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pages: 466 words: 127,728

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

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

But even experts are largely unfamiliar with or confused by the IMF’s greatest power—the ability to create money. Indeed, the name of the IMF’s world money, the special drawing right, seems designed more to confuse than to enlighten. The IMF’s printing press is standing by, ready for use when needed in the next global liquidity crisis. It will be a key tool in engineering the dollar’s demise. ■ One Currency John Maynard Keynes once mused that not one man in a million was able to understand the process by which inflation destroys wealth. It is as likely that not one woman or man in ten million understands special drawing rights, or SDRs. Still, the SDR is poised to be an inflationary precursor par excellence. The SDR’s mix of opacity and unaccountability permits global monetary elites to solve sovereign debt problems using an inflationary medium, which in turn allows individual governments to deny political responsibility.

-Iran financial war and, 55, 57 Indonesia, 45 inflation, 3–4, 7–9, 75–83 alternative measures of, 3 Berlin Consensus and, 122–23 versus deflation, in depression of 2007 to present, 243–52, 260, 290–91 export of, through exchange-rate mechanism, 75, 155 Federal Reserve’s targeting of, 186–87 money illusion and, 7–8 in 1960s and 1970s, 7–8 in 1977 to 1981, 1 in 1981 to 1986, 2 in PDS framework, 183 pro-inflation (easy-money) policy of Federal Reserve (See easy-money policy of Federal Reserve) in 2008 to present, 3, 75, 76, 77 information asymmetry, 83–88 information warfare, 44 infrastructure spending Berlin Consensus and, 123 in China, 98–101, 107 In-Q-Tel, 34, 35 insider trading Stewart’s trading of ImClone Systems, 25 by terrorists (See terrorist insider trading) interest rates bank risk taking in low-interest-rate environment, 80–81 low-interest-rate policy, of Greenspan, 76, 260 negative real rates, 183–84 zero-interest-rate policy, of Bernanke, 185, 260 internal adjustment of unit labor costs, 131 International Emergency Economic Powers Act (IEEPA), 295 International Monetary Fund (IMF), 12, 81, 190–214 Articles of Agreement, 199, 212–14, 235 Asian financial crisis and, 45, 120 C-20 project, 235 cluster paradigm and, 192–93, 194, 198 commitments to expand lending capacity of, 202–6 as de facto central bank, 199–207 deposit-taking function of, 201 financial transmission and, 193–94 gold dispositions by, 235–36, 277 governance reforms, implications of, 296 historical roles of, 191 lending role of, 199–201 leverage of, 201–6 management of, 194–95 special drawing rights (SDRs) issued by (See special drawing rights [SDRs]) spillover effects of national policy, 193, 194, 198 international monetary system, 1, 12, 118–21 Beijing Consensus, 118, 120–21 Bretton Woods system, 118, 208–9, 235, 290 C-20 project and IMF reforms, 235–36 collapses of, 5 debt and deflation as problems of, since 2009, 290–91 gold reserve rebalancing and potential reform of, 279–84 Washington Consensus, 118–19 Internet, 174 interstate highway system, 174–75 investment Berlin Consensus and, 123 Bernanke’s monetary policies aimed at increasing, 86 Chinese economic growth and, 95–101, 107–110 gold as not constituting an investment, 218–19 infrastructure (See infrastructure spending) lack of, and duration of Great Depression, 84 regime uncertainty and, 84–86 investment portfolio recommendations, 298–301 alternative funds, 299–300 cash, 300 fine art, 299 gold, 298–99 land, 299 Iran, 12, 30, 151, 152, 153, 156 cyberattacks conducted by, 60 U.S.

Treasury was forced to issue government bonds denominated in Swiss francs. Foreign creditors no longer trusted the U.S. dollar as a store of value. The dollar was losing purchasing power, dropping by half from 1977 to 1981; U.S. inflation was over 50 percent during those five years. Starting in 1979, the International Monetary Fund (IMF) had little choice but to mobilize its resources to issue world money (special drawing rights, or SDRs). It flooded the market with 12.1 billion SDRs to provide liquidity as global confidence in the dollar declined. We would do well to recall those dark days. The price of gold rose 500 percent from 1977 to 1980. What began as a managed dollar devaluation in 1971, with President Richard Nixon’s abandonment of gold convertibility, became a full-scale rout by the decade’s end. The dollar debacle even seeped into popular culture.


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

The missing-anchor problem may be one reason why the dollar continues to dominate despite its difficulties. Special Drawing Rights Perhaps no feature of the international monetary system is more shrouded in mystery and confusion for the nonexpert than the special drawing right, or SDR. This should not be the case, because the SDR is a straightforward device. The SDR is world money, controlled by the IMF, backed by nothing and printed at will. Once the IMF issues an SDR, it sits comfortably in the reserve accounts of the recipient like any other reserve currency. In international finance, the SDR captures the mood of the 1985 Dire Straits hit “Money for Nothing.” Experts object to the use of the word “money” in describing special drawing rights. After all, individual citizens can’t obtain them, and if you walk into a liquor store and try paying for a few bottles of wine with SDRs, you will not get very far.

The problem Time was really alluding to was that the price of gold was artificially low at $35 per ounce, a point on which the magazine was correct. If the price of gold was too low, the problem was not a shortage of gold but an excess of paper money in relation to gold. This excess money was reflected in rising inflation in the United States, the United Kingdom and France. In 1969, the IMF took up the “gold shortage” cause and created a new form of international reserve asset called the special drawing right, or SDR. The SDR was manufactured out of thin air by the IMF without tangible backing and allocated among members in accordance with their IMF quotas. It was promptly dubbed “paper gold” because it represented an asset that could be used to offset balance of payments deficits in the same manner as gold or reserve currencies. The creation of the SDR was a little-understood novelty at the time.

Yet mainstream economists and central bankers alike are well aware of dollar weakness and the risks to international monetary stability from the new currency wars. Taking a range of views from the conventional to the cutting-edge, we can foresee four outcomes in prospect for the dollar—call them The Four Horsemen of the Dollar Apocalypse. In order of disruptive potential from smallest to greatest, they are: multiple reserve currencies, special drawing rights, gold and chaos. Multiple Reserve Currencies A country’s reserves are something like an individual’s savings account. An individual can have current income from a job and have various forms of debt, yet still maintain some savings for future use or a rainy day. These savings can be invested in stocks and commodities or just left in the bank. A country has the same choices with its reserves.

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

The American president all but took control of a side meeting of European leaders at the G20 summit. He urged the Europeans to act decisively, and concentrated his efforts on trying to convince Germany to enhance the European firewall. If the ECB persisted in refusing to intervene in an unlimited manner (for example, by issuing the EFSF a banking licence), how about contributing the Europeans’ unused allocations of “special drawing rights”? SDRs are created by the IMF as a reserve asset, a sort of virtual gold, and their supply was greatly boosted in 2009 to give countries extra liquidity in the financial crisis. Now the tables were turned on Merkel. The idea was firmly blocked by the Bundesbank, which held Germany’s allocation and regarded their use as tantamount to printing money. The German chancellor said she might relent if Italy accepted an IMF precautionary programme, but the idea did not fly.

., The Passage to Europe, Yale University Press, 2013 Appendix 4 How The Economist saw it at the time May 1st–7th 2010 July 10th–16th 2010 November 20th–26th 2010 December 4th–10th 2010 January 15th–21st 2011 March 12th-18th 2011 June 11th-17th 2011 June 25th-July 1st 2011 October 29th-November 4th 2011 November 5th-11th 2011 November 12th-18th 2011 November 26th-December 2nd 2011 February 18th–24th 2012 March 31st–April 6th 2012 May 19th–25th 2012 May 26th-June 1st 2012 July 28th-August 3rd 2012 August 11th-17th 2012 November 17th-23rd 2012 March 23rd-29th 2013 May 25th–31st 2013 September 14th–20th 2013 October 26th-November 1st 2013 January 4th-10th 2014 Index 1974–75 global recession 10 A accession treaties 112 accountability 125–129, 162 Alliance of Liberals and Democrats for Europe (ALDE) 130–131 Alogoskoufis, George 42 Amsterdam treaty 111–112, 193 Anastasiades, Nicos 2, 86–88 Anglo Irish Bank 53 Ansip, Anders 104 Arab spring 145–146 Argentina 5, 50 Armenia 149 Ashton, Catherine 28, 43, 144 Asmussen, Jörg 51, 82 Austria 111, 127 influence 108 interest rates 93 Azerbaijan 149 Aznar, José Maria 17 B Bagehot, Walter 9 bail-in rules 83, 90–91, 165 see also Cyprus bail-outs national approval requirement 127 no-bail-out rule 45, 162, 163–165 Balkans war 143 Bank of Cyprus 86–87 Bank of England 47, 157 bank recapitalisation 58–59, 74–77, 84 Bankia 72 banking sector characteristics 35 banking supervision see financial supervision banking union 23, 74–75, 77, 83–85, 90–92, 106, 165, 195 see also deposit guarantees; financial supervision Barnier, Michel 41, 138 Barroso, José Manuel early days of crisis 41 European Commission 97, 98, 141, 172 Greece 3, 78 Italy 63 Batista, Paulo Nogueira 46 Belarus 149 Belgium 17, 100, 127 Berlusconi, Silvio euro currency view 151 Italy’s failure to reform 59, 60, 62–63 People of Freedom party (PdL) 107 resignation 64 Black Wednesday 16–17 Blair, Tony 28, 112 BNP Paribas 40 Bolkestein directive 137 bond yields 37, 38, 61, 70, 89 bond spreads 37, 42, 70, 80, 88 Bootle, Roger 1 Bowles, Sharon 98, 129 Brandt, Willy 10 Bretton Woods 9–10 Brown, Gordon 24, 41, 48, 102, 112, 144 Bruegel think-tank 35, 74, 163, 166 budget deficits Maastricht ceiling 15 timescales for meeting targets 88–89 see also stability and growth pact budgets annual, European 21, 27, 118 central 13, 168–170 federal 164, 168 fiscal capacity 84 Bulgaria 108, 113, 124, 126, 147 Bundesbank 16, 23, 157 C Cameron, David 14, 17, 64–65, 117–119, 132, 140 Cannes G20 summit (2011) 62–64 Capital Economics 1 Cassis de Dijon judgment 21 Catalonia 178 CEBS (Committee of European Banking Supervisors) 35 central banks, national 22–23 Centre for European Policy Studies 34 Centre for European Reform 34 CFSP (Common Foreign and Security Policy) 142, 144 China 33, 139, 167 Chirac, Jacques 18, 23, 100, 127 Christofias, Demetris 86 Churchill, Winston 7, 115, 161 Clark, Christopher 178 climate change 135–136 Clinton, Hillary 144 Cockfield, Arthur 13 Committee of European Banking Supervisors (CEBS) 35 Committee of Permanent Representatives (COREPER) 20 Committee of Regions 21 common fisheries policy 100, 138 Common Foreign and Security Policy (CFSP) 142, 144 community method 19, 21–22 Competitiveness Pact see Euro Plus Pact complacency pre-crisis 36–37 Constâncio, Vítor 34 constitution proposals 26–27 convergence criteria 14–16, 41, 112, 193 COREPER (Committee of Permanent Representatives) 20 COSAC (Conference of Community and European Affairs Committees of Parliaments of the European Union) 133 Council of Ministers 20, 121, 130 Council of the European Union see Council of Ministers Court of Auditors 21 Court of First Instance 21 Crafts, Nicholas 9 credit ratings (countries) 69, 77–78, 108 Crimea 150 Croatia 113, 143, 147 current-account (im)balances 25, 31, 88–89, 167–168 customs union, German 9 Cyprus accession 147 bail-out 2, 85–88 entry to euro 112 finances pre-crisis 30 Cyprus Popular Bank (Laiki) 86–88 Czech Republic 113, 118 D Dayton agreement 143 de Gaulle, Charles 9, 22, 96 de Larosière, Jacques 41, 74 Deauville meeting between Sarkozy and Merkel 51–52, 102 debt mutualisation 74, 103, 166–167 defence and security 8, 143, 145 deflation 92 Delors, Jacques 11, 37, 97 Delpla, Jacques 167 democratic accountability 125–129, 162 democratic deficit 121, 129–132, 162–163, 171–172 Denmark European participation 112 justice and home affairs (JHA) 111, 139 ministerial accountability 133 opt-outs 139 referendums 16, 27, 132 shadowing of euro 113 single currency opt-out 110, 115 UK sympathies 119 deposit guarantees 5, 40–41, 74, 77, 91 Deutschmark 10, 12, 16 devaluation, internal 31, 65–66 Dexia 72 Dijsselbloem, Jeroen 24, 87 double majority voting 20, 114 Draghi, Mario 156 appointment as ECB president 23, 68 crisis-management team 2 demand for fiscal compact 64 Long Term Refinancing Operations (LTRO) 68–70 outright monetary transactions (OMT) 78–81 pressure on Berlusconi 59 “whatever it takes” London speech 79 Duisenberg, Wim 23 E e-commerce 137 east–west divide 108 ECB (European Central Bank) bond-buying 47–49, 59–60 crisis-management planning 2, 4 delays 156 European System of Central Banks 22 liquidity provision 40–42, 68–70 outright monetary transactions (OMT) 79–81, 164, 175–176 role and function 22–24, 39–40, 170–171 supervision 6, 99, 175, 195 troika membership 160–161 EcoFin meetings 20, 114 Economic and Financial Committee 20 economic and monetary union (EMU) 11, 112 Economic and Social Committee 21 economic imbalances 30–34 The Economist on ECB responsibilities 15 fictitious memorandum to Angela Merkel 1 ECSC (European Coal and Steel Community) 7–8 EEAS (European External Action Service) 142, 144 EEC (European Economic Community) 8 EFSF (European Financial Stability Facility) 26, 48, 55, 60–61, 81, 194 see also ESM (European Stability Mechanism) EFSM (European Financial Stabilisation Mechanism) 48 Eiffel group 120, 129, 164 elections, European 121, 129–130 Elysée treaty 100 emissions-trading scheme (ETS) 135–136 EMS (European Monetary System) creation of 11 exchange-rate mechanism 16 membership 15 EMU (economic and monetary union) 11, 112 EMU@10 36 energy policies 136 enhanced co-operation 111 enlargement 33, 146–147 environment summits 135 Erdogan, Recep Tayyip 148 ESM (European Stability Mechanism) 194 establishment 26, 55, 80–81 operations 58, 75, 76, 91 Estonia 65, 108 ETS (emissions-trading scheme) 135–136 EU 2020 strategy 137 euro break-up contingency plans 2–3 convergence criteria 14–16, 41, 112, 193 crash danger 47–48 introduction of 4, 18 notes and coins 18 special circumstances 3–4 euro crisis effect on world influence 143–146 errors 155–161 focus of attention 135–141 Euro Plus Pact 55, 195 euro zone 4 economic dangers 175–178 increasing significance of institutions 113–114, 120 performance compared with US 154–155 political dangers 175–178 political integration 125 trust 173 Eurobonds 54, 59, 74, 166–167 Eurogroup of finance ministers 24, 114 European Banking Authority 114, 195 European Central Bank (ECB) bond-buying 47–49, 59–60 crisis-management planning 2, 4 delays 156 European System of Central Banks 22 liquidity provision 40–42, 68–70 outright monetary transactions (OMT) 79–81, 164, 175–176 role and function 22–24, 39–40, 170–171 supervision 6, 99, 175, 195 troika membership 160–161 European Coal and Steel Community (ECSC) 7–8 European Commission commissioners 19, 172 errors 160 future direction 171–172 influence and power 96–97, 99, 119, 125 intrusiveness 127, 140–141 organisation 19 presidency 131, 144 proposals for economic governance 50 European Community 12 European Council 20, 98–99 European Court of Human Rights 21 European Court of Justice 21 European Defence Community 8 European Economic Community (EEC) 8 European External Action Service (EEAS) 142, 144 European Financial Stabilisation Mechanism (EFSM) 48 European Financial Stability Facility (EFSF) 26, 48, 55, 60–61, 81, 194 see also European Stability Mechanism (ESM) European Financial Stability Mechanism 26 see also European Stability Mechanism (ESM) European Investment Bank 21 European Monetary Institute 22 European Monetary System (EMS) creation of 11 exchange-rate mechanism 16 membership 15 European Parliament 20–21, 97–98, 99, 100, 119, 121, 129–132, 171 European People’s Party 117, 127, 130–131 European Political Co-operation 142 European semester 25, 195 European Stability Mechanism (ESM) 194 establishment 26, 55, 80–81 operations 58, 75, 76, 91 European Systemic Risk Board 41 European Union driving forces for monetary union 12–13 expansion 26 historical background 7–12 treaty making 26–28 world influence 140, 142–150 European Union Act (2011) 117, 132 Eurosceptics 13, 123 Finns Party 124 Jobbik 125 League of Catholic Families 125 National Front 124 Party of Freedom (PdL) 124 UK Independence Party (UKIP) 118, 125, 140 excessive deficit procedure 24, 88–89, 194, 195 exchange-rate systems 3, 9–11 exchange rates 164 F Farage, Nigel 98, 118 Federal Deposit Insurance Corporation (FDIC) 77 Federal Reserve (US) 23, 47, 48, 157 federalism 19, 110, 116, 161–165, 168–170, 177–178 financial integration 35–36 financial supervision 195 ECB 6, 99, 175, 195 Jacques de Larosière proposals 41 national 23, 35 single supervisor 76–77, 83–84, 90 Finland accession 26, 111 Finns Party 124 influence 108 ministerial accountability 133 fiscal capacity 84 fiscal compact treaty 25–26, 64–65, 118, 194–195 fiscal policy, focus on 30–31 Five Star Movement 124, 126 fixed exchange-rate systems 3, 9–10 Foot, Michael 116 forecasts, growth 92 foreign policy 142–143 Fouchet plan 22 France credit rating 69, 103 current-account balance 168 EMS exchange-rate mechanism 16 excessive deficit procedure 89 GDP growth 32 and Greece 44 influence 100–104, 142–143 Maastricht deal 12, 16 public debt 159 public opinion of EU 123, 124 single currency views 16–17 unemployment 159 veto of UK entry 115 vote to block European Defence Community 8 freedoms of movement 8, 13 G Gaulle, Charles de 9, 22, 96 Gazprom 136 GDP growth 32 Georgia 149 Germany 2013 elections 90, 106, 125 bond yields 37, 89 Bundesbank 16, 23, 157 constitutional (Karlsruhe) court 45, 95, 128, 158 credit rating 69, 77–78 crisis management errors 155–156 current-account surplus 89, 105, 167–168 demands post Greek bail-out 50–51 economic strengths and weaknesses 14 GDP growth 32 and Greece 44 influence 100–106 Maastricht deal 12, 15–16 national control and accountability 128, 133 parliamentary seats 100 political parties 93, 125 public debt 159 public opinion of EU 123 unemployment 159 unification 16 Zollverein 9 Giscard d’Estaing, Valéry 11, 18, 26, 100 Glienicker group 163, 170 gold standard 9–10 Golden Dawn 124 government spending (worldwide) 4 governments, insolvency of 50 great moderation 31 Greece 2012 election 73, 126 bail-out deal 45–47, 56–58, 65–67, 70, 158 bond yields 37, 61–62 current-account balance 168 debt crisis 42–45 euro membership 18, 112, 115 finances post bail-out 93–94 finances pre-crisis 30, 71 GDP growth 32 potential euro exit 1–5, 81–83 public debt 159, 166 public opinion of EU and euro 113, 123, 124 referendum on bail-out 2, 61–62 unemployment 159 Gros, Daniel 34 H Hague, William 151 Haider, Jörg 127 Hamilton, Alexander 162, 167 Heath, Edward 10, 116 Heisbourg, François 104 Hollande, François 73–74, 89, 103–104, 127 proposed reforms 177 Hungary 41, 113, 126, 147 Hypo Real Estate 41 I Iceland 53, 147 ideological differences 114–115 IKB Deutsche Industriebank 40 immigration 139–140, 146, 147 impossible trinity 13 inter-governmentalism 96, 128, 174 interest rates 93, 164 internal devaluation 31, 65–66 International Monetary Fund (IMF) banking union 74 crisis-management planning 2, 4–5 Cyprus 86–87 errors 160–161 euro zone support 48 Greece 44–46, 56–57, 66, 83, 93–95, 160 Latvia 65 rainy-day funds 169–170 special drawing rights (SDR) 63 Iraq 143 Ireland 89, 110 bail-out 53–54, 56, 57, 89 bank crises 40, 71 bond yields 37, 47, 53, 61, 89 current-account balance 168 finances pre-crisis 30 GDP growth 32 influence 107 opt-outs 111, 139 public debt 159, 166 public opinion of EU 123 referendums 27, 28, 132 unemployment 159 Italy 2013 elections 107, 124, 126 bond yields 37, 61, 89 convergence criteria 17 current-account balance 168 danger of collapse 59 EMS exchange-rate mechanism 16 excessive deficit procedure 89 GDP growth 32 influence 100, 104, 107 interest rates 93 public debt 159, 166 public opinion of EU 123 single currency views 17 unemployment 159 J Jenkins, Roy 11 Jobbik 125 Juncker, Jean-Claude 98, 104, 177 candidate for Commission Presidency 131 EU 2005 budget crisis 28 Eurobonds 54 Eurogroup president 24 justice and home affairs (JHA) 139 K Karamanlis, Kostas 42 Karlsruhe constitutional court 45, 95, 128, 158 Kauder, Volker 105 Kerry, John 144 Kohl, Helmut 12, 18, 100 L labour markets 14, 33–34 Lagarde, Christine 51, 58, 62, 92 Laiki 86–88 Lamers, Karl 111 Lamont, Norman 17 Larosière, Jacques de 41, 74 Latin Monetary Union 9 Latvia 41, 65, 67, 88, 108 Lawson, Nigel 16 League of Catholic Families 125 legislative path 21–22 Lehman Brothers, ECB reaction to collapse 4 Letta, Enrico 107–108 Libya 143, 145 Lipsky, John 57 Lisbon treaty 28, 45, 194 foreign policy 142 institutions 20, 131 justice and home affairs (JHA) 139 subsidiarity 133 voting 20, 114 Lithuania 88, 113, 153 Long Term Refinancing Operations (LTRO) 68–70, 72 Luxembourg 77–78, 100, 108, 169 Luxembourg compromise 97 M Maastricht treaty 11–12, 15, 22, 142, 193 opt-outs and referendums 16, 110–111 MacDougall report (1977) 13, 169 Major, John 12, 111, 116 Malta 100, 112 Maroni, Roberto 34 Mayer, Thomas 1 McCreevy, Charlie 41 MEPs 20–21, 130 Merkel, Angela 2013 re-election 90 banking union 74–77 Cannes G20 summit (2011) 63–64 crisis response 40–41, 44 European constitution 28 fictitious memorandum to 1 future direction 178 power and influence 89, 102–106, 153 Sarkozy collaboration 60, 61–62, 102–103 support for Cyprus 86 support for Greece 5, 45, 49–52, 81–82 support for UK 118–119 union method 22, 128 voter support 125 Messina conference 8, 115 migration 139–140, 146, 147 Miliband, David 144 Mitterrand, François 11, 12, 18, 100 Mody, Ashoka 163 Moldova 149 Monnet, Jean 8, 152 Montebourg, Arnaud 104 Montenegro 147 Monti, Mario 64 influence 70, 75–76, 107 A New Strategy for the Single Market (2010) 137–138 Morocco 146 Morrison, Herbert 8 Morsi, Muhammad 145 Moscovici, Pierre 75 multi-annual financial framework 21, 27, 118 Mundell, Robert 12–13 mutualisation of debt 74, 103, 166–167 N national budgets 89, 125 National Front 124 NATO defence spending targets 145 European security 8 membership 110 Netherlands credit rating 77–78 excessive deficit procedure 89 influence 100, 108 ministerial accountability 133 UK sympathies 119 Nice treaty 194 no-bail-out rule 45, 162, 163–165 north–south divide 33–34, 108 Northern Rock 40 notes and coins 18 Nouy, Danièle 90 Nuland, Victoria 149 O Obama, Barack 63 official sector involvement (OSI) 83 OMT (outright monetary transactions) 79–81, 164, 175–176 Germany’s constitutional court judgment 95, 128 optimal currency-area theory 12–13, 14–15 Orban, Viktor 126 Osborne, George 117, 119 OSI (official sector involvement) 83 outright monetary transactions (OMT) 79–81, 164, 175–176 Germany’s constitutional court judgment 95, 128 P Pact for the Euro see Euro Plus Pact Papaconstantinou, George 43 Papademos, Lucas 64 Papandreou, George 56, 60 election 43 Greek referendum 61–62 resignation 2, 64 Party of Freedom 124 Poland 109, 113 Policy Exchange 1 political parties 124–125, 139–140 political union 10, 12, 133–134 Pompidou, Georges 10 Poos, Jacques 143 Portugal 110 bail-out 54, 57, 89–90 bond yields 37, 47, 53, 61, 89 public opinion of EU and euro 113 power, balance of 99–101 price stability goal of ECB 23 private-sector involvement (PSI) in debt restructuring 51–52 Prodi, Romano 17, 25, 97 Progressive Alliance of Socialists and Democrats (S&D) 130–131 public debt 15, 158–159 see also sovereign debt public opinion of EU and euro 121–124 Putin, Vladimir 149–150 Q qualified-majority voting 13, 20, 99, 121 negative qualified-majority voting 25, 195 quantitative easing (QE) 47, 15 R Rajoy, Mariano 70, 75–76, 127 recapitalisation, bank 58–59, 74–77, 84 redenomination 3–4, 153–154, 175 Reding, Viviane 139 referendums 27, 28, 121–122, 132 REFIT initiative 172 Regling, Klaus 26 Renzi, Matteo 107–108 rescue fund see European Stability Mechanism (ESM) resolution mechanism 90–91, 165, 195 single resolution mechanism (SRM) 195 single supervisory mechanism (SSM) 195 Romania 41, 108, 113, 124, 126, 147 Rome treaty 8, 97, 110, 193 Rösler, Philipp 78 Rueff, Jacques 9 Rumsfeld, Donald 143 Russia, influence on Ukraine 149–150 Rutte, Mark 77 S Samaras, Antonis 2, 78, 82, 93–94 Santer, Jacques 97 Sarkozy, Nicolas crisis response 40–41, 44 economic governance 49–50 European constitution 28 LTROs and the Sarkozy trade 69 Merkel collaboration 51–52, 60, 61–62, 102–103 Schäuble, Wolfgang 62, 75, 84, 90–91, 106, 111, 154 Schengen Agreement 110, 111–112 Schmidt, Helmut 11, 100 Schröder, Gerhard 18, 101, 127 Schulz, Martin 131 Schuman Day 8 Schuman, Robert 7–8 Scotland 112, 178 SDR (special drawing rights) 63 Securities Market Programme (SMP) 48, 79 services directive 34 Shafik, Nemat 65 Sikorski, Radek 109 Simitis, Costas 18 Simms, Brendan 179 single currency benefits 152 club within a club 112 driving forces 12–14 importance of 113 vision for 9 see also euro Single European Act 13, 193 single market 4, 137–138, 174–175 Sinn, Hans-Werner 101 six-pack 25, 50, 195 Slovakia 112 adoption of euro 41 influence 108 Slovenia 88–89, 112 influence 108 SMP (Securities Market Programme) 48, 79 snake in the tunnel 10 Solana, Javier 142 sovereign debt 165–166 see also public debt Spain 110 bail-out 70–73, 89 bank recapitalisation 84 bond yields 37, 89 CDS premiums 72 current-account balance 168 danger of collapse 59 excessive deficit procedure 89 finances pre-crisis 30 GDP growth 32 influence 107 public debt 159 public opinion of EU 123, 124 single currency views 17 unemployment 159 special drawing rights (SDR) 63 stability and growth pact 18, 24, 29, 50–51, 127, 194 Stark, Jürgen 59, 106 Steinbrück, Peer 43 Strauss-Kahn, Dominique 24, 44, 57 stress tests, bank 72, 175 subsidiarity 133, 141 Sweden 109, 111, 112 euro opt-out 18, 115 UK sympathies 119 Syria 145 Syriza 124 T Target II 157 Thatcher, Margaret 27, 110, 116 third energy package 136 Tilford, Simon 34 Tindemans, Leo 111 trade policy 138 Transatlantic Trade and Investment Partnership (TTIP) 138–139 treaty making and change 26–27, 173–174 Treaty of Amsterdam 111–112, 193 Treaty of Lisbon 28, 45, 194 foreign policy 142 institutions 20, 131 justice and home affairs (JHA) 139 subsidiarity 133 voting 20, 114 Treaty of Nice 194 Treaty of Rome 8, 97, 110, 193 Treaty on European Union (Maastricht treaty) 11–12, 15, 22, 142, 193 opt-outs and referendums 16, 110–111 Treaty on Stability, Co-ordination and Governance (TSCG) see fiscal compact treaty Tremonti, Giulio 54, 60 Trichet, Jean-Claude 151, 156 bond-buying 47–48, 52–53 crisis-management planning 2 early warnings 39–40 ECB president 23 IMF 44 Italy 59 True Finns 124 Turkey 132, 147, 148 Tusk, Donald 109, 114 two-pack 25, 89, 195 U UK Independence Party (UKIP) 118, 125, 140 Ukraine 149–150, 179–180 unemployment 158–159, 170 union method 19, 22 United Kingdom current-account balance 168 economic strengths and weaknesses 14 EMS exchange-rate mechanism 16 euro crisis reaction 117–118 euro membership 112 European budget contribution 27–28 European involvement 8, 10, 12, 115–119 future status 174–175 influence 100–101, 106, 109, 142–143 initial application to join EEC 9 opt-outs 110–111, 139 public opinion of EU 123 single currency views 17 United Left party 124 United States abandonment of gold standard 10 federalism model 177 foreign policy 143 performance compared with euro zone 154–155 Urpilainen, Jutta 77 V Van Gend en Loos v Nederlandse Administratie der Belastingen (1963) 21 Van Rompuy, Herman 98 crisis-management planning 3 Cyprus 87 European Council presidency 20, 28 Italy 63 roadmap for integration 74–75, 84, 173 support for Greece 43–45 Venizelos, Evangelos 57, 62 Verhofstadt, Guy 131 Véron, Nicolas 35 Vilnius summit 149 von Weizsäcker, Jakob 166 W Waigel, Theo 17–18 Wall Street flash crash 47 Weber, Axel 49, 56, 106 Weidmann, Jens 40, 80, 82 Weizsäcker, Jakob von 166 Werner report (1971) 10 Wilson, Harold 116 Wolfson Prize 1 World Bank 33 World Trade Organisation 138–139 Y Yanukovych, Viktor 149 Z Zapatero, José Luis Rodríguez 59, 62 Zollverein 9 PublicAffairs is a publishing house founded in 1997.

., The Passage to Europe, Yale University Press, 2013 Appendix 4 How The Economist saw it at the time May 1st–7th 2010 July 10th–16th 2010 November 20th–26th 2010 December 4th–10th 2010 January 15th–21st 2011 March 12th-18th 2011 June 11th-17th 2011 June 25th-July 1st 2011 October 29th-November 4th 2011 November 5th-11th 2011 November 12th-18th 2011 November 26th-December 2nd 2011 February 18th–24th 2012 March 31st–April 6th 2012 May 19th–25th 2012 May 26th-June 1st 2012 July 28th-August 3rd 2012 August 11th-17th 2012 November 17th-23rd 2012 March 23rd-29th 2013 May 25th–31st 2013 September 14th–20th 2013 October 26th-November 1st 2013 January 4th-10th 2014 Index 1974–75 global recession 10 A accession treaties 112 accountability 125–129, 162 Alliance of Liberals and Democrats for Europe (ALDE) 130–131 Alogoskoufis, George 42 Amsterdam treaty 111–112, 193 Anastasiades, Nicos 2, 86–88 Anglo Irish Bank 53 Ansip, Anders 104 Arab spring 145–146 Argentina 5, 50 Armenia 149 Ashton, Catherine 28, 43, 144 Asmussen, Jörg 51, 82 Austria 111, 127 influence 108 interest rates 93 Azerbaijan 149 Aznar, José Maria 17 B Bagehot, Walter 9 bail-in rules 83, 90–91, 165 see also Cyprus bail-outs national approval requirement 127 no-bail-out rule 45, 162, 163–165 Balkans war 143 Bank of Cyprus 86–87 Bank of England 47, 157 bank recapitalisation 58–59, 74–77, 84 Bankia 72 banking sector characteristics 35 banking supervision see financial supervision banking union 23, 74–75, 77, 83–85, 90–92, 106, 165, 195 see also deposit guarantees; financial supervision Barnier, Michel 41, 138 Barroso, José Manuel early days of crisis 41 European Commission 97, 98, 141, 172 Greece 3, 78 Italy 63 Batista, Paulo Nogueira 46 Belarus 149 Belgium 17, 100, 127 Berlusconi, Silvio euro currency view 151 Italy’s failure to reform 59, 60, 62–63 People of Freedom party (PdL) 107 resignation 64 Black Wednesday 16–17 Blair, Tony 28, 112 BNP Paribas 40 Bolkestein directive 137 bond yields 37, 38, 61, 70, 89 bond spreads 37, 42, 70, 80, 88 Bootle, Roger 1 Bowles, Sharon 98, 129 Brandt, Willy 10 Bretton Woods 9–10 Brown, Gordon 24, 41, 48, 102, 112, 144 Bruegel think-tank 35, 74, 163, 166 budget deficits Maastricht ceiling 15 timescales for meeting targets 88–89 see also stability and growth pact budgets annual, European 21, 27, 118 central 13, 168–170 federal 164, 168 fiscal capacity 84 Bulgaria 108, 113, 124, 126, 147 Bundesbank 16, 23, 157 C Cameron, David 14, 17, 64–65, 117–119, 132, 140 Cannes G20 summit (2011) 62–64 Capital Economics 1 Cassis de Dijon judgment 21 Catalonia 178 CEBS (Committee of European Banking Supervisors) 35 central banks, national 22–23 Centre for European Policy Studies 34 Centre for European Reform 34 CFSP (Common Foreign and Security Policy) 142, 144 China 33, 139, 167 Chirac, Jacques 18, 23, 100, 127 Christofias, Demetris 86 Churchill, Winston 7, 115, 161 Clark, Christopher 178 climate change 135–136 Clinton, Hillary 144 Cockfield, Arthur 13 Committee of European Banking Supervisors (CEBS) 35 Committee of Permanent Representatives (COREPER) 20 Committee of Regions 21 common fisheries policy 100, 138 Common Foreign and Security Policy (CFSP) 142, 144 community method 19, 21–22 Competitiveness Pact see Euro Plus Pact complacency pre-crisis 36–37 Constâncio, Vítor 34 constitution proposals 26–27 convergence criteria 14–16, 41, 112, 193 COREPER (Committee of Permanent Representatives) 20 COSAC (Conference of Community and European Affairs Committees of Parliaments of the European Union) 133 Council of Ministers 20, 121, 130 Council of the European Union see Council of Ministers Court of Auditors 21 Court of First Instance 21 Crafts, Nicholas 9 credit ratings (countries) 69, 77–78, 108 Crimea 150 Croatia 113, 143, 147 current-account (im)balances 25, 31, 88–89, 167–168 customs union, German 9 Cyprus accession 147 bail-out 2, 85–88 entry to euro 112 finances pre-crisis 30 Cyprus Popular Bank (Laiki) 86–88 Czech Republic 113, 118 D Dayton agreement 143 de Gaulle, Charles 9, 22, 96 de Larosière, Jacques 41, 74 Deauville meeting between Sarkozy and Merkel 51–52, 102 debt mutualisation 74, 103, 166–167 defence and security 8, 143, 145 deflation 92 Delors, Jacques 11, 37, 97 Delpla, Jacques 167 democratic accountability 125–129, 162 democratic deficit 121, 129–132, 162–163, 171–172 Denmark European participation 112 justice and home affairs (JHA) 111, 139 ministerial accountability 133 opt-outs 139 referendums 16, 27, 132 shadowing of euro 113 single currency opt-out 110, 115 UK sympathies 119 deposit guarantees 5, 40–41, 74, 77, 91 Deutschmark 10, 12, 16 devaluation, internal 31, 65–66 Dexia 72 Dijsselbloem, Jeroen 24, 87 double majority voting 20, 114 Draghi, Mario 156 appointment as ECB president 23, 68 crisis-management team 2 demand for fiscal compact 64 Long Term Refinancing Operations (LTRO) 68–70 outright monetary transactions (OMT) 78–81 pressure on Berlusconi 59 “whatever it takes” London speech 79 Duisenberg, Wim 23 E e-commerce 137 east–west divide 108 ECB (European Central Bank) bond-buying 47–49, 59–60 crisis-management planning 2, 4 delays 156 European System of Central Banks 22 liquidity provision 40–42, 68–70 outright monetary transactions (OMT) 79–81, 164, 175–176 role and function 22–24, 39–40, 170–171 supervision 6, 99, 175, 195 troika membership 160–161 EcoFin meetings 20, 114 Economic and Financial Committee 20 economic and monetary union (EMU) 11, 112 Economic and Social Committee 21 economic imbalances 30–34 The Economist on ECB responsibilities 15 fictitious memorandum to Angela Merkel 1 ECSC (European Coal and Steel Community) 7–8 EEAS (European External Action Service) 142, 144 EEC (European Economic Community) 8 EFSF (European Financial Stability Facility) 26, 48, 55, 60–61, 81, 194 see also ESM (European Stability Mechanism) EFSM (European Financial Stabilisation Mechanism) 48 Eiffel group 120, 129, 164 elections, European 121, 129–130 Elysée treaty 100 emissions-trading scheme (ETS) 135–136 EMS (European Monetary System) creation of 11 exchange-rate mechanism 16 membership 15 EMU (economic and monetary union) 11, 112 EMU@10 36 energy policies 136 enhanced co-operation 111 enlargement 33, 146–147 environment summits 135 Erdogan, Recep Tayyip 148 ESM (European Stability Mechanism) 194 establishment 26, 55, 80–81 operations 58, 75, 76, 91 Estonia 65, 108 ETS (emissions-trading scheme) 135–136 EU 2020 strategy 137 euro break-up contingency plans 2–3 convergence criteria 14–16, 41, 112, 193 crash danger 47–48 introduction of 4, 18 notes and coins 18 special circumstances 3–4 euro crisis effect on world influence 143–146 errors 155–161 focus of attention 135–141 Euro Plus Pact 55, 195 euro zone 4 economic dangers 175–178 increasing significance of institutions 113–114, 120 performance compared with US 154–155 political dangers 175–178 political integration 125 trust 173 Eurobonds 54, 59, 74, 166–167 Eurogroup of finance ministers 24, 114 European Banking Authority 114, 195 European Central Bank (ECB) bond-buying 47–49, 59–60 crisis-management planning 2, 4 delays 156 European System of Central Banks 22 liquidity provision 40–42, 68–70 outright monetary transactions (OMT) 79–81, 164, 175–176 role and function 22–24, 39–40, 170–171 supervision 6, 99, 175, 195 troika membership 160–161 European Coal and Steel Community (ECSC) 7–8 European Commission commissioners 19, 172 errors 160 future direction 171–172 influence and power 96–97, 99, 119, 125 intrusiveness 127, 140–141 organisation 19 presidency 131, 144 proposals for economic governance 50 European Community 12 European Council 20, 98–99 European Court of Human Rights 21 European Court of Justice 21 European Defence Community 8 European Economic Community (EEC) 8 European External Action Service (EEAS) 142, 144 European Financial Stabilisation Mechanism (EFSM) 48 European Financial Stability Facility (EFSF) 26, 48, 55, 60–61, 81, 194 see also European Stability Mechanism (ESM) European Financial Stability Mechanism 26 see also European Stability Mechanism (ESM) European Investment Bank 21 European Monetary Institute 22 European Monetary System (EMS) creation of 11 exchange-rate mechanism 16 membership 15 European Parliament 20–21, 97–98, 99, 100, 119, 121, 129–132, 171 European People’s Party 117, 127, 130–131 European Political Co-operation 142 European semester 25, 195 European Stability Mechanism (ESM) 194 establishment 26, 55, 80–81 operations 58, 75, 76, 91 European Systemic Risk Board 41 European Union driving forces for monetary union 12–13 expansion 26 historical background 7–12 treaty making 26–28 world influence 140, 142–150 European Union Act (2011) 117, 132 Eurosceptics 13, 123 Finns Party 124 Jobbik 125 League of Catholic Families 125 National Front 124 Party of Freedom (PdL) 124 UK Independence Party (UKIP) 118, 125, 140 excessive deficit procedure 24, 88–89, 194, 195 exchange-rate systems 3, 9–11 exchange rates 164 F Farage, Nigel 98, 118 Federal Deposit Insurance Corporation (FDIC) 77 Federal Reserve (US) 23, 47, 48, 157 federalism 19, 110, 116, 161–165, 168–170, 177–178 financial integration 35–36 financial supervision 195 ECB 6, 99, 175, 195 Jacques de Larosière proposals 41 national 23, 35 single supervisor 76–77, 83–84, 90 Finland accession 26, 111 Finns Party 124 influence 108 ministerial accountability 133 fiscal capacity 84 fiscal compact treaty 25–26, 64–65, 118, 194–195 fiscal policy, focus on 30–31 Five Star Movement 124, 126 fixed exchange-rate systems 3, 9–10 Foot, Michael 116 forecasts, growth 92 foreign policy 142–143 Fouchet plan 22 France credit rating 69, 103 current-account balance 168 EMS exchange-rate mechanism 16 excessive deficit procedure 89 GDP growth 32 and Greece 44 influence 100–104, 142–143 Maastricht deal 12, 16 public debt 159 public opinion of EU 123, 124 single currency views 16–17 unemployment 159 veto of UK entry 115 vote to block European Defence Community 8 freedoms of movement 8, 13 G Gaulle, Charles de 9, 22, 96 Gazprom 136 GDP growth 32 Georgia 149 Germany 2013 elections 90, 106, 125 bond yields 37, 89 Bundesbank 16, 23, 157 constitutional (Karlsruhe) court 45, 95, 128, 158 credit rating 69, 77–78 crisis management errors 155–156 current-account surplus 89, 105, 167–168 demands post Greek bail-out 50–51 economic strengths and weaknesses 14 GDP growth 32 and Greece 44 influence 100–106 Maastricht deal 12, 15–16 national control and accountability 128, 133 parliamentary seats 100 political parties 93, 125 public debt 159 public opinion of EU 123 unemployment 159 unification 16 Zollverein 9 Giscard d’Estaing, Valéry 11, 18, 26, 100 Glienicker group 163, 170 gold standard 9–10 Golden Dawn 124 government spending (worldwide) 4 governments, insolvency of 50 great moderation 31 Greece 2012 election 73, 126 bail-out deal 45–47, 56–58, 65–67, 70, 158 bond yields 37, 61–62 current-account balance 168 debt crisis 42–45 euro membership 18, 112, 115 finances post bail-out 93–94 finances pre-crisis 30, 71 GDP growth 32 potential euro exit 1–5, 81–83 public debt 159, 166 public opinion of EU and euro 113, 123, 124 referendum on bail-out 2, 61–62 unemployment 159 Gros, Daniel 34 H Hague, William 151 Haider, Jörg 127 Hamilton, Alexander 162, 167 Heath, Edward 10, 116 Heisbourg, François 104 Hollande, François 73–74, 89, 103–104, 127 proposed reforms 177 Hungary 41, 113, 126, 147 Hypo Real Estate 41 I Iceland 53, 147 ideological differences 114–115 IKB Deutsche Industriebank 40 immigration 139–140, 146, 147 impossible trinity 13 inter-governmentalism 96, 128, 174 interest rates 93, 164 internal devaluation 31, 65–66 International Monetary Fund (IMF) banking union 74 crisis-management planning 2, 4–5 Cyprus 86–87 errors 160–161 euro zone support 48 Greece 44–46, 56–57, 66, 83, 93–95, 160 Latvia 65 rainy-day funds 169–170 special drawing rights (SDR) 63 Iraq 143 Ireland 89, 110 bail-out 53–54, 56, 57, 89 bank crises 40, 71 bond yields 37, 47, 53, 61, 89 current-account balance 168 finances pre-crisis 30 GDP growth 32 influence 107 opt-outs 111, 139 public debt 159, 166 public opinion of EU 123 referendums 27, 28, 132 unemployment 159 Italy 2013 elections 107, 124, 126 bond yields 37, 61, 89 convergence criteria 17 current-account balance 168 danger of collapse 59 EMS exchange-rate mechanism 16 excessive deficit procedure 89 GDP growth 32 influence 100, 104, 107 interest rates 93 public debt 159, 166 public opinion of EU 123 single currency views 17 unemployment 159 J Jenkins, Roy 11 Jobbik 125 Juncker, Jean-Claude 98, 104, 177 candidate for Commission Presidency 131 EU 2005 budget crisis 28 Eurobonds 54 Eurogroup president 24 justice and home affairs (JHA) 139 K Karamanlis, Kostas 42 Karlsruhe constitutional court 45, 95, 128, 158 Kauder, Volker 105 Kerry, John 144 Kohl, Helmut 12, 18, 100 L labour markets 14, 33–34 Lagarde, Christine 51, 58, 62, 92 Laiki 86–88 Lamers, Karl 111 Lamont, Norman 17 Larosière, Jacques de 41, 74 Latin Monetary Union 9 Latvia 41, 65, 67, 88, 108 Lawson, Nigel 16 League of Catholic Families 125 legislative path 21–22 Lehman Brothers, ECB reaction to collapse 4 Letta, Enrico 107–108 Libya 143, 145 Lipsky, John 57 Lisbon treaty 28, 45, 194 foreign policy 142 institutions 20, 131 justice and home affairs (JHA) 139 subsidiarity 133 voting 20, 114 Lithuania 88, 113, 153 Long Term Refinancing Operations (LTRO) 68–70, 72 Luxembourg 77–78, 100, 108, 169 Luxembourg compromise 97 M Maastricht treaty 11–12, 15, 22, 142, 193 opt-outs and referendums 16, 110–111 MacDougall report (1977) 13, 169 Major, John 12, 111, 116 Malta 100, 112 Maroni, Roberto 34 Mayer, Thomas 1 McCreevy, Charlie 41 MEPs 20–21, 130 Merkel, Angela 2013 re-election 90 banking union 74–77 Cannes G20 summit (2011) 63–64 crisis response 40–41, 44 European constitution 28 fictitious memorandum to 1 future direction 178 power and influence 89, 102–106, 153 Sarkozy collaboration 60, 61–62, 102–103 support for Cyprus 86 support for Greece 5, 45, 49–52, 81–82 support for UK 118–119 union method 22, 128 voter support 125 Messina conference 8, 115 migration 139–140, 146, 147 Miliband, David 144 Mitterrand, François 11, 12, 18, 100 Mody, Ashoka 163 Moldova 149 Monnet, Jean 8, 152 Montebourg, Arnaud 104 Montenegro 147 Monti, Mario 64 influence 70, 75–76, 107 A New Strategy for the Single Market (2010) 137–138 Morocco 146 Morrison, Herbert 8 Morsi, Muhammad 145 Moscovici, Pierre 75 multi-annual financial framework 21, 27, 118 Mundell, Robert 12–13 mutualisation of debt 74, 103, 166–167 N national budgets 89, 125 National Front 124 NATO defence spending targets 145 European security 8 membership 110 Netherlands credit rating 77–78 excessive deficit procedure 89 influence 100, 108 ministerial accountability 133 UK sympathies 119 Nice treaty 194 no-bail-out rule 45, 162, 163–165 north–south divide 33–34, 108 Northern Rock 40 notes and coins 18 Nouy, Danièle 90 Nuland, Victoria 149 O Obama, Barack 63 official sector involvement (OSI) 83 OMT (outright monetary transactions) 79–81, 164, 175–176 Germany’s constitutional court judgment 95, 128 optimal currency-area theory 12–13, 14–15 Orban, Viktor 126 Osborne, George 117, 119 OSI (official sector involvement) 83 outright monetary transactions (OMT) 79–81, 164, 175–176 Germany’s constitutional court judgment 95, 128 P Pact for the Euro see Euro Plus Pact Papaconstantinou, George 43 Papademos, Lucas 64 Papandreou, George 56, 60 election 43 Greek referendum 61–62 resignation 2, 64 Party of Freedom 124 Poland 109, 113 Policy Exchange 1 political parties 124–125, 139–140 political union 10, 12, 133–134 Pompidou, Georges 10 Poos, Jacques 143 Portugal 110 bail-out 54, 57, 89–90 bond yields 37, 47, 53, 61, 89 public opinion of EU and euro 113 power, balance of 99–101 price stability goal of ECB 23 private-sector involvement (PSI) in debt restructuring 51–52 Prodi, Romano 17, 25, 97 Progressive Alliance of Socialists and Democrats (S&D) 130–131 public debt 15, 158–159 see also sovereign debt public opinion of EU and euro 121–124 Putin, Vladimir 149–150 Q qualified-majority voting 13, 20, 99, 121 negative qualified-majority voting 25, 195 quantitative easing (QE) 47, 15 R Rajoy, Mariano 70, 75–76, 127 recapitalisation, bank 58–59, 74–77, 84 redenomination 3–4, 153–154, 175 Reding, Viviane 139 referendums 27, 28, 121–122, 132 REFIT initiative 172 Regling, Klaus 26 Renzi, Matteo 107–108 rescue fund see European Stability Mechanism (ESM) resolution mechanism 90–91, 165, 195 single resolution mechanism (SRM) 195 single supervisory mechanism (SSM) 195 Romania 41, 108, 113, 124, 126, 147 Rome treaty 8, 97, 110, 193 Rösler, Philipp 78 Rueff, Jacques 9 Rumsfeld, Donald 143 Russia, influence on Ukraine 149–150 Rutte, Mark 77 S Samaras, Antonis 2, 78, 82, 93–94 Santer, Jacques 97 Sarkozy, Nicolas crisis response 40–41, 44 economic governance 49–50 European constitution 28 LTROs and the Sarkozy trade 69 Merkel collaboration 51–52, 60, 61–62, 102–103 Schäuble, Wolfgang 62, 75, 84, 90–91, 106, 111, 154 Schengen Agreement 110, 111–112 Schmidt, Helmut 11, 100 Schröder, Gerhard 18, 101, 127 Schulz, Martin 131 Schuman Day 8 Schuman, Robert 7–8 Scotland 112, 178 SDR (special drawing rights) 63 Securities Market Programme (SMP) 48, 79 services directive 34 Shafik, Nemat 65 Sikorski, Radek 109 Simitis, Costas 18 Simms, Brendan 179 single currency benefits 152 club within a club 112 driving forces 12–14 importance of 113 vision for 9 see also euro Single European Act 13, 193 single market 4, 137–138, 174–175 Sinn, Hans-Werner 101 six-pack 25, 50, 195 Slovakia 112 adoption of euro 41 influence 108 Slovenia 88–89, 112 influence 108 SMP (Securities Market Programme) 48, 79 snake in the tunnel 10 Solana, Javier 142 sovereign debt 165–166 see also public debt Spain 110 bail-out 70–73, 89 bank recapitalisation 84 bond yields 37, 89 CDS premiums 72 current-account balance 168 danger of collapse 59 excessive deficit procedure 89 finances pre-crisis 30 GDP growth 32 influence 107 public debt 159 public opinion of EU 123, 124 single currency views 17 unemployment 159 special drawing rights (SDR) 63 stability and growth pact 18, 24, 29, 50–51, 127, 194 Stark, Jürgen 59, 106 Steinbrück, Peer 43 Strauss-Kahn, Dominique 24, 44, 57 stress tests, bank 72, 175 subsidiarity 133, 141 Sweden 109, 111, 112 euro opt-out 18, 115 UK sympathies 119 Syria 145 Syriza 124 T Target II 157 Thatcher, Margaret 27, 110, 116 third energy package 136 Tilford, Simon 34 Tindemans, Leo 111 trade policy 138 Transatlantic Trade and Investment Partnership (TTIP) 138–139 treaty making and change 26–27, 173–174 Treaty of Amsterdam 111–112, 193 Treaty of Lisbon 28, 45, 194 foreign policy 142 institutions 20, 131 justice and home affairs (JHA) 139 subsidiarity 133 voting 20, 114 Treaty of Nice 194 Treaty of Rome 8, 97, 110, 193 Treaty on European Union (Maastricht treaty) 11–12, 15, 22, 142, 193 opt-outs and referendums 16, 110–111 Treaty on Stability, Co-ordination and Governance (TSCG) see fiscal compact treaty Tremonti, Giulio 54, 60 Trichet, Jean-Claude 151, 156 bond-buying 47–48, 52–53 crisis-management planning 2 early warnings 39–40 ECB president 23 IMF 44 Italy 59 True Finns 124 Turkey 132, 147, 148 Tusk, Donald 109, 114 two-pack 25, 89, 195 U UK Independence Party (UKIP) 118, 125, 140 Ukraine 149–150, 179–180 unemployment 158–159, 170 union method 19, 22 United Kingdom current-account balance 168 economic strengths and weaknesses 14 EMS exchange-rate mechanism 16 euro crisis reaction 117–118 euro membership 112 European budget contribution 27–28 European involvement 8, 10, 12, 115–119 future status 174–175 influence 100–101, 106, 109, 142–143 initial application to join EEC 9 opt-outs 110–111, 139 public opinion of EU 123 single currency views 17 United Left party 124 United States abandonment of gold standard 10 federalism model 177 foreign policy 143 performance compared with euro zone 154–155 Urpilainen, Jutta 77 V Van Gend en Loos v Nederlandse Administratie der Belastingen (1963) 21 Van Rompuy, Herman 98 crisis-management planning 3 Cyprus 87 European Council presidency 20, 28 Italy 63 roadmap for integration 74–75, 84, 173 support for Greece 43–45 Venizelos, Evangelos 57, 62 Verhofstadt, Guy 131 Véron, Nicolas 35 Vilnius summit 149 von Weizsäcker, Jakob 166 W Waigel, Theo 17–18 Wall Street flash crash 47 Weber, Axel 49, 56, 106 Weidmann, Jens 40, 80, 82 Weizsäcker, Jakob von 166 Werner report (1971) 10 Wilson, Harold 116 Wolfson Prize 1 World Bank 33 World Trade Organisation 138–139 Y Yanukovych, Viktor 149 Z Zapatero, José Luis Rodríguez 59, 62 Zollverein 9 PublicAffairs is a publishing house founded in 1997.


pages: 248 words: 57,419

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

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

The Other Money Makers It is important to remember that the Fed has not been alone in creating fiat money on a large scale in response to this crisis. The European Central Bank has increased its balance sheet (i.e., created euros) by 950 billion euros, or 80 percent since the crisis began (mid-2007). And the Bank of England has followed suit by growing its balance sheet by 164 billion pounds (206 percent). Even the International Monetary Fund has become a big-time fiat money creator. It expanded the amount of Special Drawing Rights (SDRs) (IMF money) in existence by a factor of ten, or roughly the equivalent of $280 billion, in the third quarter of 2009. The new SDRs were handed out to IMF member countries in proportion to their quotas (ownership stake) in the Fund and they served as a badly needed injection of global liquidity at a time when money was otherwise tight all around. The Fed, the ECB, and the BOE printed their own currencies and used the money to buy assets denominated in their own currencies.

Japan’s invasion of Asia and Germany’s occupation of Europe during the 1930s and 1940s resulted from the economic upheavals released by World War I and the Great Depression. If our credit-based economic system fails, a geopolitical cataclysm is sure to follow. The analysis I presented in my first two books was well received; my recommendations generally were not. In The Dollar Crisis, I proposed (1) a global minimum wage, structured to increase wages in the manufacturing sector by $1 per day each year; and (2) the use of IMF Special Drawing Rights (SDRs) to boost international liquidity when the crisis struck. Had the minimum wage proposal been adopted at that time, wage rates in the developing world would have practically tripled by now to $14 per day, thereby tripling the purchasing power of those workers near the bottom of the labor pyramid. The aggregate demand thus created would have offset the collapse in demand that resulted from the deflation of the U.S. property bubble.

solar initiative example Reagan, Ronald Rental property, in diversified portfolio Republican Party Reserve requirements: asset-based securities and government-sponsored entities and commercial banks and current Roosevelt, Franklin D. Rothbard, Murray Russia Saving and investment, in Mitchell’s theory of business cycles Savings and loan companies, credit supply and Schumpeter, Joseph Schwartz, Anna Jacobson Solar initiative, proposed Spain Special Drawing Rights (SDRs) Special purpose vehicles (SPVs), credit creation and Status quo option, for U.S. Stocks: in diversified portfolio quantitative easing and Switzerland Taiwan Tariffs: inflation and New Great Depression scenarios and Tax revenues: credit expansion’s effect on during Great Depression New Great Depression consequences and Theory of Money and Credit, The (von Mises) Time deposits, commercial bank funding and Total credit market debt (TCMD): contraction of by economic sector foreign central banks’ creation of fiat money and foreign exchange reserves in 2011 likely for 2012 major categories of sectors and changing percentages of debt Trade, generally.


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

Instead, investors have to choose between the debts of individual nation-states, of which the largest debtor is Italy. The yen suffers from the low interest rates in Japan and growing investor concern about the credit quality of Japanese government debt. The public debt will soon exceed 200 percent of GDP, and massive fiscal deficits will loom in the future. Greenwood does not regard the Special Drawing Rights (SDR) as a serious alternative to the dollar because there is no market for SDR securities. It is instead an accounting unit of the IMF, and all SDRs are deposited at the IMF. China has some preconditions for establishing a reserve currency, such as a large economy, but its capital markets are underdeveloped and the currency itself is not fully convertible, although there were some significant developments in the RMB’s liberalization process in the second half of 2010.

Feasible Alternatives to the US Dollar Having established the nine characteristics required of an international reserve currency, we may now ask what alternatives there might be to the US dollar, either now or in the medium-term future. Two broad categories are possible: (1) another existing national currency in widespread use, such as the euro, the Japanese yen, the British pound, or even the Chinese RMB; or (2) a synthetic currency designed for such a purpose, of which the Special Drawing Rights (SDR) would be the leading candidate, as was hinted at in March 2009 by Governor Zhou Xiaochuan of the People’s Bank of China.2 We will review the three main candidate currencies in turn, followed by the SDR, before considering the RMB. Existing National Currencies The euro has been available for payments and deposits since 1999, and it has been in circulation as a physical currency since 2002.

Given these shortcomings, a provisional conclusion is that despite the recent depreciation in the US unit—which may lead to some temporary diversification of reserves away from the US dollar—there is no other existing major national currency that is currently in a position to dislodge the US dollar from its preeminent role as “the” international reserve currency. Synthetic Currency: SDR or Other “Basket” The leading synthetic currency candidate is the Special Drawing Right issued by the IMF. The SDR is essentially a synthetic “basket” of currencies that is comprised of four existing currencies: the US dollar, the Japanese yen, the euro, and the British pound sterling. There are many problems with the use of a composite currency as an international reserve currency, and these problems apply to the SDR or any basket arrangement. They are as follows: 1. In international trade and financial transactions, settlement or payment is normally specified in an existing single, mutually agreed-upon currency, not in a synthetic currency.


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

David Boyle Andrew Simms List of Acronyms and Abbreviations CDCU CDFI CDO CEO CHP CND Democs DIY DTQ EBCU Escos GDP GM GPI HPI IMF IP ISEW km Lets LM3 m MDGs MDP MDR-TB mph nef NHS RESOLVE SDRs community development credit union community development finance institution collateralized debt obligation chief executive officer combined heat and power Campaign for Nuclear Disarmament deliberative meeting of citizens do-it-yourself domestic tradable quota emissions-backed currency unit energy service companies gross domestic product genetically modified Genuine Progress Indicator Happy Planet Index International Monetary Fund intellectual property Index of Sustainable Economic Welfare kilometre Local exchange and trading systems Local Money 3 metre Millennium Development Goals Measure of Domestic Progress multi-drug resistant tuberculosis miles per hour New Economics Foundation National Health Service Research Group on Lifestyles Values and Environment special drawing rights xii SERs SIV SROI T-bills TEQ TOES TRIPS WEEE THE NEW ECONOMICS special emission rights structured investment vehicle social return on investment Treasury bills tradeable emissions quota The Other Economic Summit Trade-Related Aspects of Intellectual Property Waste Electrical and Electronic Equipment (Directive) 1 The Economic Problem Man talks of a battle with nature, forgetting that if he won the battle, he would find himself on the losing side.

Back in 1922, Henry Ford and Thomas Edison teamed up to propose a more sophisticated system for financing projects in the public interest, whereby the Federal Reserve should create the money themselves, pay it back, and withdraw it from circulation as the loan was paid off.22 A third of the money to pay for the controversial public–private partnership to refurbish the London Underground in 2001 went to financial intermediaries, so this would make an immediate difference. The World Bank might also be more effective if it helped countries create their own money, sustainably and in their own currency, to finance projects, rather than by lending them money in foreign currency that inevitably seeps out of their economy again. Create new international currencies The creation of a new international currency called special drawing rights (SDRs) was 148 THE NEW ECONOMICS agreed at the Rio de Janeiro meeting of the IMF Board of Governors in September 1967. The IMF was given the authority to create more reserve assets through general allocations of SDRs to its members in proportion to their quotas. The SDRs are then exchangeable for other countries’ currencies that can be used as an international means of payment. There have been several proposals for reinvigorating SDRs in recent years for various purposes that range from reserve allocation to poverty reduction and the provision of global public goods.

(John Kenneth) 41, 51 gambling 14–15, 152 Gandhi, Mohandas (Mahatma) 18, 19, 21, 110, 112 Gates, Bill 141 Gates, Jeff 141–2 GDP (gross domestic product) 10, 32, 36–40, 42, 43, 54, 79 alternatives to 40–2, 43 bad measure of success 10, 37, 55, 78 INDEX global 141 UK 4 see also growth genetically modified crops see GM crops Germany 33, 50, 58 Gladwell, Malcolm 68 Global Barter Clubs 57, 58 global commons 113, 148 global currencies 56, 61, 120, 147–8 global greenback 61 global warming 3, 3–4, 115, 155 see also climate change globalization 8, 28, 143, 153 see also interdependence GM (genetically modified) crops 91, 117, 119, 140–1 Goetz, Stephan 124 gold standard 8, 143 Good Life, The (BBC sitcom) 69 goods, local 19, 109, 110 Goodwin, Fred 142 government borrowing 37–8, 49–50, 58, 62, 141 governments 2, 28, 116, 129, 158 creating money 58–9, 62, 90 propping up banking system 6, 7 Graham, Benjamin 120 Grameen Bank 26, 143–4, 153 Great Barrington (Massachusetts) 57, 151–2, 153 Great Depression 3, 36, 57 green bonds 157 green collar jobs 106, 157 Green Consumer Guide, The (Elkington and Hailes, 1988) 26, 69, 72 green economics 23, 100, 117 green energy 26, 97, 102–3, 114, 156, 157 Green New Deal 156–8 green taxation 153 greenhouse gas emissions 3–4, 115, 148 gross domestic product see GDP Gross National Happiness 43 growth 2, 11, 12–13, 23, 36–7, 38–40, 42, 43 185 bad measure of success 10, 158 maximizing 25 and poverty 4, 39–40, 81–2 and progress 39, 78 wealth defined in terms of 32 and well-being 4–5 see also GDP guilds 80, 80–1 happiness 12, 18, 29, 41, 43, 45–6 Happy Planet Index 32–3, 34, 43 Hard Times (Dickens, 1854) 36 HBOS 7 health 46, 72, 78, 96, 115, 129 health costs 117 healthcare 13, 33, 44 hedge funds 5, 7, 97, 120 Helsinki (Finland) 102 HIV/AIDS 70, 111, 135, 148 Honduras 139, 141 house prices 36, 46, 79, 83, 91, 126–7, 151 London 53, 54, 91 see also mortgages Howard, Ebenezer 105, 158 HSBC 5 human interaction 67–8, 74 human needs 20, 24, 67, 86 human rights 110–11, 116, 147 ill-health 35, 38, 46 ‘illth’ 29, 35 IMF (International Monetary Fund) 27, 82, 91, 135–6, 139, 143, 147, 147–8 incomes 24, 37, 43, 44, 78, 79, 81 and happiness 45–6 inequalities 37, 81, 82, 142 of poorest 4, 81, 82, 112, 142 Index of Sustainable Economic Welfare see ISEW India 82, 91, 110, 119, 136, 139–40, 153 indigenous knowledge 82, 117 inequality 4, 81–2, 96, 112–13, 116 inflation 8, 22, 58, 90 information technology 58, 59, 115 186 THE NEW ECONOMICS intellectual property 82, 91, 110, 113, 116, 117 interdependence 111–20, 135–8 Keynes on 19, 109, 110, 115, 143 see also globalization interest 8, 11, 11–12, 58, 77, 157 interest rates 144, 144–5 interest-free money 43, 73, 84, 90 intergenerational equity 25, 117 international bankruptcy 147 International Monetary Fund see IMF investment 14, 45, 53, 60, 104, 118, 137–8 ethical 26, 69–70, 74, 154 involvement 71, 75, 128–30 Iraq 49, 60, 136 ISEW (Index of Sustainable Economic Welfare) 40–1, 43, 78 Islamic banking 58, 90, 146 islands, small 31–2, 33–4 Italy 33, 119–20, 138 Ithaca hours currency 57, 58 It’s a Wonderful Life (film, Capra, 1946) 38 Jacobs, Jane 56, 110, 126 Jaffe, Bernie 126 Japan 26, 50, 91, 113, 119, 128 Jefferson, Thomas 18, 20 Jersey 52, 53 Jones, Allan 103 Jubilee Debt campaign 137 junk bonds 1, 142–3 just-in-time 123–4, 155 Keynes, John Maynard 2, 13–14, 15, 17, 21, 37, 55 on interdependence 19, 109, 110, 115, 143 international currency 61, 120 on local production 19, 109, 110 on ‘practical men’ as ‘slaves of some defunct economist’ 10, 35, 67, 87, 159 Keynesian economics 8, 18, 22, 27, 28 Kinney, Jill 130 Knowsley (Merseyside) 104 Kropotkin, Peter 18 Krugman, Paul 52 land 19, 82, 96 land tax 43 landfill 97, 98, 100, 107 Layard, Richard 41 Lehigh Hospital (Pennsylvania) 129 Letchworth Garden City (Hertfordshire) 105 lets (local exchange and trading systems) 57 liberalism 18, 19, 27 Lietaer, Bernard 56, 61, 120 life 19, 29, 55, 69, 86, 91 need for meaning 42, 75 life expectancy 31, 32–3, 82 life poverty 82–3 life satisfaction 31, 33, 41, 42 Lima (Peru) 130–1 Linton, Michael 57, 58 Living Economy, The (Ekins, 1986) 24–5 LM3 (Local Money 3) 60, 104–5 loans see debt Local Alchemy programme 152–3 local circulation of money 103–5, 107, 124, 151–2 local currencies 26, 56, 57, 58, 59, 60, 151–2, 153 local economies 26, 81, 85, 86, 105–7, 118, 124, 133 local exchange and trading systems (lets) 57 local food 2, 118, 119–20, 151 local governments 6, 44, 60 local life 4, 81, 158 Local Money 3 see LM3 local production 109, 116, 118 local savings schemes 61 local shops 75, 82–3, 104, 124, 124–5, 126, 151 supermarkets and 80, 105, 125 local wealth 14, 53–4 localization 155–6, 159 London 52, 53, 61, 97, 102, 103 house prices 53, 54, 91 traffic speed 65–6 INDEX London Underground 147 Lutzenberger, Jose 26 Macmillan Cancer Care 88–9 McRobie, George 22, 24 mainstream 4–5, 26, 154, 159–60 see also economics Malawi 135–6, 137 Malaysia 51 Manchester United 155 manipulated debt 139–41 markets 10, 12, 51, 70, 158 financial 1–2, 52, 53, 55, 138, 154–5 free 22, 85, 112–13 new economics and 67, 72–5, 85 Marsh Farm estate (Luton) 104–5, 152–3 Maslow, Abraham 67 materialism 12, 46–7 Max-Neef, Manfred 24 Maxwell, Robert 143 MDGs (Millennium Development Goals) 39, 136 Mead, Margaret 129 meaning, need for 42, 75 measurement problem 36–40 measuring 12, 42, 55, 85 success 2, 8, 10, 43, 44, 55, 154, 156, 158 value 10, 15, 29, 53, 59, 115 wealth 32, 37–40, 53–4 well-being 4, 18, 32–3, 34, 43 mechanics, Cuban 95–6, 97 medieval economics 78–80, 80–1 mega-rich 120, 141, 142 mental health 4, 35, 36, 46, 68, 83 Merck 99 micro-credit 26, 143–4, 145, 146, 151, 153 Milkin, Michael 142 Millennium Development Goals see MDGs minimum wage 92 misery, of UK young people 35–6 Mishan, E.J. 40 Mogridge, Martin 65–6, 74 Mondragon (Spain), cooperatives 153 money 8, 11, 13, 18, 27, 29, 36, 95 187 as a bad measure 10, 15, 18, 53, 59, 90, 143, 154 creating 7, 56–7, 58–9, 84, 90, 120, 138, 147 designed for money markets 53 economics and 25, 127 externalities 35 and life 55, 86, 154, 159 local circulation 103–5, 107, 124, 151–2 means to an end 15 new economics view 15, 59–60, 89 new ways of organizing 56–60 re-using 103–5 replacing with well-being 42 slowing down 51–2, 60 too little 57 types of 14–15, 57, 59, 120 and value 10, 15, 53, 59 and wealth 15, 19, 32, 38, 78 and well-being 18, 21, 81 see also GDP; growth; price; trickle down money flows 26, 50–2, 60, 103–5, 107, 124, 136–8 money markets 1–2, 52, 53, 55, 138, 154–5 money poverty 81–2 money system 7–8, 50–6, 60 monopolies 8, 20, 83, 84–6, 89–90, 125–6, 133, 146 Monsanto 85, 140 moral philosophy 12, 19, 72–3 morality 8, 18, 28, 74, 115 economics and 12, 19, 22 Morris, William 18, 78, 151 mortgages 1, 4, 5–6, 6, 7, 46, 91 working to pay 46, 68, 73, 77–8, 79, 81, 83, 84, 89, 126–7, 140 see also house prices motivations 4–5, 11, 67–9, 70, 71, 72, 73, 75 multinationals 14, 61, 84–5, 90, 137–8, 139, 143 multiple currencies 58, 59–60, 60, 90 multiplier effect 103–5 Murdoch, Rupert 52 188 THE NEW ECONOMICS Myers, Norman 117 Nanumaea (Tuvalu) 34 national accounting 37–8, 38–9 national debt 49–50, 83, 84, 139, 141 national grid 102, 106 National Health Service see NHS natural capital 3, 99 natural resources 22, 40, 43, 84, 97–8 needs 20, 24, 25, 67, 75, 86 basic 25, 89, 91–2, 115 nef (the new economics foundation) 24, 26, 45, 71, 104, 131–2, 145 Local Alchemy programme 152–3 see also Happy Planet Index; LM3 ‘neo-liberal’ policies 8, 27–8 Nether Wallop (Hampshire) 80, 81 The Netherlands 58, 106, 138 New Century 5 New Deal for Communities 152 New Deal (US) 157 new economics 2–3, 9–10, 18–19, 28–9, 59, 153–4, 159–60 Cuba as object lesson 96–7 history of 9–10, 18–19, 21–7 and the mainstream 26 as new definition of wealth 15 principles 35, 157–8 new economics foundation see nef New York City 52, 128 News Corporation 52 NHS (National Health Service) 87, 114, 131 Northern Rock 6 Nottingham 35 Nu-Spaarpas experiment 106 Obama, Barack 154, 157 obsolescence, built-in 98, 100, 101 odious debt 146 offshore assets 136–7 offshore financial centres 52–3, 61 oil 3, 96, 115, 117, 155 Oil Legacy Fund 157 orchards 111, 112, 115, 124 organic food 26 Ostrom, Elinor 127 out-of-town retailing 75, 80, 123, 132 overconsumption 32, 40, 44, 113 Owen, Robert 57 ownership 11, 46, 60, 91, 118, 156 paid work 87–9, 92 palm oil 112 Partners in Health 130–1 peak oil 3, 96, 117, 155 Pearce, David 25–6, 98, 115 Peasants’ Revolt (1381) 18 pensions 7, 44, 61, 73, 155 people, as assets 15, 57–8, 128–9, 130, 131 permit trading 45, 117–18, 148 personal carbon allowances 45, 117–18 personal debt 7, 36, 83–4, 91, 140, 141 Petrini, Carlo 119–20 Pettifor, Ann 135, 137 philanthropy 130, 133 policy makers 28, 35, 73, 87, 90 assumptions of 67, 68, 73, 128 Keynes on 10, 35, 67, 87, 159 political agenda 42–7 politicians 11, 54, 159 politics, new 159 pollution 10, 35, 37, 40, 98, 112, 114 by GM genes 91, 117, 119 poor 29, 145–6 Porritt, Jonathon 23 post-autistic economics 9–10, 71–2 poverty 4, 23, 35, 79–80, 81–2, 127 economic system and 13–14, 18, 29, 81–2, 154 interdependence leading to 111–15 reduction 39–40, 51–2, 61, 116, 124–5 poverty gap 4, 52–3, 78, 82 power 10, 12, 25, 28, 53, 141–2 corporate 20, 28, 85 monopoly power 83, 89–90, 125–6, 146 power relationships 29, 114 price 10, 67, 72, 73, 115, 153 Price, Andrew 132 INDEX prices 80, 156, 158 Pritchard, Alison 23 product life cycle 97–8, 101 professionals 130, 132, 133, 159 profits 12, 13, 99 progress 36, 37–8, 39, 43, 44, 77–8, 81–2, 84 Proudhon, Pierre-Joseph 120 psychology, economics and 67–8, 71, 72–3 public goods 148 public sector commissioning 131–2, 133 public services 45, 74, 127–32, 158 public transport 66, 74 ‘purchasing power parity’ 81 Putnam, Robert 126–7, 127–8 189 retirement 46, 73 see also pensions rewarded work 88 rewards 7, 8, 11, 25, 92, 141, 142 roads 66, 115 Robertson, James 17, 22, 23, 55, 145 Rockefeller, John D. 28 Roman Catholic church 19, 21, 117 Roosevelt, Eleanor 96 Roosevelt, Franklin Delano 157 Rotterdam (The Netherlands) 106 rubbish 97–105 Rupasingha, Anil 124 Rushey Green surgery (London) 131 Ruskin, John 17–18, 18, 29, 35, 78, 81 Russia 110 qoin system 58 rainforests 4, 10, 111, 112 ‘rational man’ assumption 10, 71 RBS 142 re-use 97, 99, 100–5 Reagan, Ronald 22, 27 real money, generating 120 ‘real’ wealth 2, 32, 36–40 reciprocity 44, 128, 128–30, 133 see also co-production recycling 97, 98, 100–1, 105–6, 106–7 redistribution 19, 27, 52, 96 regeneration 27, 104, 105, 107, 116, 124, 128 regional currencies 58, 59, 60 regulation 129, 156 competition 85, 113, 125, 126, 133 financial sector 53, 85, 157 relationships 4, 69, 83, 128–30 remittances 137 Rendell, Matt 33 renewable energy 26, 97, 102, 102–3, 114, 156, 157 repair 97, 98, 101, 105, 107 resources 32, 43, 97–8, 99, 100–1, 114, 158 local 25, 115 natural 22, 40, 43, 84, 97–8 St Louis (Missouri) 131 Samoa 34 Sane (South African New Economics) 58 saving seeds 91, 117, 119, 141 savings 7, 46, 73, 90, 157 schools 131 Schor, Juliet 83 Schumacher, E.F. (Ernst Friedrich, ‘Fritz’) 1, 18, 21–2, 27, 114, 117 SDRs (special drawing rights) 147–8 Seattle (Washington) 41 seeds 91, 117, 119, 140, 141 seigniorage 58–9 Sen, Amartya 12 SERs (special emission rights) 148 set prices 80 sharing 34, 44, 91, 119, 140 shopping 26, 80, 82–3, 104, 105, 125, 133 shops 20 local 75, 80, 82–3, 104, 105, 124, 124–5, 126, 151 see also out-of-town retailing; supermarkets short-termism 11, 13, 14–15 SIVs (structured investment vehicles) 1, 5–6, 6 skills 13, 60, 98, 100, 101, 105, 132 190 THE NEW ECONOMICS Slow Food 118, 119–20 Small is Beautiful (Schumacher, 1977) 1, 21 small islands 31–2, 33–4 small-scale banks 146 Smith, Adam 89 social auditing 26, 45, 153–4 social banks 144, 146 social capital 19, 33, 54–5, 86–7, 89, 126–7, 132 Wal-mart and 124–5 social credit 19, 58, 59, 90 social networks 36, 127, 132 social norms 67–8, 71 social relationships 34, 45 social return on investment (SROI) 45 Soros, George 51, 148 South Africa 136 South African New Economics (Sane) 58 South Shore Bank (Chicago) 144 sovereignty 55, 113 special drawing rights (SDRs) 147–8 special emission rights (SERs) 148 speculation 22, 53, 81, 82, 84, 146, 158 deterring 51–2, 60, 61 financial 7, 15, 50–1, 51–2, 61 spirituality 4–5, 18, 21–2, 75, 79, 81 SROI (social return on investment) 45 Stamp Out Poverty 61 Starkey, Richard 118 state 12–13, 28, 155 see also governments steady-state economy 43, 44 Stern Report (Stern, 2006) 155 Stiglitz, Joseph 61 stress 4, 35, 37, 83 structured investment vehicles see SIVs sub-prime loans 1, 5–7, 144 sub-Saharan Africa 82 ‘subsidiarity’ 117 subsidies 11, 82, 112, 113, 117, 119, 123–4 success 79–80, 89 measuring 2, 8, 10, 43, 44, 55, 154, 156, 158 suicides 83, 91, 140 super rich 120, 141, 142 supermarkets 80, 85, 90, 104, 105, 123–6, 129 sustainability 24, 73, 89, 113, 114, 116, 117 sustainable development 51–2, 61 Swann, Bob 120, 151 Sweden 102 Swift, Jonathan 18 Switzerland 52, 62 T-bills (Treasury bills) 49–50, 58 takeovers 84, 142, 143 talent system 58 targets 9, 41, 129 tariffs 113 tax havens 15, 52–3, 53, 61, 136, 157 Tax Justice Network 136–7 taxation 73, 92, 116 taxes 10, 15, 27, 32, 43, 62, 136–7 paid by corporations 52, 61, 137, 157 TB (tuberculosis) 130, 148 TEQs (tradeable energy quotas) 117–18 terra (currency) 56, 61, 120 Tesco 85, 116, 125 Thatcher, Margaret 21, 22, 23, 27 The Other Economic Summit see TOES Thoreau, Henry David 69 time 44, 45–6, 60, 103, 132 time banks 58, 59, 60, 89, 92, 123, 131, 132 Titmuss, Richard 65, 70 Tobin, James 51–2 Tobin Levy 51–2, 61 TOES (The Other Economic Summit) 23–5 Toffler, Alvin 88 trade 25, 81, 109–10, 111–15, 116, 148, 158 fair trade 26, 119, 145, 153 Trade-Related Aspects of Intellectual Property see TRIPS tradeable energy quotas (TEQs) 117–18 traffic speed 65–6, 74 transport 67, 74, 112, 115 see also public transport Treasury bills (T-bills) 49–50, 58 INDEX trickle down 27–8, 39–40, 138 ‘doesn’t work’ 27, 52, 104 TRIPS (Trade-Related Aspects of Intellectual Property) agreement (1995) 113, 117 tuberculosis (TB) 130, 148 Turning Point network 23 UK (United Kingdom) 4, 39, 55, 61, 70, 85, 119, 145 aid from 136 corporation tax gap 137 cultural enrichment 111 debt 83, 141 Ecological Debt Day 114 energy 102, 114 food production 96, 114 Happy Planet Index 32 ‘illth’ 4, 35 interest rates 144–5 local savings schemes 61 money deposits 136 orchard loss 111, 112, 115, 124 poverty 82 real costs of road transport 115 super-casinos 14 trade 112, 113 well-being 4, 35–6, 41, 68 working hours 68 young people in 35–6 see also house prices Ukraine 110 UN (United Nations) 39, 51–2, 60, 91, 110–11, 157 unemployment 44, 46, 55–6, 91–2, 157 unpaid work 87–9 Unto This Last (Ruskin, 1860) 18, 29 USA (United States) 39, 57, 61, 82, 113, 119, 127, 157 and Cuba 95 debt 49–50, 84, 141 Happy Planet Index 32 invasion of Iraq (2003) 49, 60 subsidies 11, 113 trade deficit 50 191 unemployment 55 well-being deteriorating 41, 68 usury 80, 81, 144–5 value 44, 98, 99 measuring 10, 15, 29, 53, 59, 115 values 11, 71, 115, 127 Vanuatu 31–2, 35, 42 Vaxjo (Sweden) 102 vegetable box schemes 104 ‘victory gardening movement’ 96 Virgil, Eclogues 110 voluntary sector 13, 87, 132, 145 voting 124–5, 127 Wal-mart 104, 123, 124–5 Wall Street Crash (1929) 1, 51, 90 Waring, Marilyn 38–9 Washington Consensus 27–8 waste 97, 100–1, 158 Waste Electrical and Electronic Equipment directive see WEEE directive wealth 18, 28, 38, 41–2, 52, 89, 141–2, 152 defining 18–19, 32, 34, 35, 38 and ‘illth’ 29, 35–6 local 14, 53–4 measuring 32, 36–40, 53–4, 143 money and 19, 32, 38, 78, 143 new economics and 3, 15, 35, 37 real 2, 32, 37–40 see also Happy Planet Index WEDGE project 23 WEEE (Waste Electrical and Electronic Equipment) directive 98, 100, 101 welfare 25, 28, 44, 127, 129, 153 Welfare State 19, 129 well-being 4–5, 25, 45–6, 99, 158 demand for 4–5, 11, 68–9 falls in 4, 37, 41, 68, 78 GDP and 4, 36, 37 measuring 4, 18, 32–3, 34, 43 money and 18, 21, 81 as motivation 4–5, 11, 68–9, 72 new economics and 41–7, 68–9 192 THE NEW ECONOMICS origins of 43 willingness to pay 99 Willington, Sally 23 Wir currency 62 Witt, Susan 151 Woking (Surrey) 102–3 women 38–9, 77–8, 79, 83, 144 work 24, 45, 81, 84–5, 86–7, 92 concept of 25, 83, 86, 87–9 to pay mortgages 46, 68, 73, 77–8, 79, 81, 83, 84, 89, 126–7, 140 of women 38–9, 77–8, 83 working hours 45–6, 78, 79, 83, 92 World Bank 27, 81, 82, 91, 137, 139, 143, 147 Yank Tanks (film, Schendel, 2002) 95 young people, UK 35–6 youth courts 129, 132 Yunus, Mohammed 143–4 Zimbabwe 32 Zurich (Switzerland) 66


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

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

The bank makes much of its money from the fees and commissions that it charges central banks for its services, such as short-term liquidity and credit, gold swaps, and by providing a range of investment opportunities and instruments. The BIS is a much sought after commercial partner. Its record is solid and conservative, its credit rating superb. In Basel at least, the crisis has, overall, been good for business. For the financial year ending in March 2009 the bank made net, tax-free, profits of 446.1 million Special Drawing Rights, the equivalent of around $650 million.2 Its total equity was valued at the equivalent of almost $20 billion.3 By the end of March 2012, profits had nearly doubled, to the equivalent of around $1.17 billion—almost $100 million a month—and the bank’s total equity had increased by 40 percent to around $28 billion.4 These are extraordinary sums for a single financial institution with just 140 clients and two local offices, in Mexico City and Hong Kong.

They fuel the peculiar arrogance of much of its senior management. The bank claims to have a mission of public service, yet is structured in such a way that the public is kept as distant as possible, behind the bank’s wall of legal immunities. Such a change would demand an Extraordinary General Meeting (EGM). There is a precedent here. In recent years, EGMs were called to change the bank’s unit of account from the gold franc to the Special Drawing Right, to forcibly buy back the shares held in private hands, and to distribute the shares held by the former Yugoslavia to its successor states. Voting is decided at EGMs by member central banks. If the governors and officials of the member central banks were mandated by their national governments to vote for the change and modernization, the bank would have to accede to the changes. Thirdly, such an EGM could also mandate the bank to spend some of its profits on corporate social responsibility and philanthropy.

Author interview with Dean Baker, in Washington, DC, May 2012. 33. Ibid.. 34. Author interview with Stephen Cecchetti, e-mail to author, December 19, 2012. CHAPTER SIXTEEN: THE CITADEL CRACKS 1. Rabbi Nosson Scherman, The Chumash: The Torah, Haftoras and Five Megillos With a Commentary Anthologised from the Rabbinic Writings (NY: Mesorah Publications, 2001), 49. 2. The BIS replaced the gold franc with the Special Drawing Right (SDR) as its unit of account in 2003. The SDR is not a currency but an international reserve asset and is based on a basket of major currencies: the euro, Japanese yen, British pound, and the US dollar. In January 2013 one SDR was equivalent to $1.53. 3. Profit and loss account for the financial year ended March 31, 2009, BIS 79th Annual Report, 182,183. 4. Profit and loss account for the financial year ended March 31, 2012, BIS 82nd Annual Report, 135. 5.


pages: 275 words: 77,017

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

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

See also individual countries Schmidt, Eric Science journal Scotland SDR. See Special Drawing Rights Secret Service Secrets of the Temple: How the Federal Reserve Runs the Country (Greider) Securency printing firm in Australia Security issues. See also Paper money: security issues for Seigniorage Serios Shanghai Sharma, Lakhnlal Shegenov, Gaziz Siberia Sigurdsson, Jón Silver silver $1 American Eagle silver quarters See also Gold: gold/silver bugs; Liberty Dollar Simmel, Georg Singapore Single Global Currency Association Sinha, Abhishek 6D Technologies Slavery Smart banknotes Smartcards Smartphones. See also Cellphones Smith, Adam Smith, Richard Smoking Dragon (undercover investigation) SMS messages Smugglers Snipes, Wesley Social networking Somaliland South Korea Spain Spanish Empire Special Drawing Rights (SDR) Specializations Squibb, Stephen Stability.

Backers of a single Earth currency envision a great smoothing of transactions, an end to damaging currency speculation, and less economic turmoil, which could mean greater prosperity for all.18 While Esperanto struggles for credibility, some economists seriously consider how a one-world currency might happen, albeit in a highly theoretical future.19 One idea is for this new currency to be an expanded version of something that already exists: Special Drawing Rights. SDR is really a crossbreed of four of the world’s most significant currencies, and it’s used for particular kinds of settlements at the IMF. Perhaps the SDR is the embryo of a new global currency. Not that this would be a geopolitical walk in the park. “No global government . . . means no global central bank, which means no global currency. Full stop,” says UC Berkeley economist Barry Eichengreen .20 And a world government, lest we forget, is an apocalyptic prospect to a hell of a lot of people.


pages: 710 words: 164,527

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

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

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

Reprinted in Rueff (1972:72). 12. Rueff (1972:76). 13. Rueff and Triffin gave a joint interview on the inevitability of a dollar crisis that was published in the London Sunday Times on July 3, 1966, and the Paris l’Aurore the following day (reprinted in Rueff [1972:107–114]). 14. Triffin (1960:91–93). 15. Rueff (1972:41). 16. Rueff (1972:95, 143). Rueff was referring specifically to the IMF’s later Special Drawing Right in his “nothingness” reference, but the term certainly applied in his mind to Keynes’s bancor, Edward Bernstein’s composite reserve units (CRU), and other variations on fiat international reserve issues. 17. Triffin (1960:146). 18. For an up-to-date historical account of SDRs, albeit one with an atypically positive gloss, see Wilkie (2012). 19. James (1996:211–220). 20. Silver too had played an important monetary role throughout history, as in China until the 1930s (see chapter 3). 21.

Harry Dexter White Archives, Princeton University, Box 9, Folder 18. ———. Undated. Stabilization and International Trade. Harry Dexter White Archives, Princeton University, Box 4, Folder 1. White, Nathan I. 1956. Harry D. White—Loyal American. (Privately printed by Bessie White) Bloom, Waban, Mass. White Archives: See individual items, listed by date, under White, Harry Dexter. Wilkie, Christopher. 2012. Special Drawing Rights: The First International Money. New York: Oxford University Press. Witteveen, Johannes. Jan. 15, 1974. “The Role of the International Monetary Fund.” Address to the World Banking Conference, London. Xinhua News Agency. Aug. 6, 2011. “After Historic Downgrade, U.S. Must Address Its Chronic Debt Problems.” Young, Arthur N. 1963. China and the Helping Hand, 1937–1945. Cambridge, Mass: Harvard University Press.


pages: 369 words: 94,588

The Enigma of Capital: And the Crises of Capitalism by David Harvey

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accounting loophole / creative accounting, anti-communist, Asian financial crisis, bank run, banking crisis, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, call centre, capital controls, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, deskilling, equal pay for equal work, European colonialism, failed state, financial innovation, Frank Gehry, full employment, global reserve currency, Google Earth, Guggenheim Bilbao, illegal immigration, indoor plumbing, interest rate swap, invention of the steam engine, Jane Jacobs, joint-stock company, Joseph Schumpeter, Just-in-time delivery, land reform, liquidity trap, Long Term Capital Management, market bubble, means of production, megacity, microcredit, moral hazard, mortgage debt, new economy, New Urbanism, Northern Rock, oil shale / tar sands, peak oil, place-making, Ponzi scheme, precariat, reserve currency, Ronald Reagan, sharing economy, Silicon Valley, special drawing rights, special economic zone, statistical arbitrage, structural adjustment programs, the built environment, the market place, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, Thorstein Veblen, too big to fail, trickle-down economics, urban renewal, urban sprawl, white flight, women in the workforce

However, the war in Vietnam and the ‘Great Society’ anti-poverty programmes of the 1960s (a strategy of ‘guns and butter’, as it was said at the time) led to a crisis of the dollar after 1968 or so. It was around this time also that US corporations began to take their surplus capital abroad. Surplus dollars, outside of US control, were accumulating within the European banking system. Belief in the fixed exchange rate of the dollar against gold began to erode. But what was to replace it? Keynes’ idea of a neutral global currency in the form of ‘special drawing rights’, based on the value of five major currencies and managed by the IMF, was revived in 1969. But this threatened US hegemony. A more acceptable solution to the US, worked out in a series of complicated international accords between 1968 and 1973, was for the fixed exchange rate with gold to be abandoned. All the major currencies of the world would then float against the dollar. While this introduced both flexibility and volatility into the international trading system, the global reserve currency remained under US control.

The US has been borrowing at the rate of around $2 billion a day for several years now and while the lenders – such as Chinese and other East Asian Central banks along with those of the Gulf States – have so far kept lending because the US economy is far too big to fail, the increasing power of the lenders over US policy is palpable. Meanwhile, the position of the dollar as the global reserve currency is threatened. The Chinese have resurrected Keynes’ original suggestion and urged the creation of a global currency of special drawing rights to be managed by a presumably democratised IMF (in which the Chinese would have an important voice). This threatens US financial hegemony. The end of the Cold War has also rendered military protection against the communist menace irrelevant, even as the ex-Soviet Bloc countries, along with China and Vietnam by very different paths, have become integrated into the global capitalist economic system.

.: Limits to Growth 72 meat-based diets 73, 74 Medicare 28–9, 224 Mellon, Andrew 11, 98 mercantilism 206 merchant capitalists 40 mergers 49, 50 forced 261 Merrill Lynch 12 Merton, Robert 100 methane gas 73 Mexico debt crisis (1982) 10, 19 northern Miexico’s proximity to the US market 36 peso rescue 261 privatisation of telecommunications 29 and remittances 38 standard of living 10 Mexico City 243 microcredit schemes 145–6 microeconomics 237 microenterprises 145–6 microfinance schemes 145–6 Middle East, and oil issue 77, 170, 210 militarisation 170 ‘military-industrial complex’ 91 minorities: colonisation of urban neighbourhoods 247, 248 Mitterrand, François 198 modelling of markets 262 modernism 171 monarchy 249 monetarism 237 monetisation 244 money centralised money power 49–50, 52 a form of social power 43, 44 limitlessness of 43, 47 loss of confidence in the symbols/quality of money 114 universality of 106 monoculture 186 Monopolies Commission 52 monopolisation 43, 68, 95, 113, 116, 221 Monsanto 186 Montreal Protocol (1989) 76, 187 Morgan Stanley 19 Morishima, Michio 70 Morris, William 160 mortgages annual rate of change in US mortgage debt 7 mortgage finance for housing 170 mortgage-backed bonds futures 262 mortgage-backed securities 4, 262 secondary mortgage market 173, 174 securitisation of local 42 securitisation of mortgage debt 85 subprime 49, 174 Moses, Robert 169, 171, 177 MST (Brazil) 257 multiculturalism 131, 176, 231, 238, 258 Mumbai, India anti-Muslim riots (early 1990s) 247 redevelopment 178–9 municipal budgets 5 Museum of Modern Art, New York 21 Myrdal, Gunnar 196 N Nandigram, West Bengal 180 Napoleon III, Emperor 167, 168 national debt 48 National Economic Council (US) 11, 236 national-origin quotas 14 nationalisation 2, 4, 8, 224 nationalism 55–6, 143, 194, 204 NATO 203 natural gas 188 ‘natural limits’ 47 natural resources 30, 71 natural scarcity 72, 73, 78, 80, 83, 84, 121 nature and capital 88 ‘first nature’ 184 relation to 121, 122 ‘the revenge of nature’ 185 ‘second nature’ 184, 185, 187 as a social product 188 neocolonialism 208, 212 neoliberal counter-revolution 113 neoliberalism 10, 11, 19, 66, 131, 132, 141, 172, 175, 197, 208, 218, 224, 225, 233, 237, 243, 255 Nepal: communist rule in 226 Nevada, foreclosure wave in 1 New Deal 71 ‘new economy’ (1990s) 97 New Labour 45, 255 ‘new urbanism’ movement 175 New York City 11 September 2001 attacks 41 fiscal crisis (1975) 10, 172, 261 investment banks 19, 28 New York metropolitan region 169, 196 Nicaragua 189 Niger delta 251 non-governmental organisations (NGOs) 35, 253–4 non-interventionism 10 North Africa, French import of labour from 14 North America, settlement in 145 North American Free Trade Association (NAFTA) 200 Northern Ireland emergency 247 Northern Rock 2 Norway: Nordic cris (1992) 8 nuclear power 188 O Obama, Barack 11, 27, 34, 210 Obama administration 78, 121 O’Connor, Jim 77, 78 offshoring 131 Ogoni people 251 oil cheap 76–7 differential rent on oil wells 83 futures 83, 84 a non-renewable resource 82 ‘peak oil’ 38, 73, 78, 79, 80 prices 77–8, 80, 82–3, 261 and raw materials prices 6 rents 83 United States and 76–7, 79, 121, 170, 210, 261 OPEC (Organisation of Oil-Producing Countries) 83, 84 options markets currency 262 equity values 262 unregulated 99, 100 Orange County, California bankruptcy 100, 261 Organisation for Economic Cooperation and Development (OECD) 51 organisational change 98, 101 organisational forms 47, 101, 121, 127, 134, 238 Ottoman Empire 194 ‘over the counter’ trading 24, 25 overaccumulation crises 45 ozone hole 74 ozone layer 187 P Pakistan: US involvement 210 Palley, Thomas 236 Paris ‘the city of light’ 168 epicentre of 1968 confrontations 177, 243 Haussmann’s rebuilding of 49, 167–8, 169, 171, 176 municipal budget crashes (1868) 54 Paris Commune (1871) 168, 171, 176, 225, 243, 244 Partnoy, Frank: Ubfectious Greed 25 patents 221 patent laws 95 patriarchy 104 pensions pension funds 4, 5, 245 reneging on obligations 49 Péreire brothers 49, 54, 98, 174 pesticides 185, 186, 187 petty bourgeois 56 pharmaceutical sector 129, 245 philanthropy 44 Philippines: excessive urban development 8 Phillips, Kevin 206 Pinochet, General Augusto 15, 64 plant 58 Poland, lending to 19 political parties, radical 255–6 politics capitalist 76 class 62 co-revolutionary 241 commodified 219 depoliticised 219 energy 77 identity 131 labour organizing 255 left 255 transformative 207 pollution air 77 oceanic 74 rights 21 ‘Ponts et Chaussées’ organisation 92 Ponzi schemes 21, 114, 245, 246 pop music 245–6 Pope, Alexander 156 population growth 59, 72, 74, 121, 167 and capital accumulation 144–7 populism 55–6 portfolio insurance 262 poverty and capitalism 72 criminalisation and incarceration of the poor 15 feminisation of 15, 258 ‘Great Society’ anti-poverty programmes 32 Prague 243 prices commodity 37, 73 energy 78 food grain 79–80 land 8, 9, 182–3 oil 8, 28, 37–8, 77–8, 80, 82–3, 261 property 4, 182–3 raw material 37 reserve price 81–2 rising 73 share 7 primitive accumulation 58, 63–4, 108, 249 private consortia 50 private equity groups 50 private property and radical egalitarianism 233, 234 see also property markets; property rights; property values privatisation 10, 28, 29, 49, 251, 256, 257 pro-natal policies 59 production expansion of 112, 113 inadequate means of 47 investment in 114 liberating the concept 87 low-profit 29 offshore 16 production of urbanisation 87 reorganisation and relocation of 33 revolutionising of 89 surplus 45 technologies 101 productivity agreements 14, 60, 96 agricultural 119 cotton industry 67 gains 88, 89 Japan and West Germany 33 rising 96, 186 products development 95 innovation 95 new lines 94, 95 niches 94 profit squeeze 65, 66, 116 profitability constrains 30 falling 94, 131 of the financial sector 51 and wages 60 profits easy 15 excess 81, 90 falling 29, 72, 94, 116, 117 privatising 10 rates 70, 94, 101 realisation of 108 proletarianisation 60, 62 property markets crash in US and UK (1973–75) 8, 171–2, 261 overextension in 85 property market-led Nordic and Japanese bank crises 261 property-led crises (2007–10) 10, 261 real estate bubble 261 recession in UK (after 1987) 261 property rights 69, 81–2, 90, 122, 179, 198, 233, 244, 245 Property Share Price Index (UK) 7 property values 171, 181, 197, 248 prostitution 15 protectionism 31, 33, 43, 211 punctuated equilibrium theory of natural evolution 130 Putin, Vladimir 29, 80 Q Q’ing dynasty 194 quotas 16 R R&D (research and development) 92, 95–6 race issues 104 racism 61, 258 radical egalitarianism 230–34 railroads 42, 49, 191 Railwan, rise of (1970s) 35 rare earth metals 188 raw materials 6, 16, 37, 58, 77, 101, 113, 140, 144, 234 RBS 20 Reagan, Ronald 15, 64, 131, 141 Reagan-Thatcher counter revolution (early 1980s) 71 Reagan administration 1, 19 Reagan recession (1980–82) 60, 261 Real Estate Investment Trusts (US) 7 recession 1970s 171–2 language of 27 Reagan (1980–82) 60, 261 Red Brigade 254 reforestation 184 refrigeration 74 reinvestment 43, 45, 66–7, 110–12, 116 religious fundamentalism 203 religious issues 104 remittances 38, 140, 147 rentiers 40 rents differential rent 81, 82, 83 on intellectual property rights 221 land 182 monetisation of 48, 109 monopoly 51, 81–2, 83 oil 83 on patents 221 rising 181 reproduction schemas 70 Republican Party (US) 11, 141 reserve price 81 resource values 234 Ricardo, David 72, 94 risks, socialising 10 robbery 44 Robinson, Joan 238 robotisation 14, 136 Rockefeller, John D. 98 Rockefeller brothers 131 Rockefeller foundation 44, 186 Roman Empire 194 Roosevelt, Franklin D. 71 Rothschild family 98, 163 Royal Society 91, 156 royalties 40 Rubin, Robert 98 ‘rule of experts’ 99, 100–101 Russia bankruptcy (1998) 246, 261 capital flight crisis 261 defaults on its debt (1998) 6 oil and natural gas flow to Ukraine 68 oil production 6 oligarchs 29 see also Soviet Union S Saddam Hussein 210 Saint-Simon, Claude Henri de Rouvroy, Comte de 49 Saint-Simonians 87, 168 Salomon Brothers 24 Samuelson, Robert 235, 239 Sandino, Augusto 189 Sanford, Charles 98 satellites 156 savings 140 Scholes, Myron 100 Schumer, Charles 11 Schumpeter, Joseph 46 Seattle battle of (1999) 38, 227 general strike (1918) 243 software development in 195 Second World War 32, 168–70, 214 sectarianism 252 securitisation 17, 36, 42 Sejong, South Korea 124–6 service industries 41 sexism 61 sexual preferences issues 104, 131, 176 Shanghai Commune (1967) 243 shark hunting 73, 76 Shell Oil 79, 251 Shenzhen, China 36 shop floor organisers (shop stewards) 103 Silicon Valley 162, 195, 216 Singapore follows Japanese model 92 industrialisation 68 rise of (1970s) 35 slavery 144 domestic 15 slums 16, 151–2, 176, 178–9 small operators, dispossession of 50 Smith, Adam 90, 164 The Wealth of Nations 35 social democracy 255 ‘social democratic’ consensus (1960s) 64 social inequality 224 social relations 101, 102, 104, 105, 119, 121, 122, 123, 126, 127, 135–9, 152, 240 loss of 246 social security 224 social services 256 social struggles 193 social welfarism 255 socialism 136, 223, 228, 242, 249 compared with communism 224 solidarity economy 151, 254 Soros, George 44, 98, 221 Soros foundation 44 South Korea Asian Currency Crisis 261 excessive urban development 8 falling exports 6 follows Japanese model 92 rise of (1970s) 35 south-east Asia: crash of 1997–8 6, 8, 49, 246 Soviet Union in alliance with US against fascism 169 break-up of 208, 217, 227 collapse of communism 16 collectivisation of agriculture 250 ‘space race’ (1960s and 1970s) 156 see also Russia space domination of 156–8, 207 fixed spaces 190 ‘space race’ (1960s and 1970s) 156 Spain property-led crisis (2007–10) 5–6, 261 unemployment 6 spatial monopoly 164–5 special drawing rights 32, 34 special economic zones 36 special investment vehicles 36, 262 special purpose entities 262 speculation 52–3 speculative binges 52 speed-up 41, 42 stagflation 113 stagnation 116 Stalin, Joseph 136, 250 Standard Oil 98 state formation 196, 197, 202 state-corporate nexus 204 ‘space race’ (1960s and 1970s) 156 state-finance nexus 204, 205, 237, 256 blind belief in its corrective powers 55 ‘central nervous system’ for capital accumulation 54 characteristics of a feudal institution 55 and the current crisis 118 defined 48 failure of 56–7 forms of 55 fusion of state and financial powers 115 innovation in 85 international version of 51 overwhelmed by centralised credit power 52 pressure on 54 radical reconstruction of 131 role of 51 and state-corporate research nexus 97 suburbanisation 171 tilts to favour particular interests 56 statistical arbitrage strategies 262 steam engine, invention of 78, 89 Stiglitz, Joseph 45 stimulus packages 261 stock markets crash (1929) 211, 217 crashes (2001–02) 261 massive liquidity injections (1987) 236, 261 Stockton, California 2 ’structural adjustment’ programmes vii, 19, 261 subcontracting 131 subprime loans 1 subprime mortgage crisis 2 substance abuse 151 suburbanisation 73, 74, 76–7, 106–7, 169, 170, 171, 181 Summers, Larry 11, 44–5, 236 supermarket chains 50 supply-side theory 237 surveillance 92, 204 swaps credit 21 Credit Default 24, 262 currency 262 equity index 262 interest rate 24, 262 Sweden banking system crash (1992) 8, 45 Nordic crisis 8 Yugoslav immigrants 14 Sweezey, Paul 52, 113 ‘switching crises’ 93 systematic ‘moral hazard’ 10 systemic risks vii T Taipei: computer chips and household technologies in 195 Taiwan falling exports 6 follows Japanese model 92 takeovers 49 Taliban 226 tariffs 16 taxation 244 favouring the rich 45 inheritance 44 progressive 44 and the state 48, 145 strong tax base 149 tax rebates 107 tax revenues 40 weak tax base 150 ‘Teamsters for Turtles’ logo 55 technological dynamism 134 technologies change/innovation/new 33, 34, 63, 67, 70, 96–7, 98, 101, 103, 121, 127, 134, 188, 193, 221, 249 electronic 131–2 ‘green’ 188, 221 inappropriate 47 labour fights new technologies 60 labour-saving 14–15, 60, 116 ‘rule of experts’ 99, 100–101 technological comparative edge 95 transport 62 tectonic movements 75 territorial associations 193–4, 195, 196 territorial logic 204–5 Thailand Asian Currency Crisis 261 excessive urban development 8 Thatcher, Margaret, Baroness 15, 38, 64, 131, 197, 255 Thatcherites 224 ‘Third Italy’, Bologna 162, 195 time-space compression 158 time-space configurations 190 Toys ‘R’ Us 17 trade barriers to 16 collapses in foreign trade (2007–10) 261 fall in global international trade 6 increase in volume of trading 262 trade wars 211 trade unions 63 productivity agreements 60 and US auto industry 56 trafficking human 44 illegal 43 training 59 transport costs 164 innovations 42, 93 systems 16, 67 technology 62 Treasury Bill futures 262 Treasury bond futures 262 Treasury instruments 262 TRIPS agreement 245 Tronti, Mario 102 Trotskyists 253, 255 Tucuman uprising (1969) 243 Turin: communal ‘houses of the people’ 243 Turin Workers Councils 243 U UBS 20 Ukraine, Russian oil and natural gas flow to 68 ultraviolet radiation 187 UN Declaration of Human Rights 234 UN development report (1996) 110 Un-American Activities Committee hearings 169 underconsumptionist traditions 116 unemployment 131, 150 benefits 60 creation of 15 in the European Union 140 job losses 93 lay-offs 60 mass 6, 66, 261 rising 15, 37, 113 and technological change 14, 60, 93 in US 5, 6, 60, 168, 215, 261 unionisation 103, 107 United Fruit Company 189 United Kingdom economy in serious difficulty 5 forced to nationalise Northern Rock 2 property market crash 261 real average earnings 13 train network 28 United Nations 31, 208 United States agricultural subsidies 79 in alliance with Soviet Union against fascism 169 anti-trust legislation 52 auto industry 56 blockbusting neighbourhoods 248 booming but debt-filled consumer markets 141 and capital surplus absorption 31–2 competition in labour markets 61 constraints to excessive concentration of money power 44–5 consumerism 109 conumer debt service ratio 18 cross-border leasing with Germany 142–3 debt 158, 206 debt bubble 18 fiscal crises of federal, state and local governments 261 health care 28–9 heavy losses in derivatives 261 home ownership 3 housing foreclosure crises 1–2, 4, 38, 166 industries dependent on trade seriously hit 141 interventionism in Iraq and Afghanistan 210 investment bankers rescued 261 investment failures in real estate 261 lack of belief in theory of evolution 129 land speculation scheme 187–8 oil issue 76–7, 79, 80, 121, 170, 210, 261 population growth 146 proletarianisation 60 property-led crisis (2007–10) 261 pursuit of science and technology 129 radical anti-authoritarianism 199 Reagan Recession 261 rescue of financial institutions 261 research universities 95 the reversing origins of US corporate profits (1950–2004) 22 the right to the city movement 257 ‘right to work’ states 65 savings and loan crisis (1984–92) 8 secondary mortgage market 173 ‘space race’ (1960s and 1970s) 156 suburbs 106–7, 149–50, 170 train network 28 unemployment 5, 6, 60, 168, 215, 261 unrestricted capitalist development 113 value of US stocks and homes, as a percentage of GDP 22 and Vietnam War 171 wages 13, 62 welfare provision 141 ‘urban crisis’ (1960s) 170 urban ‘heat islands’ 77 urban imagineering 193 urban social movements 180 urbanisation 74, 85, 87, 119, 131, 137, 166, 167, 172–3, 174, 240, 243 US Congress 5, 169, 187–8 US Declaration of Independence 199 US National Intelligence Council 34–5 US Senate 79 US Supreme Court 179 US Treasury and Goldman Sachs 11 rescue of Continental Illinois Bank 261 V Vanderbilt family 98 Vatican 44 Veblen, Thorstein 181–2 Venezuela 256 oil production 6 Vietnam War 32, 171 Volcker, Paul 2, 236 Volcker interest rate shock 261 W wage goods 70, 107, 112, 162 wages and living standards 89 a living wage 63 national minimum wage 63 rates 13, 14, 59–64, 66, 109 real 107 repression 12, 16, 21, 107, 110, 118, 131, 172 stagnation 15 wage bargaining 63 Wal-Mart 17, 29, 64, 89 Wall Street, New York 35, 162, 200, 219, 220 banking institutions 11 bonuses 2 ‘Party of Wall Street’ 11, 20, 200 ‘War on Terror’ 34, 92 warfare 202, 204 Wasserstein, Bruce 98 waste disposal 143 Watt, James 89 wealth accumulation by capitalist class interests 12 centralisation of 10 declining 131 flow of 35 wealth transfer 109–10 weather systems 153–4 Weather Underground 254 Weill, Sandy 98 Welch, Jack 98 Westphalia, Treaty of (1648) 91 Whitehead, Alfred North 75 Wilson, Harold 56 wind turbines 188 women domestic slavery 15 mobilisation of 59, 60 prostitution 15 rights 176, 251, 258 wages 62 workers’ collectives 234 working hours 59 World Bank 36, 51, 69, 192, 200, 251 ‘Fifty Years is Enough’ campaign 55 predicts negative growth in the global economy 6 World Bank Development Report (2009) 26 World Trade Organisation (WTO) 200, 227 agreements 69 street protests against (Seattle, 1999) 55 TRIPS agreement 245 and US agricultural subsidies 79 WorldCom 8, 100, 261 worldwide web 42 Wriston, Walter 19 X X-rays 99 Y Yugoslavia dissolution of 208 ethnic cleansings 247 Z Zapatista revolutionary movement 207, 226, 252 Zola, Émile 53 The Belly of Paris 168 The Ladies’ Paradise 168


pages: 376 words: 109,092

Paper Promises by Philip Coggan

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

Each country would have an overdraft with the clearing union, equivalent to half the annual volume of its trade. This overdraft would be expressed in the form of a new currency, which Keynes dubbed bancor; this would be valued in terms of gold, but not convertible into it. This device was Keynes’s way of trying to reduce the world’s dependence on the dollar as a reserve currency. (Bancor stayed on the drawing board. Eventually, a basket currency was to be created in 1969 in the form of the Special Drawing Right (SDR) comprising fixed percentages of the dollar, pound, yen and various European currencies. But the SDR was not to be used seriously until well after the Bretton Woods era was past.) Under Keynes’s plan, a country with a persistent deficit would run up against its overdraft limit, and would devalue its currency. That was pretty much the requirement under the gold standard as well. But Keynes also imposed obligations on the creditor nations, which would be required to revalue their currency or pay interest on the credits built up in the clearing union.

In a sense, this dates back to the Triffin dilemma outlined in Chapter 5: for a currency to be used internationally there must be lots of it circulating abroad. For that to happen, however, a country must run a deficit so its currency builds up in the accounts of overseas merchants. And if the deficit becomes too large, confidence in the currency will eventually decline. Some talk of a basket currency, such as the special drawing right or SDR, replacing the dollar. When the G20 countries attempted to revive the global economy in early 2009, they agreed on a new issue of SDRs to boost global liquidity. To date, however, SDRs lack the vital ingredient of liquidity. They comprise less than 5 per cent of global reserves and no private company has issued bonds denominated in the currency.5 China will eventually become the world’s largest economy, if current trends continue, in the 2020s, and its foreign-exchange reserves already give it significant power as a creditor nation.

Rubin, Robert Rueff, Jacques Rumsfeld, Donald Russia Sack, Alexander St Augustine Saint-Simon, duc de Salamis (city) Santelli, Rick Sarkozy, Nicholas Saudi Arabia savings savings glut Sbrancia, Belen Schacht, Hjalmar Scholes, Myron shale gas Second Bank of the United States Second World War Securities and Exchange Commission seignorage Shakespeare, William share options Shiller, Robert short-selling silver Singapore Sloan, Alfred Smith, Adam Smith, Fred Smithers & Co Smithsonian agreement Snowden, Philip Socialist Party of Greece social security Société Générale solidus Solon of Athens Soros, George sound money South Africa South Korea South Sea bubble sovereign debt crisis Soviet Union Spain special drawing right speculation, speculators Stability and Growth pact stagnation Standard & Poor’s sterling Stewart, Jimmy Stiglitz, Joseph stock markets stop-go cycle store of value Strauss-Kahn, Dominque Strong, Benjamin sub-prime lending Suez canal crisis Suharto, President of Indonesia Sumerians supply-side reforms Supreme Court (US) Sutton, Willie Sweden Swiss franc Swiss National Bank Switzerland Sylla, Richard Taiwan Taleb, Nassim Nicholas taxpayers Taylor, John tea party (US) Temin, Peter Thackeray, William Makepeace Thailand Thatcher, Margaret third world debt crisis Tiernan, Tommy Times Square, New York tobacco as currency treasury bills treasury bonds Treaty of Versailles trente glorieuses Triana, Pablo Triffin, Robert Triffin dilemma ‘trilemma’ of currency policy Truck Act True Finn party Truman, Harry S tulip mania Turkey Turner, Adair Twain, Mark unit of account usury value-at-risk (VAR) Vanguard Vanity Fair Venice Vietnam War vigilantes, bond market Viniar, David Volcker, Paul Voltaire Wagner, Adolph Wall Street Wall Street Crash of 1929 Wal-Mart wampum Warburton, Peter Warren, George Washington consensus Weatherstone, Dennis Weimar inflation Weimar Republic Weinberg, Sidney West Germany whales’ teeth White, Harry Dexter William of Orange Wilson, Harold Wirtschaftswunder Wizard of Oz, The Wolf, Martin Women Empowering Women Woodward, Bob Woolley, Paul World Bank Wriston, Walter Xinhua agency Yale University yen yield on debt yield on shares Zambia zero interest rates Zimbabwe Zoellick, Robert Philip Coggan is the Buttonwood columnist of the Economist.


pages: 452 words: 150,785

Business Adventures: Twelve Classic Tales From the World of Wall Street by John Brooks

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banking crisis, Bretton Woods, business climate, cuban missile crisis, Ford paid five dollars a day, invention of the wheel, large denomination, margin call, Marshall McLuhan, Plutocrats, plutocrats, short selling, special drawing rights, tulip mania, upwardly mobile, very high income

Looking beyond the Vietnam war and its incredibly broad worldwide monetary implications, the central bankers went on plugging away. Two weeks after the stopgap solution of the dollar crisis, those of the ten most powerful industrial countries met in Stockholm and agreed, with only France dissenting, on the gradual creation of a new international monetary unit to supplement gold as the bedrock underlying all currencies. It will consist (if action follows on resolution) of special drawing rights on the International Monetary Fund, available to nations in proportion to their existing reserve holdings. In bankers’ jargon the rights will be called S.D.R.’s; in popular jargon they were at once called paper gold. The success of the plan in achieving its ends—averting dollar devaluation, overcoming the world shortage of monetary gold, and thus postponing indefinitely the threatened mess—will depend on whether or not men and nations can somehow at last, in a triumph of reason, achieve what they have failed to achieve in almost four centuries of paper money: that is, to overcome one of the oldest and least rational of human traits, the lust for the look and feel of gold itself, and come to give truly equal value to a pledge written on a piece of paper.

., 57 Injunction, origin of, 305–306 Income tax, 80–82; avoidance of, 100; in Communist countries, 88; in Florence (15th century), 80; in various countries, 88 Income-tax law, 97 Inside information, legitimate use of, 118–144 Insider Trading and the Stock Market (Manne), 120 Intellectual work, and taxes, 108 Interdict, defined, 306 Interest, withholding of taxes on, 96 Interest rates, 316, 325 Internal Revenue Code: (1954), 79, 96, 98; (1964), 100, 101, 102, 108, 113; complexity of, 111 Internal Revenue Service, 89–97; and taxpayer education, 112 International Business Machines, 8, 9, 14, 18, 152 International Harvester, 378 International Latex Corp., 298, 299, 301, 306–311 International Monetary Fund, 322, 324–325, 329, 330; members of, 328; special drawing rights on (S.D.R.), 387 International Telephone & Telegraph, 378 Ira Haupt & Co., 176–189 Iran, 250, 270, 274 Italy, 250, 272, 347 I-T-E Circuit Breaker Co., 213, 217 Ivory Coast, 250–251, 272 J. R. Williston & Beane, 177, 179, 181, 182, 185 Japan, income tax in, 82 Javits, Jacob, 384 Jefferson, Thomas, 260 Jeter, R. G., 302, 306–308, 311–313 John Birch Society, 155 Johnson, Lyndon B., 80, 197, 381, 384 Judge, J.

., 81, 87 Selling short, 227, 328 Seymour, Walton, 270 Shepard, Leonard, 299 Sherman, John, 84 Sherman Antitrust Act (1890), 84, 201 Shilling, introduction of, 337 Short selling, 227, 328 Silver, 337 Singer Co., 378 Sixteenth Amendment, U.S. Constitution, 85 Smith, Raymond W., 214–217, 220 Sole Owner stores, 247 Sole Owner Tigers football team, 247 Soss, Wilma, 280–287, 292–295 Special drawing rights (S.D.R.), on International Monetary Fund, 387 Special-interest provisions of U.S. tax law (see Loopholes) Spinoff, 257 Standard Oil of New Jersey, 8, 18 State and municipal bonds, tax exemptions on, 100 Statistics of Income (I.R.S.), 99 Stehlik, Frank E., 212–219 Stephens, Claude O., 124, 128–138 Stern, Philip M., 117 Stock crash (1962), 2, 4 Stock market fluctuations, 1–24 Stock-option provision, 101 Stock options, 103 Stock traders, 120 Stockholder meetings, 276–296 Stutz Motor Co., 228–229 Styling, of automobiles, 30 Suez crisis (1956), 329 Sulphides, 121 Sunday Times (London), 374 Susskind, David, 101 Swap network, 329, 330, 372–373 Switzerland, banking laws of, 327 Swope, Gerard, 219 T.V.A.


pages: 124 words: 39,011

Beyond Outrage: Expanded Edition: What Has Gone Wrong With Our Economy and Our Democracy, and How to Fix It by Robert B. Reich

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2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, affirmative action, banking crisis, carried interest, collateralized debt obligation, collective bargaining, Credit Default Swap, credit default swaps / collateralized debt obligations, desegregation, full employment, Home mortgage interest deduction, job automation, Mahatma Gandhi, minimum wage unemployment, new economy, Occupy movement, offshore financial centre, Plutocrats, plutocrats, Ponzi scheme, race to the bottom, Ronald Reagan, single-payer health, special drawing rights, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, trickle-down economics, women in the workforce, working poor

Texas was ground zero in the savings and loan crisis that ripped through America in the 1980s, imposing huge losses on the state. The Wall Street banks were too big to fail before the bailout and are even bigger now. Twenty years ago, the ten largest banks on the Street held 10 percent of America’s total bank assets. Now the six largest hold over 70 percent. And the biggest four have a larger market share than ever. Their size gives them special privileges at the Fed—lower interest rate charges and special drawing rights—that provide them with a competitive advantage over their smaller rivals. And with this advantage they’re sure to grow even larger. They must be broken up. REQUIRE BIG BANKS TO MODIFY UNDERWATER MORTGAGES In February 2012, five big banks reached a deal with government authorities over dubious mortgage practices and foreclosure abuses. In exchange for reducing the principal on the mortgage loans of distressed homeowners by $17 billion, the banks were absolved of many legal claims against them.


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

It would be written in close consultation with the officials from the recipient country, who felt it would be useful at home to have a message of international concern and support delivered to the head of their government.40 The concrete measures adopted in light of such discussions to deal with the top item on the agenda in the early 1960s on which the endangered fixed-rate currency exchange system depended—the defense of the dollar—were both “permanent” and “temporary.” The General Agreement to Borrow and IMF Special Drawing Rights were permanent; the London gold pool to stabilize the official price at $35 an ounce, and the issuance of “Roosa bonds” by the Treasury to guarantee against a devaluation of the dollar, were designed as temporary. Roosa called all of these the “rings of outer and inner defenses for the dollar and the system.”41 In fact, in the decades to come, long after fixed rates had been abandoned, the “swap networks” that the US Treasury and Federal Reserve developed at this time to coordinate interventions by the advanced capitalist states in foreign exchange markets would become central to achieving the much broader goal of defending the system of global capitalism in the face of economic and financial crises.

But behind this lay a frustration with the European states themselves. At a meeting in Washington an ECB official was greeted by his American host, who “brandished the Articles of Confederation, the 1781 precursor to the United States Constitution, to use as an example of why stronger unions become necessary.”12 It was clear by this time that all the heady talk between Russia, China and other emerging market states about using “SDRs” (the IMF’s “special drawing rights”), let alone the euro, to displace the dollar as the international reserve currency had amounted to little more than rhetoric. Rumors that the Middle East’s oil-exporting states would abandon the dollar vanished with the 2011 “Arab Spring,” just as May ’68 put a stop to expectations that France might lead a return to the gold standard. The dollar’s continuing central global role certainly produced problems for rapidly growing emerging market economies, which experienced high capital inflows and currency appreciation as a result of the Fed’s low interest rates and quantitative easing policies.

In any case, “the package was not large by historical standards . . . less than 1 percent of the GNP for 1977, whereas the Kennedy package was 1.7 percent and the Ford package 1.5 percent of GNP.” Biven, Jimmy Carter’s Economy, p. 71. 19 The Fed established and expanded swap lines of credit with major foreign central banks, while the Treasury used the Exchange Stabilization Funds, drew on its reserve position at the IMF, resumed public auctions of gold, and sold special drawing rights to the Bundesbank for marks. It also attempted to navigate the growing financial market revolt by issuing US bonds denominated in foreign currencies in the German and Swiss capital markets. The sale of these so-called Carter bonds rested on a conceptual distinction between the credibility of the US state and the forward value of the US dollar. This was supported by the European central banks, who nevertheless rejected a proposal the Fed floated for an international agreement to have reserve requirements on Eurodollar accounts, once again demonstrating that the European states were unwilling to embrace cooperative capital controls, even to prevent the demise of Keynesianism.


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 simple terms, the IMF was a bank from which nations could borrow to help balance their short-term imbalances in trade and capital flows. This facility was intended to avoid situations such as those that affected Great Britain before and after WWI, when the country almost ran out of foreign reserves and collapsed. More modest fluctuations in currency values were meant to be managed by the various members of the IMF or by drawing upon “special drawing rights” (SDR)—a form of ersatz global currency that, like the dollar, was and is backed by nothing. This arrangement did not really address the underlying economic problems in the various nations, but merely obscured the reality with a veneer of government intervention. John H. Barton, Bart S. Fisher, and Michael P. Malloy put the key issue succinctly: The obvious question was how currency values were to be maintained at a fixed relationship, even though governments might engage in inconsistent economic policies.

Raskob support Roosevelt nomination Smith, Rixey (Carter Glass: A Biography) Smoot-Hawley tariff enactment impact role Snyder, John Socialist parties, growth Social Security impact inflation driver Social Security Act, Supreme Court (upholding) Social Security Trust fund, level Soft money, Republican party position Solomon, Tony Solorzano, Cuauhtemoc Cardenas Southern industry, Cotton Whig/Republican banker stake (substantiality) Sovereign borrowing, return Sovereign states, foreign lending (problem) Soviet communism, military advance Soviet threat Sowell, Thomas (Conflict of Visions) Spanish-American War, cessation (Hobart negotiation) Special drawing rights (SDR) Speculation age forms, acceptance issue, Fed (impact) model, rise Speculative estimates, usage Speculative lending, cessation Spooner, John Sproul, Allan St. Louis Federal Reserve Banks, FRASER database maintenance Stalin, Joseph FDR, opposition rise Standardization, usage (growth) Standard Oil, Rockefeller creation Stanislaw, Joseph State chartered banks currency, usage debt repudiation impact numbers (1935) State debt accumulation, Washington (impact) defaults Steagall, Henry B.

Making Globalization Work by Joseph E. Stiglitz

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

As this initiative illustrates, reserves can be viewed like a cooperative mutual insurance system. The holdings of one another's currencies in reserves has the same effect as a line of credit, a commitment on the part of other countries to allow the country access to resources in times of need. The international community has already recognized that it can provide the kind of liquidity that Keynes envisioned, in the form of special drawing rights (SDRs). SDRs are simply a kind of international money that the IMF is allowed to create.2° The global greenbacks proposal simply extends the concept. I refer to the new money as global greenbacks to emphasize that what is being 262 MAKING GLOBALIZATION WORK created is a new global reserve currency, and to avoid confusion with the existing SDR system, which has two problems: SDRs are only created episodically, while global greenbacks would be created every year; and SDRs are given largely to the wealthiest countries of the world, while global greenbacks would be used not only to solve the world's financial problems but also to combat some of the deeper problems facing the world today, such as global poverty and environmental degradation.21 Here is a simplified description of how the system might work.

., 327n Singapore, 33, 55, 97, 247-48 sleeping sickness, 316n Slovenia, 39, 319n Small Business Administration (SBA), 71 small businesses, 192 Smith, Adam, xiv, 66, 68, 189-90, 192, 296n-97n, 325n social insurance programs, 11-12 social justice, xvii, 28, 118 social responsibility, of corporations, 198-99 social security, 27 privatization of, xii, 331n systems of, 19 soc i a l sta b il ity , 4 9 software industry, 84, 114 s e e a l s o technology Somare, Michael, 324n Somavia, Juan, 4 South Africa, 121, 122, 229, 230, 316n South Korea, 30, 33, 34, 69, 70, 203, 261, 264 borrowing trouble of, 238 development success of, 31, 32 economic crisis in, 226 income in, 297n INDEX industrial investment by government in, 33 Microsoft in, 58 reserves held by, 247-48 sovereign bankruptcy, 233-44 sovereignty, 8, 20-21, 62 Soviet Union, 211, 227, 229 see also Russia special drawing rights (SDRs), 261-62, 263, 3350 speculators, 34-35 Stability and Growth Pact, 334n stabilization funds, 147, 148-49, 150, 155 standards of living, 46, 276 State Department, U.S., 193, 231 steel industry, 201-2, 303n-4n stock market, U.S., 257-58 stock prices, 257 subsidies, 73, 130, 173, 284, 289 agricultural, 16, 74, 80, 84, 85-87, 131, 274, 275, 307n in cotton industry, 76, 81, 85-86, 185, 278, 305n, 306n-7n for drug supplies to developing countries, 120 on emissions, 185 as protective measure for mining industry, 206 Sudan, 151, 230 Suharto, General, 231 Summers, Larry, 332n "super Chapter 11," 233 Supreme Court, U.S., 207, 311n, 314n, 328n-29n sustainability, 17, 26, 36, 44-45, 130 Sweden, xv, 172, 295n Switzerland, 85, 111, 139, 170, 229, 242 Tagment, 313n Taiwan, 32, 33, 259 Tanzania, 40, 41, 331n tariff escalation, 87-88 tariffs, 16, 69, 71-72, 75, 77, 78, 80, 81, 82, 84, 98, 271, 300n, 303n eliminated by NAFTA, 64, 66 history of, 74 steel, 303n see also nontariff barriers Tata, J.


pages: 537 words: 144,318

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

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

Although the Chinese renminbi will not become the sole reserve currency, it will become a major tradable currency and could eventually become an important part of a world reserve currency basket. A clear concern is the structural flaw in the global monetary system, whereby the U.S. deficit is everyone else’s surplus. As such, everyone else is simply wed to the level of U.S. debt and implicitly to the U.S. economy’s growth rate. Nevertheless, regardless of the rhetoric, it would be impossible to move to an SDR model (see box) within the immediate investment horizon. Special Drawing Rights (SDR) The SDR is an international reserve asset created by the International Monetary Fund (IMF) in 1969 to supplement member country reserves and to support the Bretton Woods fixed exchange rate system. The SDR is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, through the IMF, which designates members with strong external positions to purchase SDRs from members with weak external positions.

See Risk premia payment Price/earnings (P/E) multiples, exchange rate valuation (relationship) Primary Dealer Credit Facility, placement Prime broker risk Princeton University (endowment) Private equity cash flow production tax shield/operational efficiency arguments Private sector debt, presence Private-to-public sector risk Probability, Bayesian interpretation Professor, The bubble predication capital loss, avoidance capital management cataclysms, analysis crowding factor process diversification efficient markets, disbelief fiat money, cessation global macro fund manager hedge fund space historical events, examination idea generation inflation/deflation debate interview investment process lessons LIBOR futures ownership liquidity conditions, change importance market entry money management, quality opportunities personal background, importance portfolio construction management positioning process real macro success, personality traits/characteristics (usage) returns, generation risk aversion rules risk management process setback stocks, purchase stop losses time horizon Titanic scenario threshold trades attractiveness, measurement process expression, options (usage) personal capital, usage quality unlevered portfolio Property/asset boom Prop shop trading, preference Prop trader, hedge fund manager (contrast) Protectionism danger hedge process Public college football coach salary, public pension manager salary (contrast) Public debt, problems Public pensions average wages to returns endowments impact Q ratio (Tobin) Qualitative screening, importance Quantitative easing (QE) impact usage Quantitative filtering Random walk, investment Real annual return Real assets Commodity Hedger perspective equity-like exposure Real estate, spread trade Real interest rates, increase (1931) Real macro involvement success, personality traits/characteristics (usage) Real money beta-plus domination denotation evolution flaws hedge funds, differentiation impacts, protection importance investors commodity exposure diversification, impact macro principles management, change weaknesses Real money accounts importance long-only investment focus losses (2008) Real money funds Commodity Hedger operation Equity Trader management flexibility frontier, efficiency illiquid asset avoidance importance leverage example usage management managerial reserve optimal portfolio construction failure portfolio management problems size Real money managers Commodity Investor scenario liquidity, importance long-term investor misguidance poor performance, usage (excuse) portfolio construction valuation approach, usage Real money portfolios downside volatility, mitigation leverage, amount management flaws Rear view mirror investment process Redemptions absence problems Reflexivity Rehypothecation Reichsmarks, foreign holders (1922-1923) Relative performance, inadequacy Reminiscences of a Stock Operator (Lefèvre) Renminbi (2005-2009) Repossession property levels Republic of Turkey examination investment rates+equities (1999-2000) Reserve currency, question Resource nationalism Returns forecast generation maximization momentum models targets, replacement Return-to-worst-drawdown, ratios (improvement) Reward-to-variability ratio Riksbank (Sweden) Risk amount, decision aversion rules capital, reduction collars function positive convexity framework, transition function global macro manager approach increase, leverage (usage) measurement techniques, importance parameters Pensioner management pricing reduction system, necessity Risk-adjusted return targets, usage Risk assets, decrease Risk-free arbitrage opportunities Risk management Commodity Hedger process example game importance learning lessons portfolio level process P&L, impact tactic techniques, importance Risk premia annualization earning level, decrease specification Risk/reward trades Risk-versus-return, Pensioner approach Risk-versus-reward characteristics opportunities Roll yield R-squared (correlation) Russia crisis Russia Index (RTSI$) (1995-2002) Russia problems Savings ratio, increase Scholes, Myron Sector risk, limits Securities, legal lists Self-reinforcing cycles (Soros) Sentiment prediction swings Seven Sisters Sharpe ratio increase return/risk Short-dated assets Short selling, ban Siegel’s Paradox example Single point volatility 60-40 equity-bond policy portfolio 60-40 model 60-40 portfolio standardization Smither, Andrew Socialism, Equity Trader concern Society, functioning public funds, impact real money funds, impact Softbank (2006) Soros, George self-reinforcing cycles success Sovereign wealth fund Equity Trader operation operation Soybeans (1970-2009) Special drawing rights (SDR) Spot price, forward price (contrast) Spot shortages/outages, impact Standard deviation (volatility) Standard & Poor’s 500 (S&P500) (2009) decrease Index (1986-1995) Index (2000-2009) Index (2008) shorting U.S. government bonds, performance (contrast) Standard & Poor’s (S&P) shorts, coverage Stanford University (endowment) State pension fund Equity Trader operation operation Stochastic volatility Stock index total returns (1974-2009) Stock market increase, Predator nervousness Stocks hedge funds, contrast holders, understanding pickers, equity index futures usage shorting/ownership, contrast Stops, setting Stress tests, conducting Subprime Index (2007-2009) Sunnies, bidding Super Major Survivorship bias Sweden AP pension funds government bond market Swensen, David equity-centric portfolio Swiss National Bank (SNB) independence Systemic banking crisis Tactical asset allocation function models, usage Tactical expertise Tail hedging, impact Tail risk Take-private LBO Taleb, Nassim Tax cut sunset provisions Taxes, hedge Ten-year U.S. government bonds (2008-2009) Theta, limits Thundering Herd (Merrill Lynch) Time horizons decrease defining determination shortening Titanic funnel, usage Titanic loss number Titanic scenario threshold Topix Index (1969-2000) Top-line inflation Total credit market, GDP percentage Total dependency ratio Trade ideas experience/awareness, impact generation process importance origination Traders ability Bond Trader hiring characteristics success, personality characteristics Trades attractiveness, measurement process hurdle money makers, percentage one-year time horizon selection, Commodity Super Cycle (impact) time horizon, defining Trading decisions, policy makers (impact) floor knowledge noise level ideas, origination Tragedy of the commons Transparency International, Corruption Perceptions Index Treasury Inflation-Protected Securities (TIPS) trade Triangulated conviction Troubled Asset Relief Program (TARP) Turkey economy inflation/equities (1990-2009) investment rates+equities (1999-2000) stock market index (ISE 100) Unconventional Success (Swensen) Underperformance, impact Undervaluation zones, examination United Kingdom (UK), two-year UK swap rates (2008) United States bonds pricing debt (1991-2008) debt (2000-2008) home prices (2000-2009) hyperinflation listed equities, asset investment long bonds, market pricing savings, increase stocks tax policy (1922-1936) trade deficit, narrowing yield curves (2004-2006) University endowments losses impact unlevered portfolio U.S.


pages: 700 words: 201,953

The Social Life of Money by Nigel Dodd

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

Monetary union seems desirable for such states because of the scale of the threat posed by unrestricted capital flows to most existing national currencies when their exchange rates are not fixed (Eichengreen 2008).9 Fourth, there is the decline of the U.S. dollar as the world’s reserve currency, and relatedly, the “currency wars” and the strengthening of the Chinese renminbi, along with other BRIC (Brazil, Russia, India, and China) currencies (Cohen 2011; Fratzscher and Mehl 2011; Rickards 2011). Fifth, in the wake of that decline, there is the prospect of a global currency such as the special drawing rights (SDRs) issued by the IMF (Cohen 2011; Mundell 2012). Sixth, and finally, there is the growth of monetary forms that are not issued by states, such as digital monies. Although these forms are by no means new, their development has accelerated since the 1990s, and there are now several thousand complementary currencies in operation worldwide (North 1999, 2005, 2007). This development constitutes a trend toward increasing heterogeneity and is characterized by the development of local currencies (e.g., time dollars, which are exchanged for person-hours of work), reputation-based currencies (e.g., Whuffie), and digital money (e.g., Bitcoin).

See also Gemeinschaft, Gesellschaft; perfect society socius, 251 Sontag, Susan, 190 South Sea bubble, 126 South Sea Company, 126 sovereign debt, 2, 58, 66n17, 71, 91, 110, 127, 129, 131, 219, 242, 253, 257–58, 265, 388 sovereign wealth funds, 66, 220–21 sovereignty, 216, 245, 250, in Agamben, 266n; and banks, 116, 237; in Balibar, 261–62; in Bodin, 223–24, 261–62; in Derrida, 165, 185, 209; in the Eurozone, 46, 127, 129, 252, 253, 255, 261, 264–66, 267; and the fiscus, 261–62; in Hardt and Negri, 238, 239, 244, 245, 247; of the individual, 185, 360; and insolvency, 260–61; in Karatani, 86–87; and law, 224; in Marx, 53; and monetary governance, 45, 246, 307–8; and money, 20, 43, 44, 77, 110, 217, 237, 246–47, 249, 251; and the multitude, 247; in Proudhon, 53; in Schmitt, 223–24, 266, 267; and the state, 106; and territory, 226. See also sovereign debt spatial fix, 66, 68, 192, 238 special drawing rights (SDRs), 214 special investment vehicles (SIVs), 116, 123 specie, 15. See also coinage speculation, 3n, 18n4, 22, 44, 61n20, 201; and fictitious capital, 68–69; financial, 70, 75–76; in Marx, 56–58, 64; in Minsky, 117, 118; in property, 113; as violence, 44 speculative finance, 118 speech, and money, 37, 42; versus writing, 180–81 speed, of circulation, 201n29, 390; of debt contraction, 119; of electronic trade, 307; of mobile payments, 378, 379; and the transmission of information, 36 Spengler, Oswald, 247 Sperber, Jonathan, 50n5 spheres of exchange, 283–84 Spinoza, Baruch, 247, 251, 332, 337, 338; on desire, 229; ethics, 228; Ethics, 335; multitude, 77, 238, 239, 246, 268, 293 spiritual poverty, 334 Square Wallet, 378, 379 stagflation, 68, 192 stamp scrip, 314, 349 state, 5, 6, 13, 14, 26, 299–300; and accumulation by dispossession, 68; and banking, 102, 106, 236, 382; as a borrower, 71; and capitalism, 68; and civil society, 220; and colonialism, 60; and the conflict between creditors and debtors, 109–10; and cooperatives, 84; and credit money, 57; and empire, 77; and finance, 51, 59–60, 66, 111; and free market money, 360; as the guarantor of money, 46, 79, 111, 235; and imperialism, 60, 300; infrastructural power of, 212, 217; and insolvency, 267; lender of last resort, 74, 246; versus market, 247, 306–7; and money of account, 104, 109–10, 297; and the monetary base, 79; and monetary governance, 4, 21, 26, 71, 74, 379; and monopoly capitalism, 60–61; naming rights over of money, 104, 105, 109–10, 111; and the origins of money, 18–19; and primitive accumulation, 64, 66, 68; in Proudhon, 353, 357; in Rousseau, 38; in Schmitt, 224; and seigniorage, 378; and society, 8, 26, 106, 211, 226; taxation, 103; violence. 96.


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

There is some tentative and controversial indication that policy makers at the highest levels are aware of the vulnerability of existing currencies and have begun thinking about alternatives. Some anti-globalization bloggers believe there may be an Orwellian solution in store: Point 19 of the official communiqué from the 2009 G20 summit noted, “We have agreed to support a general SDR allocation which will inject $250bn (£170bn) into the world economy and increase global liquidity.” SDRs, or Special Drawing Rights, are “a synthetic paper currency issued by the International Monetary Fund.” Could the IMF be testing the waters for the creation of a global currency?24 Full implementation of a global currency would require many more steps, including the setting up of a full-fledged global central bank (the IMF is not currently equipped to fulfill this role, though perhaps it could be revamped for the purpose).


pages: 369 words: 98,776

The God Species: Saving the Planet in the Age of Humans by Mark Lynas

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back-to-the-land, Berlin Wall, carbon footprint, clean water, Climategate, Climatic Research Unit, David Ricardo: comparative advantage, decarbonisation, dematerialisation, demographic transition, Haber-Bosch Process, ice-free Arctic, invention of the steam engine, James Watt: steam engine, megacity, meta analysis, meta-analysis, moral hazard, Negawatt, New Urbanism, oil shale / tar sands, out of africa, peak oil, planetary scale, quantitative easing, race to the bottom, Ronald Reagan, special drawing rights, Stewart Brand, University of East Anglia

To some this “printing money” approach might raise the specter of inflation, but central banks have plenty of options—like limiting the annual amount offered, altering interest rates, or forcing commercial banks to hold more reserves—to make this a minor concern. A version of this idea has been put at the international level by the World Future Council, which suggests using the International Monetary Fund’s “special drawing rights” facility to create a $100-billion-a-year Green Fund for investment in low-carbon infrastructure.77 Much of this money could go to developing countries, particularly those in the poorest category of “least developed.” Many of these countries would be much better off eschewing expensive fossil fuel imports in favor of using their indigenous renewables, but lack both the funding and the capacity to manage energy policy properly.


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

The Dissolution of the Bretton Woods Consensus The success of the Bretton Woods regime contained the seeds of its undermining. As world trade and finance expanded, the “policy space” that the existing controls afforded shrank and external constraints began to play a larger role. The IMF and its resources proved inadequate, despite the creation of an artificial reserve asset designed to augment its lending capacity (the Special Drawing Right or SDR). When the country at the center of the system, the United States, came under attack in the late 1960s, the regime of fixed exchange rates could no longer be sustained. 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.


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

Even the start of such a move is unlikely for at least another decade, because currency convertibility and open capital markets would substantially weaken the Communist Party’s capacity for economic and social control. The only possible alternative to the dollar as the key currency of global trade and finance would be some kind of artificial international money created and managed by an international institution such as the IMF. The dollar could in principle be replaced by the IMF’s special drawing rights (SDR), but for this to happen, the United States, China, and Europe would have to give up a significant part of their economic sovereignty and accept the superior legitimacy of the IMF, and of the UN system to which it ultimately belongs. This would indeed be a big step forward in global cooperation. But it is a step the world is unlikely to take, even on the thirty- to forty-year timescale during which the new version of capitalism can be expected to survive.


pages: 483 words: 141,836

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

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

Economists tend to emphasize the first two but we had token money and commodity money as mediums of exchange, and bulk metal as a store of value, for thousands of years before true money added the numeraire function and caused an explosion in value creation. We have many things that function as partial money today, credit cards as mediums of exchange, financial securities as stores of value, special drawing rights (a unit of account for transactions between central banks that is defined by reference to a basket of currencies) and consumer price indexes (a unit of account used by economists that is defined by reference to a basket of goods) as numeraires; but the forms of money that stimulate the economy are those that equate constraints and goals of important risk-taking activities. Although few people seemed to have noticed, at the moment financial derivatives are the most important form of money used in advanced economies.


pages: 457 words: 128,838

The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order by Paul Vigna, Michael J. Casey

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3D printing, Airbnb, altcoin, bank run, banking crisis, bitcoin, blockchain, Bretton Woods, California gold rush, capital controls, carbon footprint, clean water, collaborative economy, collapse of Lehman Brothers, Columbine, Credit Default Swap, cryptocurrency, David Graeber, disintermediation, Edward Snowden, Elon Musk, ethereum blockchain, fiat currency, financial innovation, Firefox, Flash crash, Fractional reserve banking, hacker house, Hernando de Soto, high net worth, informal economy, Internet of things, inventory management, Julian Assange, Kickstarter, Kuwabatake Sanjuro: assassination market, litecoin, Long Term Capital Management, Lyft, M-Pesa, Mark Zuckerberg, McMansion, means of production, Menlo Park, mobile money, money: store of value / unit of account / medium of exchange, Network effects, new economy, new new economy, Nixon shock, offshore financial centre, payday loans, peer-to-peer lending, pets.com, Ponzi scheme, prediction markets, price stability, profit motive, RAND corporation, regulatory arbitrage, rent-seeking, reserve currency, Robert Shiller, Robert Shiller, Satoshi Nakamoto, seigniorage, shareholder value, sharing economy, short selling, Silicon Valley, Silicon Valley startup, Skype, smart contracts, special drawing rights, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, supply-chain management, Ted Nelson, The Great Moderation, the market place, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, Turing complete, Tyler Cowen: Great Stagnation, Uber and Lyft, underbanked, WikiLeaks, Y Combinator, Y2K, Zimmermann PGP

Might a cryptocurrency crisis goad governments into another such sweeping agreement? A Bretton Woods II? Those who’ve dreamed of the IMF’s playing an intermediary role in international commerce, who’ve wanted to free the world of its unhealthy dependence on the dollar and to reduce the excessive influence of the Fed and U.S. Treasury, might suddenly feel empowered. The Chinese and the French, who’ve pushed to have the IMF’s Special Drawing Rights elevated from their current role as mere units of accounting to becoming an international reserve currency for storing central bank deposits, might have themselves a new cause. We doubt officials in Paris or Beijing are conceiving of such things right now, but if cryptocurrency technology lives up to its potential, they may have to think about it. Under this imagined Bretton Woods II, perhaps the IMF would create its own cryptocurrency, with nodes for managing the blockchain situated in proportionate numbers within all the member countries, where none could ever have veto power, to avoid a state-run 51 percent attack.


pages: 448 words: 142,946

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

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

So, the United States simply announced it would no longer redeem dollars for gold within the international banking system, just as it had ceased to do so domestically some four decades earlier, revealing the gold standard as a convenient fiction. The proclamation that money is backed is little different from any other ritual incantation in that it derives its power from collective human belief. However true this was of gold, it is truer still of more recent, more sophisticated backed-currency proposals, such as Bernard Lietaer’s terra currency, and recent proposals for revised IMF Special Drawing Rights, to be backed by a commodity basket reflecting overall economic activity. There is merit in this approach; indeed it is a step in the direction I envision in this book. But this backing is obviously a fiction: no one is ever going to exchange their terras for actual, physical delivery—on their doorstep—of the prescribed combination of oil, grain, carbon credits, pork bellies, iron ingots, and whatever else is on the list.


pages: 524 words: 143,993

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

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

In December 2011 euro area member countries committed themselves to providing additional funds of up to €150 billion (about $200 billion). The 14th General Review of Quotas, approved in December 2010, will double the IMF’s permanent resources to SDR 476.8 billion (about $737 billion). There will be a rollback in the NAB credit arrangements to SDR 182 billion, which will become effective when participants pay for these quota increases. In addition, in 2009, the membership agreed to make a general allocation of special drawing rights (SDRs), equivalent to $250 billion, resulting in a near tenfold increase in SDRs. See International Monetary Fund, ‘IMF’s Response to the Global Economic Crisis’, 19 September 2013, http://www.imf.org/external/np/exr/facts/changing.htm. 47. International Monetary Fund, ‘Greece: Ex Post Evaluation of Exceptional Access under the 2010 Stand-by Arrangement’, 20 May 2013, http://www.imf.org/external/pubs/ft/scr/2013/cr13156.pdf. 48.


pages: 859 words: 204,092

When China Rules the World: The End of the Western World and the Rise of the Middle Kingdom by Martin Jacques

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Admiral Zheng, Asian financial crisis, Berlin Wall, Bretton Woods, BRICs, British Empire, credit crunch, Dava Sobel, deindustrialization, Deng Xiaoping, deskilling, discovery of the americas, Doha Development Round, energy security, European colonialism, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, global reserve currency, global supply chain, illegal immigration, income per capita, invention of gunpowder, James Watt: steam engine, joint-stock company, Kenneth Rogoff, land reform, land tenure, Malacca Straits, Martin Wolf, Naomi Klein, new economy, New Urbanism, open economy, pension reform, price stability, purchasing power parity, reserve currency, rising living standards, Ronald Reagan, Scramble for Africa, Silicon Valley, South China Sea, sovereign wealth fund, special drawing rights, special economic zone, spinning jenny, Spread Networks laid a new fibre optics cable between New York and Chicago, the scientific method, Thomas L Friedman, trade liberalization, urban planning, Washington Consensus, Xiaogang Anhui farmers

And China is demonstrating that it intends to be a full-hearted participant in this process. It is not difficult to predict some of the likely consequences: the G20 will effectively replace the G8 and the IMF and the World Bank will be subject to reform, with the developing countries acquiring a greater say. The most audacious proposal that has so far emanated from Beijing is the suggestion for a new de facto global currency based on using IMF’s special drawing rights, which might in time replace the dollar as the world’s reserve currency. Whether such a proposal would ever see the light of day, or indeed work, given that reserve currencies hitherto have always depended on a powerful sovereign state, it offers an insight into the strategic financial thinking that informs the Chinese government’s approach. It suggests that the Chinese recognize that the days of the dollar as the dominant global currency are now numbered.


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

Wise heads shook, though they shook in the wrong direction, absurdly conjuring up a ‘liquidity crisis’, and deflation, in which they were quite wrong, because the problem was that there was a glut of money, and an inflation that rocked the entire system. At any rate, tinkering happened. A G10 group of the industrial nations was formed to defend the dollar (and a Basle one for the pound) and they could lend to the IMF, which allowed special drawing rights of immediate credit to defend a currency under threat. The IMF thereby, at last, acquired a role. NATO members were encouraged to spend dollars in the USA and to deposit cash there; American citizens were forbidden to own gold coins (1965) and the GATT round of 1958-62 even allowed countries with threatened currencies to impose an import surcharge of 10 per cent (as happened with the British in 1961 and 1964).