Carmen Reinhart

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pages: 376 words: 109,092

Paper Promises by Philip Coggan

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, Alan Greenspan, balance sheet recession, bank run, banking crisis, barriers to entry, Bear Stearns, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, bond market vigilante , Bretton Woods, British Empire, business cycle, 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, currency risk, 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, Goodhart's law, Greenspan put, hiring and firing, Hyman Minsky, income inequality, inflation targeting, Isaac Newton, John Meriwether, joint-stock company, junk bonds, Kenneth Rogoff, Kickstarter, labour market flexibility, light touch regulation, Long Term Capital Management, manufacturing employment, market bubble, market clearing, Martin Wolf, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Myron Scholes, negative equity, Nick Leeson, Northern Rock, oil shale / tar sands, paradox of thrift, peak oil, pension reform, plutocrats, Ponzi scheme, price stability, principal–agent problem, purchasing power parity, quantitative easing, QWERTY keyboard, railway mania, regulatory arbitrage, reserve currency, Robert Gordon, Robert Shiller, Ronald Reagan, savings glut, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, Suez crisis 1956, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, time value of money, too big to fail, trade route, tulip mania, value at risk, Washington Consensus, women in the workforce, zero-sum game

Britain has not formally defaulted since 1672, although this record does not apply to its European neighbours. In the nineteenth century, for example, the Austro-Hungarian Empire defaulted or rescheduled its debt five times. In their magisterial study of the subject, This Time Is Different,15 Carmen Reinhart and Kenneth Rogoff describe a cycle of sovereign defaults, with peaks in the Napoleonic Wars, the 1820s through to the 1840s, the 1870s to the 1890s and the Great Depression of the 1930s. Clearly, wars often played their part in this cycle, with defeated nations highly likely to renege on their debts.

As Jeremy Grantham of the fund management company GMO has written, ‘Individuals, as well as institutions, were fooled into believing that the market signals were real, that they truly were rich. They acted accordingly, spending too much or saving too little, all the while receiving less than usual from their overpriced holdings.’1 It is not just investors who are fooled. Policymakers can be too. As Carmen Reinhart and Kenneth Rogoff put it, ‘Debt-fuelled booms all too often provide false affirmation of a government’s policies, a financial institution’s ability to make outsized profits or a country’s standard of living. Most of these booms end badly.’2 FORTY YEARS OF BUBBLES The last forty years of economic history (since the collapse of Bretton Woods) have been remarkable.

Good debtors, like Britain and the Netherlands, had financial advantages over bad debtors, like eighteenth-century France. Britain’s financial success encouraged other countries to follow its example. But the willingness of countries to follow prudent financial policies proved no more permanent than the willingness of most January revellers to follow their New Year’s resolutions. Carmen Reinhart and Kenneth Rogoff recount that sovereign default has occurred in a number of waves, starting with the Napoleonic Wars.1 In the 1840s cycle, nearly half the countries in the developed world were in default. There was a 1870s to 1890s wave, associated with falling commodity prices, and a 1930s to 1950s phase, linked to the Great Depression and the war.


pages: 249 words: 66,383

House of Debt: How They (And You) Caused the Great Recession, and How We Can Prevent It From Happening Again by Atif Mian, Amir Sufi

"Robert Solow", Andrei Shleifer, asset-backed security, balance sheet recession, bank run, banking crisis, Ben Bernanke: helicopter money, break the buck, business cycle, Carmen Reinhart, collapse of Lehman Brothers, creative destruction, debt deflation, Edward Glaeser, en.wikipedia.org, financial innovation, full employment, high net worth, Home mortgage interest deduction, housing crisis, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, liquidity trap, Long Term Capital Management, market bubble, Martin Wolf, money market fund, moral hazard, mortgage debt, negative equity, paradox of thrift, quantitative easing, Robert Shiller, school choice, shareholder value, the payments system, the scientific method, tulip mania, young professional, zero-sum game

International Monetary Fund, “Chapter 3: Dealing with Household Debt,” in World Economic Outlook: Growth Resuming, Dangers Remain, April 2012. 16. Mervyn King, “Debt Deflation: Theory and Evidence,” European Economic Review 38 (1994): 419–45. 17. Carmen Reinhart and Kenneth Rogoff, “Is the 2007 US Sub-Prime Financial Crisis So Different?: An International Historical Comparison,” American Economic Review 98 (2008): 339–44. 18. Carmen Reinhart and Kenneth Rogoff, This Time Is Different (Princeton, NJ: Princeton University Press, 2009). 19. Oscar Jorda, Moritz Schularick, and Alan M. Taylor, “When Credit Bites Back: Leverage, Business Cycles, and Crisis” (working paper no. 17621, NBER, 2011). 20.

Despite focusing on a completely different recession, King found exactly the same relation: Countries with the largest increase in household-debt burdens—Sweden and the United Kingdom, in particular—experienced the largest decline in growth during the recession. Another set of economic downturns we can examine are what economists Carmen Reinhart and Kenneth Rogoff call the “big five” postwar banking crises in the developed world: Spain in 1977, Norway in 1987, Finland and Sweden in 1991, and Japan in 1992.17 These recessions were triggered by asset-price collapses that led to massive losses in the banking sector, and all were especially deep downturns with slow recoveries.

In 2011 Harvard economist and president emeritus of the National Bureau of Economic Research Martin Feldstein wrote that the “only real solution” to the housing mess was “permanently reducing the mortgage debt hanging over America.”22 Top economists who met with the president and vice president in 2011 said that the president “could have significantly accelerated the slow economic recovery if he had better addressed the overhang of mortgage debt left when housing prices collapsed.”23 In 2011 Carmen Reinhart concluded that “a restructuring of U.S. household debt, including debt forgiveness for low-income Americans, would be most effective in speeding economic growth.”24 Lessons from History There are sound microeconomic and macroeconomic reasons for government intervention to restructure household debt during a levered-losses episode.


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

air freight, Alan Greenspan, anti-communist, Asian financial crisis, asset allocation, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Black Swan, bonus culture, break the buck, Bretton Woods, business cycle, call centre, capital asset pricing model, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collateralized debt obligation, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, currency risk, 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, foreign exchange controls, forward guidance, Fractional reserve banking, full employment, global rebalancing, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, inflation targeting, information asymmetry, invisible hand, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, mandatory minimum, margin call, market bubble, market clearing, market fragmentation, Martin Wolf, Mexican peso crisis / tequila crisis, Modern Monetary Theory, Money creation, money market fund, moral hazard, mortgage debt, negative equity, new economy, North Sea oil, Northern Rock, open economy, paradox of thrift, Paul Samuelson, price stability, private sector deleveraging, purchasing power parity, pushing on a string, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, Richard Feynman, risk-adjusted returns, risk/return, road to serfdom, Robert Gordon, Robert Shiller, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, shareholder value, short selling, sovereign wealth fund, special drawing rights, tail risk, 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, Tyler Cowen: Great Stagnation, very high income, winner-take-all economy, zero-sum game

The weakness of private demand within high-income countries has precluded that and, in particular, the loss of creditworthiness by many households. In all, the legacy of the crises includes deep practical challenges to policymaking almost everywhere. As a result of these unexpected economic developments, crisis-hit countries have been forced to struggle with worse fiscal positions than they had previously imagined. As the work of Carmen Reinhart and Kenneth Rogoff, both now at Harvard University, has shown, fiscal crises are a natural concomitant of financial crises, largely because of the impact on government revenue and spending of declining profits and economic activity, together with rising unemployment. These come on top of the direct fiscal costs of bank bailouts.7 As was to be predicted, in the current crisis the biggest adverse fiscal effects were felt in countries that suffered a direct hit from the financial crises, such as the US, the UK, Ireland and Spain, rather than in countries that suffered an indirect hit, via trade.

In fact, it was a pity that a form of ‘sticker shock’ over the scale of the unexpected deficits frightened policymakers into not giving the discretionary fiscal support then needed and, subsequently, as we shall see further below, into premature retrenchment. Nobody should be surprised by the huge fiscal deterioration that followed the crisis. In their seminal book, This Time is Different, Carmen Reinhart and Kenneth Rogoff argue that: ‘Declining revenues and higher expenditures, owing to a combination of bailout costs and higher transfer payments and debt service costs, led to a rapid and marked worsening in the fiscal balance.’48 In fact, they note from an analysis of crises in thirteen countries, the cumulative increase in real public debt was 86 per cent – close to a doubling.49 What happened after 2007 is in line with that prior experience.

In the US, austerity was the result of a political stand-off between the two parties. But in the UK it was a deliberate policy.22An influential argument was that the UK had too much public debt, even though the ratio of debt to GDP has remained below its average of the past three centuries. Research by Carmen Reinhart and Kenneth Rogoff, both at Harvard University and celebrated as authors of This Time is Different, a justly influential book on financial and fiscal crises, supported the idea that public debt was becoming dangerously high and so that an early shift towards fiscal austerity was both necessary and wise.


pages: 576 words: 105,655

Austerity: The History of a Dangerous Idea by Mark Blyth

"Robert Solow", "there is no alternative" (TINA), accounting loophole / creative accounting, Alan Greenspan, balance sheet recession, bank run, banking crisis, Bear Stearns, Black Swan, Bretton Woods, business cycle, buy and hold, capital controls, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, deindustrialization, disintermediation, diversification, en.wikipedia.org, ending welfare as we know it, Eugene Fama: efficient market hypothesis, eurozone crisis, financial engineering, financial repression, fixed income, floating exchange rates, Fractional reserve banking, full employment, German hyperinflation, Gini coefficient, global reserve currency, Greenspan put, Growth in a Time of Debt, high-speed rail, Hyman Minsky, income inequality, information asymmetry, interest rate swap, invisible hand, Irish property bubble, Joseph Schumpeter, Kenneth Rogoff, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, Long Term Capital Management, market bubble, market clearing, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, Occupy movement, offshore financial centre, paradox of thrift, Philip Mirowski, Phillips curve, Post-Keynesian economics, price stability, quantitative easing, rent-seeking, reserve currency, road to serfdom, savings glut, short selling, structural adjustment programs, tail risk, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, unorthodox policies, value at risk, Washington Consensus, zero-sum game

In all cases, private-sector weaknesses ended up creating public-sector liabilities that European publics now have to pay for with austerity programs that make the situation worse rather than better. The fiscal crisis in all these countries was the consequence of the financial crisis washing up on their shores, not its cause. To say that it is the cause is to deliberately, and politically, confuse cause and effect. We really should know better. Carmen Reinhart and Kenneth Rogoff, no friends of Keynesian policy, note that a banking crisis is followed by a sovereign debt crisis 80 percent of the time.42 Reinhardt and Rogoff stop short of using the word “cause.” However, as Moritz Schularick and Alan Taylor have shown, sovereign debt crises are almost always “credit booms gone bust.”43 They develop in the private sector and end up in the public sector.

But the lessons of the 1920s suggest that this will come to an end by prompting one of the other options: devaluation, inflation, or default. Is there a more stable alternative future path? Yes, there are two, and neither is great, but they are, as Churchill said about democracy, the worst options except for the alternatives. The first path is usually known by the pejorative sobriquet of financial repression. Carmen Reinhart and M. Belen Sbrancia recently discussed this possible path.36 They concluded, by examining episodes of past high indebtedness, that states restructure their financial systems in periods of crisis in such a way as to allow them to create “captive audiences.” Banks, pension funds, and other long-term debt holders are “encouraged” through capital controls, interest-rate ceilings, and other devices to hold a large amount of government bonds.

“Budget of the United States Government, Fiscal Year 2002,” Executive Office of the President of the United States, 224, table S. 2, http://www.gpo.gov/fdsys/pkg/BUDGET-2002-BUD/pdf/BUDGET-2002-BUD.pdf. 27. Alberto Alesina, “Tax Cuts vs. ‘Stimulus’: The Evidence Is In,” Wall Street Journal, September 15, 2010, Opinion; Carmen M. Reinhart and Kenneth S. Rogoff “Growth in a Time of Debt,” American Economic Review, 100, 2 (2010): 573–578. 28. Timothy Noah, “Introducing the Great Divergence,” Slate, September 3, 2010, Part of a series entitled “The United States of Inequality,” http://www.slate.com/articles/news_and_politics/the_great_divergence/features/2010/the_united_states_of_inequality/introducing_the_great_divergence.html. 29.


pages: 310 words: 90,817

Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown by Detlev S. Schlichter

bank run, banks create money, British Empire, business cycle, capital controls, Carmen Reinhart, central bank independence, currency peg, fixed income, Fractional reserve banking, German hyperinflation, global reserve currency, inflation targeting, Kenneth Rogoff, Kickstarter, Long Term Capital Management, market clearing, Martin Wolf, means of production, Money creation, money market fund, moral hazard, mortgage debt, open economy, Ponzi scheme, price discovery process, price mechanism, price stability, pushing on a string, quantitative easing, reserve currency, rising living standards, risk tolerance, savings glut, the market place, The Wealth of Nations by Adam Smith, Thorstein Veblen, transaction costs, Y2K

Ben Bernanke, Remarks before the National Economics Club, Washington, DC, Nov. 21, 2002, http://www.federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm 2. Carmen M. Reinhart, Kenneth S. Rogoff, This Time Is Different: Eight Centuries of Financial Folly (Princeton and Oxford: Princeton University Press, 2009), pp. 204–207. 3. Board of Governors of the Federal Reserve System, http://www.federalreserve.gov/releases/h8/Current/ 4. Federal Reserve Statistical Release H.6 Money Stock Measures, http://www.federalreserve.gov/releases/h6/hist/ 5. Federal Reserve Bank of St. Louis, http://fraser.stlouisfed.org/publications/ERP/page/7254/download/46604/7254_ERP.pdf 6. Carmen M. Reinhart, Kenneth S. Rogoff, This Time Is Different: Eight Centuries of Financial Folly, p. 207 7.

For a historian’s account of these events, see Adam Ferguson, When Money Dies (London: Old Street Publishing, 2010/1975). 19. Peter Bernholz, Monetary Regimes and Inflation, p. 8. 20. Carmen M. Reinhart, Kenneth S. Rogoff, This Time Is Different: Eight Centuries of Financial Folly, p. 112. 21. Milton Friedman/Anna Jacobson Schwartz, A Monetary History of the United States, 1867–1960, pp. 461–493. 22. Quoted from John Laughland, The Tainted Source, p. 41. 23. Carmen M. Reinhart, Kenneth S. Rogoff, This Time Is Different: Eight Centuries of Financial Folly, pp. 204–206. Part Five: BEYOND THE CYCLE Paper Money Collapse Chapter 8 The Beneficiaries of the Paper Money System By now we have fully exposed the disadvantages and dangers of elastic money.

The inevitable consequences of the new infrastructure and policy have become ever more manifest. Since 1971 the decline in the purchasing power of pound and dollar—two of the oldest currencies in the world—has been the steepest in their long history. Debt levels have risen sharply and the financial industry has greatly expanded. As economists Carmen Reinhart and Kenneth Rogoff demonstrated in their extensive study of financial crises, the number and intensity of international banking crises has risen markedly since 1971.2 Japan experienced an enormous money-driven housing boom in the 1980s and has still not recovered from the dislocations this created.


pages: 361 words: 97,787

The Curse of Cash by Kenneth S Rogoff

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

Others, led by my colleague Lawrence Summers, argue that there has been a secular decline in global aggregate demand. Personally, I think it is hard to reach any definitive conclusion on where long-run growth is headed, especially since slow growth periods almost invariably follow deep systemic financial crises (as documented in my 2009 book with Carmen Reinhart).4 Even if real interest rates eventually do rise a couple of percentage points to more normal levels, it is now clear that they can sometimes be very low or even negative for sustained periods. Indeed, it is sobering to realize that Japan’s financial crisis began back in the early 1990s, and yet the country is still struggling with the zero bound two decades later.

Ben Bernanke has argued forcefully that the right remedy for dealing with debt buildups is so-called macroprudential regulation, for example, putting limits on loan-to-value ratios in housing loans.4 But this is easier said than done. After many years of a long boom, there are strong political economy pressures on regulators to ease up on markets that seem to be doing just fine. Yet it is exactly toward the end of long booms that risks start becoming the greatest, as Carmen Reinhart and I emphasize in our 2009 book on eight centuries of financial crises.5 Beyond that, crafting good financial regulation is not easy, and there will inevitably be important omissions, especially as the private sector will constantly be looking for weak links. The case for using interest rate policy to lean against the wind of a debt-fueled asset-price bubble was perhaps made most eloquently by former Fed governor Jeremy Stein, who said that, unlike macroprudential policy, interest rate policy gets in the “cracks” of the financial system.

Judson. 1996. “The Location of US Currency: How Much Is Abroad?” Federal Reserve Bulletin, October. Washington, DC. Reifschneider, David L., and John C. Williams. 2000. “Three Lessons for Monetary Policy in a Low-Inflation Era.” Journal of Money, Credit and Banking 32 (4): 936–66. Reinhart, Carmen M., Vincent Reinhart, and Kenneth S. Rogoff. 2015. “Dealing with Debt.” Journal of International Economics 96, suppl. 1 (July): S43–S55. Reinhart, Carmen M., and Kenneth S. Rogoff. 2002. “The Modern History of Exchange Rate Arrangements: A Reinterpretation.” NBER Working Paper 8963 (June). Cambridge, MA: National Bureau of Economic Research. ———. 2004.


pages: 183 words: 17,571

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

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

The second category of book involves serious academic research and, at best, the ability to make complex realities simple and interesting. And, unlike the greed-and-corruption literature, they put things in historical context, sometimes centuries. The late Charles Kindleberger was the master in this regard, though for the 2008 crisis This Time Its Different by Ken Rogoff and Carmen Reinhart might represent the gold standard. Certainly the events of the last five years will keep both economists and economic historians busy for generations, as the Great Depression of the 1930s continues to stimulate research and controversy. Like the less substantive financial thrillers, these more serious works tend to leave the “so what?”

The good news is that financial repression works in both making high debt levels affordable and in reducing them over time. The bad news is that it massively redistributes wealth from savers and investors to the government. Financial Repression Made Simple In a recent paper for the National Bureau of Economic Research (NBER), The Liquidation of Government Debt (NBER Working Paper 16893, March 2011) Carmen Reinhart and M. Belen Sbrancia make the case that between 1945 and the 1970s, almost all advanced countries practiced “a subtle type of debt restructuring,” financial repression, to achieve “sharp and rapid” reduction of public debt as a portion of their economies. Financial repression has three key pillars: • First, governments directly or indirectly set interest rates that are below what the market would set.

The “progressive” view is that debt per se is not a problem if taxes are raised on the 1 percent, although they already carry 40 percent or more of the tax burden. As with many such political standoffs, everybody is wrong. The odds of the US economy growing out of our debt overhang are extremely long if past experience is any guide. Carmen Reinhart and Ken Rogoff studied centuries of financial crises—read their indispensible This Time Is Different (Princeton University Press, 2009) for the full picture—and found that public debt levels began to impede economic growth when they moved above 90 percent of GDP. The mean growth drag was 1 percent, and a 1 percent drag on GDP makes a huge difference in the size of an economy over time.


pages: 466 words: 127,728

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

Affordable Care Act / Obamacare, Alan Greenspan, Asian financial crisis, asset allocation, Ayatollah Khomeini, bank run, banking crisis, Bear Stearns, Ben Bernanke: helicopter money, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, Bretton Woods, BRICs, business climate, business cycle, buy and hold, 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, Dr. Strangelove, Edward Snowden, eurozone crisis, fiat currency, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, Flash crash, floating exchange rates, forward guidance, G4S, George Akerlof, global macro, global reserve currency, global supply chain, Goodhart's law, Growth in a Time of Debt, Herman Kahn, high-speed rail, income inequality, inflation targeting, information asymmetry, invisible hand, jitney, John Meriwether, junk bonds, Kenneth Rogoff, labor-force participation, 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, megaproject, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mutually assured destruction, Nixon triggered the end of the Bretton Woods system, obamacare, offshore financial centre, oil shale / tar sands, open economy, operational security, 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, undersea cable, uranium enrichment, Washington Consensus, working-age population, yield curve

Makin, “Trillion-Dollar Deficits Are Sustainable for Now, Unfortunately,” American Enterprise Institute, December 13, 2012, http://www.aei.org/outloook/trillion-dollar-deficits-are-sustainable-for-now-unfortunately. Contrary to the oft-cited . . . : Carmen M. Reinhart and Kenneth S. Rogoff, “Growth in a Time of Debt,” National Bureau of Economic Research, Working Paper no. 15639, January 2010, http://www.nber.org/papers/w15639. “The Liquidation of Government Debt”: Carmen M. Reinhart and M. Belen Sbrancia, “The Liquidation of Government Debt,” National Bureau of Economic Research, Working Paper no. 16893, March 2011, http://www.nber.org/papers/w16893. “A . . . reason why forward guidance may be needed . . .”: Michael Woodford, “Methods of Policy Accommodation at the Interest-Rate Lower Bound,” paper presented at the Federal Reserve Bank of Kansas City Symposium, Jackson Hole, Wyo., August 31, 2012, p. 6, emphasis in the original, http://www.kc.frb.org/publicat/sympos/2012/mw.pdf.

Plugging these actual numbers into the PDS framework results in: (2.5 + 1) – 1.5 < 4, or 2 < 4 In this example, real growth plus inflation minus interest expense is less than the primary deficit, which means that debt as a percentage of GDP is increasing. This is the unsustainable condition. Again, what matters in this model is not the level but the trend, as played out in the dynamics of the BRITS and their interactions. Contrary to the oft-cited Carmen Reinhart and Kenneth Rogoff thesis, the absolute level of debt to GDP is not what triggers a crisis; it is the trend toward unsustainability. One beauty of PDS is that the math is simple. Starting with the identity as 2 < 4 means that to achieve sustainability, either the 2 must go up, the 4 must go down, or both.

In normal markets, bond buyers would demand higher interest rates to offset inflation, but these are not normal markets. The bond market may want higher nominal rates, but the Fed won’t permit it. The Fed enforces negative real rates through financial repression. The theory of financial repression was explained incisively by Carmen Reinhart and M. Belen Sbrancia in their 2011 paper “The Liquidation of Government Debt.” The key to financial repression is the use of law and policy to prevent interest rates from exceeding the rate of inflation. This strategy can be carried out in many different ways. In the 1950s and 1960s it was done through bank regulation that made it illegal for banks to pay more than a stated amount on savings deposits.


pages: 356 words: 103,944

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

affirmative action, Alan Greenspan, Asian financial crisis, bank run, banking crisis, Bear Stearns, bilateral investment treaty, borderless world, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, central bank independence, collective bargaining, colonial rule, Corn Laws, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, Doha Development Round, en.wikipedia.org, endogenous growth, eurozone crisis, financial deregulation, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, George Akerlof, guest worker program, Hernando de Soto, immigration reform, income inequality, income per capita, industrial cluster, information asymmetry, joint-stock company, Kenneth Rogoff, land reform, liberal capitalism, light touch regulation, Long Term Capital Management, low skilled workers, margin call, market bubble, market fundamentalism, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, microcredit, Monroe Doctrine, moral hazard, night-watchman state, non-tariff barriers, offshore financial centre, oil shock, open borders, open economy, Paul Samuelson, precautionary principle, price stability, profit maximization, race to the bottom, regulatory arbitrage, Savings and loan crisis, 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

By the time it’s all over, the economy will have forfeited, on average, around 20 percent of its GDP.30 None of this should have come as a real surprise. Whenever capital has been free to move around the world, it has produced what the economic historian Charles Kindleberger has memorably called “manias, panics and crashes.”31 Recent research by Carmen Reinhart and Ken Rogoff has quantified what had long been obvious to economic historians. These two economists painstakingly sifted through the historical record to identify every single important instance of banking crisis since 1800. When they superimposed their results on the historic trajectory of capital mobility, they discovered that the two series lined up almost perfectly.

For example, when the European economics network VoxEU.org solicited advice from leading economists on how to address the frailties of the global financial system in the wake of the 2008 crisis, the proposed solutions often took the form of tighter international rules administered by some kind of technocracy: an international bankruptcy court, a world financial organization, an international bank charter, an international lender of last resort, and so on.2 Jeffrey Garten, under secretary of commerce for international trade in the Clinton administration, has long called for the establishment of a global central bank.3 Economists Carmen Reinhart and Ken Rogoff have proposed an international financial regulator. These proposals may seem like the naive ruminations of economists who don’t understand politics, but in fact they are often based on an explicit political motive. When Reinhart and Rogoff argue for an international financial regulator, their goal is as much to fix a political failure as it is to address economic spillovers across nations; perhaps the political motive even takes precedence over the economic one.

Calvo, “Explaining Sudden Stops, Growth Collapse and BOP Crises: The Case of Distortionary Output Taxes,” in his Emerging Capital Markets in Turmoil: Bad Luck or Bad Policy? (Cambridge, MA: MIT Press, 2005). 30 Laeven and Fabian, “Systemic Bank Crises,” p. 25. 31 Charles P. Kindleberger, Manias, Panics and Crashes: A History of Financial Crises (New York: Basic Books, 1989). 32 Carmen M. Reinhart and Kenneth S. Rogoff, “This Time Is Different: A Panoramic View of Eight Centuries of Financial Crises,” Unpublished paper, Harvard University, April 16, 2008, p. 7 (http://www.economics.harvard.edu/faculty/ rogoff/files/This_Time_Is_Different.pdf). 33 Research at the IMF has shown that the volatility of consumption in the developing economies rose under financial globalization—M.


Britannia Unchained: Global Lessons for Growth and Prosperity by Kwasi Kwarteng, Priti Patel, Dominic Raab, Chris Skidmore, Elizabeth Truss

Airbnb, banking crisis, Carmen Reinhart, central bank independence, clockwatching, creative destruction, Credit Default Swap, demographic dividend, Edward Glaeser, eurozone crisis, fail fast, fear of failure, financial engineering, glass ceiling, informal economy, James Dyson, Kenneth Rogoff, knowledge economy, long peace, margin call, Mark Zuckerberg, Martin Wolf, megacity, Mexican peso crisis / tequila crisis, Neil Kinnock, new economy, North Sea oil, oil shock, open economy, paypal mafia, pension reform, price stability, profit motive, Ronald Reagan, Sand Hill Road, Silicon Valley, Stanford marshmallow experiment, Steve Jobs, Suez crisis 1956, tech worker, Walter Mischel, wealth creators, Winter of Discontent, working-age population, Yom Kippur War

If it is really is impossible for countries to go bust, then it is strange that so many countries have failed to pay back their loans. From Edward III defaulting on his loans to Florence financiers in 134039 through to today’s Eurozone crisis, sovereign defaults have been a constant feature throughout history. In their definitive text, This Time is Different, economists Carmen M. Reinhart and Kenneth S. Rogoff list hundreds of examples of default through the last 800 years. Default is not just not unknown, it is endemic. Only a small number of countries – such as Australia, New Zealand, Canada, Denmark, Thailand and the United States40 – have never defaulted. The UK has been relatively fortunate in past centuries, but it too defaulted.

Macaulay, History of England. 30. http://krugman.blogs.nytimes.com/2011/12/04/british-debt-history/ 31. http://krugman.blogs.nytimes.com/2011/11/30/bleeding-britain/ 32. http://johannhari.com/2011/03/29/the-biggest-lie-in-british-politics/ 33. http://www.ft.com/cms/s/0/a9042452-1a3c-11de-9f91-0000779fd2ac. html#axzz1gJPBneNS 34. http://www.newstatesman.com/blogs/david-blanchflower/2011/06/creditcard-cameron-basic 35. Niall Ferguson, The Cash Nexus: Money and Power in the Modern World, 1700–2000 (Penguin, 2001), p. 53. 36. Ferguson, The Cash Nexus, p. 129. 37. Ferguson, The Cash Nexus, p. 130. 38. Office for Budget Responsibility, Economic and Fiscal Outlook, March 2012. 39. Carmen Reinhart and Kenneth Rogoff, This Time is Different: Eight Centuries of Financial Folly (Princeton University Press, 2009). 40. Reinhart and Rogoff, This Time is Different. 41. http://www.thedailybeast.com/newsweek/2009/11/27/an-empire-at-risk.html 42. http://www.thedailybeast.com/newsweek/2009/11/27/an-empire-at-risk.html 43.


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

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

The country is not prepared for, and does not understand, the degree of swingeing reduction that the coalition government plans. The international environment, plagued by sovereign debt crises and growing assertive national self-interest, is hardly a source of comfort. These are difficult times. Britain is going to be much poorer than it anticipated just a few years ago. Two American economists, Carmen Reinhart and Ken Rogoff, have assessed the aftermath of credit explosions and financial crashes in sixty-seven countries. They paint a sober picture of prolonged loss of output, high unemployment and depressed asset prices, and warn that there is no precedent for what happens after the kind of global crisis through which we have just lived.1 Earlier, I cited Andrew Haldane’s estimates of cumulative lost output, which had a best-case scenario of £1.4 trillion.

Equally problematic is determining a sustainable level of public debt, which is certain to rise to maintain economic activity in almost every country as private debt starts to fall. Most countries can handle public debt up to 90 per cent of GDP; above that level, the ratio of debt service to any reasonable level of tax receipts as a share of GDP starts to nudge above 10 per cent, which causes problems for most states over time. Carmen Reinhart and Kenneth Rogoff say that once ratios of public debt to GDP exceed 90 per cent, median growth rates fall by 1 per cent a year, but there is no association between growth and public debt below 90 per cent.5 Indeed, if rising public debt is associated with an increase in capital investment, it can even stimulate growth rates.

See also Julia Jones, Piyamas Nanork and Benjamin Oldroyd (2007) ‘The Role of Genetic Diversity in Nest Cooling in a Wild Honey Bee, Apis florea’, Journal of Comparative Physiology a-Neuroethology Sensory Neural and Behavioral Physiology 193 (2): 159–65. 55 Dean Amel, Colleen Barnes, Fabio Panetta and Carmelo Salleo (2004) ‘Consolidation and Efficiency in the Financial Sector: A Review of the International Evidence’, Journal of Banking and Finance 28: 2493–519. 56 ACT Response to the Turner Review of Banking Regulation, at http://www.treasurers.org/reviewbankingregulation/actresponse/0609. 57 Peter Boone and Simon Johnson, ‘Bernanke on Banking’, Economix, 19 October 2009, at http://economix.blogs.nytimes.com/2009/10/29/bernankeon-banking/. 58 Manmohan Singh (2010) ‘Collateral, Netting and Systemic Risk in the OTC Derivatives Market’, IMF Working Paper No. 10/99. 59 Michael Lewis (2010) The Big Short: Inside the Doomsday Machine, Allen Lane. Chapter Eight: The £5 Trillion Mistake 1 Carmen Reinhart and Kenneth Rogoff (2010) This Time is Different, Princeton University Press. 2 HM Treasury (2009) Pre-Budget Report 2009: Securing the Recovery: Growth and Opportunity, HMSO. See also Martin Wolf, ‘Britain’s Dismal Choice: Sharing the Losses’, Financial Times, 15 December 2009, at http://www.ft.com/cms/s/0/f693b6a4-e9af-11de-9f1f-00144feab49a,s01=1.html. 3 OECD (2009) OECD Factbook, OECD, with Treasury figures and estimates for 2008 and 2009. 4 Robert Chote, Carl Emmerson and Jonathan Shaw (eds) (2010) The Institute for Fiscal Studies Green Budget, IFS. 5 Francesco Guerrera, ‘Welch Denounces Corporate Obsessions’, Financial Times, 13 March 2009, at http://www.ft.com/cms/s/0/3ca8ec2e-0f70-11de-ba10-0000779fd2ac.html. 6 Max Hastings, ‘The End of Britain’s Long Weekend’, Financial Times, 20 December 2009, at http://www.ft.com/cms/s/0/1e9f7cdc-ed8e-11de-ba12-00144feab49a.html. 7 Internal Cabinet Office analysis. 8 Chris Giles, ‘Manufacturing Fades under Labour’, Financial Times, 2 December 2009, at http://www.ft.com/cms/s/0/f32a3392-df7a-11de-98ca-00144feab49a.html. 9 Leonard Trelawny Hobhouse (1911) Liberalism, at socserv.mcmaster.ca/econ/ugcm/3ll3/hobhouse/liberalism.pdf. 10 Buffett, Gates and Simon are all cited in Gar Alperovitz and Lew Daly (2008) Unjust Deserts: How the Rich Are Taking Our Common Inheritance and Why We Should Take It Back, The New Press. 11 Antonio Afonso, Ludger Schuknecht and Vito Tanzi (2005) ‘Public Sector Efficiency: An International Comparison’, Public Choice 123 (3–4): 321–47.


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

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

After liberalisation took hold in the 1970s, and as profits fell relative to earlier periods, unemployment rose across the world and wages declined as a share of GDP. Inequality exploded. Globally private debt expanded and exceeded global income. And financial crises proliferated as Professor Ken Rogoff and Carmen Reinhart have shown. Trust and confidence in the banking system and in democratic and other public institutions waned. The reason is not hard to understand. The transfer of economic power away from public authority to private wealthy elites had placed key financiers beyond the reach of the law, of regulators or politicians.

This loss of democratic power hollowed out democratic institutions – parliaments and congresses – while ‘privatisation’ diminished whole sectors of the economy that had been subject to democratic oversight. Source: This Time is Different: A Panoramic View of Eight Centuries of Financial Crises by Carmen M. Reinhart, University of Maryland and NBER; and Kenneth S. Rogoff, Harvard University and NBER. Fig. 1. Financial crises during periods of high capital mobility after financial liberalisation. The economics profession and the universities stood aloof, as enormous power was concentrated in the hands of small groups of reckless financiers.

But debts have to be repaid from income, whether the form of income comes as wages, salaries, profits or tax revenues. If rates of interest are too high, debtors have to raise the funds for debt repayment by increasing rates of profit, and by the further extraction of value. Source: This Time is Different: A Panoramic View of Eight Centuries of Financial Crises by Carmen M. Reinhart, University of Maryland and NBER; and Kenneth S. Rogoff, Harvard University and NBER. Fig. 2. Illustrations of different growth patterns. These pressures to increase income at exponential rates for the repayment of debt implies that both labour and the land (defined broadly) have to be exploited at ever-rising rates.


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

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

The growing ties between nations over the last decade have made every one of them less inclined to allow their trade partners to go under. For all the current discussion about debt defaults, stemming from the crisis in Greece, the reality is that default has largely disappeared from the international economic scene. In their book, This Time Is Different, Carmen Reinhart and Kenneth Rogoff chart how surprisingly commonplace default used to be: In a typical year between the 1920s and 2003, nations representing at least 5 to 10 percent of global income were in default, and that proportion spiked up to 40 percent during the Depression and World War II, and close to 15 percent in the late 1980s.

The high debt burden is indeed weighing on the long-term U.S. growth rate, which is widely believed to have fallen from 3.4 percent between 1950 and 2007 to 2 percent, which is slower than during the recovery phase of most postwar recessions. There is a widespread sense that America has lost its mojo. In a recent paper, however, Harvard economists Carmen Reinhart and Kenneth Rogoff point out that the relevant comparison is not previous U.S. recessions but the very different case of systemic financial crises. These are much more traumatic and rare, and by this standard the United States is recovering lost per capita output faster than it did following previous systemic crises, from the meltdown of 1873 through the Great Depression, and faster than most Western nations following the systemic crisis of 2008.


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

Alan Greenspan, American ideology, Andrei Shleifer, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, Bonfire of the Vanities, bonus culture, break the buck, business cycle, buy and hold, capital controls, Carmen Reinhart, central bank independence, Charles Lindbergh, collapse of Lehman Brothers, collateralized debt obligation, commoditize, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency risk, Edward Glaeser, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, George Akerlof, Gordon Gekko, greed is good, Greenspan put, Home mortgage interest deduction, Hyman Minsky, income per capita, information asymmetry, interest rate derivative, interest rate swap, junk bonds, Kenneth Rogoff, laissez-faire capitalism, late fees, light touch regulation, Long Term Capital Management, market bubble, market fundamentalism, Martin Wolf, Michael Milken, money market fund, moral hazard, mortgage tax deduction, Myron Scholes, Paul Samuelson, Ponzi scheme, price stability, profit maximization, race to the bottom, regulatory arbitrage, rent-seeking, Robert Bork, Robert Shiller, Ronald Reagan, Saturday Night Live, Satyajit Das, Savings and loan crisis, sovereign wealth fund, Tax Reform Act of 1986, The Myth of the Rational Market, too big to fail, transaction costs, Tyler Cowen, value at risk, yield curve

Quoted in Wessel, In Fed We Trust, supra note 3, at 23. 25. Sorkin, Too Big to Fail, supra note 2, at 2. 26. Troubled Asset Relief Program Office of the Special Inspector General, Quarterly Report to Congress, April 21, 2009. 27. See Carmen M. Reinhart and Kenneth S. Rogoff, “Is the 2007 U.S. Subprime Crisis So Different? An International Historical Comparison,” American Economic Review 98 (2008): 339–44; and Carmen M. Reinhart and Kenneth S. Rogoff, “The Aftermath of Financial Crises” (paper presented at the meetings of the American Economic Association, January 3, 2009), available at http://www.aeaweb.org/annual_mtg_papers/2009/retrieve.php?

In January 2008, just as the economy was tipping into recession, the Congressional Budget Office (CBO) projected that, by the end of 2018, U.S. government debt would fall to $5.1 trillion, or 22.6 percent of GDP. Surveying the wreckage in August 2009, the CBO projected that debt at the end of 2018 would rise to $13.6 trillion, or 67.0 percent of GDP—a difference of $8.5 trillion.78 This should come as no surprise; Carmen Reinhart and Kenneth Rogoff have shown that, on average, modern banking crises lead to an 86 percent increase in government debt over the three years following the crisis.79 The financial crisis and the government’s emergency response also increased the likelihood of two bleak scenarios. First, the enormous amount of liquidity that the Federal Reserve poured into the economy created the long-term potential for high inflation; if the Fed cannot “mop up” that liquidity when the economy recovers, all that excess money could make dollars less valuable, driving up prices.

Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2008 to 2018, January 2008, available at http://cbo.gov/ftpdocs/89xx/doc8917/01–23–2008_BudgetOutlook.pdf; Congressional Budget Office, The Budget and Economic Outlook: An Update, August 2009, available at http://cbo.gov/ftpdocs/105xx/doc10521/08–25-BudgetUpdate.pdf. 79. Carmen M. Reinhart and Kenneth S. Rogoff, This Time Is Different: Eight Centuries of Financial Folly (Princeton: Princeton University Press, 2009), 231–32. 80. Maura Reynolds and Janet Hook, “Critics Say Bush Is Not Doing Enough,” Los Angeles Times, March 18, 2008, available at http://articles.latimes.com/2008/mar/18/nation/na-bush18; cited in Sorkin, Too Big to Fail, supra note 2, at 38. 81.


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The Age of Stagnation: Why Perpetual Growth Is Unattainable and the Global Economy Is in Peril by Satyajit Das

"Robert Solow", "there is no alternative" (TINA), 9 dash line, accounting loophole / creative accounting, additive manufacturing, Airbnb, Alan Greenspan, Albert Einstein, Alfred Russel Wallace, Anton Chekhov, Asian financial crisis, banking crisis, Bear Stearns, Berlin Wall, bitcoin, bond market vigilante , Bretton Woods, BRICs, British Empire, business cycle, business process, business process outsourcing, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Clayton Christensen, cloud computing, collaborative economy, colonial exploitation, computer age, creative destruction, cryptocurrency, currency manipulation / currency intervention, David Ricardo: comparative advantage, declining real wages, Deng Xiaoping, deskilling, disintermediation, disruptive innovation, Downton Abbey, Emanuel Derman, energy security, energy transition, eurozone crisis, financial engineering, financial innovation, financial repression, forward guidance, Francis Fukuyama: the end of history, full employment, geopolitical risk, gig economy, Gini coefficient, global reserve currency, global supply chain, Goldman Sachs: Vampire Squid, Greenspan put, happiness index / gross national happiness, high-speed rail, Honoré de Balzac, hydraulic fracturing, Hyman Minsky, illegal immigration, income inequality, income per capita, indoor plumbing, informal economy, Innovator's Dilemma, intangible asset, Intergovernmental Panel on Climate Change (IPCC), It's morning again in America, Jane Jacobs, John Maynard Keynes: technological unemployment, junk bonds, Kenneth Rogoff, knowledge economy, knowledge worker, light touch regulation, liquidity trap, Long Term Capital Management, low skilled workers, Lyft, Mahatma Gandhi, margin call, market design, Marshall McLuhan, Martin Wolf, middle-income trap, Mikhail Gorbachev, military-industrial complex, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, oil shale / tar sands, oil shock, old age dependency ratio, open economy, PalmPilot, passive income, peak oil, peer-to-peer lending, pension reform, plutocrats, Ponzi scheme, Potemkin village, precariat, price stability, profit maximization, pushing on a string, quantitative easing, race to the bottom, Ralph Nader, Rana Plaza, rent control, rent-seeking, reserve currency, ride hailing / ride sharing, rising living standards, risk/return, Robert Gordon, Ronald Reagan, salary depends on his not understanding it, Satyajit Das, savings glut, secular stagnation, seigniorage, sharing economy, Silicon Valley, Simon Kuznets, Slavoj Žižek, South China Sea, sovereign wealth fund, TaskRabbit, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the market place, the payments system, The Spirit Level, Thorstein Veblen, Tim Cook: Apple, too big to fail, total factor productivity, trade route, transaction costs, uber lyft, unpaid internship, Unsafe at Any Speed, Upton Sinclair, Washington Consensus, We are the 99%, WikiLeaks, Y2K, Yom Kippur War, zero-coupon bond, zero-sum game

Similarly, expansionary fiscal policy in an environment of contracting private sector demand and reduction in debt can result in lower multipliers, as the government cannot fully offset the fall in private economic activity. Budget deficits must be financed, requiring governments to borrow. By 2009, there was increasing unease about rising government debt. Based on data from hundreds of years of financial crises, economists Carmen Reinhart and Kenneth Rogoff argued that sovereign debt levels above 60–90 percent of GDP affected growth.5 In 2013, in the academic equivalent of Fight Club, three economists from the University of Massachusetts in Amherst published a paper alleging that Reinhart and Rogoff had exaggerated the decline in growth at higher debt levels, due to unorthodox statistical choices and a spreadsheet error.

But the trend has reversed in recent decades, ushering in the return of patrimonial capitalism. Based on his research, Professor Piketty derives his fundamental law of capitalism: where the rate of return to wealth (r) grows faster than economic output (g) (r > g), it leads to a concentration of wealth. Echoing the controversy around Carmen Reinhart and Kenneth Rogoff, the Financial Times raised doubts about Piketty's data, suggesting errors and questionable selection and analysis. Corrected for these errors, they argued, the conclusions of rising wealth inequality were flawed. But irrespective of the accuracy of the data, interpreting and extrapolating from information spanning centuries, in countries with different economic and social structures, is inherently difficult.

Lazear, Economic Imperialism, Hoover Institution and Graduate School of Business, Stanford University, May 1999. http://faculty-gsb.stanford.edu/lazear/personal/pdfs/economic%20imperialism.pdf. 2 John Maynard Keynes, General Theory of Employment, Interest and Money, Atlantic Publishers & Distributors (1936) 2006, p. 272. 3 Raghuram Rajan, “The Paranoid Style in Economics,” Project Syndicate, 8 August 2013. www.project-syndicate.org/commentary/the-declining-quality-of-public-economic-debate-by-raghuram-rajan. 4 G. K. Chesterton, Orthodoxy, Chapter VI, 1908. http://en.wikiquote.org/wiki/G._K._Chesterton. 5 Carmen M. Reinhart and Kenneth Rogoff, This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press, 2009. 6 See Patrick Bernau, “‘Eine Hexenjagd’—Keneth Rogoff Über seinen Excel-Fehler,” Fazit, 22 October 2013. http://blogs.faz.net/fazit/2013/10/22/kenneth-rogoff-ueber-excel-fehler-hexenjagd-2818/. 7 Frederic Mishkin, “The Economist's Reply to the ‘Inside Job,’” Financial Times, 8 October 2010. 8 Quoted in Robert John, “Behind the Balfour Declaration: Britain's Great War Pledge to Lord Rothschild,” The Journal of Historical Review, vol. 6, no. 4 (Winter 1985–6), pp. 389–450. 9 See Neil Irwin, “With Consumers Slow to Spend, Businesses Are Slow to Hire,” Washington Post, 21 August 2010. 10 Tim Duy, “Yes, I Am Optimistic,” 30 November 2014. http://economistsview.typepad.com/timduy/2014/11/yes-i-am-optimistic-1.html. 11 Wynne Godley, “Macroeconomics without Equilibrium or Disequilibrium,” The Jerome Levy Economics Institute, Working Paper No. 205, August 1997. www.levyinstitute.org/pubs/wp205.pdf. 12 Olivier Blanchard, “Monetary Policy Will Never Be the Same,” IMF Direct, 19 November 2013. http://blog-imfdirect.imf.org/2013/11/19/monetary-policy-will-never-be-the-same/. 13 Fyodor Dostoyevsky, trans.


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

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

If instead government is hopelessly corrupt, industrial policy will likely make things worse. Note how, in this case, research has pushed the disagreement onto a domain—public administration—in which economists have no particular expertise. Models, Authority, and Hierarchy Two well-known economists, Carmen Reinhart and Kenneth Rogoff, published a paper in 2010 that would become fodder in a political battle with high stakes.18 The paper appeared to show that public-debt levels above 90 percent of GDP significantly impede economic growth. Conservative US politicians and European Union officials latched on to this work to justify their ongoing call for fiscal austerity.

Itzhak Gilboa, Andrew Postlewaite, Larry Samuelson, and David Schmeidler, “Economic Models as Analogies” (unpublished paper, January 27, 2013), 6–7. 17. See, for example, my online debate for the Economist magazine with Harvard Business School professor Josh Lerner, July 12–17, 2010, http://www.economist.com/debate/debates/overview/177. 18. Carmen M. Reinhart and Kenneth S. Rogoff, Growth in a Time of Debt, NBER Working Paper 15639 (Cambridge, MA: National Bureau of Economic Research, 2010). 19. Thomas Herndon, Michael Ash, and Robert Pollin, “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff” (Amherst: University of Massachusetts at Amherst, Political Economy Research Institute, April 15, 2013). 20.


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No Ordinary Disruption: The Four Global Forces Breaking All the Trends by Richard Dobbs, James Manyika

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, access to a mobile phone, additive manufacturing, Airbnb, Amazon Mechanical Turk, American Society of Civil Engineers: Report Card, autonomous vehicles, Bakken shale, barriers to entry, business cycle, business intelligence, Carmen Reinhart, central bank independence, circular economy, cloud computing, corporate governance, creative destruction, crowdsourcing, data science, demographic dividend, deskilling, digital capitalism, disintermediation, disruptive innovation, distributed generation, Erik Brynjolfsson, financial innovation, first square of the chessboard, first square of the chessboard / second half of the chessboard, Gini coefficient, global supply chain, global village, high-speed rail, hydraulic fracturing, illegal immigration, income inequality, index fund, industrial robot, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Internet of things, inventory management, job automation, Just-in-time delivery, Kenneth Rogoff, Kickstarter, knowledge worker, labor-force participation, low skilled workers, Lyft, M-Pesa, mass immigration, megacity, megaproject, mobile money, Mohammed Bouazizi, Network effects, new economy, New Urbanism, oil shale / tar sands, oil shock, old age dependency ratio, openstreetmap, peer-to-peer lending, pension reform, private sector deleveraging, purchasing power parity, quantitative easing, recommendation engine, Report Card for America’s Infrastructure, RFID, ride hailing / ride sharing, Salesforce, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart cities, Snapchat, sovereign wealth fund, spinning jenny, stem cell, Steve Jobs, subscription business, supply-chain management, TaskRabbit, The Great Moderation, trade route, transaction costs, Travis Kalanick, uber lyft, urban sprawl, Watson beat the top human players on Jeopardy!, working-age population, Zipcar

In this new macroeconomic territory, a traditional view of supply and demand fundamentals may no longer be a sufficient indicator for the future cost of capital. As illustrated by the European Central Bank’s move in the spring of 2014 to lower its benchmark deposit interest rate below zero, ultralow interest rates may remain the norm over the coming years.43 As economists Carmen Reinhart and Kenneth Rogoff argued in a 2013 IMF paper, policy makers need to guard against overplaying the risks related to unconventional monetary support and limiting central banks’ room for policy maneuvering.44 HOW TO ADAPT As demand-supply dynamics change, business leaders need to be prepared to navigate both worlds.

Hiroko Tabuchi, “In Japan, a tenuous vow to cut,” New York Times, September 1, 2011, www.nytimes.com/2011/09/02/business/global/japan-seeks-answers-to-debt-load-without-angering-voters.html?Pagewanted=all&_r=0. 43. Ben Chu, “European Central Bank imposes negative rates on banks in historic move,” Independent (London), June 5, 2014, www.independent.co.uk/news/business/news/european-central-bank-imposes-negative-rates-on-banks-in-historic-move-9494027.html. 44. Carmen M. Reinhart and Kenneth S. Rogoff, Financial and sovereign debt crises: Some lessons learned and those forgotten, IMF working paper no. 13/266, December 2013, www.imf.org/external/pubs/ft/wp/2013/wp13266.pdf. 45. Global Benchmark of Cost and Schedule Performance for Mega Projects in Mining, McKinsey & Company, 2013. 46.

Richard Dobbs, Jeremy Oppenheim, Fraser Thompson, Sigurd Mareels, Scott Nyquist, and Sunil Sanghvi, Resource revolution: Tracking global commodity markets, McKinsey Global Institute, September 2013. 27. Richard Dobbs, Jeremy Oppenheim, Fraser Thompson, Marcel Brinkman, and Marc Zornes, Resource revolution: Meeting the world’s energy, materials, food, and water needs, McKinsey Global Institute, November 2011. 28. Carmen M. Reinhart and Kenneth S. Rogoff, “From financial crash to debt crisis,” American Economic Review 101, no. 5, August 2011, www.aeaweb.org/articles.php?doi=10.1257/aer.101.5.1676; also see David Beers and Jean-Sébastien Nadeau, Introducing a new database of sovereign defaults, Bank of Canada, technical report no. 101, February 2014. 29.


pages: 288 words: 89,781

The Classical School by Callum Williams

bank run, banking crisis, basic income, Brexit referendum, British Empire, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Charles Babbage, complexity theory, Corn Laws, David Ricardo: comparative advantage, deindustrialization, Donald Trump, double entry bookkeeping, falling living standards, Fellow of the Royal Society, full employment, Gini coefficient, Gordon Gekko, greed is good, helicopter parent, income inequality, invisible hand, Jevons paradox, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, land reform, low skilled workers, Mahatma Gandhi, Martin Wolf, means of production, minimum wage unemployment, Modern Monetary Theory, new economy, New Journalism, non-tariff barriers, Paul Samuelson, Post-Keynesian economics, purchasing power parity, Ronald Coase, secular stagnation, Silicon Valley, spinning jenny, The Wealth of Nations by Adam Smith, Thomas Malthus, universal basic income

Under the cooperative system the workers would own the capital that they worked with, rather than working on someone else’s capital. So all the value created in the production process would end up accruing to the workers in their joint role as labourers and owners. Chapter 10–Jean-Baptiste Say (1767–1832) 1. This is an estimate from Kenneth Rogoff and Carmen Reinhart’s database. 2. For this biographical information I am grateful to William Baumol’s research. 3. No relation to David, unfortunately. 4. As Joseph Schumpeter points out, in the United States a professorship of Moral Philosophy and Political Economy was founded at Columbia in 1818. 5. The figures for France are an estimate compiled from different sources, which may affect comparability. 6.

He basically argues that the amount of invested capital does not vary all that much between industries. This is where George Stigler’s characterisation of Ricardo as proposing a “93% labour theory of value” comes from. 14. Rothbard’s analysis of the Marx–Engels intellectual tangle is particularly interesting. Chapter 16–Friedrich Engels (1820–1895) 1. These estimates are from Carmen Reinhart and Kenneth Rogoff’s database. 2. Stalin argued that “[t]o keep on strengthening state power in order to prepare the conditions for the withering away of state power–that is the Marxist formula.” Chapter 17–William Stanley Jevons (1835–1882) 1. It is not a settled question who was the first person to suggest “economics” in place of “political economy”.


pages: 1,088 words: 228,743

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

Alan Greenspan, Andrei Shleifer, asset allocation, asset-backed security, availability heuristic, backtesting, balance sheet recession, bank run, banking crisis, barriers to entry, Bernie Madoff, Black Swan, bond market vigilante , Bretton Woods, business cycle, buy and hold, buy low sell high, capital asset pricing model, capital controls, Carmen Reinhart, central bank independence, collateralized debt obligation, commoditize, commodity trading advisor, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, debt deflation, deglobalization, delta neutral, demand response, discounted cash flows, disintermediation, diversification, diversified portfolio, dividend-yielding stocks, equity premium, Eugene Fama: efficient market hypothesis, fiat currency, financial deregulation, financial innovation, financial intermediation, fixed income, Flash crash, framing effect, frictionless, frictionless market, G4S, George Akerlof, global macro, global reserve currency, Google Earth, high net worth, hindsight bias, Hyman Minsky, implied volatility, income inequality, incomplete markets, index fund, inflation targeting, information asymmetry, interest rate swap, invisible hand, John Bogle, junk bonds, Kenneth Rogoff, laissez-faire capitalism, law of one price, London Interbank Offered Rate, Long Term Capital Management, loss aversion, managed futures, margin call, market bubble, market clearing, market friction, market fundamentalism, market microstructure, mental accounting, merger arbitrage, mittelstand, moral hazard, Myron Scholes, negative equity, New Journalism, oil shock, p-value, passive investing, Paul Samuelson, performance metric, Phillips curve, Ponzi scheme, prediction markets, price anchoring, price stability, principal–agent problem, private sector deleveraging, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, random walk, reserve currency, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, riskless arbitrage, Robert Shiller, savings glut, search costs, selection bias, Sharpe ratio, short selling, sovereign wealth fund, statistical arbitrage, statistical model, stochastic volatility, stock buybacks, stocks for the long run, survivorship bias, systematic trading, tail risk, The Great Moderation, The Myth of the Rational Market, too big to fail, transaction costs, tulip mania, value at risk, volatility arbitrage, volatility smile, working-age population, Y2K, yield curve, zero-coupon bond, zero-sum game

Sustained inflation only became pervasive in the 20th century: Median inflation rate (5-year moving average) for all countries, 1500–2010. Sources: Carmen M. Reinhart and Kenneth S. Rogoff (2008), “This time is different: A panoramic view of eight centuries of financial crises,” NBER working paper 13882, March 2008. Carmen M. Reinhart (2010), “This time is different chartbook: Country histories on debt, default, and financial crises,” NBER working paper 15815. Reproduced by permission of Carmen M. Reinhart and Kenneth S. Rogoff. During the gold standard (Britain adopted it in 1717, other developed countries in the 19th century), inflations and deflations took turns with no persistence, and long-run inflation expectations were likely near zero most of the time.

After a quarter-century when bearing duration risk was amply rewarded, Treasuries may provide neither safety nor performance in the coming decade. Figure 27.6. Global perspective on inflation and external default histories. Source: Carmen M. Reinhart and Kenneth S. Rogoff (2008), “This time is different: A panoramic view of eight centuries of financial crises,” NBER working paper 13882. Reproduced by permission of Carmen M. Reinhart and Kenneth S. Rogoff. Figure 27.7. Sovereign CDS spreads, July 2007–July 2010. Source: Bloomberg. Finally, the last innings of the debt supercycle may arrive even before the demographic costs balloon.

I especially thank Elroy Dimson, Paul Marsh, and Mike Staunton for the use of their 110-year-long return histories and Robert Arnott for even older data used in Arnott–Bernstein (2002). I am grateful to Michael Afreh (Nomura), Andrew Ang, David Blitz (Robeco), Giuliano de Rossi (UBS), Eric Falkenstein, Kenneth Froot, Robin Greenwood, Campbell Harvey, Sharon Kozicki, Carmen Reinhart, Matti Suominen, Arthur Warga, and Mungo Wilson for sending me some of their research data. I also thank Professors Kenneth French, Morris Davis, Amit Goyal, Lubos Pastor, Robert Shiller, Stephen Wilcox, and Jeffrey Wurgler for data available on their websites. Finally, a few graphs are directly extracted from other works, as credited below them: Figures 9.8 Rosenberg–Maurer, 17.4 Reinhart–Rogoff, 18.1 Hasbrouck, 18.2 Naes–Skjeltorp–Odegaard, 19.7 Buraschi–Kosowski–Trojani, 19.9 Frazzini–Pedersen, 27.6 Reinhart–Rogoff.


pages: 288 words: 64,771

The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality by Brink Lindsey

"Robert Solow", Airbnb, Asian financial crisis, bank run, barriers to entry, Bernie Sanders, Build a better mousetrap, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Cass Sunstein, collective bargaining, creative destruction, Credit Default Swap, crony capitalism, Daniel Kahneman / Amos Tversky, David Brooks, diversified portfolio, Donald Trump, Edward Glaeser, endogenous growth, experimental economics, experimental subject, facts on the ground, financial engineering, financial innovation, financial intermediation, financial repression, hiring and firing, Home mortgage interest deduction, housing crisis, income inequality, informal economy, information asymmetry, intangible asset, inventory management, invisible hand, Jones Act, Joseph Schumpeter, Kenneth Rogoff, Kevin Kelly, knowledge worker, labor-force participation, Long Term Capital Management, low skilled workers, Lyft, Mark Zuckerberg, market fundamentalism, mass immigration, mass incarceration, medical malpractice, Menlo Park, moral hazard, mortgage debt, Network effects, patent troll, plutocrats, principal–agent problem, regulatory arbitrage, rent control, rent-seeking, ride hailing / ride sharing, Robert Metcalfe, Ronald Reagan, Savings and loan crisis, Silicon Valley, Silicon Valley ideology, smart cities, software patent, subscription business, tail risk, tech bro, too big to fail, total factor productivity, trade liberalization, Tragedy of the Commons, transaction costs, tulip mania, Tyler Cowen, Uber and Lyft, uber lyft, Washington Consensus, white picket fence, winner-take-all economy, women in the workforce

The problem of regressive regulatory rents is much bigger than these specific instances, but we hope that a close look at these instances will suffice to give a well-grounded appreciation of how widespread and serious the problem has become. 3 FINANCE IN ANY SEARCH FOR POLICIES that slow growth and drive inequality, financial regulation is an obvious place to start. After all, the financial sector was Ground Zero for the worst economic crisis to hit this country since the Great Depression. As Harvard economists Carmen Reinhart and Kenneth Rogoff have documented, financial crises are terrible for growth because recoveries from them are generally slow and arduous.1 The US experience since the bursting of the housing bubble certainly jibes with Reinhart and Rogoff’s analysis, as the expansion in the aftermath of the Great Recession has been the slowest on record since World War II.

Carew, “Regulatory Improvement Commission: A Politically Viable Approach to U.S. Regulatory Reform,” Progressive Policy Institute Policy Memo, May 2013, http://www.progressivepolicy.org/wp-content/uploads/2013/05/05.2013-Mandel-Carew_Regulatory-Improvement-Commission_A-Politically-Viable-Approach-to-US-Regulatory-Reform.pdf. Chapter 3 1.See Carmen M. Reinhart and Kenneth S. Rogoff, This Time It’s Different: Eight Centuries of Financial Folly (Princeton, NJ: Princeton University Press, 2011). 2.See Tyler Atkinson, David Luttrell, and Harvey Rosenblum, “How Bad Was It? The Costs and Consequences of the 2007–09 Financial Crisis,” Federal Reserve Bank of Dallas Staff Paper no. 20, July 2013, https://dallasfed.org/assets/documents/research/staff/staff1301.pdf. 3.See Jon Bakija, Adam Cole, and Bradley T.


pages: 353 words: 98,267

The Price of Everything: And the Hidden Logic of Value by Eduardo Porter

Alan Greenspan, Alvin Roth, Asian financial crisis, Ayatollah Khomeini, banking crisis, barriers to entry, Berlin Wall, British Empire, capital controls, Carmen Reinhart, Cass Sunstein, clean water, Credit Default Swap, Deng Xiaoping, Edward Glaeser, European colonialism, Fall of the Berlin Wall, financial deregulation, financial engineering, Ford paid five dollars a day, full employment, George Akerlof, Gordon Gekko, guest worker program, happiness index / gross national happiness, housing crisis, illegal immigration, immigration reform, income inequality, income per capita, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jean Tirole, John Maynard Keynes: technological unemployment, Joshua Gans and Andrew Leigh, junk bonds, Kenneth Rogoff, labor-force participation, laissez-faire capitalism, longitudinal study, loss aversion, low skilled workers, Martin Wolf, means of production, Menlo Park, Mexican peso crisis / tequila crisis, Michael Milken, Monkeys Reject Unequal Pay, new economy, New Urbanism, peer-to-peer, pension reform, Peter Singer: altruism, pets.com, placebo effect, precautionary principle, price discrimination, price stability, rent-seeking, Richard Thaler, rising living standards, risk tolerance, Robert Shiller, Ronald Reagan, search costs, Silicon Valley, stem cell, Steve Jobs, Stewart Brand, superstar cities, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade route, transatlantic slave trade, ultimatum game, unpaid internship, urban planning, Veblen good, women in the workforce, World Values Survey, Yom Kippur War, young professional, zero-sum game

What’s more, whatever we do to prevent financial turmoil, we must acknowledge an important limitation: we are unlikely to stamp out bubbles and crashes entirely. Financial crises spawned by investment surges, credit booms, and asset bubbles appear to be a standard feature of the landscape of capitalism. Economists Carmen Reinhart and Kenneth Rogoff found that of the world’s sixty-six major economies—including developed nations and the largest developing countries—only Portugal, Austria, the Netherlands, and Belgium had avoided a banking crisis between 1945 and 2007. By the end of 2008 no country was unscathed. Every time investors become enthusiastic about some new investment proposition, they assure us that this time will be different.

Lansing, “Speculative Growth, Overreaction, and the Welfare Cost of Technology-Driven Bubbles,” Federal Reserve Bank of San Francisco Working Paper, August 2009 (www.frbsf.org/publications/economics/papers/2008/wp08-08bk.pdf, accessed 08/08/2010); and James Edward Meeker, The Work of the Stock Exchange (New York: The Ronald Press Company, 1922), p. 419. The tally of countries that have escaped banking crises is by Carmen Reinhart and Kenneth Rogoff, “Banking Crises: An Equal Opportunity Menace,” NBER Working Paper, December 2008. 236-239 What Rationality?: Eugene Fama’s quote is in Douglas Clement, “Interview with Eugene Fama,” The Region, Federal Reserve Bank of Minnesota, December 2007. Keynes’s quote is in John Maynard Keynes, The General Theory of Employment, Interest and Money (New York: Harcourt Brace and World, 1965), p. 161.


pages: 391 words: 97,018

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

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

The weight of history suggested that the United States, overextended and debt-ridden, was likely to suffer the same fate in the early twenty-first century that befell the British Empire in the mid-twentieth. “It’s not a thousand years that separates imperial zenith from imperial oblivion,” he said in a May 2010 speech. “It’s really a very, very short ride from the top to the bottom.”1 Kenneth Rogoff and Carmen Reinhart, economists who data-mined history in This Time Is Different, a comprehensive look at financial debacles going back to the 1300s, arrived at a similar conclusion. Centuries worth of data on finance-induced crises suggest the United States won’t be bouncing back any time soon, they concluded. The moment Barack Obama was sworn in as president, a wave of economic declinism swamped the political right.

These recessions were unusually shallow too, with 1.49 and 0.62 percent declines in output from peak to trough, respectively.7 The only contraction worse than the one we just lived through was the Great Depression, a forty-three-month doozy that ran from August 1929 to March 1933. Our balance sheets, bank accounts, egos, and psyches simply weren’t prepared for the depth and degree of shrinkage. Or for the slowness of the recovery. As Kenneth Rogoff and Carmen Reinhart document in This Time Is Different, not all recessions are created equal. Economies recover relatively quickly from downturns that are natural outcomes of the business cycle. Having produced too much or too exuberantly, companies idle capacity until inventories are worked down, and then reopen factories when demand rises again.


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

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, additive manufacturing, Airbnb, Alan Greenspan, algorithmic trading, Alvin Roth, Asian financial crisis, asset allocation, bank run, Basel III, Bear Stearns, Big Tech, bonus culture, Bretton Woods, British Empire, business cycle, buy and hold, call centre, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, centralized clearinghouse, clean water, collateralized debt obligation, commoditize, computerized trading, corporate governance, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, crowdsourcing, data science, David Graeber, deskilling, Detroit bankruptcy, diversification, Double Irish / Dutch Sandwich, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial intermediation, Frederick Winslow Taylor, George Akerlof, gig economy, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Greenspan put, High speed trading, Home mortgage interest deduction, housing crisis, Howard Rheingold, Hyman Minsky, income inequality, index fund, information asymmetry, interest rate derivative, interest rate swap, Internet of things, invisible hand, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", John Bogle, John Markoff, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, Kickstarter, knowledge economy, labor-force participation, London Whale, Long Term Capital Management, manufacturing employment, market design, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, offshore financial centre, oil shock, passive investing, Paul Samuelson, pensions crisis, Ponzi scheme, principal–agent problem, quantitative easing, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, Rana Plaza, RAND corporation, random walk, rent control, Robert Shiller, Ronald Reagan, Satyajit Das, Savings and loan crisis, scientific management, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Snapchat, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, Steve Jobs, stock buybacks, technology bubble, The Chicago School, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tobin tax, too big to fail, Tragedy of the Commons, trickle-down economics, Tyler Cowen: Great Stagnation, Vanguard fund, zero-sum game

On top of this, it’s quantitatively increasing market volatility and risk of the sort that wiped out $16 trillion in household wealth during the Great Recession.59 Evidence shows that the number of wealth-destroying financial crises has risen in tandem with financial sector growth over the last several decades. In their book This Time Is Different: Eight Centuries of Financial Folly, academics Carmen Reinhart and Kenneth Rogoff describe how the proportion of the world affected by banking crises (weighed by countries’ share of global GDP) rose from some 7.5 percent in 1971 to 11 percent in 1980 and to 32 percent in 2007.60 And economist Robert Aliber, in updating one of the seminal books on financial bubbles, the late Charles Kindleberger’s Manias, Panics, and Crashes: A History of Financial Crises, issued a grave warning in 2005, well before the 2008 meltdown: “The conclusion is unmistakable that financial failure has been more extensive and pervasive in the last thirty years than in any previous period.”61 This is a startling illustration of how finance has transitioned from an industry that encourages healthy risk taking to one that simply creates debt and spreads unproductive risk in the market system as a whole.

Locke, Ruchir Sharma, Gautam Mukunda, Saule Omarova, Eileen Appelbaum, and Sherle Schwenninger. Thanks also to the many academics and policy thinkers whose research I relied heavily on, including but not limited to: Greta Krippner, Moritz Schularick, Alan M. Taylor, Robin Greenwood, David Scharfstein, Raghuram G. Rajan, Carmen Reinhart, Ken Rogoff, Thomas Philippon, Robert Atkinson, J. W. Mason, Luigi Zingales, Thomas Piketty, Emmanuel Saez, Gabriel Zucman, Jeff Madrick, George Akerlof, Robert Shiller, John Coates, Karen Ho, Enisse Kharroubi, Claudia Goldin, Lawrence Katz, David Graeber, Charles Calomiris, Stephen H. Haber, Allan H.

See also Atif Mian and Amir Sufi, House of Debt: How They (and You) Caused the Great Recession and How We Can Prevent It from Happening Again (Chicago: University of Chicago Press, 2014). 19. Raghuram G. Rajan, Fault Lines: How Hidden Fractures Still Threaten the World Economy (Princeton, NJ: Princeton University Press, 2010), 21. 20. Carmen M. Reinhart and Kenneth Rogoff, This Time Is Different: Eight Centuries of Financial Folly (Princeton, NJ: Princeton University Press, 2009). 21. McKinsey Global Institute, “Debt and (Not Much) Deleveraging,” February 2015, 98–99. 22. Greenwood and Scharfstein, “The Growth of Finance,” 21. 23. Financial efficiency is defined here as the amount of money and engagement that finance provides to Main Street, rather than to the capital markets themselves. 24.


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

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

* I focused only on large economies because the current account in smaller ones can swing sharply with one big investment from abroad, skewing the results. Large is defined as an economy representing at least 0.2 percent of global GDP, which in 2015 would be an economy of more than $150 billion. † I say “of some kind” because this definition includes banking, currency, inflation, or debt crises as defined by Carmen Reinhart and Kenneth Rogoff. Data on these kinds of crises is available for 34 of the 40 cases, and 31 of them, or 91 percent, suffered at least one of these crises. ‡ The revival of savings is demonstrated, in technical terms, by the global correlation between domestic savings and domestic investment, which fell from 0.8 in 1980 to −0.1 in 2007 and has since climbed back up to 0.7. 9 THE KISS OF DEBT Is debt growing faster or slower than the economy?

† By 2015, I should note, some private financial industry researchers were publishing pieces on the connection between credit binges and slower economic growth, including “Untangling China’s Credit Conundrum” from Goldman Sachs that January and “Keeping a Wary Eye on the EM Credit Cycle” by JP Morgan that November. ‡ In most of these cases, GDP growth was strong during the five-year period when credit was growing dangerously fast, so credit growth was the main reason the credit/GDP ratio was rising § Here I use financial crisis to mean a banking crisis as defined by Carmen Reinhart and Kenneth Rogoff in This Time Is Different (2009), which captures bank runs that force a government to close, merge, bail out, or take over one or more financial institutions. ¶ In twenty-six of the thirty cases, the average annual rate of growth fell over the next five years. The other four—Malaysia, Uruguay, Finland, and Norway—experienced a serious contraction in the economy, but the recovery came soon enough to lift the average rate of growth for the next five years

“Dark Matter: The Hidden Capital Flows That Drive G10 Exchange Rates.” Deutsche Bank Markets Research, March 6, 2015). Hyman, Ed. “Bond Yields Up But S&P Advances.” Evercore ISI, February 18, 2015. “Is That a Kleptocrat in Your Balance of Payments?” Financial Times Alphaville, March 10, 2015. Kaminsky, Graciela, Saul Lizondo, and Carmen Reinhart. “Leading Indicators of Currency Crises.” International Monetary Fund, 1998. Keohane, David. “China, When a Hot Money Outflow Threatens to Become a Torrent.” Financial Times Alphaville, May 13, 2015. Lowther, Ed. “A Short History of the Pound.” BBC News, February 14, 2014. “NRIs Sent Home $65 Billion in Past Six Months:Lord Swraj Paul.”


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

Asian financial crisis, banking crisis, Berlin Wall, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, cognitive bias, cuban missile crisis, currency risk, energy security, Fairchild Semiconductor, flex fuel, global pandemic, Herman Kahn, income per capita, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John von Neumann, mass immigration, Menlo Park, Mikhail Gorbachev, moral hazard, Norbert Wiener, oil rush, oil shale / tar sands, oil shock, packet switching, RAND corporation, Ray Kurzweil, reserve currency, Ronald Reagan, The Wisdom of Crowds, trade route, Vannevar Bush, Vernor Vinge, Yom Kippur War

In 1983–85, devaluation did not set the stage for a wave of bankruptcies, so before the crisis hit in 1997 this remained the expectation of most observers. In retrospect, the analysis that came closest to predicting the dynamics of the East Asian crisis was a March 1996 U.S. Federal Reserve report by Carmen Reinhart and Graciela Kaminsky on banking crises and balance-of-payment problems.5 The paper examined the history of financial crises in several countries, looking specifically at the link between banking problems and the exchange rate. After reviewing the experience of several countries, Reinhart and Kaminsky found a pattern in which countries deregulated their financial systems and experienced a surge of lending that produced credit-quality problems.

“Key Judgments from October 2002 National Intelligence Estimate,” Iraq’s Continuing Programs for Weapons of Mass Destruction, presented at background briefing by a senior administration official, released by the White House (July 18, 2003). Chapter Five 1. Paul Krugman, “The Myth of Asia’s Miracle,” Foreign Affairs (November/December, 1994). 2. Jim Walker, Credit Lyonnais Securities. 3. Simon Ogus and Danny Truell, “The Myth of Asian Growth” (London: SBC Warburg, June 1996). 4. UN report. 5. Graciela L. Kaminsky and Carmen M. Reinhart, “The Twin Crises: The Causes of Banking and Balance-of-Payments Problems,” International Finance Discussion Papers 544 (Washington: Federal Reserve System, March 1996). Chapter Six 1. Carlotta Perez, Technological Revolutions and Financial Capital (Cheltenham, U.K.: Edward Elgar, 2002). See also Robert D.


pages: 497 words: 150,205

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

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

Along with Alesina’s claptrap, another flawed economic study that was influential with eurozone policymakers, notably European Commission fiscal enforcer Olli Rehn, purported to show that the economy grinds to a halt once public debt exceeds 90 per cent of GDP.202 Since government debt in the eurozone as a whole was nearing that apparent threshold in 2010 – and had exceeded it in several countries – this appeared to warrant immediate, front-loaded austerity.203 But the “findings” in the paper published in January 2010 by Harvard economists Carmen Reinhart and Kenneth Rogoff were always dubious – and they were later discredited.204 Reinhart and Rogoff found that high public debt was associated with slow growth but did not establish that the former caused the latter. While high debt may lead to slow growth, it is more plausible that slow growth leads to high debt, and that a third factor may determine both.

“Stability Programme for Spain, 2011–2014” http://ec.europa.eu/europe2020/pdf/nrp/sp_spain_en.pdf 200 http://www.cnbc.com/id/38987325/Austerity_Equals_Confidence_Trichet 201 http://www.ecb.int/pub/pdf/annrep/ar2010annualaccounts_en.pdf 202 For example, in a speech to the Council of Foreign Relations in Brussels on 1 June 2011, Olli Rehn said "Carmen Reinhart and Kenneth Rogoff have coined the ‘90 per cent rule’, that is, countries with public debt exceeding 90 per cent of annual economic output grow more slowly. High debt levels can crowd out economic activity and entrepreneurial dynamism, and thus hamper growth. This conclusion is particularly relevant at a time when debt levels in Europe are now approaching the 90% threshold, which the US has already passed." http://europa.eu/rapid/press-release_SPEECH-11-407_en.htm Even in February 2013, when the devastating consequences of austerity were apparent, Rehn wrote to EU finance ministers stating that "it is widely acknowledged, based on serious academic research, that when public debt levels rise above 90 per cent they tend to have a negative impact on economic dynamism, which translates into low growth for many years.

That is why consistent and carefully calibrated fiscal consolidation remains necessary in Europe.” http://ec.europa.eu/commission_2010-2014/rehn/documents/cab20130213_en.pdf 203 Eurostat, general government consolidated gross debt. Code: tsieb090. In the eurozone as a whole this was 85.4 per cent of GDP in 2010, 87.3 per cent in 2011 and 90.6 per cent in 2012. 204 Carmen Reinhart and Kenneth Rogoff, "Growth in a Time of Debt", NBER working paper 15639, January 2010 205 http://www.nextnewdeal.net/rortybomb/guest-post-reinhartrogoff-and-growth-time-debt 206 A point eloquently made by Adam Posen here: http://www.ft.com/cms/s/0/a6d94b02-a774-11e2-9fbe-00144feabdc0.html 207 Thomas Herndon, Michael Ash and Robert Pollin, "Does High Public Debt Consistently Stifle Economic Growth?


pages: 662 words: 180,546

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

"Robert Solow", "there is no alternative" (TINA), Alan Greenspan, Alvin Roth, An Inconvenient Truth, Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Bear Stearns, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, bond market vigilante , Bretton Woods, Brownian motion, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, disinformation, do-ocracy, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, facts on the ground, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, Flash crash, full employment, George Akerlof, Goldman Sachs: Vampire Squid, Greenspan put, Hernando de Soto, housing crisis, Hyman Minsky, illegal immigration, income inequality, incomplete markets, information asymmetry, invisible hand, Jean Tirole, joint-stock company, junk bonds, Kenneth Arrow, Kenneth Rogoff, Kickstarter, knowledge economy, l'esprit de l'escalier, labor-force participation, liberal capitalism, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, Pareto efficiency, Paul Samuelson, payday loans, Philip Mirowski, Phillips curve, Ponzi scheme, Post-Keynesian economics, precariat, prediction markets, price mechanism, profit motive, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Ronald Coase, Ronald Reagan, Savings and loan crisis, savings glut, school choice, sealed-bid auction, search costs, Silicon Valley, South Sea Bubble, Steven Levy, tail risk, technoutopianism, The Chicago School, The Great Moderation, the map is not the territory, The Myth of the Rational Market, the scientific method, The Theory of the Leisure Class by Thorstein Veblen, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Tyler Cowen, Vilfredo Pareto, War on Poverty, Washington Consensus, We are the 99%, working poor

Yet the nightmare cast its shroud in the guise of a contagion of a deer-in-the-headlights paralysis: beyond their pretense of expertise, no one who fancied themselves opposed to neoliberal decadence really possessed solid convictions concerning where the intellectual failure behind the crisis should have been well and truly situated. They seemed united by nothing more than a vague disaffection from the status quo in economics. And worse, while the authorities dithered, the Ghoulish Creatures of the Right had gotten back up, dusted themselves off, and discovered renewed strength. Economists such as Ken Rogoff and Carmen Reinhart had the audacity to stand up at INET and treat the contemporary world crisis as just another ho-hum business cycle: nothing untoward or unprecedented had happened here. Thus doctrines concocted at the American Enterprise Institute and the Cato Institute began their slow seepage back into respectability.

In subscribing to this notion, the left unconsciously accepts the key notion of the populist right and the neoclassical orthodoxy, that “nothing is substantially different between then and now.” Markets are timeless entities with timeless laws, they insist. Indeed, this is the identical premise of some of the most popular crisis books of the last few years, from Kenneth Rogoff and Carmen Reinhart’s This Time Is Different to David Graeber’s Debt: The First 5,000 Years.24 Yet that is precisely where the polemical divergence should originate on the left. Things are profoundly different about the economy, the society, and in the global political arena than they were during the Cold War: some recent neoliberal innovations have lent the current crisis its special bitter tang; understanding precisely how and where they are different is a necessary first step in developing a blueprint for a better world.

Roberts, David. Victorian Origins of the British Welfare State (New Haven: Yale University Press, 1960). Robin, Corey. The Reactionary Mind (New York: Oxford University Press, 2011). Robison, Richard. The Neoliberal Revolution: Forging the Market State (London: Palgrave, 2006). Rogoff, Kenneth, and Carmen Reinhart. This Time Is Different (Princeton: Princeton University Press, 2009). Roncaglia, Alessandro. Why Economists Got It Wrong: The Crisis and Its Cultural Roots (London: Anthem, 2010). Rose, Nikolas. Inventing Our Selves: Psychology, Power and Personhood (Cambridge, U.K.: Cambridge University Press, 1996).


pages: 414 words: 119,116

The Health Gap: The Challenge of an Unequal World by Michael Marmot

active measures, active transport: walking or cycling, Affordable Care Act / Obamacare, Atul Gawande, Bonfire of the Vanities, Broken windows theory, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, centre right, clean water, congestion charging, correlation does not imply causation, Doha Development Round, epigenetics, financial independence, future of work, Gini coefficient, Growth in a Time of Debt, illegal immigration, income inequality, Indoor air pollution, Kenneth Rogoff, Kibera, labour market flexibility, longitudinal study, lump of labour, Mahatma Gandhi, Mahbub ul Haq, meta-analysis, microcredit, New Urbanism, obamacare, paradox of thrift, race to the bottom, Rana Plaza, RAND corporation, road to serfdom, Simon Kuznets, Socratic dialogue, structural adjustment programs, the built environment, The Spirit Level, trickle-down economics, twin studies, urban planning, Washington Consensus, Winter of Discontent, working poor

As so often, what should be an informed debate about evidence is a none-too-veiled contest about prior political beliefs, or short-term low-level politics. It is difficult for a non-economist to penetrate the argument and form an independent judgement. It can be noted that the intellectual case for austerity has suffered a couple of recent blows. Austerians have cited, among others, the Harvard economists Carmen Reinhart and Kenneth Rogoff, who set out to show that when national debt climbs above 90 per cent of GDP, economic growth slows.30 They showed it, except that a graduate student checking their figures found elementary errors that cast considerable doubt on their conclusions.31 Second, the IMF, which arguably has wreaked great havoc globally with its universal prescription to cut government spending, has published new estimates that austerity has a bigger effect on slowing economic growth than it used to think.32 In Britain, the Office of Budget Responsibility says that it subscribes to the widely held assumption that fiscal contraction damages growth.

It had gone from being a well-organised society based on fishing and huge supplies of geothermal energy – hence aluminium smelting – to housing three private banks that represented everyone’s worst nightmare of what reckless cowboys can do when let loose on the global economy. In Chapter 6, I referred to the debate around the work of Harvard economists Carmen Reinhart and Kenneth Rogoff who showed that when national debt climbs above 90 per cent of GDP, economic growth slows.2,3 At its peak, Iceland’s debt was 850 per cent of GDP! Icelandic banks bought assets round the world, as though all curves go ever upwards without a day of reckoning. The butterfly that flapped its wings might have been the collapse of sub-prime mortgages in the USA, but it caused a hurricane in Iceland and, predictably, the castles in the air were reduced to rubble.


pages: 446 words: 117,660

Arguing With Zombies: Economics, Politics, and the Fight for a Better Future by Paul Krugman

affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, Andrei Shleifer, antiwork, Asian financial crisis, bank run, banking crisis, basic income, Berlin Wall, Bernie Madoff, bitcoin, blockchain, bond market vigilante , Bonfire of the Vanities, business cycle, capital asset pricing model, carbon footprint, Carmen Reinhart, central bank independence, centre right, Climategate, cognitive dissonance, cryptocurrency, David Ricardo: comparative advantage, different worldview, Donald Trump, Edward Glaeser, employer provided health coverage, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial innovation, financial repression, frictionless, frictionless market, fudge factor, full employment, Growth in a Time of Debt, hiring and firing, illegal immigration, income inequality, index fund, indoor plumbing, invisible hand, job automation, John Snow's cholera map, Joseph Schumpeter, Kenneth Rogoff, knowledge worker, labor-force participation, large denomination, liquidity trap, London Whale, market bubble, market clearing, market fundamentalism, means of production, Modern Monetary Theory, New Urbanism, obamacare, oil shock, open borders, Paul Samuelson, plutocrats, Ponzi scheme, price stability, quantitative easing, road to serfdom, Robert Gordon, Robert Shiller, Ronald Reagan, salary depends on his not understanding it, secular stagnation, Seymour Hersh, stock buybacks, The Chicago School, The Great Moderation, the map is not the territory, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, universal basic income, very high income, working-age population

In this case, one paper, by the economists Alberto Alesina and Silvia Ardagna, claimed to find evidence that cutting government spending inspired so much private-sector confidence that overall spending would actually rise. In “Myths of Austerity,” I mocked this as belief in the “confidence fairy.” Indeed, a closer look at the evidence, and then the experience of austerity in practice, showed that the doctrine of “expansionary austerity” was all wrong. But key policymakers seized on the doctrine. Meanwhile, Carmen Reinhart and Ken Rogoff—who had done fine work in the past—came out with a paper that was, well, sloppy, asserting that terrible things happen to economies when debt crosses a magic threshold of 90 percent of G.D.P. This work also fell apart on examination, but only after it had served as an excuse for destructive policies in much of Europe.

NASA’s Mars Orbiter crashed because engineers forgot to convert to metric measurements; JPMorgan Chase’s “London Whale” venture went bad in part because modelers divided by a sum instead of an average. So, did an Excel coding error destroy the economies of the Western world? The story so far: at the beginning of 2010, two Harvard economists, Carmen Reinhart and Kenneth Rogoff, circulated a paper, “Growth in a Time of Debt,” that purported to identify a critical “threshold,” a tipping point, for government indebtedness. Once debt exceeds 90 percent of gross domestic product, they claimed, economic growth drops off sharply. Ms. Reinhart and Mr. Rogoff had credibility thanks to a widely admired earlier book on the history of financial crises, and their timing was impeccable.


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

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

Such eighteenth-century luminaries as Edmund Burke, Thomas Jefferson and David Hume were all fervent in their denunciations of paper money. Today government debt and deficits are arguably the greatest challenge facing the developed economies of the world. In a widely cited book, This Time is Different: Eight Centuries of Financial Folly, Carmen Reinhart and Kenneth Rogoff analysed the nature of government indebtedness over 800 years of ‘financial folly’. Debt crises have been punctuating world history for centuries, as governments continued to spend beyond their resources. This is the theme of Reinhart and Rogoff’s work.6 My book implicitly argues a rather different case.

As George Papandreou swept into power after the elections of 4 October 2009, he promised a new beginning. Behind the optimism and the vague and cloudy phrases lay the reality of 200 years of Greek financial history. ‘From 1800 to well after World War II, Greece found itself virtually in continual default,’ noted Carmen Reinhart and Kenneth Rogoff in their important history of financial crises, This Time is Different.40 Such a history would perhaps have disqualified Greece automatically from ever being considered as a full participant in the euro. But it became such a participant, because political considerations were paramount in the promotion of the European single currency; economics played only a minor part.


pages: 372 words: 107,587

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

3D printing, agricultural Revolution, Alan Greenspan, back-to-the-land, banking crisis, banks create money, Bear Stearns, Bretton Woods, business cycle, carbon footprint, Carmen Reinhart, clean water, cloud computing, collateralized debt obligation, computerized trading, 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, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Jevons paradox, Kenneth Rogoff, late fees, liberal capitalism, mega-rich, military-industrial complex, Money creation, money market fund, 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, price stability, private military company, quantitative easing, reserve currency, ride hailing / ride sharing, Ronald Reagan, short selling, special drawing rights, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, trade liberalization, tulip mania, WikiLeaks, working poor, zero-sum game

Moreover, much of this apparent growth has come about because of enormous injections of stimulus and bailout money from the Federal government. Subtract those, and the GDP growth of the past year or so almost disappears. On the basis of historical analysis of previous financial crises, economists Carmen Reinhart and Kenneth Rogoff conclude that the economic crisis of 2008 will have “. . .deep and lasting effects on asset prices, output and employment. Unemployment rises and housing price declines extend out for five and six years, respectively. On the encouraging side, output declines last only two years on average.

., “British Economic Growth, 1270–1870,” University of Warwick, UK, published online December 6, 2010. 7. “GDP United States (Recent History),” Data360.org, data360.org/dsg.aspx?Data_Set_Group_Id=353&page=3&count=100. 8. “‘Great Recession’ Over, Research Group Says,” msnbc.msn.com, posted September 20, 2010. 9. Carmen M. Reinhart and Kenneth S. Rogoff, “The Aftermath of Financial Crises,” (presented at the meeting of the American Economic Association, San Francisco, CA, January 3, 2009). 10. In philosophy this is called the problem of induction. One cannot infer that a series of events will happen in the future just as they have in past.

The Atlantic, 9/21/2010theatlantic.com/business/archive/2010/09/why-we-dont-need-to-pay-down-the-national-debt/63273. 17. For a perspective on why US government debt may not face limits anytime soon, as long as the economy returns to growth, see James K. Galbraith, “Casting Light on ‘The Moment of Truth,’” The Huffington Post, posted December 3, 2010. 18. Carmen M. Reinhart and Kenneth Rogoff, This Time Is Different: Eight Centuries of Financial Folly (New Jersey: Princeton University Press, 2009). 19. See Paul Krugman, “The burden of debt,” New Y Times. 4/28/2009. krugman.blogs. nytimes.com/2009/08/28/the-burden-of-debt/; Daniel Berger, “The Deficit: Size Doesn’t Matter” (2009).


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Destined for War: America, China, and Thucydides's Trap by Graham Allison

9 dash line, anti-communist, Berlin Wall, borderless world, Bretton Woods, British Empire, capital controls, Carmen Reinhart, conceptual framework, cuban missile crisis, currency manipulation / currency intervention, Deng Xiaoping, disruptive innovation, Donald Trump, Dr. Strangelove, escalation ladder, facts on the ground, Flash crash, Francis Fukuyama: the end of history, game design, George Santayana, Haber-Bosch Process, Herman Kahn, high-speed rail, industrial robot, Internet of things, Kenneth Rogoff, liberal world order, long peace, Mark Zuckerberg, megacity, megaproject, middle-income trap, Mikhail Gorbachev, Monroe Doctrine, mutually assured destruction, Nelson Mandela, one-China policy, Paul Samuelson, Peace of Westphalia, purchasing power parity, RAND corporation, Ronald Reagan, Scramble for Africa, selection bias, Silicon Valley, Silicon Valley startup, South China Sea, special economic zone, spice trade, the rule of 72, The Wealth of Nations by Adam Smith, too big to fail, trade route, UNCLOS, Washington Consensus, zero-sum game

Some observers claim the twenty-first century is so different from the past that lessons from previous experience are no longer relevant. To be sure, it is difficult to find precedents for current levels of economic integration, globalization, and ubiquitous worldwide communication, or global threats from climate disruption to violent Islamic extremism. But as my colleagues Carmen Reinhart and Kenneth Rogoff remind us in their analysis of 350 financial crises over the past eight centuries, many previous generations have imagined that This Time Is Different. 56 Reinhart and Rogoff side with Thucydides in reasoning that, as long as men are men, we can anticipate recurring patterns in human affairs.

For a definitive account of Soviet and American interventions in the Third World during this era, see Odd Arne Westad, The Global Cold War: Third World Interventions and the Making of Our Times (Cambridge: Cambridge University Press, 2005). For an illuminating narrative history of American covert operations in the Cold War that were aimed at foreign regime change, see Stephen Kinzer, Overthrow: America’s Century of Regime Change from Hawaii to Iraq (New York: Times Books, 2006), 111–216. [back] 56. Carmen Reinhart and Kenneth Rogoff, This Time Is Different: Eight Centuries of Financial Folly (Princeton, NJ: Princeton University Press, 2009). [back] 57. See Howard Weinroth, “Norman Angell and The Great Illusion: An Episode in Pre-1914 Pacifism,” Historical Journal 17, no. 3 (September 1974), 551–74. [back] 58.


Science Fictions: How Fraud, Bias, Negligence, and Hype Undermine the Search for Truth by Stuart Ritchie

Albert Einstein, anesthesia awareness, Bayesian statistics, Carmen Reinhart, Cass Sunstein, Charles Babbage, citation needed, Climatic Research Unit, cognitive dissonance, complexity theory, coronavirus, correlation does not imply causation, COVID-19, crowdsourcing, data science, deindustrialization, Donald Trump, double helix, en.wikipedia.org, epigenetics, Estimating the Reproducibility of Psychological Science, Goodhart's law, Growth in a Time of Debt, Helicobacter pylori, Kenneth Rogoff, l'esprit de l'escalier, meta-analysis, microbiome, Milgram experiment, mouse model, New Journalism, p-value, phenotype, placebo effect, profit motive, publication bias, publish or perish, race to the bottom, randomized controlled trial, recommendation engine, rent-seeking, replication crisis, Richard Thaler, risk tolerance, Ronald Reagan, Scientific racism, selection bias, Silicon Valley, Silicon Valley startup, Stanford prison experiment, statistical model, stem cell, Steven Pinker, Thomas Bayes, twin studies, Tyler Cowen, University of East Anglia, Wayback Machine

Just as physicists would love to discover a new law (or a way to break the ones we already know), and just as mathematicians work endlessly to prove their theorems, many social scientists, particularly economists, long to discover a stylised fact that can be associated with their name – and that the people who make important decisions can easily keep in mind. When they published a major paper in 2010, the economists Carmen Reinhart and Kenneth Rogoff thought they’d hit the stylised-fact jackpot. For two years, politicians had been frantically trying to address the fallout of the 2008 financial crisis and the ensuing Great Recession. Amid all the conflicting advice, Reinhart and Rogoff’s paper, entitled ‘Growth in a Time of Debt’, was a godsend, providing strong evidence to recommend one particular course of economic action: austerity.2 Reinhart and Rogoff had studied the debt-to-GDP ratio – the relationship between what a country owes to its creditors (its public debt, which, perhaps confusingly, is also known as its government debt or its sovereign debt) and what new goods and services it can produce (its Gross Domestic Product).

Daniel Hirschman, ‘Stylized Facts in the Social Sciences’, Sociological Science 3 (2016): pp. 604–26; https://doi.org/10.15195/v3.a26 2.  The study was an online ‘working paper’ for a while (as is normal in economics, as we’ll see in the final chapter), but it was eventually officially published as Carmen M. Reinhart and Kenneth S. Rogoff, ‘Growth in a Time of Debt’, American Economic Review 100, no. 2 (May 2010): pp. 573–78; https://doi.org/10.1257/aer.100.2.573 3.  Osborne: George Osborne, ‘Mais Lecture – A New Economic Model’, 24 Feb. 2010; https://conservative-speeches.sayit.mysociety.org/speech/601526; Republican members: United States Senate Committee on the Budget, ‘Sessions, Ryan Issue Joint Statement On Jobs Report, Call For Senate Action On Budget’, 8 July 2011; https://www.budget.senate.gov/chairman/newsroom/press/sessions-ryan-issue-joint-statement-on-jobs-report-call-for-senate-action-on-budget 4.  

., ‘Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff’, Cambridge Journal of Economics 38, no. 2 (April 2013): pp. 257–79; https://doi.org/10.1093/cje/bet075 6.  Reinhart and Rogoff admitted the Excel error, though they didn’t agree with the critics on many of their other points: Carmen M. Reinhart & Kenneth S. Rogoff, ‘Reinhart-Rogoff Response to Critique’, Wall Street Journal, 16 April 2013; https://blogs.wsj.com/economics/2013/04/16/reinhart-rogoff-response-to- critique/ 7.  Herndon et al., ‘High Public Debt’, p. 14. 8.  Betsey Stevenson & Justin Wolfers, ‘Refereeing Reinhart-Rogoff Debate’, Bloomberg Opinion, 28 April 2013; https://www.bloomberg.com/opinion/articles/2013-04-28/refereeing-the-reinhart-rogoff-debate 9.  


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Red Flags: Why Xi's China Is in Jeopardy by George Magnus

3D printing, 9 dash line, Admiral Zheng, Asian financial crisis, autonomous vehicles, balance sheet recession, banking crisis, Bear Stearns, Bretton Woods, Brexit referendum, BRICs, British Empire, business process, capital controls, carbon footprint, Carmen Reinhart, cloud computing, colonial exploitation, corporate governance, crony capitalism, currency manipulation / currency intervention, currency peg, demographic dividend, demographic transition, Deng Xiaoping, Doha Development Round, Donald Trump, financial deregulation, financial innovation, financial repression, fixed income, floating exchange rates, full employment, Gini coefficient, global reserve currency, high net worth, high-speed rail, hiring and firing, Hyman Minsky, income inequality, industrial robot, information security, Internet of things, invention of movable type, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, labour market flexibility, labour mobility, land reform, Malacca Straits, means of production, megacity, megaproject, middle-income trap, money market fund, moral hazard, non-tariff barriers, Northern Rock, offshore financial centre, old age dependency ratio, open economy, peer-to-peer lending, pension reform, price mechanism, purchasing power parity, regulatory arbitrage, rent-seeking, reserve currency, rising living standards, risk tolerance, Shenzhen special economic zone , smart cities, South China Sea, sovereign wealth fund, special drawing rights, special economic zone, speech recognition, The Wealth of Nations by Adam Smith, total factor productivity, trade route, urban planning, Washington Consensus, women in the workforce, working-age population, zero-sum game

However, the almost fourfold rise in the old-age dependency ratio will subject China to a substantial fiscal burden. The development of coping mechanisms can help to mitigate the burden, but China will also have to make difficult decisions affecting taxation and spending to keep public debt on an even keel. In their seminal work in the wake of the financial crisis, Carmen Reinhart and Kenneth Rogoff asserted that economic growth slows sharply, or even falls, once the ratio of public debt to GDP breaches 90 per cent.17 While the mechanical implication here has been disputed, and may in any case be uncertain in a state-driven economy, economists are right to say that the debt to GDP ratio cannot increase continuously without important economic implications, even if precise thresholds of risk are hard to define.

‘China Plans Immigration Agency to Lure Overseas Talent’, Bloomberg, 18 July 2016, <https://www.bloomberg.com/news/articles/2016-07-18/china-said-to-create-new-office-to-lure-overseas-work-talent>. 16. ‘China 2030’, World Bank and Development Research Center of the State Council, 2013. 17. Carmen M. Reinhart and Kenneth S. Rogoff, This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press, 2009. 18. IMF, ‘Older and Smaller’, Finance and Development, vol. 53, no. 1, March 2016. 19. IMF, Fiscal Monitor, October 2016. 20. Hu Jiye, China University of Political Science and Law, cited in Wynne Wang, ‘The Silver Age: China’s Aging Population’, Cheung Kong Graduate School of Business (CKGSB) Knowledge, 17 October 2016. 21.


EuroTragedy: A Drama in Nine Acts by Ashoka Mody

"Robert Solow", Alan Greenspan, Andrei Shleifer, asset-backed security, availability heuristic, bank run, banking crisis, Basel III, Bear Stearns, Berlin Wall, book scanning, Bretton Woods, Brexit referendum, call centre, capital controls, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, credit crunch, currency risk, Daniel Kahneman / Amos Tversky, debt deflation, Donald Trump, eurozone crisis, Fall of the Berlin Wall, financial intermediation, floating exchange rates, forward guidance, George Akerlof, German hyperinflation, global macro, global supply chain, global value chain, hiring and firing, Home mortgage interest deduction, income inequality, inflation targeting, Irish property bubble, Isaac Newton, job automation, Johann Wolfgang von Goethe, Johannes Kepler, Kenneth Rogoff, Kickstarter, liberal capitalism, light touch regulation, liquidity trap, loadsamoney, London Interbank Offered Rate, Long Term Capital Management, low-wage service sector, Mikhail Gorbachev, mittelstand, money market fund, moral hazard, mortgage tax deduction, neoliberal agenda, offshore financial centre, oil shock, open borders, pension reform, precautionary principle, premature optimization, price stability, purchasing power parity, quantitative easing, rent-seeking, Republic of Letters, Robert Gordon, Robert Shiller, short selling, Silicon Valley, The Great Moderation, The Rise and Fall of American Growth, too big to fail, total factor productivity, trade liberalization, transaction costs, urban renewal, working-age population, Yogi Berra

It was not too early, Gourinchas advised, for the Greek and Portuguese governments to tighten their fiscal belts and start saving up for the day when the bills would surely come due. Another Princeton economist, Christopher Sims, spoke next, and he had the same message: “Opening up capital markets in poor countries has often led initially to large inflows and later to financial problems.”137 Sims also warned of the risk of sovereign defaults. In August 2003, economists Carmen Reinhart and Kenneth Rogoff noted that Greece and Portugal belonged to the small club of “serial defaulters.”138 Both had defaulted on external creditors multiple times in the nineteenth century. Rogoff was still the IMF’s chief economist and Reinhart was one of his deputies. Together with their colleague, Miguel Savastano, they reported that serial defaulters had “weak fiscal structures and weak financial systems,” which persisted for years.

He acknowledged that the financial tumult since the Lehman bankruptcy announcement was unnerving and was likely to continue. But Rogoff insisted that the financial sector had been coddled too long and, as a consequence, had become “badly bloated.” Lehman’s failure, he said, was necessary to return to a leaner and more effective financial system. Rogoff was basing his comments on research with Carmen Reinhart, his colleague while at the IMF and now an economics professor at the University of Maryland. They had recently established through careful historical analysis that financial debt crises are followed by prolonged economic distress.93 Hence, the crucial policy task was to prevent debt from building up in the first place.

However, the victorious allies after World War II did not risk making the same mistake: under the London Debt Agreement in 1953, they wrote off about half of German prewar and postwar debt. That debt write-​off created the fiscal space for the German government to increase expenditures on public health, education, and housing, and by lowering default risk, the write-​off reduced the interest rates the government had to pay on its debt to private creditors.93 Economists Carmen Reinhart and Christoph Trebesch have documented that such benefits of debt forgiveness have applied in a large number of cases. They report that in the 1920s, the United States and the United Kingdom wrote off substantial portions of debt owed to them by several European countries, providing much-​needed growth impetus to the countries receiving relief.94 Tsipras and Syriza had influential supporters, such as Columbia University economist Jeffrey Sachs and US President Barack Obama.


pages: 268 words: 74,724

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

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

It did not matter what the Federal Reserve said.1 In 1933, FDR made the decision to devalue the dollar from 1/20th of an ounce of gold to 1/35th of an ounce.2 Forgetting the lesson of the early 1920s, when the integrity of the dollar was maintained, Roosevelt devalued the dollar and thereby marked the first time the United States defaulted on its debt. As Carmen Reinhart and Kenneth Rogoff describe in This Time Is Different (2009), “The abrogation of the gold clause in the United States in 1933, which meant that public debts would be repaid in fiat currency rather than gold, constitutes a restricting of nearly all the government’s domestic debt.”3 With the United States heavily in debt thanks to spending that was logically failing to stimulate the economy, FDR reduced the value of the dollars being returned to holders of U.S. debt.

John Balassi and Josie Cox, “Apple Wows Market with Record $17 Billion Bond Deal,” Reuters, April 30, 2013. 4. Smith, Dead Bank Walking, 163. 5. Ibid. CHAPTER TWENTY 1. Amity Shlaes, The Forgotten Man: A New History of the Great Depression (New York: HarperCollins, 2007), 147. My emphasis. 2. Lewis, Gold: The Once and Future Money. 3. Carmen M. Reinhart and Kenneth S. Rogoff, This Time Is Different: Eight Centuries of Financial Folly (Princeton, N.J.: Princeton University Press, 2009). 4. Thiel, Zero to One, 44. 5. Shlaes, Forgotten Man, 148. 6. Eric Rauchway, The Money Makers: How Roosevelt and Keynes Ended the Depression, Defeated Facism, and Secured a Prosperous Peace (New York: Basic Books, 2015). 7.


pages: 318 words: 77,223

The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse by Mohamed A. El-Erian

activist fund / activist shareholder / activist investor, Airbnb, Alan Greenspan, balance sheet recession, bank run, barriers to entry, Bear Stearns, Black Monday: stock market crash in 1987, break the buck, Bretton Woods, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, collapse of Lehman Brothers, corporate governance, currency peg, disruptive innovation, Erik Brynjolfsson, eurozone crisis, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, fixed income, Flash crash, forward guidance, friendly fire, full employment, future of work, geopolitical risk, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, income inequality, inflation targeting, Jeff Bezos, Kenneth Rogoff, Khan Academy, liquidity trap, Martin Wolf, megacity, Mexican peso crisis / tequila crisis, moral hazard, mortgage debt, Norman Mailer, oil shale / tar sands, price stability, principal–agent problem, quantitative easing, risk tolerance, risk-adjusted returns, risk/return, Second Machine Age, secular stagnation, sharing economy, Sheryl Sandberg, sovereign wealth fund, The Great Moderation, The Wisdom of Crowds, too big to fail, University of East Anglia, yield curve, zero-sum game

They avoided talking about debt reduction despite the fact that their emergency liquidity support to highly indebted countries was associated with growth rates that consistently undershot their own expectations and projections. And they underestimated the societal and political implications of a prolonged period of economic underperformance and financial insecurity. The harmful consequences have been material. As Carmen Reinhart and Kenneth Rogoff have noted, because the advanced economies have not been able to also use other options, such as debt restructuring and conversions, which were used in the 1930s, they have been undermined by a “forgotten lesson.”6 It is high time to change this. 4. GETTING THE ARCHITECTURE RIGHT (OR, AT LEAST, LESS WRONG) A.

“The Fund’s Lending Framework and Sovereign Debt,” International Monetary Fund, Washington, D.C., June 2014, http://www.imf.org/external/np/pp/eng/2014/052214a.pdf. 5. See, for example, “Debt Relief Under the Heavily Indebted Poor Countries (HIPC) Initiative,” IMF Factsheet, Washington, D.C., September 2014, https://www.imf.org/external/np/exr/facts/hipc.htm. 6. Carmen M. Reinhart and Kenneth S. Rogoff, “Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten,” IMF Working Paper, WP/13/266, December 2013, https://www.imf.org/external/pubs/ft/wp/2013/wp13266.pdf. 7. “Bleak Words and Difficult Homework from the IMF,” Financial Times, October 5, 2014, http://www.ft.com/intl/cms/s/0/53516aec-4af6-11e4-b1be-00144feab7de.html. 8.


pages: 267 words: 71,123

End This Depression Now! by Paul Krugman

airline deregulation, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, bond market vigilante , Bretton Woods, business cycle, capital asset pricing model, Carmen Reinhart, centre right, correlation does not imply causation, credit crunch, Credit Default Swap, currency manipulation / currency intervention, debt deflation, Eugene Fama: efficient market hypothesis, financial deregulation, financial innovation, Financial Instability Hypothesis, full employment, German hyperinflation, Gordon Gekko, high-speed rail, Hyman Minsky, income inequality, inflation targeting, invisible hand, It's morning again in America, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Joseph Schumpeter, junk bonds, Kenneth Rogoff, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, low skilled workers, Mark Zuckerberg, Money creation, money market fund, moral hazard, mortgage debt, negative equity, paradox of thrift, Paul Samuelson, price stability, quantitative easing, rent-seeking, Robert Gordon, Ronald Reagan, salary depends on his not understanding it, Savings and loan crisis, Upton Sinclair, We are the 99%, working poor, Works Progress Administration

The Road Not Taken Historically, financial crises have typically been followed by prolonged economic slumps, and U.S. experience since 2007 has been no different. Indeed, U.S. numbers on unemployment and growth have been remarkably close to the historical average for countries experiencing these kinds of problems. Just as the crisis was gathering momentum, Carmen Reinhart, of the Peterson Institute of International Economics, and Kenneth Rogoff, of Harvard, published a history of financial crises with the ironic title This Time Is Different (because in reality it never is). Their research led readers to expect a protracted period of high unemployment, and as the story unfolded, Rogoff would note that America was experiencing a “garden-variety severe financial crisis.”


pages: 250 words: 64,011

Everydata: The Misinformation Hidden in the Little Data You Consume Every Day by John H. Johnson

Affordable Care Act / Obamacare, Black Swan, business intelligence, Carmen Reinhart, cognitive bias, correlation does not imply causation, Daniel Kahneman / Amos Tversky, data science, Donald Trump, en.wikipedia.org, Kenneth Rogoff, labor-force participation, lake wobegon effect, Long Term Capital Management, Mercator projection, Mercator projection distort size, especially Greenland and Africa, meta-analysis, Nate Silver, obamacare, p-value, PageRank, pattern recognition, publication bias, QR code, randomized controlled trial, risk-adjusted returns, Ronald Reagan, selection bias, statistical model, The Signal and the Noise by Nate Silver, Thomas Bayes, Tim Cook: Apple, wikimedia commons, Yogi Berra

Food and Drug Administration (FDA) allows foods with less than half a gram of fat per serving to still be called “fat-free.” So, if you eat more than one serving of a few “fat-free” foods per day, you could easily be consuming a few grams of fat.27 Tough cell—It was, as Bloomberg Business called it, “the Excel Error that Changed History.”28 Two Harvard University economists—Carmen Reinhart and Kenneth Rogoff—ended up in the headlines for all the wrong reasons when they made a spreadsheet mistake in a paper that examined the effects of government debt on economic growth. They forgot to include five rows in one of their calculations, which made a key result turn out to be -0.1 percent instead of +0.2 percent.


pages: 142 words: 45,733

Utopia or Bust: A Guide to the Present Crisis by Benjamin Kunkel

Alan Greenspan, anti-communist, Bear Stearns, Bretton Woods, business cycle, capital controls, Carmen Reinhart, creative destruction, David Graeber, declining real wages, full employment, Hyman Minsky, income inequality, late capitalism, liberal capitalism, liquidity trap, means of production, money: store of value / unit of account / medium of exchange, mortgage debt, Occupy movement, peak oil, price stability, profit motive, savings glut, Slavoj Žižek, The Wealth of Nations by Adam Smith, transatlantic slave trade, War on Poverty, We are the 99%, women in the workforce, Works Progress Administration, zero-sum game

The first decades after World War II, before the US abandoned the gold standard, saw an inflationary erosion of the value of money; over the past generation, by contrast, the major currencies of the capitalist core, lacking any metallic basis, have nevertheless stubbornly resisted rapid inflation. In other words, the years of gold’s long goodbye were less, not more, propitious for creditors than the virtual money era that followed. As Carmen Reinhart established in a paper cited by Coggan, the real rate of interest (taking inflation into account) was, from 1945 to 1980, as often negative as positive across developed economies; in any given year, a lender was as likely to be losing as gaining real wealth. If this didn’t quite bring about Keynes’s “euthanasia of the rentier,” it did amount to the pacification of the rentier, even as profit rates reached historic heights: the main way for capitalists to beat inflation was by investing money, not by lending it.


The Limits of the Market: The Pendulum Between Government and Market by Paul de Grauwe, Anna Asbury

"Robert Solow", Alan Greenspan, banking crisis, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, conceptual framework, crony capitalism, Erik Brynjolfsson, eurozone crisis, Honoré de Balzac, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kitchen Debate, means of production, Money creation, moral hazard, Paul Samuelson, price discrimination, price mechanism, profit motive, Robert Gordon, Ronald Coase, Simon Kuznets, The Nature of the Firm, The Rise and Fall of American Growth, too big to fail, transaction costs, trickle-down economics, ultimatum game, very high income

This euphoria has a blinding effect, and few people notice the risks. Real estate prices and share prices continue to rise. The markets exercise no disciplining influence whatsoever on people’s behaviour. On the contrary, they lead the way to increased euphoria and an ever greater lack of discipline. As Carmen Reinhart and Kenneth Rogoff emphasize in their book This Time is Different,8 in periods of euphoria people tell tales which suggest that the price rises in shares or real estate are the result of fundamental developments. They believe that these high prices are the consequence of new technological developments and are completely justified.


pages: 280 words: 79,029

Smart Money: How High-Stakes Financial Innovation Is Reshaping Our WorldÑFor the Better by Andrew Palmer

Affordable Care Act / Obamacare, Alan Greenspan, algorithmic trading, Andrei Shleifer, asset-backed security, availability heuristic, bank run, banking crisis, Black Monday: stock market crash in 1987, Black-Scholes formula, bonus culture, break the buck, Bretton Woods, call centre, Carmen Reinhart, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, David Graeber, diversification, diversified portfolio, Edmond Halley, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, eurozone crisis, family office, financial deregulation, financial engineering, financial innovation, fixed income, Flash crash, Google Glasses, Gordon Gekko, high net worth, housing crisis, Hyman Minsky, impact investing, implied volatility, income inequality, index fund, information asymmetry, Innovator's Dilemma, interest rate swap, Kenneth Rogoff, Kickstarter, late fees, London Interbank Offered Rate, Long Term Capital Management, longitudinal study, loss aversion, margin call, Mark Zuckerberg, McMansion, money market fund, mortgage debt, mortgage tax deduction, Myron Scholes, negative equity, Network effects, Northern Rock, obamacare, payday loans, peer-to-peer lending, Peter Thiel, principal–agent problem, profit maximization, quantitative trading / quantitative finance, railway mania, randomized controlled trial, Richard Feynman, Richard Thaler, risk tolerance, risk-adjusted returns, Robert Shiller, Savings and loan crisis, short selling, Silicon Valley, Silicon Valley startup, Skype, South Sea Bubble, sovereign wealth fund, statistical model, tail risk, Thales of Miletus, transaction costs, Tunguska event, unbanked and underbanked, underbanked, Vanguard fund, web application

From Breakthrough to Meltdown The previous chapter described how breakthroughs in finance have helped to propel enterprise and realize ambitions throughout human history. But anyone who seeks to defend the industry must also recognize how often, and how badly, it goes wrong. In This Time Is Different, their excellent survey of debt crises across the centuries, Carmen Reinhart and Kenneth Rogoff analyze episodes of banking crises. Such meltdowns are depressingly common in both developed and emerging economies: Britain, America, and France have experienced twelve, thirteen, and fifteen episodes of banking crisis, respectively, since 1800, for example.1 The first bailout in the United States happened way back in 1792, when a bubble and then a slump in the price of the country’s federal debt helped spark widespread panic.


pages: 305 words: 75,697

Cogs and Monsters: What Economics Is, and What It Should Be by Diane Coyle

"Robert Solow", 3D printing, additive manufacturing, Airbnb, Al Roth, Alan Greenspan, algorithmic management, Amazon Web Services, autonomous vehicles, banking crisis, barriers to entry, Big bang: deregulation of the City of London, bitcoin, Boston Dynamics, Bretton Woods, Brexit referendum, business cycle, call centre, Carmen Reinhart, central bank independence, choice architecture, Chuck Templeton: OpenTable:, cloud computing, complexity theory, computer age, conceptual framework, congestion charging, constrained optimization, coronavirus, COVID-19, creative destruction, credit crunch, data science, deglobalization, deindustrialization, Diane Coyle, discounted cash flows, disintermediation, Donald Trump, Edward Glaeser, en.wikipedia.org, endogenous growth, endowment effect, Erik Brynjolfsson, eurozone crisis, everywhere but in the productivity statistics, experimental subject, financial deregulation, financial innovation, financial intermediation, Flash crash, framing effect, George Akerlof, global supply chain, Goodhart's law, Google bus, haute cuisine, High speed trading, hockey-stick growth, Ida Tarbell, information asymmetry, intangible asset, Internet of things, invisible hand, Jaron Lanier, Jean Tirole, job automation, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, knowledge worker, libertarian paternalism, linear programming, Long Term Capital Management, loss aversion, low earth orbit, lump of labour, market bubble, market design, Menlo Park, millennium bug, Modern Monetary Theory, Mont Pelerin Society, multi-sided market, Myron Scholes, Nash equilibrium, Nate Silver, Network effects, Occupy movement, Pareto efficiency, payday loans, payment for order flow, Phillips curve, post-industrial society, price mechanism, Productivity paradox, quantitative easing, randomized controlled trial, rent control, rent-seeking, ride hailing / ride sharing, road to serfdom, Robert Gordon, Robert Shiller, Robinhood: mobile stock trading app, Ronald Coase, Ronald Reagan, San Francisco homelessness, savings glut, school vouchers, sharing economy, Silicon Valley, software is eating the world, spectrum auction, statistical model, Steven Pinker, tacit knowledge, The Chicago School, The Future of Employment, The Great Moderation, the map is not the territory, The Rise and Fall of American Growth, the scientific method, The Signal and the Noise by Nate Silver, the strength of weak ties, The Wealth of Nations by Adam Smith, total factor productivity, transaction costs, Uber for X, urban planning, winner-take-all economy, Winter of Discontent, women in the workforce, Y2K

Yet, all too often economists allow lay people and policy makers to believe that our policy suggestions have far more scientific foundation than a neutral objective observer would give them. Yet macroeconomists typically draw on a limited range of highly aggregated, correlated, and auto-correlated data, now readily available online, without reflecting enough on how the data have been constructed, to make sometimes strong claims. Indeed, Carmen Reinhart and Ken Rogoff (2009) were unusual in collecting a significant new data set, a historical database on government debt, whatever your views about their interpretation of the data.1 Too few economists take the time to understand in detail how macroeconomic statistics are collected and adjusted, or to consider the conceptual issues, for example, in defining the production boundary delineating what we count as being in ‘the economy’, or making quality adjustments in measuring how much prices of goods such as consumer electronics have changed.


Investment: A History by Norton Reamer, Jesse Downing

activist fund / activist shareholder / activist investor, Alan Greenspan, Albert Einstein, algorithmic trading, asset allocation, backtesting, banking crisis, Bear Stearns, Berlin Wall, Bernie Madoff, break the buck, Brownian motion, business cycle, buttonwood tree, buy and hold, California gold rush, capital asset pricing model, Carmen Reinhart, carried interest, colonial rule, credit crunch, Credit Default Swap, Daniel Kahneman / Amos Tversky, debt deflation, discounted cash flows, diversified portfolio, dogs of the Dow, equity premium, estate planning, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, family office, Fellow of the Royal Society, financial innovation, fixed income, Gordon Gekko, Henri Poincaré, Henry Singleton, high net worth, impact investing, index fund, information asymmetry, interest rate swap, invention of the telegraph, James Hargreaves, James Watt: steam engine, John Bogle, joint-stock company, Kenneth Rogoff, labor-force participation, land tenure, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, managed futures, margin call, means of production, Menlo Park, merger arbitrage, Michael Milken, money market fund, moral hazard, mortgage debt, Myron Scholes, negative equity, Network effects, new economy, Nick Leeson, Own Your Own Home, Paul Samuelson, pension reform, Performance of Mutual Funds in the Period, Ponzi scheme, Post-Keynesian economics, price mechanism, principal–agent problem, profit maximization, quantitative easing, RAND corporation, random walk, Renaissance Technologies, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Sand Hill Road, Savings and loan crisis, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spinning jenny, statistical arbitrage, survivorship bias, tail risk, technology bubble, Teledyne, The Wealth of Nations by Adam Smith, time value of money, too big to fail, transaction costs, two and twenty, underbanked, Vanguard fund, working poor, yield curve

Given the still novel nature of many of the monetary responses and the almost accidental nature of some, but not all, of the fiscal support, it is unfortunate that a significant number of Americans seem to have drawn incorrect interpretations of the efficacy of what was done as well as the intended purpose. Not surprisingly, in view of the research published by Carmen Reinhart and Kenneth Rogoff, the recovery has been slow and not extraordinarily dynamic. Through an exhaustive historical compilation of past economic crises, Reinhart and Rogoff seem to have established that a serious recession accompanied by a financial crisis normally results in a slow, drawn-out recovery.50 In fact, that is what the United States appears to have experienced since 2009.

Stewart, “Volcker Rule, Once Simple, Now Boggles,” New York Times, October 21, 2011, http://www.nytimes.com/2011/10/22 /business/volcker-rule-grows-from-simple-to-complex.html. Ibid.; Dan Kedmey, “2 Years and 900 Pages Later, the Volcker Rule Gets the Green Light,” TIME.com, December 11, 2013, http://business.time .com/2013/12/11/2-years-and-900-pages-later-the-volcker-rule-gets -the-green-light. Carmen M. Reinhart and Kenneth S. Rogoff, This Time Is Different: Eight Centuries of Financial Folly (Princeton, NJ: Princeton University Press, 2011), xliv–xlv and 238–239. 7. THE EMERGENCE OF INVESTMENT THEORY 1. Jean-Michel Courtault et al., “Louis Bachelier on the Centenary of Théorie de la Spéculation,” Mathematical Finance 10, no. 3 (July 2000): 342–343. 370 7.


pages: 566 words: 155,428

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

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

Instead, the euro kept Greece expensive, and antiausterity riots scared tourists away. The third critical difference between the United States and Europe is perhaps too obvious to state: They had to deal with Greece; we didn’t. The Greek situation is, if you’ll pardon the Latin, sui generis. Greece has a dismal fiscal history. Economists Carmen Reinhart and Kenneth Rogoff found that Greece has been in default on its public debt roughly 50 percent of the time since gaining independence in the 1830s! More recently, Greece’s budget deficits were large before the crisis and huge thereafter. The Greeks also turn out to be pretty poor tax collectors—some would say they hardly try.

.), 58 causes of, 58–59 and credit default swaps (CDS), 65–68, 131–32 and credit-rating agencies, 80–81 and derivatives, 60–64 and efficient markets hypothesis, 64–65 Federal Deposit Insurance Corporation (FDIC), 58 and Glass-Steagall repeal, 266–67 Office of the Comptroller of the Currency (OTS), 57–58 and political pressure, 59 and shadow banking system, 59–64 and structured investment vehicles (SIVs), 57 and subprime mortgages, 58–59 Reid, Harry, 183–84, 226 Reinhart, Carmen, 413 Reinhart, Vincent, 110, 113 Republicans anticonsumer protection, 312 anti-Dodd-Frank Act, 306, 317–18 anti-Keynesian, 211, 235–36, 350–51 antistimulus, 225–28, 234, 351, 393–94 anti-TARP, 192–93 backlash by, areas of, 346–53 blood sport, engaging in, 439, 441 congressional gains (2010), 347–48 Obama bipartisan goals with, 220, 227 populist movement.


pages: 322 words: 87,181

Straight Talk on Trade: Ideas for a Sane World Economy by Dani Rodrik

3D printing, airline deregulation, Asian financial crisis, bank run, barriers to entry, Berlin Wall, Bernie Sanders, blue-collar work, Bretton Woods, BRICs, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, central bank independence, centre right, collective bargaining, conceptual framework, continuous integration, corporate governance, corporate social responsibility, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Donald Trump, endogenous growth, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, financial deregulation, financial innovation, financial intermediation, financial repression, floating exchange rates, full employment, future of work, George Akerlof, global value chain, income inequality, inflation targeting, information asymmetry, investor state dispute settlement, invisible hand, Jean Tirole, Kenneth Rogoff, low skilled workers, manufacturing employment, market clearing, market fundamentalism, meta-analysis, moral hazard, Nelson Mandela, new economy, offshore financial centre, open borders, open economy, Pareto efficiency, postindustrial economy, precautionary principle, price stability, pushing on a string, race to the bottom, randomized controlled trial, regulatory arbitrage, rent control, rent-seeking, Richard Thaler, Robert Gordon, Robert Shiller, Ronald Reagan, Sam Peltzman, Silicon Valley, special economic zone, spectrum auction, Steven Pinker, tacit knowledge, The Rise and Fall of American Growth, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, total factor productivity, trade liberalization, transaction costs, Tyler Cowen, unorthodox policies, Washington Consensus, World Values Survey, zero-sum game, éminence grise

Economics Hijacked When the stakes are high, it is no surprise that battling political opponents use whatever support they can garner from economists and other researchers. That is what happened when conservative American politicians and European Union officials latched on to the work of two Harvard professors—Carmen Reinhart and Kenneth Rogoff—to justify their support of fiscal austerity.9 Reinhart and Rogoff had published a paper that appeared to show that public-debt levels above 90 percent of GDP do significant damage to economic growth. The paper was criticized by three economists from the University of Massachusetts at Amherst, who argued their findings were brittle.10 They had found a relatively minor spreadsheet error.

New York Times, Opinion Pages, January 26, 2016, https://www.nytimes.com/2016/01/26/opinion/whats-our-duty-to-the-people-globalization-leaves-behind.html?_r=2. 8. Fabrice Defever and Alejandro Riaño, “China’s Pure Exporter Subsidies,” Centre for Economic Performance Discussion Paper No. 1182, London School of Economics and Political Science, December 2012. 9. The original paper is Carmen M. Reinhart and Kenneth S. Rogoff, “Growth in the Time of Debt,” NBER Working Paper No. 15639, January 2010. 10. Thomas Herndon, Michael Ash, and Robert Pollin, “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff,” Cambridge Journal of Economics, vol. 38(2), 2014: 257–279. 11.


pages: 460 words: 122,556

The End of Wall Street by Roger Lowenstein

Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, break the buck, Brownian motion, Carmen Reinhart, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fear of failure, financial deregulation, financial engineering, fixed income, geopolitical risk, Greenspan put, high net worth, Hyman Minsky, interest rate derivative, invisible hand, junk bonds, Ken Thompson, Kenneth Rogoff, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, Martin Wolf, Michael Milken, money market fund, moral hazard, mortgage debt, negative equity, Northern Rock, Ponzi scheme, profit motive, race to the bottom, risk tolerance, Ronald Reagan, Rubik’s Cube, Savings and loan crisis, savings glut, short selling, sovereign wealth fund, statistical model, the payments system, too big to fail, tulip mania, Y2K

Bernanke argued that their dollars had to flow somewhere, and the United States was merely an attractive destination. The curious financing of rich nations by poor ones reversed a long tradition. During previous eras, the U.S. had loaned money to developing nations, and had often come to rue the day. This time, as two professors, Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard, put it, “a large chunk of money had been recycled to a developing economy that exists within the United States’ own borders [emphasis added].”8 Surplus credit was flowing not to weak borrowers overseas, but to a Subprime Nation inside the United States.

ACCT=104&STORY=/www/story/02-04-2003/0001885208&EDATE=. 3 David Andrukonis, e-mail, September 7, 2004. 4 Mortgage Bankers Association. 5 Meredith Whitney, Oppenheimer equity research report, December 11, 2008. Household growth was 2.5 percent. 6 Martin Wolf, “Asia’s Revenge,” Financial Times, October 9, 2008, and also Martin Wolf, “Seeds of Its Own Destruction,” Financial Times, March 9, 2009. 7 Ben S. Bernanke, Sandridge Lecture, Virginia Association of Economics, Richmond, March 10, 2005. 8 Carmen M. Reinhart and Kenneth S. Rogoff, draft of “Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International Historical Comparison,” February 5, 2008; subsequently published in American Economic Review, May 2009. 9 Fannie Mae found 932 articles in a Google search of “housing bubble” in the first four months of 2005, and 1,248 such articles in just the next two months—a sharp acceleration.


pages: 365 words: 88,125

23 Things They Don't Tell You About Capitalism by Ha-Joon Chang

"Robert Solow", accelerated depreciation, affirmative action, Alan Greenspan, Asian financial crisis, bank run, banking crisis, basic income, Berlin Wall, Bernie Madoff, borderless world, Carmen Reinhart, central bank independence, collateralized debt obligation, colonial rule, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, deskilling, ending welfare as we know it, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, full employment, German hyperinflation, Gini coefficient, hiring and firing, Hyman Minsky, income inequality, income per capita, invisible hand, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour market flexibility, light touch regulation, Long Term Capital Management, low skilled workers, manufacturing employment, market fundamentalism, means of production, Mexican peso crisis / tequila crisis, microcredit, Myron Scholes, North Sea oil, offshore financial centre, old-boy network, post-industrial society, price stability, profit maximization, profit motive, purchasing power parity, rent control, shareholder value, short selling, Skype, structural adjustment programs, the market place, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, Toyota Production System, trade liberalization, trickle-down economics, women in the workforce, working poor, zero-sum game

One sense in which the world has become more unstable during the last three decades of free-market dominance and strong anti-inflationary policies is the increased frequency and extent of financial crises. According to a study by Kenneth Rogoff, a former chief economist of the IMF and now a professor at Harvard University, and Carmen Reinhart, a professor at the University of Maryland, virtually no country was in banking crisis between the end of the Second World War and the mid 1970s, when the world was much more unstable than today, when measured by inflation. Between the mid 1970s and the late 1980s, when inflation accelerated in many countries, the proportion of countries with banking crises rose to 5–10 per cent, weighted by their share of world income, seemingly confirming the inflation-centric view of the world.


Firefighting by Ben S. Bernanke, Timothy F. Geithner, Henry M. Paulson, Jr.

Asian financial crisis, asset-backed security, bank run, Basel III, Bear Stearns, break the buck, Build a better mousetrap, business cycle, Carmen Reinhart, collapse of Lehman Brothers, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Doomsday Book, financial deregulation, financial engineering, financial innovation, housing crisis, Hyman Minsky, income inequality, invisible hand, Kenneth Rogoff, labor-force participation, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, margin call, money market fund, moral hazard, mortgage debt, negative equity, Northern Rock, opioid epidemic / opioid crisis, pets.com, price stability, quantitative easing, regulatory arbitrage, Robert Shiller, Savings and loan crisis, savings glut, short selling, sovereign wealth fund, special drawing rights, tail risk, The Great Moderation, too big to fail

., with Nellie Liang, eds., First Responders: Inside the U.S. Strategy for Fighting the 2007–2009 Global Financial Crisis (New Haven: Yale University Press, forthcoming). U.S. strategy was able to limit the damage: Data for 63 financial crises in advanced economies, 1857 to 2013, were taken from Carmen Reinhart and Kenneth Rogoff, “Recovery from Financial Crises: Evidence from 100 Episodes,” American Economic Review: Papers & Proceedings 104(5) (2014): 50–55, https://scholar.harvard.edu/files/rogoff/files/aer_104-5_50-55.pdf. Based on Nellie Liang, Margaret M. McConnell, and Phillip Swagel, “Evidence on Outcomes,” in Ben S.


pages: 484 words: 136,735

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

"Robert Solow", Alan Greenspan, bank run, banking crisis, Bear Stearns, Benoit Mandelbrot, Berlin Wall, Black Swan, bond market vigilante , bonus culture, Bretton Woods, BRICs, business cycle, buy and hold, Carmen Reinhart, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, currency manipulation / currency intervention, currency risk, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, eat what you kill, 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, foreign exchange controls, full employment, geopolitical risk, George Akerlof, global rebalancing, Goodhart's law, Hyman Minsky, income inequality, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, Long Term Capital Management, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, military-industrial complex, Modern Monetary Theory, Money creation, money market fund, moral hazard, mortgage debt, Nelson Mandela, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, oil shock, paradox of thrift, Pareto efficiency, Paul Samuelson, Paul Volcker talking about ATMs, 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, Ronald Reagan, Savings and loan crisis, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Vilfredo Pareto, Washington Consensus, zero-sum game

The question that needs to be asked about the Japanese experience is whether government support for struggling banks and overindebted borrowers caused the twenty years of stagnation or whether twenty years of economic stagnation prevented a recovery for weak borrowers and banks. A similar question must be asked about a fascinating and much-quoted historic study, coauthored by Carmen Reinhart and Kenneth Rogoff, the IMF’s former chief economist, which looked at the macroeconomic effect of financial crises in dozens of countries over the past six hundred years. This study concluded that recessions accompanied by banking crises are generally much longer and deeper than recessions in which banks avoid serious losses.12 The question is whether this historic evidence proves that banking crises cause particularly severe recessions or that particularly severe recessions cause banking crises, which then make these recessions even worse.

Organisation for Economic Co-operation and Development (OECD), OECD Outlook 86 (November 2009). 4 There has been a long history of debt defaults by sovereign governments, and in every case creditors have been left with no legal or political redress. See Anatole Kaletsky, The Costs of Default, and Carmen M. Reinhart and Kenneth Rogoff, This Time Is Different: Eight Centuries of Financial Folly. 5 The figures for Treasury securities exclude the notional holdings owned by the federal government itself through the Social Security Trust Fund and other purely notional accounting entities. Federal Reserve Board, “Flow of Funds Accounts of the United States: Flows and Outstandings, Third Quarter 2009,” December 10, 2009. 6 Strictly speaking, the current account deficit is slightly different from the trade deficit, as explained in the text. 7 The current account deficit for the first three quarters of 2009, annualized, was $407 billion. 8 To be precise, real incomes sixty years from now will be 3.2 times higher if U.S. growth averages 1.96 percent per head, as it has since 1950, and 1.8 times higher if growth slows to 1 percent per head. 9 This assumes real economic growth of 3 percent real and 2 percent inflation. 10 International Monetary Fund, “Fiscal Implications of the Global Economic and Financial Crisis,” IMF Staff Position Note SPN/09/13, June 2009. 11 Japan suffered five recessions in the twenty years since 1990, while the United States had three recessions and Britain and the eurozone suffered two each. 12 Reinhart and Rogoff, This Time Is Different. 13 Kaletsky, The Costs of Default. 14 See “Continental Illinois and ‘Too Big to Fail,’” in FDIC Division of Research and Statistics, History of the Eighties—Lessons for the Future, vol. 1, 235-257.


pages: 483 words: 134,377

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

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

When financial markets and institutions mobilize savings from disparate households to invest in these promising projects, this represents a second crucial step in fostering growth.33 There may indeed be more scope in finance than in goods markets for activities that generate private returns that are not social returns, such as deception, embezzlement, and outright Ponzi schemes. As explained by the great book satirically titled This Time Is Different, by Carmen Reinhart and Kenneth Rogoff, cheating in finance did not start with the horrific financial crisis of 2007 to 2008; it has been happening for centuries.34 Yet somehow, despite the cheating, finance keeps providing the essential services without which large-scale success would not be possible. ADAM SMITH AND DEVELOPMENT In 1986, just as Hyundai was cracking the US market, the Journal of Political Economy, one of the most prestigious journals in economics, published an article titled “Increasing Returns and Long-Run Growth.”

eds. Douglas Evanoff, Cornelia Holthausen, George Kaufman, and Manfred Kremer (Singapore: World Scientific Publishing Company, 2013), 2011 working paper available at http://faculty.haas.berkeley.edu/ross_levine/Papers/2011_ChicagoFed_DefenseofWallStreet.pdf, accessed September 12, 2013. 34. Carmen M. Reinhart and Kenneth S. Rogoff, This Time Is Different: Eight Centuries of Financial Folly (Princeton, NJ: Princeton University Press, 2009). CHAPTER 12: TECHNOLOGY: HOW TO SUCCEED WITHOUT KNOWING HOW 1. Broadband Commission, The State of Broadband 2012: Achieving Digital Inclusion for All (Geneva, Switzerland: International Telecommunication Union, 2012), 5, 35, 43.


pages: 488 words: 144,145

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

Alan Greenspan, Albert Einstein, bank run, banking crisis, Bear Stearns, Black Swan, Bretton Woods, British Empire, business cycle, buy and hold, California gold rush, Carmen Reinhart, central bank independence, commoditize, conceptual framework, corporate governance, corporate raider, creative destruction, 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, military-industrial complex, Money creation, money: store of value / unit of account / medium of exchange, moral hazard, mutually assured destruction, Nixon triggered the end of the Bretton Woods system, non-tariff barriers, oil shock, Paul Samuelson, payday loans, plutocrats, price stability, pushing on a string, quantitative easing, rent-seeking, reserve currency, Ronald Reagan, Savings and loan crisis, special drawing rights, Suez crisis 1956, The Chicago School, The Great Moderation, too big to fail, trade liberalization, transcontinental railway, Upton Sinclair, women in the workforce

“Instead, every such loan has been subjected to major currency devaluation, rolled over, suspended, rescheduled, or otherwise restructured, repudiated, reduced, cancelled, or forgiven. The more drastic steps, leading to eventual, partial or complete cancelation of debt have been surprisingly frequent.”39 The views of researchers such as Walker Todd and Gerry O’Driscoll on foreign lending are confirmed in the more recent work of Carmen Reinhart and Kenneth Rogoff, This Time it is Different: Eight Centuries of Financial Folly. The book is another monumental research effort in the fine tradition of Freidman and Schwartz’s Monetary History of the United States and Allan Meltzer’s updates of that work, albeit focused on the foreign debt component of the economic story.


pages: 554 words: 158,687

Profiting Without Producing: How Finance Exploits Us All by Costas Lapavitsas

"Robert Solow", Alan Greenspan, Andrei Shleifer, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, borderless world, Branko Milanovic, Bretton Woods, business cycle, capital controls, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, computer age, conceptual framework, corporate governance, credit crunch, Credit Default Swap, David Graeber, David Ricardo: comparative advantage, disintermediation, diversified portfolio, Erik Brynjolfsson, eurozone crisis, everywhere but in the productivity statistics, financial deregulation, financial independence, financial innovation, financial intermediation, financial repression, Flash crash, full employment, global value chain, global village, High speed trading, Hyman Minsky, income inequality, inflation targeting, informal economy, information asymmetry, intangible asset, job satisfaction, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, liberal capitalism, London Interbank Offered Rate, low skilled workers, M-Pesa, market bubble, means of production, Modern Monetary Theory, Money creation, money market fund, moral hazard, mortgage debt, Network effects, new economy, oil shock, open economy, pensions crisis, post-Fordism, Post-Keynesian economics, price stability, Productivity paradox, profit maximization, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, race to the bottom, regulatory arbitrage, reserve currency, Robert Shiller, savings glut, Scramble for Africa, secular stagnation, shareholder value, Simon Kuznets, special drawing rights, Thales of Miletus, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, total factor productivity, trade liberalization, transaction costs, union organizing, value at risk, Washington Consensus, zero-sum game

Brynjolfsson, Erik, Lorin Hitt, and Shinkyu Yang, ‘Intangible Assets: Computers and Organizational Capital’, Brookings Papers on Economic Activity: Macroeconomics, vol. 1, 2002, pp. 137–99. Buiter, Willem, and Anne Sibert, ‘The Central Bank as the Market-Maker of Last Resort: From Lender of Last Resort to Market-Maker of Last Resort’, in The First Global Financial Crisis of the 21st Century, ed. Andrew Felton and Carmen Reinhart, London: Center for Economic Policy Research (CERP), 2007; available at VoxEU.org. Buiter, Willem, ‘New Developments in Monetary Economics: Two Ghosts, Two Eccentricities, a Fallacy, a Mirage and a Mythos’, Economic Journal, 115, 2005, pp. C1–C31. Buiter, William, ‘The “Good Bank” Solution’, Financial Times (online), 29 January 2009.

De Grauwe, Paul, ‘The Governance of a Fragile Eurozone’, CEPS Working Document No. 346, Centre for European Policy Studies, May 2011. De Grauwe, Paul, ‘There is More to Central Banking Than Inflation Targeting’, in The First Global Financial Crisis of the 21st Century, ed. Andrew Felton and Carmen Reinhart, VoxEU–Center for Economic Policy Research, 2007. De Grauwe, Paul, and Wim Moesen, ‘Gains for All: A Proposal for a Common Euro Bond’, Intereconomics 44:3, 2009, pp. 132–5. De Grauwe, Paul, and Yuemei Ji, ‘Mispricing of Sovereign Risk and Multiple Equilibria in the Eurozone’, CEPS Working Document No. 361, Centre for European Policy Studies, January 2012.


pages: 350 words: 103,270

The Devil's Derivatives: The Untold Story of the Slick Traders and Hapless Regulators Who Almost Blew Up Wall Street . . . And Are Ready to Do It Again by Nicholas Dunbar

Alan Greenspan, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, Black Swan, Black-Scholes formula, bonus culture, break the buck, buy and hold, capital asset pricing model, Carmen Reinhart, Cass Sunstein, collateralized debt obligation, commoditize, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, delayed gratification, diversification, Edmond Halley, facts on the ground, financial innovation, fixed income, George Akerlof, Greenspan put, implied volatility, index fund, interest rate derivative, interest rate swap, Isaac Newton, John Meriwether, junk bonds, Kenneth Rogoff, Kickstarter, Long Term Capital Management, margin call, market bubble, money market fund, Myron Scholes, Nick Leeson, Northern Rock, offshore financial centre, Paul Samuelson, price mechanism, regulatory arbitrage, rent-seeking, Richard Thaler, risk free rate, risk tolerance, risk/return, Ronald Reagan, Salesforce, Savings and loan crisis, shareholder value, short selling, statistical model, The Chicago School, Thomas Bayes, time value of money, too big to fail, transaction costs, value at risk, Vanguard fund, yield curve, zero-sum game

By the end of 2010, Ireland was forced into using the new facility, with Portugal anticipated to follow suit. The creeping malaise caused by too much debt was never going to be easy to fix. What was clear by the end of summer 2010 was that a crisis forged in the workshops of investment bank financial innovators had metamorphosed into a crisis all too familiar to economic historians. As Carmen Reinhart and Kenneth Rogoff point out in their book, This Time Is Different, there is a clear pattern to the credit booms that have bankrupted banks and nation states over the past eight centuries.5 What was different in 2010 was the global scale of the problem, and how regulators in the world’s developed countries, led by the United States and Britain, were ill suited to handle the burden of their failed consumer finance and banking systems.

Morgan Chase in February 2010, www.jpmorgan.com. 2. See U.K. Office of Budget Responsibility prebudget report, June 2010, http://budgetresponsibility.independent.gov.uk/index.html. 3. James Sassoon, interview by author, November 2009. 4. Nicholas Dunbar, “Revealed: Goldman Sachs’ Mega-Deal for Greece,” Risk, July 2003, 20. 5. Carmen M. Reinhart and Kenneth S. Rogoff, This Time Is Different: Eight Centuries of Financial Folly (Princeton, NJ: Princeton University Press, 2009). Acknowledgments Someone who fits Amartya Sen’s description of a rational fool would be fairly close to a psychopath. The economic world is full of these psychopaths: they are corporations.


pages: 180 words: 61,340

Boomerang: Travels in the New Third World by Michael Lewis

Bear Stearns, Berlin Wall, Bernie Madoff, Carmen Reinhart, Celtic Tiger, collapse of Lehman Brothers, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, fiat currency, financial engineering, financial thriller, full employment, German hyperinflation, Irish property bubble, junk bonds, Kenneth Rogoff, offshore financial centre, pension reform, Ponzi scheme, Ronald Reagan, Ronald Reagan: Tear down this wall, South Sea Bubble, the new new thing, Tragedy of the Commons, tulip mania, women in the workforce

“I went looking for someone, anyone, who knew something about the history of sovereign defaults,” he said. He found the leading expert on the subject, a professor at Harvard named Kenneth Rogoff, who, as it happened, was preparing a book on the history of national financial collapse, This Time Is Different: Eight Centuries of Financial Folly, with fellow scholar Carmen Reinhart. “We walked Rogoff through the numbers,” said Bass, “and he just looked at them, then sat back in his chair, and said, ‘I can hardly believe it is this bad.’ And I said, ‘Wait a minute. You’re the world’s foremost expert on sovereign balance sheets. You are the go-to guy for sovereign trouble.


pages: 829 words: 186,976

The Signal and the Noise: Why So Many Predictions Fail-But Some Don't by Nate Silver

"Robert Solow", airport security, Alan Greenspan, Alvin Toffler, An Inconvenient Truth, availability heuristic, Bayesian statistics, Bear Stearns, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, big-box store, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, Broken windows theory, business cycle, buy and hold, Carmen Reinhart, Charles Babbage, Claude Shannon: information theory, Climategate, Climatic Research Unit, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, computer age, correlation does not imply causation, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, Daniel Kahneman / Amos Tversky, disinformation, diversification, Donald Trump, Edmond Halley, Edward Lorenz: Chaos theory, en.wikipedia.org, equity premium, Eugene Fama: efficient market hypothesis, everywhere but in the productivity statistics, fear of failure, Fellow of the Royal Society, Freestyle chess, fudge factor, Future Shock, George Akerlof, global pandemic, Goodhart's law, haute cuisine, Henri Poincaré, high batting average, housing crisis, income per capita, index fund, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Internet Archive, invention of the printing press, invisible hand, Isaac Newton, James Watt: steam engine, John Bogle, John Nash: game theory, John von Neumann, Kenneth Rogoff, knowledge economy, Laplace demon, locking in a profit, Loma Prieta earthquake, market bubble, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, Monroe Doctrine, mortgage debt, Nate Silver, negative equity, new economy, Norbert Wiener, PageRank, pattern recognition, pets.com, Phillips curve, Pierre-Simon Laplace, prediction markets, Productivity paradox, random walk, Richard Thaler, Robert Shiller, Rodney Brooks, Ronald Reagan, Saturday Night Live, savings glut, security theater, short selling, Skype, statistical model, Steven Pinker, The Great Moderation, The Market for Lemons, the scientific method, The Signal and the Noise by Nate Silver, The Wisdom of Crowds, Thomas Bayes, Thomas Kuhn: the structure of scientific revolutions, too big to fail, transaction costs, transfer pricing, University of East Anglia, Watson beat the top human players on Jeopardy!, Wayback Machine, wikimedia commons

“You may know what to pay for House A versus House B versus House C because you can say one has a kitchen with gadgets that is worth $500 more than House B, which has a kitchen with no gadgets. But you don’t know what the price of a house should be.” 86. Carmen M. Reinhart and Kenneth S. Rogoff, “The Aftermath of the Financial Crisis,” Working Paper 14656, NBER Working Paper Series, National Bureau of Economic Research, January 2009. http://www.bresserpereira.org.br/terceiros/cursos/Rogoff.Aftermath_of_Financial_Crises.pdf. 87. Carmen M. Reinhart and Vincent R. Reinhart, “After the Fall,” presentation at Federal Reserve Bank of Kansas City Jackson Hole Symposium, August 2010. http://www.kcfed.org/publicat/sympos/2010/reinhart-paper.pdf. 88.

Act III: This Time Wasn’t Different Once the housing bubble had burst, greedy investors became fearful ones who found uncertainty lurking around every corner. The process of disentangling a financial crisis—everyone trying to figure out who owes what to whom—can produce hangovers that persist for a very long time. The economists Carmen Reinhart and Kenneth Rogoff, studying volumes of financial history for their book This Time Is Different: Eight Centuries of Financial Folly, found that financial crises typically produce rises in unemployment that persist for four to six years.86 Another study by Reinhart, which focused on more recent financial crises, found that ten of the last fifteen countries to endure one had never seen their unemployment rates recover to their precrisis levels.87 This stands in contrast to normal recessions, in which there is typically above-average growth in the year or so following the recession88 as the economy reverts to the mean, allowing employment to catch up quickly.


pages: 831 words: 98,409

SUPERHUBS: How the Financial Elite and Their Networks Rule Our World by Sandra Navidi

activist fund / activist shareholder / activist investor, Alan Greenspan, assortative mating, bank run, barriers to entry, Bear Stearns, Bernie Sanders, Black Swan, Blythe Masters, Bretton Woods, butterfly effect, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, commoditize, conceptual framework, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, diversification, East Village, eat what you kill, Elon Musk, eurozone crisis, family office, financial engineering, financial repression, Gini coefficient, glass ceiling, Goldman Sachs: Vampire Squid, Google bus, Gordon Gekko, haute cuisine, high net worth, hindsight bias, income inequality, index fund, intangible asset, Jaron Lanier, Jim Simons, John Meriwether, junk bonds, Kenneth Arrow, Kenneth Rogoff, knowledge economy, London Whale, Long Term Capital Management, longitudinal study, Mark Zuckerberg, mass immigration, McMansion, mittelstand, Money creation, money market fund, Myron Scholes, NetJets, Network effects, offshore financial centre, old-boy network, Parag Khanna, Paul Samuelson, peer-to-peer, performance metric, Peter Thiel, plutocrats, Ponzi scheme, quantitative easing, Renaissance Technologies, rent-seeking, reserve currency, risk tolerance, Robert Gordon, Robert Shiller, rolodex, Satyajit Das, search costs, shareholder value, Sheryl Sandberg, Silicon Valley, social intelligence, sovereign wealth fund, Stephen Hawking, Steve Jobs, tech billionaire, The Future of Employment, The Predators' Ball, The Rise and Fall of American Growth, too big to fail, Tyler Cowen, women in the workforce, young professional

Senate Banking Committee and had worked at Soros Fund Management, gave the welcoming speech. The discussions were thoroughly academic and to the financial layperson would probably have seemed hopelessly abstract. Harvard Professor Ken Rogoff and George Soros spoke about the emerging economic and political order, while Columbia University Professor Jeffrey Sachs and Carmen Reinhart of the Peterson Institute discussed postcrisis macroeconomic management. Former U.K. prime minister Gordon Brown, whom I had previously thought to be rather dry, enthralled the audience with an insightful and passionately delivered lunch keynote on global financial issues. The schedule was packed with sessions beginning in the early morning and stretching into the evening.


pages: 370 words: 102,823

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth by Michael Jacobs, Mariana Mazzucato

Alan Greenspan, balance sheet recession, banking crisis, basic income, Bear Stearns, Bernie Sanders, Bretton Woods, business climate, business cycle, Carmen Reinhart, central bank independence, circular economy, collaborative economy, complexity theory, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, decarbonisation, deindustrialization, dematerialisation, Detroit bankruptcy, double entry bookkeeping, Elon Musk, endogenous growth, energy security, eurozone crisis, factory automation, facts on the ground, fiat currency, Financial Instability Hypothesis, financial intermediation, forward guidance, full employment, G4S, Gini coefficient, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Internet of things, investor state dispute settlement, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, labour market flexibility, low skilled workers, Martin Wolf, mass incarceration, military-industrial complex, Modern Monetary Theory, Money creation, Mont Pelerin Society, neoliberal agenda, Network effects, new economy, non-tariff barriers, paradox of thrift, Paul Samuelson, Post-Keynesian economics, price stability, private sector deleveraging, quantitative easing, QWERTY keyboard, railway mania, rent-seeking, road to serfdom, savings glut, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Steve Jobs, stock buybacks, the built environment, The Great Moderation, The Spirit Level, Thorstein Veblen, too big to fail, total factor productivity, Tragedy of the Commons, transaction costs, trickle-down economics, universal basic income, very high income

The presumption that ‘the self-interest of organisations, specifically banks, is such that they were best capable of protecting shareholders and equity in the firms’ had proved incorrect.8 Contrary to the claims of the ‘efficient markets hypothesis’ which underpinned that assumption, financial markets had systematically mispriced assets and risks, with catastrophic results.9 The financial crash of 2008 was the most severe since that of 1929. But as Carmen Reinhart and Kenneth Rogoff have pointed out, since most countries undertook financial liberalisation in the 1970s and 1980s, there has been a marked increase in the frequency of banking crises (see Figure 1).10 Globally, in the period 1970 to 2007, the International Monetary Fund has recorded 124 systemic bank crises, 208 currency crises and 63 sovereign debt crises.11 For modern capitalism instability has become, not the exception, but a seemingly structural feature.


pages: 409 words: 125,611

The Great Divide: Unequal Societies and What We Can Do About Them by Joseph E. Stiglitz

"Robert Solow", accelerated depreciation, accounting loophole / creative accounting, affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Alan Greenspan, Asian financial crisis, banking crisis, Bear Stearns, Berlin Wall, Bernie Madoff, Branko Milanovic, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, clean water, collapse of Lehman Brothers, collective bargaining, computer age, corporate governance, credit crunch, Credit Default Swap, deindustrialization, Detroit bankruptcy, discovery of DNA, Doha Development Round, everywhere but in the productivity statistics, Fall of the Berlin Wall, financial deregulation, financial innovation, full employment, George Akerlof, ghettoisation, Gini coefficient, glass ceiling, global macro, global supply chain, Home mortgage interest deduction, housing crisis, income inequality, income per capita, information asymmetry, job automation, Kenneth Rogoff, Kickstarter, labor-force participation, light touch regulation, Long Term Capital Management, manufacturing employment, market fundamentalism, mass incarceration, moral hazard, mortgage debt, mortgage tax deduction, new economy, obamacare, offshore financial centre, oil shale / tar sands, Paul Samuelson, plutocrats, purchasing power parity, quantitative easing, race to the bottom, rent-seeking, rising living standards, Ronald Reagan, Savings and loan crisis, school vouchers, secular stagnation, Silicon Valley, Simon Kuznets, The Chicago School, the payments system, Tim Cook: Apple, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Turing machine, unpaid internship, upwardly mobile, urban renewal, urban sprawl, very high income, War on Poverty, Washington Consensus, We are the 99%, white flight, winner-take-all economy, working poor, working-age population

All of this exposes the Republicans’ argument in favor of these food policies—a concern for our future, particularly the impact of the national debt on our children—as a dishonest and deeply cynical pretense. Not only has the intellectual undergirding of debt fetishism been knocked out (with the debunking of work by the Harvard economists Carmen M. Reinhart and Kenneth S. Rogoff that tied slowed growth to debt-to-GDP ratios above 90 percent). The Republicans’ farm bill also clearly harms both America’s children and the world’s in a variety of ways. For these proposals to become law would be a moral and economic failure for the country. ______________ * New York Times, November 16, 2013.

As in many other countries, conservative governments are arguing for cutbacks in government spending, on the grounds that fiscal deficits imperil their future. In the case of Australia, however, such assertions ring particularly hollow—though that has not stopped Abbott’s government from trafficking in them. Even if one accepts the claim of the Harvard economists Carmen Reinhart and Kenneth Rogoff that very high public debt levels mean lower growth—a view that they never really established and that has subsequently been discredited—Australia is nowhere near that threshold. Its debt-to-GDP ratio is only a fraction of that of the U.S., and one of the lowest among the OECD countries.


pages: 416 words: 106,532

Cryptoassets: The Innovative Investor's Guide to Bitcoin and Beyond: The Innovative Investor's Guide to Bitcoin and Beyond by Chris Burniske, Jack Tatar

Airbnb, Alan Greenspan, altcoin, Alvin Toffler, asset allocation, asset-backed security, autonomous vehicles, Bear Stearns, bitcoin, Bitcoin Ponzi scheme, blockchain, Blythe Masters, business cycle, business process, buy and hold, capital controls, Carmen Reinhart, Clayton Christensen, clean water, cloud computing, collateralized debt obligation, commoditize, correlation coefficient, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, disintermediation, distributed ledger, diversification, diversified portfolio, Dogecoin, Donald Trump, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, fiat currency, financial engineering, financial innovation, fixed income, Future Shock, George Gilder, Google Hangouts, high net worth, information security, Jeff Bezos, Kenneth Rogoff, Kickstarter, Leonard Kleinrock, litecoin, Marc Andreessen, Mark Zuckerberg, market bubble, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Network effects, packet switching, passive investing, peer-to-peer, peer-to-peer lending, Peter Thiel, pets.com, Ponzi scheme, prediction markets, quantitative easing, quantum cryptography, RAND corporation, random walk, Renaissance Technologies, risk free rate, risk tolerance, risk-adjusted returns, Robert Shiller, Ross Ulbricht, Salesforce, Satoshi Nakamoto, Sharpe ratio, Silicon Valley, Simon Singh, Skype, smart contracts, social web, South Sea Bubble, Steve Jobs, transaction costs, tulip mania, Turing complete, two and twenty, Uber for X, Vanguard fund, WikiLeaks, Y2K

Typically, the logic goes that the markets have evolved from more primitive years, and financial engineering innovations have led to robust markets that can’t possibly crash. Time and again this thesis has been refuted by subsequent market crashes. In their well-regarded book This Time Is Different: Eight Centuries of Financial Folly, Carmen Reinhart and Kenneth Rogoff deliver a 300-page tour de force to prove that this time is never different. They describe how “this time is different” thinking was used to justify the sustainability of jubilant markets prior to the 1929 crash that led to the Great Depression. Proponents of “this time is different” thinking claimed that business cycles had been cured by the creation of the Federal Reserve in 1913.


pages: 401 words: 109,892

The Great Reversal: How America Gave Up on Free Markets by Thomas Philippon

airline deregulation, Amazon Mechanical Turk, Amazon Web Services, Andrei Shleifer, barriers to entry, Big Tech, bitcoin, blockchain, business cycle, business process, buy and hold, Carmen Reinhart, carried interest, central bank independence, commoditize, crack epidemic, cross-subsidies, disruptive innovation, Donald Trump, Erik Brynjolfsson, eurozone crisis, financial deregulation, financial innovation, financial intermediation, flag carrier, gig economy, income inequality, income per capita, index fund, intangible asset, inventory management, Jean Tirole, Jeff Bezos, Kenneth Rogoff, labor-force participation, law of one price, liquidity trap, low cost airline, manufacturing employment, Mark Zuckerberg, market bubble, minimum wage unemployment, money market fund, moral hazard, natural language processing, Network effects, new economy, offshore financial centre, opioid epidemic / opioid crisis, Pareto efficiency, patent troll, Paul Samuelson, price discrimination, profit maximization, purchasing power parity, QWERTY keyboard, rent-seeking, ride hailing / ride sharing, risk-adjusted returns, Robert Bork, Robert Gordon, Ronald Reagan, search costs, Second Machine Age, self-driving car, Silicon Valley, Snapchat, spinning jenny, statistical model, Steve Jobs, stock buybacks, supply-chain management, Telecommunications Act of 1996, The Chicago School, the payments system, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, transaction costs, Travis Kalanick, Vilfredo Pareto, warehouse automation, zero-sum game

TABLE 13.1 Top Ten Global Firms, Spring 2018 Company Country Market value ($ billion) Apple US 926.9 Amazon US 777.8 Alphabet US 766.4 Microsoft US 750.6 Facebook US 541.5 Alibaba China 499.4 Berkshire Hathaway US 491.9 Tencent Holdings China 491.3 JPMorgan Chase US 387.7 ExxonMobil US 344.1 These companies are stars, undoubtedly. But there have always been stars in the economy. Are these stars different? Carmen Reinhart and Kenneth Rogoff (2009) have famously shown that thinking “this time is different” is the shortest way to a financial crisis. In macroeconomics, there is no such thing as “this time is different.” But, perhaps, matters could be different where the internet is concerned. There are some technological reasons to believe this time might be different.


pages: 453 words: 111,010

Licence to be Bad by Jonathan Aldred

"Robert Solow", Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, availability heuristic, Ayatollah Khomeini, Benoit Mandelbrot, Berlin Wall, Black Monday: stock market crash in 1987, Black Swan, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Cass Sunstein, Charles Babbage, clean water, cognitive dissonance, corporate governance, correlation does not imply causation, cuban missile crisis, Daniel Kahneman / Amos Tversky, Donald Trump, Douglas Engelbart, Douglas Engelbart, Dr. Strangelove, Edward Snowden, Fall of the Berlin Wall, falling living standards, feminist movement, framing effect, Frederick Winslow Taylor, From Mathematics to the Technologies of Life and Death, full employment, Gary Kildall, George Akerlof, glass ceiling, Herman Kahn, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Jeff Bezos, John Nash: game theory, John von Neumann, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, meta-analysis, Mont Pelerin Society, mutually assured destruction, Myron Scholes, Nash equilibrium, Norbert Wiener, nudge unit, obamacare, offshore financial centre, Pareto efficiency, Paul Samuelson, plutocrats, positional goods, precautionary principle, profit maximization, profit motive, race to the bottom, RAND corporation, rent-seeking, Richard Thaler, ride hailing / ride sharing, risk tolerance, road to serfdom, Robert Shiller, Ronald Coase, Ronald Reagan, scientific management, Skype, Social Responsibility of Business Is to Increase Its Profits, spectrum auction, The Nature of the Firm, The Wealth of Nations by Adam Smith, Tragedy of the Commons, transaction costs, trickle-down economics, Vilfredo Pareto, wealth creators, zero-sum game

Again, after the financial crisis Nobel laureate macroeconomist Tom Sargent, who had not once warned about imminent problems in the financial sector, asserted, ‘it is just wrong to say that this financial crisis caught modern macroeconomists by surprise’.29 David Miles, a macroeconomist who served on the Bank of England panel setting UK interest rates, took the opposite view, insisting that the crisis was inevitably a surprise, with no more clues in advance than the number on a winning lottery ticket: ‘Any criticism of economics that rests on its failure to predict the crisis is no more plausible than the idea that statistical theory needs to be rewritten because mathematicians have a poor record at predicting winning lottery ticket numbers.’30 And so it goes on. Recent austerity policies pursued in several countries were explicitly based on the research of Harvard economists Carmen Reinhart and Ken Rogoff, showing that economic growth falls sharply once the government debt-to-GDP ratio exceeds 90 per cent.31 Except it didn’t: in April 2013 a graduate student discovered a crucial error in their spreadsheet. It turned out that slow growth causes high debt, not the other way around, as Reinhart and Rogoff had implied.


pages: 652 words: 172,428

Aftershocks: Pandemic Politics and the End of the Old International Order by Colin Kahl, Thomas Wright

2021 United States Capitol attack, banking crisis, Berlin Wall, Boris Johnson, British Empire, Carmen Reinhart, centre right, Charles Lindbergh, circular economy, citizen journalism, clean water, collapse of Lehman Brothers, colonial rule, coronavirus, COVID-19, creative destruction, cuban missile crisis, deglobalization, disinformation, Donald Trump, drone strike, eurozone crisis, failed state, Fall of the Berlin Wall, fear of failure, future of work, George Floyd, German hyperinflation, Gini coefficient, global pandemic, global supply chain, global value chain, income inequality, industrial robot, informal economy, Intergovernmental Panel on Climate Change (IPCC), Internet of things, job automation, junk bonds, Kibera, liberal world order, Mahatma Gandhi, Martin Wolf, mass immigration, megacity, mobile money, oil shale / tar sands, oil shock, one-China policy, open borders, open economy, Paris climate accords, Ronald Reagan, South China Sea, spice trade, statistical model, W. E. B. Du Bois, World Values Survey

A TWO-TIER ECONOMY Billions of people around the world were fully concerned with basic needs: they may have lost their job or seen their wages cut; they may have quit their job to care for their kids; their kids might not be in school or have access to the internet to participate in school remotely. For these people, the Great Lockdown was far worse than the global financial crisis. “This situation is so dire that it deserves to be called a ‘depression’—a pandemic depression,” the economists Carmen Reinhart and Vincent Reinhart wrote in Foreign Affairs. “Unfortunately, the memory of the Great Depression has prevented economists and others from using that word, as the downturn of the 1930s was wrenching in both its depth and its length in a manner not likely to be repeated.”36 Major democracies saw their economies take an unprecedented hit in 2020.

Isabel Debre, “G-20 Agrees on Framework for More Debt Relief amid COVID-19,” Associated Press, November 13, 2020, https://apnews.com/article/dubai-united-arab-emirates-coronavirus-pandemic-g-20-summit-6729d0caf1bc639039447f07f3938a0b; Clemence Landers, “A Plan to Address the COVID-19 Debt Crises in Poor Countries and Build a Better Sovereign Debt System,” Center for Global Development, December 3, 2020, https://www.cgdev.org/publication/plan-address-covid-19-debt-crises-poor-countries-and-build-better-sovereign-debt-system; “COVID-19: Debt Service Suspension Initiative,” World Bank, https://www.worldbank.org/en/topic/debt/brief/covid-19-debt-service-suspension-initiative, accessed January 12, 2021; Homi Kharas and Meagan Dooley, “COVID-19’s Legacy of Debt and Debt Service in Developing Countries,” Brookings Institution, December 2020, 3, https://www.brookings.edu/wp-content/uploads/2020/12/COVID-19-legacy-of-debt_final.pdf.   34.  Wheatley, “Debt Dilemma.”   35.  Global Economic Prospects (Washington, DC: World Bank, January 2021), xvii, https://openknowledge.worldbank.org/bitstream/handle/10986/34710/9781464816123.pdf.   36.  Carmen Reinhart and Vincent Reinhart, “The Pandemic Depression,” Foreign Affairs, September/October 2020, https://www.foreignaffairs.com/articles/united-states/2020-08-06/coronavirus-depression-global-economy.   37.  Martin Crutsinger, “U.S. Economy Shrank by 3.5% in 2020 After Growing by 4% in Last Quarter,” Associated Press, January 28, 2021, https://apnews.com/article/us-economy-shrink-in-2020-b59f9be06dcf1da924f64afde2ce094c; Ben Dooley and Makiko Inoue, “Japan’s Growth Rebounds but Virus-Related Weakness Looms,” New York Times, February 14, 2021, https://www.nytimes.com/2021/02/14/business/japan-gdp-economy-coronavirus.html; Martin Arnold and Valentina Romei, “Eurozone Economy Drops into Double Digit Contraction,” Financial Times, February 2, 2021, https://www.ft.com/content/f8efe708-3c22-493b-88bd-855ec6d98522; Danica Kirka, “UK Economy Suffers Biggest Drop Since 1709,” Associated Press, February 12, 2021, https://apnews.com/article/coronavirus-pandemic-economy-4f0b6285a57c8b2929e2aceb864e7675; Prinesha Naidoo, “S.


pages: 614 words: 174,226

The Economists' Hour: How the False Prophets of Free Markets Fractured Our Society by Binyamin Appelbaum

"Robert Solow", airline deregulation, Alan Greenspan, Alvin Roth, Andrei Shleifer, anti-communist, battle of ideas, Benoit Mandelbrot, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, Celtic Tiger, central bank independence, clean water, collective bargaining, Corn Laws, correlation does not imply causation, Credit Default Swap, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, desegregation, Diane Coyle, Donald Trump, Dr. Strangelove, ending welfare as we know it, financial deregulation, financial engineering, financial innovation, fixed income, flag carrier, floating exchange rates, full employment, George Akerlof, George Gilder, Gini coefficient, greed is good, Greenspan put, Growth in a Time of Debt, Ida Tarbell, income inequality, income per capita, index fund, inflation targeting, invisible hand, Isaac Newton, It's morning again in America, Jean Tirole, John Markoff, Kenneth Arrow, Kenneth Rogoff, land reform, Long Term Capital Management, low cost airline, manufacturing employment, means of production, Menlo Park, minimum wage unemployment, Mohammed Bouazizi, money market fund, Mont Pelerin Society, Network effects, new economy, Nixon triggered the end of the Bretton Woods system, oil shock, Paul Samuelson, Philip Mirowski, Phillips curve, plutocrats, precautionary principle, price stability, profit motive, Ralph Nader, RAND corporation, rent control, rent-seeking, Richard Thaler, road to serfdom, Robert Bork, Robert Gordon, Ronald Coase, Ronald Reagan, Sam Peltzman, Savings and loan crisis, Silicon Valley, Simon Kuznets, starchitect, Steve Bannon, Steve Jobs, supply-chain management, The Chicago School, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, transaction costs, trickle-down economics, ultimatum game, Unsafe at Any Speed, urban renewal, War on Poverty, Washington Consensus

Some economists howled in protest. The Italian economists Alberto Alesina and Silvia Ardagna published a study in October 2009 that said governments could spur economic growth by reducing budget deficits — in other words, by spending less money rather than more.6 A few months later, in January 2010, the American economists Carmen Reinhart and Kenneth Rogoff published a paper purporting to identify a kind of red line for government borrowing: they said that when debts exceeded 90 percent of a nation’s annual economic output, growth declined.7 The European Commission’s head of economic and monetary affairs, Olli Rehn, started talking about a “90-percent rule.”

Alesina and Ardagna were graduates of the School of Economics at Bocconi University in Milan, founded by the conservative economist and politician Luigi Einaudi, who served as Italy’s president from 1948 to 1955. The school became associated with the economic theory that deficit reduction could spur economic growth. 7. Carmen M. Reinhart and Kenneth S. Rogoff, “Growth in a Time of Debt,” January 2010, National Bureau of Economic Research Working Paper 15639. 8. The error was discovered by Thomas Herndon, a graduate student at the University of Massachusetts, Amherst, who was doing his homework: The assignment was to pick a published economics paper and try to replicate the results.


Manias, Panics and Crashes: A History of Financial Crises, Sixth Edition by Kindleberger, Charles P., Robert Z., Aliber

active measures, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, Bonfire of the Vanities, break the buck, Bretton Woods, British Empire, business cycle, buy and hold, Carmen Reinhart, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, Corn Laws, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency peg, currency risk, death of newspapers, debt deflation, Deng Xiaoping, disintermediation, diversification, diversified portfolio, edge city, financial deregulation, financial innovation, Financial Instability Hypothesis, financial repression, fixed income, floating exchange rates, George Akerlof, German hyperinflation, Herman Kahn, Honoré de Balzac, Hyman Minsky, index fund, inflation targeting, information asymmetry, invisible hand, Isaac Newton, joint-stock company, junk bonds, large denomination, law of one price, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, Michael Milken, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, new economy, Nick Leeson, Northern Rock, offshore financial centre, Ponzi scheme, price stability, railway mania, Richard Thaler, riskless arbitrage, Robert Shiller, short selling, Silicon Valley, South Sea Bubble, special drawing rights, telemarketer, The Chicago School, the market place, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, very high income, Washington Consensus, Y2K, Yogi Berra, Yom Kippur War

The global inflation of the 1970s resulted from a combination of expansive US monetary policy and expansive monetary policies in Europe and Japan as their large balance of payments surpluses led to rapid growth in their holdings of international Reserve assets. Central bank holdings of international reserve assets again increased rapidly in the mid-1990s and the late 1990s.59 Three years later a French economist, Pascal Blanqué, wrote of a US credit bubble.60 In a similar view, Graciela Kaminsky and Carmen Reinhart blame foreign countries for printing money and the United States for running a persistent balance-of-payments deficit.61 The central question is whether a central bank can restrain the instability of credit and slow speculation to avoid its dangerous extension. If the monetary authorities fix some proxy for the money supply or for liquidity, or if they focus directly on the rate of interest, can the upswing and decline of the crisis be moderated or eliminated entirely?

For a defense of central banking, see Charles Goodhart, The Evolution of Central Banks (Cambridge: Cambridge University Press, 1989). 59. ‘The Post-1990 Surge in World Currency Reserves’, Conjuncture, 26th year, no. 9 (October 1996), pp. 2–12. 60. Pascal Blanqué, ‘US Credit Bubble.com’, Conjuncture, 29th year, no. 4 (April 1999), pp. 12–21. 61. Graciela L. Kaminsky and Carmen W. Reinhart, ‘The Twin Crises: the Causes of Banking and Balance-of-Payments Problems’, American Economic Review (June 1999), pp. 433–500. 62. Gayer, Rostow, and Schwartz, Growth and Fluctuation, vol. 1, p. 300. 63. Hughes, Fluctuations, p. 12. 64. Ibid., p. 261. 65. Elmer Wood, English Theories of Central Banking Control, 1819–1858, with Some Account of Contemporary Procedures (Cambridge, Mass.: Harvard University Press, 1939), p. 147. 66.


pages: 300 words: 77,787

Investing Demystified: How to Invest Without Speculation and Sleepless Nights by Lars Kroijer

Andrei Shleifer, asset allocation, asset-backed security, Bernie Madoff, bitcoin, Black Swan, BRICs, Carmen Reinhart, cleantech, compound rate of return, credit crunch, currency risk, diversification, diversified portfolio, equity premium, estate planning, fixed income, high net worth, implied volatility, index fund, intangible asset, invisible hand, John Bogle, Kenneth Rogoff, market bubble, money market fund, passive investing, pattern recognition, prediction markets, risk tolerance, risk/return, Robert Shiller, selection bias, sovereign wealth fund, too big to fail, transaction costs, Vanguard fund, yield curve, zero-coupon bond

If you have a longer investment horizon, then match the investment horizon with the maturity of your minimal risk bond portfolio. You will have to accept interest rate risk even if you avoid inflation risk by buying inflation-adjusted bonds. 1 For those who don’t think government bonds can default I would encourage you to read This Time is Different: Eight Centuries of Financial Folly by Carmen Reinhart and Kenneth Rogoff (Princeton University Press, 2011). The authors make a mockery of the belief that governments rarely default and that we are somehow now protected from the catastrophic financial events of the past. 2 There are cases where the yield curve is reversed and shorter-term bonds yield more than longer-term ones, but these cases are less frequent. 3 Imagine the scenario where you want to hold one-month government bonds.


pages: 245 words: 75,397

Fed Up!: Success, Excess and Crisis Through the Eyes of a Hedge Fund Macro Trader by Colin Lancaster

Adam Neumann (WeWork), Airbnb, Alan Greenspan, always be closing, asset-backed security, beat the dealer, Ben Bernanke: helicopter money, Bernie Sanders, Big Tech, Black Monday: stock market crash in 1987, bond market vigilante , Bonfire of the Vanities, Boris Johnson, Bretton Woods, business cycle, buy the rumour, sell the news, Carmen Reinhart, Chuck Templeton: OpenTable:, collateralized debt obligation, coronavirus, COVID-19, creative destruction, credit crunch, currency manipulation / currency intervention, Donald Trump, Edward Thorp, family office, fiat currency, fixed income, Flash crash, George Floyd, global macro, global pandemic, global supply chain, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Growth in a Time of Debt, housing crisis, index arbitrage, Jeff Bezos, Jim Simons, junk bonds, Kenneth Rogoff, liquidity trap, Long Term Capital Management, low skilled workers, margin call, market bubble, Masayoshi Son, Michael Milken, Mikhail Gorbachev, Modern Monetary Theory, moral hazard, National Debt Clock, Nixon triggered the end of the Bretton Woods system, Northern Rock, oil shock, pets.com, Ponzi scheme, price stability, quantitative easing, reserve currency, Ronald Reagan, Ronald Reagan: Tear down this wall, Sharpe ratio, short selling, SoftBank, statistical arbitrage, stock buybacks, The Great Moderation, too big to fail, trickle-down economics, two and twenty, value at risk, Vision Fund, WeWork, yield curve, zero-sum game

TALF (Term Asset-Backed Securities Loan Facility) allowed the Fed to lend money to banks and other financial institutions on a nonrecourse basis. Because the money came from the Fed and not the Treasury, there was no congressional oversight of how the funds were doled out. 8 “Growth in a Time of Debt,” also known by its authors’ names as Reinhart–Rogoff, is an economics paper by American economists Carmen Reinhart and Kenneth Rogoff. The paper argues that when “gross external debt reaches 60% of GDP,” a country’s annual growth declines by 2%, and “for levels of external debt in excess of 90%,” GDP growth is “roughly cut in half.” Appearing in the aftermath of the financial crisis of 2007–2008, the evidence for the 90% debt threshold hypothesis provided support for pro-austerity policies. 9 Thank you Hunter Thompson.


pages: 464 words: 139,088

The End of Alchemy: Money, Banking and the Future of the Global Economy by Mervyn King

"Robert Solow", Alan Greenspan, Andrei Shleifer, Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, collapse of Lehman Brothers, creative destruction, Credit Default Swap, crowdsourcing, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Doha Development Round, Edmond Halley, Fall of the Berlin Wall, falling living standards, fiat currency, financial engineering, financial innovation, financial intermediation, floating exchange rates, foreign exchange controls, forward guidance, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, German hyperinflation, Hyman Minsky, inflation targeting, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, labour market flexibility, large denomination, lateral thinking, liquidity trap, Long Term Capital Management, manufacturing employment, market clearing, Martin Wolf, Mexican peso crisis / tequila crisis, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, Nick Leeson, North Sea oil, Northern Rock, oil shale / tar sands, oil shock, open economy, paradox of thrift, Paul Samuelson, Ponzi scheme, price mechanism, price stability, purchasing power parity, quantitative easing, rent-seeking, reserve currency, Richard Thaler, rising living standards, Robert Shiller, Satoshi Nakamoto, savings glut, secular stagnation, seigniorage, stem cell, Steve Jobs, The Great Moderation, the payments system, The Rise and Fall of American Growth, Thomas Malthus, too big to fail, transaction costs, Tyler Cowen: Great Stagnation, yield curve, Yom Kippur War, zero-sum game

, London. Reddaway, W. Brian (1939), The Economic Consequences of a Declining Population, Allen and Unwin, London. Reinhart, Carmen M. and Kenneth S. Rogoff (2009), This Time is Different: Eight Centuries of Financial Folly, Princeton University Press, Princeton, New Jersey. Reinhart, Carmen, Vincent Reinhart and Kenneth Rogoff (2015), ‘Dealing with Debt’, Journal of International Economics, forthcoming. Ricardo, David (1816), Proposals for an Economical and Secure Currency, T. Davison, London. Roberts, Andrew (2014), Napoleon the Great, Allen Lane, London. Roberts, Richard (2013), Saving the City, Oxford University Press, Oxford.


Crisis and Dollarization in Ecuador: Stability, Growth, and Social Equity by Paul Ely Beckerman, Andrés Solimano

banking crisis, banks create money, barriers to entry, business cycle, capital controls, Carmen Reinhart, carried interest, central bank independence, centre right, clean water, currency peg, declining real wages, disintermediation, financial intermediation, fixed income, floating exchange rates, Future Shock, Gini coefficient, income inequality, income per capita, labor-force participation, land reform, London Interbank Offered Rate, Mexican peso crisis / tequila crisis, microcredit, Money creation, money: store of value / unit of account / medium of exchange, offshore financial centre, old-boy network, open economy, pension reform, price stability, rent-seeking, school vouchers, seigniorage, trade liberalization, women in the workforce

“On Dollarization.” Processed. ———. 2000. “Capital Markets and the Exchange Rate with Special Reference to the Dollarization Debate in Latin America.” http://www.bsos.umd.edu/econ/clecalvo.htm. ———. 2002. “The Case for Hard Pegs.” http://www.bsos.umd.edu/ econ/clecalvo.htm. Calvo, Guillermo, and Carmen Reinhart. 2000. “When Capital Flows Come to a Sudden Stop.” In Peter Kenen and Alexander Swoboda, eds., Key Issues in the Reform of the International Monetary and Financial System. International Monetary Fund, Washington, D.C. ———. 2002. “Fear of Floating.” Quarterly Journal of Economics, forthcoming. www.puaf.umd.edu/faculty/papers/reinhart/papers.html.


pages: 394 words: 85,734

The Global Minotaur by Yanis Varoufakis, Paul Mason

active measures, Alan Greenspan, banking crisis, Bear Stearns, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, business climate, business cycle, capital controls, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, colonial rule, corporate governance, correlation coefficient, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, debt deflation, declining real wages, deindustrialization, endogenous growth, eurozone crisis, financial engineering, financial innovation, first-past-the-post, full employment, Hyman Minsky, industrial robot, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, labour market flexibility, light touch regulation, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, market fundamentalism, Mexican peso crisis / tequila crisis, military-industrial complex, Money creation, money market fund, mortgage debt, Myron Scholes, negative equity, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, paper trading, Paul Samuelson, planetary scale, post-oil, price stability, quantitative easing, reserve currency, rising living standards, Ronald Reagan, special economic zone, Steve Jobs, structural adjustment programs, Suez crisis 1956, systematic trading, too big to fail, trickle-down economics, urban renewal, War on Poverty, WikiLeaks, Yom Kippur War

These words were written by Karl Marx in 1844, in the text entitled Economic and Philosophical Manuscripts. Chapter 2 1. See Jared Diamond (2006) Guns, Germs and Steel, New York: Norton. 2. Ibn Khaldun (1967) The Muqaddimah: An introduction to history, trans. Franz Rosenthal, Bollingen Series XLIII, Princeton, NJ: Princeton University Press. 3. For a good account of such calamities, see Carmen Reinhart and Kenneth Rogoff (2009) This Time Is Different: Eight centuries of financial folly, Princeton, NJ: Princeton University Press. 4. Once all your music, films, applications, addresses, etc. are on iTunes and readily accessible by any Apple product (iPod, iPhone, iPad, etc.), the opportunity cost of buying a Nokia or a Sony device is huge (even if these companies bring a better device to market) – you need to spend literally hours setting the new gadget up.


Rethinking Money: How New Currencies Turn Scarcity Into Prosperity by Bernard Lietaer, Jacqui Dunne

3D printing, agricultural Revolution, Albert Einstein, Asian financial crisis, banking crisis, Berlin Wall, BRICs, business climate, business cycle, business process, butterfly effect, carbon footprint, Carmen Reinhart, clockwork universe, collapse of Lehman Brothers, complexity theory, conceptual framework, credit crunch, different worldview, discounted cash flows, en.wikipedia.org, Fall of the Berlin Wall, fear of failure, fiat currency, financial innovation, Fractional reserve banking, full employment, German hyperinflation, happiness index / gross national happiness, holacracy, job satisfaction, John Perry Barlow, liberation theology, Marshall McLuhan, microcredit, mobile money, Money creation, money: store of value / unit of account / medium of exchange, more computing power than Apollo, new economy, Occupy movement, price stability, reserve currency, Silicon Valley, the payments system, too big to fail, transaction costs, trickle-down economics, urban decay, War on Poverty, working poor

Gerard Caprio and Daniela Klingebiel, “Bank Insolvencies: Cross- Country Experience,” Policy Research Working Paper, no. 1620 (Washington, DC: World Bank, Policy and Research Department, 1996); J. Frankel and A. Rose, “Currency Crashes in Emerging Markets: An Empirical Treatment,” Journal of International Economics 4 (1996): 351– 366; Graziela L. Kaminsky and Carmen M. Reinhart, “The Twin Crisis: The Causes of Banking and Balance of Payment Problems,” American Economic Review 89, no. 3 (1999): 473– 500; and, for the data after 2006, Luc Laevan and Fabian Valencia, “Resolution of Banking Crises: The Good, the Bad, 225 226 NOTES and the Ugly,” IMF Working Paper 10/146 (Washington, DC: International Monetary Fund, 2010), 4. www.imf.org /external /pubs/ft /wp/2010/wp10146.pdf /. 3. www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf and www.telegraph.co.uk /fi nance/comment/9623863/IMFs-epic-plan-to-conjure-away-debt-and- deth rone -bankers.html. 4.

Luc Laevan and Fabian Valencia, “Resolution of Banking Crises: The Good, the Bad, and the Ugly,” IMF Working Paper 10/146 (Washington, DC: International Monetary Fund, 2010), 4. www.imf.org /external /pubs/ft /wp/2010/wp10146.pdf; Gerard Caprio and Daniela Klingebiel, “Bank Insolvencies: Cross- Country Experience,” Policy Research Working Paper PRWP1620 (Washington, DC: World Bank, 1996); Graziela L. Kaminsky and Carmen M. Reinhart, “Twin Crises: The Causes of Banking and Balance-of-Payments Problems,” American Economic Review, American Economic Association, 89, no. 3 (June 1999): 473– 500. 6. Fritz Schwartz, Das Experiment von Wörgl (Bern, Switzerland: Genossenschaft Verlag Freiwirtschaftlicher Schriften, 1951). 7. See M.


pages: 322 words: 84,580

The Economics of Belonging: A Radical Plan to Win Back the Left Behind and Achieve Prosperity for All by Martin Sandbu

"Robert Solow", air traffic controllers' union, Airbnb, Alan Greenspan, autonomous vehicles, balance sheet recession, bank run, banking crisis, basic income, Berlin Wall, Bernie Sanders, Big Tech, Boris Johnson, Branko Milanovic, Bretton Woods, business cycle, call centre, capital controls, carbon footprint, Carmen Reinhart, centre right, collective bargaining, debt deflation, deindustrialization, deskilling, Diane Coyle, Donald Trump, Edward Glaeser, eurozone crisis, Fall of the Berlin Wall, financial engineering, financial intermediation, full employment, future of work, gig economy, Gini coefficient, hiring and firing, income inequality, income per capita, industrial robot, intangible asset, job automation, John Maynard Keynes: technological unemployment, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, liquidity trap, longitudinal study, low skilled workers, manufacturing employment, Martin Wolf, meta-analysis, mini-job, Money creation, mortgage debt, new economy, offshore financial centre, oil shock, open economy, pattern recognition, pink-collar, precariat, quantitative easing, race to the bottom, Richard Florida, Robert Shiller, Ronald Reagan, secular stagnation, social intelligence, TaskRabbit, total factor productivity, universal basic income, very high income, winner-take-all economy, working poor

Olivier Blanchard, “Public Debt and Low Interest Rates” (presidential address, American Economic Association, January 2019), https://www.aeaweb.org/aea/2019conference/program/pdf/14020_paper_etZgfbDr.pdf. Chapter 9. A Smarter Financial System 1. For a view of why this was, see Martin Sandbu, “Talking ’bout a Revolution,” Financial Times, 19 April 2013, https://www.ft.com/content/91a3782a-a80f-11e2-b031-00144feabdc0. 2. See, for example, Carmen Reinhart and Kenneth Rogoff, This Time Is Different: Eight Centuries of Financial Folly, Princeton, NJ: Princeton University Press, 2009; Atif Mian and Amir Sufi, House of Debt: How They (and You) Caused the Great Recession, and How We Can Prevent It from Happening Again, Chicago: University of Chicago Press, 2015; and Valerie Cerra and Sweta Saxena, “Growth Dynamics: The Myth of Economic Recovery,” American Economic Review 98, no. 1 (2008): 439–57, https://doi.org/10.1257/aer.98.1.439. 3.


pages: 263 words: 80,594

Stolen: How to Save the World From Financialisation by Grace Blakeley

"Robert Solow", activist fund / activist shareholder / activist investor, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, basic income, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Big Tech, bitcoin, bond market vigilante , Bretton Woods, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, capitalist realism, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, credit crunch, Credit Default Swap, cryptocurrency, currency peg, David Graeber, debt deflation, decarbonisation, Donald Trump, emotional labour, eurozone crisis, Extinction Rebellion, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, fixed income, full employment, G4S, gender pay gap, gig economy, Gini coefficient, global reserve currency, global supply chain, Greenspan put, housing crisis, Hyman Minsky, impact investing, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), job polarisation, junk bonds, Kenneth Rogoff, Kickstarter, land value tax, light touch regulation, low skilled workers, market clearing, means of production, Modern Monetary Theory, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, paradox of thrift, payday loans, pensions crisis, Phillips curve, Ponzi scheme, Post-Keynesian economics, post-war consensus, price mechanism, principal–agent problem, profit motive, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Right to Buy, rising living standards, risk-adjusted returns, road to serfdom, savings glut, secular stagnation, shareholder value, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, the built environment, The Great Moderation, too big to fail, transfer pricing, universal basic income, Winter of Discontent, working-age population, yield curve, zero-sum game

The idea that the UK is on the verge of a sovereign debt crisis is laughable. If anything, investors are demanding more government bonds than states like the UK are willing to issue. The second argument for austerity is that high levels of debt curb economic growth. This argument has featured heavily in the debate about austerity thanks to Carmen Reinhart and Kenneth Rogoff, the authors of This Time Is Different: Eight Centuries of Financial Folly, the book used to justify George Osborne’s austerity agenda. This Time Is Different argues that above a particular level — 90% of GDP — government debt has a negative and statistically significant impact on growth.


pages: 288 words: 16,556

Finance and the Good Society by Robert J. Shiller

Alan Greenspan, Alvin Roth, bank run, banking crisis, barriers to entry, Bear Stearns, Bernie Madoff, buy and hold, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, cognitive dissonance, collateralized debt obligation, collective bargaining, computer age, corporate governance, Daniel Kahneman / Amos Tversky, Deng Xiaoping, diversification, diversified portfolio, Donald Trump, Edward Glaeser, eurozone crisis, experimental economics, financial engineering, financial innovation, financial thriller, fixed income, full employment, fundamental attribution error, George Akerlof, Ida Tarbell, income inequality, information asymmetry, invisible hand, John Bogle, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, land reform, loss aversion, Louis Bachelier, Mahatma Gandhi, Mark Zuckerberg, market bubble, market design, means of production, microcredit, moral hazard, mortgage debt, Myron Scholes, Nelson Mandela, Occupy movement, passive investing, Ponzi scheme, prediction markets, profit maximization, quantitative easing, random walk, regulatory arbitrage, Richard Thaler, Right to Buy, road to serfdom, Robert Shiller, Ronald Reagan, selection bias, self-driving car, shareholder value, Sharpe ratio, short selling, Simon Kuznets, Skype, Steven Pinker, tail risk, telemarketer, Thales and the olive presses, Thales of Miletus, The Market for Lemons, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, Vanguard fund, young professional, zero-sum game, Zipcar

I too have contributed to this discussion, in my scholarly writings on market volatility and in books such as Irrational Exuberance. The current severe nancial crisis has called forth questions not only about the system’s parts but also about nancial capitalism as a whole. This crisis—dubbed by Carmen Reinhart and Kenneth Rogo as the “Second Great Contraction,” a period of weakened economies around the world starting in 2007 but continuing for years after, mirroring the Great Contraction that followed the nancial crisis of 1929—has led to angry rejections of the value of financial capitalism. Given this experience, many wonder, what is the role of nance in the good society?


pages: 726 words: 172,988

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

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

Jordà et al. (2011) and Schularick and Taylor (2012) show that historically, recessions that have been associated with credit booms gone bust and with subsequent financial crises have been much larger and costlier than other types of recessions. On the slow recovery from the financial crisis in the United States, see Carmen Reinhart and Kenneth Rogoff, “Sorry, U.S. Recoveries Really Aren’t Different,” Bloomberg, October 15, 2012, and Martin Wolf, “A Slow Convalescence under Obama,” Financial Times, October 24, 2012. 20. For example, according to the Federal Reserve Bank of St. Louis, from February 2008 to September 2009, total nonfarm employment declined by 8.138 million.


pages: 441 words: 136,954

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

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

By 2011, it had reached $14 trillion—the equivalent of the country’s GDP—with the prospect of increasing to $16 trillion by 2012 without countervailing steps. “Total American general government debt today is at a phenomenal level,” said Kenneth Rogoff, a professor of economics and public policy at Harvard University and formerly the chief economist at the International Monetary Fund. Rogoff is also the co-author with Carmen Reinhart of This Time Is Different: Eight Centuries of Financial Folly, which surveys the history of debt and financial crises. “By our benchmark,” Rogoff added, “when you take local, state, and federal government debt together we are at our all-time high—above 119 percent of GDP. That is even higher than at the end of World War II, which is the only time before now that we have ever been that high … We are at the outer edge of the envelope of the last two hundred years of experience.


Adam Smith: Father of Economics by Jesse Norman

"Robert Solow", active measures, Alan Greenspan, Andrei Shleifer, balance sheet recession, bank run, banking crisis, Basel III, Bear Stearns, Berlin Wall, Black Swan, Branko Milanovic, Bretton Woods, British Empire, Broken windows theory, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, centre right, cognitive dissonance, collateralized debt obligation, colonial exploitation, Corn Laws, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, David Ricardo: comparative advantage, deindustrialization, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Fellow of the Royal Society, financial engineering, financial intermediation, frictionless, frictionless market, future of work, George Akerlof, Hyman Minsky, income inequality, incomplete markets, information asymmetry, intangible asset, invention of the telescope, invisible hand, Isaac Newton, Jean Tirole, John Nash: game theory, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, lateral thinking, loss aversion, market bubble, market fundamentalism, Martin Wolf, means of production, money market fund, Mont Pelerin Society, moral hazard, moral panic, Naomi Klein, negative equity, Network effects, new economy, non-tariff barriers, Northern Rock, Pareto efficiency, Paul Samuelson, Peter Thiel, Philip Mirowski, price mechanism, principal–agent problem, profit maximization, purchasing power parity, random walk, rent-seeking, Richard Thaler, Robert Shiller, Ronald Coase, scientific worldview, seigniorage, Socratic dialogue, South Sea Bubble, special economic zone, speech recognition, Steven Pinker, The Chicago School, The Myth of the Rational Market, The Nature of the Firm, The Rise and Fall of American Growth, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, time value of money, transaction costs, transfer pricing, Veblen good, Vilfredo Pareto, Washington Consensus, working poor, zero-sum game

History of manias, bubbles and crashes: there is considerable controversy as to the correct explanation for different bubbles or manias. See e.g. Charles P. Kindleberger, Manias, Panics, and Crashes, 4th edn, John Wiley 2000; Robert Shiller, Irrational Exuberance, Princeton University Press 2000; Peter Garber, Famous First Bubbles: The Fundamentals of Early Manias, MIT Press 2000; and for finance, Carmen Reinhart and Kenneth Rogoff, This Time is Different, Princeton University Press 2011 Keynes’s beauty competition: J. M. Keynes, The General Theory of Employment, Interest and Money, Macmillan 1936 Asset markets and credit creation: see George Cooper, The Origin of Financial Crises, 2nd edn, Harriman House 2010 Hyman Minsky: see his Stabilizing an Unstable Economy, Yale University Press 1986.


pages: 772 words: 203,182

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

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

The discipline of the gold standard and prudence of American presidents produced some global fiscal stability in the post–World War II era. Between 1960 and the early 1980s, for example, severe sovereign credit crises involving default or restructuring afflicted fewer than 15 percent of countries. That was easily the lowest share since 1827. But, as economists Carmen Reinhart and Kenneth Rogoff document in their book, This Time is Different, the number of profligate nations that became severely indebted leaped in the Reagan era. By the end of Ronald Reagan’s Presidency, nearly 40 percent of nations across the globe had succumbed to his siren song of wildcat banking and were dealing with severe debt crises.38 America hopefully will not face a debt crisis in the years ahead.

Augustine, Alexander Maasry, Damilola Sobo, and Di Wang, “Sovereign Fiscal Responsibility Index 2011,” Stanford University and the Comeback America Initiative, March 23, 2011. 36 Publicly held debt statistics are from “Fiscal Year 2013 Historical Tables,” Office of Management and Budget, Table 7.1, 2013. 37 Niall Ferguson, Civilization (New York: Penguin Group, 2011), 149–50. 38 Carmen M. Reinhart and Kenneth S. Rogoff, This Time Is Different, fig 1. John Mauldin and Jonathan Tepper, Endgame (Hoboken, NJ: John Wiley & Sons, 2011), 27. CHAPTER 11 1 David Stockman, “Four Deformations of the Apocalypse.” 2 Michale Sauga and Peter Müller, “Interview with German Finance Minister Schäuble,” Der Spiegel, Nov. 8, 2010. 3 Joseph E.


pages: 442 words: 94,734

The Art of Statistics: Learning From Data by David Spiegelhalter

algorithmic bias, Antoine Gombaud: Chevalier de Méré, Bayesian statistics, Brexit referendum, Carmen Reinhart, Charles Babbage, complexity theory, computer vision, correlation coefficient, correlation does not imply causation, dark matter, data science, Edmond Halley, Estimating the Reproducibility of Psychological Science, Gregor Mendel, Hans Rosling, Kenneth Rogoff, meta-analysis, Nate Silver, Netflix Prize, p-value, placebo effect, probability theory / Blaise Pascal / Pierre de Fermat, publication bias, randomized controlled trial, recommendation engine, replication crisis, self-driving car, speech recognition, statistical model, The Design of Experiments, The Signal and the Noise by Nate Silver, The Wisdom of Crowds, Thomas Bayes, Thomas Malthus

All these issues should have been foreseen and avoided by careful piloting. The easiest way for Analysis to go wrong is simply to make a mistake. Many of us will have made errors in coding or spreadsheets, but perhaps not with the consequences of the following examples: Prominent economists Carmen Reinhart and Kenneth Rogoff published a paper in 2010 which strongly influenced attitudes to austerity. A PhD student later found that five countries had been inadvertently left out of their main analysis due to a simple spreadsheet error.fn2 4 A programmer for AXA Rosenberg, a global equity investment firm, incorrectly programmed a statistical model so that some of its calculated risk elements were too small by a factor of ten thousand, leading to $217 million in losses to clients.


pages: 404 words: 92,713

The Art of Statistics: How to Learn From Data by David Spiegelhalter

algorithmic bias, Antoine Gombaud: Chevalier de Méré, Bayesian statistics, Brexit referendum, Carmen Reinhart, Charles Babbage, complexity theory, computer vision, correlation coefficient, correlation does not imply causation, dark matter, data science, Edmond Halley, Estimating the Reproducibility of Psychological Science, Gregor Mendel, Hans Rosling, Kenneth Rogoff, meta-analysis, Nate Silver, Netflix Prize, p-value, placebo effect, probability theory / Blaise Pascal / Pierre de Fermat, publication bias, randomized controlled trial, recommendation engine, replication crisis, self-driving car, speech recognition, statistical model, The Design of Experiments, The Signal and the Noise by Nate Silver, The Wisdom of Crowds, Thomas Bayes, Thomas Malthus

All these issues should have been foreseen and avoided by careful piloting. The easiest way for Analysis to go wrong is simply to make a mistake. Many of us will have made errors in coding or spreadsheets, but perhaps not with the consequences of the following examples: • Prominent economists Carmen Reinhart and Kenneth Rogoff published a paper in 2010 which strongly influenced attitudes to austerity. A PhD student later found that five countries had been inadvertently left out of their main analysis due to a simple spreadsheet error.*4 • A programmer for AXA Rosenberg, a global equity investment firm, incorrectly programmed a statistical model so that some of its calculated risk elements were too small by a factor of ten thousand, leading to $217 million in losses to clients.


pages: 733 words: 179,391

Adaptive Markets: Financial Evolution at the Speed of Thought by Andrew W. Lo

"Robert Solow", Alan Greenspan, Albert Einstein, Alfred Russel Wallace, algorithmic trading, Andrei Shleifer, Arthur Eddington, Asian financial crisis, asset allocation, asset-backed security, backtesting, bank run, barriers to entry, Bear Stearns, Berlin Wall, Bernie Madoff, bitcoin, Bonfire of the Vanities, bonus culture, break the buck, Brexit referendum, Brownian motion, business cycle, business process, butterfly effect, buy and hold, capital asset pricing model, Captain Sullenberger Hudson, Carmen Reinhart, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computerized trading, corporate governance, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, Daniel Kahneman / Amos Tversky, delayed gratification, Diane Coyle, diversification, diversified portfolio, double helix, easy for humans, difficult for computers, Ernest Rutherford, Eugene Fama: efficient market hypothesis, experimental economics, experimental subject, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, financial intermediation, fixed income, Flash crash, Fractional reserve banking, framing effect, global macro, Gordon Gekko, greed is good, Hans Rosling, Henri Poincaré, high net worth, housing crisis, incomplete markets, index fund, information security, interest rate derivative, invention of the telegraph, Isaac Newton, James Watt: steam engine, Jeff Hawkins, Jim Simons, job satisfaction, John Bogle, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, Joseph Schumpeter, Kenneth Rogoff, London Interbank Offered Rate, Long Term Capital Management, longitudinal study, loss aversion, Louis Pasteur, mandelbrot fractal, margin call, Mark Zuckerberg, market fundamentalism, martingale, megaproject, merger arbitrage, meta-analysis, Milgram experiment, money market fund, moral hazard, Myron Scholes, Nick Leeson, old-boy network, out of africa, p-value, PalmPilot, paper trading, passive investing, Paul Lévy, Paul Samuelson, Paul Volcker talking about ATMs, Phillips curve, Ponzi scheme, predatory finance, prediction markets, price discovery process, profit maximization, profit motive, quantitative hedge fund, quantitative trading / quantitative finance, RAND corporation, random walk, randomized controlled trial, Renaissance Technologies, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance, Robert Shiller, Sam Peltzman, Savings and loan crisis, Shai Danziger, short selling, sovereign wealth fund, Stanford marshmallow experiment, Stanford prison experiment, statistical arbitrage, Steven Pinker, stochastic process, stocks for the long run, survivorship bias, Thales and the olive presses, The Great Moderation, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Triangle Shirtwaist Factory, ultimatum game, Upton Sinclair, US Airways Flight 1549, Walter Mischel, Watson beat the top human players on Jeopardy!, WikiLeaks, Yogi Berra, zero-sum game

The second mistake on Stiglitz’s list was: “The decision in April 2004 by the Securities and Exchange Commission, at a meeting attended by virtually no one and largely overlooked at the time, to allow big investment banks to increase their debt-to-capital ratio (from 12:1 to 30:1, or higher) so that they could buy more mortgage-backed securities, inflating the housing bubble in the process.”19 This narrative even made its way into the historical record, through economists Carmen Reinhart and Ken Rogoff’s highly regarded and otherwise meticulously researched history of eight centuries of financial crises, This Time Is Different: “What could in retrospect be recognized as huge regulatory mistakes, including the deregulation of the subprime mortgage market and the 2004 decision of the Securities and Exchange Commission to allow investment banks to triple their leverage ratios (that is, the ratio measuring the amount of risk to capital), appeared benign at the time.”20 And in January 2011, nearly two years after Sirri’s speech correcting the mistaken interpretation of the 2004 SEC rule change, the macroeconomist Robert Hall criticized “so-called deregulation” for its contribution to the crisis in a speech he delivered at MIT: I think that the one most important failure of regulation is easy to identify.


pages: 436 words: 98,538

The Upside of Inequality by Edward Conard

affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Alan Greenspan, Albert Einstein, assortative mating, bank run, Berlin Wall, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Climatic Research Unit, cloud computing, corporate governance, creative destruction, Credit Default Swap, crony capitalism, disruptive innovation, diversified portfolio, Donald Trump, en.wikipedia.org, Erik Brynjolfsson, Fall of the Berlin Wall, full employment, future of work, Gini coefficient, illegal immigration, immigration reform, income inequality, informal economy, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invention of the telephone, invisible hand, Isaac Newton, Jeff Bezos, Joseph Schumpeter, Kenneth Rogoff, Kodak vs Instagram, labor-force participation, liquidity trap, longitudinal study, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, mass immigration, means of production, meta-analysis, new economy, offshore financial centre, paradox of thrift, Paul Samuelson, pushing on a string, quantitative easing, randomized controlled trial, risk-adjusted returns, Robert Gordon, Ronald Reagan, Second Machine Age, secular stagnation, selection bias, Silicon Valley, Simon Kuznets, Snapchat, Steve Jobs, survivorship bias, The Rise and Fall of American Growth, total factor productivity, twin studies, Tyler Cowen, Tyler Cowen: Great Stagnation, University of East Anglia, upwardly mobile, War on Poverty, winner-take-all economy, women in the workforce, working poor, working-age population, zero-sum game

“Global Wealth Report 2015,” Credit Suisse Research, October 2015, https://publications.credit-suisse.com/tasks/render/file/?fileID=F2425415-DCA7-80B8-EAD989AF9341D47E. 14. Chris Gaither and Dawn Chmielewski, “Fears of Dot-Com Crash, Version 2.0,” Los Angeles Times, July 16, 2006, http://articles.latimes.com/2006/jul/16/business/fi-overheat16. 15. Carmen Reinhart and Kenneth Rogoff, This Time Is Different: Eight Centuries of Financial Folly (Princeton, NJ: Princeton University Press, 2009). 16. Lawrence Summers, “The Future of Work in the Age of the Machine: A Hamilton Project Policy Forum,” National Press Club, February 19, 2015, http://www.hamiltonproject.org/events/the_future_of_work_in_the_age_of_the_machine. 17.


pages: 518 words: 147,036

The Fissured Workplace by David Weil

accounting loophole / creative accounting, affirmative action, Affordable Care Act / Obamacare, banking crisis, barriers to entry, business cycle, business process, buy and hold, call centre, Carmen Reinhart, Cass Sunstein, Clayton Christensen, clean water, collective bargaining, commoditize, corporate governance, corporate raider, Corrections Corporation of America, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, declining real wages, employer provided health coverage, Frank Levy and Richard Murnane: The New Division of Labor, George Akerlof, global supply chain, global value chain, hiring and firing, income inequality, independent contractor, information asymmetry, intermodal, inventory management, Jane Jacobs, Kenneth Rogoff, law of one price, long term incentive plan, loss aversion, low skilled workers, minimum wage unemployment, moral hazard, Network effects, new economy, occupational segregation, Paul Samuelson, performance metric, pre–internet, price discrimination, principal–agent problem, Rana Plaza, Richard Florida, Richard Thaler, Ronald Coase, shareholder value, Silicon Valley, statistical model, Steve Jobs, supply-chain management, The Death and Life of Great American Cities, The Nature of the Firm, transaction costs, Triangle Shirtwaist Factory, ultimatum game, union organizing, women in the workforce, yield management

National income is the sum of employee, proprietor, rental, corporate, interest, and government income less the subsidies paid by government to any of those groups. Analysis of the percentage of gross domestic product shows the same trends: corporate profits after tax hit an all-time high as a percentage of GDP (over 10%), while the share of GDP going to wages and salary fell to an all-time low of 44%. 47. Kenneth Rogoff and Carmen Reinhart have objected that the term “Great Recession” itself is unhelpful since it implies that the recent recession is similar to typical downturns, just a particularly deep one. Instead, they refer to it as the “second great contraction” (the first being the Great Depression). See Reinhart and Rogoff (2009). 48.


How to Be a Liberal: The Story of Liberalism and the Fight for Its Life by Ian Dunt

4chan, Alan Greenspan, Alfred Russel Wallace, bank run, battle of ideas, Bear Stearns, Big bang: deregulation of the City of London, Boris Johnson, bounce rate, Brexit referendum, British Empire, Brixton riot, Carmen Reinhart, centre right, David Ricardo: comparative advantage, disinformation, Dominic Cummings, Donald Trump, eurozone crisis, experimental subject, feminist movement, Francis Fukuyama: the end of history, full employment, Growth in a Time of Debt, illegal immigration, invisible hand, John Bercow, Kenneth Rogoff, liberal world order, Mark Zuckerberg, mass immigration, means of production, Mohammed Bouazizi, Northern Rock, old-boy network, Paul Samuelson, Peter Thiel, Phillips curve, price mechanism, profit motive, quantitative easing, recommendation engine, road to serfdom, Ronald Reagan, Saturday Night Live, Scientific racism, Silicon Valley, Silicon Valley billionaire, Steve Bannon, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile, Winter of Discontent, working poor, zero-sum game

They started to treat traditionally safe government bonds – the IOUs issued for national borrowing – as uncertain. That drove up interest rates on borrowing, which would in turn plunge countries further into the red, trapping them in debt servitude. This argument was given additional potency in 2010 by the publication of a research paper by two former IMF economists, Carmen Reinhart and Kenneth Rogoff, called Growth in a Time of Debt. It contained an alarming finding. Once public debt passed 90 per cent of GDP, it said, something happened. Economic growth slowed. The economy couldn’t get out from under the sheer weight of state borrowing. Government revenue dwindled, more and more money was spent on servicing the debt, and hopes of ever paying it off vanished.


pages: 357 words: 110,017

Money: The Unauthorized Biography by Felix Martin

Alan Greenspan, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, call centre, capital asset pricing model, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, creative destruction, credit crunch, David Graeber, en.wikipedia.org, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, fixed income, Fractional reserve banking, full employment, Goldman Sachs: Vampire Squid, Hyman Minsky, inflation targeting, invention of writing, invisible hand, Irish bank strikes, joint-stock company, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kenneth Rogoff, Michael Milken, mobile money, moral hazard, mortgage debt, new economy, Northern Rock, Occupy movement, Paul Volcker talking about ATMs, plutocrats, private military company, Republic of Letters, Richard Feynman, Robert Shiller, Savings and loan crisis, Scientific racism, scientific worldview, seigniorage, Silicon Valley, smart transportation, South Sea Bubble, supply-chain management, The Wealth of Nations by Adam Smith, too big to fail

Readers rushed to consult the great financial historian, Charles Kindleberger.1 To learn of his discovery that “financial crises have tended to appear at roughly ten-year intervals for the last 400 years or so” was either disturbing or comforting, depending on one’s perspective.2 Within a couple of years, however, the economists Carmen Reinhart and Kenneth Rogoff had published an even more comprehensive investigation into the history of financial crises. Its ominous subtitle warned the reader to expect not just four but “Eight Centuries of Financial Folly.”3 And as Tactitus’ account of the credit crunch under the Emperor Tiberius shows, monetary society has been prone to the problem of growing indebtedness ending in a crisis of solvency for much longer even than that.


pages: 126 words: 37,081

Men Without Work by Nicholas Eberstadt

business cycle, Carmen Reinhart, centre right, deindustrialization, financial innovation, full employment, illegal immigration, jobless men, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, labor-force participation, low skilled workers, mass immigration, moral hazard, post-work, Ronald Reagan, secular stagnation, Simon Kuznets, The Rise and Fall of American Growth, War on Poverty, women in the workforce, working-age population

It is possible that the anemic state of the U.S. macroeconomy is being exaggerated by measurement issues—productivity improvements from information technology, for example, have been oddly elusive in our officially reported national output—but few today imagine that such concealed gains would totally transform our view of the real economy’s true performance. 4.Carmen M. Reinhart and Kenneth S. Rogoff, “Recovery from Financial Crises: Evidence from 100 Episodes,” American Economic Review: Papers and Proceedings 104, no. 5: 50–55. http://scholar.harvard.edu/files/rogoff/files/aer_104-5_50-55.pdf. 5.Cf. Robert J. Gordon, The Rise and Fall of American Growth: The U.S.


pages: 424 words: 115,035

How Will Capitalism End? by Wolfgang Streeck

"there is no alternative" (TINA), accounting loophole / creative accounting, air traffic controllers' union, Airbnb, Alan Greenspan, basic income, Ben Bernanke: helicopter money, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, Clayton Christensen, collective bargaining, conceptual framework, corporate governance, creative destruction, credit crunch, David Brooks, David Graeber, debt deflation, deglobalization, deindustrialization, disruptive innovation, en.wikipedia.org, eurozone crisis, failed state, financial deregulation, financial innovation, first-past-the-post, fixed income, full employment, Gini coefficient, global reserve currency, Google Glasses, haute cuisine, income inequality, information asymmetry, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, junk bonds, Kenneth Rogoff, labour market flexibility, labour mobility, late capitalism, liberal capitalism, market bubble, means of production, military-industrial complex, moral hazard, North Sea oil, offshore financial centre, open borders, pension reform, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, post-industrial society, private sector deleveraging, profit maximization, profit motive, quantitative easing, reserve currency, rising living standards, Robert Gordon, savings glut, secular stagnation, shareholder value, sharing economy, sovereign wealth fund, tacit knowledge, The Future of Employment, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transaction costs, Uber for X, upwardly mobile, Vilfredo Pareto, winner-take-all economy, Wolfgang Streeck

CHAPTER TWO 1An earlier version of this chapter was given as the 2011 Max Weber Lecture at the European University Institute, Florence. I am grateful to Daniel Mertens for his research assistance. Published in: New Left Review 71, September/October 2011, pp. 5–29. 2For the term ‘Great Recession’, see Carmen Reinhart and Kenneth Rogoff, This Time Is Different: Eight Centuries of Financial Folly, Princeton, NJ: Princeton University Press 2009. 3The classic statement is Buchanan and Tullock, The Calculus of Consent: Logical Foundations of Constitutional Democracy. 4See Edward Thompson, ‘The Moral Economy of the English Crowd in the Eighteenth Century’, Past & Present, vol. 50, no. 1, 1971; and James Scott, The Moral Economy of the Peasant: Rebellion and Subsistence in Southeast Asia, New Haven, CT: Yale University Press 1976.


pages: 457 words: 125,329

Value of Everything: An Antidote to Chaos The by Mariana Mazzucato

"Robert Solow", activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Airbnb, Alan Greenspan, bank run, banks create money, Basel III, Berlin Wall, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, business cycle, butterfly effect, buy and hold, Buy land – they’re not making it any more, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, cleantech, Corn Laws, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, David Ricardo: comparative advantage, debt deflation, European colonialism, fear of failure, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, full employment, G4S, George Akerlof, Google Hangouts, Growth in a Time of Debt, high net worth, Hyman Minsky, income inequality, independent contractor, index fund, informal economy, interest rate derivative, Internet of things, invisible hand, John Bogle, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour market flexibility, laissez-faire capitalism, light touch regulation, liquidity trap, London Interbank Offered Rate, margin call, Mark Zuckerberg, market bubble, means of production, military-industrial complex, Money creation, money market fund, negative equity, Network effects, new economy, Northern Rock, obamacare, offshore financial centre, Pareto efficiency, patent troll, Paul Samuelson, peer-to-peer lending, Peter Thiel, Post-Keynesian economics, profit maximization, quantitative easing, quantitative trading / quantitative finance, QWERTY keyboard, rent control, rent-seeking, Sand Hill Road, shareholder value, sharing economy, short selling, Silicon Valley, Simon Kuznets, smart meter, Social Responsibility of Business Is to Increase Its Profits, software patent, stem cell, Steve Jobs, The Great Moderation, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, too big to fail, trade route, transaction costs, two and twenty, two-sided market, very high income, Vilfredo Pareto, wealth creators, Works Progress Administration, you are the product, zero-sum game

You might imagine they are arrived at through some kind of scientific process - but if so, you'd be wrong. These numbers are taken out of thin air, supported by neither theory nor practice. Let's start with debt. In 2010 the American Economic Review published an article by two top economists, professors at Harvard University: Carmen Reinhart, ranked the following year by the Bloomberg Markets magazine among the ‘Most Influential 50 in Finance'; and Kenneth Rogoff, a former chief economist of the IMF.4 In this piece the pair claimed that when the size of government debt (as a proportion of GDP) is over 90 per cent (much higher than the 60 per cent of the Maastricht Treaty, but still lower than that of many countries), economic growth falls.


pages: 316 words: 117,228

The Code of Capital: How the Law Creates Wealth and Inequality by Katharina Pistor

"Robert Solow", Andrei Shleifer, Asian financial crisis, asset-backed security, barriers to entry, Bear Stearns, Bernie Madoff, Big Tech, bilateral investment treaty, bitcoin, blockchain, Bretton Woods, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collateralized debt obligation, colonial rule, conceptual framework, Corn Laws, corporate governance, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, Donald Trump, double helix, Edward Glaeser, Ethereum, ethereum blockchain, facts on the ground, financial innovation, financial intermediation, fixed income, Francis Fukuyama: the end of history, full employment, global reserve currency, Gregor Mendel, Hernando de Soto, income inequality, intangible asset, investor state dispute settlement, invisible hand, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, land reform, land tenure, London Interbank Offered Rate, Long Term Capital Management, means of production, money market fund, moral hazard, offshore financial centre, phenotype, Ponzi scheme, price mechanism, price stability, profit maximization, railway mania, regulatory arbitrage, reserve currency, Ronald Coase, Satoshi Nakamoto, secular stagnation, self-driving car, shareholder value, Silicon Valley, smart contracts, software patent, sovereign wealth fund, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, trade route, Tragedy of the Commons, transaction costs, Wolfgang Streeck

Reuters Staff, “IMF projects Venezuela inflation will hit 1,000,000 percent in 2018. Reuters Business News, July 23, 2018, available online at www.reuters .com (last accessed August 8, 2018). 57. Kim Oosterlinck, “Sovereign Debt Defaults: Insights from History,” Oxford Review of Economic Policy 29, no. 4 (2013):697–714; see also Carmen Reinhart and Kenneth S. Rogoff, This Time Is Different: Eight Centuries of Financial Folly (Princeton, NJ: Princeton University Press, 2009). 58. M. Aycard, Credit Mobilier (Brussels, Leipzig, Livourne: A. Lacroix, Verboeckhoven & Cie, 1867). 59. Merton as quoted in McKinsey Global Institute, “Mapping Global Capital Markets” (New York: McKinsey Global Institute, 2008), p. 136. 60.


Money and Government: The Past and Future of Economics by Robert Skidelsky

Alan Greenspan, anti-globalists, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, barriers to entry, Basel III, basic income, Bear Stearns, Ben Bernanke: helicopter money, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, constrained optimization, Corn Laws, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Graeber, David Ricardo: comparative advantage, debt deflation, Deng Xiaoping, Donald Trump, Eugene Fama: efficient market hypothesis, eurozone crisis, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, forward guidance, Fractional reserve banking, full employment, Gini coefficient, Goodhart's law, Growth in a Time of Debt, Hyman Minsky, income inequality, incomplete markets, inflation targeting, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, law of one price, liberal capitalism, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, market clearing, market friction, Martin Wolf, means of production, Mexican peso crisis / tequila crisis, mobile money, Modern Monetary Theory, Money creation, Mont Pelerin Society, moral hazard, mortgage debt, new economy, Nick Leeson, North Sea oil, Northern Rock, offshore financial centre, oil shock, open economy, paradox of thrift, Pareto efficiency, Paul Samuelson, Phillips curve, placebo effect, post-war consensus, price stability, profit maximization, quantitative easing, random walk, regulatory arbitrage, rent-seeking, reserve currency, Richard Thaler, rising living standards, risk/return, road to serfdom, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, shareholder value, short selling, Simon Kuznets, structural adjustment programs, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, trade liberalization, value at risk, Washington Consensus, yield curve, zero-sum game

By November 2010 he was writing: ‘sometimes, not always, some fiscal adjustments based upon spending cuts are not associated with economic downturns’.21 But the damage had been done. Since 2011 little has been heard of ‘expansionary fiscal contraction’. We got the contraction, but not the expansion. 231 M ac roe c onom ic s i n t h e C r a s h a n d A f t e r , 2 0 0 7 – Reinhart and Rogoff and the 90 per cent barrier Two American economists, Carmen Reinhart and Kenneth Rogoff, produced another correlation to bolster the austerity case. They attributed the ‘vast range of crises’ they had analysed to ‘excessive debt accumulation’.22 They noticed that, once the public debt–GDP ratio crashed through the 90 per cent barrier, ‘growth rates are roughly cut in half’. 23 Early in 2013 researchers at the University of Massachusetts examined the data behind the Reinhart–Rogoff work and found that the results were partly driven by a spreadsheet error: More importantly, the results weren’t at all robust: using standard statistical procedures rather than the rather odd approach Reinhart and Rogoff used, or adding a few more years of data, caused the 90% cliff to vanish.


pages: 353 words: 81,436

pages: 401 words: 112,784

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

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

Niall Ferguson, ‘A long shadow’, Financial Times, 22 September 2008, at: www.ft.com/cms/s/0/aeb88d8a–8800–11dd-b114–0000779fd18c.html#axzz2WahpoyYx 4. One analysis of post-war financial crises estimates that unemployment rises by an average of 7 percentage points, while output falls an average of 9%, the latter taking place over the course of two years; whereas the average ‘non-financial’ recession lasts less than a year. See Carmen M. Reinhart and Kenneth S. Rogoff, ‘The aftermath of financial crises’, American Economic Review, 99:2 (2009), pp. 466–72, at: www.ems.bbk.ac.uk/for_students/msc_ec­on/ETA2_EMEC025P/GZrhein.pdf 5. The 2001 census recorded a UK population of 59,113,500, whereas the 2011 census recorded a total of 63,285,100.


pages: 209 words: 53,236

The Scandal of Money by George Gilder

Affordable Care Act / Obamacare, Alan Greenspan, bank run, Bernie Sanders, bitcoin, blockchain, borderless world, Bretton Woods, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, Claude Shannon: information theory, Clayton Christensen, cloud computing, corporate governance, cryptocurrency, currency manipulation / currency intervention, currency risk, Daniel Kahneman / Amos Tversky, Deng Xiaoping, disintermediation, Donald Trump, fiat currency, financial innovation, Fractional reserve banking, full employment, George Gilder, glass ceiling, Home mortgage interest deduction, impact investing, index fund, indoor plumbing, industrial robot, inflation targeting, informal economy, Innovator's Dilemma, Internet of things, invisible hand, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jeff Bezos, John Bogle, John von Neumann, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, Law of Accelerating Returns, Marc Andreessen, Mark Zuckerberg, Menlo Park, Metcalfe’s law, Money creation, money: store of value / unit of account / medium of exchange, mortgage tax deduction, Nixon triggered the end of the Bretton Woods system, obamacare, OSI model, Paul Samuelson, Peter Thiel, Ponzi scheme, price stability, Productivity paradox, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, Ray Kurzweil, reserve currency, road to serfdom, Robert Gordon, Robert Metcalfe, Ronald Reagan, Sand Hill Road, Satoshi Nakamoto, Search for Extraterrestrial Intelligence, secular stagnation, seigniorage, Silicon Valley, smart grid, South China Sea, special drawing rights, The Great Moderation, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Tim Cook: Apple, time value of money, too big to fail, transaction costs, trickle-down economics, Turing machine, winner-take-all economy, yield curve, zero-sum game

“Bankers used leverage to increase profitability and exploited the backstop of public guarantees. The profits largely flow to the employees [i.e., the bankers], while the losses are defrayed by the taxpayers and shareholders and even retirees (through artificially low interest rates). The Fed also provided $1.2 trillion in loans to banks (mostly secret at the time).” 4.Carmen M. Reinhart and Kenneth Rogoff, This Time Is Different: Eight Centuries of Financial Folly (Princeton, NJ: Princeton University Press, 2011). 5.Mark Skousen, Vienna & Chicago, Friends or Foes? A Tale of Two Schools of Free-Market Economics (Washington, DC: Capital Press, 2005). Skousen superbly covers the canonical sources of Austrian and Chicago economic thought.


pages: 524 words: 155,947

More: The 10,000-Year Rise of the World Economy by Philip Coggan

"Robert Solow", accounting loophole / creative accounting, Ada Lovelace, agricultural Revolution, Airbnb, airline deregulation, Alan Greenspan, Andrei Shleifer, anti-communist, assortative mating, autonomous vehicles, bank run, banking crisis, banks create money, basic income, Bear Stearns, Berlin Wall, Black Monday: stock market crash in 1987, Bob Noyce, Boeing 747, bond market vigilante , Branko Milanovic, Bretton Woods, Brexit referendum, British Empire, business cycle, call centre, capital controls, carbon footprint, Carmen Reinhart, Celtic Tiger, central bank independence, Charles Babbage, Charles Lindbergh, clean water, collective bargaining, Columbian Exchange, Columbine, Corn Laws, cotton gin, credit crunch, Credit Default Swap, crony capitalism, currency peg, currency risk, debt deflation, Deng Xiaoping, discovery of the americas, Donald Trump, Erik Brynjolfsson, European colonialism, eurozone crisis, Fairchild Semiconductor, falling living standards, financial engineering, financial innovation, financial intermediation, floating exchange rates, Fractional reserve banking, Frederick Winslow Taylor, full employment, germ theory of disease, German hyperinflation, gig economy, Gini coefficient, global supply chain, global value chain, Gordon Gekko, greed is good, Greenspan put, Haber-Bosch Process, Hans Rosling, Hernando de Soto, hydraulic fracturing, Ignaz Semmelweis: hand washing, income inequality, income per capita, independent contractor, indoor plumbing, industrial robot, inflation targeting, Isaac Newton, James Watt: steam engine, job automation, John Snow's cholera map, joint-stock company, joint-stock limited liability company, Kenneth Arrow, Kula ring, labour market flexibility, land reform, land tenure, Lao Tzu, large denomination, liquidity trap, Long Term Capital Management, Louis Blériot, low cost airline, low skilled workers, lump of labour, M-Pesa, Malcom McLean invented shipping containers, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Martin Wolf, McJob, means of production, Mikhail Gorbachev, mittelstand, Modern Monetary Theory, moral hazard, Murano, Venice glass, Myron Scholes, Nelson Mandela, Network effects, Northern Rock, oil shale / tar sands, oil shock, Paul Samuelson, Paul Volcker talking about ATMs, Phillips curve, popular capitalism, popular electronics, price stability, principal–agent problem, profit maximization, purchasing power parity, quantitative easing, railway mania, Ralph Nader, regulatory arbitrage, road to serfdom, Robert Gordon, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, scientific management, Scramble for Africa, Second Machine Age, secular stagnation, Silicon Valley, Simon Kuznets, South China Sea, South Sea Bubble, special drawing rights, spice trade, spinning jenny, Steven Pinker, TaskRabbit, Thales and the olive presses, Thales of Miletus, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Rise and Fall of American Growth, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade route, Tragedy of the Commons, transaction costs, transatlantic slave trade, transcontinental railway, Triangle Shirtwaist Factory, universal basic income, Unsafe at Any Speed, Upton Sinclair, V2 rocket, Veblen good, War on Poverty, Washington Consensus, Watson beat the top human players on Jeopardy!, women in the workforce, Yom Kippur War, you are the product, zero-sum game

“Too big not to fail”, The Economist, February 18th 2012 20. Barry Eichengreen and Kevin O’Rourke, “What do the new data tell us?”, March 7th 2010, https://voxeu.org/article/tale-two-depressions-what-do-new-data-tell-us-february-2010-update 21. “China seeks stimulation”, The Economist, November 10th 2008 22. Carmen Reinhart, “Eight years later: post-crisis recovery and deleveraging”, The Clearing House, https://www.theclearinghouse.org/banking-perspectives/2017/2017-q1-banking-perspectives/articles/post-crisis-recovery-and-deleveraging 23. Ibid. 24. Tooze, Crashed, op. cit. The three were Royal Bank of Scotland, UBS and Deutsche. 25.


pages: 566 words: 160,453

Not Working: Where Have All the Good Jobs Gone? by David G. Blanchflower

active measures, affirmative action, Affordable Care Act / Obamacare, Albert Einstein, bank run, banking crisis, basic income, Bear Stearns, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, Boris Johnson, Brexit referendum, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Clapham omnibus, collective bargaining, correlation does not imply causation, credit crunch, declining real wages, deindustrialization, Donald Trump, estate planning, Fall of the Berlin Wall, full employment, George Akerlof, gig economy, Gini coefficient, Growth in a Time of Debt, high-speed rail, illegal immigration, income inequality, independent contractor, indoor plumbing, inflation targeting, job satisfaction, John Bercow, Kenneth Rogoff, labor-force participation, liquidationism / Banker’s doctrine / the Treasury view, longitudinal study, low skilled workers, manufacturing employment, Mark Zuckerberg, market clearing, Martin Wolf, mass incarceration, meta-analysis, moral hazard, Nate Silver, negative equity, new economy, Northern Rock, obamacare, oil shock, open borders, opioid epidemic / opioid crisis, Own Your Own Home, p-value, Panamax, pension reform, Phillips curve, plutocrats, post-materialism, price stability, prisoner's dilemma, quantitative easing, rent control, Richard Thaler, Robert Shiller, Ronald Coase, selection bias, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, South Sea Bubble, The Theory of the Leisure Class by Thorstein Veblen, Thorstein Veblen, trade liberalization, universal basic income, University of East Anglia, urban planning, working poor, working-age population, yield curve

Galbraith also noted that “the descent is always more sudden than the increase: a balloon that has been punctured does not deflate in an orderly way” (xiv). And so it was. The Great Recession started in the Arizona, Florida, California, and Nevada housing markets and grew and grew as the subprime housing market collapsed. It spread around the world and took banks down with it. As Carmen Reinhart and Kenneth Rogoff (2009) have famously noted, financial crises take an inordinate amount of time for economies to recover from. This book will be published a dozen years after the start of the Great Recession, which the National Bureau of Economic Research (NBER) estimates started in the United States in December 2007.7 In most other advanced countries, including the UK, France, Japan, and Italy, it started a few months later.


pages: 580 words: 168,476

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

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

Like a good magician, a free-market economist succeeds by drawing spectators’ attention to what he wants them to see—the rabbit jumping out of the hat—while distracting their attention from other things—how the rabbit got into the hat in the first place. 6. Adam Smith, The Wealth of Nations (1776; New York: P. F. Collier, 1902), p. 207. 7. See Carmen Reinhart and Kenneth Rogoff, This Time Is Different: Eight Centuries of Financial Folly (Princeton: Princeton University Press, 2009). 8. A derivative is just a financial instrument the return to which is derived on the basis of something else, e.g., the performance of a stock or the price of oil or the value of a bond.


pages: 381 words: 101,559

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

Alan Greenspan, Asian financial crisis, bank run, Bear Stearns, Benoit Mandelbrot, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, borderless world, Bretton Woods, BRICs, British Empire, business climate, buy and hold, 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, currency risk, Daniel Kahneman / Amos Tversky, Deng Xiaoping, diversification, diversified portfolio, Dr. Strangelove, 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, John Meriwether, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, Money creation, money market fund, money: store of value / unit of account / medium of exchange, Myron Scholes, Network effects, New Journalism, Nixon shock, Nixon triggered the end of the Bretton Woods system, offshore financial centre, oil shock, one-China policy, open economy, paradox of thrift, Paul Samuelson, 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, zero-sum game



pages: 584 words: 187,436

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

Alan Greenspan, Andrei Shleifer, Asian financial crisis, asset-backed security, automated trading system, bank run, barriers to entry, Bear Stearns, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, business cycle, buy and hold, capital controls, Carmen Reinhart, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, currency peg, Elliott wave, Eugene Fama: efficient market hypothesis, failed state, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, financial intermediation, fixed income, full employment, German hyperinflation, High speed trading, index fund, Jim Simons, John Bogle, John Meriwether, junk bonds, Kenneth Rogoff, Kickstarter, Long Term Capital Management, margin call, market bubble, market clearing, market fundamentalism, merger arbitrage, Michael Milken, money market fund, moral hazard, Myron Scholes, natural language processing, Network effects, new economy, Nikolai Kondratiev, operational security, pattern recognition, Paul Samuelson, pre–internet, quantitative hedge fund, quantitative trading / quantitative finance, random walk, Renaissance Technologies, Richard Thaler, risk-adjusted returns, risk/return, Robert Mercer, rolodex, Savings and loan crisis, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical arbitrage, statistical model, survivorship bias, tail risk, technology bubble, The Great Moderation, The Myth of the Rational Market, the new new thing, too big to fail, transaction costs, two and twenty

This paper finds that a doubling in the size of private credit in an average developing country is associated with a 2 percentage point rise in annual economic growth, meaning that after thirty-five years the economy would be twice as large as it would have been without ample opportunities to borrow. 7. I am grateful to Gary Gladstein, the former chief administrative officer and managing director of Soros Fund Management, for these data. 8. Arminio Fraga, interview with the author, June 6, 2008. 9. Ibid. 10. Ibid. 11. The paper was by Graciela Kaminsky of the Federal Reserve and Carmen Reinhart of the International Monetary Fund. It was later published in the American Economic Review. 12. Fraga interview. 13. A participant at the meeting recalls, “It was really kind of a bombshell statement to make. Talk about being pathetically ignorant when you say that to the three guys from Soros.” 14.


pages: 741 words: 179,454

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

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", "there is no alternative" (TINA), affirmative action, Alan Greenspan, Albert Einstein, algorithmic trading, Andy Kessler, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Basel III, Bear Stearns, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, business cycle, buy the rumour, sell the news, capital asset pricing model, Carmen Reinhart, carried interest, Celtic Tiger, clean water, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, Daniel Kahneman / Amos Tversky, debt deflation, Deng Xiaoping, deskilling, discrete time, diversification, diversified portfolio, Doomsday Clock, Dr. Strangelove, Edward Thorp, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, eurozone crisis, Everybody Ought to Be Rich, Fall of the Berlin Wall, financial engineering, financial independence, financial innovation, financial thriller, fixed income, foreign exchange controls, full employment, global reserve currency, Goldman Sachs: Vampire Squid, Goodhart's law, Gordon Gekko, greed is good, Greenspan put, happiness index / gross national happiness, haute cuisine, Herman Kahn, high net worth, Hyman Minsky, index fund, information asymmetry, interest rate swap, invention of the wheel, invisible hand, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", job automation, Johann Wolfgang von Goethe, John Bogle, John Meriwether, joint-stock company, Jones Act, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kenneth Rogoff, Kevin Kelly, laissez-faire capitalism, load shedding, locking in a profit, Long Term Capital Management, Louis Bachelier, margin call, market bubble, market fundamentalism, Marshall McLuhan, Martin Wolf, mega-rich, merger arbitrage, Michael Milken, Mikhail Gorbachev, Milgram experiment, military-industrial complex, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, Naomi Klein, National Debt Clock, negative equity, NetJets, Network effects, new economy, Nick Leeson, Nixon shock, Northern Rock, nuclear winter, oil shock, Own Your Own Home, Paul Samuelson, pets.com, Philip Mirowski, Phillips curve, plutocrats, Ponzi scheme, price anchoring, price stability, profit maximization, quantitative easing, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Ray Kurzweil, regulatory arbitrage, rent control, rent-seeking, reserve currency, Richard Feynman, Richard Thaler, Right to Buy, risk free rate, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Rod Stewart played at Stephen Schwarzman birthday party, rolodex, Ronald Reagan, Ronald Reagan: Tear down this wall, Satyajit Das, savings glut, shareholder value, Sharpe ratio, short selling, Silicon Valley, six sigma, Slavoj Žižek, South Sea Bubble, special economic zone, statistical model, Stephen Hawking, Steve Jobs, stock buybacks, survivorship bias, tail risk, Teledyne, The Chicago School, The Great Moderation, the market place, the medium is the message, The Myth of the Rational Market, The Nature of the Firm, the new new thing, The Predators' Ball, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, trickle-down economics, Turing test, two and twenty, Upton Sinclair, value at risk, Yogi Berra, zero-coupon bond, zero-sum game

Nomi Prins (2004) Other People’s Money: The Corporate Mugging of America, The New Press, New York. John Quiggin (2010) Zombie Economics: How Dead Ideas Still Walk Among Us, Princeton University Press, Princeton and Oxford. Raghuram G. Rajan (2010) Fault Lines: How Hidden Fractures Still Threaten the World Economy, Princeton University Press, Princeton and Oxford. Carmen Reinhart and Kenneth Rogoff (2010) This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press, Princeton and Oxford. Barry Ritholtz (2009) Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook The World Economy, John Wiley, New Jersey. David Roche and Bob McKee (2008) New Monetarism, Independent Strategy Publications, London.


pages: 593 words: 189,857

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

Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, Atul Gawande, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Bernie Sanders, Black Monday: stock market crash in 1987, break the buck, Buckminster Fuller, Carmen Reinhart, central bank independence, collateralized debt obligation, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency risk, David Brooks, Doomsday Book, eurozone crisis, financial engineering, financial innovation, Flash crash, Goldman Sachs: Vampire Squid, Greenspan put, housing crisis, Hyman Minsky, illegal immigration, implied volatility, Kickstarter, London Interbank Offered Rate, Long Term Capital Management, margin call, market fundamentalism, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, Nate Silver, negative equity, Northern Rock, obamacare, paradox of thrift, pets.com, price stability, profit maximization, pushing on a string, quantitative easing, race to the bottom, RAND corporation, regulatory arbitrage, reserve currency, Saturday Night Live, Savings and loan crisis, savings glut, selection bias, Sheryl Sandberg, short selling, sovereign wealth fund, stock buybacks, tail risk, The Great Moderation, The Signal and the Noise by Nate Silver, Tobin tax, too big to fail, working poor

Sources: Compiled from Congressional Budget Office, Federal Deposit Insurance Corporation, Federal Reserve Board, Office of Management and Budget, and U.S. Treasury Department. Still, the financial crisis left tragic pain and suffering in its wake. Financial crises always do. The economists Carmen Reinhart and Ken Rogoff, my former IMF colleague who played chess in his head during meetings, have calculated that it takes the average country eight years after a financial crisis to reach its pre-crisis income levels. Even though we did much better than the average, and our crisis was much worse than the average, Americans absorbed a terrible blow.


pages: 1,066 words: 273,703

Crashed: How a Decade of Financial Crises Changed the World by Adam Tooze

"there is no alternative" (TINA), Affordable Care Act / Obamacare, Alan Greenspan, Apple's 1984 Super Bowl advert, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bond market vigilante , Boris Johnson, break the buck, Bretton Woods, Brexit referendum, BRICs, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, currency risk, dark matter, deindustrialization, desegregation, Detroit bankruptcy, Dissolution of the Soviet Union, diversification, Doha Development Round, Donald Trump, Edward Glaeser, Edward Snowden, en.wikipedia.org, energy security, eurozone crisis, Fall of the Berlin Wall, family office, financial engineering, financial intermediation, fixed income, Flash crash, forward guidance, friendly fire, full employment, global reserve currency, global supply chain, global value chain, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, high-speed rail, housing crisis, Hyman Minsky, illegal immigration, immigration reform, income inequality, interest rate derivative, interest rate swap, junk bonds, Kenneth Rogoff, large denomination, light touch regulation, Long Term Capital Management, margin call, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, military-industrial complex, mittelstand, money market fund, moral hazard, mortgage debt, mutually assured destruction, negative equity, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shale / tar sands, old-boy network, open economy, opioid epidemic / opioid crisis, paradox of thrift, Peter Thiel, Ponzi scheme, Post-Keynesian economics, predatory finance, price stability, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, reserve currency, risk tolerance, Ronald Reagan, Savings and loan crisis, savings glut, secular stagnation, Silicon Valley, South China Sea, sovereign wealth fund, special drawing rights, Steve Bannon, structural adjustment programs, tail risk, The Great Moderation, Tim Cook: Apple, too big to fail, trade liberalization, upwardly mobile, Washington Consensus, We are the 99%, white flight, WikiLeaks, women in the workforce, Works Progress Administration, yield curve, éminence grise

This dealt the most serious blow to government finances that any of the major developed countries had suffered since World War II. The fate of Greece in 2010 seemed to spell out what lay in store for any state that slid over the edge into insolvency. Warnings ranged from outrageous rants and scaremongering from the likes of Beck to ultrarespectable academic research, most notably by two former IMF economists, Carmen Reinhart and Kenneth Rogoff. Following their surprise bestseller This Time Is Different: Eight Centuries of Financial Folly, in January 2010 Reinhart and Rogoff launched a research paper with the title “Growth in a Time of Debt.”2 This purported to show that as public debts passed the threshold of 90 percent of GDP, economic growth slowed down sharply.


pages: 270 words: 73,485

Hubris: Why Economists Failed to Predict the Crisis and How to Avoid the Next One by Meghnad Desai

"Robert Solow", 3D printing, Alan Greenspan, bank run, banking crisis, Bear Stearns, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, correlation coefficient, correlation does not imply causation, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, German hyperinflation, Gunnar Myrdal, Home mortgage interest deduction, imperial preference, income inequality, inflation targeting, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, market bubble, market clearing, means of production, Mexican peso crisis / tequila crisis, mortgage debt, Myron Scholes, negative equity, Northern Rock, oil shale / tar sands, oil shock, open economy, Paul Samuelson, Phillips curve, Post-Keynesian economics, price stability, purchasing power parity, pushing on a string, quantitative easing, reserve currency, rising living standards, risk/return, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, seigniorage, Silicon Valley, Simon Kuznets, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, women in the workforce

–Apr. 1971). 4.Gerard Duménil and Dominique Lévy, “The Crisis of the Early 21st Century: Marxian Perspectives,” in R. Bellofiore and G. Vertova, eds, The Great Recession and the Contradictions of Contemporary Capitalism (Edward Elgar, Cheltenham, 2014). 5.Piketty, Capital in the Twenty-First Century, ch. 5. 6.Carmen M. Reinhart and Kenneth S. Rogoff, This Time Is Different: Eight Centuries of Financial Folly (Princeton University Press, Princeton, NJ, 2009). 7.Lawrence Summers, “Why Stagnation May Prove to Be the New Normal,” Financial Times, Dec. 15, 2013. 8.Julia Leung, The Tides of Capital: How Asia Surmounted the Crisis and Is Now Guiding World Recovery (Official Monetary and Financial Institutions Forum, London, 2015). 9.Karl Marx, Preface to A Contribution to the Critique of Political Economy (1859), trans.


pages: 573 words: 115,489

Prosperity Without Growth: Foundations for the Economy of Tomorrow by Tim Jackson

"Robert Solow", Alan Greenspan, bank run, banking crisis, banks create money, Basel III, basic income, bonus culture, Boris Johnson, business cycle, carbon footprint, Carmen Reinhart, Cass Sunstein, choice architecture, circular economy, collapse of Lehman Brothers, creative destruction, credit crunch, Credit Default Swap, critique of consumerism, David Graeber, decarbonisation, dematerialisation, en.wikipedia.org, energy security, financial deregulation, Financial Instability Hypothesis, financial intermediation, full employment, Garrett Hardin, Growth in a Time of Debt, Hans Rosling, Hyman Minsky, impact investing, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invisible hand, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, liberal capitalism, Mahatma Gandhi, mass immigration, means of production, meta-analysis, Money creation, moral hazard, mortgage debt, Naomi Klein, negative emissions, new economy, offshore financial centre, oil shale / tar sands, open economy, paradox of thrift, peak oil, peer-to-peer lending, Philip Mirowski, Post-Keynesian economics, profit motive, purchasing power parity, quantitative easing, Richard Thaler, road to serfdom, Robert Gordon, Ronald Reagan, science of happiness, secular stagnation, short selling, Simon Kuznets, Skype, smart grid, sovereign wealth fund, Steve Jobs, The Chicago School, The Great Moderation, The Rise and Fall of American Growth, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, Tragedy of the Commons, universal basic income, Works Progress Administration, World Values Survey, zero-sum game


pages: 1,373 words: 300,577