind. All we could tell him was that this might be an inventory-based recession, aggravated by the oil shock and inflation—maybe a Category 2 or 3. Or it might be a Category 5. The president had to make a choice. With the discomfort index nearing 20 percent, there was tremendous political pressure from Congress to slash taxes or massively pump up government spending. That was the way to deal with a Category 5. It could revive growth in the short term, though it risked pushing inflation even higher, with potentially disastrous longterm effects.

One thing that surprised everyone was the lack of public protest. Coming off a decade of civil rights and anti-Vietnam War marches, anyone who could have foreseen 9 percent unemployment would have expected massive demonstrations and barricades in the streets, not just in the United States but also in Europe and Japan, where the economic problems were equally severe. Yet that didn't happen. Perhaps the world was simply exhausted by the oil shock and the decade that had led up to it. But the era of protest was over. America was going through this period with what seemed like a new sense of cohesion. President Ford held off the pressure, and his economic program eventually made it into law (Congress did raise the tax rebate by almost 50 percent, to about $125 per average household). More important, the recovery began when we promised the public it would, in mid-1975.

 

pages: 255 words: 68,829

How PowerPoint Makes You Stupid by Franck Frommer

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Albert Einstein, business continuity plan, cuban missile crisis, dematerialisation, hypertext link, invention of writing, inventory management, invisible hand, Just-in-time delivery, knowledge worker, Marshall McLuhan, means of production, new economy, oil shock, Ronald Reagan, Silicon Valley, Steve Jobs, Steve Wozniak, union organizing

It is a regular and permanent occupation intended to spread their good methods, their perceptive analyses, their organizational methods, their strategic recommendations—in short, models of thinking concocted in managerial agencies primarily based in the United States. This democratization and proliferation of new models of thinking surfaced in the early 1980s after various economic disturbances, particularly the two oil shocks. Companies at the time were forced to substantially change their organizational and operational methods. They had to resolve to take the medication prescribed by the only “therapists” able to treat them—consultants, strategic advisers serving many companies in public relations and information systems.1 Thanks to the thousands of person-days sold to client companies and the millions of slides repeating essentially the same models and the same arguments, these experts in recommendations have been able to link rationality, authority, and entertainment, if not to help their clients, at least to enrich their employers.

His three most famous books, which he published himself for reasons of graphic precision, are The Visual Display of Quantitative Information (1983), Envisioning Information (1990), and Visual Explanation (1997), all published by Graphics Press, Cheshire, CT. 20. Tufte comments ironically on the barrels, gas pumps, and derricks widely used as illustrative devices in American magazines during the oil shocks of 1973 and 1979. 21. The literature in England and America on this subject has been plentiful in the last twenty years. See in particular three papers by Vivien Beattie and Michael J. Jones: “A Six-Country Comparison of the Use of Graphs in Annual Reports,” International Journal of Accounting 36, no. 2 (2001): 195–222; “A Comparative Study of the Use of Financial Graphs in the Corporate Annual Reports of Major U.S. and U.K.

 

pages: 287 words: 81,970

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

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

Stocks fell about 15 percent in 1973, more than 25 percent in 1974. Unemployment hit 9 percent, while the official inflation rate climbed to 12.2 percent in 1974 and 13.3 percent in 1979. It was a period of confused monetary policy. Businesses encountered Nixon’s disastrous wage and price controls, which fixed the prices at which they could sell, while they also had to contend with huge increases in borrowing costs. And then came the oil shocks. OPEC warned repeatedly that a change in the value of the dollar would result in higher nominal oil prices, so when Nixon suspended dollar convertibility to gold in 1971, oil prices were bound to climb. They quadrupled from $3 per barrel in 1972 to $12 in 1974. They spiked again beginning in the late 1970s until they hit $35 in 1981. Periods of stagflation are particularly painful because of the proliferation of mixed economic messages.

The average U.S. price of gas peaked in July 2008 at $4.11 per gallon. By December it had fallen to $1.66. Even with gas lower than it had been since 2004, the sting of $4.00 gasoline is not likely to be forgotten by drivers for some time. The destruction of demand caused by high prices can persist even after prices have fallen back. As American consumers began moving massively to smaller cars after the oil shocks of the 1970s, average fuel consumption declined and continued to do so for years even after the price of gasoline had retreated sharply. By the end of 2008, in response to the recent price shocks, plants making SUVs were closing left and right. On December 23, General Motors closed an Ohio plant that had turned out 3.7 million large SUVs. In response to lower gas and oil prices, OPEC nations, having already agreed to production cuts of 2 million barrels a day in the fall, announced an additional cut of 2.2 million barrels a day in December 2008.

 

pages: 233 words: 73,772

The Secret World of Oil by Ken Silverstein

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business intelligence, clean water, corporate governance, Donald Trump, energy security, Exxon Valdez, failed state, Google Earth, offshore financial centre, oil shock, paper trading, rolodex, Ronald Reagan, WikiLeaks, Yom Kippur War

“As he was talking, the minister started taking off his tie, and then his jacket, and then his shirt—and there were whip marks on his back, scars. ‘You know who gave these to me?’ he asked. ‘Two British police who arrested me when we were fighting for our independence. And you know what? I don’t bear a grudge. I’ll do business with the British as long as you give me the right price. So don’t give me your political propaganda, just give me a good contract.” After the first OPEC oil shock, in 1973, Calil became seriously involved in the petroleum business, first trading oil and then obtaining concessions and reselling them. Within five years, oil had become the largest sector of his business. Calil’s influence and wealth soared after the Nigerian general Ibrahim Babangida assumed power in a 1985 coup. When I asked Calil about his relationship with Babangida, who is still a power broker in Nigeria, he acknowledged that they were close friends.

Others I spoke with acknowledged—some with satisfaction and others dismay—that traders played a more substantial role in the speculation that has agitated oil markets in recent years. I took a fifty-minute train ride from Geneva to the town of Montreux, at the foot of the Alps, to meet with a retired commodities broker who got his start in the 1980s trading cement, rice, and spices before moving on to buying and selling oil and refined products. We had lunch across the street from the train station at the Grand Hotel. Since the oil shocks of the 1970s, the prevailing analysis has tended to describe oil prices in strict supply-and-demand terms, often placed in a geopolitical context. If it wasn’t conflict in the Middle East that was jacking up prices, it was devious oil cartels tinkering with the spigot, Hugo Chávez nationalizing refineries, rebels in the Niger Delta blowing up pipelines, or demand from the emerging middle class in India and China.

 

Blindside: How to Anticipate Forcing Events and Wild Cards in Global Politics by Francis Fukuyama

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Asian financial crisis, banking crisis, Berlin Wall, Bretton Woods, British Empire, capital controls, Carmen Reinhart, cognitive bias, cuban missile crisis, energy security, flex fuel, income per capita, informal economy, invisible hand, John von Neumann, Menlo Park, Mikhail Gorbachev, moral hazard, Norbert Wiener, oil rush, oil shale / tar sands, oil shock, packet switching, RAND corporation, Ray Kurzweil, reserve currency, Ronald Reagan, The Wisdom of Crowds, trade route, Vannevar Bush, Vernor Vinge, Yom Kippur War

The fact that ten of the top fourteen oil-exporting countries are politically unstable, that the United States may be facing a long period of increased hurricane activity in the Gulf of Mexico, and that, following the Abqaiq attack, al-Qaeda promised that “we shall not cease our attacks until our territories are liberated,” implies that it is only a matter of time before the United States finds itself in the midst of a severe oil shock.3 Here is an eminently predictable catastrophe if ever there was one. The Energy Weapon Is Back Transportation underlies the modern U.S. economy. With 97 percent of U.S. transportation energy based on petroleum, oil is the lifeblood of America’s economy. Without oil, goods and raw materials cannot reach their destinations, service providers cannot arrive at their clients, and children cannot go to school.

An aggressive, inventive energy policy can gradually diminish the role of oil in world politics and reduce predictable friction between consumers and producers and among consumers themselves. Such a vision is both practical and economical—far cheaper than maintaining the current energy system. The only question is whether our leaders will lead or will instead be dragged to act by the most painful oil shock in American history. 2990-7 ch08 barrett 7/23/07 12:12 PM Page 82 8 Emerging Infectious Diseases: Are We Prepared? Scott Barrett N ews that a person has become infected with HIV is a personal tragedy but of no consequence to the world at large. News of the first person to be infected with HIV—now that, had it been revealed years ago at the start of the pandemic, would have been of monumental importance.

 

pages: 376 words: 118,542

Free to Choose: A Personal Statement by Milton Friedman, Rose D. Friedman

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affirmative action, agricultural Revolution, air freight, back-to-the-land, bank run, banking crisis, Corn Laws, Fractional reserve banking, full employment, German hyperinflation, invisible hand, labour mobility, means of production, minimum wage unemployment, oil shale / tar sands, oil shock, price stability, Ralph Nader, RAND corporation, rent control, road to serfdom, school vouchers, Simon Kuznets, The Wealth of Nations by Adam Smith, union organizing, Unsafe at Any Speed, Upton Sinclair, urban renewal, War on Poverty, working poor, Works Progress Administration

The reduction in output raised the price level. But that was a once-for-all effect. It did not produce any longer-lasting effect on the rate of inflation from that higher price level. In the five years after the 1973 oil shock, inflation in both Germany and Japan declined, in Germany from about 7 percent a year to less than 5 percent; in Japan from over 30 percent to less than 5 percent. In the United States inflation peaked a year after the oil shock at about 12 percent, declined to 5 percent in 1976, and then rose to over 13 percent in 1979. Can these very different experiences be explained by an oil shock that was common to all countries? Germany and Japan are 100 percent dependent on imported oil, yet they have done better at cutting inflation than the United States, which is only 50 percent dependent, or than the United Kingdom, which has become a major producer of oil.

 

Falling Behind: Explaining the Development Gap Between Latin America and the United States by Francis Fukuyama

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Andrei Shleifer, Atahualpa, barriers to entry, Berlin Wall, British Empire, business climate, Cass Sunstein, central bank independence, collective bargaining, colonial rule, conceptual framework, crony capitalism, European colonialism, Fall of the Berlin Wall, first-past-the-post, Francis Fukuyama: the end of history, Francisco Pizarro, Hernando de Soto, income inequality, income per capita, labour market flexibility, land reform, land tenure, Monroe Doctrine, moral hazard, New Urbanism, oil shock, open economy, purchasing power parity, rent-seeking, Ronald Reagan, The Wealth of Nations by Adam Smith, total factor productivity, trade liberalization, transaction costs, upwardly mobile, Washington Consensus

While these events had important consequences for all countries in the Western 6 Falling Behind Hemisphere, their impact was arguably less severe in Latin America than in the United States. The gap widened again in the last three decades of the twentieth century with the spread of authoritarian regimes throughout the region. In addition, many of the large countries in Latin America catastrophically failed to adjust to the rapidly changing external environment, resulting from the two oil shocks of the 1970s. Burgeoning fiscal deficits, attempts to monetize deficits through growth in money supplies, hyperinflation, and overvalued exchange rates in Mexico, Brazil, Argentina, Peru, and other countries set the stage for the debt crisis of the 1980s and the subsequent drop in real growth rates throughout Latin America. The United States, on the other hand, controlled the inflationary spiral set off by the oil crisis relatively quickly in the early 1980s and put into place a series of liberalizing economic policies that laid the groundwork for two decades of almost uninterrupted growth in per capita income.

., Japan, South Korea, and Taiwan) grew even more rapidly in this period despite heavy state intervention in capital markets and protection of domestic markets against foreign goods and investment. Indeed, Alice Amsden has pointed out that, by the 1970s, South Korea’s average rate of tariff protection was comparable to that of Argentina.7 Across-theboard openness to market forces and minimal state intervention were thus not the sine qua non of economic growth in either region. Economic performance began diverging dramatically between East Asia and Latin America primarily after the oil shocks of the 1970s; the difference in long-term performance (and thus the reason for Latin America’s failure to close the gap with the United States) was largely Conclusion 273 the result of Latin America’s failure to adjust to the changed conditions of the external environment. As current account deficits began piling up in all non–oil producing countries, many of those in East Asia tightened their belts, cut government spending, and kept fiscal deficits under control.

This history suggests that good policies are not, in themselves, sufficient to produce sustained economic growth. Latin America, as Dani Rodrik has pointed out, grew impressively under the sway of heterodox protectionist policies in the benign environment of the 1950s and 1960s, and its performance has been uneven during the era of liberal reform from the late 1980s onward.8 The real problems emerged as a result of the region’s failure to adjust to the oil shocks and to the sharply less benign international environment that emerged during the 1970s, something the East Asian fast developers managed much more successfully. This suggests a second critical factor that explains the development gap: institutions. 274 Conclusion Institutions Many of the authors in this volume, including Robinson, Roett and González, Przeworski and Curvale, and Fukuyama, identified weak or defective institutions as one of the most significant sources of the development gap.

 

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

Inflation expectations were insufficiently adaptive: investors should have looked more at the most recent year’s inflation than the past decade’s inflation when setting expectations:• It seems harsh and hindsighted to call this irrational, given that the inflation process was changing dramatically. If we recognize that inflation expectations in the 1970s and 1980s evolved amidst almost unprecedented structural uncertainty (the end of Bretton Woods, oil shocks, and other wrenching changes), rational learning models may be relevant. In a regime shift context, people may have adjusted too slowly to the probability of being in a high-inflation or low-inflation regime. • A few decades earlier, price stability was the long-run norm (zero inflation expectations and little persistence in annual inflation rates); by the 1970s, the level of and uncertainty regarding inflation were rising and so was its persistence; the inflation rate (as opposed to the price level) became close to a random walk.

In the U.S., wars (Korea and Vietnam) again coincided with rising fiscal deficits and rising inflation; aggressive demand man-agement and insufficient understanding of expectations also contributed. After the Bretton Woods regime (a quasi gold standard) collapsed in 1971, the major economies were clearly in a fiat money regime and inflation expectations became further unanchored. The two 1970s’ oil shocks coincided with productivity decline, while the Fed’s overestimation of trend output and therefore slack in the economy resulted in overly loose monetary policy, contributing to the Great Inflation. Under Paul Volcker’s leadership, which began in 1979, the Fed finally ended and reversed the decades-long uptrend in inflation—at the cost of deep recessions in 1980–1982. The decades of the Great Moderation followed, although inflation scares (1984, 1987, 1990, 1994) did still occur until the Fed’s anti-inflation credibility was firmly established.

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

 

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

Governments and the corporate sector were engaged deeply on these issues, and the public, driven by major climatic events and high-profile campaigners like Al Gore and Tim Flannery, had put the issue at the forefront of public and political debate. So many experts argued we’d turned the corner and would now start to see serious political action. Jorgen was skeptical of that view. He had seen the issue ebb and flow over many decades, from the 1970s oil shock through various peaks of attention in the 1980s and 1990s to the then emerging global financial crisis. He was convinced the world still wasn’t ready for the type of transformational action required to shift the global economy. He mounted a convincing argument, so our conversation moved to when we thought real action was likely to occur and what the science told us about the implications of acting at that stage.

With the transformation thus in full swing by the end of this decade, anyone guiding a company or investment fund needs to pay careful attention now. While it will start with a focus on energy and water it will soon spread to all aspects of the high-carbon economy and then to sustainability more broadly. Some of you are thinking, “Haven’t we heard all this before, several times? Wasn’t the energy revolution going to start in the 1970s with the oil shock and the beginning of the solar revolution? Then oil prices went down and it all went away? Haven’t people been saying ever since that the boom is ‘just around the corner’?” Yes, all true, but this is fundamentally different for a simple reason. Each previous time, the transformation has been driven by economics; fossil-fuel prices went up so alternatives became competitive. We have let the market determine the pace of change, yet put no price into that market for the damage caused by climate change.

 

pages: 302 words: 86,614

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

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Asian financial crisis, asset allocation, asset-backed security, backtesting, Bernie Madoff, Bretton Woods, business process, call centre, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, en.wikipedia.org, family office, fixed income, high net worth, interest rate derivative, Isaac Newton, Long Term Capital Management, Mark Zuckerberg, merger arbitrage, NetJets, oil shock, pattern recognition, Ponzi scheme, quantitative easing, quantitative trading / quantitative finance, Renaissance Technologies, risk-adjusted returns, risk/return, rolodex, short selling, Silicon Valley, South Sea Bubble, statistical model, Steve Jobs, systematic trading

Even back then, I was never really concerned with money past a certain point of utility. I was happy sleeping on a cot in a studio apartment. All I cared about was having the freedom to do what I wanted to do.” As luck would have it, Dalio’s return to Harvard coincided with a huge surge of inflation. The breakdown of the monetary system in 1971 had caused a surge that pushed commodity prices higher and created the first oil shock in 1973. To combat inflation, the Federal Reserve tightened monetary policy, which brought on what until then was the worst bear market since the Great Depression. All of a sudden, there was a rush into previously unfashionable commodities futures trading, and brokerage houses clamored to build new trading departments. Because Dalio had experience trading commodities, had worked for the commodity division head at Merrill Lynch the previous summer, and had a Harvard MBA, he immediately got a job as the director of commodities at a midsize brokerage and was tasked with setting up the new division.

Once a natural reserve filled with large lakes, there is a serene ambience to Dalio’s inner sanctum. Somewhat contradictory to its placid work environment, however, the Bridgewater team is awfully focused on crisis. Dalio creates universal investment and management principles by learning from history. He analyzes how different countries, cultures, and people around the world react to different incidents like debt or oil shocks, for example, and figures out the variables that affected the different outcomes. Stripping away all the variables let Bridgewater arrive at universal laws for doing business. “If you’re limiting yourself to what you experienced, you are going to be in trouble. . . . I studied the Great Depression. I studied the Weimar Republic. I studied important events that didn’t happen to me.” Doing this over time led Bridgewater to develop ideas such as its crisis indicator.

 

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

In a similar way, Carter began the process of deregulating the airline, banking, trucking, and telecommunications industries that Reagan later built on as he unraveled the economic base of the Roosevelt social contract. Carter provided a bridge from the age of Roosevelt to the age of Reagan. At the same time, Carter, more than any president since, seemed to understand the geopolitical lesson of the 1970s oil shocks: that the United States had become dangerously dependent on foreign supplies of oil. A year after he became president, Carter proposed a comprehensive multiyear plan for conservation and the development of new energy technologies. He spent most of his political capital trying to convince Congress and the people that (aside from the prevention of nuclear war) energy dependence was “the greatest challenge our country will face during our lifetimes,” as he told the nation in a televised speech on April 18, 1977.

As the finance sector grew in political importance, maintaining low interest rates to protect the bondholders grew in importance to the Washington politicians. That high federal deficits always lead to inflation is an economic urban myth. In the modern American experience, there has been virtually no peacetime example of budget deficits triggering inflation and higher interest rates. The last serious bout of U.S. inflation had occurred in the 1970s, and it was driven not by federal deficits but by three separate oil shocks generated by the global oil cartel. The previous episode of inflation resulted from the cost of the Vietnam War added to an economy already at full employment. The episode of inflation before that was fueled by the Korean War, and the one before that was caused by the pent-up demand for consumer goods and the loosening of price controls after World War II. In the 2009–2010 recession in which the Obama administration found itself, the threat from inflation being generated by too much money in circulation was as close to zero as one could get.

 

pages: 323 words: 89,795

Food and Fuel: Solutions for the Future by Andrew Heintzman, Evan Solomon, Eric Schlosser

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agricultural Revolution, Berlin Wall, big-box store, clean water, Community Supported Agriculture, corporate social responsibility, David Brooks, deindustrialization, distributed generation, energy security, Exxon Valdez, flex fuel, full employment, half of the world's population has never made a phone call, hydrogen economy, land reform, microcredit, Negawatt, oil shale / tar sands, oil shock, peak oil, RAND corporation, risk tolerance, Silicon Valley, statistical model, Upton Sinclair, uranium enrichment

Second, when policies promote both efficiency and supply, customers typically use only one, usually the cheaper one. Third, efficiency is far faster than new supply. Ordinary people are able to implement efficiency long before big, slow, centralized plants can be built, let alone paid for. Since Western economies ceased to think that oil was infinite and reliably available, more efficient use has been the biggest “source” of new energy — not oil, gas, coal, or nuclear power. After the 1979 oil shock, efficient use of energy enabled Americans to cut oil consumption by 15 percent in six years while the economy grew 16 percent. There are many ways to measure progress in saving energy but even by the broadest and crudest measure — lower primary energy consumption per dollar of real GDP — progress has been dramatic. If the energy use of 1975 is taken as a base measure, by 2000, reduced “energy intensity” was providing 40 percent of all U.S. energy services.

Could there really be a demand for some thirty nuclear reactor units in the Canadian Maritime provinces by 2000, as some Atomic Energy of Canada Ltd. projections suggested? For the two preceding decades energy demand had indeed been growing rapidly, fueled by low oil prices and the post-war economic expansion. For many of the megaproject proponents, the link between growth in energy use and growth in the GDP seemed not only strong historically but inflexible and essential. Of course new supply projects would be needed! Then in 1973 came the first oil shock. With little warning the Arab oil producers embargoed the United States for some months, and the Organization of Petroleum Exporting Countries (OPEC) declared they would no longer negotiate but would instead adopt a take-it-or-leave-it approach to oil pricing. By the end of 1974 the price of a barrel of oil was eight times higher than it had been five years earlier.1 The resulting impacts shocked the Western world, both economically and politically.

 

pages: 375 words: 105,067

Pound Foolish: Exposing the Dark Side of the Personal Finance Industry by Helaine Olen

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asset allocation, Bernie Madoff, Cass Sunstein, Credit Default Swap, David Brooks, delayed gratification, diversification, diversified portfolio, Donald Trump, Elliott wave, en.wikipedia.org, estate planning, financial innovation, Flash crash, game design, greed is good, high net worth, impulse control, income inequality, index fund, London Whale, Mark Zuckerberg, mortgage debt, oil shock, payday loans, pension reform, Ponzi scheme, quantitative easing, Ralph Nader, RAND corporation, random walk, Richard Thaler, Ronald Reagan, Saturday Night Live, too big to fail, transaction costs, Unsafe at Any Speed, upwardly mobile, Vanguard fund, wage slave, women in the workforce, working poor, éminence grise

Julia Child, who arguably did for fine cooking what Porter did for financial advice, is still widely known, while Porter is so forgotten that a mention of her name to anyone under the age of fifty-five will elicit not an opinion about the columnist deemed one of the most important women of the 1970s by Ladies Home Journal, but rather the simple query: “Who?” There isn’t even a single nostalgia-trip clip of this once ubiquitous television presence on YouTube. Sylvia Porter’s descent into oblivion began at the height of her fame. The oil shocks, inflation, unemployment, and overall recessionary environment of the 1970s led to a growing demand for financial and investment information. Porter initially rode the wave, publishing her biggest bestseller Sylvia Porter’s Money Book in 1975. The book featured more than a thousand pages devoted to all things financial, from how to dress appropriately for the office without busting the budget to tips on how to cut your grocery and medical bills.

Like the MoneyShow, televised financial news began in a much more highfalutin way than this. In the early 1970s, longtime foreign correspondent Irving R. Levine pioneered the business beat for NBC News, after network honchos dinged his request to cover the State Department. What seemed like an assignment destined to send Levine to career Siberia turned out to be anything but as the economy turned into the defining story of the decade. Through oil shocks, inflation, and job woes, Levine, wearing a trademark bow tie, explained it all in a calm, almost phlegmatic tone. Soon, PBS joined in, picking up Wall Street Week with Louis Rukeyser from a local Maryland affiliate. As for the now-ubiquitous CNBC, its origins are in second-tier Los Angeles UHF television station KWHY. In the mid-1980s, it changed its name to the Financial News Network and expanded its national presence via cable.

 

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

International capital flows remained tightly circumscribed. The Bretton Woods compromise was a roaring success: the industrial countries recovered and became prosperous while most developing nations experienced unprecedented levels of economic growth. The world economy flourished as never before. The Bretton Woods monetary regime eventually proved unsustainable as capital became internationally more mobile and as the oil shocks of the 1970s hit the advanced economies hard. This regime was superseded in the 1980s and 1990s by a more ambitious agenda of economic liberalization and deep integration—an effort to establish what we may call hyperglobalization. Trade agreements now extended beyond their traditional focus on import restrictions and impinged on domestic policies; controls on international capital markets were removed; and developing nations came under severe pressure to open their markets to foreign trade and investment.

Moreover, the belief system that supported capital controls began to dissolve over the 1970s and was replaced in subsequent decades by an alternative narrative emphasizing the inevitability of liberalization and the benefits of capital mobility. Just as in trade, an agenda of deep integration centered on free capital mobility would replace the Bretton Woods compromise. The 1960s were the heyday of Keynesian ideas on economic management. The oil shocks and the stagflation of the 1970s—which confronted advanced economies with unemployment and inflation together—pushed attention away from Keynes’s focus on demand management to the supply side of the economy. In the traditional Keynesian model, unemployment was the result of too little demand for domestic products; but the simultaneous increase in inflation belied that explanation. Discretionary monetary and fiscal policies à la Keynes began to be seen by economists and technocrats as a force for instability rather than stability.

 

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

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Albert Einstein, Asian financial crisis, asset-backed security, banking crisis, Basel III, Berlin Wall, Bernie Madoff, British Empire, capital controls, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, congestion charging, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cross-subsidies, debt deflation, Deng Xiaoping, Diane Coyle, endowment effect, eurozone crisis, Fall of the Berlin Wall, financial innovation, financial repression, floating exchange rates, full employment, George Akerlof, German hyperinflation, Hyman Minsky, income inequality, income per capita, inflation targeting, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, London Interbank Offered Rate, loss aversion, market clearing, moral hazard, mortgage debt, new economy, New Urbanism, Nick Leeson, Northern Rock, Occupy movement, oil shale / tar sands, oil shock, price mechanism, price stability, quantitative easing, railway mania, rent-seeking, reserve currency, rising living standards, South Sea Bubble, sovereign wealth fund, technology bubble, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, too big to fail, trade route, trickle-down economics, Washington Consensus, women in the workforce, working-age population

The recessions of my childhood and my early adulthood were extraordinarily painful affairs both for nations as a whole and, on a personal level, for my own family: in Thatcherism’s darkest days, my father was unemployed for many months. Even during the deepest recessions, however, there was always the hope of subsequent recovery. Long-­ term economic growth was supposedly God-­given. Recessions were merely annoying interruptions, blamed variously on policy-­making incompetence, excessive union power, short-­sighted financial institutions, lazy managers and nasty oil shocks. Our modern era of economic stagnation is a fundamentally different proposition. Many of the factors that led to such scintillating rates of economic expansion in the Western world in earlier decades are no longer working their magic: the forces of globalization are in retreat, the boomers are ageing, women are thankfully better represented in the workforce,3 wages are being squeezed as competition from the emerging superpowers hots up and, as those superpowers demand a bigger share of the world’s scarce resources, Westerners are forced to pay more for food and energy.

All successful monetary unions depend on the free flow of capital within their constituent parts, whether as a result of market forces or thanks to government transfers. A home bias within the eurozone would remove, at a stroke, the benefits of the single market and likely condemn the southern nations to decades of grinding economic adjustment. That, surely, would be politically unsustainable. In time, and making up for lost ground, maybe money will be recycled into risky ventures in hitherto untapped parts of the world economy. Following the first oil shock in 1973, the money earned by Arab nations eventually found its way via the US banking system to Latin America. Yet Latin America was unable to deal with the scale of capital inflows. Poorly invested, they eventually paved the way to the Latin American debt crisis between 1982 and 1984. Hunting for yield is all very well but, without a proper understanding of the associated risk, unsustainable financial bubbles too often become an unfortunate way of life. 216 4099.indd 216 29/03/13 2:23 PM Dystopia MISTRUST OF GOVERNMENT Ultimately, governments are faced with tough decisions where the costs are felt now but the benefits appear only much later.

 

pages: 340 words: 92,904

Street Smart: The Rise of Cities and the Fall of Cars by Samuel I. Schwartz

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2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, active transport: walking or cycling, Affordable Care Act / Obamacare, American Society of Civil Engineers: Report Card, autonomous vehicles, car-free, City Beautiful movement, collaborative consumption, congestion charging, crowdsourcing, desegregation, Enrique Peñalosa, Ford paid five dollars a day, Frederick Winslow Taylor, if you build it, they will come, intermodal, invention of the wheel, lake wobegon effect, Loma Prieta earthquake, Lyft, Masdar, megacity, meta analysis, meta-analysis, moral hazard, Nate Silver, oil shock, Productivity paradox, Ralph Nader, rent control, ride hailing / ride sharing, Rosa Parks, self-driving car, skinny streets, smart cities, smart grid, smart transportation, the built environment, the map is not the territory, transportation-network company, Uber and Lyft, Uber for X, Unsafe at Any Speed, urban decay, urban planning, urban renewal, walkable city, Wall-E, white flight, Works Progress Administration, Yogi Berra, Zipcar

More unhappy drivers. The gas crises were the only times I had seen traffic volumes go down significantly in my long career until 2005 or so. It wasn’t the cost of gas that was keeping drivers out of their cars; it was the difficulty of getting gas. We made this observation after the supply crisis was over, when even though prices surged, VMT started rising again. The purpose for reminding ourselves about the oil shocks and gas lines is not to make a purely economic argument. The price of filling a tank is, of course, higher today than it was before OPEC started flexing its muscles (and before China and India started putting millions of new cars on the road, thus increasing demand for a shrinking resource like petroleum). But it’s not quite the whole story. Gas might have jumped to a price of $1.35 a gallon by 1981, but if you adjust for inflation, it was about the same as it was in the middle of 2014: $3.47 in current dollars.

When the price of gas dropped below $2.00 in many parts of the United States at the beginning of 2015, it was still higher than the 1979 price in inflation-adjusted terms. In 1920, the height of the popularity of the Model T, gas cost 20 cents a gallon, which is equivalent to $3.87 in 2015. Gas prices go up, and they go down. More important than the inflation-corrected price per gallon is how drivers thought about the cost of a fill-up. And repairs. And insurance. And traffic jams. From the second oil shock on, their daily commute and weekly fill-up gave them more and more reasons to be annoyed about tradeoffs demanded by the six- or eight-cylinder money pits taking up space in their suburban garages. By 2004, economists were calculating that what they called the commuting effect (an increase of about twenty minutes in commuting time daily) was about as costly, in emotional terms, as breaking up with a boyfriend or girlfriend.

 

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

Alan Greenspan put the practice down to a slowdown in innovation and excess capital.14 Stock buybacks left the company with more debt and a weaker financial position.15 In 1987 Standard Oil of Ohio (Sohio), once part of the grand dame of oil companies but now owned by Britain’s BP, advertised in leading financial magazines—“Standard Oil not standard thinking.”16 An arty graphic depicted a drop of oil in which a reflection of an oil well was visible. The text mentioned “a new very active management strategy,” a subtext for financialization. “Assets not strategic to Standard Oil have been divested” spoke of redeploying the firm’s capital by divesting underperforming investments. “We have also become fast creative traders” declared the trend to trading in financial instruments for profit. The text ended: “in a world of oil sheikhs and oil shocks, the more liquid we are the more solid.” The advertisement spoke of a financial strategy. The oil company had become the oil bank.17 Marriages and Separations Corporations restructured constantly, acquiring and disposing of assets and companies, making comparison of performance over time impossible. Merger activity was the market for corporate control. Like Ronin, lord-less mercenary Samurai, groups of corporate managers competed for control of assets, providing the necessary discipline on errant businesses.

In the new economy, there were three kinds of people: the haves, the have-nots, and the have-not-paid-for-what-they-haves.7 Casino Banking Banks also began to trade financial instruments, taking the advice of Fear of Flying author Erica Jong: “If you don’t risk anything then you risk even more.” Initially, banks traded currencies and government bonds. Volatility of currencies increased following the collapse of the Bretton Woods agreement and the demise of the gold standard. Volatility of interest rates increased, following removal of controls on interest rates and a rise in inflation as a result of the oil shocks of 1974 and 1979. Derivatives—different forms of price insurance on currencies, interest rates, and equities—began trading in the 1970s. As volatility forced businesses and investors to hedge their financial risks, banks moved into the protection racket. Initially, they acted primarily as an intermediary, matching transactions between clients. Over time, banks began to take positions without having a matching counterparty.

The Gipper and the Iron Lady In 1956, Clinton Rossiter, a political scientist, identified the skills needed by the occupant of the Oval Office: “scoutmaster, Delphic Oracle, hero of the silver screen and father of the multitudes.”16 Ronald Wilson Reagan, a Hollywood B film actor, possessed one of these qualities. A Democrat who switched to the Republican Party, Reagan was elected governor of California to send welfare bums back to work and to clean up the University of California at Berkeley, a reference to antiwar and anti-establishment student protests. In the 1970s, growth slowed as a result of the twin oil shocks of 1974 and 1979, leading to higher oil prices. Inflation and interest rates were in double figures. Unemployment was high and there was increasing labor unrest. America’s public finances were in poor shape. The Bretton Woods system of fixed exchange rate collapsed. Since the end of the go-go years of the 1960s, the stock market had been moribund. Americans were racked with self-doubt by the effects of the Vietnam War, race problems, the Watergate scandal, as well as increasing instability and uncertainty.

 

pages: 780 words: 168,782

Strange Rebels: 1979 and the Birth of the 21st Century by Christian Caryl

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anti-communist, Ayatollah Khomeini, Berlin Wall, Bretton Woods, British Empire, colonial rule, Deng Xiaoping, financial deregulation, financial independence, friendly fire, full employment, income inequality, industrial robot, Internet Archive, land reform, land tenure, Mahatma Gandhi, means of production, Mikhail Gorbachev, Mohammed Bouazizi, Mont Pelerin Society, new economy, New Urbanism, oil shock, open borders, open economy, Plutocrats, plutocrats, price stability, rent control, road to serfdom, Ronald Reagan, single-payer health, special economic zone, The Chicago School, union organizing, upwardly mobile, Winter of Discontent, Xiaogang Anhui farmers, Yom Kippur War

Macroeconomic orthodoxy held that inflation tended to stimulate economic activity, so slow growth and high unemployment were assumed to be at odds with high price levels. Central banks in the United States, Europe, and Japan jointly cut interest rates, desperately hoping to stimulate a recovery. But nothing happened. Investment and employment failed to respond—yet inflation, already high before the “oil shock,” now began to climb. “Stagflation,” as this new phenomenon was called, defied all expert prognoses. The experts in Washington, and in the other capitals of the Western world, no longer appeared as the guarantors of prosperity. In some ways, the first energy crisis merely exacerbated shifts that were already under way. The impact of the Arab oil embargo on the economies of the West was so devastating in part because the rules that had governed the postwar order were already in flux.

Thus was born what came to be known as the “postwar consensus,” the bedrock of British politics until the end of the 1970s. The postwar consensus endured because it worked—at least for the first few decades. The British economy grew steadily through the 1950s and 1960s, widely spreading the benefits of expanding national wealth. But by the 1970s, the bloom was off. Rising global competition had revealed the structural rigidities of Britain’s social-democratic system. The oil shock hit at a moment when traditional British manufacturing industries were already affected by painful decline. Once-proud working-class cities had turned into landscapes of blight, factory ruins defaced with graffiti. In the 1970s, the British economy tottered from one crisis to another. In 1974, in the wake of the Arab oil embargo, Conservative prime minister Edward Heath was forced to introduce electricity rationing and a three-day workweek.

A country that had been at the heart of the Western economic and political system found itself reduced to the status of a banana republic. Callaghan diagnosed the problems but was unable to come up with a remedy. Something always seemed to get in the way: the resistance of the unions, the global economic climate, the accustomed way of doing things. The old ideas no longer worked—that much was clear. But where were the new ones? Britain was waiting for something to give. There were, of course, countries that benefited from the oil shock. First and foremost among them was the Imperial State of Iran, one of America’s key Cold War allies in the Middle East. Nevertheless, the shah of Iran, Mohammad Reza Pahlavi, welcomed the cash that poured into his coffers as a result of the OPEC embargo. He had ambitious plans for the remaking of Iranian society, and changes on the scale he envisioned certainly did not come cheap. Ten years earlier, in 1963, he had inaugurated the grand reform scheme that he called the “White Revolution.”

 

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

The Thiels moved around a lot when Peter was young—he attended seven different elementary schools. Although he had a younger brother, he was a lonely boy, almost without friends until he approached his teens, lonely and inward in the way of the extremely gifted. By the age of five he knew the names of all the countries and could draw the world map from memory. When he was six, his father got a job with a uranium mining company—it was just after the 1973 oil shock, when America seemed to be headed toward nuclear energy—and the Thiels spent two and a half years in South Africa and South-West Africa, under apartheid. Peter began to play chess with his parents and quickly mastered it. In Swakopmund, a little German town on the coast of South-West Africa, he spent hours making up adventures for himself in the dried-up riverbed facing the desert sand dunes behind their house, or reading atlases, nature books, and French comics in the local bookstore.

As he reconsidered the years since the seventies, years that had seemed so bright and hopeful, especially in Silicon Valley, even Facebook lost its glow. But Thiel’s pessimism also led him to form radical new ideas about the future. 2008 BAM SLAMS HILLARY IN HISTORIC VICTORY He’s First Black to Win Iowa Caucus as Voters Embrace Message of Change … REAL ESTATE APPRAISED: FROM MALAISE TO CRITICAL … GM POSTS RECORD US AUTOMOTIVE LOSS OF $38.7B FOR 2007 Offers Buyouts to 74,000 US Workers … OIL SHOCK: ANALYST PREDICTS $7 GAS, “MASS EXODUS” OF US CARS … DEPRESSION QUESTIONS RETURN IN NEW CENTURY … IN WEEK OF IRAQ WAR ANNIVERSARY, OBAMA’S RACE SPEECH DOMINATED MEDIA COVERAGE … Obama’s entire campaign is built on class warfare and human envy. The “change” he peddles is not new. We’ve seen it before. It is change that diminishes individual liberty for the soft authoritarianism of socialism.… that there is something happening in America, that we are not as divided as our politics suggests, that we are one people, that we are one nation … LEHMAN FILES FOR BANKRUPTCY, MERRILL SOLD, AIG SEEKS CASH … BUSH ASKING FOR $700 BILLION BAILOUT … McCAIN PICKS FAILING OHIO FACTORY TO LAUD FREE TRADE He used his own recent political fortunes—a dramatic fade followed by an unexpected comeback to secure the Republican presidential nomination—to illustrate that depressed Rust Belt cities such as Youngstown can rebound.… PALIN REIGNITES CULTURE WARS … We believe that the best of America is in these small towns that we get to visit, and in these wonderful little pockets of what I call real America, being here with all of you hard working very patriotic … I bet bin Laden feels like a real asshole now, huh?

If a sort of unwinding was happening in America, status markers became weirdly problematic—in a screwed-up society, they could not be the correct, real things. Almost nothing that had high status was a good thing to invest in. After the global financial crisis, Thiel developed a theory about the past and the future. It went back to 1973—“the last year of the fifties.” That was the year of the oil shock, the year when median wages in America began to stagnate. The seventies was the decade when things started going wrong. A lot of institutions stopped working. Science and technology stopped progressing, the growth model broke down, government no longer worked as well as in the past, middle-class life started to fray. Then came the eighties—when Thiel graduated from high school in 1985, things had seemed very optimistic, anything was possible.

 

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

The Treasury and Fed began meetings to address the likely inability of Mexico to meet the payments on its loans from both Wall Street and other foreign banks, and this led to their secretly launching a rescue operation explicitly designed to bail out the banks that held Mexico’s debts—and then conscripting the British, Japanese, and Swiss central banks into the operation too. What concerns us here, however, is the changing role of the American state in relation to the new domestic contradictions that emerged after the Volcker shock. By the time Volcker was replaced by Alan Greenspan, in 1987, “the Great Inflation was over” and “markets recognized it was over.”81 But just as the “demons of the 1970s—high inflation, oil shocks, bitter labor disputes, stagnation—seemed to be receding, banished by liberalized markets, monetarism, Reaganism, Thatcherism, and by the vogue for aggressive financial management,”82 a stock market crash confronted Greenspan with a stark new contradiction: the inherent volatility of the new age of finance. It was under Greenspan that the Fed’s lender-of-last-resort role now came to play a much more systemic function than ever before.

At the end of the 1970s, when the US and most of Europe were facing double-digit inflation, Japan’s inflation rate was 3.6 percent.47 Its levels of unemployment remained low (just above 2 percent), and its per capita rate of growth—while a far cry from what it had been in the 1950s and 1960s—stayed above that of the other G7 economies. Japan was immediately able to compensate for the upward revaluation of its currency (and for the oil shock of 1973) by establishing a dramatic gap between productivity and wage increases (which had run in tandem from 1968 to 1973) that averaged over 3 percent a year from 1975 to 1985. This sustained manufacturing profit rates, after their fall in the early 1970s from the stratospheric levels of the previous two decades, at a higher level than those prevailing in the rest of the G7 until the mid 1980s.48 A key reason for this was that increased capital investment in the leading Japanese manufacturing sectors did not confront, as it had in the US, militant shop-floor resistance to the organizational changes necessary to yield high productivity increases.

The so-called Brazilian miracle remained in many ways “a clear descendent of the earlier era of import substitution” in which the home market still dominated, even as many of the old ISI price and tariff regulations were loosened and external bank financing allowed for large fiscal and trade deficits.91 For its part, the establishment of maquiladoras at the US–Mexican border proved at best a partial outlet for ISI’s contradictions.92 Such industrial development as occurred depended on a nine-fold rise in capital goods imports, which contributed heavily to a more than six-fold increase in public-sector foreign debt, mostly borrowed from US banks.93 The recycling of petrodollars through New York and London after the 1973 oil shock further fueled international bank lending to Latin American governments. This was only partly because large US banks were encouraged to do their “patriotic duty” (as one Ford administration economic advisor put it) by thus recycling dollars to Latin American dictatorships;94 the main reason was that the profits were so tempting, hitting a peak of 233 percent of their total capital and reserves in 1981.95 This left Latin America more subject than ever to crises generated in the North American imperial heartland, as was fully revealed when it became the unintended casualty of the Volcker shock.

 

pages: 488 words: 144,145

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

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

In that year the government was going to spend about $390 billion and take in $291 billion, including a cut in taxes of about $25 billion. The chart in Figure 8.1 illustrates the federal government’s spending in that period. Figure 8.1 Federal Outlays, Receipts, and Balance (1968–1976) (Millions of $) Source: Office of Management and Budget. Ford had the bad luck of serving in the worst economy since the Great Depression. The mid-1970s were difficult years in the United States, with the oil shock and double-digit unemployment breaking the renewed sense of confidence that had prevailed in the post-WWII era. The fact that the fiscal deficits were rising at a time of slack economic demand made the public uneasy. Despite the fact that members of both political parties tacitly accepted the need for deficits, the public at large was still largely unaware of the change in the basic assumptions of government which had occurred during the Cold War.

In heartland manufacturing states such as Indiana, Michigan, and Illinois joblessness reached into the teens. The U.S. economy was mired in recession for three years. This illustrated the level of adjustment that the two oil price increases of the decade, 1973 and 1979, required literally to squeeze the inflationary increases out of the system. The United States was unable to remove the impact of the oil shocks, but could merely slow the rate of increases in prices by brutally suppressing the economy. In a 1982 memo from Paul Krugman and Larry Summers, who were both then working in the Reagan White House, to William Poole and Martin Feldstein, the two economists predicted that inflation would again begin to accelerate because the reduction in inflation engineered by the Fed was only temporary. But Summers, Krugman, and many other liberal economists were wrong.

 

pages: 465 words: 124,074

Atomic Obsession: Nuclear Alarmism From Hiroshima to Al-Qaeda by John Mueller

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airport security, Albert Einstein, Black Swan, Cass Sunstein, conceptual framework, cuban missile crisis, Doomsday Clock, energy security, F. W. de Klerk, failed state, Mikhail Gorbachev, mutually assured destruction, nuclear winter, oil shock, RAND corporation, Ronald Reagan, side project, uranium enrichment, Yom Kippur War

Currently in the research phase, it may become possible in the future to reduce radically the cost of producing nuclear energy by using lasers for isotope separation to produce the fuel required by reactors.29 This, of course, might also make it easier, or at any rate less costly, for terrorists and rogue states to develop nuclear weapons. Accordingly, a balanced assessment of costs and benefits would have to be made if the technique ever proves to be feasible. But there is an excellent chance no one will ever make it: like the technology Schelling discusses, it will be dismissed out of hand. There is also something of a security aspect to this process. Ever since the oil shocks of the 1970s, it has become common in American politics to espy a danger to the country’s security in allowing it to be so dependent on a product that is so disproportionately supplied to the world by regimes in the Middle East that are sometimes contemptible, hostile, and/or unstable. Little or no progress has been made on this constantly repeated goal, but one obvious solution would be to rely much more on nuclear energy.

See also overstatement alarm, 162 all-out thermonuclear war, 8–9 atomic theater, 69–70 blast, 5 “certainty,” ix–x contamination, 6 deterring potential attack, 143 direct radiation and nuclear bomb, 4 disadvantages to acquiring, 103 economic and organizational cost, 110–112 ego trip, 143 electromagnetic pulse, 4 enhancing appeal, 143–149 existence of, and security, 251n.26 fallout, radiation and “dirty bombs,” 5–7 groundburst Hiroshima-size device, 10–11 Hiroshima and Nagasaki, 9–10 historical impact, 236–237 horizontal proliferation, 73 hostility, 25–26 indirect and longer-term effects, 8 influence on history, xii lacking technological imperative, 104–105 military attacks, 147 military value, 108–110 overstatement, 27–28 overstating importance of existence, 23 proliferation, 237 sanctions, 145–147 spread within and to states, xii–xiii status effects, 147–149 status symbol, 105–108 taboo, 61–63 thermal pulse of heat and light, 5 threats, 144–145 United States and USSR freezing programs, 79 vertical proliferation, 73, 76 weapons designers, 167 weapons of mass destruction (WMD), 11–13 WMD and battlefield messiness, 14–15 nuclear weapons laboratories, 266–267n.43 nuclear weapon state, definition, 148–149 nuclear winter, nuclear attack, 8 Obama, President B., potential atomic bomb, x–xi obsession, ix, xiii, 237, 237 Office of Technology Assessment, sarin, 12 oil shocks, American politics and security, 139–140 Oklahoma City, truck bomb, 19 Olympics, China’s quest to host, 108 Omar, Mullah, Taliban leader, 211 On the Beach, nuclear fears, 57 Oppenheimer, J. Robert atomic bomb, 162 exaggeration of bomb capacity, 17–18 politically productive terror, 26 priestly exaggerations, 243n.2 world government, 74 “oppositional nationalist,” Hymans, 261n.2 Oren, Michael, 262n.20, 263n.27, 264n.24 organizational costs, nuclear weapons, 110–112 overstatement consequences of, 27–28 existence of nuclear weapons, 23 explanations for, 25–27 physical effects, 17–19 social and political effects, 19–22 Pakistan apprehensions about chaos, 108 conversations with scientists in, 203–205 criticism of Musharraf’s regime, 260n.24 economics of nuclear weapons, 111 fissile material, 169 nuclear arsenal and United States, 145 opposition of Taliban regime after 9/11, 225 troubles with Taliban, 167 United States and, 164 Paris, image of destruction, 24 partial test ban treaty of 1963, arms race, 75–77 Pasdaran, sanctions, 146 Payne, Keith, threat to use nuclear weapons, 109 “peacetime standards,” radiation, 6 Pearl Harbor, 193, 247n.23, 269–270n.23 Perle, Richard, 261n.4 physical effects, overstating, 17–19 plutonium dangers and difficulties, 168 implosion trigger on hydrogen bomb, 250n.17 Mahmood in Pakistan, 205 sensitivity, 174 terrorists, 265n.20, 269n.16 Podheretz, Norman, 261n.4 points of no return, cascades of proliferation, 91 policing wars, 257n.5 political advantage, existential bombast, 232 politicization, terror, 26 Pollack, Kenneth, The Threatening Storm: The Case for Invading Iraq, 130 poor man’s nuclear weapon, “dirty bombs,” 13 Porter, Patrick, 224–225, 226 port security, Los Angeles/Long Beach, 141 postwar world, international relations, 52 Potsdam Declaration, 249n.4 Potter, William, points of no return, 20–21, 94–95 Powell, General Colin, nuclear options, 63 predictions, bombing, 195 probability, terrorists overcoming barriers, 187–189 proliferation cascadology, 89–95 China, 95–97 deterring war, 117–118 domination, 97–99 espy benefit, 257n.5 nuclear weapons, 237 pace, 103 reducing effective threat, 116–117 solving specific security problems, 118 value in, 115–118 proliferation fixation comparing costs, 141–142 foreign policy and economic costs, 137–141 human costs, 130–137 Iraq, 130–135 North Korea, 135–137 propaganda, stigmatizing Germans, 245n.26 propaganda video, Gadahn, 219 publications, 223, 244–245n.19 Putin, Vladimir, role in Russia, 137 Qaddafi, Colonel Muammar, Libya, 124–126, 154 race to demobilize, post-cold war, 84–85 radiation acceptable levels, 241–242n.10 background levels, 6–7 coping mechanisms of body, 7 Department of Homeland Security, 196–197 direct, and neutron bomb, 4 education about effects, 195–196 fear and anxiety, 196 “hormesis” hypothesis, 242n.12 nuclear explosions, 18 nuclear weapons, 5–7 Reagan, President Ronald building up U.S. military forces, 59–60 Intermediate-range Nuclear Forces (INF) agreement, 80 neutron bomb, 81 Soviet joining family of nations, 51 terrorists and Libya, 125 Reiss, Mitchell, 117, 147, 257n.18 Revolutionary Guards, sanctions, 146 rhetoric, xii, 231 rhetoric of alarm atomic bomb and World War II, 55–56 nuclear fear declining again, 60–61 nuclear fear during classic cold war, 56–57 nuclear fear reviving in early 1980s, 58–60 nuclear fear subsiding in 1960s and 1970s, 57–58 Rhodes, Richard, 80, 252n.37 Rice, Condoleezza, 131, 230 Richardson, Louise, loose-nuke stories, 208, 209, 213 Ridge, Tom, nuclear worry, 163 risk, acceptable, of catastrophic events, 197–198 rogue state, 86, 95–97, 237 Rosecrance, Richard, nuclear dispersion, 91, 251n.26 Rosenberg, Julius and Ethel, atomic traitors, 49 Rove, Karl, weapons of mass destruction, 131 Rush–Bagot Agreement, formal arms control, 83 Russia fissile material, 169–170 fixation of Putin, 137 gas fatalities, 244n.16 “naughty child” effect, 108 North Korea support, 135, 136 safety devices, nuclear weapons, 100 Sageman, Marc, 220–221, 229 SALT I (Strategic Arms Limitation Treaty) of 1972, 77–78 SALT II of 1979, arms race, 78–79 “Samson Option,” Israel, 110 sanctions appeal of nuclear weapons, 145–147 Iraq, 134, 145, 147 North Korea, 136 sanitation, nuclear attack, 8 sarin, 12, 228 scaremongers, weapons laboratories, 266–267n.43 scenario, atomic terrorist’s task in most likely, 185 Schell, Jonathan, “The Fate of the Earth,” 60, 61 Schelling, Thomas deterrence by Iran, 154–155 energy production, 139 nuclear weapons, 61–62 Scheuer, Michael, 202, 209, 214, 230, 272n.27 Schultz, George, terrorists and Libya, 125 secrets, 49–50, 237 security American politics, 139–140 balance with accident prevention, 85 existence of nuclear weapons, 251n.26 homeland, and weapons of mass destruction, 140 Israeli anxieties about, 150–151 port, 140–141 security problems, solving, 118 September 11, 2001, plot envisioning as type of Hiroshima, 200–202 9/11 Commission, 161 terrorism probability, 192–193 World Trade Center, 22 Silberman–Robb Commission, 111–112 Simon, Steven, 20, 21 Six-Day War, nuclear threat, 48 size, al-Qaeda’s capacity, 220–221 sky-is-still-falling profession, Arkin, 92 Slaughter, Anne-Marie, 258n.1 sleep disorders, atomic obsession, xi, xiii, 239 sleeper cells, al-Qaeda, 222, 275–276n.37 smuggling, atomic devices, 177 society, 20, 22 Solingen, Etel, 113, 119–120, 122, 124, 125, 254n.8 South Africa, 110, 121–122, 138, 171 South Korea, 124, 138 Soviet-Chinese confrontation, 48, 250n.14 Soviet power, external expansion, 246n.15 Soviet Union Afghanistan, 109 Afghanistan invasion, 78–79 assumptions for Western Europe invasion, 35–36 back down in Cuban missile crisis, 248n.32 “cautious opportunism,” 246n.15 Chernobyl nuclear reactor meltdown, 7 danger for United States, 52 deterrence of United States and, 65–66 end of cold war, 50–51 end of expansionary threat, 250n.21 expansionary ideology, 50–51 first Strategic Arms Limitation Treaty, 77–78 hot line between capitals with U.S., 76–77 ideology, 33–35 Japanese and, intervention, 45–46 lessons of Korean War, 38 postwar contentment, 33–35 potential invasion of Europe, 35–38 supplies by United States, 37 triple-warhead missiles, 59 world war deterrence, 32 stability, proliferation, 99 Stalin, Joseph, 36, 47, 49–50 “Star Wars,” United States and USSR, 79 status appeal of nuclear weapons, 147–149 value of nuclear weapons as, 105–108, 237 Stenersen, Anne, 207, 214 sting operation, nuclear, 194 stolen bombs, loose nukes, 165–168 Strategic Defense Initiative (SDI), 79–80, 253n.12 success, modest, of antiproliferation, 126–127 Sudan, death and destruction, 271n.10 suicide, Japanese civilians, 45 suicide pills, 85–86, 253n.26 suitcase bomb Fox Television’s 24 series, 167 possibility, 162 Soviet-made, 272n.35 stolen or illicit purchase, 165 Sunstein, Cass, case for fear, 197–198 “Superbomb,” nuclear weapon, 206 supermissile MX, Strategic Defense Initiative, 81 “supreme priority,” 129, 155–158 taboo, aftermath of Hiroshima and Nagasaki, 61–63 Taiwan, 118, 124, 138 Taiwan Straits crises, nuclear threat, 48 Takeyh, Ray, invasion of Iran, 156 Taliban hosts to al-Qaeda, 224 leader Omar in Afghanistan, 211 opposition by Pakistan after 9/11, 225 Pakistan’s trouble with, 167 retaking Afghanistan and seizing power, 265n.12 Taubman, William, world war and Soviets, 32 Tauscher, Rep.

 

pages: 520 words: 129,887

Power Hungry: The Myths of "Green" Energy and the Real Fuels of the Future by Robert Bryce

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Bernie Madoff, carbon footprint, cleantech, collateralized debt obligation, correlation does not imply causation, Credit Default Swap, credit default swaps / collateralized debt obligations, decarbonisation, Deng Xiaoping, en.wikipedia.org, energy security, energy transition, flex fuel, greed is good, Hernando de Soto, hydraulic fracturing, hydrogen economy, Indoor air pollution, Isaac Newton, James Watt: steam engine, Menlo Park, new economy, offshore financial centre, oil shale / tar sands, oil shock, peak oil, Ponzi scheme, purchasing power parity, RAND corporation, Ronald Reagan, Silicon Valley, smart grid, Stewart Brand, Thomas L Friedman, uranium enrichment, Whole Earth Catalog

Valero had tried to sell the refineries but couldn’t find buyers.65 Though we cannot predict the future, we can look backward and see that the beginning of the latest economic recession—like many recessions before it—coincided with a major spike in oil prices. History shows that sharp increases in oil prices are often followed by recessions. Those oil price spikes also lead to sharp decreases in oil demand. For instance, in 1978, U.S. oil consumption peaked at 18.8 million barrels per day. But the high prices that came with the 1979 oil shock, the second big price spike in six years, sent U.S. consumption tumbling. In fact, it took two decades for U.S. oil demand to recover after the price shocks of the 1970s. It wasn’t until 1998, when U.S. consumption hit 18.9 million barrels per day, that the 1978 level of consumption was surpassed.66 And it took two decades for oil demand to recover, even though oil prices were remarkably low.

Sterling, VA: Earthscan, 2008. Prindle, David E. Petroleum Politics and the Texas Railroad Commission. Austin: University of Texas Press, 1981. Roberts, Paul. The End of Oil: On the Edge of a Perilous New World. New York: Houghton Mifflin, 2004. Schumacher, E. F. Small Is Beautiful: Economics as if People Mattered. New York: Harper and Row, 1973. Simmons, Matthew. Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy. Hoboken, NJ: John Wiley and Sons, 2005. Smil, Vaclav. Creating the Twentieth Century: Technical Innovations of 1867–1914 and Their Lasting Impact. New York: Oxford University Press, 2005. ———. Energies: An Illustrated Guide to the Biosphere and Civilization. Cambridge: MIT Press, 1999. ———. Energy: A Beginner’s Guide. Oxford, UK: Oneworld Publications, 2006. ———. Energy at the Crossroads: Global Perspectives and Uncertainties.

 

pages: 349 words: 134,041

Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives by Satyajit Das

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accounting loophole / creative accounting, Albert Einstein, Asian financial crisis, asset-backed security, Black Swan, Black-Scholes formula, Bretton Woods, BRICs, Brownian motion, business process, buy low sell high, call centre, capital asset pricing model, collateralized debt obligation, complexity theory, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, currency peg, disintermediation, diversification, diversified portfolio, Eugene Fama: efficient market hypothesis, financial innovation, fixed income, Haight Ashbury, high net worth, implied volatility, index arbitrage, index card, index fund, interest rate derivative, interest rate swap, Isaac Newton, job satisfaction, locking in a profit, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Marshall McLuhan, mass affluent, merger arbitrage, Mexican peso crisis / tequila crisis, moral hazard, mutually assured destruction, new economy, New Journalism, Nick Leeson, offshore financial centre, oil shock, Parkinson's law, placebo effect, Ponzi scheme, purchasing power parity, quantitative trading / quantitative finance, random walk, regulatory arbitrage, risk-adjusted returns, risk/return, shareholder value, short selling, South Sea Bubble, statistical model, technology bubble, the medium is the message, time value of money, too big to fail, transaction costs, value at risk, Vanguard fund, volatility smile, yield curve, Yogi Berra, zero-coupon bond

Derivatives have always been about knowledge – people who knew, people who didn’t. If you didn’t know then somewhere along the line you would pay school fees to learn about the other side of derivatives. Whole lotta swapping going on When I started in 1977, banking was changing. In 1973, Richard Nixon abolished the gold standard. The Bretton Woods Agreement on fixed exchange rates collapsed. Two oil shocks (1973 and 1978) contributed to high inflation. Under Paul Volcker, US interest rates surged. The prime rate peaked at an incomprehensible 21.50% pa. Interest rates, currencies and share prices began to fluctuate in a way that no one had ever experienced. DAS_C02.QXP 8/7/06 34 4:22 PM Page 34 Tr a d e r s , G u n s & M o n e y Banking systems were deregulated, exposing the incumbents to the strange phenomenon of competition.

Knowledge of credit (avoiding taking responsibility for bad loans), the ability to court clients and a reasonable golf game were all that was required. Walter Wriston, the head of Citibank, was the intellectual giant amongst bankers of this era. He was famed for two pronouncements: ‘Risk is a four letter word’ and ‘Countries do not go bankrupt’. On the first, it was hard to dispute the great man but the second proved more controversial. Following the oil shocks of the 1970s, the oil exporting countries, especially in the Middle East, were awash in cash (petrodollars). The oil importing countries were running massive trade deficits. Wriston led the charge for international banks to lend petrodollars deposited with the banks to oil importers. The theory that countries didn’t go bankrupt proved to be not entirely well founded. Citibank, together with other global banks, wrote off several billion dollars in loan losses in the 1980s.

 

pages: 477 words: 135,607

The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger by Marc Levinson

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air freight, anti-communist, barriers to entry, Bay Area Rapid Transit, British Empire, call centre, collective bargaining, conceptual framework, David Ricardo: comparative advantage, deindustrialization, deskilling, Edward Glaeser, Erik Brynjolfsson, full employment, global supply chain, intermodal, Isaac Newton, job automation, knowledge economy, Malcom McLean invented shipping containers, manufacturing employment, Network effects, New Economic Geography, new economy, oil shock, Panamax, Port of Oakland, post-Panamax, Productivity paradox, refrigerator car, South China Sea, trade route, Works Progress Administration, Yom Kippur War

In the decade after the container first came into international use, in 1966, the volume of international trade in manufactured goods grew more than twice as fast as the volume of global manufacturing production, and two and a half times as fast as global economic output. Something was accelerating the growth of trade even though the economic expansion that normally stimulates trade was weak. Something was driving a vast increase in international commerce in manufactured goods even though oil shocks were making the world economy sluggish. While attributing the vast changes in the world economy to a single cause would be foolhardy, we should not dismiss out of hand the possibility that the extremely sharp drop in freight costs played a major role in increasing the integration of the global economy.10 The subject of this book lies at the confluence of several major streams of research. One delves into the impact of changes in transportation technology, a venerable subject for both historians and economists.

The economics of container shipping were equally treacherous for ship operators themselves. Many ship lines sacrificed the potential advantages of containerization by ordering vessels that carried containers along with other types of cargo or even passengers. Others guessed wrong about how big their ships or their containers should be. McLean himself went badly astray several times: he ordered fuel-guzzling SL-7s just ahead of the 1973 oil shock, built the sluggish but fuel-efficient Econships just as fuel prices plummeted, and sailed the Econships on a round-the-world route that left some legs heavily booked but others operating well below capacity. The “experts” who deemed container shipping uncompetitive on long routes, such as those across the Pacific, were proven to be wildly off course, and Asia’s containerports, filled with boxes destined for North America and Europe, soon became the largest in the world.

 

pages: 435 words: 127,403

Panderer to Power by Frederick Sheehan

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Asian financial crisis, asset-backed security, bank run, banking crisis, Bretton Woods, British Empire, call centre, central bank independence, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, deindustrialization, diversification, financial deregulation, financial innovation, full employment, inflation targeting, interest rate swap, inventory management, Isaac Newton, Long Term Capital Management, margin call, market bubble, McMansion, Menlo Park, mortgage debt, new economy, Northern Rock, oil shock, place-making, Ponzi scheme, price stability, reserve currency, rising living standards, rolodex, Ronald Reagan, Sand Hill Road, savings glut, shareholder value, Silicon Valley, Silicon Valley startup, South Sea Bubble, supply-chain management, supply-chain management software, The Great Moderation, too big to fail, transaction costs, trickle-down economics, VA Linux, Y2K, Yom Kippur War

Greenspan couldn’t see a bubble and now sat on his hands waiting for a recession. When a problem confronted the chairman, he walked away from it. The Federal Reserve, like a ship’s captain, is expected to act in extremis; once again, Greenspan deserted the bridge. Greenspan pinned the model problem on oil: “[W]e have never been able to use our model structures to forecast a recession out of an oil shock. We’ve had three oil shocks in recent decades that were followed by recessions.”31 Given this observation, why did he need a model at all to prepare for a recession? The definition of a recession is debated and redefined by committees. The simplest (though not official) measurement of recession is whether the GDP has contracted for two consecutive quarters. Real GDP fell 0.1 percent in the second quarter of 2000, rose +0.5 percent in the third quarter, and fell 0.1 percent in the fourth quarter.

 

pages: 401 words: 112,784

Hard Times: The Divisive Toll of the Economic Slump by Tom Clark, Anthony Heath

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Affordable Care Act / Obamacare, British Empire, Carmen Reinhart, credit crunch, Daniel Kahneman / Amos Tversky, debt deflation, deindustrialization, Etonian, eurozone crisis, falling living standards, full employment, Gini coefficient, hiring and firing, income inequality, interest rate swap, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, labour market flexibility, low skilled workers, mortgage debt, new economy, Northern Rock, obamacare, oil shock, Plutocrats, plutocrats, price stability, quantitative easing, Ronald Reagan, science of happiness, statistical model, The Wealth of Nations by Adam Smith, unconventional monetary instruments, War on Poverty, We are the 99%, women in the workforce, working poor

In mid-2013, 64 months into the downturn, output was still 2% below where it started, whereas the full depth of the dip in the Depression was recovered within 48 months. Again, this sustained decline would be even more marked if we looked at national income per head. For the US, the figure opposite tracks the recent slump against the two nastiest recessions since the Second World War.6 The American slide that began with the credit crunch in 2007 is confirmed as both deeper and more enduring than any since the 1930s. The oil shock of 1973 called time on America's motoring way of life, forcing the introduction of a national speed limit and requiring President Nixon to plead with filling stations not to sell fuel on Saturdays; but the crisis of 2008 knocked half as much again off GDP. The great Reagan industrial shake-out of the 1980s felt as though it dragged on for ever, but the graph shows that after the recent recession it took GDP a whole year longer to bounce back.

In the US, which has been seriously unequal for longer, stuck wages for both the middling and the poor had slowly become an established fact of life long before the recession. In the post-war years from 1948 through to 1973, the value of what the typical worker was producing (‘labour productivity’) and the average wage he or she took home, rose exactly in proportion, at 2.8% a year: workers were gaining in line with the fruits of their efforts. Since that year of the first oil shock, there has not been any dearth of ingenuity – labour productivity has continued to rise by a very similar 2.6% a year. The big difference concerns wages, which have subsequently climbed by only 0.6% annually at the median.17 That implies that the typical employee has now been missing out on something like three-quarters of the extra prosperity that America has been generating over 40 years. The graph below captures this great divergence for male workers, for whom it has been most acute.

 

pages: 393 words: 115,263

Planet Ponzi by Mitch Feierstein

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

Equity markets have such a remarkable gift for self-deceit that, for all I know, stock prices will race back to 1500 before reality finally catches up. What I would say, however, is just what I said in relation to the housing markets. Why should we expect equity prices to normalize when we are living in extraordinarily abnormal times? The period in recent economic history which bears the greatest resemblance to our own is the troubled decade of the 1970s. The 1970s saw oil shocks, inflation, weak growth, high unemployment, and the breakdown of global currency systems. Between the oil shock of 1973 and the start of recovery a decade later, Shiller’s CAPE ratio averaged just 10.2. If the S&P were to return to those bargain basement levels, it would need to fall by some 50% to around 600 or 700. If you think that a fall on that scale is impossible, you might want to take this book back to the place you bought it and ask for a refund.

 

pages: 412 words: 113,782

Business Lessons From a Radical Industrialist by Ray C. Anderson

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Albert Einstein, banking crisis, carbon footprint, centralized clearinghouse, clean water, cleantech, corporate social responsibility, Credit Default Swap, dematerialisation, distributed generation, energy security, Exxon Valdez, fear of failure, Gordon Gekko, greed is good, Indoor air pollution, intermodal, invisible hand, late fees, Mahatma Gandhi, market bubble, music of the spheres, Negawatt, new economy, oil shale / tar sands, oil shock, peak oil, renewable energy credits, shareholder value, Silicon Valley, six sigma, supply-chain management, urban renewal, Y2K

The last time we faced prices like these, OPEC had turned off the taps for purely political reasons. There was plenty of oil in the ground relative to the global demand for it. It was the delivery of that oil to market that was being constrained artificially. The result? In 1972, crude oil traded at $3 a barrel. By the end of 1974, it quadrupled, to $12. This precipitated the recession in whose grips we found ourselves during Interface’s start-up. We called it an oil shock, and it was. But there were other shocks to follow. The one-two punch of the Iranian revolution and their war with Iraq pushed oil up from $14 a barrel in 1978 to $35 a barrel in 1981. Saudi Arabia’s oil minister, Ahmed Yamani, warned his fellow OPEC members that those sky-high prices could lead to a fall in demand. His fellow oil ministers didn’t pay attention. Fortunately, many Americans were listening.

They responded to spiking energy costs by installing better insulation in their homes, achieving greater efficiency in industrial processes, and buying automobiles that went a lot farther on a gallon of gasoline. Burning oil to generate electricity died a long overdue death. These factors along with a global recession caused crude oil prices to collapse below $10 a barrel in 1986. But today’s oil shock is very different. No one is throttling the pipelines or holding back the tankers. The wells are pumping for all they are worth, and then some. Why? Because most oil-exporting countries (and the companies that own, refine, and distribute petroleum products) are amassing profits at a rate more commonly found in the illegal drug trade. Oil prospecting is under way in ever more remote regions of the world.

 

pages: 478 words: 126,416

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

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

In the immediate post-war era it was expected that America would remain the world’s dominant creditor nation. The post-war institutions of global finance, such as the International Monetary Fund (IMF) and World Bank, were designed around this assumption. But as Germany and Japan recovered rapidly from wartime destruction, and the American economy weakened in the 1960s, US economic hegemony declined, and in 1971 the dollar was devalued. The oil shock of 1973–4 gave oil-producing countries, particularly Saudi Arabia and other states in the Persian Gulf, windfalls beyond their capacity to spend. ‘Petrodollars’ were recycled as loans to Europe and the USA. Meanwhile Japan, followed by other Asian countries such as South Korea, Taiwan and Hong Kong, first imitated and then improved modern production methods, and began to export manufactured goods to Europe and North America.

.: Hyperion 220 Loomis, Carol 108 lotteries 65, 66, 68, 72 Lucas, Robert 40 Lynch, Dennios 108 Lynch, Peter 108, 109 M M-Pesa 186 Maastricht Treaty (1993) 243, 250 McCardie, Sir Henry 83, 84, 282, 284 McGowan, Harry 45 Machiavelli, Niccolò 224 McKinley, William 44 McKinsey 115, 126 Macy’s department store 46 Madoff, Bernard 29, 118, 131, 132, 177, 232, 293 Madoff Securities 177 Magnus, King of Sweden 196 Manhattan Island, New York: and Native American sellers 59, 63 Manne, Henry 46 manufacturing companies, rise of 45 Marconi 48 marine insurance 62, 63 mark-to-market accounting 126, 128–9, 320n22 mark-to-model approach 128–9, 320n21 Market Abuse Directive (MAD) 226 market economy 4, 281, 302, 308 ‘market for corporate control, the’ 46 market risk 97, 98, 177, 192 market-makers 25, 28, 30, 31 market-making 49, 109, 118, 136 Markets in Financial Instruments Directive (MIFID) 226 Markkula, Mike 162, 166, 167 Markopolos, Harry 232 Markowitz, Harry 69 Markowitz model of portfolio allocation 68–9 Martin, Felix 323n5 martingale 130, 131, 136, 139, 190 Marx, Groucho 252 Marx, Karl 144, 145 Capital 143 Mary Poppins (film) 11, 12 MasterCard 186 Masters, Brooke 120 maturity transformation 88, 92 Maxwell, Robert 197, 201 Mayan civilisation 277 Meade, James 263 Means, Gardiner 51 Meeker, Mary 40, 167 Melamed, Leo 19 Mercedes 170 merchant banks 25, 30, 33 Meriwether, John 110, 134 Merkel, Angela 231 Merrill Lynch 135, 199, 293, 300 Merton, Robert 110 Metronet 159 Meyer, André 205 MGM 33 Microsoft 29, 167 middleman, role of the 80–87 agency and trading 82–3 analysts 86 bad intermediaries 81–2 from agency to trading 84–5 identifying goods and services required 80, 81 logistics 80, 81 services from financial intermediaries 80–81 supply chain 80, 81 transparency 84 ‘wisdom of crowds’ 86–7 Midland Bank 24 Milken, Michael 46, 292 ‘millennium bug’ 40 Miller, Bill 108, 109 Minuit, Peter 59, 63 Mises, Ludwig von 225 Mittelstand (medium-size business sector) 52, 168, 169, 170, 171, 172 mobile banking apps 181 mobile phone payment transfers 186–7 Modigliani-Miller theorem 318n9 monetarism 241 monetary economics 5 monetary policy 241, 243, 245, 246 money creation 88 money market fund 120–21 Moneyball phenomenon 165 monopolies 45 Monte Carlo casino 123 Monte dei Paschi Bank of Siena 24 Montgomery Securities 167 Moody’s rating agency 21, 248, 249, 313n6 moral hazard 74, 75, 76, 92, 95, 256, 258 Morgan, J.P. 44, 166, 291 Morgan Stanley 25, 40, 130, 135, 167, 268 Morgenthau, District Attorney Robert 232–3 mortality tables 256 mortgage banks 27 mortgage market fluctuation in mortgage costs 148 mechanised assessment 84–5 mortgage-backed securities 20, 21, 40, 85, 90, 100, 128, 130, 150, 151, 152, 168, 176–7, 284 synthetic 152 Mozilo, Angelo 150, 152, 154, 293 MSCI World Bank Index 135 muckraking 44, 54–5, 79 ‘mugus’ 118, 260 multinational companies, and diversification 96–7 Munger, Charlie 127 Munich, Germany 62 Munich Re 62 Musk, Elon 168 mutual funds 27, 108, 202, 206 mutual societies 30 mutualisation 79 mutuality 124, 213 ‘My Way’ (song) 72 N Napoleon Bonaparte 26 Napster 185 NASA 276 NASDAQ 29, 108, 161 National Economic Council (US) 5, 58 National Employment Savings Trust (NEST) 255 National Institutes of Health 167 National Insurance Fund (UK) 254 National Provincial Bank 24 National Science Foundation 167 National Westminster Bank 24, 34 Nationwide 151 Native Americans 59, 63 Nazis 219, 221 neo-liberal economic policies 39, 301 Netjets 107 Netscape 40 Neue Markt 170 New Deal 225 ‘new economy’ bubble (1999) 23, 34, 40, 42, 98, 132, 167, 199, 232, 280 new issue market 112–13 New Orleans, Louisiana: Hurricane Katrina disaster (2005) 79 New Testament 76 New York Stock Exchange 26–7, 28, 29, 31, 49, 292 New York Times 283 News of the World 292, 295 Newton, Isaac 35, 132, 313n18 Niederhoffer, Victor 109 NINJAs (no income, no job, no assets) 222 Nixon, Richard 36 ‘no arbitrage’ condition 69 non-price competition 112, 219 Norman, Montagu 253 Northern Rock 89, 90–91, 92, 150, 152 Norwegian sovereign wealth fund 161, 253 Nostradamus 274 O Obama, Barack 5, 58, 77, 194, 271, 301 ‘Obamacare’ 77 Occidental Petroleum 63 Occupy movement 52, 54, 312n2 ‘Occupy Wall Street’ slogan 305 off-balance-sheet financing 153, 158, 160, 210, 250 Office of Thrift Supervision 152–3 oil shock (1973–4) 14, 36–7, 89 Old Testament 75–6 oligarchy 269, 302–3, 305 oligopoly 118, 188 Olney, Richard 233, 237, 270 open market operations 244 options 19, 22 Organisation for Economic Co-operation and Development (OECD) 263 Osborne, George 328n19 ‘out of the money option’ 102, 103 Overend, Gurney & Co. 31 overseas assets and liabilities 179–80, 179 owner-managed businesses 30 ox parable xi-xii Oxford University 12 P Pacific Gas and Electric 246 Pan Am 238 Paris financial centre 26 Parliamentary Commission on Banking Standards 295 partnerships 30, 49, 50, 234 limited liability 313n14 Partnoy, Frank 268 passive funds 99, 212 passive management 207, 209, 212 Patek Philippe 195, 196 Paulson, Hank 300 Paulson, John 64, 109, 115, 152, 191, 284 ‘payment in kind’ securities 131 payment protection policies 198 payments system 6, 7, 25, 180, 181–8, 247, 259–60, 281, 297, 306 PayPal 167, 168, 187 Pecora, Ferdinand 25 Pecora hearings (1932–34) 218 peer-to-peer lending 81 pension funds 29, 98, 175, 177, 197, 199, 200, 201, 208, 213, 254, 282, 284 pension provision 78, 253–6 pension rights 53, 178 Perkins, Charles 233 perpetual inventory method 321n4 Perrow, Charles 278, 279 personal financial management 6, 7 personal liability 296 ‘petrodollars’ 14, 37 Pfizer 96 Pierpoint Morgan, J. 165 Piper Alpha oil rig disaster (1987) 63 Ponzi, Charles 131, 132 Ponzi schemes 131, 132, 136, 201 pooled investment funds 197 portfolio insurance 38 Potts, Robin, QC 61, 63, 72, 119, 193 PPI, mis-selling of 296 Prebble, Lucy: ENRON 126 price competition 112, 219 price discovery 226 price mechanism 92 Prince, Chuck 34 private equity 27, 98, 166, 210 managers 210, 289 private insurance 76, 77 private sector 78 privatisation 39, 78, 157, 158, 258, 307 probabilistic thinking 67, 71, 79 Procter & Gamble 69, 108 product innovation 13 property and infrastructure 154–60 protectionism 13 Prudential 200 public companies, conversion to 18, 31–2, 49 public debt 252 public sector 78 Q Quandt, Herbert 170 Quandt Foundation 170 quantitative easing 245, 251 quantitative style 110–11 quants 22, 107, 110 Quattrone, Frank 167, 292–3 queuing 92 Quinn, Sean 156 R railroad regulation 237 railway mania (1840s) 35 Raines, Franklin 152 Rajan, Raghuram 56, 58, 79, 102 Rakoff, Judge Jed 233, 294, 295 Ramsey, Frank 67, 68 Rand, Ayn 79, 240 ‘random walk’ 69 Ranieri, Lew 20, 22, 106–7, 134, 152 rating agencies 21, 41, 84–5, 97, 151, 152, 153, 159, 249–50 rationality 66–7, 68 RBS see Royal Bank of Scotland re-insurance 62–3 Reagan, Ronald 18, 23, 54, 59, 240 real economy 7, 18, 57, 143, 172, 190, 213, 226, 239, 271, 280, 288, 292, 298 redundancy 73, 279 Reed, John 33–4, 48, 49, 50, 51, 242, 293, 314n40 reform 270–96 other people’s money 282–5 personal responsibility 292–6 principles of 270–75 the reform of structure 285–92 robust systems and complex structures 276–81 regulation 215, 217–39 the Basel agreements 220–25 and competition 113 the origins of financial regulation 217–19 ‘principle-based’ 224 the regulation industry 229–33 ‘rule-based’ 224 securities regulation 225–9 what went wrong 233–9 ‘Regulation Q’ (US) 13, 14, 20, 28, 120, 121 regulatory agencies 229, 230, 231, 235, 238, 274, 295, 305 regulatory arbitrage 119–24, 164, 223, 250 regulatory capture 237, 248, 262 Reich, Robert 265, 266 Reinhart, C.M. 251 relationship breakdown 74, 79 Rembrandts, genuine/fake 103, 127 Renaissance Technologies 110, 111, 191 ‘repo 105’ arbitrage 122 repo agreement 121–2 repo market 121 Reserve Bank of India 58 Reserve Primary Fund 121 Resolution Trust Corporation 150 retirement pension 78 return on equity (RoE) 136–7, 191 Revelstoke, first Lord 31 risk 6, 7, 55, 56–79 adverse selection and moral hazard 72–9 analysis by ‘ketchup economists’ 64 chasing the dream 65–72 Geithner on 57–8 investment 256 Jackson Hole symposium 56–7 Kohn on 56 laying bets on the interpretation of incomplete information 61 and Lloyd’s 62–3 the LMX spiral 62–3, 64 longevity 256 market 97, 98 mitigation 297 randomness 76 socialisation of individual risks 61 specific 97–8 risk management 67–8, 72, 79, 137, 191, 229, 233, 234, 256 risk premium 208 risk thermostat 74–5 risk weighting 222, 224 risk-pooling 258 RJR Nabisco 46, 204 ‘robber barons’ 44, 45, 51–2 Robertson, Julian 98, 109, 132 Robertson Stephens 167 Rockefeller, John D. 44, 52, 196 Rocket Internet 170 Rogers, Richard 62 Rogoff, K.S. 251 rogue traders 130, 300 Rohatyn, Felix 205 Rolls-Royce 90 Roman empire 277, 278 Rome, Treaty of (1964) 170 Rooney, Wayne 268 Roosevelt, Franklin D. v, 25, 235 Roosevelt, Theodore 43–4, 235, 323n1 Rothschild family 217 Royal Bank of Scotland 11, 12, 14, 24, 26, 34, 78, 91, 103, 124, 129, 135, 138, 139, 211, 231, 293 Rubin, Robert 57 In an Uncertain World 67 Ruskin, John 60, 63 Unto this Last 56 Russia defaults on debts 39 oligarchies 303 Russian Revolution (1917) 3 S Saes 168 St Paul’s Churchyard, City of London 305 Salomon Bros. 20, 22, 27, 34, 110, 133–4 ‘Salomon North’ 110 Salz Review: An Independent Review of Barclays’ Business Practices 217 Samuelson, Paul 208 Samwer, Oliver 170 Sarkozy, Nicolas 248, 249 Savage, L.J. 67 Scholes, Myron 19, 69, 110 Schrödinger’s cat 129 Scottish Parliament 158 Scottish Widows 26, 27, 30 Scottish Widows Fund 26, 197, 201, 212, 256 search 195, 209, 213 defined 144 and the investment bank 197 Second World War 36, 221 secondary markets 85, 170, 210 Securities and Exchange Commission (SEC) 20, 64, 126, 152, 197, 225, 226, 228, 230, 232, 247, 292, 293, 294, 313n6 securities regulation 225–9 securitisation 20–21, 54, 100, 151, 153, 164, 169, 171, 222–3 securitisation boom (1980s) 200 securitised loans 98 See’s Candies 107 Segarra, Carmen 232 self-financing companies 45, 179, 195–6 sell-side analysts 199 Sequoia Capital 166 Shad, John S.R. 225, 228–9 shareholder value 4, 45, 46, 50, 211 Sharpe, William 69, 70 Shell 96 Sherman Act (1891) 44 Shiller, Robert 85 Siemens 196 Siemens, Werner von 196 Silicon Valley, California 166, 167, 168, 171, 172 Simon, Hermann 168 Simons, Jim 23, 27, 110, 111–12, 124 Sinatra, Frank 72 Sinclair, Upton 54, 79, 104, 132–3 The Jungle 44 Sing Sing maximum-security gaol, New York 292 Skilling, Jeff 126, 127, 128, 149, 197, 259 Slim, Carlos 52 Sloan, Alfred 45, 49 Sloan Foundation 49 small and medium-size enterprises (SMEs), financing 165–72, 291 Smith, Adam 31, 51, 60 The Wealth of Nations v, 56, 106 Smith, Greg 283 Smith Barney 34 social security 52, 79, 255 Social Security Trust Fund (US) 254, 255 socialism 4, 225, 301 Société Générale 130 ‘soft commission’ 29 ‘soft’ commodities 17 Soros, George 23, 27, 98, 109, 111–12, 124, 132 South Sea Bubble (18th century) 35, 132, 292 sovereign wealth funds 161, 253 Soviet empire 36 Soviet Union 225 collapse of 23 lack of confidence in supplies 89–90 Spain: property bubble 42 Sparks, D.L. 114, 283, 284 specific risk 97–8 speculation 93 Spitzer, Eliot 232, 292 spread 28, 94 Spread Networks 2 Square 187 Stamp Duty 274 Standard & Poor’s rating agency 21, 99, 248, 249, 313n6 Standard Life 26, 27, 30 standard of living 77 Standard Oil 44, 196, 323n1 Standard Oil of New Jersey (later Exxon) 323n1 Stanford University 167 Stanhope 158 State Street 200, 207 sterling devaluation (1967) 18 stewardship 144, 163, 195–203, 203, 208, 209, 210, 211, 213 Stewart, Jimmy 12 Stigler, George 237 stock exchanges 17 see also individual stock exchanges stock markets change in organisation of 28 as a means of taking money out of companies 162 rise of 38 stock-picking 108 stockbrokers 16, 25, 30, 197, 198 Stoll, Clifford 227–8 stone fei (in Micronesia) 323n5 Stone, Richard 263 Stora Enso 196 strict liability 295–6 Strine, Chancellor Leo 117 structured investment vehicles (SIVs) 158, 223 sub-prime lending 34–5, 75 sub-prime mortgages 63, 75, 109, 149, 150, 169, 244 Summers, Larry 22, 55, 73, 119, 154, 299 criticism of Rajan’s views 57 ‘ketchup economics’ 5, 57, 69 support for financialisation 57 on transformation of investment banking 15 Sunday Times 143 ‘Rich List’ 156 supermarkets: financial services 27 supply chain 80, 81, 83, 89, 92 Surowiecki, James: The Wisdom of Crowds xi swap markets 21 SWIFT clearing system 184 Swiss Re 62 syndication 62 Syriza 306 T Taibbi, Matt 55 tailgating 102, 103, 104, 128, 129, 130, 136, 138, 140, 152, 155, 190–91, 200 Tainter, Joseph 277 Taleb, Nassim Nicholas 125, 183 Fooled by Randomness 133 Tarbell, Ida 44, 54 TARGET2 system 184, 244 TARP programme 138 tax havens 123 Taylor, Martin 185 Taylor Bean and Whitaker 293 Tea Party 306 technological innovation 13, 185, 187 Tel Aviv, Israel 171 telecommunications network 181, 182 Tesla Motors 168 Tetra 168 TfL 159 Thai exchange rate, collapse of (1997) 39 Thain, John 300 Thatcher, Margaret 18, 23, 54, 59, 148, 151, 157 Thiel, Peter 167 Third World debt problem 37, 131 thrifts 25, 149, 150, 151, 154, 174, 290, 292 ticket touts 94–5 Tobin, James 273 Tobin tax 273–4 Tolstoy, Count Leo 97 Tonnies, Ferdinand 17 ‘too big to fail’ 75, 140, 276, 277 Tourre, Fabrice ‘Fabulous Fab’ 63–4, 115, 118, 232, 293, 294 trader model 82, 83 trader, rise of the 16–24 elements of the new trading culture 21–2 factors contributing to the change 17–18 foreign exchange 18–19 from personal relationships to anonymous markets 17 hedge fund managers 23 independent traders 22–3 information technology 19–20 regulation 20 securitisation 20–21 shift from agency to trading 16 trading as a principal source of revenue and remuneration 17 trader model 82, 83 ‘trading book’ 320n20 transparency 29, 84, 205, 210, 212, 226, 260 Travelers Group 33, 34, 48 ‘treasure islands’ 122–3 Treasuries 75 Treasury (UK) 135, 158 troubled assets relief program 135 Truman, Harry S. 230, 325n13 trust 83–4, 85, 182, 213, 218, 260–61 Tuckett, David 43, 71, 79 tulip mania (1630s) 35 Turner, Adair 303 TWA 238 Twain, Mark: Pudd’nhead Wilson’s Calendar 95–6 Twitter 185 U UBS 33, 134 UK Independence Party 306 unemployment 73, 74, 79 unit trusts 202 United States global dominance of the finance industry 218 house prices 41, 43, 149, 174 stock bubble (1929) 201 universal banks 26–7, 33 University of Chicago 19, 69 ‘unknown unknowns’ 67 UPS delivery system 279–80 US Defense Department 167 US Steel 44 US Supreme Court 228, 229, 304 US Treasury 36, 38, 135 utility networks 181–2 V value discovery 226–7 value horizon 109 Van Agtmael, Antoine 39 Vanderbilt, Cornelius 44 Vanguard 200, 207, 213 venture capital 166 firms 27, 168 venture capitalists 171, 172 Vickers Commission 194 Viniar, David 204–5, 233, 282, 283, 284 VISA 186 volatility 85, 93, 98, 103, 131, 255 Volcker, Paul 150, 181 Volcker Rule 194 voluntary agencies 258 W wagers and credit default swaps 119 defined 61 at Lloyd’s coffee house 71–2 lottery tickets 65 Wall Street, New York 1, 16, 312n2 careers in 15 rivalry with London 13 staffing of 217 Wall Street Crash (1929) 20, 25, 27, 36, 127, 201 Wall Street Journal 294 Wallenberg family 108 Walmart 81, 83 Warburg 134 Warren, Elizabeth 237 Washington consensus 39 Washington Mutual 135, 149 Wasserstein, Bruce 204, 205 Watergate affair 240 ‘We are the 99 per cent’ slogan 52, 305 ‘We are Wall Street’ 16, 55, 267–8, 271, 300, 301 Weber, Max 17 Weill, Sandy 33–4, 35, 48–51, 55, 91, 149, 293, 314n40 Weinstock, Arnold 48 Welch, Jack 45–6, 48, 50, 52, 126, 314n40 WestLB 169 Westminster Bank 24 Whitney, Richard 292 Wilson, Harold 18 windfall payments 14, 32, 127, 153, 290 winner’s curse 103, 104, 156, 318n11 Winslow Jones, Alfred 23 Winton Capital 111 Wolfe, Humbert 7 The Uncelestial City 1 Wolfe, Tom 268 The Bonfire of the Vanities 16, 22 women traders 22 Woodford, Neil 108 Woodward, Bob: Maestro 240 World Bank 14, 220 World.Com bonds 197 Wozniak, Steve 162 Wriston, Walter 37 Y Yellen, Janet 230–31 Yom Kippur War (1973) 36 YouTube 185 Z Zurich, Switzerland 62

 

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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

Tankers full of crude arrived at the then-new Louisiana Offshore Oil Port, or LOOP, America’s single largest point of entry for crude. Deepwater tankers idled a few miles off the coast and unloaded the cargos into floating buoys connected to pipelines. Within a few years, more than five million barrels a day of OPEC crude was imported into the United States. In 1973 surging fuel costs led to the first “oil shock,” a period when geopolitical disputes cut off supplies and global economic growth was clipped by pricey oil. This pattern of a strong economy leading to high oil prices that, in turn, contributed to recessions repeated in 1979, 2001, and 2008. Expensive foreign oil has long been a brake on the economy. In 1973 President Richard Nixon announced Project Independence, an effort to eliminate dependence on foreign energy by 1980.

I determined average wages by using state US Bureau of Labor Statistics data and was guided by Michael Ziesch, manager of the Labor Market Information Center of Job Service North Dakota. Details on the preliminary production of the Irene Kovaloff provided by Marathon Oil. Hamilton, James D. “Oil and the Macroeconomy Since World War II.” Journal of Political Economy 91, no. 2 (April 1983): 228–48. ———. “Causes and Consequences of the Oil Shock of 2007–08.” Brookings Papers on Economic Activity (Spring 2009): 215–59. Nordeng, Stephan. “A Brief History of Oil Production from the Bakken Formation in the Williston Basin.” Geo News (January 2010): 5. Rankin, R., M. Thibodeau, M. C. Vincent, and T. T. Palisch. “Improved Production and Profitability Achieved with Superior Completions in Horizontal Wells: A Bakken/Three Forks Case History.”

 

pages: 566 words: 163,322

The Rise and Fall of Nations: Forces of Change in the Post-Crisis World by Ruchir Sharma

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3D printing, Asian financial crisis, backtesting, bank run, banking crisis, Berlin Wall, Bernie Sanders, BRICs, business climate, business process, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, colonial rule, Commodity Super-Cycle, corporate governance, crony capitalism, currency peg, dark matter, debt deflation, deglobalization, deindustrialization, demographic dividend, demographic transition, Deng Xiaoping, Doha Development Round, Donald Trump, Edward Glaeser, Elon Musk, eurozone crisis, failed state, Fall of the Berlin Wall, falling living standards, Francis Fukuyama: the end of history, Freestyle chess, Gini coefficient, hiring and firing, income inequality, indoor plumbing, industrial robot, inflation targeting, Internet of things, Jeff Bezos, job automation, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labor-force participation, Malacca Straits, Mark Zuckerberg, market bubble, megacity, Mexican peso crisis / tequila crisis, mittelstand, moral hazard, New Economic Geography, North Sea oil, oil rush, oil shale / tar sands, oil shock, pattern recognition, Peter Thiel, pets.com, Plutocrats, plutocrats, Ponzi scheme, price stability, Productivity paradox, purchasing power parity, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, Ronald Coase, Ronald Reagan, savings glut, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Simon Kuznets, smart cities, Snapchat, South China Sea, sovereign wealth fund, special economic zone, spectrum auction, Steve Jobs, The Wisdom of Crowds, Thomas Malthus, total factor productivity, trade liberalization, trade route, tulip mania, Tyler Cowen: Great Stagnation, unorthodox policies, Washington Consensus, WikiLeaks, women in the workforce, working-age population

In Brazil, for example, the military toppled an increasingly left-leaning government in a 1964 coup and moved quickly to restart the economy by cutting red tape, creating a central bank, working to lower budget deficits, and cutting taxes for exporters. The economic growth rate accelerated from less than 5 percent to double digits until the first oil price shock hit in 1974, and the military government—increasingly embattled by its violent crackdown on critics at home and abroad—tried to command a continued boom. It started borrowing heavily, piling up foreign debts it could no longer pay, when the second oil shock hit in 1979. The economy slid into recession and runaway inflation by the time the junta agreed to new elections in 1984. In some respects, the country never recovered from the meddling instincts of the later military government, and its per capita income relative to the United States is at the same level as it was in the 1970s. In contrast, democracies dominate the list of countries that since 1950 have registered the fewest years of extreme growth.

Bernstein Research, December 6, 2013. Reid, Jim, Nick Burns, and Seb Barker, “Long-Term Asset Return Study: Bonds: The Final Bubble Frontier?” Deutsche Bank Markets Research Report, September 10, 2014. Schofield, Mark. “Challenging the Consensus on Inflation.” Citigroup Research, June 29, 2015. Scott, David. “Deflationary Boom—Some Random Thoughts and Questions.” Cha-am Advisors, March 2, 2015. Sharma, Ruchir. “The Oil Shock with No Pain.” Newsweek, October 31, 2005. ——. “Cracking Inflation Should Be India’s Priority.” Financial Times, December 8, 2013. Stephens, Bret. “Book Review: ‘The Myth of America’s Decline,’ by Josef Joffe.” Wall Street Journal, November 6, 2013. Ward, Justin. “Commodity Super Cycle Analysis.” Wells Fargo Research, January 15, 2015. Warsh, Kevin, and Stanley Druckenmiller. “The Asset-Rich, Income-Poor Economy.”

 

pages: 868 words: 147,152

How Asia Works by Joe Studwell

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affirmative action, anti-communist, Asian financial crisis, bank run, banking crisis, barriers to entry, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collective bargaining, crony capitalism, cross-subsidies, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Deng Xiaoping, failed state, financial deregulation, financial repression, Gini coefficient, glass ceiling, income inequality, income per capita, industrial robot, Joseph Schumpeter, land reform, land tenure, large denomination, market fragmentation, non-tariff barriers, offshore financial centre, oil shock, open economy, passive investing, purchasing power parity, rent control, rent-seeking, Ronald Coase, South China Sea, The Wealth of Nations by Adam Smith, urban sprawl, Washington Consensus, working-age population

The steamroller approach In the most investment-intensive era of industrial growth, from approximately 1965 to the early 1980s, there developed a pattern in which each time Korea hit a road block in the form of an external economic shock and/or a domestic financial crisis, government did whatever was financially necessary to maintain developmental momentum. In the early 1970s, in addition to the kerb market interest moratorium, General Park’s government forced state banks to swap loans for chaebol shares and abandoned the high domestic interest rate policy begun in 1965. It met each crisis with cheaper money. With the first global oil shock, and a deep world recession, from late 1973 until 1975, the government massively increased domestic credit, while foreign debt rose from 31 to 40 per cent of GNI. With the second international oil crisis of 1979, plus increased US interest rates that helped trigger a world recession from 1980, Korea cranked up foreign debt again; the level, which had been pulled back to 30 per cent of GNI before the crisis, was increased to 50 per cent.23 Korea grew through a cataclysm which, in 1982, brought similarly indebted Latin American countries, and then the Philippines, to their knees.

China has experienced the bursting of a few localised property bubbles as a result of recent excesses, but this does not pose an immediate systemic risk. Chinese finance remains on a leash, even if that leash is inevitably, inexorably lengthening. Forward march China’s recent reaction to external crises is best viewed, then, not as a sudden loss of financial discipline but in the historical context of the Japanese, Korean and Taiwanese responses to the global currency and oil shocks of the 1970s. The Chinese government has intervened to maintain the momentum of the country’s developmental learning process. ‘School’ has not been suspended because of external economic shocks. Of course, this does not mean that China has no debt issues. If one adds together different central government debts, local government debts for which Beijing is ultimately responsible and other near-term contingent liabilities (although not long-run liabilities like China’s huge state pension fund gap), then public debt is perhaps 80 per cent of GDP.62 However, some of this debt is offset by readily saleable assets, almost none is owed to foreigners, and capital controls mean that banks do not need to worry about insolvency (that is, their potential losses on bad loans exceeding their capital) because they always have cash on hand.

 

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

The fact is there have been very few empirical testings of this kind ... while assertions of conviction are plentiful, factual findings are rare." 8 Indeed, it is difficult to think of any issue on which a position once held by a substantial, respected group of economists has been vacated as a result of empirical refutation. Perhaps the Phillips curve-an empirical correlation between unemployment and inflation that broke down after the oil shock of the 1970s-falls into this category. But then I turned again to Mankiw's elementary textbook, and discovered an entire chapter devoted to the Phillips curve: and that George Akerlof, receiving the Nobel Prize in 2001, described the Phillips curve as "probably the single most important macroeconomic relationship." 9 No modern chemistry textbook describes the phlogiston theory. No physics laureate commends the theory that the sun rotates the earth.

Economists may design and describe markets, but are rarely hired by those who made decisions in markets. In those antitrust issues, economists would increasingly describe behavior in terms that were not recognized by those whose behavior was described. This golden age of the professional economist came to an abrupt end. Formal planning systems went into decline, and accelerating inflation from the 1960s, exacerbated by the 1973 oil shock, meant that confidence in macroeconomic policies declined. As economies went wrong, politicians would increasingly make jokes at the expense of economists. But economists, sensitive to market trends, reinvented themselves, as Culture and Prosperity { 335} cheerleaders for conservative, market-oriented policies, and a new simple theory-monetarism-supposedly took the place of the Keynesian economics which had supposedly been discredited.

 

pages: 537 words: 158,544

Second World: Empires and Influence in the New Global Order by Parag Khanna

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Admiral Zheng, affirmative action, anti-communist, Asian financial crisis, Bartolomé de las Casas, Branko Milanovic, British Empire, call centre, capital controls, central bank independence, cognitive dissonance, colonial rule, complexity theory, crony capitalism, Deng Xiaoping, Dissolution of the Soviet Union, Donald Trump, Edward Glaeser, energy security, European colonialism, facts on the ground, failed state, flex fuel, Francis Fukuyama: the end of history, friendly fire, Gini coefficient, global reserve currency, global supply chain, haute couture, Hernando de Soto, illegal immigration, income inequality, informal economy, invisible hand, Islamic Golden Age, Khyber Pass, knowledge economy, land reform, low skilled workers, means of production, megacity, Monroe Doctrine, oil shale / tar sands, oil shock, open borders, open economy, Pax Mongolica, pirate software, Plutonomy: Buying Luxury, Explaining Global Imbalances, Potemkin village, price stability, race to the bottom, RAND corporation, reserve currency, rising living standards, Ronald Reagan, Silicon Valley, Skype, South China Sea, special economic zone, stem cell, Stephen Hawking, Thomas L Friedman, trade route, trickle-down economics, uranium enrichment, urban renewal, Washington Consensus, women in the workforce

Philadelphia: Wharton School Publishing, 2005. Shikaki, Khalil. Building a State, Building Peace: How to Make a Roadmap That Works for Palestinians and Israelis. Saban Center for Middle East Policy, Monograph no. 1. Washington, D.C.: Brookings Institution Press, 2003. Siddiqa, Ayesha, Military, Inc.: Inside Pakistan’s Military Economy. London: Pluto Press, 2007. Simmons, Matthew R. Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy. Hoboken, N.J.: John Wiley and Sons, 2005. Simon, Sheldon W., ed. The Many Faces of Asian Security. Lanham, Md.: Rowman and Littlefield, 2001. Simons, Thomas W., Jr. Islam in a Globalizing World. Stanford, Calif.: Stanford University Press, 2003. Singer, Peter. One World: The Ethics of Globalization. New Haven, Conn.: Yale University Press, 2003. Smith, Peter H. Democracy in Latin America: Political Change in Comparative Perspective.

See Afshin Molavi, “The Real ‘New Middle East,’” Washington Post, August 20, 2006; and Nawaf Obaid and Khalid al-Rhodan, “Saudi Arabia’s Sustainable Capacity and Security Issues,” Center for Strategic and International Studies, September 27, 2005. 15. There is constant debate over the longevity of Saudi Arabia’s oil reserves based on whether or not it has reached its peak production point, the number of years of oil remaining in its fields based on global demand, and the volume of oil contained in new discoveries. See Matthew R. Simmons, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy (Hoboken, N.J.: John Wiley and Sons, 2005); and Peter Maass, “The Breaking Point,” New York Times Magazine, August 21, 2005. 16. Peter Bergen and Alec Reynolds, “Blowback Revisited,” Foreign Affairs, November–December 2005, 2–6. As the U.S. Defense Science Board notes, “Muslims do not hate our freedoms, but rather they hate our policies.” 17. See John Bradley, Saudi Arabia Exposed: Inside a Kingdom in Crisis (New York: Palgrave Macmillan, 2005); and International Crisis Group, The Shiite Question in Saudi Arabia, Middle East Report no. 145, September 19, 2005. 18.

 

pages: 127 words: 51,083

The Oil Age Is Over: What to Expect as the World Runs Out of Cheap Oil, 2005-2050 by Matt Savinar

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Albert Einstein, clean water, energy security, hydrogen economy, illegal immigration, invisible hand, new economy, oil shale / tar sands, oil shock, peak oil, post-oil, Ralph Nader, reserve currency, Rosa Parks, The Wealth of Nations by Adam Smith, Y2K

This fact, as much as anything else you read in this book, indicates the absolutely breathtaking scope of our problem. 19. But I just heard on the news that they made a huge oil discovery somewhere! Nowadays, an oil discovery of 200 million barrels is considered huge, and will garner much attention in the press. The world uses 75 million barrels per day. So even a huge find is really only a 3- to 4-day supply. It will certainly make a lot of money for whoever found it, but it won't do much to soften the oil shocks. 20. Is it possible that things might get better before they get worse? Yes. Once an oil find is made, it takes about 5 years for production to come online. As stated in the previous question, the last remotely decent year for oil finds was 2000. This means the last decent year for new production to come online will be about 2005. By 2008-2010, those projects will be in decline. 21. Can't technology just find better, more efficient ways to use the oil that is left?

 

pages: 217 words: 61,407

Twilight of Abundance: Why the 21st Century Will Be Nasty, Brutish, and Short by David Archibald

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Bakken shale, Climategate, Climatic Research Unit, deindustrialization, energy security, failed state, Francis Fukuyama: the end of history, income per capita, means of production, mutually assured destruction, oil shale / tar sands, oil shock, out of africa, peak oil, price discovery process, rising living standards, South China Sea, University of East Anglia, uranium enrichment, Yom Kippur War

A few pilot plants producing liquid fuels from coal were also operating in the United States until cheap oil killed off those efforts in the early 1950s. South Africa adopted CTL technology as a way of sidestepping the international oil embargo imposed on it because of apartheid. A similar technology has actually been operating in the United States since 1984. The Carter administration started building the Great Plains Synfuels Plant in Beulah, North Dakota, in response to the oil shock of 1980. Based, like so many Carter administration initiatives, on a flawed understanding of the world, it was begun with good intentions, but its results fell short of what they should have been. The Beulah plant could be making, and should be making, liquid fuels. Instead, it manufactures synthetic natural gas. When the plant was being built, it was thought that the United States had a greater shortage of natural gas than of oil.

 

Trend Commandments: Trading for Exceptional Returns by Michael W. Covel

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Albert Einstein, Bernie Madoff, Black Swan, commodity trading advisor, correlation coefficient, delayed gratification, diversified portfolio, en.wikipedia.org, Eugene Fama: efficient market hypothesis, family office, full employment, Lao Tzu, Long Term Capital Management, market bubble, market microstructure, Mikhail Gorbachev, moral hazard, Nick Leeson, oil shock, Ponzi scheme, prediction markets, quantitative trading / quantitative finance, random walk, Sharpe ratio, systematic trading, the scientific method, transaction costs, tulip mania, upwardly mobile, Y2K

Do not strive for things occurring to occur as you wish, but wish the things occurring as they occur, and you will flow well.1 Ignition Trading for exceptional returns may not appear realistic in the schizophrenic cacophony: “What is the right approach for investors faced with an unusually uncertain economic outlook and volatile markets?” “Big concerns over job insecurity, consumer and corporate spending, and housing prices.” “Should you buy gold?” “Where are markets headed?” “Oil shock, dollar drop, Japanese earthquake, elections!” That’s white noise. Yes, sure, of course, you may have more options, but an explosion of naiveté has muddied the waters. Ignorance and confusion reign supreme. The idiot box is no longer just the bedroom flat screen. It is every PC, Mac, iPhone, and iPad. People absorb TMZ and Drudge via an intravenous drip. We are in a voyeuristic world where living vicariously through someone or something is accepted without hesitation and, in fact, encouraged.

 

pages: 288 words: 76,343

The Plundered Planet: Why We Must--And How We Can--Manage Nature for Global Prosperity by Paul Collier

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agricultural Revolution, Berlin Wall, business climate, Doha Development Round, energy security, food miles, megacity, new economy, offshore financial centre, oil shock, profit maximization, rent-seeking, Ronald Coase, Scramble for Africa, sovereign wealth fund, stem cell, Stewart Brand

The romantics prefer wind power, tidal power, and solar power, all of which are readily intelligible to ordinary citizens; nuclear power harnesses forces of nature only intelligible to a scientific elite. Unfortunately, however, wind, wave, and sun power are not yet scalable in the way that nuclear power is scalable. By far the most carbon-efficient advanced economy is France, which, following the oil shock of 1974, decided to achieve energy security by investing in nuclear power. France was able to do this because whereas elsewhere the political left was hostile to nuclear energy, in France it was nationalistic and so supported the idea of independence from imported oil. Wind, wave, and solar power may eventually become scalable (provided enough money is put into research), but for the moment pragmatists such as Stewart Brand, one of the pioneers of the environmental movement, have accepted that nuclear power is an essential part of the battle to contain global warming.

 

pages: 305 words: 69,216

A Failure of Capitalism: The Crisis of '08 and the Descent Into Depression by Richard A. Posner

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Andrei Shleifer, banking crisis, Bernie Madoff, collateralized debt obligation, collective bargaining, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, debt deflation, diversified portfolio, equity premium, financial deregulation, financial intermediation, Home mortgage interest deduction, illegal immigration, laissez-faire capitalism, Long Term Capital Management, market bubble, moral hazard, mortgage debt, oil shock, Ponzi scheme, price stability, profit maximization, race to the bottom, reserve currency, risk tolerance, risk/return, Robert Shiller, Robert Shiller, savings glut, shareholder value, short selling, statistical model, too big to fail, transaction costs, very high income

Doom" about a reputable academic economist, a professor at New York University named Nouriel Roubini, who for years had been predicting with uncanny accuracy what has now happened. The article reported that in September 2006—two years before the financial crisis but after the bursting of the housing bubble—Roubini had "announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac."

 

pages: 251 words: 76,868

How to Run the World: Charting a Course to the Next Renaissance by Parag Khanna

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Albert Einstein, Asian financial crisis, back-to-the-land, bank run, blood diamonds, borderless world, BRICs, British Empire, call centre, carbon footprint, charter city, clean water, cleantech, cloud computing, corporate governance, corporate social responsibility, Deng Xiaoping, Doha Development Round, don't be evil, double entry bookkeeping, energy security, European colonialism, facts on the ground, failed state, friendly fire, global village, Google Earth, high net worth, index fund, informal economy, invisible hand, labour mobility, laissez-faire capitalism, Masdar, megacity, microcredit, mutually assured destruction, Naomi Klein, New Urbanism, offshore financial centre, oil shock, open economy, out of africa, private military company, Productivity paradox, race to the bottom, RAND corporation, reserve currency, Silicon Valley, smart grid, South China Sea, sovereign wealth fund, special economic zone, sustainable-tourism, The Fortune at the Bottom of the Pyramid, The Wisdom of Crowds, too big to fail, trade liberalization, trickle-down economics, UNCLOS, uranium enrichment, Washington Consensus, X Prize

As Robert Hormats, a veteran America Sherpa recently returned to the Obama administration, recalls, Sherpas think of themselves as “munchkins,” like the old but diminutive Wizard of Oz characters. So many young diplomats today want to become Sherpas—but first they have to do an apprenticeship as “yaks.” For Jay and his counterparts, being a Sherpa is the peak of professional achievement in diplomacy: “It’s a tough job, but huge fun!” Since the 1970s oil shocks, the Sherpa job has attracted some of the best troubleshooters from the world’s leading governments. For thirty-five years, their main job was to coordinate financial stability policies among the Group of Seven (G-7), which until recently was the exclusive club of the world’s leading industrial economies.* But in late 2008, their task was nothing less than saving the world from a looming depression.

 

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

Indeed, at a summit meeting of heads of government in Paris in December 1972, all nine national leaders, including the UK’s Edward Heath, signed up blithely not only to monetary union but also to political union by 1980. A last-minute attempt by the Danish prime minister to ask his colleagues exactly what was meant by political union was ignored by the French president, Georges Pompidou, who was in the chair.8 It was the final collapse of Bretton Woods, followed by the Arab-Israeli war and oil shock and then by the global recession of 1974–75, that upset most of these ambitious plans. Yet by then West Germany, always on the look-out for greater currency stability, had already set up a system linking most of Europe’s currencies to the Deutschmark, swiftly dubbed the “snake in the tunnel”. The idea was to set limits to bilateral currency fluctuations, enforced by central-bank intervention. However, it turned out that the snake had only a fitful and unsatisfactory life.

 

pages: 725 words: 221,514

Debt: The First 5,000 Years by David Graeber

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Admiral Zheng, anti-communist, back-to-the-land, banks create money, Bretton Woods, British Empire, carried interest, cashless society, central bank independence, colonial rule, corporate governance, David Graeber, delayed gratification, dematerialisation, double entry bookkeeping, financial innovation, full employment, George Gilder, informal economy, invention of writing, invisible hand, Isaac Newton, joint-stock company, means of production, microcredit, money: store of value / unit of account / medium of exchange, moral hazard, oil shock, payday loans, place-making, Ponzi scheme, price stability, profit motive, reserve currency, Ronald Reagan, seigniorage, short selling, Silicon Valley, South Sea Bubble, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transatlantic slave trade, transatlantic slave trade, tulip mania, upwardly mobile, urban decay, working poor

Quite possibly it wouldn’t even remain viable if all its workers were free wage laborers; certainly it will never be able to provide everyone in the world the sort of life lived by, say, a 1960s auto worker in Michigan or Turin with his own house, garage, and children in college—and this was true even before so many of those children began demanding less stultifying lives. The result might be termed a crisis of inclusion. By the late 1970s, the existing order was clearly in a state of collapse, plagued simultaneously by financial chaos, food riots, oil shock, widespread doomsday prophecies of the end of growth and ecological crisis—all of which, it turned out, proved to be ways of putting the populace on notice that all deals were off. The moment that we start framing the story this way, it’s easy to see that the next thirty years, the period from roughly 1978 to 2009, follows nearly the same pattern. Except that the deal, the settlement, had changed.

It proved no more possible to really turn everyone in the world into micro-corporations, or to “democratize credit” in such a way that every family that wanted to could have a house (and if you think about it, if we have the means to build them, why shouldn’t they? are there families who don’t “deserve” houses?) than it had been to allow all wage laborers to have unions, pensions, and health benefits. Capitalism doesn’t work that way. It is ultimately a system of power and exclusion, and when it reaches the breaking point, the symptoms recur, just as they had in the 1970s: food riots, oil shock, financial crisis, the sudden startled realization that the current course was ecological unsustainable, attendant apocalyptic scenarios of every sort. In the wake of the subprime collapse, the U.S. government was forced to decide who really gets to make money out of nothing: the financiers, or ordinary citizens. The results were predictable. Financiers were “bailed out with taxpayer money”—which basically means that their imaginary money was treated as if it were real.

 

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

That’s how the Bridgewater system began and developed in the early years. That same process continued and was improved with the help of many others over the years. Are the individual rules in the compendium of rules that make up the Bridgewater system sometimes revised or do they remain static through time? They are sometimes revised. For example, we used to look at how changes in the oil price affected countries. Between the first oil shock and the second oil shock in the 1970s, crude oil was discovered in the North Sea, and the U.K. went from being a net importer to a net exporter. That event prompted us to change how we configured the decision rule that related to oil prices so that when the mix of export and import items changed, the rule changed. How are you able to manage such a large amount of money without substantially impeding your performance?

 

pages: 843 words: 223,858

The Rise of the Network Society by Manuel Castells

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Apple II, Asian financial crisis, barriers to entry, Big bang: deregulation of the City of London, borderless world, British Empire, capital controls, complexity theory, computer age, Credit Default Swap, declining real wages, deindustrialization, delayed gratification, dematerialisation, deskilling, disintermediation, double helix, Douglas Engelbart, edge city, experimental subject, financial deregulation, financial independence, floating exchange rates, future of work, global village, Hacker Ethic, hiring and firing, Howard Rheingold, illegal immigration, income inequality, industrial robot, informal economy, information retrieval, intermodal, invention of the steam engine, invention of the telephone, inventory management, James Watt: steam engine, job automation, job-hopping, knowledge economy, knowledge worker, labor-force participation, labour market flexibility, labour mobility, laissez-faire capitalism, low skilled workers, manufacturing employment, Marshall McLuhan, means of production, megacity, Menlo Park, new economy, New Urbanism, offshore financial centre, oil shock, open economy, packet switching, planetary scale, popular electronics, post-industrial society, postindustrial economy, prediction markets, Productivity paradox, profit maximization, purchasing power parity, RAND corporation, Robert Gordon, Silicon Valley, Silicon Valley startup, social software, South China Sea, South of Market, San Francisco, special economic zone, spinning jenny, statistical model, Steve Jobs, Steve Wozniak, Ted Nelson, the built environment, the medium is the message, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, total factor productivity, trade liberalization, transaction costs, urban renewal, urban sprawl

And what are the consequences of such timed/placed clustering for their future development and for their interaction with societies? It would be tempting to relate directly the formation of this technological paradigm to the characteristics of its social context, particularly if we remember that in the mid-1970s the United States and the capitalist world were shaken by a major economic crisis, epitomized (but not caused) by the oil shock of 1973–4: a crisis that prompted the dramatic restructuring of the capitalist system on a global scale, actually inducing a new model of accumulation in historical discontinuity with post-Second World War capitalism, as I proposed in the Prologue of this book. Was the new technological paradigm a response by the capitalist system to overcome its internal contradictions? Or, alternatively, was it a way to ensure military superiority over the Soviet foe, responding to its technological challenge in the space race and nuclear weaponry?

According to the government’s labor status definitions, “part-time” workers are those considered as such by the company.125 In fact, they work almost full-time (6 hours a day, compared to 7.5 hours for regular workers), although the number of working days in a month is slightly less than for regular workers. Yet they receive, on average, about 60 percent of a regular worker’s salary, and about 15 percent of the annual bonus. More importantly, they have no job security, so they are hired and fired according to the company’s convenience. Part-timers and temporary workers provide the required labor flexibility. Their role has substantially increased since the 1970s, when the oil shock induced major economic restructuring in Japan. In the 1975–90 period, the number of part-time workers increased by 42.6 percent for male workers and by 253 percent for female workers. Indeed, women account for two-thirds of part-timers. Women are the skilled, adaptable workers who provide flexibility to Japanese labor management practices. This is in fact an old practice in Japanese industrialization.

 

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

SOCIAL AUTO-MOBILITY: THE CAR’S INFLUENCE ON RISING INEQUALITY For the first several decades after World War II, the United States was a country with a large and relatively comfortable middle class. The rising tide of affluence in those years lifted most boats, and economic measures showed slow gains in levels of equality until the mid-1970s. For a variety of reasons—most of them having to do with public policy changes initiated during the Reagan years, related declines in the strength of unions, and the oil shocks of the early 1970s—this began to change. The idea of a government safety net for those excluded from a living wage was shredded by the notion that the market would more efficiently solve such problems. Wages and benefits for the working and middle class flattened or declined, corporate profits rose, and CEO salaries went through the roof: where the ratio of the highest- and lowest-paid workers in the United States was 50 to 1 in 1965, it was 800 to 1 by 2005.1 In the process, the fundamental social contract between government, business, and American workers was radically changed.

 

pages: 305 words: 79,356

Drowning in Oil: BP & the Reckless Pursuit of Profit by Loren C. Steffy

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Berlin Wall, clean water, corporate governance, Exxon Valdez, Fall of the Berlin Wall, North Sea oil, oil rush, oil shock, peak oil, Piper Alpha, Ronald Reagan, South China Sea, sovereign wealth fund

Priest, Tyler. The Offshore Imperative: Shell Oil’s Search for Petroleum in Postwar America. College Station: Texas A&M University Press, 2007. The Report of the BP U.S. Refineries Independent Safety Review Panel, January 2007. Sampson, Anthony. The Seven Sisters: The Great Oil Companies and the World They Shaped. New York: Bantam Books, 1991. Simmons, Matthew R. Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy. Hoboken, N.J.: John Wiley & Sons, 2005. Solomon, Charlene M., and Michael S. Schell. Managing across Cultures: The Seven Keys to Doing Business with a Global Mindset. New York: McGraw-Hill, 2009. Tarbell, Ida M. The History of the Standard Oil Company. Edited by David M. Chambers. Mineola, N.Y.: Dover Publications, 1966. U.S. Chemical Safety and Hazard Investigation Board.

 

pages: 381 words: 101,559

Currency Wars: The Making of the Next Gobal Crisis by James Rickards

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Asian financial crisis, bank run, Benoit Mandelbrot, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, borderless world, Bretton Woods, BRICs, British Empire, business climate, capital controls, Carmen Reinhart, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, Deng Xiaoping, diversification, diversified portfolio, Fall of the Berlin Wall, family office, financial innovation, floating exchange rates, full employment, game design, German hyperinflation, Gini coefficient, global rebalancing, global reserve currency, high net worth, income inequality, interest rate derivative, Kenneth Rogoff, labour mobility, laissez-faire capitalism, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, money: store of value / unit of account / medium of exchange, Network effects, New Journalism, Nixon shock, offshore financial centre, oil shock, open economy, paradox of thrift, price mechanism, price stability, private sector deleveraging, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, Ronald Reagan, sovereign wealth fund, special drawing rights, special economic zone, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, time value of money, too big to fail, value at risk, War on Poverty, Washington Consensus

Inflation had been defeated and gold had been subdued. King Dollar was back. Although Volcker’s efforts were heroic, he was not the sole cause of declining inflation and a stronger dollar. Equal credit was due to the low-tax and deregulatory policies of Ronald Reagan. The new president entered office in January 1981 at a time when American economic confidence had been shattered by the recessions, inflation and oil shocks of the Nixon-Carter years. Although the Fed was independent of the White House, Reagan and Volcker together constructed a strong dollar, implemented a low-tax policy that proved to be a tonic for the U.S. economy and launched the United States on one of its strongest periods of growth in history. Volcker’s hard-money policies combined with Reagan’s tax cuts helped gross domestic product achieve cumulative real growth of 16.6 percent in the three-year span from 1983 to 1985.

 

pages: 327 words: 103,336

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

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

The basic idea of scenario planning is to create what strategy consultant Charles Perrottet calls “detailed, speculative, well thought out narratives of ‘future history.’ ” Critically, however, scenario planners attempt to sketch out a wide range of these hypothetical futures, where the main aim is not so much to decide which of these scenarios is most likely as to challenge possibly unstated assumptions that underpin existing strategies.18 In the early 1970s, for example, the economist and strategist Pierre Wack led a team at Royal Dutch/Shell that used scenario planning to test senior management’s assumptions about the future success of oil exploration efforts, the political stability of the Middle East, and the emergence of alternative energy technologies. Although the main scenarios were constructed in the relatively placid years of energy production before the oil shocks of the 1970s and the subsequent rise of OPEC—events that definitely fall into the black swan category—Wack later claimed that the main trends had indeed been captured in one of his scenarios, and that the company was as a result better prepared both to exploit emerging opportunities and to hedge against potential pitfalls.19 Once these scenarios have been sketched out, Raynor argues that planners should formulate not one strategy, but rather a portfolio of strategies, each of which is optimized for a given scenario.

 

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

Few people outside Korea were aware that the beautiful public parks surrounding the impressive Seoul Football Stadium they saw during the 2002 World Cup were built literally on top of the old rubbish dump on the island (which nowadays has an ultra-modern eco-friendly methane-burning power station, which taps into the organic material dumped there). In October 1979, when I was still a secondary school student, President Park was unexpectedly assassinated by the chief of his own Intelligence Service, amid mounting popular discontent with his dictatorship and the economic turmoil following the Second Oil Shock. A brief ‘Spring of Seoul’ followed, with hopes of democracy welling up. But it was brutally ended by the next military government of General Chun Doo-Hwan, which seized power after the two-week armed popular uprising that was crushed in the Kwangju Massacre of May 1980. Despite this grave political setback, by the early 1980s, Korea had become a solid middle-income country, on a par with Ecuador, Mauritius and Costa Rica.

 

pages: 397 words: 112,034

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

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affirmative action, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Berlin Wall, Black Swan, Bretton Woods, capital controls, Cass Sunstein, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, debt deflation, declining real wages, deindustrialization, diversification, energy security, Erik Brynjolfsson, Fall of the Berlin Wall, financial innovation, floating exchange rates, full employment, Gini coefficient, global reserve currency, global village, high net worth, Home mortgage interest deduction, housing crisis, index fund, inflation targeting, invisible hand, Just-in-time delivery, Kenneth Rogoff, labour market flexibility, labour mobility, Long Term Capital Management, Mahatma Gandhi, Martin Wolf, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, mortgage tax deduction, Network effects, new economy, Nicholas Carr, oil shale / tar sands, oil shock, open economy, passive investing, payday loans, peak oil, Ponzi scheme, post-oil, price stability, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, reserve currency, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, sovereign wealth fund, special drawing rights, technology bubble, The Great Moderation, Thomas Kuhn: the structure of scientific revolutions, Tobin tax, too big to fail, total factor productivity, trade liberalization, Washington Consensus, women in the workforce, yield curve

However, the bottom line remains that in 2030 (notwithstanding the thinking triggered by the Deepwater Horizon oil spill), ours will still be a hydrocarbon-powered economy, and enough oil and gas resources will be available to meet the huge energy demand that cannot be met by alternative energy sources, however rapid their development. Lessons learned in 2009 and 2010 highlight the importance of better governance of energy as well as climate issues.43 Notes 1. Matthew R. Simmons, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy (Hoboken, NJ: Wiley, 2005). 2. Kenneth S. Deffeyes, Hubbert’s Peak: The Impending World Oil Shortage (Princeton, NJ: Princeton University Press, 2001). For an opposing view, see Robin M. Mills, The Myth of the Oil Crisis: Overcoming the Challenges of Depletion, Geopolitics, and Global Warming (Westport, CT: Praeger, 2008). 3. “Our data confirms that the world has enough proved reserves of oil, natural gas and coal to meet the world’s needs for decades to come.

 

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

The European Currency Unit (ECU), though formally at the heart of the system, played a much more limited role (as a unit of account, etc.) than originally intended by the French. 2. Exchange rates were determined between the member currencies (the ‘parity grid’). 3. Compulsory interventions were correspondingly tied not to the ECU, that is, to a currency basket, but to the parity grid. It soon became apparent that the EMS was a system founded on the strongest currency; in short, it was a ‘DM bloc’. In the wake of the strong price pressures exerted by the second oil shock in 1979/80, the consequences of this currency system quickly came to light. The Deutsche Bundesbank fought against the inflation risks with a clear, stability-oriented monetary policy, thereby sparing Germany a repetition of the sequence of inflation and stagflation that had marked the period after the first oil price shock in the 1970s. Those countries that were unable or unwilling to join in this The rocky road to monetary union • 7 disinflationary process were forced into repeated devaluations of their currencies as their attempts to defend the parities reached crisis point.

 

pages: 219 words: 15,438

The Essays of Warren Buffett: Lessons for Corporate America by Warren E. Buffett, Lawrence A. Cunningham

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compound rate of return, corporate governance, Dissolution of the Soviet Union, diversified portfolio, dividend-yielding stocks, fixed income, index fund, invisible hand, large denomination, low cost carrier, oil shock, passive investing, price stability, Ronald Reagan, the market place, transaction costs, Yogi Berra, zero-coupon bond

If I have to bite at stuff that is out of my happy zone, I'm not a .344 hitter. I might only be a .250 hitter." Charlie and I agree and will try to wait for opportunities that are well within our own "happy zone." We will continue to ignore political and economic forecasts, which are an expensive distraction for many investors and businessmen. Thirty years ago, no one could have foreseen the huge expansion of the Vietnam War, wage and price controls, two oil shocks, the resignation of a president, the dissolution of the Soviet Union, a one-day drop in the Dow of 508 points, or treasury bill yields fluctuating between 2.8% and 17.4%. But, surprise-none of these blockbuster events made the slightest dent in Ben Graham's investment principles. Nor did they render unsound the negotiated purchases of fine businesses at sensible prices. Imagine the cost to us, then, if we had let a fear of unknowns cause us to defer or alter the deployment of capital.

 

pages: 329 words: 85,471

The Locavore's Dilemma by Pierre Desrochers, Hiroko Shimizu

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air freight, back-to-the-land, British Empire, Columbian Exchange, Community Supported Agriculture, edge city, Edward Glaeser, food miles, Food sovereignty, global supply chain, intermodal, invention of agriculture, inventory management, invisible hand, Jane Jacobs, labour mobility, land tenure, megacity, moral hazard, mortgage debt, oil shale / tar sands, oil shock, peak oil, planetary scale, profit motive, refrigerator car, Steven Pinker, the market place, The Wealth of Nations by Adam Smith, Thomas Malthus, trade liberalization, Upton Sinclair, urban sprawl

Not surprisingly, while supporters of such schemes acknowledge these challenges, they nonetheless justified these programs on the grounds that “even a flawed solution to fight hunger is better than no solution,” while an international bureaucrat opined that such cereal banks “are a microcosm of Africa [and of] Africa’s problems. There are management problems, transparency and corruption issues no matter who funds the start-up.”14 Similar problems have also been observed in the strategic grain reserves set up throughout Africa under the aegis of the Food and Agricultural Organization of the United Nations (FAO) after the first oil shock of the 1970s.15 As the geographer Evan Fraser and the journalist Andrew Rimas—two analysts not exactly friendly to market solutions—observed, the “seemingly limitless hoard” in silos proved “too tempting for local officials to ignore, and the program was plagued by politicking, mismanagement, and corruption. By the end of the 1980s, all that was left was the ink on a ledger sheet.” During the crop failure of 2001 in Malawi, local officials were “shocked, shocked, shocked” (our words, not theirs) to discover that when the silo doors were opened, the “strategic grain reserves held no grain.”16 Yet, blaming African political culture for these failures is misguided, for major problems in similar schemes have been uncovered elsewhere.

 

pages: 223 words: 10,010

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

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

For their advocates, the new economic orthodoxy and its acceptance of soaring inequality, was to be judged above all on its impact on the real economy, on whether it delivered more productive, efficient and innovative economies. Yet the evidence is that market capitalism has been weaker on most key measures of economic performance than the period of managed capitalism. This is clear from dividing the post-war era into two distinct periods. The first—the 23 year period of ‘managed capitalism’—dates from 1950 to 1973, the year of the first OPEC oil shock and the one which perhaps best marks the end of the post-war boom. The second period—the 29 years of ‘market capitalism’—covers the period from 1980 to 2009, beginning with the first full year of the new economic experiment. Although this comparison misses 1974-1979, this period was a special case which saw the first serious recession of the post-war era, one ushered in by the OPEC shock. Moreover, the application of market principles did not start until Margaret Thatcher and Ronald Reagan were in power.

 

pages: 339 words: 88,732

The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies by Erik Brynjolfsson, Andrew McAfee

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2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, access to a mobile phone, additive manufacturing, Airbnb, Albert Einstein, Amazon Mechanical Turk, Amazon Web Services, American Society of Civil Engineers: Report Card, Any sufficiently advanced technology is indistinguishable from magic, autonomous vehicles, barriers to entry, Baxter: Rethink Robotics, British Empire, business intelligence, business process, call centre, clean water, combinatorial explosion, computer age, computer vision, congestion charging, corporate governance, crowdsourcing, David Ricardo: comparative advantage, employer provided health coverage, en.wikipedia.org, Erik Brynjolfsson, factory automation, falling living standards, Filter Bubble, first square of the chessboard / second half of the chessboard, Frank Levy and Richard Murnane: The New Division of Labor, Freestyle chess, full employment, game design, global village, happiness index / gross national happiness, illegal immigration, immigration reform, income inequality, income per capita, indoor plumbing, industrial robot, informal economy, inventory management, James Watt: steam engine, Jeff Bezos, jimmy wales, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kevin Kelly, Khan Academy, knowledge worker, Kodak vs Instagram, law of one price, low skilled workers, Lyft, Mahatma Gandhi, manufacturing employment, Mark Zuckerberg, Mars Rover, means of production, Narrative Science, Nate Silver, natural language processing, Network effects, new economy, New Urbanism, Nicholas Carr, Occupy movement, oil shale / tar sands, oil shock, pattern recognition, payday loans, price stability, Productivity paradox, profit maximization, Ralph Nader, Ray Kurzweil, recommendation engine, Report Card for America’s Infrastructure, Robert Gordon, Rodney Brooks, Ronald Reagan, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Simon Kuznets, six sigma, Skype, software patent, sovereign wealth fund, speech recognition, statistical model, Steve Jobs, Steven Pinker, Stuxnet, supply-chain management, TaskRabbit, technological singularity, telepresence, The Bell Curve by Richard Herrnstein and Charles Murray, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, total factor productivity, transaction costs, Tyler Cowen: Great Stagnation, Vernor Vinge, Watson beat the top human players on Jeopardy!, winner-take-all economy, Y2K

Workers, 1963–2008 The effects of skill-biased technical change can be vividly seen in figure 9.2, which is based on data from a paper by MIT economists Daron Acemoglu and David Autor.18 The lines tell a story about the diverging paths of millions of workers over recent generations. Before 1973, American workers all enjoyed brisk wage growth. The rising tide of productivity increased everyone’s incomes, regardless of their educational levels. Then came the massive oil shock and recession of the 1970s, which reversed the gains for all groups. However, after that, we began to see a growing spread of incomes. By the early 1980s, those with college degrees started to see their wages growing again. Workers with graduate degrees did particularly well. Meanwhile, workers without college degrees were confronted with a much less attractive labor market. Their wages stagnated or, if they were high school dropouts, actually fell.

 

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

He argued that the luxuries of one generation became necessities for the next as if society were a column moving steadily forward with the rich tasting the fruits that would eventually be conveyed to the rest of humanity. He predicted a future of increasing personal competition in an ever more vicious rat race and that such a process would have a detrimental impact on the moral fabric of society. These authors were writing at a time when the social strains of the late 1960s and the oil shock of the early 1970s had clearly triggered a crisis of capitalism. The lesson is being painfully relearned by our generation. One example is an essay by Manhattan Institute scholar Jim Manzi, who writes of the “bifurcation of social norms in America,” the chasm between patterns of life and behavior of the well-off and the poor. As a conservative writer, he blames welfare: A welfare state can best perform its basic function—buffering the human consequences of the market, without unduly hampering its effectiveness—where enough widely shared social capital exists to guide the behavior of most people in a bourgeois direction.

 

pages: 335 words: 107,779

Some Remarks by Neal Stephenson

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airport security, augmented reality, barriers to entry, British Empire, cable laying ship, call centre, cellular automata, edge city, Eratosthenes, Fellow of the Royal Society, Hacker Ethic, impulse control, Iridium satellite, Isaac Newton, Jaron Lanier, John von Neumann, Just-in-time delivery, Kevin Kelly, music of the spheres, Norbert Wiener, offshore financial centre, oil shock, packet switching, pirate software, Richard Feynman, Richard Feynman, Saturday Night Live, shareholder value, Silicon Valley, Skype, slashdot, social web, Socratic dialogue, South China Sea, special economic zone, Stephen Hawking, the scientific method, trade route, Turing machine, uranium enrichment, Vernor Vinge, X Prize

Scientists and engineers who came of age during the first half of the 20th century could look forward to building things that would solve age-old problems, transform the landscape, build the economy, and provide jobs for the burgeoning middle class that was the basis for our stable democracy. The Deepwater Horizon oil spill of 2010 crystallized my feeling that we have lost our ability to get important things done. The OPEC oil shock was in 1973—almost 40 years ago. It was obvious then that it was crazy for the United States to let itself be held economic hostage to the kinds of countries where oil was being produced. It led to Jimmy Carter’s proposal for the development of an enormous synthetic fuels industry on American soil. Whatever one might think of the merits of the Carter presidency or of this particular proposal, it was, at least, a serious effort to come to grips with the problem.

 

pages: 426 words: 105,423

The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich by Timothy Ferriss

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Albert Einstein, Amazon Mechanical Turk, call centre, clean water, Donald Trump, en.wikipedia.org, Firefox, follow your passion, game design, global village, Iridium satellite, knowledge worker, late fees, Maui Hawaii, oil shock, paper trading, Parkinson's law, passive income, pre–internet, Ralph Waldo Emerson, remote working, Richard Feynman, risk tolerance, Ronald Reagan, side project, Silicon Valley, Silicon Valley startup, Skype, Steve Jobs, wage slave, William of Occam

A mindset of scarcity (which breeds jealousy and unethical behavior) is due to a disdain for those things easily obtained (Seneca). A small cup of black Kenyan AA coffee with cinnamon on top, no milk or sweeteners. It’s usually better to keep old resolutions than to make new ones. To bring in a wonderful 2009, I’d like to quote an e-mail I received from a mentor of more than a decade: While many are wringing their hands, I recall the 1970s when we were suffering from an oil shock causing long lines at gas stations, rationing, and 55 MPH speed limits on federal highways, a recession, very little venture capital ($50 million per year into VC firms), and what President Jimmy Carter (wearing a sweater while addressing the nation on TV because he had turned down the heat in the White House) called a “malaise.” It was during those times that two kids without any real college education, Bill Gates and Steve Jobs, started companies that did pretty well.

 

pages: 357 words: 95,986

Inventing the Future: Postcapitalism and a World Without Work by Nick Srnicek, Alex Williams

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3D printing, additive manufacturing, air freight, algorithmic trading, anti-work, back-to-the-land, banking crisis, battle of ideas, blockchain, Bretton Woods, call centre, capital controls, carbon footprint, Cass Sunstein, centre right, collective bargaining, crowdsourcing, cryptocurrency, David Graeber, decarbonisation, deindustrialization, deskilling, Doha Development Round, Elon Musk, Erik Brynjolfsson, Ferguson, Missouri, financial independence, food miles, Francis Fukuyama: the end of history, full employment, future of work, gender pay gap, housing crisis, income inequality, industrial robot, informal economy, intermodal, Internet Archive, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, late capitalism, low skilled workers, manufacturing employment, market design, Martin Wolf, means of production, minimum wage unemployment, Mont Pelerin Society, neoliberal agenda, New Urbanism, Occupy movement, oil shale / tar sands, oil shock, patent troll, pattern recognition, post scarcity, postnationalism / post nation state, precariat, price stability, profit motive, quantitative easing, reshoring, Richard Florida, rising living standards, road to serfdom, Robert Gordon, Ronald Reagan, Second Machine Age, secular stagnation, self-driving car, Slavoj Žižek, social web, stakhanovite, Steve Jobs, surplus humans, the built environment, The Chicago School, Tyler Cowen: Great Stagnation, universal basic income, wages for housework, We are the 99%, women in the workforce, working poor, working-age population

But this would all change by the 1980s – a decade that would leave Keynesianism in disarray and enshrine neoliberalism as the preeminent model for economic modernisation. GRASPING THE WHEEL Having made national inroads, neoliberalism first gained serious international prominence in the 1970s, as a response to the combined pressures of high unemployment and high inflation – both of which had originated in oil shocks, general commodity price rises, wage increases and the expansion of credit. The dominant Keynesian approach to the economy had argued that governments should stimulate the economy by putting money into it when unemployment was rising, but, when inflation was rising, take money out of the economy, to slow down price rises. In the 1970s, however, both problems arose simultaneously – rising inflation and rising unemployment, or ‘stagflation’.

 

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

Few people outside Korea were aware that the beautiful public parks surrounding the impressive Seoul Football Stadium they saw during the 2002 World Cup were built literally on top of the old rubbish dump on the island (which nowadays has an ultra-modern eco-friendly methane-burning power station, which taps into the organic material dumped there). In October 1979, when I was still a secondary school student, President Park was unexpectedly assassinated by the chief of his own Intelligence Service, amid mounting popular discontent with his dictatorship and the economic turmoil following the Second Oil Shock. A brief ‘Spring of Seoul’ followed, with hopes of democracy welling up. But it was brutally ended by the next military government of General Chun Doo-Hwan, which seized power after the two-week armed popular uprising that was crushed in the Kwangju Massacre of May 1980. Despite this grave political setback, by the early 1980s, Korea had become a solid middle-income country, on a par with Ecuador, Mauritius and Costa Rica.

 

pages: 207 words: 86,639

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

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

The availability of basic food staples like wheat and other grains fell by half and, overall, the average Cuban’s calorie intake fell by over one third in around five years. But serious and long-term investment in science, engineering, health and education meant the country had a strong social fabric and the capacity to act. Successive reforms, dating back longer, reduced inequality and redistributed land. Before its local oil shock, Cuba had investigated forms of ecological farming far less dependent on fossil fuels, and had in place a system of regional research institutes, training centres and extension services to support farmers. At the heart of the transition was the success of small farms, and urban farms and gardens. State farms later followed their example. Immediate crisis was averted by food programmes that targeted the most vulnerable people – the old, young, pregnant women and young mothers – and a rationing programme that guaranteed a minimum amount of food to everyone.

 

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

The individualism of the '60s turned toxic as it was stripped of its initial liberating purposes and as positive '60s values like social responsibility—which had counterbalanced the new individualism—lost traction in popular culture. Young people became more cynical and materialistic. The nation drifted without a strong sense national purpose—stuck, it seemed, in an intractable malaise. Meanwhile, the economic upheavals of the decade—inflation, currency instability, oil shocks, rising foreign competition—mobilized the business community to get leaner and meaner, and to begin a far-reaching assault on government regulation and labor unions. By the end of the '70s the stage was set for a new era of extreme capitalism. IN 1981, AFTER he was sworn in as President, Ronald Reagan pronounced: "Government is not the solution, government is the problem." Elsewhere, Reagan articulated another adage that summed up both his philosophy and the dawning ethos of the time: "What I want to see above all is that this remains a country where someone can always get rich."

 

pages: 391 words: 97,018

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

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

The U.S. economy suffered a wipeout in the Great Recession of 2008–2009, like one of the icons of my childhood, Steve Austin. Played by Lee Majors, Steve Austin was an astronaut who crashed to earth and then became the Six Million Dollar Man. The series started as a television movie in 1973, a year the United States was undergoing a similar dark night of the soul, grappling with a succession of political and economic crises: Vietnam, Watergate, rising inflation, and an oil shock. But from its opening credits the Six Million Dollar Man exuded a typically American confidence: “We can rebuild him. We have the technology. We have the capability to make the world’s first bionic man. Steve Austin will be that man. Better than he was before. Better, stronger, faster.” And like Steve Austin, the U.S. economy can bounce back from its catastrophic wipeout. In fact, the process has already started.

 

pages: 261 words: 86,905

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

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asset allocation, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, blood diamonds, Bretton Woods, BRICs, Capital in the Twenty-First Century by Thomas Piketty, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collective bargaining, credit crunch, Credit Default Swap, crony capitalism, Dava Sobel, David Graeber, disintermediation, double entry bookkeeping, en.wikipedia.org, estate planning, financial innovation, Flash crash, forward guidance, Gini coefficient, global reserve currency, high net worth, High speed trading, hindsight bias, income inequality, inflation targeting, interest rate swap, Isaac Newton, Jaron Lanier, joint-stock company, joint-stock limited liability company, Kodak vs Instagram, liquidity trap, London Interbank Offered Rate, London Whale, loss aversion, margin call, McJob, means of production, microcredit, money: store of value / unit of account / medium of exchange, moral hazard, neoliberal agenda, New Urbanism, Nick Leeson, Nikolai Kondratiev, Nixon shock, Northern Rock, offshore financial centre, oil shock, open economy, paradox of thrift, Plutocrats, plutocrats, Ponzi scheme, purchasing power parity, pushing on a string, quantitative easing, random walk, rent-seeking, reserve currency, Richard Feynman, Richard Feynman, road to serfdom, Ronald Reagan, Satoshi Nakamoto, security theater, shareholder value, Silicon Valley, six sigma, South Sea Bubble, sovereign wealth fund, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, trickle-down economics, Washington Consensus, working poor, yield curve

Both of those things are conscious choices on the part of the society; we decreased levels of inequality and increased levels of opportunity before; we can do it again. As the political historian David Runciman recently wrote, The world that fell apart at the end of the 1970s had begun to unravel much earlier in the decade, in the succession of crises that included the demise of Bretton Woods, the Arab-Israeli war, the consequent oil shock and a world-wide recession. That confused and confusing period turned out to be the dawn of neoliberalism, though it wasn’t until much later that it became clear what had happened. Now that neoliberal order is stumbling through its own succession of crises. We are barely five years into the unravelling, if that is what is taking place. . . . [W]e shouldn’t be surprised if we can’t yet spot who is going to make the difference this time round.

 

pages: 361 words: 97,787

The Curse of Cash by Kenneth S Rogoff

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

Identity Is the New Money. London: London Publishing Partnership. Black, Fischer. 1995. “Interest Rates as Options.” Journal of Finance 50 (December): 1371–76. Blanchard, Olivier, Giovanni Dell’Ariccia, and Paolo Mauro. 2010. “Rethinking Macroeconomic Policy.” International Monetary Fund Position Note SPN/10/03. Washington, DC (February). Bodenstein, Martin, Luca Guerrieri, and Christopher J. Gust. 2013. “Oil Shocks and the Zero Bound on Nominal Interest Rates.” Journal of International Money and Finance 32(1): 941–967. Boeschoten, W. C., and G. E. Hebbink. 1996. “Electronic Money, Currency Demand and Seigniorage Loss in the G10 Countries.” De Nederlandsche Bank Staff Reports 1. Amsterdam. Bordo, Michael D. 2008. “The History of Monetary Policy.” In New Palgrave Dictionary of Economics, 2nd ed. London: Palgrave Macmillan.

 

pages: 417 words: 109,367

The End of Doom: Environmental Renewal in the Twenty-First Century by Ronald Bailey

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3D printing, additive manufacturing, agricultural Revolution, Albert Einstein, autonomous vehicles, Cass Sunstein, Climatic Research Unit, Commodity Super-Cycle, conceptual framework, corporate governance, credit crunch, David Attenborough, decarbonisation, dematerialisation, demographic transition, diversified portfolio, double helix, energy security, failed state, financial independence, Gary Taubes, hydraulic fracturing, income inequality, invisible hand, knowledge economy, meta analysis, meta-analysis, Naomi Klein, oil shale / tar sands, oil shock, pattern recognition, peak oil, phenotype, planetary scale, price stability, profit motive, purchasing power parity, race to the bottom, RAND corporation, rent-seeking, Stewart Brand, Tesla Model S, trade liberalization, University of East Anglia, uranium enrichment, women in the workforce, yield curve

For example, in 2006 Princeton geologist Ken Deffeyes was warning that the imminent peak of global oil production would result in “war, famine, pestilence and death.” Deffeyes, author of 2001’s Hubbert’s Peak: The Impending World Oil Shortage and 2005’s Beyond Oil: The View from Hubbert’s Peak, had already predicted that the peak of global oil production would occur on Thanksgiving 2005. Deffeyes was far from alone. Houston investment banker Matthew Simmons stated in his 2005 book Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy that the Saudi Arabians were lying about the size of their petroleum reserves, claiming that they are really running on empty. In September 2005 Simmons announced that “we could be looking at $10-a-gallon gas this winter.” The price of gasoline in December 2005 was about $2.25 per gallon. In a 2005 bet consciously modeled on the Simon-Ehrlich bet, New York Times columnist John Tierney and peak oil proponent Matthew Simmons wagered $5,000 on whether the price of oil in 2010 would average above $200 per barrel.

 

Rogue States by Noam Chomsky

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anti-communist, Asian financial crisis, Berlin Wall, Branko Milanovic, Bretton Woods, capital controls, collective bargaining, colonial rule, cuban missile crisis, declining real wages, deskilling, Edward Snowden, experimental subject, Fall of the Berlin Wall, floating exchange rates, labour market flexibility, labour mobility, land reform, Mikhail Gorbachev, Monroe Doctrine, new economy, oil shock, RAND corporation, Silicon Valley, strikebreaker, structural adjustment programs, Tobin tax, union organizing, Washington Consensus

Were elementary moral principles even to be imaginable in elite Western culture, similar conclusions would at once be drawn far more broadly throughout Europe and the US, even without World Court judgments. But that day remains very distant.7 Bank lending more than doubled from 1971 to 1973, then “levelled off for the next two years, despite the enormous increase in oil bills” from late 1973, the OECD reported, adding that “the most decisive and dramatic increase in bank lending was associated with the major commodity price boom of 1972-73—before the oil shock.” One example was the tripling in price of US wheat exports.8 Lending later increased as banks sought to recycle petrodollars. The (temporary) rise in oil prices led to sober calls that Middle East oil “could be internationalized, not on behalf of a few oil companies, but for the benefit of the rest of mankind.”9 There were no similar proposals for internationalization of US agriculture, highly productive as a result of natural advantages and public-sector research and development for many years, not to speak of the measures that made the land available, hardly through the miracle of the market.

 

pages: 344 words: 93,858

The Post-American World: Release 2.0 by Fareed Zakaria

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affirmative action, agricultural Revolution, airport security, anti-communist, Asian financial crisis, battle of ideas, Berlin Wall, Bretton Woods, BRICs, British Empire, call centre, capital controls, central bank independence, centre right, collapse of Lehman Brothers, conceptual framework, Credit Default Swap, currency manipulation / currency intervention, delayed gratification, Deng Xiaoping, double entry bookkeeping, failed state, Fall of the Berlin Wall, financial innovation, global reserve currency, global supply chain, illegal immigration, interest rate derivative, knowledge economy, Mahatma Gandhi, Martin Wolf, mutually assured destruction, new economy, oil shock, open economy, out of africa, postindustrial economy, purchasing power parity, race to the bottom, reserve currency, Ronald Reagan, Silicon Valley, Silicon Valley startup, South China Sea, Steven Pinker, The Great Moderation, Thomas L Friedman, Thomas Malthus, trade route, Washington Consensus, working-age population, young professional

The fact that we have experienced decades of synchronous global growth is good news, but it has also raised a series of complex and potentially lethal dilemmas. Consider oil prices. It’s only a dim memory now, but in 2008 the cost of a barrel climbed upward at a dizzying rate. After years of hovering in the $25–$50 range, oil hit nearly $150 in mid-2008, and a Goldman Sachs analyst predicted it would reach $200 the following year. The oil shock of the naughts was different from previous ones. In the past, prices rose because oil producers—OPEC—artificially restricted supply and thus forced up the cost of gasoline. By contrast, prices rose in 2008 because of demand from China, India, and other emerging markets, as well as the continuing, massive demand in the developed world. If prices are rising because economies are growing, it means that economies have the vigor and flexibility to handle increased costs by improving productivity (and, to a lesser extent, by passing them on to consumers).

 

pages: 386 words: 91,913

The Elements of Power: Gadgets, Guns, and the Struggle for a Sustainable Future in the Rare Metal Age by David S. Abraham

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3D printing, carbon footprint, clean water, cleantech, Deng Xiaoping, Elon Musk, en.wikipedia.org, glass ceiling, global supply chain, information retrieval, Internet of things, new economy, oil shale / tar sands, oil shock, reshoring, Ronald Reagan, Silicon Valley, South China Sea, Steve Ballmer, Steve Jobs, telemarketer, Tesla Model S, thinkpad, upwardly mobile, uranium enrichment, Y2K

It developed a framework to ensure that U.S. military businesses had the resources to compete in an increasingly global marketplace, which constituted one of the largest reports in the nation’s history—if you stack the twelve volumes of the findings they extend over a foot from end to end. Internationally, U.S. diplomats served tours of duty in a newly created office of nonferrous materials policy.29 Interest in critical materials remained high in policy circles through the 1960s, and the oil shock of the 1970s sparked concern once again about critical resources. But fears and concerns over critical materials dampened with the recession of the early 1980s as it ushered in an era of relative price decline, and in the case of some commodities, like oil, far lower prices. Western governments started to feel that natural resource security, especially critical material supply, was yesterday’s issue.

 

pages: 441 words: 136,954

That Used to Be Us by Thomas L. Friedman, Michael Mandelbaum

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3D printing, Affordable Care Act / Obamacare, Albert Einstein, Amazon Web Services, American Society of Civil Engineers: Report Card, Andy Kessler, Ayatollah Khomeini, bank run, barriers to entry, Berlin Wall, blue-collar work, Bretton Woods, business process, call centre, carbon footprint, Carmen Reinhart, Cass Sunstein, centre right, Climatic Research Unit, cloud computing, collective bargaining, corporate social responsibility, Credit Default Swap, crowdsourcing, delayed gratification, energy security, Fall of the Berlin Wall, fear of failure, full employment, Google Earth, illegal immigration, immigration reform, income inequality, job automation, Kenneth Rogoff, knowledge economy, Lean Startup, low skilled workers, Mark Zuckerberg, market design, more computing power than Apollo, Network effects, obamacare, oil shock, pension reform, Report Card for America’s Infrastructure, rising living standards, Ronald Reagan, Rosa Parks, Saturday Night Live, shareholder value, Silicon Valley, Silicon Valley startup, Skype, Steve Jobs, the scientific method, Thomas L Friedman, too big to fail, University of East Anglia, WikiLeaks

One reason was that Detroit fiercely—and, as it turns out, suicidally—fought any change in the standards the whole time. “Imagine if, instead, the fuel economy level had grown just 2 percent per year after 1985,” said Harvey. “U.S. cars would have reached an average of forty-four miles per gallon this year, Detroit would be a technology leader, U.S. oil consumption would be three million barrels per day less.” We would have saved hundreds of millions of dollars, and the recent oil shocks would have been avoided or been far less severe. It is never too late to get this right, because the gains are so huge and the costs so low. In 2011, the Obama administration is expected to issue a proposal for new mileage standards to take us from 2017 to 2025. It is considering mandating annual improvements ranging from 3 percent to 6 percent. The current rules, which run from 2012 through 2016, compel automakers to decrease emissions—the proxy for fuel efficiency—by 5 percent each year.

 

pages: 441 words: 135,176

The Edifice Complex: How the Rich and Powerful--And Their Architects--Shape the World by Deyan Sudjic

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Ayatollah Khomeini, Berlin Wall, British Empire, call centre, colonial rule, Columbine, cuban missile crisis, dematerialisation, Deng Xiaoping, Dissolution of the Soviet Union, Donald Trump, Frank Gehry, glass ceiling, Guggenheim Bilbao, haute couture, haute cuisine, megastructure, Mikhail Gorbachev, new economy, New Urbanism, oil shock, Ronald Reagan, Socratic dialogue, urban planning, urban renewal, V2 rocket, Victor Gruen

Their work was entirely lacking in self-doubt; it seemed to represent the faithful and undiluted expression of an America born to rule. And when the Vietnam tragedy, and the burning of the ghettos of the 1960s, and the assassinations, destroyed the self-confidence and unassailability of that America, SOM’s confidence evaporated with it. Financially, SOM was battered and bruised by the post-Vietnam economic slump and the oil shock, but its real trauma was philosophical. It was no longer possible to build the way that Bunshaft had done. His generation had invested heavily in the aesthetic of swaggering restraint. It was more than a mannerism: he and his contemporaries had believed in it, regarded it as a moral imperative. When modernism began to be viewed not as a progressive force but as a deeply reactionary tendency, unpopular with both CEOs wanting to make a mark and radical opponents of urban redevelopment, they simply did not know how to respond.

 

pages: 602 words: 120,848

Winner-Take-All Politics: How Washington Made the Rich Richer-And Turned Its Back on the Middle Class by Paul Pierson, Jacob S. Hacker

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accounting loophole / creative accounting, affirmative action, asset allocation, barriers to entry, Bonfire of the Vanities, business climate, carried interest, Cass Sunstein, clean water, collective bargaining, corporate governance, Credit Default Swap, David Brooks, desegregation, employer provided health coverage, financial deregulation, financial innovation, financial intermediation, full employment, Home mortgage interest deduction, Howard Zinn, income inequality, invisible hand, knowledge economy, laissez-faire capitalism, Martin Wolf, medical bankruptcy, moral hazard, Nate Silver, new economy, night-watchman state, offshore financial centre, oil shock, Ralph Nader, Ronald Reagan, shareholder value, Silicon Valley, The Wealth of Nations by Adam Smith, too big to fail, trickle-down economics, union organizing, very high income, War on Poverty, winner-take-all economy, women in the workforce

Individual firms had little chance of fending off such broad initiatives on their own; to craft an appropriately broad political defense, they needed organization. Business was galvanized by more than perceived government overreach. It was also responding to the growing economic challenges it faced. Organization-building began even before the economy soured in the early 1970s, but the tumultuous economy of that decade—battered by two major oil shocks, which pushed up inflation and dragged down growth—created panic in corporate sectors as well as growing dissatisfaction among voters. The 1970s was not the economic wasteland that retrospective accounts often suggest. The economy actually grew more quickly overall (after adjusting for inflation) during the 1970s than during the 1980s.6 But against the backdrop of the roaring 1960s, the economic turbulence was a rude jolt that strengthened the case of business leaders that a new governing approach was needed.

 

pages: 586 words: 159,901

Wall Street: How It Works And for Whom by Doug Henwood

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accounting loophole / creative accounting, affirmative action, Andrei Shleifer, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, borderless world, Bretton Woods, British Empire, capital asset pricing model, capital controls, central bank independence, corporate governance, correlation coefficient, correlation does not imply causation, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, dematerialisation, diversification, diversified portfolio, Donald Trump, equity premium, Eugene Fama: efficient market hypothesis, experimental subject, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, George Gilder, hiring and firing, Hyman Minsky, implied volatility, index arbitrage, index fund, interest rate swap, Internet Archive, invisible hand, Isaac Newton, joint-stock company, Joseph Schumpeter, kremlinology, labor-force participation, late capitalism, law of one price, liquidationism / Banker’s doctrine / the Treasury view, London Interbank Offered Rate, Louis Bachelier, market bubble, Mexican peso crisis / tequila crisis, microcredit, minimum wage unemployment, moral hazard, mortgage debt, mortgage tax deduction, oil shock, payday loans, pension reform, Plutocrats, plutocrats, price mechanism, price stability, prisoner's dilemma, profit maximization, Ralph Nader, random walk, reserve currency, Richard Thaler, risk tolerance, Robert Gordon, Robert Shiller, Robert Shiller, shareholder value, short selling, Slavoj Žižek, South Sea Bubble, The Market for Lemons, The Nature of the Firm, The Predators' Ball, The Wealth of Nations by Adam Smith, transaction costs, transcontinental railway, women in the workforce, yield curve, zero-coupon bond

Gold first began trading freely in 1968, and it immediately broke away from the classic $35 an ounce price, set in 1934, when the Roosevelt administration banned private ownership of monetary gold. The price rose slowly, breaking gently above $40 as the decade turned. Once the U.S. abandoned convertibility, however, gold started a ripping bull market. Reaching a first peak just under $200 in oil-shocked 1974, the price settled back with the recession, and turned up with the world economy in 1976 in a spectacular rise that ended at $850 an ounce in January 1980. From there, when the Volcker clampdown took hold, gold sank almost unrelievedly to below $300 in 1985. After 1985, it spent ten years going nowhere — which should be no surprise over the long term, given the metal's reputation as 1400 1200 1000 800 600 400 200 0 real gold price, 1934^98(1998$) 1998: first quarter only 1934 1944 1954 1964 1974 1984 1994 INSTRUMENTS a sterile repository of value.

 

A Sea in Flames: The Deepwater Horizon Oil Blowout by Carl Safina

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big-box store, clean water, cognitive dissonance, energy security, Exxon Valdez, hydraulic fracturing, North Sea oil, oil shale / tar sands, oil shock, Piper Alpha, Ronald Reagan

But we allow it, rather than freeing ourselves to a more diverse, decentralized, cleaner, stable array of fuel sources. The real tragedy is that for thirty years we’ve known that for reasons of national security and patriotism alone, we need to phase out our dependence on oil, coal, and gas. Our foreign dependence, the jobs we’re missing out on, the pollution, the worker-killing explosions, the way we enrich dictators and terrorists—we’ve known all that since the politically induced oil shocks and gasoline lines of the 1970s. I remember those lines with some fondness, because I waited on them as a young high school buck and proud new owner of a used hippie van. But those lines were all we needed to learn that security for the United States, and the globe, requires a future largely free of fossil fuels. And since the late 1980s, we’ve known that fossil fuels are also destabilizing the world climate.

 

pages: 443 words: 112,800

The Third Industrial Revolution: How Lateral Power Is Transforming Energy, the Economy, and the World by Jeremy Rifkin

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3D printing, additive manufacturing, Albert Einstein, barriers to entry, borderless world, carbon footprint, centre right, collaborative consumption, collaborative economy, Community Supported Agriculture, corporate governance, decarbonisation, distributed generation, en.wikipedia.org, energy security, energy transition, global supply chain, hydrogen economy, income inequality, informal economy, invisible hand, Isaac Newton, job automation, knowledge economy, manufacturing employment, marginal employment, Martin Wolf, Masdar, megacity, Mikhail Gorbachev, new economy, oil shale / tar sands, oil shock, open borders, peak oil, Ponzi scheme, post-oil, purchasing power parity, Ray Kurzweil, Ronald Reagan, Silicon Valley, Simon Kuznets, Skype, smart grid, smart meter, Spread Networks laid a new fibre optics cable between New York and Chicago, supply-chain management, the market place, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, transaction costs, trickle-down economics, urban planning, urban renewal, Yom Kippur War, Zipcar

The public reaction was understandable given that it was America’s abundant oil reserves and its wily ability to mass-produce affordable cars for a restless, nomadic people that catapulted the United States to commanding heights, making it the world’s leading superpower in the twentieth century. The jolt to our national pride came without warning. Just two months earlier, the Organization of Petroleum Exporting Countries (OPEC) slapped an oil embargo against the United States in retaliation to Washington’s decision to resupply the Israeli government with military equipment during the Yom Kippur War. The “oil shock” reverberated quickly across the world. By December, the price of oil on the world market had shot up from $3 per barrel to $11.65.1 Panic ensued on Wall Street and on Main Street. The first and most obvious sign of the new reality was at neighborhood gas stations. Many Americans believed that the giant oil companies were taking advantage of the situation by arbitrarily spiking prices to secure windfall profits.

 

pages: 500 words: 146,240

Gamers at Work: Stories Behind the Games People Play by Morgan Ramsay, Peter Molyneux

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Any sufficiently advanced technology is indistinguishable from magic, augmented reality, collective bargaining, game design, index card, Mark Zuckerberg, oil shock, pirate software, RAND corporation, risk tolerance, Silicon Valley, Skype, Steve Jobs, Von Neumann architecture

When the first personal computers came out, I bought a TRS-80 from RadioShack, and started programming the most boring parts of the legal business and job estimating. Neither set of programs used the full capabilities of even the early personal computers. I wrote some games to develop my programming skills and for fun. I sold those games through a Florida company called Adventure International, and it wasn’t long before the revenue matched my other sources of income. The oil shocks of the 70s had dried up the housing market, and I was bored with practicing law, so I was looking for an alternative. Gary: I had spent the previous three years trying to get a couple of other businesses started, one with a friend and one with my brother Doug. My brother had moved out to Oregon from Maine to share an apartment with me and had brought his TRS-80 computer with him. Most of my work experience prior to Brøderbund was as a women’s basketball coach in Sweden.

 

pages: 289 words: 113,211

A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation by Richard Bookstaber

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affirmative action, Albert Einstein, asset allocation, backtesting, Black Swan, Black-Scholes formula, Bonfire of the Vanities, butterfly effect, commodity trading advisor, computer age, disintermediation, diversification, double entry bookkeeping, Edward Lorenz: Chaos theory, family office, financial innovation, fixed income, frictionless, frictionless market, George Akerlof, implied volatility, index arbitrage, Jeff Bezos, London Interbank Offered Rate, Long Term Capital Management, loose coupling, margin call, market bubble, market design, merger arbitrage, Mexican peso crisis / tequila crisis, moral hazard, new economy, Nick Leeson, oil shock, quantitative trading / quantitative finance, random walk, Renaissance Technologies, risk tolerance, risk/return, Robert Shiller, Robert Shiller, rolodex, Saturday Night Live, shareholder value, short selling, Silicon Valley, statistical arbitrage, The Market for Lemons, time value of money, too big to fail, transaction costs, tulip mania, uranium enrichment, yield curve, zero-coupon bond

The economic sectors themselves are also far more diversified. In the early twentieth century, there were no technology, telecommunications, media, or health care sectors. The industrial economy revolved around a few highly integrated, large-scale industries. A coal miners’ or steelworkers’ strike would cripple the country, shutting factory floors and shipping yards. Even as late as the 1970s, the industrialized nations were so energy dependent that an oil shock precipitated a global recession. Today, high gasoline prices cause lots of grumbling, but little real pain. Similarly, as progress and refinement reduce risk, so should they also level the playing field for market participants. There should be less of a gap between your investment returns and those of Wall Street pros. Do you think that’s happening? Sure, the trappings are there: Information is released more quickly and to a broader constituency of investors, and limitations are imposed on insider trading and nonpublic disclosure.

 

pages: 497 words: 143,175

Pivotal Decade: How the United States Traded Factories for Finance in the Seventies by Judith Stein

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1960s counterculture, affirmative action, airline deregulation, anti-communist, Ayatollah Khomeini, barriers to entry, Berlin Wall, blue-collar work, Bretton Woods, capital controls, centre right, collective bargaining, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, deindustrialization, desegregation, energy security, Fall of the Berlin Wall, falling living standards, feminist movement, financial deregulation, floating exchange rates, full employment, income inequality, income per capita, intermodal, invisible hand, knowledge worker, laissez-faire capitalism, Long Term Capital Management, manufacturing employment, market bubble, Martin Wolf, new economy, oil shale / tar sands, oil shock, open economy, payday loans, post-industrial society, post-oil, price mechanism, price stability, Ralph Nader, RAND corporation, reserve currency, Robert Gordon, Ronald Reagan, Simon Kuznets, strikebreaker, trade liberalization, union organizing, urban planning, urban renewal, War on Poverty, Washington Consensus, working poor, Yom Kippur War

If the demand for money outstripped the targeted supply, the Fed would not add bank reserves to satisfy the demand for money, so interest rates would rise, often rapidly. Most Fed officials believed that monetarists were simplistic, calling them “the chiropractors of modern economics.”12 Fed governor Henry Wallich disparaged Friedman, who “implies that there are no fluctuations in the real economy that need affect monetary policy—no investment boom, no housing boom, no oil shocks. We should simply supply a steady growth of money.” Robert Mayo, president of the Fed bank in Chicago, remarked, “We have found no magic formula” to make “monetary policy as simple as some of our academic friends believe it can be made.”13 Volcker was not a monetarist, either. Thirteen years later, he said he acted only to give notice that the Fed meant business.14 It was the psychological, not technical, virtues that appealed to Volcker.

 

pages: 497 words: 150,205

European Spring: Why Our Economies and Politics Are in a Mess - and How to Put Them Right by Philippe Legrain

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

This deceptively stable environment tricked policymakers into thinking they could plan economic development while fine-tuning demand to maintain full employment. But the system broke down in the early 1970s as the post-war economic boom ran out of steam, efforts to boost employment resulted in ever higher inflation, the Bretton Woods system of currencies pegged to the US dollar collapsed and the oil shocks of 1973–74 resulted in the previously unthinkable combination of stagnation and inflation: stagflation. In this new stop-go world, controlling inflation became the top priority of economic policy and monetary policy the preferred tool for economic management, with central banks causing short, sharp recessions by raising interest rates whenever inflation looked like getting out of hand. Governments increasingly delegated this task to independent central banks.

 

pages: 559 words: 157,112

Dealers of Lightning by Michael A. Hiltzik

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Apple II, Apple's 1984 Super Bowl advert, Bill Duvall, Bill Gates: Altair 8800, computer age, Dynabook, El Camino Real, index card, Jeff Rulifson, Joseph Schumpeter, Marshall McLuhan, Menlo Park, oil shock, popular electronics, Ronald Reagan, Silicon Valley, speech recognition, Steve Ballmer, Steve Crocker, Steve Jobs, Steve Wozniak, Steven Levy, Stewart Brand, the medium is the message, Vannevar Bush, Whole Earth Catalog

At one point Tom Sawyering even begot an audacious extracur-ricular project. This was the so-called “Bose Conspiracy,” which was hatched at a poker game at Rick Jones’s house. Jones, Kay, Thacker, Dick Shoup, Chuck Geschke, and a couple of others had fallen into a discussion of the merits of stereo speakers. Kay was a particular fan of the state-of-the-art Bose 901s, which came with their own electronic equalizer and cost $1,100 the set (in the pre-oil shock dollars of the early 1970s). He was also the only one in the group who owned a pair, having acquired them on his PARC budget as part of a real-time music synthesizer his group was developing. “You know,” someone said as cards riffled in the background, “there’s no reason why we couldn’t make the electronics work just as well. And for a lot less money, too.” Appropriating a basement room in Building 34, the group took apart Kay’s speakers and painstakingly analyzed the design.

 

pages: 497 words: 123,718

A Game as Old as Empire: The Secret World of Economic Hit Men and the Web of Global Corruption by Steven Hiatt; John Perkins

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airline deregulation, Andrei Shleifer, Asian financial crisis, Berlin Wall, big-box store, Bretton Woods, British Empire, capital controls, centre right, clean water, colonial rule, corporate governance, corporate personhood, deglobalization, deindustrialization, Doha Development Round, energy security, European colonialism, financial deregulation, financial independence, full employment, global village, high net worth, land reform, large denomination, Long Term Capital Management, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, moral hazard, Naomi Klein, new economy, North Sea oil, offshore financial centre, oil shock, Ponzi scheme, race to the bottom, reserve currency, Ronald Reagan, Scramble for Africa, statistical model, structural adjustment programs, too big to fail, trade liberalization, transatlantic slave trade, transfer pricing, union organizing, Washington Consensus, working-age population, Yom Kippur War

The Freedom: Shadows and Hallucinations in Occupied Iraq. New York: New Press, 2004. Phillips, Kevin. American Theocracy: The Peril and Politics of Radical Religion, Oil, and Borrowed Money in the 21st Century. New York: Viking, 2006. Rutledge, Ian. Addicted to Oil: America’s Relentless Drive for Energy Security. London: I. B. Tauris, 2005. Simmons, Matthew. Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy. New York: John Wiley & Sons, 2005. Yergin, Daniel. The Prize: The Epic Quest for Oil, Money, and Power. New York: Free Press, 1993. General Union of Oil Employees: www.basraoilunion.org. Iraq Occuaption Focus, www.iraqoccupationfocus.org.uk/. Hub for news and analysis of the occupation of Iraq; publishes a free e-newsletter. The World Bank and Corruption Caufield, Catherine.

 

pages: 368 words: 145,841

Financial Independence by John J. Vento

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Affordable Care Act / Obamacare, Albert Einstein, asset allocation, diversification, diversified portfolio, estate planning, financial independence, fixed income, high net worth, Home mortgage interest deduction, mortgage debt, mortgage tax deduction, oil shock, Own Your Own Home, passive income, risk tolerance, time value of money, transaction costs, young professional, zero day

So what happened to the stock market today is not important to the money you will need and hopefully have when you retire. Just keep saving, and keep investing, with your long-term goal in mind. c08.indd 220 26/02/13 2:51 PM 9 C H A P T E R Managing Your Investments In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497. —Warren Buffett, most successful investor of the twentieth century T his chapter provides information and guidance for dealing with investment, beginning with basic definitions of various investment vehicles: stocks, bonds, mutual funds, and exchange-traded funds (ETFs). I then give general information on the process of creating an investment portfolio that considers your financial goals, comfort levels, expectations, and the effects of inflation and taxes on these investments.

 

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

Logarithm of financial indices as a function of the logarithm of the time to the critical time tc = 2050, such that time flows from right to left. The straight lines are the best fits, which qualify as power law behavior, as explained in the text, and suggest an abrupt transition at 2050. 3. From 1933 to the present, there were some strong inflationary periods associated with World War II, the Cold War, the Korean war, the Vietnam war, as well as the oil shocks of the seventies. The factor 15 thus corresponds approximately to an average annual inflation rate of 4% since 1933. We present in Figure 10.5, the long-term time evolution of the debt of the U.S. federal government. There seems to be a relationship (a factor 2, approximately) between the growth of this debt and inflation rates. This relationship is especially strong in times of war, when inflation is galloping and the debt is accumulating at a fast rate.

 

pages: 413 words: 119,379

The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa's Wealth by Tom Burgis

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Berlin Wall, blood diamonds, BRICs, British Empire, central bank independence, clean water, colonial rule, corporate social responsibility, crony capitalism, Deng Xiaoping, Donald Trump, F. W. de Klerk, Gini coefficient, Livingstone, I presume, McMansion, megacity, offshore financial centre, oil shock, open economy, purchasing power parity, rolodex, Ronald Reagan, Silicon Valley, South China Sea, sovereign wealth fund, structural adjustment programs, trade route, transfer pricing, upwardly mobile, urban planning, Washington Consensus, WikiLeaks

Neither is he the sole corrupter of the Nigerian customs service – Shell has admitted paying bungs worth $2 million between 2004 and 2006 to Nigerian customs officials to smooth the importation of materials for Bonga, its giant offshore oilfield, part of a wider scheme in which the Swiss group Panalpina showered bribes on Nigerian officials, some on behalf of Shell, booking them as ‘evacuations’, ‘special handling’, and ‘prereleases’.23 But Mangal has scavenged the terrain laid waste by Dutch Disease, further weakening northern Nigeria’s chances of recovery. From the early 1970s to the mid-1980s, during the period when two oil shocks drove up the price of crude from $3 to $38 a barrel, Nigeria’s currency appreciated dramatically.24 The shift in the real naira exchange rate against the dollar sent a chill wind through the incipient industrial base. ‘This is what killed industries and agriculture, in conjunction with the power crisis,’ Nasir El-Rufai, the former minister, told me. ‘As industries were collapsing, people like Mangal saw the opportunity.’

 

pages: 385 words: 128,358

Inside the House of Money: Top Hedge Fund Traders on Profiting in a Global Market by Steven Drobny

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Albert Einstein, asset allocation, Berlin Wall, Bonfire of the Vanities, Bretton Woods, buy low sell high, capital controls, central bank independence, Chance favours the prepared mind, commodity trading advisor, corporate governance, correlation coefficient, Credit Default Swap, diversification, diversified portfolio, family office, fixed income, glass ceiling, high batting average, implied volatility, index fund, inflation targeting, interest rate derivative, inventory management, Long Term Capital Management, margin call, market bubble, Maui Hawaii, Mexican peso crisis / tequila crisis, moral hazard, new economy, Nick Leeson, oil shale / tar sands, oil shock, out of africa, paper trading, Peter Thiel, price anchoring, purchasing power parity, reserve currency, risk tolerance, risk-adjusted returns, risk/return, rolodex, Sharpe ratio, short selling, Silicon Valley, The Wisdom of Crowds, too big to fail, transaction costs, value at risk, yield curve, zero-coupon bond

It was a very benign environment because unemployment was coming down and so was inflation, which made it much easier to set interest rates.You got much less criticism. I don’t want to underplay it because it has played an important role. It has brought inflation expectations right down to the target and that has had a lot of beneficial effects. In the old days, when oil prices went up, there was always a risk that you needed to tighten policy to ensure that inflation didn’t get out of hand. Now we’ve had two significant oil shocks since the Bank of England has been independent, and in neither case did they have to tighten policy, because wages and prices were well anchored by subdued inflation expectations.That’s a good outcome. There are other benefits from the reduction of inflation volatility, such as businesses being more willing to invest, and you don’t get unfair redistribution because of unexpected inflation. Likewise, the Treasury is no longer worrying that much about macromanagement and macrostability, so it can concentrate on other policies designed to help the long-term growth rate of the UK economy.

 

pages: 483 words: 143,123

The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters by Gregory Zuckerman

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American energy revolution, Asian financial crisis, Bakken shale, Bernie Sanders, Buckminster Fuller, corporate governance, credit crunch, energy security, Exxon Valdez, housing crisis, hydraulic fracturing, LNG terminal, margin call, Maui Hawaii, North Sea oil, oil rush, oil shale / tar sands, oil shock, peak oil, Peter Thiel, reshoring, self-driving car, Silicon Valley, sovereign wealth fund, Steve Jobs, urban decay

Disregarding their advice, Hamm borrowed $90,000 to cover the expense of the well and hit a gusher producing two thousand barrels a day. The Bradleys, who received royalties from the well, took their cash and moved to Idaho to live with their grandchildren. Hamm purchased a company that drilled wells and operated rigs for other exploration companies. As oil prices soared on the heels of the oil shocks of 1973 and 1979, demand grew for his service and drilling companies.4 Hamm sometimes used his humble beginnings to outmaneuver rivals. In 1981, Bob Moore, a competitor in the trucking business, tried to entice Hamm to buy his operation. Moore traveled to Enid and spent over an hour discussing his business with him, according to Art Swanson, who worked for Moore at the time. Moore discussed which customers he had, where he got his employees, and more.

 

pages: 483 words: 134,377

The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor by William Easterly

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air freight, Andrei Shleifer, battle of ideas, Bretton Woods, British Empire, business process, business process outsourcing, Carmen Reinhart, clean water, colonial rule, correlation does not imply causation, Daniel Kahneman / Amos Tversky, Deng Xiaoping, desegregation, discovery of the americas, Edward Glaeser, en.wikipedia.org, European colonialism, Francisco Pizarro, fundamental attribution error, germ theory of disease, greed is good, income per capita, invisible hand, James Watt: steam engine, Jane Jacobs, John Snow's cholera map, Joseph Schumpeter, Kenneth Rogoff, M-Pesa, microcredit, Monroe Doctrine, oil shock, place-making, Ponzi scheme, risk/return, road to serfdom, Silicon Valley, Steve Jobs, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, Thomas L Friedman, urban planning, urban renewal, Washington Consensus, World Values Survey, young professional

The traffic authorities in Los Angeles declared the Toyopet not roadworthy: the rearview mirrors were too small, the headlights too weak, and the turn signals did not signal.40 And the Toyopet cost 40 percent more than a VW Beetle. US sales of the Toyopet were not strong. A better-performing innovation was the Toyota Corolla in 1968, which by 1970 was already selling 200,000 units in the United States. The oil-price shocks in the 1970s shifted the global demand toward small cars. The Toyota Corolla was the perfect oil-shock car, with close to the highest fuel efficiency in the world. Toyota and other small-car Japanese automakers took off. By 1980, Japan was the world’s leading car exporter. The same names from automobile history are still around today among the top world automakers—Daimler, Mercedes, Benz, Peugeot, Renault, Ford, Porsche, Volkswagen, and Toyota—showing how long the private return from innovation for the monopolistic competitors really does last.

 

pages: 497 words: 144,283

Connectography: Mapping the Future of Global Civilization by Parag Khanna

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1919 Motor Transport Corps convoy, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, 9 dash line, additive manufacturing, Admiral Zheng, affirmative action, agricultural Revolution, Airbnb, Albert Einstein, amateurs talk tactics, professionals talk logistics, Amazon Mechanical Turk, Asian financial crisis, asset allocation, autonomous vehicles, banking crisis, Basel III, Berlin Wall, bitcoin, Black Swan, blockchain, borderless world, Boycotts of Israel, Branko Milanovic, BRICs, British Empire, business intelligence, call centre, capital controls, charter city, clean water, cloud computing, collateralized debt obligation, complexity theory, corporate governance, corporate social responsibility, credit crunch, crony capitalism, crowdsourcing, cryptocurrency, cuban missile crisis, data is the new oil, David Ricardo: comparative advantage, deglobalization, deindustrialization, dematerialisation, Deng Xiaoping, Detroit bankruptcy, diversification, Doha Development Round, edge city, Edward Snowden, Elon Musk, energy security, ethereum blockchain, European colonialism, eurozone crisis, failed state, Fall of the Berlin Wall, family office, Ferguson, Missouri, financial innovation, financial repression, forward guidance, global supply chain, global value chain, global village, Google Earth, Hernando de Soto, high net worth, Hyperloop, ice-free Arctic, if you build it, they will come, illegal immigration, income inequality, income per capita, industrial robot, informal economy, Infrastructure as a Service, interest rate swap, Internet of things, Isaac Newton, Jane Jacobs, Jaron Lanier, John von Neumann, Julian Assange, Just-in-time delivery, Kevin Kelly, Khyber Pass, Kibera, Kickstarter, labour market flexibility, labour mobility, LNG terminal, low cost carrier, manufacturing employment, mass affluent, megacity, Mercator projection, microcredit, mittelstand, Monroe Doctrine, mutually assured destruction, New Economic Geography, new economy, New Urbanism, offshore financial centre, oil rush, oil shale / tar sands, oil shock, openstreetmap, out of africa, Panamax, Peace of Westphalia, peak oil, Peter Thiel, Plutocrats, plutocrats, post-oil, post-Panamax, private military company, purchasing power parity, QWERTY keyboard, race to the bottom, Rana Plaza, rent-seeking, reserve currency, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Scramble for Africa, Second Machine Age, sharing economy, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, six sigma, Skype, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, South China Sea, South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, Stuxnet, supply-chain management, sustainable-tourism, TaskRabbit, telepresence, the built environment, Tim Cook: Apple, trade route, transaction costs, UNCLOS, uranium enrichment, urban planning, urban sprawl, WikiLeaks, young professional, zero day

RESOURCE GENES AND DATA CENTERS FOR FOOD The global mineral and food systems are in perpetual flux, with production expanding and contracting based on climate, technology, geopolitics, and other factors. For years, the extraction and processing of rare earth minerals was controlled by a small number of mostly state-owned companies in China—allowing them to rattle the entire electronics supply chain when China temporarily banned the export of rare earth minerals in 2011. But as with the oil shocks of the 1970s, geopolitical risk has spurred the United States, Canada, India, Kazakhstan, and Australia to invest in excavating new supplies.9 Just as distributed energy supplies and alternative and renewable energy technologies have ended OPEC’s grip on oil prices, it is better to have diverse mineral suppliers as well. The even more interesting story, however, is not of material competition but of substitution.

 

pages: 437 words: 115,594

The Great Surge: The Ascent of the Developing World by Steven Radelet

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Admiral Zheng, agricultural Revolution, Asian financial crisis, bank run, Berlin Wall, Branko Milanovic, business climate, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, clean water, colonial rule, demographic dividend, Deng Xiaoping, Dissolution of the Soviet Union, Doha Development Round, Erik Brynjolfsson, European colonialism, F. W. de Klerk, failed state, Francis Fukuyama: the end of history, Gini coefficient, global supply chain, income inequality, income per capita, invention of the steam engine, James Watt: steam engine, John Snow's cholera map, Joseph Schumpeter, land reform, low skilled workers, M-Pesa, megacity, Mikhail Gorbachev, oil shock, out of africa, purchasing power parity, race to the bottom, randomized controlled trial, Robert Gordon, Second Machine Age, secular stagnation, Simon Kuznets, South China Sea, special economic zone, Steven Pinker, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, women in the workforce, working poor

In the immediate post–World War II era, several countries in East and Southeast Asia (alongside a few others like Botswana and Mauritius) began to make remarkable advances that continue today. China began its rapid resurgence in 1980, in many ways setting the stage for the broader transformation that followed in other countries. Some other developing countries started to move forward, only to see progress halt in the late 1970s and 1980s following the global oil shocks and subsequent debt crises. However, most developing countries made little headway—that is, until the early 1990s, when progress accelerated and dozens of developing countries around the world began to move forward. My central focus is on four critical dimensions of development progress: poverty, income, health and education, and democracy and governance (although I will touch on many others).

 

Stocks for the Long Run, 4th Edition: The Definitive Guide to Financial Market Returns & Long Term Investment Strategies by Jeremy J. Siegel

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asset allocation, backtesting, Black-Scholes formula, Bretton Woods, buy low sell high, California gold rush, capital asset pricing model, cognitive dissonance, compound rate of return, correlation coefficient, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, dividend-yielding stocks, equity premium, Eugene Fama: efficient market hypothesis, fixed income, German hyperinflation, implied volatility, index arbitrage, index fund, Isaac Newton, joint-stock company, Long Term Capital Management, loss aversion, market bubble, mental accounting, new economy, oil shock, passive investing, prediction markets, price anchoring, price stability, purchasing power parity, random walk, Richard Thaler, risk tolerance, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, short selling, South Sea Bubble, technology bubble, The Great Moderation, The Wisdom of Crowds, transaction costs, tulip mania, Vanguard fund

But this should not have surprised those who studied history. Suspensions of the gold standard and devaluations of currencies have witnessed some of the most dramatic stock market rallies in history. Investors agreed that gold was a monetary relic. POSTGOLD MONETARY POLICY With the dismantling of the gold standard, there was no longer any constraint on monetary expansion, either in the United States or in foreign countries. The first inflationary oil shock from 1973 to 1974 caught most of the industrialized countries off guard, and all suffered significantly higher inflation as governments vainly attempted to offset falling output by expanding the money supply. Because of the inflationary policies of the Federal Reserve, the U.S. Congress tried to control monetary expansion by passing a congressional resolution in 1975 that obliged the central bank to announce monetary growth targets.

 

pages: 403 words: 125,659

It's Our Turn to Eat by Michela Wrong

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Berlin Wall, Bretton Woods, British Empire, clean water, colonial rule, Doha Development Round, failed state, Fall of the Berlin Wall, financial independence, Kibera, Mahatma Gandhi, Mikhail Gorbachev, oil shock, out of africa, profit motive, Ronald Reagan, structural adjustment programs, upwardly mobile, young professional, éminence grise

Having piled into the country with promises of aid when Moi quit the scene, they needed reassurance that it was not sliding back into the bad old ways. Kenya is one of a raft of African nations locked in a symbiotic – perhaps ‘mutually parasitic’ is a more accurate term – relationship with the developed world and the lending institutions set up at the Bretton Woods conference in the wake of the Second World War to combat global poverty. Post-independence, its agricultural sector received British support, but it was with the oil shocks of the 1970s and the collapse of commodity prices that Kenya's economy really began to depend heavily on loans, grants and investment from an industrialised world ready, as the Cold War locked Africa in its icy grip, to provide ‘no questions asked’ funding to any government rebuffing the Soviet Union and the Communist bloc. Seen as too important to be allowed to fail, Kenya became the first sub-Saharan country in the 1980s to receive structural adjustment funding from the IMF.

 

pages: 515 words: 132,295

Makers and Takers: The Rise of Finance and the Fall of American Business by Rana Foroohar

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3D printing, accounting loophole / creative accounting, additive manufacturing, Airbnb, algorithmic trading, Asian financial crisis, asset allocation, bank run, Basel III, bonus culture, Bretton Woods, British Empire, call centre, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, centralized clearinghouse, clean water, collateralized debt obligation, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, crowdsourcing, David Graeber, deskilling, Detroit bankruptcy, diversification, Double Irish / Dutch Sandwich, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial deregulation, financial intermediation, Frederick Winslow Taylor, George Akerlof, gig economy, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, High speed trading, Home mortgage interest deduction, housing crisis, Howard Rheingold, Hyman Minsky, income inequality, index fund, interest rate derivative, interest rate swap, Internet of things, invisible hand, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, knowledge economy, labor-force participation, labour mobility, London Whale, Long Term Capital Management, manufacturing employment, market design, Martin Wolf, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, offshore financial centre, oil shock, passive investing, pensions crisis, Ponzi scheme, principal–agent problem, quantitative easing, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, Rana Plaza, RAND corporation, random walk, rent control, Robert Shiller, Robert Shiller, Ronald Reagan, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Snapchat, sovereign wealth fund, Steve Jobs, technology bubble, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tobin tax, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, Vanguard fund

Jensen and Meckling were, not surprisingly, disciples of Friedman and Eugene Fama. And ironically, given the damage it would do to any number of firms, their idea was a response to a growing worry, sparked in the 1970s, that American business actually wasn’t really all that healthy at its core. Despite the confidence of the “organization man” and the large, global enterprises that he ran, a series of events—from oil shocks to higher inflation to swift advances into manufacturing being made by emerging economies like China and India—made people fear that the United States was losing ground. Postwar prosperity, which had always been taken as a given, was no longer guaranteed. The poverty rate was rising, inequality was on the upswing, and the hollowing out of American manufacturing had begun: that sector’s contribution to GDP dropped from 24 percent to around 17 percent in the mid-1970s.37 The term Rust Belt was invented to describe the collapse of once-great industrial cities like Buffalo, Pittsburgh, Cleveland, and Detroit.

 

pages: 411 words: 114,717

Breakout Nations: In Pursuit of the Next Economic Miracles by Ruchir Sharma

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3D printing, affirmative action, Albert Einstein, American energy revolution, anti-communist, Asian financial crisis, banking crisis, Berlin Wall, BRICs, British Empire, business climate, business process, business process outsourcing, call centre, capital controls, Carmen Reinhart, central bank independence, centre right, cloud computing, collective bargaining, colonial rule, corporate governance, crony capitalism, deindustrialization, demographic dividend, Deng Xiaoping, eurozone crisis, Gini coefficient, global supply chain, housing crisis, income inequality, indoor plumbing, inflation targeting, informal economy, Kenneth Rogoff, knowledge economy, labor-force participation, labour market flexibility, land reform, M-Pesa, Mahatma Gandhi, market bubble, megacity, Mexican peso crisis / tequila crisis, new economy, oil shale / tar sands, oil shock, open economy, Peter Thiel, planetary scale, quantitative easing, reserve currency, Robert Gordon, Shenzhen was a fishing village, Silicon Valley, software is eating the world, sovereign wealth fund, The Great Moderation, Thomas L Friedman, trade liberalization, Watson beat the top human players on Jeopardy!, working-age population

Since the crises of the 1980s Brazil’s government spending as a share of its economy has climbed steadily from nearly 20 percent—pretty typical for the emerging markets—to around 40 percent in 2010, among the highest in the developing world. This is not how Brazil used to be. In the 1950s and 1960s, the economy expanded at a double-digit growth rate, and professors of development economics from South Korea to Argentina held Brazil up as a paragon of economic virtue. But by the 1970s, as the oil shocks first started to drive up prices, Brazil lost its way and succumbed to the populist appeal of trying to lock in a comfortable lifestyle: the 1988 constitution guarantees free health care and university education, and today the minimum wage is so high that it applies to one in three workers. Economists don’t agree on when big government equals bad government, but they do agree that government spending should track changes in per capita income, and for Brazil currently that would correspond to around 25 percent of GDP, not 40 percent.

 

Debt of Honor by Tom Clancy

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airport security, banking crisis, Berlin Wall, buttonwood tree, complexity theory, cuban missile crisis, defense in depth, job satisfaction, margin call, New Journalism, oil shock, Silicon Valley, tulip mania

Worst of all, the American manufacturers, to a man, had all recently invested money in large-car plants, a fact that had almost been the undoing of Chrysler. This oil shock had not lasted long, but long enough for America to rethink its buying habits, and the domestic companies had not possessed the capital or the engineering flexibility to change rapidly to what unaccustomedly nervous American citizens wanted. Those citizens had immediately increased purchases of Japanese automobiles, especially in the crucial, trend-setting West Coast markets, which had had the effect of funding research and development for the Japanese firms, which in turn had hired American styling engineers to make their products more attractive to their growing market and utilized its own engineers to improve such things as safety. Thus, by the second great oil shock of 1979, Toyota, Honda, Datsun (later Nissan), and Subaru were in the right place with the right product.

 

pages: 351 words: 102,379

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

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affirmative action, Asian financial crisis, Berlin Wall, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Fall of the Berlin Wall, fear of failure, fixed income, Goldman Sachs: Vampire Squid, housing crisis, indoor plumbing, invisible hand, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, Mikhail Gorbachev, moral hazard, NetJets, Northern Rock, oil shock, paper trading, risk tolerance, rolodex, Ronald Reagan, savings glut, shareholder value, short selling, sovereign wealth fund, supply-chain management, too big to fail, value at risk, éminence grise

Aron & Company, a little-known commodities trading firm that was looking for law school graduates who could solve complex problems and then explain to clients precisely what they had done. When he told his fiancée, Laura, who was also a corporate lawyer, with the New York firm of Phillips, Nizer, Benjamin, Krim & Ballon, that he was taking a job as a salesman of gold coins and bars, she cried. Several months later, Blankfein became a Goldman employee when the firm acquired J. Aron in late October 1981. After the oil shocks and inflation spikes of the 1970s, Goldman was determined to expand into commodities trading. J. Aron gave the firm a powerful gold and metals trading business and an international presence, with a significant London operation. But while Goldman was disciplined and subdued, J. Aron was wild and loud. When Goldman ultimately moved the trading operations of J. Aron into 85 Broad Street, its immaculately groomed executives were stunned to see traders with their ties wrenched loose and their sleeves rolled up, who shouted out prices and insults alike.

 

pages: 840 words: 202,245

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

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accounting loophole / creative accounting, Asian financial crisis, bank run, Bretton Woods, capital controls, collapse of Lehman Brothers, collateralized