Northern Rock

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pages: 475 words: 155,554

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

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

This presumption was included in Rule 11.1.19G of the FSA’s handbook (in 2009 it was deleted). Was Northern Rock systemically important? Did the then governor of the Bank of England consider Northern Rock systemically important? It is clear that Northern Rock and the FSA initially believed that funding markets would never close; even if they did, the Bank of England would be there as the UK’s lender of last resort. Northern Rock’s mortgages, profits and bonuses were all built on the backstop of the Bank of England. With my own eyes, on the first day of the Northern Rock run, I saw one of Britain’s top regulators struggling with the reality that the glory days of light-touch regulation were over.

So it was never going to get enough retail deposits in, even if noughties Britons had wanted to save. So how to fund the desired growth? ‘You can’t do it in the capital markets,’ I was told by one member of the Northern Rock securitisation team, whom I shall call Jon Taylor (he wishes to remain anonymous). ‘You’re Northern Rock, you don’t have a great rating. Until secure technology. Whatever you say, it gave Northern Rock a level playing field.’ Adam Applegarth, Northern Rock’s cricket-playing chief executive, was a marketeer rather than banker. He looked after his staff very well, and he came up with the ‘virtuous circle strategy’ that sought to gobble up market share with cheap innovative mortgage products (see here).

Most banks in the UK securitised mortgages back to 1994, because of a change in the terms and conditions of mortgage transfer in the UK. ‘That was the beauty of it,’ Taylor told me. ‘I couldn’t go securitising a 1992 mortgage at Northern Rock, because I’d have to write a letter to you, saying “Hey, I’ve sold your mortgage to Granite.” If it’s a 1995 mortgage, I can go and sell it to Granite, and not tell you. Because Granite has sourced back the administration of that mortgage to Northern Rock, so you’re still going to get Northern Rock setting interest rates, Northern Rock headed paper, everything.’ All of this was done with most of the British population completely unaware. Esther Spick’s mortgage (see here) is probably in Granite.


pages: 253 words: 79,214

The Money Machine: How the City Works by Philip Coggan

activist fund / activist shareholder / activist investor, algorithmic trading, asset-backed security, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, bond market vigilante , bonus culture, Bretton Woods, call centre, capital controls, carried interest, central bank independence, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, disintermediation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, endowment effect, financial deregulation, financial independence, floating exchange rates, foreign exchange controls, Glass-Steagall Act, guns versus butter model, Hyman Minsky, index fund, intangible asset, interest rate swap, inverted yield curve, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", joint-stock company, junk bonds, labour market flexibility, large denomination, London Interbank Offered Rate, Long Term Capital Management, low interest rates, merger arbitrage, Michael Milken, money market fund, moral hazard, mortgage debt, negative equity, Nick Leeson, Northern Rock, pattern recognition, proprietary trading, purchasing power parity, quantitative easing, reserve currency, Right to Buy, Ronald Reagan, shareholder value, South Sea Bubble, sovereign wealth fund, technology bubble, time value of money, too big to fail, tulip mania, Washington Consensus, yield curve, zero-coupon bond

What emerged was a classic ‘run on the bank’ such has been seen many times in history. Even without the run, Northern Rock was probably finished as an independent entity. But the run ruined Northern Rock’s brand name, making it more difficult to sell the bank to a private company. Eventually, it had to be nationalized. And the run on the bank caused the authorities to worry that other banks might be threatened; Alistair Darling, the chancellor, was forced into making the extraordinary pledge of guaranteeing, not just Northern Rock’s deposits, but those of any other bank that got into trouble. Order was eventually restored with the help of a change to the deposit insurance scheme, that guaranteed the first £35,000 of all deposits (in 2008, this had to be increased to £50,000).

Instead of waiting for deposits to build up, a bank could go out and make the mortgage loans it desired and then sell those loans in the financial markets. Provided it received a higher rate from homeowners than it paid in the market, such a strategy would be profitable. Northern Rock, a Newcastle building society turned bank, was the British institution that proved most aggressive in pursuing this strategy. By 2007, it was Britain’s fifth biggest mortgage provider even though it had just 76 branches. When it ran into trouble, only a quarter of its funds came from retail customers. The strategy had enabled Northern Rock to expand very quickly; in the first half of 2007, its lending was 31 per cent higher than the year before. This approach looked highly profitable.

Ironically enough, the last annual results that it produced before its collapse showed record pre-tax profits of £627 million, 27 per cent higher than the previous year. Indeed, anyone who looked at the raw data might have been surprised by Northern Rock’s collapse; the repayment arrears on its mortgages were less than half the industry average. But these headline numbers belied some fundamental weaknesses. It takes time for mortgages to go wrong and when it got into trouble, a third of Northern Rock’s loans were less than two years old. As it expanded, it was increasing the proportion of loans to homebuyers with a small deposit (and to those who wanted to borrow more than the value of the house itself).


pages: 311 words: 99,699

Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe by Gillian Tett

"World Economic Forum" Davos, accounting loophole / creative accounting, Alan Greenspan, asset-backed security, bank run, banking crisis, Bear Stearns, Black-Scholes formula, Blythe Masters, book value, break the buck, Bretton Woods, business climate, business cycle, buy and hold, collateralized debt obligation, commoditize, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, easy for humans, difficult for computers, financial engineering, financial innovation, fixed income, Glass-Steagall Act, housing crisis, interest rate derivative, interest rate swap, inverted yield curve, junk bonds, Kickstarter, locking in a profit, Long Term Capital Management, low interest rates, McMansion, Michael Milken, money market fund, mortgage debt, North Sea oil, Northern Rock, Plato's cave, proprietary trading, Renaissance Technologies, risk free rate, risk tolerance, Robert Shiller, Satyajit Das, Savings and loan crisis, short selling, sovereign wealth fund, statistical model, tail risk, The Great Moderation, too big to fail, value at risk, yield curve

[ FOURTEEN ] BEAR BLOWS UP On January 11, 2008, JPMorgan Chase burst into the news again. Andy Kuipers, chief executive of Northern Rock, announced that the bank was buying £2.2 billion of Northern Rock’s mortgage loans. “This is a relatively small transaction, representing around two percent of Northern Rock’s gross assets, but it is a positive development in the company’s ongoing strategic review,” Kuipers said, noting that the sale “will allow us to reduce the debt with the Bank of England.” The significance of Northern Rock’s announcement, though, went well beyond Northern Rock’s fate. It signaled that JPMorgan Chase was flexing its muscles even as other major banks were furiously trying to shore themselves up.

By 2007, Northern Rock had trebled its share of the UK mortgage market, accounting for 18.9 percent of all mortgages, and was still hungry for more. At the start of that year, its website cheerfully told consumers that “if your wallet has taken a beating over the festive season, a new loan from Northern Rock could be the perfect way to sort things out.” When the money markets seized up in August 2007, though, Northern Rock discovered that its main funding source had frozen. For a few days, officials cast around to see whether any large UK banks would be willing to buy Northern Rock or club together to offer a loan. Lloyds TSB, one large lender, seemed interested in a deal. However, it refused to commit itself unless the Bank of England offered a loan to the group, and Mervyn King, the Bank governor, was unwilling to do that.

Then, on Monday afternoon, September 17, a full four days after Peston’s newsbreak, the British government stepped in to stop the bank run. The government would guarantee all remaining Northern Rock deposits, and the Bank would provide enough loans to keep the lender operating and extend the same support to other banks, too, if necessary. As Peston had pointed out in his first, breathless BBC bulletin, Northern Rock’s fate showed that the impact of the subprime crisis was spreading inexorably into the “real” banking system. That posed a troubling question: just how much further might the shocks spread? A couple of days after the Northern Rock drama, senior officials at JPMorgan Chase’s offices in New York received a surprising telephone call from the Treasury in Washington: could they attend a voluntary meeting to discuss the state of the shadow banks?


pages: 597 words: 172,130

The Alchemists: Three Central Bankers and a World on Fire by Neil Irwin

"World Economic Forum" Davos, Alan Greenspan, Ayatollah Khomeini, bank run, banking crisis, Bear Stearns, Berlin Wall, Bernie Sanders, break the buck, Bretton Woods, business climate, business cycle, capital controls, central bank independence, centre right, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, currency peg, eurozone crisis, financial engineering, financial innovation, Flash crash, foreign exchange controls, George Akerlof, German hyperinflation, Google Earth, hiring and firing, inflation targeting, Isaac Newton, Julian Assange, low cost airline, low interest rates, market bubble, market design, middle-income trap, Money creation, money market fund, moral hazard, mortgage debt, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, Paul Samuelson, price stability, public intellectual, quantitative easing, rent control, reserve currency, Robert Shiller, Robert Solow, rolodex, Ronald Reagan, Savings and loan crisis, savings glut, Socratic dialogue, sovereign wealth fund, The Great Moderation, too big to fail, union organizing, WikiLeaks, yield curve, Yom Kippur War

The timing of their trip to the riverside city best known for its sweet fortified wine was terrible. For the past several weeks, Northern Rock PLC, a bank based in the North East of England with £100 billion in assets, had been in crisis. Its business was to issue mortgages, which would then be packaged and sold on financial markets—and since August, mortgage securities had been toxic to global investors. Northern Rock faced a cash crunch, as depositors discovered just how bad its situation was, a classic bank run. Television news programs showed ominously long lines of Northern Rock customers waiting to pull their deposits. “You don’t want to be the ones in the end of the queue that the money’s run out,” an uncertain customer said to the cameras outside a branch in Reading.

In a palatial Moorish hall, the governor of the Bank of England and the chancellor of the exchequer watched from afar—on TV, just like many of those Northern Rock customers determined not to be in the end of the queue when the money ran out. “They’re behaving perfectly rationally, you know,” King told Darling, the chancellor later recalled. It was an accurate statement—but hardly what Darling wanted to hear. Britain had seen a number of bank failures over the years. But the two men had overseen the first run on a British bank since Overend & Gurney’s in 1866. Known before 1997 as the Northern Rock Building Society, Northern Rock had established itself as a very modern variety of bank.

In continental Europe or the United States, this wouldn’t have been much of an issue, because the European Central Bank and the Federal Reserve had relaxed their emergency lending programs so banks like Northern Rock could get money on favorable terms. But King’s concerns about moral hazard meant that the Bank of England would offer no such accommodation until it was too late. When Northern Rock needed cash, it explored using its one branch in Ireland—part of the eurozone—to access money through the ECB. It concluded that getting the legal details in order would have taken two or three months—far too long to wait. As the weeks passed, Northern Rock’s cash crunch became increasingly self-perpetuating. With its future in doubt, the bank was less likely to get any money from lenders on private markets; their reluctance made its cash shortage all the more acute.


pages: 398 words: 105,917

Bean Counters: The Triumph of the Accountants and How They Broke Capitalism by Richard Brooks

"World Economic Forum" Davos, accounting loophole / creative accounting, Alan Greenspan, asset-backed security, banking crisis, Bear Stearns, Big bang: deregulation of the City of London, blockchain, BRICs, British Empire, business process, Charles Babbage, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Strachan, Deng Xiaoping, Donald Trump, double entry bookkeeping, Double Irish / Dutch Sandwich, energy security, Etonian, eurozone crisis, financial deregulation, financial engineering, Ford Model T, forensic accounting, Frederick Winslow Taylor, G4S, Glass-Steagall Act, high-speed rail, information security, intangible asset, Internet of things, James Watt: steam engine, Jeremy Corbyn, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, junk bonds, light touch regulation, Long Term Capital Management, low cost airline, new economy, Northern Rock, offshore financial centre, oil shale / tar sands, On the Economy of Machinery and Manufactures, Ponzi scheme, post-oil, principal–agent problem, profit motive, race to the bottom, railway mania, regulatory arbitrage, risk/return, Ronald Reagan, Savings and loan crisis, savings glut, scientific management, short selling, Silicon Valley, South Sea Bubble, statistical model, supply-chain management, The Chicago School, too big to fail, transaction costs, transfer pricing, Upton Sinclair, WikiLeaks

As subprime mortgage defaults in the US spread into the mainstream banking system and credit became harder to come by, the market took a closer look at Northern Rock. In September 2007, it said ‘no more’. The shunned Rock turned to the Bank of England for support. When the news leaked, the streets of Britain saw the first ‘run’ on a bank since Overend & Gurney a century and a half earlier. Hundreds of jobs went as Northern Rock was nationalized, with no compensation to investors, many of whom had spent their life savings on shares. In a description applied to many of the banks a couple of years later by Financial Services Authority chairman Lord Turner, Northern Rock’s returns had been ‘illusory profits’.30 Yet they justified huge payments to executives and shareholders, stripping the bank of any real capital.

It was a risk of which its auditor PwC was certainly aware, based on what it had said in its 2004 paper, but one about which the firm now said nothing. Northern Rock began to use the new IAS39 accounting standard at the beginning of 2005, a year earlier than most banks. It was no longer making provision for expected losses on mortgage loans. At the same time, the consequences of the markets’ excesses were becoming real: 8,200 home repossessions across the UK in 2004 became 21,000 in 2006.27 The interest rates the bank was having to pay in the money markets were steadily rising. Yet the prospect of greater defaults in the not-too-distant future was being ignored in both the accounts that Northern Rock was preparing under the new standard and, accordingly, the numbers used in its boardroom.

The law required the auditors to report to the Financial Services Authority when a bank ‘may not be, or may cease to be a going concern’.35 As any half-competent bean counter would have realized that Northern Rock was in a precarious position and ‘may cease to be a going concern’ well before it crumbled, this obligation ought to have been triggered. Even if the auditors were shy of publicly expressing concerns over a bank’s ‘going concern’ status for fear of spooking the markets, they should at least have put the regulator in the picture. Yet, throughout the whole of 2006, PwC and the Financial Services Authority did not discuss Northern Rock at all. They had just one meeting and one phone call, far too late, in 2007.


pages: 457 words: 143,967

The Bank That Lived a Little: Barclays in the Age of the Very Free Market by Philip Augar

"Friedman doctrine" OR "shareholder theory", activist fund / activist shareholder / activist investor, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Bonfire of the Vanities, bonus culture, book value, break the buck, business logic, call centre, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, family office, financial deregulation, financial innovation, fixed income, foreign exchange controls, Glass-Steagall Act, high net worth, hiring and firing, index card, index fund, interest rate derivative, light touch regulation, loadsamoney, Long Term Capital Management, long term incentive plan, low interest rates, Martin Wolf, money market fund, moral hazard, Nick Leeson, Northern Rock, offshore financial centre, old-boy network, out of africa, prediction markets, proprietary trading, quantitative easing, risk free rate, Ronald Reagan, shareholder value, short selling, Sloane Ranger, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, too big to fail, vertical integration, wikimedia commons, yield curve

Reflecting widely held economic theory, he believed that the banking sector was strong enough to withstand the impact of taking mortgage backed securities on to balance sheets; that the private sector would re-establish valuations; and that to step in prematurely would encourage ‘moral hazard’, the perception among financial institutions that they would be protected from the consequences of their actions by a government safety net.21 It was the direct opposite of the view Diamond had put forward but the careful reader would have noted the penultimate paragraph of the governor’s letter: ‘lender of last resort operations remain in the armoury of all central banks.’22 THE RUN ON THE ROCK The lender of last resort’s role is to provide loans to institutions on the verge of collapse and when King wrote that letter he had already agreed with the Treasury and the FSA that the Bank of England would if necessary stand behind Northern Rock. He had also intimated as much to the company itself. Northern Rock’s June profits warning had been a sign of fundamental problems with its business model. It had been one of the most aggressive players in the residential mortgage market, raising its share from 6 to 20 per cent in a decade.23 The money it lent came from securitizing and selling on its loans and from borrowing in the short term inter-bank money markets; by 2007, only a quarter of Northern Rock’s £101 billion loan book was covered by retail deposits. When money markets dried up in August 2007, Northern Rock was unable to renew wholesale debt as it matured or lend to new borrowers – or even repay depositors.

The team had just twelve staff keeping their eyes on two of the UK’s largest banks which at that time had combined assets of £2 trillion. The boom conditions of 2006 had bred total confidence in the banking industry. Northern Rock and HBOS were piling up mortgage market share, RBS was lending with astonishing confidence and gung-ho chiefs believed that ‘big was good but bigger was even better’. Fund managers wanted to know why Northern Rock’s asset and dividend growth was better than Barclays’ and pressed Varley to get ahead of the pack. As the top of the industry consolidated around a smaller number of bigger players, Barclays dared not get left behind.

On 16 August, King had told Northern Rock’s chairman Dr Matt Ridley that the Bank of England would, if necessary, act as a lender of last resort but that his strong advice was to find an alternative. No such alternative was forthcoming and on 10 September it had to seek emergency funds from the Bank of England, in secret. Nevertheless, on Thursday 13 September what had happened was reported on the BBC by Robert Peston, the broadcaster’s business editor. It was the most dramatic business story in living memory. The following day thousands of depositors rushed to Northern Rock branches anxious to withdraw their money before the bank went bust.


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, Glass-Steagall Act, 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, land bank, Michael Milken, mobile money, moral hazard, mortgage debt, new economy, Northern Rock, Occupy movement, Paul Volcker talking about ATMs, plutocrats, private military company, proprietary trading, public intellectual, 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

Chancellor of the Exchequer announced that he had authorised the Bank of England to provide a “liquidity support facility”—effectively, a larger than normal overdraft—to Northern Rock, a medium-sized British bank that specialised in residential mortgages.9 Northern Rock had run into trouble because it funded a large part of its book of mortgage lending—by its nature, a collection of very long-term promises to pay—by selling short-dated bills and bonds to investors; that is, short-term promises to pay. When problems emerged in international financial markets in the course of 2007, this short-term funding disappeared. And when Northern Rock’s depositors saw the way the wind was blowing, they also began to pull out their money.

The liquidity support operation had consisted of the sovereign merely agreeing to give one fixed promise to pay—a claim on the Bank of England—in return for another fixed promise of supposedly equal value—a claim on Northern Rock. What was now required, however, was something quite different. The sovereign would give its fixed promises to pay in return for equity: a residual claim on the uncertain difference between the value of Northern Rock’s assets and its liabilities. The liquidity support, at least in principle, had involved no risk of profit or loss—just a transfer of liquidity risk from private investors to the sovereign. This new operation would involve, by contrast, a transfer of credit risk. If losses ceased to mount on Northern Rock’s mortgages, the sovereign might not lose money.

This was the time-honoured palliative being deployed in September 2007 by the Bank of England—for the first time, it was said, since the collapse of Overend, Gurney a hundred and forty years earlier.12 As the months went on, it became clear that Northern Rock’s problem was not just one of liquidity, however. Many of the loans it had made were no good. This was no longer a problem of synchronising payments that were going to be made as agreed. It meant that no matter how good the synchronisation, the sums might not add up. The total value of Northern Rock’s liabilities, it seemed, was larger than the value of its assets—regardless of when one or the other was coming due. Under normal circumstances—if it has been doing its job properly—the value of a bank’s assets will be larger than its liabilities.


pages: 309 words: 85,584

Nine Crises: Fifty Years of Covering the British Economy From Devaluation to Brexit by William Keegan

Alan Greenspan, banking crisis, Bear Stearns, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, Bretton Woods, Brexit referendum, British Empire, capital controls, congestion charging, deindustrialization, Donald Trump, Etonian, eurozone crisis, Fall of the Berlin Wall, financial engineering, financial innovation, financial thriller, floating exchange rates, foreign exchange controls, full employment, gig economy, inflation targeting, Jeremy Corbyn, Just-in-time delivery, light touch regulation, liquidity trap, low interest rates, Martin Wolf, military-industrial complex, moral hazard, negative equity, Neil Kinnock, Nixon triggered the end of the Bretton Woods system, non-tariff barriers, North Sea oil, Northern Rock, oil shock, Parkinson's law, Paul Samuelson, pre–internet, price mechanism, quantitative easing, Ronald Reagan, school vouchers, short selling, South Sea Bubble, Suez crisis 1956, The Chicago School, transaction costs, tulip mania, Winter of Discontent, Yom Kippur War

Borrowing ‘short’ and lending ‘long’ is all very well in good times, but not when there is a collapse of confidence. The building society Northern Rock was over-dependent on extremely short-term funds, offering 100 per cent plus mortgages, which they funded by borrowing very short-term funds. It was perfectly rational for members of the public to rush to withdraw what might otherwise be considered longer-term savings when it was reported that the institution was in trouble, and, at that stage, government guarantees of the safety of deposits had not been confirmed. Those guarantees were soon announced, but not before memorable scenes of queues outside Northern Rock branches were flashed around the world.

That Lehman Brothers was allowed to go under shook financial confidence so much that it certainly added to the momentum for a large-scale recapitalisation and rescue of the banking system. Concerned about the historical association between Old Labour and nationalisation, Gordon Brown had resisted calls for immediate nationalisation of Northern Rock, even when Governor King was saying this was the obvious answer. Finally, on 17 February 2008, Chancellor Darling announced that Northern Rock would ‘temporarily’ be taken into public ownership. Several years later, the Treasury’s most senior official, Sir Nicholas Macpherson, acknowledged, ‘With the benefit of hindsight the Treasury was slow off the mark in addressing the problem.

For years, Labour had been terrified of being considered ‘the party of devaluation’ – just as, after the onset of the financial crisis of 2007, Gordon Brown, haunted by accusations that Labour was the party of nationalisation, was slow to accept the advice of his officials that he would have to nationalise Northern Rock. As president of the Board of Trade, Wilson had presided over what he referred to as ‘a bonfire of controls’, left over from the recent war. Unlike most economists, he was more tuned intellectually to physical, supply-side measures such as import controls to cure a trade deficit rather than to use of the price mechanism for a currency adjustment.


pages: 346 words: 90,371

Rethinking the Economics of Land and Housing by Josh Ryan-Collins, Toby Lloyd, Laurie Macfarlane

agricultural Revolution, asset-backed security, balance sheet recession, bank run, banking crisis, barriers to entry, basic income, book value, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, debt deflation, deindustrialization, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, foreign exchange controls, full employment, garden city movement, George Akerlof, ghettoisation, Gini coefficient, Hernando de Soto, housing crisis, Hyman Minsky, income inequality, information asymmetry, knowledge worker, labour market flexibility, labour mobility, land bank, land reform, land tenure, land value tax, Landlord’s Game, low interest rates, low skilled workers, market bubble, market clearing, Martin Wolf, means of production, Minsky moment, Money creation, money market fund, mortgage debt, negative equity, Network effects, new economy, New Urbanism, Northern Rock, offshore financial centre, Pareto efficiency, place-making, Post-Keynesian economics, price stability, profit maximization, quantitative easing, rent control, rent-seeking, Richard Florida, Right to Buy, rising living standards, risk tolerance, Robert Solow, Second Machine Age, secular stagnation, shareholder value, subprime mortgage crisis, the built environment, The Great Moderation, The Market for Lemons, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Malthus, transaction costs, universal basic income, urban planning, urban sprawl, working poor, working-age population

In 1965, two North East societies ‒ the Northern Counties Permanent Building Societies (established in 1850) and the Rock Building Societies (established in 1865) – merged and Northern Rock Building Societies was born. Following the deregulation of the 1970s and 1980s, increasing competition for mortgage finance from banks, including international banks, led building societies to expand via mergers and acquisitions. Northern Rock acquired 53 smaller building societies, most notably the North of England Building Society in 1994. Finally, in 1997, Northern Rock chose to demutualise and become a shareholder-owned bank. Its assets, patiently built up by its members since the 1860s, were floated on the stock exchange, with existing savers and mortgage borrowers receiving a cash windfall.

Often such loans are temporarily held in special purpose vehicles (SPVs) sponsored by banks and held off their balance sheets (see Box 5.5). By shifting these loans off the balance sheet, banks were able to reduce the amount of capital they had to hold against their assets, meaning they could make more loans. Box 5.4 The parable of Northern Rock In November 2015 the UK government agreed to sell a £13 billion collection of former Northern Rock mortgages – transferred to public ownership after the bank collapsed during the financial crisis ‒ to a US private equity group, Cerberus Capital Management. The loans covered about 125,000 customers owing an average of £100,000. It was the biggest ever sale of financial assets by a European government.

How did a US investment fund specialising in distressed debt come to buy £13 billion worth of nationalised UK mortgages? The story is a remarkable insight into the way in which property and land in the UK has become financialised over the past century. Northern Rock was a bank when, at the height of the financial crisis in February 2008, it was nationalised by the government. Six months earlier, customers were queuing outside its doors to withdraw their cash in the first genuine bank run in the UK since the nineteenth century. But only seven years before Northern Rock was a quite different kind of institution: it was a building society. Over time, many building societies merged, enabling the pooling of liquidity that allowed for larger home building schemes and mortgage financing.


pages: 482 words: 149,351

The Finance Curse: How Global Finance Is Making Us All Poorer by Nicholas Shaxson

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Airbnb, airline deregulation, Alan Greenspan, anti-communist, bank run, banking crisis, Basel III, Bear Stearns, benefit corporation, Bernie Madoff, Big bang: deregulation of the City of London, Blythe Masters, Boris Johnson, Bretton Woods, British Empire, business climate, business cycle, capital controls, carried interest, Cass Sunstein, Celtic Tiger, central bank independence, centre right, Clayton Christensen, cloud computing, corporate governance, corporate raider, creative destruction, Credit Default Swap, cross-subsidies, David Ricardo: comparative advantage, demographic dividend, Deng Xiaoping, desegregation, Donald Trump, Etonian, export processing zone, failed state, fake news, falling living standards, family office, financial deregulation, financial engineering, financial innovation, forensic accounting, Francis Fukuyama: the end of history, full employment, gig economy, Gini coefficient, Glass-Steagall Act, global supply chain, Global Witness, high net worth, Ida Tarbell, income inequality, index fund, invisible hand, Jeff Bezos, junk bonds, Kickstarter, land value tax, late capitalism, light touch regulation, London Whale, Long Term Capital Management, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, megaproject, Michael Milken, Money creation, Mont Pelerin Society, moral hazard, neoliberal agenda, Network effects, new economy, Northern Rock, offshore financial centre, old-boy network, out of africa, Paul Samuelson, plutocrats, Ponzi scheme, price mechanism, proprietary trading, purchasing power parity, pushing on a string, race to the bottom, regulatory arbitrage, rent-seeking, road to serfdom, Robert Bork, Ronald Coase, Ronald Reagan, Savings and loan crisis, seminal paper, shareholder value, sharing economy, Silicon Valley, Skype, smart grid, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, special economic zone, Steve Ballmer, Steve Jobs, stock buybacks, Suez crisis 1956, The Chicago School, Thorstein Veblen, too big to fail, Tragedy of the Commons, transfer pricing, two and twenty, vertical integration, Wayback Machine, wealth creators, white picket fence, women in the workforce, zero-sum game

Plain, crude ownership is for the little people. It also helps to explain that suspicious Northern Rock structure held ‘under the terms of a discretionary trust for the benefit of one or more charities’. The structure was legally separated from Northern Rock by the legal walls of the trust, so those assets were considered off the bank’s balance sheet. And yet the structure was economically connected to Northern Rock, with its financialised pipework of Jersey androids ultimately spitting profits out of the fortress and into the bank’s bottom line. Northern Rock, too, got to have its cake and eat it. And yet, you may still ask, what’s with the charitable trust?

These vehicles got funding to buy mortgages by issuing short-term debt and selling it to global investors; when investors got the jitters and stopped rolling over their loans, the whole tightly interconnected financial machine ground to a violent halt. On one level, this explained Northern Rock’s sudden cardiac arrest. But the deeper Murphy probed, the odder it looked. It wasn’t just that these vehicles were mostly based in the British tax haven of Jersey, or that they were controlled by Northern Rock but not owned by it – a distinction that allowed it to profit from them while claiming they were off its balance sheet, freeing up capital.1 The really odd thing was the fact that the whole shebang, holding £40 billion or so worth of mortgages, was according to Northern Rock documents ‘held on trust by a professional trust company under the terms of a discretionary trust for the benefit of one or more charities’ and for ‘other charitable purposes selected at the discretion of the professional trust company’.

See also ‘Serious Fraud Office needs funding boost, warns OECD’, Financial Times, 23 March 2017. 8 Wealth and its Armour 1. See ‘Northern Rock – the questions needing answers’, taxresearch.org.uk, 17 September 2007. The distinction between ownership and control is outlined on p.28 of ‘Granite Master Issuer plc: annual report and accounts for the year ended 31 December 2006’, where it states, ‘The Company’s ultimate controlling party is Northern Rock plc … the Company’s ultimate parent is the Law Debenture Intermediary Corporation plc, a company registered in England and Wales, the shares being held under a trust arrangement.’ Also see Ian Cobain and Ian Griffiths, ‘A twisty trail: from Northern Rock to Jersey to a tiny charity’, Guardian, 28 November 2007; ‘Memorandum from the Financial Services Authority’, Parliament.uk., 9 October 2007; Paul Murphy, ‘The (un)charitable core of Northern Rock’, FT Alphaville, 8 October 2007.


pages: 334 words: 82,041

How Did We Get Into This Mess?: Politics, Equality, Nature by George Monbiot

Affordable Care Act / Obamacare, Alfred Russel Wallace, Anthropocene, bank run, bilateral investment treaty, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, Corn Laws, creative destruction, credit crunch, David Attenborough, dematerialisation, demographic transition, drone strike, en.wikipedia.org, first-past-the-post, full employment, Gini coefficient, hedonic treadmill, income inequality, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, invisible hand, land bank, land reform, land value tax, Leo Hollis, market fundamentalism, meta-analysis, Mont Pelerin Society, moral panic, Naomi Klein, Northern Rock, obamacare, oil shale / tar sands, old-boy network, peak oil, place-making, planned obsolescence, plutocrats, profit motive, rent-seeking, rewilding, The Wealth of Nations by Adam Smith, Thomas Malthus, transaction costs, urban sprawl, We are all Keynesians now, wealth creators, World Values Survey

Let’s throw off these parasitic overlords and liberate the research which belongs to us. 29 August 2011 34 The Man Who Wants to Northern Rock the Planet Brass neck doesn’t begin to describe it. Matt Ridley used to make his living partly by writing state-bashing columns in the Daily Telegraph. The government, he complained, is ‘a self-seeking flea on the backs of the more productive people of this world … governments do not run countries, they parasitise them’.1 Taxes, bail-outs, regulations, subsidies, intervention of any kind, he argued, are an unwarranted restraint on market freedom. Then he became chairman of Northern Rock, where he was able to put his free market principles into practice.

The taxpayer eventually bailed out Northern Rock to the tune of £27 billion. When news of the crisis leaked, it caused the first run on a bank in this country since 1878. The parasitic state had to intervene a second time: the run was halted only when the government guaranteed the depositors’ money. Eventually the government was obliged to nationalise the bank. Investors, knowing that their money would now be safe as it was protected by the state, began to return. While the crisis was made possible by a ‘substantial failure of regulation’, MPs identified the directors of Northern Rock as ‘the principal authors of the difficulties that the company has faced’.

Of those whose fluctuations have been measured, one is increasing, three are stable and eight are declining.20 Ridley uses blatant cherry-picking to create the impression that ecosystems are recovering: water snake numbers in Lake Erie, fish populations in the Thames, bird’s eggs in Sweden.21 But as the Millennium Ecosystem Assessment shows, of sixty-five global indicators of human impacts on biodiversity, only one – the extent of temperate forests – is improving. Eighteen are stable, but in all the other cases the impacts are increasing.22 Northern Rock grew rapidly by externalising its costs, pursuing money-making schemes that would eventually be paid for by other people. Ridley encourages us to treat the planet in the same way. He either ignores or glosses over the costs of ever-expanding trade and perpetual growth. His timing, as BP fails to contain the oil spill in the Gulf of Mexico, is unfortunate. Like the collapse of Northern Rock, the Deepwater Horizon disaster was made possible by weak regulation. Ridley would weaken it even further, leaving public protection to the invisible hand of the market.


pages: 263 words: 80,594

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

"Friedman doctrine" OR "shareholder theory", 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, democratizing finance, Donald Trump, emotional labour, eurozone crisis, Extinction Rebellion, extractivism, 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, green new deal, Greenspan put, housing crisis, Hyman Minsky, impact investing, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), Jeremy Corbyn, job polarisation, junk bonds, Kenneth Rogoff, Kickstarter, land value tax, light touch regulation, low interest rates, 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, Robert Solow, 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

They may have done so on unwise terms, but they had invested in the expansion of the productive capacity of the economy — in our ability to produce things, both then and in the future. Northern Rock was doing no such thing. A former building society, Northern Rock lent consumers money to buy already-existing homes. It had been criticised for approving mortgages with incredibly high “loan-to-value” ratios; on occasion the bank granted mortgages worth 125% of the property’s value.3 Rather than creating assets, Northern Rock was creating debt. And it was doing so on an unsustainable scale. The contrast is puzzling. If it was so unproductive, then why was Northern Rock bailed out when Overend, Gurney and Company was allowed to fail?

Overend appealed to the Bank of England for financial assistance, but its pleas fell on deaf ears. Queues started forming outside the bank’s headquarters at 65 Lombard Street, and within a week the “Panic of 1866” had taken hold of the country. 141 years later, the panic of 2007 was just beginning as Northern Rock, the largest mortgage lender in the UK, found itself unable to access funding.2 Northern Rock’s business model was based on the securitisation of mortgage loans — turning mortgages into financial securities that could be traded on capital markets. It borrowed from other financial institutions over short-time horizons — often on an overnight basis — and lent long, issuing mortgages that wouldn’t mature for decades.

When financial markets started to seize up in 2007, banks stopped lending to one another, and “the Rock” found itself unable to access international capital markets, meaning it couldn’t pay its debts. On 13 September 2007, the news broke that Northern Rock was seeking emergency support from the Bank of England: the first UK bank run since Overend. Both bank runs resulted from an asset bubble — one in railways, the other in housing. Both Northern Rock and Overend relied on borrowing from financial markets to finance their day-to-day liabilities. Both were eventually forced to appeal to the Bank of England for help. But there were also some critical differences between the two institutions.


pages: 387 words: 119,244

Making It Happen: Fred Goodwin, RBS and the Men Who Blew Up the British Economy by Iain Martin

Alan Greenspan, asset-backed security, bank run, Basel III, Bear Stearns, beat the dealer, Big bang: deregulation of the City of London, Bletchley Park, call centre, central bank independence, computer age, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, deindustrialization, deskilling, Edward Thorp, Etonian, Eugene Fama: efficient market hypothesis, eurozone crisis, falling living standards, financial deregulation, financial engineering, financial innovation, G4S, Glass-Steagall Act, high net worth, interest rate swap, invisible hand, joint-stock company, Kickstarter, light touch regulation, London Whale, Long Term Capital Management, long term incentive plan, low interest rates, moral hazard, negative equity, Neil Kinnock, Nick Leeson, North Sea oil, Northern Rock, old-boy network, pets.com, proprietary trading, Red Clydeside, shareholder value, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile, value at risk, warehouse robotics

By mid-September the credit crunch spread to the British high street and there were queues outside branches of Northern Rock, as an old-fashioned bank run got under way. The Northern Rock business model had been built on lending large multiples of salary to Britons who wanted to buy a house, on the expectation that it could borrow this on the international ‘wholesale’ money markets, markets that were now freezing. An ill-prepared FSA, Bank of England and Treasury were desperately trying to work out how to keep Northern Rock going, before moving later to full nationalisation at huge cost to the taxpayer. In August and September there was considerable concern inside RBS over market turbulence, although it didn’t yet turn into panic.

In 2000, after being axed by Rowland, Wanless joined the board of a then small bank in his native North East of England and chaired its audit and risk committees until the crash of 2007. That bank was called Northern Rock. To replace Wanless at NatWest in 1999, Rowland made Ron Sandler chief operating officer. The tough, Zimbabwean-born former boss of Lloyd’s insurance market was charged with helping Rowland fight off Mathewson and Burt. In a much later incarnation, Sandler would follow Wanless once again. He was hired by the Labour government to oversee the nationalised Newcastle-based Northern Rock after Wanless and others were forced to resign following its collapse in 2007. In October 1999, it was NatWest that Sandler was battling to save.

In January 2013, five years into the crisis, the UK economy was still 3.4 per cent below its pre-slump peak. The living standards of millions of families have declined. Of course, in the crisis of 2007 to 2008 RBS was not the only British institution to need rescuing. Plenty of others got into difficulties – HBOS, Northern Rock, Bradford & Bingley. All had to be bailed out or sold, and even the institutions that did not have to be nationalised – taken over by the taxpayer – relied on forms of special support and loan facilities from a government desperate to keep the banking system alive. RBS is a special case, however.


pages: 315 words: 99,065

The Virgin Way: Everything I Know About Leadership by Richard Branson

barriers to entry, Boeing 747, call centre, carbon footprint, Celtic Tiger, clean water, collective bargaining, Costa Concordia, do what you love, Donald Trump, Elon Musk, flag carrier, friendly fire, glass ceiling, illegal immigration, index card, inflight wifi, Lao Tzu, legacy carrier, low cost airline, M-Pesa, Mahatma Gandhi, Mark Zuckerberg, Nelson Mandela, Northern Rock, profit motive, Ralph Waldo Emerson, Ronald Reagan, shareholder value, Sheryl Sandberg, Silicon Valley, stem cell, Steve Jobs, Tesla Model S, Tony Fadell, trade route, vertical integration, Virgin Galactic, work culture , zero-sum game

The days of the mega-parties at the Manor may be a thing of the past but generally we have reverted to the original smaller more intimate roots and settings in which everyone gets a chance to glimpse an ‘other side’ to the people they work with – including myself, whenever I can work an invitation. ROCKING THE ROCK In January 2012, Virgin Money finally acquired Northern Rock, the British high-street bank that had been nationalised four years earlier, and we had a lot to celebrate. After their brief spell of working for the government, Northern Rock’s 2,000 or so employees were clearly excited about joining the Virgin family. They didn’t have to wait long to get a taste of their new corporate culture when Jayne-Anne Gadhia, CEO of Virgin Money, and I hosted a huge street party inside Northern Rock’s headquarters in Newcastle upon Tyne, at which everyone got an opportunity to behave in very ‘unbankerlike’ ways!

In retrospect I was also glad she just happened to be watching TV at home one Sunday evening and saw a discussion about the struggles facing Northern Rock, an iconic bank in the north of England that had run afoul of the 2007 financial crisis. Apparently some TV banking expert on the show said something to the effect that, ‘What this bank needs is someone like Richard Branson to sort it out and run it.’ She sent me an email right away saying, ‘Maybe it’s not a bad idea so let’s talk about it.’ We did – and following a call to Alistair Darling, the Chancellor of the Exchequer, the next day, we were on our way for what would be a highly frustrating but finally successful four-year pursuit: in January of 2012 Northern Rock officially became a part of Virgin Money when we acquired it from the UK government.

We did – and following a call to Alistair Darling, the Chancellor of the Exchequer, the next day, we were on our way for what would be a highly frustrating but finally successful four-year pursuit: in January of 2012 Northern Rock officially became a part of Virgin Money when we acquired it from the UK government. It was agreed that all of the Northern Rock branches would be rebranded as Virgin Money as quickly as possible and just like that we found ourselves with a high-street banking presence for the first time. Northern Rock had a lot of wonderful people working for them but understandably they’d been feeling pretty beaten up as their bank was dragged through bankruptcy and was then run by the government for four years. Talk about one extreme to the other! An overnight leap from being a government employee to working for Virgin is about as dramatic (hopefully not traumatic) a change as I can imagine.


pages: 324 words: 90,253

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

Alan Greenspan, Albert Einstein, Apollo 11, Asian financial crisis, asset-backed security, banking crisis, Basel III, Bear Stearns, Berlin Wall, Bernie Madoff, bond market vigilante , British Empire, business cycle, capital controls, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, congestion charging, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cross-subsidies, currency risk, debt deflation, Deng Xiaoping, Diane Coyle, endowment effect, eurozone crisis, Fall of the Berlin Wall, financial innovation, financial repression, fixed income, floating exchange rates, Ford Model T, full employment, George Akerlof, German hyperinflation, Glass-Steagall Act, Hyman Minsky, income inequality, income per capita, inflation targeting, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, junk bonds, Kickstarter, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, London Interbank Offered Rate, loss aversion, low interest rates, market clearing, mass immigration, Minsky moment, moral hazard, mortgage debt, Neil Armstrong, new economy, New Urbanism, Nick Leeson, Northern Rock, Occupy movement, oil shale / tar sands, oil shock, old age dependency ratio, price mechanism, price stability, quantitative easing, railway mania, rent-seeking, reserve currency, rising living standards, risk free rate, Savings and loan crisis, seminal paper, South Sea Bubble, sovereign wealth fund, technology bubble, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, too big to fail, trade route, trickle-down economics, Washington Consensus, women in the workforce, working-age population

Yet, today, bankers no longer trust each other. While Northern Rock grabbed all the headlines in 2007 thanks to the vast queues of worried depositors who gathered outside, understandably fearing the loss of their savings, its public failure was only the final chapter in a whole volume of – sometimes self-imposed – mishaps. The loss of trust in Northern Rock reflected four factors: (1) a loss of faith in the pieces of paper – the IOUs – which banks released into the capital markets – so-called wholesale funding – to support lending to high risk households; (2) a sense that Northern Rock's own business model – unusually dependent on wholesale funding – was no longer sustainable; (3) a sudden panic on behalf of equity investors who recognized that, in the absence of wholesale funding, Northern Rock was no longer a viable concern; and (4) in the absence of sufficient deposit guarantees – and after a leak to the BBC9 – a recognition on behalf of Northern Rock's depositors that their money was no longer safe.

Banks assume a decent rate of economic growth and continued gains in house prices both to increase their loan books (and, hence, their profitability) and also to limit the number of non-performing loans.17 Think, for example, of the behaviour of UK banks before the onset of the financial crisis. Back then, loan-to-value ratios on UK mortgages averaged around 75 per cent. Some of the more outlandish banks – most obviously, Northern Rock – were offering loan-to-value ratios of 125 per cent, based on the foolish expectation that property prices would forever rise. In 2012, five years after the collapse of Northern Rock, average loan-to-value ratios were down to around 55 per cent and the mortgage market was barely growing. Consumer credit had stagnated while commercial real estate loans were shrinking fast. Delusional behaviour creates its own problems.

The loss of trust in Northern Rock reflected four factors: (1) a loss of faith in the pieces of paper – the IOUs – which banks released into the capital markets – so-called wholesale funding – to support lending to high risk households; (2) a sense that Northern Rock's own business model – unusually dependent on wholesale funding – was no longer sustainable; (3) a sudden panic on behalf of equity investors who recognized that, in the absence of wholesale funding, Northern Rock was no longer a viable concern; and (4) in the absence of sufficient deposit guarantees – and after a leak to the BBC9 – a recognition on behalf of Northern Rock's depositors that their money was no longer safe. For the banking industry more generally, a further complication came with the formation of so-called conduits and related structured investment vehicles (SIVs), which typically created a contingent – albeit hidden – liability for banks.


pages: 368 words: 32,950

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

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

Mervyn King’s continued long-term role as Governor of the Bank of England came under brief trial by media. Shortly afterwards, King told a Treasury Select Committee that he had been stopped from acting quickly to prevent the Northern Rock panic because of four pieces of legislation that ensure transparency. He said he would have preferred to deal with Northern Rock by acting covertly as a lender of last resort, but was advised that the Market Abuse Directive (see Chapter 22) meant this action had to be made public. He told the Committee that he had hoped Northern Rock could be taken over, but this had not been possible because it would have taken too long. Acquisitions under the UK’s Takeover Code take 60 days to complete. _______________________________________ THE BANK OF ENGLAND 17  King noted two pieces of current legislation that could contribute to public panic in the event of a banking liquidity problem.

If the operation had been allowed to fail, other bullion dealers would have joined the creditors, which would have diminished confidence in the London gold market. In September 2007, the Bank of England agreed to provide Northern Rock, a mortgage lending bank, with ‘as much funding as may be necessary’. The mortgage lender obtained three-quarters of its funds from wholesale markets, where lending had become much more difficult as a knock-on effect from US sub-prime mortgage failures (see Chapter 12). Some commentators queried whether the crisis at Northern Rock, only the fifth largest mortgage lender in the UK, had justified intervention by the Bank of England, which on the Bank’s own criteria should have been in the case of systemic threat.

Some thought that the Bank of England might have made things easier for banks generally if, like the European Central Bank (ECB) or the US Federal Reserve, it had injected liquidity earlier into the system. The Bank of England’s publicised support was met with a public panic, and hordes of customers withdrew savings from Northern Rock. A few days later the Chancellor offered an unprecedented and legally binding guarantee of all funds deposited with Northern Rock, something that it would not be able to extend to the entire banking system without having to print money on a scale that could lead to horrendous inflation. Later in the same month, the Bank of England said it would pump a further £10 billion into the money markets at a three-month maturity, with penal interest rates, against a wider range of collateral, including mortgage collateral, than in its weekly open market operations.


pages: 543 words: 147,357

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

Abraham Maslow, Alan Greenspan, Andrei Shleifer, asset-backed security, bank run, banking crisis, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Blythe Masters, Boris Johnson, bread and circuses, Bretton Woods, business cycle, capital controls, carbon footprint, Carmen Reinhart, Cass Sunstein, centre right, choice architecture, cloud computing, collective bargaining, conceptual framework, Corn Laws, Cornelius Vanderbilt, 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, general purpose technology, George Akerlof, Gini coefficient, Glass-Steagall Act, 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, Japanese asset price bubble, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, language acquisition, Large Hadron Collider, liberal capitalism, light touch regulation, Long Term Capital Management, long term incentive plan, Louis Pasteur, low cost airline, low interest rates, low-wage service sector, mandelbrot fractal, margin call, market fundamentalism, Martin Wolf, mass immigration, means of production, meritocracy, 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, power law, price discrimination, private sector deleveraging, proprietary trading, 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, systems thinking, 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, three-masted sailing ship, too big to fail, unpaid internship, value at risk, Vilfredo Pareto, Washington Consensus, wealth creators, work culture , working poor, world market for maybe five computers, zero-sum game, éminence grise

By 2000, Cheltenham and Gloucester, the Alliance and Leicester, the Halifax, Northern Rock, the Woolwich and Bradford and Bingley had all demutualised as well. Some, like the Halifax and Cheltenham and Gloucester, had been taken over (by Bank of Scotland and Lloyds-TSB, respectively) and were lending as components of larger banking groups; others, like the Bradford and Bingley and Northern Rock, were still independent. But all advanced mortgages in an environment in which there was no check to growth, knowing that they could be financed after the event in the interbank and securitisation markets. Northern Rock was far from the only bank willing to lend more than 100 per cent of a house’s value and six times the borrower’s income.

An IMF paper reports that young people growing up in recessions are much more fatalistic than others, believing that effort and work are far less important in generating results than having the luck to live in good times.7 Bank crashes can even damage health directly. A study at Cambridge University found that they increase the risk of death from stress and worry.8 The customers who tried to withdraw cash from Northern Rock, Britain’s first bank run for more than a century, experienced a similar level of stress to victims of an earthquake. The capitalism that Britain developed and which crashed so spectacularly has a lot to answer for. To date, though, it has hardly even been asked any questions, let alone provided any answers.

At the same time, transient, footloose shareholders demanded higher and quicker profits. Caught in this pincer, even the most conservative banks started to consider higher leverage or investing in riskier assets as the only means to survive.20 Unregulated nineteenth-century banking witnessed Northern Rock-type bank runs aplenty. Famously, Overend, Gurney and Co. went belly up in 1866, prompting the great economic and political commentator Walter Bagehot to describe its senior executives as ‘sapient nincompoops’. ‘These losses’, he wrote, ‘were made in a manner so reckless and so foolish that one would think a child who had lent money in the City of London would have lent it better.’21 The bank had borrowed short, made terrible long-term lending decisions and suffered the consequences.


pages: 566 words: 160,453

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

90 percent rule, active measures, affirmative action, Affordable Care Act / Obamacare, Albert Einstein, bank run, banking crisis, basic income, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Lives Matter, 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, driverless car, estate planning, fake news, 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, Jeremy Corbyn, job satisfaction, John Bercow, Kenneth Rogoff, labor-force participation, liquidationism / Banker’s doctrine / the Treasury view, longitudinal study, low interest rates, 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

Britain’s deposit-insurance scheme guaranteed fully only the first £2,000 of deposits, and then 90 percent of only the next £33,000. It was sensible to run to the bank to get your money. Northern Rock relied on wholesale markets rather than on retail deposits to finance most of its lending.11 In January 2007, it announced record pretax profits of £627 million for 2006, up 27 percent on the previous year. As the MPC was pushing interest rates up, from 4.5 percent in July 2006 to 5.75 percent in August 2007, Northern Rock had agreed to issue a tranche of mortgages at interest rates lower than those it eventually had to pay to finance them. Northern Rock was in trouble. The Bank of England emphasized the concerns over moral hazard.

As the Treasury Select Committee (TSC) noted, these factors together explained why it did not take many customers seeking to withdraw their funds for queues to extend out the front door and into the street—and into the public consciousness.12 Lines started to form outside branches of Northern Rock on Friday, September 14, as the share price fell 31 percent on the day. Lines continued to form the next day, Saturday. 13 On Monday, September 17, shares opened 31 percent lower. With lines forming again. Alistair Darling intervened, pledging that the government would guarantee all deposits. Northern Rock was eventually nationalized on February 17, 2008. The run was halted. The man in the street was rightly upset at the failure to stop a bank run. The Bank of England knew well before it failed that Northern Rock was in trouble and did nothing about it.

Output collapsed and there were five negative quarters. It is also apparent from this figure that in August 2008 the UK was already in recession. We didn’t know where we were. We didn’t know where we had been, and we didn’t know where we were going. Same as now. Northern Rock It is not as if there weren’t adequate warnings. During my time on the MPC I watched as thousands of people lined up outside Northern Rock when its website failed. The world was treated to the scenes of a good old bank run. Depositors waiting in line around the country to withdraw their cash. Shin (2009) has noted that the last time that happened was at Overend, Gurney, a London bank that got in trouble in the railway and docks boom of the 1860s.


pages: 223 words: 10,010

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

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

Despite raising eyebrows across the industry and being attacked by some rivals as ‘too racy’, other banks soon started offering more generous deals just to stay in the race. By 2006, mortgages of five times salary or more were commonplace.264 For a while, Northern Rock’s aggressive business model appeared to pay off handsomely. By 2007, it had risen to provide a fifth of all mortgages, outstripping bigger rivals like Halifax and Nationwide, while its share price hit an all-time high. But Northern Rock’s strategy was in many ways a microcosm of what had been happening to the finance and market-led British economy. By the middle of the 2000s, Britain was riding the wave of an economic boom and house prices were heading skyward.

Gradually, most building societies chose to sell up and convert into banks, abandoning mutuality in favour of profits (at least in part because of the Citystyle rewards available to bank executives) and making them accountable not to members but to shareholders. One by one, the biggest of the high street names—Abbey National, Halifax, Cheltenham and Gloucester, Northern Rock—converted. Although mutual building societies—from Nationwide to the Yorkshire—still exist, the majority of mortgages are now provided by banks. Deregulation and demutualisation proved another personal gravy-train for those at the top of the finance industry bringing higher fees, commissions and bonuses.

In the 1960s and 1970s, the typical mortgage was limited to two and a half times earnings, and rarely more than 80 or 90 per cent of the property value. Some kind of deposit was mandatory. After big bang, these restrictions were mostly axed and mortgage deals became more and more generous. The bank leading the charge on innovation was Northern Rock, the Newcastlebased building society that had started life as a friendly society in the nineteenth century. More than a century later, it was among the last of those building societies succumbing to privatisation, converting, despite a good deal of opposition from members, into a bank in 1997.


pages: 464 words: 139,088

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

Alan Greenspan, Andrei Shleifer, Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, behavioural economics, 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, classic study, 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, Glass-Steagall Act, Great Leap Forward, Hyman Minsky, inflation targeting, invisible hand, Japanese asset price bubble, 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, low interest rates, 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, no-fly zone, North Sea oil, Northern Rock, oil shale / tar sands, oil shock, open economy, paradox of thrift, Paul Samuelson, Ponzi scheme, price mechanism, price stability, proprietary trading, purchasing power parity, quantitative easing, rent-seeking, reserve currency, Richard Thaler, rising living standards, Robert Shiller, Robert Solow, 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

At the same time, the bank’s leverage ratio was extraordinarily high at between 60 to 1 and 80 to 1.31 The reason for this remarkable discrepancy between the two measures of capital ratios was that the international standards assumed that mortgages were an extremely safe form of lending and Northern Rock did little else. But Northern Rock had been selling its mortgage loans to other investors rather than holding them on its own balance sheet. When the market for such transactions closed in the late summer of 2007, the bank could no longer obtain funds to finance its assets. The initial threat to Northern Rock did not come from volatility in the value of its mortgages but from the risk that its short-term creditors would withdraw their funds, leaving the bank high and dry.

A Bank of England study of 116 large global banks during the crisis (of which 74 survived and 42 failed) found that the simple but robust leverage ratio was better at predicting which banks would fail than the more sophisticated risk-weighted measures of capital.30 The most extreme example was Northern Rock, which failed in the autumn of 2007. At the start of that year, Northern Rock had the highest ratio of capital to risk-weighted assets of any major bank in Britain, so much so that it was proposing to return capital to its shareholders because they had no need of it – under the regulations. At the same time, the bank’s leverage ratio was extraordinarily high at between 60 to 1 and 80 to 1.31 The reason for this remarkable discrepancy between the two measures of capital ratios was that the international standards assumed that mortgages were an extremely safe form of lending and Northern Rock did little else.

There are also too many examples of the irresponsible encouragement of people on low incomes to borrow for one to be sanguine about the behaviour of the financial services industry. 24 Gibbon (1776), Vol. 1, p. 282. 25 Although when the British bank Northern Rock started to fail in September 2007, a surprising proportion of depositors who withdrew their money were prepared to leave a branch of the bank clutching a cheque drawn on Northern Rock itself. 26 Between the spring of 2007 and the spring of 2009 the demand for £50 notes rose by 28 per cent, double the increase for other denominations. See Bank of England statistics: http://www.bankofengland.co.uk/banknotes/Pages/about/stats.aspx#1 27 Bernanke and James (1991). 28 In 2013 the Freedom From Religion Foundation, a group of atheists, took legal action against the United States Treasury Department claiming that the inclusion of this traditional motto was unconstitutional on the grounds that whenever they used money they were being ‘forced to proselytise’ for a god in whom they didn’t believe.


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), "World Economic Forum" Davos, affirmative action, Alan Greenspan, Albert Einstein, algorithmic trading, Andy Kessler, AOL-Time Warner, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Basel III, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, bonus culture, book value, Bretton Woods, BRICs, British Empire, business cycle, buy the rumour, sell the news, capital asset pricing model, carbon credits, Carl Icahn, 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, deal flow, debt deflation, Deng Xiaoping, deskilling, discrete time, diversification, diversified portfolio, Doomsday Clock, Dr. Strangelove, Dutch auction, 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, Glass-Steagall Act, 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, low interest rates, margin call, market bubble, market fundamentalism, Market Wizards by Jack D. Schwager, Marshall McLuhan, Martin Wolf, mega-rich, merger arbitrage, Michael Milken, Mikhail Gorbachev, Milgram experiment, military-industrial complex, Minsky moment, 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, planned obsolescence, plutocrats, Ponzi scheme, price anchoring, price stability, profit maximization, proprietary trading, public intellectual, quantitative easing, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Ray Kurzweil, regulatory arbitrage, Reminiscences of a Stock Operator, 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, short squeeze, 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

One mortgage product allowed homebuyers to borrow 125 percent of the value of the home, or up to six times their income. As growth outstripped the ability to finance loans from deposits from its customers, Northern Rock relied on securitization, arguing that issuing MBSs provided access to large pools of money from investors, cheaper borrowing costs and shifted the risk away from Northern Rock. Northern Rock issued £17 billion of MBSs in 2006 alone. In early 2007, bankers reaping large fees from Northern Rock securitizations voted them the best financial borrower in capital markets. In late 2007, Northern Rock’s dependence on securitization would destroy it when the market failed. CitiGroup, Merrill Lynch, and UBS committed seppuku, ritualized suicide.

Bankers had not grasped painter Robert Motherwell’s observation that “the deep necessity of art is the examination of self-deception.” Originally a self-help movement for artisans based in Newcastle, Northern Rock for much of its 150 years in existence took deposits from savers and lent to people to buy homes. Originally owned by its members, in 1997 the company demutualized and offered its shares on the London Stock Exchange. Between 1997 and 2007, under CEO Adam Applegarth, Northern Rock’s loan portfolio increased from £16 billion to £101 billion, a rate of more than 20 percent per annum. Northern Rock’s share of the UK’s residential mortgage market more than tripled from 6 percent to 20 percent in ten years.

As the markets seized up, banks were left with low-quality loans that they were unable to repackage and sell off, as planned. Despite minimal exposure to subprime mortgages, Northern Rock was unable to raise money as the securitization market seized up. In mid-September 2007, queues of panicked customers outside Northern Rock branches waited to withdraw deposits. In the Internet banking age, the signs of an old-fashioned bank run sealed Northern Rock’s fate. Adam Applegarth confessed to a UK parliamentary hearing that he understood: “the logic of somebody who has their life savings invested in an institution and who sees pictures of people queuing outside the door and they go join that queue.”22 Unable to issue commercial paper as holdings of toxic assets fell in value, conduits triggered parent bank credit lines, returning the assets to the mother ship.


pages: 246 words: 74,341

Financial Fiasco: How America's Infatuation With Homeownership and Easy Money Created the Economic Crisis by Johan Norberg

accounting loophole / creative accounting, Alan Greenspan, bank run, banking crisis, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, business cycle, capital controls, central bank independence, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Brooks, diversification, financial deregulation, financial innovation, Greenspan put, helicopter parent, Home mortgage interest deduction, housing crisis, Howard Zinn, Hyman Minsky, Isaac Newton, Joseph Schumpeter, Long Term Capital Management, low interest rates, market bubble, Martin Wolf, Mexican peso crisis / tequila crisis, millennium bug, money market fund, moral hazard, mortgage tax deduction, Naomi Klein, National Debt Clock, new economy, Northern Rock, Own Your Own Home, precautionary principle, price stability, Ronald Reagan, savings glut, short selling, Silicon Valley, South Sea Bubble, The Wealth of Nations by Adam Smith, too big to fail

In scenes that the country had not witnessed for over 140 years, long lines of worried depositors wanting to withdraw their money were forming outside the branch offices of Northern Rock. This Newcastle bank had derived two-thirds of its financing from money-market loans, capable of being canceled at any time, and used the money for decadelong securitized mortgages whose value exceeded that of the actual homes.16 As Martin Wolf has concluded, government guarantees for the banking system meant that savers saw only the high rates of interest paid by Northern Rock, not the risks it was taking. But this daredevil business concept did not survive a nervous market that would no longer touch mortgage-backed securities with a 10-foot pole.

The Bank of England, the UK central bank, expressed its willingness to support Northern Rock on September 14, but that did not make savers any calmer-on the contrary, this was when the bank run started in earnest. It took three more days until the lines dissolved, after the government had declared that taxpayers would indirectly guarantee deposits. That was the first step toward nationalization. Only days before the run, a trader at Lehman Brothers had underlined in an e-mail that now was the perfect time to buy: "Load up on Northern Rock for your children, your mum, your goldfish."17 And that was not a lone optimist.

Only days before the run, a trader at Lehman Brothers had underlined in an e-mail that now was the perfect time to buy: "Load up on Northern Rock for your children, your mum, your goldfish."17 And that was not a lone optimist. Despite a whole series of alarms going off and a number of meetings with the bank, the UK Financial Services Authority had not noticed any major problems. On the contrary, the FSA approved Northern Rock's dividends and models briefly before the end. It was "asleep at the wheel," as an inquiry report put it." The government-sponsored mortgage giants in the United States also remained optimists to the very end. In January 2007, Fannie Mae's chief economist gave a soothing message at a press conference: "I think the worst in housing is over. The biggest declines are behind us."" In the subsequent month, Fannie Mae's CEO Daniel Mudd launched a plan to buy additional subprime mortgages for $11 billion.


pages: 322 words: 77,341

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

Alan Greenspan, asset-backed security, bank run, banking crisis, Bear Stearns, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Black-Scholes formula, Blythe Masters, Celtic Tiger, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, Daniel Kahneman / Amos Tversky, diversified portfolio, double entry bookkeeping, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, fixed income, George Akerlof, Glass-Steagall Act, greed is good, Greenspan put, hedonic treadmill, hindsight bias, housing crisis, Hyman Minsky, intangible asset, interest rate swap, invisible hand, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jane Jacobs, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, junk bonds, Kickstarter, laissez-faire capitalism, light touch regulation, liquidity trap, Long Term Capital Management, loss aversion, low interest rates, Martin Wolf, money market fund, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, negative equity, new economy, Nick Leeson, Norman Mailer, Northern Rock, off-the-grid, Own Your Own Home, Ponzi scheme, quantitative easing, reserve currency, Right to Buy, risk-adjusted returns, Robert Shiller, Ronald Reagan, Savings and loan crisis, shareholder value, South Sea Bubble, statistical model, Tax Reform Act of 1986, The Great Moderation, the payments system, too big to fail, tulip mania, Tyler Cowen, value at risk

Perhaps we can experience a twinge of national pride at the thought that this planetwide problem began with Northern Rock, which in September 2007 experienced the single most dreaded event which can overtake any financial institution, not seen in Britain for more than a century: a bank run. So many people turned up in person to withdraw money that the bank ended up paying out 5 percent of its total assets, a cool £1 billion in cash. Perhaps we can also experience a twinge of nostalgia at the fact that at the time of its nationalization a few months later, the £25 billion Northern Rock bailout was the biggest sum any government anywhere in the world had ever given to a private company.

That left an awful lot of people wondering one simple thing: what happened? I’ve been following the economic crisis for more than two years now. I began working on the subject as part of the background to a novel, and soon realized that I had stumbled across the most interesting story I’ve ever found. While I was beginning to work on it, the British bank Northern Rock blew up, and it became clear that, as I wrote at the time, “If our laws are not extended to control the new kinds of super-powerful, super-complex, and potentially super-risky investment vehicles, they will one day cause a financial disaster of global-systemic proportions.” I also wrote, apropos the obvious bubble in property prices, that “you would be forgiven for thinking that some sort of crash is imminent.”

Back in those days it was very hard, verging on impossible, for people who do what I do now—write for a living—to get a mortgage, because we couldn’t produce the relevant pay slips and employment history.* All those rules have long since gone from the U.K. property market. A banker involved in picking over the corpse of Northern Rock told me, “Most of the loans were sound, but one or two of their books had blown up, and one of the worst of them was the hundred and twenty percent mortgages.” I asked why anyone would want to borrow 120 percent of the value of the thing they were buying, and he just shrugged. That product makes sense only if you are absolutely certain of the value of the property you’re buying: and there is no reason to be absolutely certain of that.


Global Financial Crisis by Noah Berlatsky

"World Economic Forum" Davos, accounting loophole / creative accounting, Alan Greenspan, asset-backed security, banking crisis, Bear Stearns, Bretton Woods, capital controls, Celtic Tiger, centre right, circulation of elites, collapse of Lehman Brothers, collateralized debt obligation, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, Doha Development Round, energy security, eurozone crisis, financial innovation, Food sovereignty, George Akerlof, Glass-Steagall Act, God and Mammon, Gordon Gekko, housing crisis, illegal immigration, income inequality, low interest rates, market bubble, market fundamentalism, mass immigration, Money creation, moral hazard, new economy, Northern Rock, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Robert Shiller, Ronald Reagan, Savings and loan crisis, shareholder value, social contagion, South China Sea, structural adjustment programs, subprime mortgage crisis, too big to fail, trade liberalization, transfer pricing, working poor

., no more freebies in the form of underpriced equity, preferred shares, loan guarantees or insurance on assets), it will just confirm how bad things really are. 221 The Global Financial Crisis Britain Nationalizes Northern Rock Bank, February 2008 The chancellor [of the exchequer, or finance minister of Britain] Alistair Darling, moved to end six months of turmoil over the fate of Northern Rock yesterday when he admitted his efforts to find a buyer for the stricken bank had failed and he was forced into the first nationalisation of a British company since the 1970s. . . . Darling . . . defended his handling of the crisis. . . . The government only stepped in to prevent a domino effect in the industry, he said. Phillip Inman, Larry Elliott, and David Hencke, “Darling Under Fire as Northern Rock Is Nationalised,” Guardian Online, February 18, 2008. www.guardian.co.uk.

This route was chosen in preference to fresh government equity capital precisely because it makes a quick return to private-sector ownership easier. There is now a danger of premature reprivatisation, which would leave the taxpayer with a vast toxic dump of losses and a poor price for the share sale. There are already rumours that Northern Rock is being lined up for a rapid sale. If banks are to return to “normal” commercial operation under private ownership, the issue arises of how they should be regulated. The Cruickshank report on banking, commissioned by Gordon Brown a decade ago, posed the central question: why should banks be allowed to pursue the maximisation of shareholder value—and management bonuses— when they are underwritten by the taxpayer?

The difficulty of evaluating the loan asset value, when the adverse feedback loop between the financial system and the real economy is at play, seems to be an unflagging issue at any time. Third, the framework to deal with troubled financial institutions was not well-equipped. It can hardly be said that the 211 The Global Financial Crisis process of the disposal of the Northern Rock and Lehman Brothers, was carried out within the sufficiently robust institutional framework. Even if such framework was in place, public capital injection into financial institutions is unpopular among the public in any country. In addition, there is a stigma on the part of financial institution to apply for injection of public capital.


pages: 484 words: 136,735

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

"World Economic Forum" Davos, Alan Greenspan, bank run, banking crisis, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Black Swan, bond market vigilante , bonus culture, Bretton Woods, BRICs, business cycle, buy and hold, Carmen Reinhart, classic study, 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, electricity market, 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, Great Leap Forward, Hyman Minsky, income inequality, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, long and variable lags, Long Term Capital Management, low interest rates, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, military-industrial complex, Minsky moment, 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, Robert Solow, Ronald Reagan, Savings and loan crisis, seminal paper, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, systems thinking, 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

This temporary guarantee instantly stopped the bank run, stabilized the financial system, and gave regulators the breathing space they needed to work out a longer-term solution. Had the U.S. Treasury been prepared to think seriously about the role of government in the modern financial system, they would have seen Northern Rock as a dress rehearsal and model for dealing with the Lehman crisis a year later. By taking somewhat earlier action, the U.S. government could probably have avoided even the moderate costs and financial damage of a Northern Rock-style response. Paulson could almost certainly have saved the situation much earlier and less expensively by implementing a government-led Plan B to end the credit crunch in early 2008.

The next chapter argues that cyclical, rather than structural, forces were behind the 2007 bust in mortgage finance, which was then exaggerated by the astonishing incompetence of political mismanagement into the greatest financial crisis of all time. CHAPTER NINE Boom and Bust Forever We will never return to the old boom and bust. —Prime Minister Gordon Brown, March 2007, six months before the run on Northern Rock, Britain’s largest mortgage bank FINANCIAL BOOMS AND BUSTS have baffled and fascinated economic thinkers since capitalism’s earliest days. It is therefore no surprise that the greatest financial crisis in living memory, which occurred in the months after the bankruptcy of Lehman, elicited many different explanations.

The market fundamentalism of regulators and accountants thus gravely weakened the world economy and banking system. But disaster could still have been avoided had it not been for the third and greatest blunder: the U.S. government’s refusal to intervene directly in the financial system when the credit crunch began. Such direct intervention was what saved Britain after the Northern Rock collapse, the most serious run on a major bank anywhere in the advanced capitalist world since the Great Depression. The British government provided a temporary but open-ended guarantee to all British financial institutions, albeit reluctantly and under pressure from the Bank of England. This temporary guarantee instantly stopped the bank run, stabilized the financial system, and gave regulators the breathing space they needed to work out a longer-term solution.


pages: 1,066 words: 273,703

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

"there is no alternative" (TINA), "World Economic Forum" Davos, 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 , book value, Boris Johnson, bread and circuses, break the buck, Bretton Woods, Brexit referendum, BRICs, British Empire, business cycle, business logic, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, company town, 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, inverted yield curve, junk bonds, Kenneth Rogoff, large denomination, light touch regulation, Long Term Capital Management, low interest rates, 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, post-truth, predatory finance, price stability, private sector deleveraging, proprietary trading, 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

It marks the cut-off point between ‘an Edwardian summer’ of prosperity and tranquility and the trench warfare of the credit crunch—the failed banks, the petrified markets, the property markets blown to pieces by a shortage of credit.”9 Quite how bad things were soon going to get was suggested three weeks later, when on September 14, Northern Rock, one of Britain’s largest mortgage lenders, failed. On TV screens, the Northern Rock panic looked like a classic bank run. Anxious depositors queued up outside beleaguered bank branches to retrieve their funds. News photographers and camera crews had a field day. But off camera something even worse was happening. The trillion-dollar global funding market was shutting down.10 I Northern Rock was a product of Britain’s overheated housing bubble. Formed in the 1960s through amalgamation of two nineteenth-century building societies (thrifts) and headquartered in gritty Newcastle, it had by the 1990s acquired fifty-three competitors across the north of England.

This transaction was the largest debut deal in that market for a single A rated financial institution targeted at both domestic Australian investors and the Far East.”11 Northern Rock had minimal exposure to US subprime. But that didn’t matter, because it sourced its funding from markets heavily used by banks that did. The bad news from Paribas on August 9 was enough to shut down the interbank lending markets and the market for asset-backed commercial paper. It was the seizure in the funding market that poleaxed the entire securitization business and in particular the European side, which had been most actively involved in the issuance of ABCP. Given Northern Rock’s extreme dependence on wholesale funding, it took only two working days after the markets dried up for the bank to notify the Financial Services Authority of an impending crisis.12 But the Bank of England was in no mood to help.

Governor Mervyn King took the view that the overextended mortgage lender should suffer the consequences of its irresponsible expansion. By the end of August Northern Rock’s liquidity problems had become life threatening. But it wasn’t until September 13, after the BBC reported the story and the government acted to address the crisis by announcing a guarantee, that the retail depositors panicked. After that, the main damage to Northern Rock’s balance sheet was done by online withdrawals. The elderly savers queuing in the streets made for alarming TV footage. But it was not their panic that was bringing down the bank.


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, cross-border payments, 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, Glass-Steagall Act, Herman Kahn, Honoré de Balzac, Hyman Minsky, index fund, inflation targeting, information asymmetry, invisible hand, Isaac Newton, Japanese asset price bubble, joint-stock company, junk bonds, large denomination, law of one price, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market bubble, Mary Meeker, 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, Suez canal 1869, 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

At the same time, there was a run on Northern Rock, which was the largest mortgage lender in Britain. Both firms had been aggressive in their efforts to increase their market share, both had relied on the commercial paper market for more than 30 percent of the money that they used to buy mortgage loans. In effect they had been selling short-term IOUs to firms that had extra cash to get the money to buy more mortgages. Countrywide Financial was rescued by the Bank of America, which initially made a capital investment through the purchases of preferred shares and subsequently acquired Countrywide. Northern Rock was rescued by the Bank of England, which initially provided liquidity; subsequently the British government acquired shares in the firm and became its majority owner.

The sharp declines in prices of residential real estate in the United States, Britain, Ireland, and several other countries that began toward the end of 2006 led to massive government investments – ‘bailouts’ – of the financial institutions. In 2008 many of the top firms in the US investment banking industry were wiped out or forced to seek a stronger merger partner. The British government ‘nationalized’ Northern Rock, the largest mortgage lender in the country, and became the dominant shareholder in the Royal Bank of Scotland. The Irish government made massive investments in the six largest banks in the country. The three large banks in Iceland were taken over by the government. Countrywide Financial, the largest mortgage lender in the United States, was acquired by Bank of America, which subsequently acquired Merrill Lynch, one of the largest US investment banks – but then Bank of America required a large injection of capital from the US Treasury.

The concern was that if AIG tanked, runs on many other financial institutions would occur, and this dramatic rush for cash would lead to the collapse of the financial system. The interplay among the decline in real estate prices and bank loan losses was inevitable and predictable, although the identity of the firms that would be pummeled could not have been predicted. However, those firms that had rapidly increased their market share – Countrywide, Northern Rock, Washington Mutual – had done so on the basis of short-term funds borrowed in wholesale markets, and they were more vulnerable to runs than the lenders that relied almost exclusively on deposits for the money to buy mortgages. The money market funds – established primarily by brokerage firms as an alternative to government-guaranteed deposits – were subject to runs, and the US Treasury hastily extended the umbrella of deposit insurance to these firms.


pages: 270 words: 73,485

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

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, Glass-Steagall Act, 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, low interest rates, market bubble, market clearing, means of production, Meghnad Desai, 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, Robert Solow, Ronald Reagan, savings glut, secular stagnation, seigniorage, Silicon Valley, Simon Kuznets, subprime mortgage crisis, 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

In September 2007 the British bank Northern Rock requested financial assistance from the government. The story is much the same. The bank had loaned out excessively in mortgages. It had securitized them and sold them on the international markets. Once the US market for subprime securities started to cool, Northern Rock became concerned that it did not have sufficient liquidity to refund customer deposits if they were demanded. Northern Rock initially tried to borrow money on the wholesale money market, but found it too expensive. As rumors circulated that Northern Rock was in trouble, depositors queued up to withdraw their money.

As rumors circulated that Northern Rock was in trouble, depositors queued up to withdraw their money. The UK government had to rush to the rescue and nationalize the bank. Northern Rock was not the only UK bank to experience trouble, but it was the first UK bank to experience a bank run in over a century. The crisis deepened in March 2008 when the 80-year-old American investment bank Bear Stearns also found itself in trouble. It had exposed itself in the securitized mortgage market and as the prices fell, its exposure increased and the Fed could not rescue it. It had assets of $400 billion but a debt of $33 per each dollar of its capital. Bear Stearns had already fired its CEO in January.

Joseph (i) Meade, James (i) mean (i) measurement of capital debate (i) mechanization, of weaving (i) Meiselman, David (i) Menger, Carl (i) mercantilism (i), (ii), (iii) Mexico see crises, Mexican microeconomics (i) Middle East, post-World War I (i) Mill, John Stuart (i) Mitchell, Wesley Clair (i) Mitterand, François (i) modeling (i), (ii) macro-200 new classical economics (i) see also econometric modeling Modigliani, Franco (i) monetarism (i) control of money supply (i) deficit reduction demands (i) effects of (i) political support (i) monetarists (i) monetary policy Bundesbank (i) role of (i) as tool for recovery (i), (ii) monetary theory (i) money circulation (i) effect on economic system (i) motives for demand (i) role of (i) as scaling variable (i) money balances (i), (ii) money changers (i) money cranks (i) money price level (i) money problem (i) money supply (i), (ii) money wages flexibility/rigidity (i) and inflation (i) rates of increase (i) and unemployment (i), (ii) see also real wages; wages monopolies, grants of (i) monopoly power (i) Moore, Henry (i) mortgages (i), (ii), (iii) securitization (i) subprime (i), (ii) moving data, and unique static equilibrium (i) “Mr Keynes and the ‘Classics’: A Suggested Interpretation” (Hicks) (i) multiplier-accelerator model (i) multiplier process (i), (ii) Friedman’s challenge (i) Myrdal, Gunnar (i), (ii) Monetary Equilibrium (i) national data (i) National Debt (i) natural rate of interest (i) natural rate of unemployment (i) negative equity (i) neoclassical economics (i) neoclassical-Keynesian synthesis (i) new classical economics (i) attitude to modeling (i) modeling (i) time series data (i) new classical macro model (i) new classical model (i) aggregate demand and aggregate supply (i) policy implications (i) new normality (i) Newcomb, Simon (i) newly-industrialized economies (i) Newton, Isaac (i), (ii), (iii) Nixon, Richard (i), (ii), (iii) Nobel Prize (i), (ii), (iii), (iv), (v), (vi) nominal level (i) non-inflationary continuous expansion (NICE) (i), (ii) normal distribution (i) North America, Declaration of Independence (i) Northern Rock (i) oil shock (i) “On the High Price of Bullion’’ (Ricardo) (i) one-to-one jobs (i) O’Neill, Jim (i) open economy (i) opportunity cost (i) optimism/pessimism (i) options (i) Osborne, George (i) Ottoman Empire (i) Overend & Gurney (i) oversaving (i), (ii), (iii), (iv), (v), (vi) Overstone, Lord (i) Paish, Frank (i) paper currency, withdrawal (i) parameters (i) partial equilibrium theory (i), (ii) Paterson, William (i) Pax Britannica (i) per capita incomes (i) perfect markets see under markets Phillips, A.


Where Does Money Come From?: A Guide to the UK Monetary & Banking System by Josh Ryan-Collins, Tony Greenham, Richard Werner, Andrew Jackson

bank run, banking crisis, banks create money, Basel III, Big bang: deregulation of the City of London, book value, Bretton Woods, business cycle, capital controls, cashless society, central bank independence, credit crunch, currency risk, double entry bookkeeping, en.wikipedia.org, eurozone crisis, fiat currency, financial innovation, fixed income, floating exchange rates, Fractional reserve banking, full employment, global reserve currency, Goodhart's law, Hyman Minsky, inflation targeting, interest rate derivative, interest rate swap, Joseph Schumpeter, low skilled workers, market clearing, market design, market friction, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Northern Rock, offshore financial centre, Post-Keynesian economics, price mechanism, price stability, proprietary trading, purchasing power parity, quantitative easing, Real Time Gross Settlement, reserve currency, Ronald Reagan, seigniorage, special drawing rights, the payments system, trade route, transaction costs

During investigations into the LIBOR scandal, evidence given by Barclays created the impression that the Bank of England may have encouraged banks such as Barclays to under-report LIBOR, so as to downplay the worries about the fragility of the banking system – a claim strongly denied by the Bank’s Deputy Governor, Paul Tucker.21 As we have seen, banks cover most of their borrowing needs in the interbank market. So this sudden rise in the market rate of interest and credit rationing between banks caused a liquidity crisis that threatened the payment system and the stability of the banking system in general. When queues formed outside Northern Rock, the Bank of England was forced to step in, lending billions to Northern Rock directly and buying increasing amounts of assets from the banks in exchange for Bank of England reserves and cash that would enable them to make payments and rebuild their capital. Only by flooding banks and the interbank market with central bank reserves on a massive scale was the Bank able to avert financial collapse. 5.5.

Indeed, as we discussed in Section 4.1, Bank of England statistics do distinguish between cash and the ‘broad’ money supply, which includes commercial bank money. However, the reality now is slightly different. While it is true that cash has a different status from bank deposits – as the run on Northern Rock demonstrated, people have more confidence in banknotes – it is only possible for members of the public to get hold of cash via their bank deposits. In this sense one could describe cash as a physical representation of commercial bank money, over which the Bank of England retains the branding rights.

In reality, the tail wags the dog: rather than the Bank of England determining how much credit banks can issue, one could argue that it is the banks that determine how much central bank reserves and cash the Bank of England must lend to them (Section 4.3). This follows on from the Bank’s acceptance of its position as lender of last resort, even though it has not fully played this role in the recent bank rescues, such as Northern Rock and RBS, since it passed on the cost of initial central bank money injections to the Government and hence to tax-payers. When a commercial bank requests additional central bank reserves or cash, the Bank of England is not in position to refuse. If it did, the payment system described above would rapidly collapse.22 In academic terminology, this process is often described as endogenous money creation.


pages: 393 words: 115,263

Planet Ponzi by Mitch Feierstein

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

The overconfident, overaggressive British bank Northern Rock failed in 2007 because it could no longer obtain funds. Historically, retail banks have always been careful to fund themselves largely by attracting customer deposits, because such deposits have historically proved a reliable and stable form of financing. Northern Rock threw that tried-and-tested model out of the window, relying in very large part on short-term money market financing. That funding structure was insane in at least two respects. First, it generated a huge maturity mismatch between Northern Rock’s long-term assets (primarily loans made to customers) and its very short-term funding.

Search for ‘Advanced bond concepts: yield and bond price.’ 6 Emma Charlton and Keith Jenkins, ‘German bunds slide most in 8 weeks; Greek two-year notes rise,’ Bloomberg, Sept. 17, 2011. 7 Though rumor has it that banks are trying to recreate these now. 8 Search Bank of International Settlements (www.bis.org) for ‘Amounts outstanding of over-the-counter (OTC) derivatives.’ 9 Fawn Johnson, ‘SEC queries firms on repos,’ Wall Street Journal, March 30, 2010. 10 Tett, Fool’s Gold, p. 241. 11 Eric Dash and Sewell Chan, ‘Panel criticizes oversight of Citi by 2 executives,’ New York Times, April 8, 2010. 12 See JP Morgan Chase’s financial statements, most easily accessed via investor.shareholder.com/JPMorganchase/earnings.cfm. 13 James Kirkup, ‘The path to Northern Rock’s nationalisation,’ Daily Telegraph, Jan. 14, 2008. 14 Kirsty Walker, ‘Northern Rock chief’s offer to resign,’ Daily Mail, Oct. 16, 2007. 15 ‘Northern Rock bosses: A board profile,’ Daily Mail, Sept. 18, 2007. 16 Ashley Seager and Angela Balakrishnan, ‘Rock liabilities added to the national debt,’ Guardian, Feb. 8, 2008. 17 For a scarily huge number, see table on p. 192 of JP Morgan’s annual report for 2010, accessible at investor.shareholder.com/jpmorganchase/annual.cfm.

First, it generated a huge maturity mismatch between Northern Rock’s long-term assets (primarily loans made to customers) and its very short-term funding. Secondly, it placed vastly excessive reliance on the continued willingness of commercial lenders to lend to it. It was simply asking for trouble‌—‌and in 2007 that’s what it got. It took £26 billion of government loans to keep Northern Rock afloat, until the bank was effectively nationalized in 2008.13 That story was only the first in a chain of failures. The German bank IKB set up some off-balance-sheet investment vehicles that were funded exclusively in the commercial paper market (the main form of short-term borrowing). When those markets closed up, IKB was left with nowhere to turn.


pages: 443 words: 98,113

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

"World Economic Forum" Davos, 3D printing, Airbnb, Alan Greenspan, Albert Einstein, Amazon Mechanical Turk, anti-fragile, Asian financial crisis, asset-backed security, bank run, banking crisis, basic income, Ben Bernanke: helicopter money, Bernie Sanders, Big bang: deregulation of the City of London, Big Tech, bilateral investment treaty, Bonfire of the Vanities, Boris Johnson, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, carried interest, cashless society, central bank independence, centre right, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, commons-based peer production, credit crunch, crony capitalism, cross-border payments, crowdsourcing, debt deflation, declining real wages, deindustrialization, disruptive innovation, Doha Development Round, Donald Trump, Double Irish / Dutch Sandwich, ending welfare as we know it, eurozone crisis, Evgeny Morozov, falling living standards, financial deregulation, financial innovation, Firefox, first-past-the-post, future of work, Garrett Hardin, gentrification, gig economy, Goldman Sachs: Vampire Squid, Greenspan put, Growth in a Time of Debt, housing crisis, income inequality, independent contractor, information retrieval, intangible asset, invention of the steam engine, investor state dispute settlement, it's over 9,000, James Watt: steam engine, Jeremy Corbyn, job automation, John Maynard Keynes: technological unemployment, labour market flexibility, light touch regulation, Long Term Capital Management, low interest rates, lump of labour, Lyft, manufacturing employment, Mark Zuckerberg, market clearing, Martin Wolf, means of production, megaproject, mini-job, Money creation, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, Neil Kinnock, non-tariff barriers, North Sea oil, Northern Rock, nudge unit, Occupy movement, offshore financial centre, oil shale / tar sands, open economy, openstreetmap, patent troll, payday loans, peer-to-peer lending, Phillips curve, plutocrats, Ponzi scheme, precariat, quantitative easing, remote working, rent control, rent-seeking, ride hailing / ride sharing, Right to Buy, Robert Gordon, Ronald Coase, Ronald Reagan, Sam Altman, savings glut, Second Machine Age, secular stagnation, sharing economy, Silicon Valley, Silicon Valley startup, Simon Kuznets, SoftBank, sovereign wealth fund, Stephen Hawking, Steve Ballmer, structural adjustment programs, TaskRabbit, The Chicago School, The Future of Employment, the payments system, The Rise and Fall of American Growth, Thomas Malthus, Thorstein Veblen, too big to fail, Tragedy of the Commons, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, Y Combinator, zero-sum game, Zipcar

Securitisation was at the heart of the sub-prime mortgage scandal in the USA, which precipitated the financial crash that ruined lives and intensified inequality and economic insecurity. It is still going on. An egregious case in Britain was Northern Rock, a lender that borrowed heavily on UK and international capital markets during the pre-2007 housing boom to give mortgage loans of up to 125 per cent of the property value. Like its counterparts in the USA, the firm bundled up these risky mortgages and sold them as income-generating assets to investors, using the proceeds to help pay its debts. When the credit crunch came in 2007, the demand for securitised mortgage assets dried up and Northern Rock was unable to meet debt commitments. There was a run on the bank, the first UK bank run in 150 years, and in 2008 it was taken into state ownership.

Warrell, ‘Students take on more paid employment as living costs rise’, Financial Times, 10 August 2015. 31 L. Bachelor, ‘Flatscreen TVs, chic interiors … and rents of up to £300 a week’, The Observer, 16 August 2015, pp. 8–9. 32 J. Farrell and D. Hellier, ‘Northern Rock mortgages worth £13 billion sold to US investment firm’, The Guardian, 14 November 2015, p. 42. 33 This was widely reported, amid allegations in the Northern Ireland Parliament. See, for instance, ‘Cantillon: Cerberus and the Northern Rock deal’, Irish Times, 14 November 2015. 34 Human Rights Watch, ‘US: Courts rubber stamp corporate suits against poor’, Press Release, 21 January 2016. 35 C. Reinhart and K. Rogoff, This Time is Different: Eight Centuries of Financial Folly (Princeton: Princeton University Press, 2011). 36 See, for instance, S.

With the exception of a planned £2 billion sale in 2016 to retail (small) investors at a 5 per cent discount to the market price, the sales have been to carefully selected private investors, enabled to reap the gains from a publicly funded bailout. In 2015, the UK government also sold a £13 billion package of mortgages and loans formerly issued by Northern Rock, which collapsed in 2007, to the US private equity group Cerberus; Cerberus promptly sold a quarter of the loans to another bank. The once-toxic mortgages, with an interest rate of nearly 5 per cent, had come good mainly because of a rise in property prices. So public assets were sold on favourable terms to the financial elite based on an ideological commitment to privatisation and a desire to finance tax cuts.


pages: 478 words: 126,416

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

Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Bonfire of the Vanities, bonus culture, book value, Bretton Woods, buy and hold, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, Cornelius Vanderbilt, corporate governance, Credit Default Swap, cross-subsidies, currency risk, dematerialisation, disinformation, disruptive innovation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial engineering, financial innovation, financial intermediation, financial thriller, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Greenspan put, Growth in a Time of Debt, Ida Tarbell, income inequality, index fund, inflation targeting, information asymmetry, intangible asset, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, it is difficult to get a man to understand something, when his salary depends on his not understanding it, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jim Simons, John Meriwether, junk bonds, light touch regulation, London Whale, Long Term Capital Management, loose coupling, low cost airline, M-Pesa, market design, Mary Meeker, megaproject, Michael Milken, millennium bug, mittelstand, Money creation, money market fund, moral hazard, mortgage debt, Myron Scholes, NetJets, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, Paul Samuelson, Paul Volcker talking about ATMs, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, reality distortion field, regulatory arbitrage, Renaissance Technologies, rent control, risk free rate, risk tolerance, road to serfdom, Robert Shiller, Ronald Reagan, Schrödinger's Cat, seminal paper, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, vertical integration, Washington Consensus, We are the 99%, Yom Kippur War

(The foul-mouthed Jimmy Cayne, of Bear Stearns, who refused to participate, would receive his comeuppance a decade later when the Federal Reserve took pleasure in forcing a fire-sale of his failing business to J.P. Morgan.) But the concerns about banks that paralysed the USA in 1933, or which brought the global financial system close to collapse in 2008, were not like that. The run on Northern Rock was very different from the run on the Derbyshire Building Society. Northern Rock had a fundamental business problem. The company relied on being able to refinance packages of mortgages of indifferent quality in a market for mortgage-backed securities that was drying up. The problem was in the reality of the business, not in the imagination of depositors, and was the result of uncertainty about the underlying solvency of the company and the quality of its assets.

The financial analogue of the spare pint is the necessity for businesses and households to maintain monetary balances. In extreme cases of illiquidity, households end up hoarding cash under the bed. These supply chain inefficiencies may be costly, in both the milk supply chain and the money market. In September 2007 a picture of depositors queuing up to withdraw money from Northern Rock, a small British mortgage lender, made the front page of every national newspaper. This was a ‘bank run’, when everyone was attempting to withdraw their deposits before the cash was exhausted. But financial services are not unique in their vulnerability to runs. If people suspect there is not enough milk, they will queue to obtain whatever milk is available, and the fears of shortage will prove – temporarily – justified.

A run on a solvent, liquid, well-capitalised and well-managed bank, in which unfounded panic among depositors creates an unnecessary crisis, is a theoretical possibility: but in practice it is as rare as a milk panic. When the Derby-based engineering firm Rolls-Royce collapsed in 1971, there was a run on the Derbyshire Building Society, and the queues outside its offices were similar to those that gathered at branches of Northern Rock in 2007. Depositors feared that the collapse of one venerable local institution might be followed by the collapse of another. But these unfounded fears quickly subsided. If they had not, the affairs of the solvent Derbyshire Building Society could easily and quickly have been transferred to another institution.


pages: 367 words: 108,689

Broke: How to Survive the Middle Class Crisis by David Boyle

anti-communist, AOL-Time Warner, banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Bonfire of the Vanities, bonus culture, call centre, collateralized debt obligation, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, delayed gratification, Desert Island Discs, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, financial deregulation, financial independence, financial innovation, financial intermediation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, gentrification, Goodhart's law, housing crisis, income inequality, Jane Jacobs, job satisfaction, John Bogle, junk bonds, Kickstarter, knowledge economy, knowledge worker, low interest rates, market fundamentalism, Martin Wolf, Mary Meeker, mega-rich, Money creation, mortgage debt, Neil Kinnock, Nelson Mandela, new economy, Nick Leeson, North Sea oil, Northern Rock, Ocado, Occupy movement, off grid, offshore financial centre, pension reform, pensions crisis, Plutonomy: Buying Luxury, Explaining Global Imbalances, Ponzi scheme, positional goods, precariat, quantitative easing, school choice, scientific management, Slavoj Žižek, social intelligence, subprime mortgage crisis, too big to fail, trickle-down economics, Vanguard fund, Walter Mischel, wealth creators, Winter of Discontent, work culture , working poor

‘We want none of it.’[24] When building-society interest rates started to rise up to market levels, wholesale funds were available to the banks on the wholesale markets — but not to the building societies. They had to wait for new legislation in 1986 (see the next chapter) that allowed them to bypass their own depositors and raise money in that way — eventually the cause of disaster for Northern Rock and HBOS a quarter of a century later. The year 1986 was also the year that the former Times editor Simon Jenkins said he heard a director of Halifax Building Society, as it was then, say: ‘God help us if the bankers get their hands on our mortgages or if our brokers get their hands on their deposits.’[25] Both events did take place in the fullness of time, as we shall see.

Much more controversially, if they didn’t have enough depositors’ money for the mortgages people wanted, they would be allowed to raise 40 per cent of their mortgage finance on the international markets (raised by the Blair government to 50 per cent). It was overusing this power that would eventually bring down Northern Rock in 2008. As the new law came up for its first reading in the House of Commons, the building societies’ share of the UK mortgage market dipped below 50 per cent. Would the legislation be in time to provide any kind of opposition to the rampaging banks? Boléat dampened expectations. ‘In fact,’ he said in a speech once the bill had passed through the House of Commons, ‘the building-society legislation will be the cause of comparatively little.’[7] As it turned out, Boléat was wrong.

‘Most of the customers of Cheltenham & Gloucester had less than that in their accounts. Most of them didn’t realize they were owners of it, and — in return for giving up membership, when we were so poor at explaining what mutuality was — they would get all this money. It was a real no-brainer.’ Two weeks later, Northern Rock said that it would merge with the Heart of England Building Society. Something was going on, and the Cheltenham & Gloucester announcement changed everything. Even the giant Halifax decided it would have to rethink its decision not to convert. What if there was a hostile bid? Could they ever withstand it?


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

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

Like Hayes, she worked long hours in a challenging, stressful environment that left little room for anything else. In the days that followed, Hayes couldn’t get Tighe out of his mind.19 Outwardly serene, she had a fiery streak and an inner confidence. They agreed to meet again. This time she listened to him ramble on about the fortune he made off the collapse of Northern Rock bank and didn’t glaze over. Tighe came from a family of Aston Villa fanatics and knew the intricacies of the British soccer leagues. She was a keeper, someone who found his idiosyncrasies endearing and his ambition attractive. When it was time for Tighe to return to London, they embarked on a long-distance relationship.

Rising defaults on mortgages in the U.S. had spooked markets, drying up the easy flow of credit between financial institutions and exposing the shaky foundations upon which years of easy profits had rested. Banks were forced to write down the value of their assets by billions of dollars and were left perilously close to insolvency. Northern Rock was nationalized in February 2008 after the mortgage lender became the first British firm in 150 years to suffer a bank run. BNP Paribas, France’s biggest lender, created panic the previous August when it froze redemptions from its funds, refusing to give investors their money back. Most of the afternoon was spent discussing the pressing issue of how to access enough capital to stay alive.

The mortgage crisis in the U.S. caused banks and investment funds around the world to become skittish about lending to each other without collateral. Firms that relied on the so-called money markets to fund their businesses were paralyzed by the ballooning cost of short-term credit. On Sept. 14, customers of Northern Rock queued for hours to withdraw their savings after the U.K. lender announced it was relying on loans from the Bank of England to stay afloat. After that, banks were only prepared to make unsecured loans to each other for a few days at a time, and interest rates on longer-term loans rocketed. Libor, as a barometer of stress in the system, reacted accordingly.


pages: 504 words: 143,303

Why We Can't Afford the Rich by Andrew Sayer

"World Economic Forum" Davos, accounting loophole / creative accounting, Alan Greenspan, Albert Einstein, Anthropocene, anti-globalists, asset-backed security, banking crisis, banks create money, basic income, biodiversity loss, bond market vigilante , Boris Johnson, Bretton Woods, British Empire, Bullingdon Club, business cycle, call centre, capital controls, carbon footprint, carbon tax, collective bargaining, corporate raider, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Graeber, David Ricardo: comparative advantage, debt deflation, decarbonisation, declining real wages, deglobalization, degrowth, deindustrialization, delayed gratification, demand response, don't be evil, Double Irish / Dutch Sandwich, en.wikipedia.org, Etonian, financial engineering, financial innovation, financial intermediation, Fractional reserve banking, full employment, G4S, Goldman Sachs: Vampire Squid, green new deal, high net worth, high-speed rail, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", James Dyson, job automation, Julian Assange, junk bonds, Kickstarter, labour market flexibility, laissez-faire capitalism, land bank, land value tax, long term incentive plan, low skilled workers, Mark Zuckerberg, market fundamentalism, Martin Wolf, mass immigration, means of production, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, New Urbanism, Northern Rock, Occupy movement, offshore financial centre, oil shale / tar sands, patent troll, payday loans, Philip Mirowski, plutocrats, popular capitalism, predatory finance, price stability, proprietary trading, pushing on a string, quantitative easing, race to the bottom, rent-seeking, retail therapy, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, Steve Jobs, tacit knowledge, TED Talk, The Nature of the Firm, 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, transfer pricing, trickle-down economics, universal basic income, unpaid internship, upwardly mobile, Washington Consensus, wealth creators, WikiLeaks, Winter of Discontent, working poor, Yom Kippur War, zero-sum game

Pension funds and insurance houses that had protected themselves by buying CDSs found that the banks that sold them couldn’t afford to honour them in the event of default. In September 2008, global private pensions dropped in value by 20% in one week.128 Northern Rock on the rocks In the UK, the first bank to fail and be bailed out – to the tune of £27 billion – was Northern Rock, which had led the way in over-lending on mortgages and securitisation. Commenting on the former chairman Matt Ridley’s views, George Monbiot writes: As chairman of Northern Rock, he was responsible, according to the Treasury select committee, for the ‘high-risk, reckless business strategy’ which caused the first run on a British bank since 1878 . . .

These are not merely responses to market shifts but ways of influencing those shifts, for example by inflating bubbles: they are weapons, not tools, as Ewald Engelen and co-researchers argue.137 On ‘Black Wednesday’, 16 September 1992, multi-billionaire George Soros made £1 billion by short-selling sterling – in anticipation of its being ejected from the European Exchange Rate Mechanism. In effect, he saw that the pound was overvalued, took on the Bank of England when it made frenzied efforts to defend the currency, and won.138 When the previously much-lauded Northern Rock bank got into trouble in 2008, hedge funds short-sold its shares and then bought them up when they’d hit rock bottom.139 When, in 2013, the UK’s Royal Mail was privatised by issuing shares at far below the market price, it was an aggressive hedge fund that became the largest shareholder. Hedge fund managers’ remuneration system is distinctive: most get 2% of assets, regardless of whether they make a profit or loss, and 20% of profits.

Having done his best to bankrupt the blood-sucking state, he returned to his family seat at Blagdon Hall, set in 15 square miles of farmland, where the Ridleys live – non-parasitically of course – on rents from their tenants, hand-outs from the Common Agricultural Policy and fees from the estate’s opencast coal mines. No one has been uncouth enough to mention the idea that he might be surcharged for part of the £400m loss Northern Rock has inflicted on the parasitic taxpayer. It’s not the 1% who have to carry the costs of their cock-ups.129 Estimates of the size of the UK bank bailout range between £289 billion and £550 billion – or nearly £10,000 for every British resident – exceeding the £203 billion of tax that the sector paid in the five years up to 2006–07.130 These costs are around 1% of gross domestic product in the UK.


pages: 807 words: 154,435

Radical Uncertainty: Decision-Making for an Unknowable Future by Mervyn King, John Kay

Airbus A320, Alan Greenspan, Albert Einstein, Albert Michelson, algorithmic trading, anti-fragile, Antoine Gombaud: Chevalier de Méré, Arthur Eddington, autonomous vehicles, availability heuristic, banking crisis, Barry Marshall: ulcers, battle of ideas, Bear Stearns, behavioural economics, Benoit Mandelbrot, bitcoin, Black Swan, Boeing 737 MAX, Bonfire of the Vanities, Brexit referendum, Brownian motion, business cycle, business process, capital asset pricing model, central bank independence, collapse of Lehman Brothers, correlation does not imply causation, credit crunch, cryptocurrency, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, DeepMind, demographic transition, discounted cash flows, disruptive innovation, diversification, diversified portfolio, Donald Trump, Dutch auction, easy for humans, difficult for computers, eat what you kill, Eddington experiment, Edmond Halley, Edward Lloyd's coffeehouse, Edward Thorp, Elon Musk, Ethereum, Eugene Fama: efficient market hypothesis, experimental economics, experimental subject, fear of failure, feminist movement, financial deregulation, George Akerlof, germ theory of disease, Goodhart's law, Hans Rosling, Helicobacter pylori, high-speed rail, Ignaz Semmelweis: hand washing, income per capita, incomplete markets, inflation targeting, information asymmetry, invention of the wheel, invisible hand, Jeff Bezos, Jim Simons, Johannes Kepler, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Snow's cholera map, John von Neumann, Kenneth Arrow, Kōnosuke Matsushita, Linda problem, Long Term Capital Management, loss aversion, Louis Pasteur, mandelbrot fractal, market bubble, market fundamentalism, military-industrial complex, Money creation, Moneyball by Michael Lewis explains big data, Monty Hall problem, Nash equilibrium, Nate Silver, new economy, Nick Leeson, Northern Rock, nudge theory, oil shock, PalmPilot, Paul Samuelson, peak oil, Peter Thiel, Philip Mirowski, Phillips curve, Pierre-Simon Laplace, popular electronics, power law, price mechanism, probability theory / Blaise Pascal / Pierre de Fermat, quantitative trading / quantitative finance, railway mania, RAND corporation, reality distortion field, rent-seeking, Richard Feynman, Richard Thaler, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Solow, Ronald Coase, sealed-bid auction, shareholder value, Silicon Valley, Simon Kuznets, Socratic dialogue, South Sea Bubble, spectrum auction, Steve Ballmer, Steve Jobs, Steve Wozniak, Suez crisis 1956, Tacoma Narrows Bridge, Thales and the olive presses, Thales of Miletus, The Chicago School, the map is not the territory, The Market for Lemons, The Nature of the Firm, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Bayes, Thomas Davenport, Thomas Malthus, Toyota Production System, transaction costs, ultimatum game, urban planning, value at risk, world market for maybe five computers, World Values Survey, Yom Kippur War, zero-sum game

In the spring of 2007, the UK bank Northern Rock announced at its AGM that it was the best-capitalised bank in the United Kingdom, and would be returning ‘surplus’ capital to shareholders. 10 And according to the internationally agreed risk calculations embodied in the Basel regulations that had come into force at the beginning of the year, it was indeed the best-capitalised bank in Britain. The risk weights mandated by those new regulations assumed that mortgages were among the safest assets in which a bank could invest; however, if you stripped out the risk weighting, the liabilities of Northern Rock were eighty times its equity capital.

Both commercial bankers and regulators believed that while retail funding might suddenly dry up, wholesale funding would always be available at a price. This reasonable assumption turned out to be wrong. Northern Rock was felled by an off-model event. The abject failure of models in the global financial crisis has not dented their popularity among regulators. European directives – known as Solvency II – have extended the use of similar models to the insurance sector, and a pension fund regime is likely to follow. But insurance companies rarely fail as a result of low-probability events described by risk models, but in consequence of off-model issues such as fraud or – as at Northern Rock – the realisation of narratives which had not been imagined by management or regulators.

The risk weights mandated by those new regulations assumed that mortgages were among the safest assets in which a bank could invest; however, if you stripped out the risk weighting, the liabilities of Northern Rock were eighty times its equity capital. Worse, the very detailed regulations which defined ‘capital adequacy’ took no account of how the bank structured the liability side of its balance sheet – the bank’s own borrowings which funded its mortgage lending. Under an ambitious young chief executive, Adam Applegarth, Northern Rock had moved far from the traditional building society it had been only ten years earlier, which took deposits from retail savers and lent them to home buyers. The bank now financed much of its lending from day-to-day borrowing in money markets before selling packages of securitised mortgages to other financial institutions.


pages: 394 words: 85,734

The Global Minotaur by Yanis Varoufakis, Paul Mason

active measures, Alan Greenspan, AOL-Time Warner, 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, Easter island, endogenous growth, eurozone crisis, financial engineering, financial innovation, first-past-the-post, full employment, Glass-Steagall Act, Great Leap Forward, guns versus butter model, 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, low interest rates, 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

September – The obvious unwillingness of the banks to lend to one another is revealed when the rate at which they do this lending (the LIBOR, short for the London Interbank Offered Rate) exceeds the Bank of England’s rate by more than 1 per cent (for the first time since the South East Asian crisis of 1998). At that point, we witness the first run on a bank since 1929. The bank in question is Northern Rock. While it holds no CDOs or sub-prime mortgage accounts, the bank relies heavily on short-term loans from other banks. When this source of credit dries up, it can no longer meet its liquidity needs. When customers suspect this, they try to withdraw their money, at which point the bank collapses, before being brought back to ‘life’ by the Bank of England at a cost in excess of £15 billion.

February – The Fed lets it be known that it is worried about the insurance sector, while the G7 (the representatives of the seven leading developed countries) forecast the cost of the sub-prime crisis to be in the region of $400 billion. Meanwhile the British government is forced to nationalize Northern Rock. Wall Street’s fifth-largest bank, Bear Stearns (which in 2007 was valued at $20 billion) is wiped out, absorbed by JPMorgan Chase, which pays the paltry sum of $240 million for it, with the taxpayer throwing in a subsidy in the order of $30 billion. April – It is reported that more than 20 per cent of mortgage ‘products’ in Britain are being withdrawn from the market, along with the option of taking out a 100 per cent mortgage.

ABN-Amro, takeover by RBS, 119–20 ACE (aeronautic–computer–electronics) complex, 83 Acheson, Dean, 68 Adenauer, Konrad, 74 Afghanistan, proposed US invasion, 106–7 Africa: colonization, 79; investment in, 214, 218, 252, 253 agriculture, 26, 31 AIG (American Insurance Group), 150, 153, 159 Akins, James, 97 Allied Control Council, 70 America see US (United States) American Civil War, 40 Anglo-Celtic model, 12–13, 23, 117, 199 Anglo-Celtic societies, 20, 128–9 Anglo Irish Bank, 158 Angola, effect of China on, 214–15 AOL-Time Warner, 117 apartheid, in the US, 84 aporia, 1, 3–4, 25, 33, 146 Argentina: Crash of 2008, 163; currency unions, 61, 65; effect of China on, 215, 218; financial crisis, 190; trade with Asia, 215 asabiyyah (solidarity), 33–4 Asia: investment in, 191, 215; investors from, 175; reaction to the Crash of 2008, 13; surplus output, 184; US-controlled, 78 see also East Asia; South East Asia; specific countries ATMs (automated telling machines): virtual, 8, 9; Volcker on, 122 Australia: effect of China on, 214; house prices, 128, 129, 129; Reserve Bank, 160 balance, global, 22 Bank of America, 153, 157, 158 Bank of Canada, 148, 155 Bank of Denmark, 157 Bank of England: and Barings Bank, 40; and the Crash of 2008, 151, 155, 156, 158; and Northern Rock, 148; rates, 148, 159 Bank of Japan, 148, 187, 189 Bank of Sweden, 157 bankruptocracy, 164–8, 169, 191, 230, 236, 237, 250 banks: bonuses, 8; and the EFSF, 175; main principle of, 130; nationalization, 153, 154, 155, 158; Roosevelt’s regulations, 10; runs on, 148; zombie, 190–1 see also specific banks Barclays Bank, 151, 152 Barings Bank, 40 bauxite, prices, 96 Bear Stearns, 147, 151 Belgium, 75, 79, 120, 154, 196 Berlin crisis, 71 Berlin Wall, demolition, 201 Bernanke, Ben, 147, 148, 164, 230, 231, 233, 234 Big Bang, 138 bio-fuels, 163 biological weapons, 27 Black Monday, 2, 10 Blake, William, 29 BNP-Paribas, 147–8 boom to bust cycle, 35 Bradford and Bingley, 154 Brazil: Crash of 2008, 163; effect of China on, 215, 217, 218, 253; trade with Asia, 215 Bretton Woods conference, 58–61, 62, 64, 254–5 Bretton Woods system, 60, 62, 63, 67, 78, 92–3; end, 94, 95–6 Britain: Crash of 2008, 2, 159; crisis of 1847, 40; devaluing of the pound, 93; economy under Thatcher, 136–7; Global Plan, 69; gold request, 94; Gold Standard, 44; Icelandic bank nationalization, 155; labour costs, 105; Plaza Accord, 188; stance on Cyprus, 79; stance on India, 79; unemployment rate, 160 British Academy, 4, 5, 6 Buffet, Warren, 8 bureaucracies, rise of, 27 Bush, George W., 149, 156, 157 Byrnes, James, 68 capital, and the human will, 18–19 capitalism: dynamic system, 139–40; free market, 68; generation of crises, 34; global, 58, 72, 114, 115, 133; Greenspan and, 11–12; Marxism, 17–18; static system, 139; supposed cure for poverty, 41–2; surplus recycling mechanisms, 64–5 capitalists, origin of, 31 car production, 70, 103, 116, 157–8 carry trade, 189–90 Carter, Jimmy, 99, 100 CDOs (collateralized debt obligations), 141–2, 147–8, 149, 150, 153; for crops, 163; eurozone, 205; explanation, 6–9; France, 203; function, 130–2; Greece, 206 see also EFSF; Geithner–Summers Plan CDSs (credit default swaps), 149, 150, 153, 154, 176, 177 CEOs (chief executive officers), 46, 48, 49 Chamber of Commerce, British, 152 cheapness, ideology of, 124 Chiang Kai-shek, 76 Chicago Commodities Exchange, 120 Chicago Futures Exchange, 163 China: aggregate demand, 245; Crash of 2008, 156, 162; currency, 194, 213, 214, 217, 218, 252; economic development, 106–7; effects of the Crash of 2008, 3; financial support for the US, 216; global capital, 116; Global Plan, 76; growth, 92; rise and impact, 212–18, 219–20 Chrysler, 117, 159 CIA (Central Intelligence Agency), 69 Citigroup, 149, 156, 158 City of London: Anglo-Celtic model, 12; Crash of 2008, 148, 152; debt in relation to GDP, 4–5; financialization, 118–19; under Thatcher, 138; wealth of merchants, 28 civilization, 27, 29–30, 128 Clinton, Hillary, 212, 215–16 Cold War, 71, 80, 81, 86 collateralized debt obligations see CDOs commodification: resistance to, 53–4; rise of, 30, 33, 54; of seeds, 175 commodities: global, 27–8; human nature not, 53; labour as, 45, 49, 54; money as, 45, 49; prices, 96, 98, 102, 125; trading, 31, 175 common market, European, 195 communism, collapse of, 22, 107–8 complexity, and economic models, 139–40 Condorcet, Nicholas de Caritat, marquis de, 29, 32 Congress (US): bail-outs, 77, 153–4, 155; import tariff bill, 45 Connally, John, 94–5 council houses, selling off, 137, 138 Crash of 1907, 40 Crash of 1929, 38–43, 44, 181 Crash of 2008, 146–68; aftermath, 158–60; chronicle, 2007, 147–9; chronicle, 2008, 149, 151–8; credit default swaps, 150; effects, 2–3; epilogue, 164–8; explanations, 4–19; in Italy, 237; review, 160–4; in Spain, 237; warnings, 144–5 credit crunch, 149, 151 credit default swaps (CDSs), 149, 150, 153, 154, 176, 177 credit facilities, 127–8 credit rating agencies, 6–7, 8, 9, 20, 130 crises: as laboratories of the future, 28; nature of, 141; pre-1929, 40; pre-2008, 2; proneness to, 30; redemptive, 33–5, 35 currency unions, 60–1, 61–2, 65, 251 Cyprus, Britain’s role in, 69, 79 Daimler-Benz, 117 DaimlerChrysler, 117 Darling, Alistair, 159 Darwinian process, 167 Das Kapital (Marx), 49 de Gaulle, Charles, 76, 93 Debenhams, takeover of, 119 debt: and GDP, 4–5; unsecured, 128; US government, 92; US households, 161–2 see also CDOs; leverage debt–deflation cycle, 63 deficits: in the EU, 196; US budget, 22–3, 25, 112, 136, 182–3, 215–16; US trade, 22–3, 25, 111, 182–3, 196, 227 Deng Xiao Ping, 92, 212 Depressions: US 1873–8, 40; US Great Depression, 55, 58, 59, 80 deregulations, 138, 143, 170 derivatives, 120, 131–2, 174, 178 Deutschmark, 74, 96, 195, 197 Dexia, 154 distribution, and production, 30, 31, 54, 64 dollar: devaluing, 188; flooding markets, 92–3; pegging, 190; reliance on, 57, 60, 102; value of, 96, 204; zone, 62, 78, 89, 164 dotcom bubble, 2, 5 Draghi, Mario, 239 East Asia, 79, 143, 144, 194 see also Asia; specific countries East Germany, 201, 202 see also Germany Eastern Europe, 108, 198, 203 ECB (European Central Bank): aftermath of Crash of 2008, 158; bank bail-outs, 203, 204; Crash of 2008, 148, 149, 155, 156, 157; European banking crisis, 208, 209–10; Greek crisis, 207; LTRO, 238; Maastricht Treaty, 199–200; toxic theory, 15 economic models, 139–42 Economic Recovery Advisory Board (ERAB), 180, 181 Economic Report of the President (1999), 116 ECSC (European Coal and Steel Community), 74, 75–6 Edison, Thomas, 38–9 Efficient Market Hypothesis (EMH), 15 EFSF (European Financial Stability Facility), 174, 175–7, 207, 208–9 EIB (European Investment Bank), 210 Eisenhower, Dwight D., 82 Elizabeth II, Queen, 4, 5 ERAB (Economic Recovery Advisory Board), 180, 181 ERM (European Exchange Rate Mechanism), 197 EU (European Union): economies within, 196; EFSF, 174; European Financial Stability Mechanism, 174; financial support for the US, 216; origins, 73, 74, 75; SPV, 174 euro see eurozone eurobonds, toxic, 175–7 Europa myth, 201 Europe: aftermath of Crash of 2008, 162; bank bail-outs, 203–5; Crash of 2008, 2–3, 12–13, 183; end of Bretton Woods system, 95; eurozone problems, 165; Geithner–Summers Plan, 174–7; oil price rises, 98; unemployment, 164 see also specific countries European Central Bank see ECB European Coal and Steel Community (ECSC), 74, 75–6 European Commission, 157, 203, 204 European Common Market, 195 European Exchange Rate Mechanism (ERM), 197 European Financial Stability Facility (EFSF), 174, 207, 208–9 European Financial Stability Mechanism, 174, 175–7 European Investment Bank (EIB), 210 European Recovery Progam see Marshall Plan European Union see EU eurozone, 61, 62, 156, 164; crisis, 165, 174, 204, 208–9, 209–11; European banks’ exposure to, 203; formation of, 198, 202; France and, 198; Germany and, 198–201; and Greek crisis, 207 exchange rate system, Bretton Woods, 60, 63, 67 falsifiability, empirical test of, 221 Fannie Mae, 152, 166 Fed, the (Federal Reserve): aftermath of Crash of 2008, 159; Crash of 2008, 148, 149, 151, 153, 155, 156, 157; creation, 40; current problems, 164; Geithner–Summers Plan, 171–2, 173, 230; Greenspan and, 3, 10; interest rate policy, 99; sub-prime crisis, 147, 149; and toxic theory, 15 feudalism, 30, 31, 64 Fiat, 159 finance: as a pillar of industry, 31; role of, 35–8 Financial Crisis Inquiry Commission, 166 financialization, 30, 190, 222 First World War, Gold Standard suspension, 44 food: markets, 215; prices, 163 Ford, Henry, 39 formalist economic model, 139–40 Forrestal, James, 68 Fortis, 153 franc, value against dollar, 96 France: aid for banks, 157; colonialism criticized, 79; EU membership, 196; and the euro, 198; gold request, 94; Plaza Accord, 188; reindustrialization of Germany, 74; support for Dexia, 154 Freddie Mac, 152, 166 free market fundamentalism, 181, 182 French Revolution, 29 G7 group, 151 G20 group, 159, 163–4 Galbraith, John Kenneth, 73 GATT (General Agreement on Tariffs and Trade), 78 GDP (Gross Domestic Product): Britain, 4–5, 88, 158; eurozone, 199, 204; France, 88; Germany, 88, 88; Japan, 88, 88; US, 4, 72, 73, 87, 88, 88, 161; world, 88 Geithner–Summers Plan, 159, 169–83; in Europe, 174–7; results, 178–81; in the US, 169–74, 170, 230 Geithner, Timothy, 170, 173, 230 General Motors (GM), 131–2, 157–8, 160 General Theory (Keynes), 37 geopolitical power, 106–8 Germany: aftermath of the Second World War, 68, 73–4; competition with US, 98, 103; current importance, 251; and Europe, 195–8; and the eurozone, 198–201, 211; global capital, 115–16; Global Plan, 69, 70; Greek crisis, 206; house prices, 129; Marshall Plan, 73; reunification, 201–3; support for Hypo Real Estate, 155; trade surplus, 251; trade surpluses, 158 Giscard d’Estaing, Valery, 93 Glass–Steagall Act (1933), 10, 180 global balance, 22 global imbalances, 251–2 Global Plan: appraisal, 85–9; architects, 68; end of, 100–1, 182; geopolitical ideology, 79–82; Germany, 75; Marshall Plan, 74; origins, 67–71; real GDP per capita, 87; unravelling of, 90–4; US domestic policies, 82–5 global surplus recycing mechanism see GSRM global warming, 163 globalization, 12, 28, 125 GM (General Motors), 131–2, 157–8, 160 gold: prices, 96; rushes, 40; US reserves, 92–3 Gold Exchange Standard, collapse, 43–5 Goodwin, Richard, 34 Great Depression, 55, 58, 59, 80 Greece: currency, 205; debt crisis, 206–8 greed, Crash of 2008, 9–12 Greek Civil War, 71, 72, 79 Greenspan, Alan, 3, 10–11 Greenwald, Robert, 125–6 Gross Domestic Product see GDP GSRM (global surplus recycling mechanism), 62, 66, 85, 90, 109–10, 222, 223, 224, 248, 252–6 HBOS, 153, 156 Heath, Edward, 94 hedge funds, 147, 204; LTCM, 2, 13; toxic theory, 15 hedging, 120–1 history: consent as driving force, 29; Marx on, 178; as undemocratic, 28 Ho Chi Minh, 92 Holland, 79, 120, 155, 196, 204 home ownership, 12, 127–8; reposessions, 161 Homeownership Preservation Foundation, 161 Hoover, Herbert, 42–3, 44–5, 230 House Committee on Un-American Activities, 73 house prices, 12, 128–9, 129, 138; falling, 151, 152 human nature, 10, 11–12 humanity, in the workforce, 50–2, 54 Hypo Real Estate, 155 Ibn Khaldun, 33 IBRD (International Bank for Reconstruction and Development) see World Bank Iceland, 154, 155, 156, 203 ICU (International Currency Union) proposal, 60–1, 66, 90, 251 IMF (International Monetary Fund): burst bubbles, 190; cost of the credit crunch, 151; Crash of 2008, 155–6, 156, 159; demise of social services, 163; on economic growth, 159; European banking crisis, 208; G20 support for, 163–4; Greek crisis, 207; origins, 59; South East Asia, 192, 193; Third World debt crisis, 108; as a transnational institution, 253, 254 income: distribution, 64; national, 42; US national, 43 India: Britain’s stance criticized, 79; Crash of 2008, 163; suicides of farmers, 163 Indochina, and colonization, 79 Indonesia, 79, 191 industrialization: Britain, 5; Germany, 74–5; Japan, 89, 185–6; roots of, 27–8; South East Asia, 86 infinite regress, 47 interest rates: CDOs, 7; post-Global Plan, 99; prophecy paradox, 48; rises in, 107 International Bank for Reconstruction and Development (IBRD) see World Bank International Currency Union (ICU) proposal, 60–1, 66, 90, 253 International Labour Organisation, 159 International Monetary Fund see IMF Iran, Shah of, 97 Ireland: bankruptcy, 154, 156; EFSF, 175; nationalization of Anglo Irish Bank, 158 Irwin, John, 97 Japan: aftermath of the Second World War, 68–9; competition with the US, 98, 103; in decline, 186–91; end of Bretton Woods system, 95; financial support for the US, 216; global capital, 115–16; Global Plan, 69, 70, 76–8, 85–6; house prices, 129; labour costs, 105; new Marshall Plan, 77; Plaza Accord, 188; post-war, 185–91; post-war growth, 185–6; relations with the US, 187–8, 189; South East Asia, 91, 191–2; trade surpluses, 158 joblessness see unemployment Johnson, Lyndon B.: Great Society programmes, 83, 84, 92; Vietnam War, 92 JPMorgan Chase, 151, 153 keiretsu system, Japan, 186, 187, 188, 189, 191 Kennan, George, 68, 71 Kennedy, John F., New Frontier social programmes, 83, 84 Keynes, John Maynard: Bretton Woods conference, 59, 60, 62, 109; General Theory, 37; ICU proposal, 60, 66, 90, 109, 254, 255; influence on New Dealers, 81; on investment decisions, 48; on liquidity, 160–1; trade imbalances, 62–6 Keynsianism, 157 Kim Il Sung, 77 Kissinger, Henry, 94, 98, 106 Kohl, Helmut, 201 Korea, 91, 191, 192 Korean War, 77, 86 labour: as a commodity, 28; costs, 104–5, 104, 105, 106, 137; hired, 31, 45, 46, 53, 64; scarcity of, 34–5; value of, 50–2 labour markets, 12, 202 Labour Party (British), 69 labourers, 32 land: as a commodity, 28; enclosure, 64 Landesbanken, 203 Latin America: effect of China on, 215, 218; European banks’ exposure to, 203; financial crisis, 190 see also specific countries lead, prices, 96 Lebensraum, 67 Left-Right divide, 167 Lehman Brothers, 150, 152–3 leverage, 121–2 leveraging, 37 Liberal Democratic Party (Japan), 187 liberation movements, 79, 107 LIBOR (London Interbank Offered Rate), 148 liquidity traps, 157, 190 Lloyds TSB, 153, 156 loans: and CDOs, 7–8, 129–31; defaults on, 37 London School of Economics, 4, 66 Long-Term Capital Management (LTCM) hedge fund collapse, 13 LTCM (Long-Term Capital Management) hedge fund collapse, 2, 13 Luxembourg, support for Dexia, 154 Maastricht Treaty, 199–200, 202 MacArthur, Douglas, 70–1, 76, 77 machines, and humans, 50–2 Malaysia, 91, 191 Mao, Chairman, 76, 86, 91 Maresca, John, 106–7 Marjolin, Robert, 73 Marshall, George, 72 Marshall Plan, 71–4 Marx, Karl: and capitalism, 17–18, 19, 34; Das Kapital, 49; on history, 178 Marxism, 181, 182 Matrix, The (film), 50–2 MBIA, 149, 150 McCarthy, Senator Joseph, 73 mercantilism, in Germany, 251 merchant class, 27–8 Merkel, Angela, 158, 206 Merrill Lynch, 149, 153, 157 Merton, Robert, 13 Mexico: effect of China on, 214; peso crisis, 190 Middle East, oil, 69 MIE (military-industrial establishment), 82–3 migration, Crash of 2008, 3 military-industrial complex mechanism, 65, 81, 182 Ministry for International Trade and Industry (Japan), 78 Ministry of Finance (Japan), 187 Minotaur legend, 24–5, 25 Minsky, Hyman, 37 money markets, 45–6, 53, 153 moneylenders, 31, 32 mortgage backed securities (MBS) 232, 233, 234 NAFTA (North American Free Trade Agreement), 214 National Bureau of Economic Research (US), 157 National Economic Council (US), 3 national income see GDP National Security Council (US), 94 National Security Study Memorandum 200 (US), 106 nationalization: Anglo Irish Bank, 158; Bradford and Bingley, 154; Fortis, 153; Geithner–Summers Plan, 179; General Motors, 160; Icelandic banks, 154, 155; Northern Rock, 151 NATO (North Atlantic Treaty Organization), 76, 253 negative engineering, 110 negative equity 234 neoliberalism, 139, 142; and greed, 10 New Century Financial, 147 New Deal: beginnings, 45; Bretton Woods conference, 57–9; China, 76; Global Plan, 67–71, 68; Japan, 77; President Kennedy, 84; support for the Deutschmark, 74; transfer union, 65 New Dealers: corporate power, 81; criticism of European colonizers, 79 ‘new economy’, 5–6 New York stock exchange, 40, 158 Nietzsche, Friedrich, 19 Nixon, Richard, 94, 95–6 Nobel Prize for Economics, 13 North American Free Trade Agreement (NAFTA), 214 North Atlantic Treaty Organization (NATO), 76 North Korea see Korea Northern Rock, 148, 151 Obama administration, 164, 178 Obama, Barack, 158, 159, 169, 180, 230, 231 OECD (Organisation for Economic Co-operation and Development), 73 OEEC (Organisation for European Economic Co-operation), 73, 74 oil: global consumption, 160; imports, 102–3; prices, 96, 97–9 OPEC (Organization of the Petroleum Exporting Countries), 96, 97 paradox of success, 249 parallax challenge, 20–1 Paulson, Henry, 152, 154, 170 Paulson Plan, 154, 173 Penn Bank, 40 Pentagon, the, 73 Plaza Accord (1985), 188, 192, 213 Pompidou, Georges, 94, 95–6 pound sterling, devaluing, 93 poverty: capitalism as a supposed cure for, 41–2; in China, 162; reduction in the US, 84; reports on global, 125 predatory governance, 181 prey–predator dynamic, 33–5 prices, flexible, 40–1 private money, 147, 177; Geithner–Summers Plan, 178; toxic, 132–3, 136, 179 privatization, of surpluses, 29 probability, estimating, 13–14 production: cars, 70, 103, 116, 157–8; coal, 73, 75; costs, 96, 104; cuts in, 41; in Japan, 185–6; processes, 30, 31, 64; steel, 70, 75 production–distribution cycle, 54 property see real estate prophecy paradox, 46, 47, 53 psychology, mass, 14 public debt crisis, 205 quantitative easing, 164, 231–6 railway bubbles, 40 Rational Expectations Hypothesis (REH), 15–16 RBS (Royal Bank of Scotland), 6, 151, 156; takeover of ABN-Amro, 119–20 Reagan, Ronald, 10, 99, 133–5, 182–3 Real Business Cycle Theory (RBCT), 15, 16–17 real estate, bubbles, 8–9, 188, 190, 192–3 reason, deferring to expectation, 47 recession predictions, 152 recessions, US, 40, 157 recycling mechanisms, 200 regulation, of banking system, 10, 122 relabelling, 14 religion, organized, 27 renminbi (RMB), 213, 214, 217, 218, 253 rentiers, 165, 187, 188 representative agents, 140 Reserve Bank of Australia, 148 reserve currency status, 101–2 risk: capitalists and, 31; riskless, 5, 6–9, 14 Roach, Stephen, 145 Robbins, Lionel, 66 Roosevelt, Franklin D., 165; attitude towards Britain, 69; and bank regulation, 10; New Deal, 45, 58–9 Roosevelt, Theodore (‘Teddy’), 180 Royal Bank of Scotland (RBS), 6, 151, 156; takeover of ABN-Amro, 119–20 Rudd, Kevin, 212 Russia, financial crisis, 190 Saudi Arabia, oil prices, 98 Scandinavia, Gold Standard, 44 Scholes, Myron, 13 Schopenhauer, Arthur, 19 Schuman, Robert, 75 Schumpter, Joseph, 34 Second World War, 45, 55–6; aftermath, 87–8; effect on the US, 57–8 seeds, commodification of, 163 shares, in privatized companies, 137, 138 silver, prices, 96 simulated markets, 170 simulated prices, 170 Singapore, 91 single currencies, ICU, 60–1 slave trade, 28 SMEs (small and medium-sized enterprises), 186 social welfare, 12 solidarity (asabiyyah), 33–4 South East Asia, 91; financial crisis, 190, 191–5, 213; industrialization, 86, 87 South Korea see Korea sovereign debt crisis, 205 Soviet Union: Africa, 79; disintegration, 201; Marshall Plan, 72–3; Marxism, 181, 182; relations with the US, 71 SPV (Special Purpose Vehicle), 174 see also EFSF stagflation, 97 stagnation, 37 Stalin, Joseph, 72–3 steel production, in Germany, 70 Strauss-Kahn, Dominique, 60, 254, 255 Summers, Larry, 230 strikes, 40 sub-prime mortgages, 2, 5, 6, 130–1, 147, 149, 151, 166 success, paradox of, 33–5, 53 Suez Canal trauma, 69 Suharto, President of Indonesia, 97 Summers, Larry, 3, 132, 170, 173, 180 see also Geithner–Summers Plan supply and demand, 11 surpluses: under capitalism, 31–2; currency unions, 61; under feudalism, 30; generation in the EU, 196; manufacturing, 30; origin of, 26–7; privatization of, 29; recycling mechanisms, 64–5, 109–10 Sweden, Crash of 2008, 155 Sweezy, Paul, 73 Switzerland: Crash of 2008, 155; UBS, 148–9, 151 systemic failure, Crash of 2008, 17–19 Taiwan, 191, 192 Tea Party (US), 162, 230, 231, 281 technology, and globalization, 28 Thailand, 91 Thatcher, Margaret, 117–18, 136–7 Third World: Crash of 2008, 162; debt crisis, 108, 219; interest rate rises, 108; mineral wealth, 106; production of goods for Walmart, 125 tiger economies, 87 see also South East Asia Tillman Act (1907), 180 time, and economic models, 139–40 Time Warner, 117 tin, prices, 96 toxic theory, 13–17, 115, 133–9, 139–42 trade: balance of, 61, 62, 64–5; deficits (US), 111, 243; global, 27, 90; surpluses, 158 trades unions, 124, 137, 202 transfer unions, New Deal, 65 Treasury Bills (US), 7 Treaty of Rome, 237 Treaty of Versailles, 237 Treaty of Westphalia, 237 trickle-down, 115, 135 trickle-up, 135 Truman Doctrine, 71, 71–2, 77 Truman, Harry, 73 tsunami, effects of, 194 UBS, 148–9, 151 Ukraine, and the Crash of 2008, 156 UN Security Council, 253 unemployment: Britain, 160; Global Plan, 96–7; rate of, 14; US, 152, 158, 164 United States see US Unocal, 106 US economy, twin deficits, 22–3, 25 US government, and South East Asia, 192 US Mortgage Bankers Association, 161 US Supreme Court, 180 US Treasury, 153–4, 156, 157, 159; aftermath of the Crash of 2008, 160; Geithner–Summers Plan, 171–2, 173; bonds, 227 US Treasury Bills, 109 US (United States): aftermath of the Crash of 2008, 161–2; assets owned by foreign state institutions, 216; attitude towards oil price rises, 97–8; China, 213–14; corporate bond purchases, 228; as a creditor nation, 57; domestic policies during the Global Plan, 82–5; economy at present, 184; economy praised, 113–14; effects of the Crash of 2008, 2, 183; foreign-owned assets, 225; Greek Civil War, 71; labour costs, 105; Plaza Accord, 188; profit rates, 106; proposed invasion of Afghanistan, 106–7; role in the ECSC, 75; South East Asia, 192 value, costing, 50–1 VAT, reduced, 156 Venezuela, oil prices, 97 Vietnamese War, 86, 91–2 vital spaces, 192, 195, 196 Volcker, Paul: 2009 address to Wall Street, 122; demand for dollars, 102; and gold convertibility, 94; interest rate rises, 99; replaced by Greenspan, 10; warning of the Crash of 2008, 144–5; on the world economy, 22, 100–1, 139 Volcker Rule, 180–1 Wachowski, Larry and Andy, 50 wage share, 34–5 wages: British workers, 137; Japanese workers, 185; productivity, 104; prophecy paradox, 48; US workers, 124, 161 Wal-Mart: The High Cost of Low Price (documentary, Greenwald), 125–6 Wall Street: Anglo-Celtic model, 12; Crash of 2008, 11–12, 152; current importance, 251; Geithner–Summers Plan, 178; global profits, 23; misplaced confidence in, 41; private money, 136; profiting from sub-prime mortgages, 131; takeovers and mergers, 115–17, 115, 118–19; toxic theory, 15 Wallace, Harry, 72–3 Walmart, 115, 123–7, 126; current importance, 251 War of the Currents, 39 Washington Mutual, 153 weapons of mass destruction, 27 West Germany: labour costs, 105; Plaza Accord, 188 Westinghouse, George, 39 White, Harry Dexter, 59, 70, 109 Wikileaks, 212 wool, as a global commodity, 28 working class: in Britain, 136; development of, 28 working conditions, at Walmart, 124–5 World Bank, 253; origins, 59; recession prediction, 149; and South East Asia, 192 World Trade Organization, 78, 215 written word, 27 yen, value against dollar, 96, 188, 193–4 Yom Kippur War, 96 zombie banks, 190–1


pages: 471 words: 109,267

The Verdict: Did Labour Change Britain? by Polly Toynbee, David Walker

Alan Greenspan, An Inconvenient Truth, banking crisis, Big bang: deregulation of the City of London, blood diamond, Bob Geldof, Boris Johnson, call centre, central bank independence, congestion charging, Corn Laws, Credit Default Swap, Crossrail, decarbonisation, deglobalization, deindustrialization, Etonian, failed state, first-past-the-post, Frank Gehry, gender pay gap, Gini coefficient, high net worth, hiring and firing, illegal immigration, income inequality, Intergovernmental Panel on Climate Change (IPCC), knowledge economy, labour market flexibility, market bubble, mass immigration, military-industrial complex, millennium bug, moral panic, North Sea oil, Northern Rock, offshore financial centre, pension reform, plutocrats, Ponzi scheme, profit maximization, purchasing power parity, Right to Buy, shareholder value, Skype, smart meter, social distancing, stem cell, The Spirit Level, too big to fail, University of East Anglia, working-age population, Y2K

Public spending gushed, private debt spiralled, house prices skyrocketed; the UK economy was becoming lopsided. With ‘fewer children and pensioners living in hardship’, we wrote in Better or Worse? (2005), ‘Blair’s era was a better time to be British than for many decades’. But that era came to a precipitate end as the crowds milled outside Northern Rock in the autumn of 2007. How little, it now seems, was entrenched. How little political effort was put into changing public attitudes to recognize that generous public services required generous levels of tax. Labour never began the national discussion about what it was costing to improve public services.

No, I’d say three or four times round in a circle.’ If she stays on during the Con-Lib era, she will have more circuits to do. CHAPTER 3 The economy under Labour ‘I just want my money out,’ Thea Hardy from Crystal Palace told reporters as she joined a shuffling, angry queue outside a Northern Rock branch, showing how formerly phlegmatic Britain could panic with the best of them. The day the good times ended was 14 September 2007. The subsequent recession caused UK national output to fall 5 per cent, a larger cumulative loss of output than in any other post-war recession. Labour went from impresario of capitalist prosperity to doughty Keynesian mobilizing the state to fill capitalism’s deficiencies.

Government reforms were self-defeating. The remuneration committees it had insisted on became a means of further inflating top pay. A new shape for boards did not lead to better behaviour. Labour tried to strengthen the arm of dissident shareholders, giving them extra rights to push and probe. However, the Northern Rock board reached the end of the worst year in its history, nationalization pending, by paying its chief executive a salary of £760,000 pro rata till he departed, plus a bonus of £660,000. So much for shareholder power. Evidence piled up that mergers and acquisitions did not secure prosperity, either for workers affected, or in aggregate.


pages: 297 words: 108,353

Boom and Bust: A Global History of Financial Bubbles by William Quinn, John D. Turner

accounting loophole / creative accounting, Alan Greenspan, algorithmic trading, AOL-Time Warner, bank run, banking crisis, barriers to entry, Bear Stearns, behavioural economics, Big bang: deregulation of the City of London, bitcoin, blockchain, book value, Bretton Woods, business cycle, buy and hold, capital controls, Celtic Tiger, collapse of Lehman Brothers, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, cryptocurrency, debt deflation, deglobalization, Deng Xiaoping, different worldview, discounted cash flows, Donald Trump, equity risk premium, Ethereum, ethereum blockchain, eurozone crisis, fake news, financial deregulation, financial intermediation, Flash crash, Francis Fukuyama: the end of history, George Akerlof, government statistician, Greenspan put, high-speed rail, information asymmetry, initial coin offering, intangible asset, Irish property bubble, Isaac Newton, Japanese asset price bubble, joint-stock company, Joseph Schumpeter, junk bonds, land bank, light touch regulation, low interest rates, margin call, market bubble, market fundamentalism, Martin Wolf, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, negative equity, Network effects, new economy, Northern Rock, oil shock, Ponzi scheme, quantitative easing, quantitative trading / quantitative finance, railway mania, Right to Buy, Robert Shiller, Shenzhen special economic zone , short selling, short squeeze, Silicon Valley, smart contracts, South Sea Bubble, special economic zone, subprime mortgage crisis, technology bubble, the built environment, total factor productivity, transaction costs, tulip mania, urban planning

High loan-to-value ratios, high earnings-to-loan ratios, interest-only mortgages and mortgages with low initial teaser rates also became common in the United Kingdom, Ireland and Spain. In the United Kingdom, for example, institutions such as Northern Rock lent to subprime parts of the market on loan-to-value ratios close to or over 100 per cent. Northern Rock’s infamous Together mortgages, which allowed individuals to 175 BOOM AND BUST borrow up to 125 per cent of the value of their homes, were aimed at those on low incomes who needed to borrow to furnish their home, never mind buy it. Lenders in Ireland introduced 100 per cent mortgages in 2004, and by 2008 they constituted 12 per cent of all new mortgages granted.18 The expansion of mortgage credit in the United States, Spain and the United Kingdom was supercharged by growth in the securitisation of mortgages.19 This involved a bank ‘distributing’ the mortgages which it had originated by selling their associated cash flows.

Then, in August 2007, the interest rate on the interbank market (the so-called LIBOR) increased and banks effectively stopped lending to one another – they did not know who was holding the soon-to-be-toxic MBSs. The clogging up of the securitisation machine and the freezing of the interbank market had a major impact on Northern Rock, then the leading British mortgage bank. On 13 September 2007, it received liquidity assistance from the Bank of England. However, when news of this leaked out, its depositors mounted a run on the bank which ended only when Chancellor Alistair Darling guaranteed its deposits. This was Britain’s first bank run in over 150 years. On 17 February 2008, Northern Rock was nationalised. About one month later, the US bank Bear Stearns was rescued by the Federal Reserve and taken over by JP Morgan for only a fraction of what its market value had been the previous week.

On 15 October, the US Treasury announced the TARP Capital Purchase Program, which allowed it to take up to $250 billion from TARP and inject it as capital into troubled banks. In the announcement, the Treasury stated that 9 major financial institutions had already agreed to receive capital injections.33 A further 42 institutions participated in the programme. Following its nationalisation of Northern Rock earlier in 2008, the UK Treasury put together a rescue package to deal with another large mortgage bank, the Bradford and Bingley, on 27 September 2008. Then, on 8 October 2008, the UK government announced three measures to relieve the ongoing financial crisis. First, it extended the Special Liquidity Scheme, whereby the Bank of England, indemnified by the Treasury, swapped Treasury bills for a bank’s illiquid assets for up to 3 years.


pages: 491 words: 131,769

Crisis Economics: A Crash Course in the Future of Finance by Nouriel Roubini, Stephen Mihm

Alan Greenspan, Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, barriers to entry, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, bond market vigilante , bonus culture, Bretton Woods, BRICs, British Empire, business cycle, call centre, capital controls, Carmen Reinhart, central bank independence, centralized clearinghouse, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, dark matter, David Ricardo: comparative advantage, debt deflation, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, George Akerlof, Glass-Steagall Act, global pandemic, global reserve currency, Gordon Gekko, Greenspan put, Growth in a Time of Debt, housing crisis, Hyman Minsky, information asymmetry, interest rate swap, invisible hand, Joseph Schumpeter, junk bonds, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, Louis Bachelier, low interest rates, margin call, market bubble, market fundamentalism, Martin Wolf, means of production, Minsky moment, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, Northern Rock, offshore financial centre, oil shock, Paradox of Choice, paradox of thrift, Paul Samuelson, Ponzi scheme, price stability, principal–agent problem, private sector deleveraging, proprietary trading, pushing on a string, quantitative easing, quantitative trading / quantitative finance, race to the bottom, random walk, regulatory arbitrage, reserve currency, risk tolerance, Robert Shiller, Satyajit Das, Savings and loan crisis, savings glut, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, subprime mortgage crisis, Suez crisis 1956, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, too big to fail, tulip mania, Tyler Cowen, unorthodox policies, value at risk, We are all Keynesians now, Works Progress Administration, yield curve, Yom Kippur War

As irrational as these bank runs may have seemed, depositors actually did have reason to worry. Like Countrywide, Northern Rock offered deposit insurance only up to a certain point: $100,000 in the case of Countrywide, and £30,000 in the case of Northern Rock. Plenty of depositors had sums well in excess of these amounts, and should the bank become insolvent—with or without the support of a lender of last resort—they would lose their savings. In fact, in the United States in 2007, some 40 percent of conventional deposits were uninsured. Bank runs, in other words, were rather rational. The cases of Countrywide and Northern Rock highlighted the difficulties of channeling aid only to “good” banks as opposed to “bad” ones.

One retiree waiting in line outside a branch captured the spirit of the panic when he told a reporter, “I’m at the age where I can’t afford to take the risk. I’ll gladly put it back as soon as I know the storm is over.” Words like these were uttered during panics in Bagehot’s time, but to hear them spoken in the twenty-first century was remarkable. Even more extraordinary, bank runs spread around the world. Northern Rock, a sizable British mortgage lender with a banking arm, suffered Countrywide’s fate the following month. Like Countrywide, most of its funding came from sources other than ordinary depositors, but that didn’t stop its ordinary depositors from lining up outside its branches in mid-September, under the glaring lights of the global media.

But what sounds good in theory is hard to put into practice during a crisis, when depositors storm banks and the financial system crumbles. The Bank of England’s Mervyn King found himself in precisely this awkward position. A month after lecturing the market about letting bad banks fail, he reversed course, promising to insure all of Northern Rock’s deposits and offering additional lines of liquidity to the beleaguered bank. That blanket deposit guarantee was soon extended to all banking institutions throughout the United Kingdom. Most other countries eventually followed suit or, at the very least, raised the deposit insurance ceiling. These interventions were just the beginning, but for a brief period in the winter of 2007 and 2008, some claimed that the crisis was over: the markets seemed to settle down.


pages: 352 words: 98,561

The City by Tony Norfield

accounting loophole / creative accounting, air traffic controllers' union, anti-communist, Asian financial crisis, asset-backed security, bank run, banks create money, Basel III, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, capital controls, central bank independence, colonial exploitation, colonial rule, continuation of politics by other means, currency risk, dark matter, Edward Snowden, Fall of the Berlin Wall, financial innovation, financial intermediation, foreign exchange controls, Francis Fukuyama: the end of history, G4S, global value chain, Goldman Sachs: Vampire Squid, interest rate derivative, interest rate swap, Irish property bubble, Leo Hollis, linked data, London Interbank Offered Rate, London Whale, Londongrad, low interest rates, Mark Zuckerberg, Martin Wolf, means of production, Money creation, money market fund, mortgage debt, North Sea oil, Northern Rock, Occupy movement, offshore financial centre, plutocrats, purchasing power parity, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, Ronald Reagan, seigniorage, Sharpe ratio, sovereign wealth fund, Suez crisis 1956, The Great Moderation, transaction costs, transfer pricing, zero-sum game

As it begins to face losses, it will find it harder to access the monetary system because other banks will be reluctant to lend to it, something that usually happens before the bank’s customers realise the problem and decide to get their money out. In the case of the UK’s Northern Rock crisis of 2007, the interbank deposit market was closed to Northern Rock well before the bank’s worried customers queued anxiously outside its branches or tried to use internet banking to transfer their funds elsewhere. The process of credit creation is critical for the capitalist system’s expansion of financial assets and is a unique feature of banks as financial companies.

The debtor need not worry if the creditor goes bust (the money has been already lent and the terms of a loan are usually fixed), but the depositor has much more reason to worry if the bank holding his or her deposits is under threat. One bank’s failure will also raise the risk of others failing and could cause trouble in the national (or international) payments system. This can even be true for a smaller bank, as with the UK’s Northern Rock in 2007. The UK government had to guarantee bank deposits and the Bank of England extended massive loans to Northern Rock and others.19 The links between capitalist companies and the nation-state help explain the different status of countries within the world economy. This also gives an economic definition of the term ‘imperialism’. My argument is that imperialism is not the same thing as colonial rule, and should not be understood only in terms of some countries dominating others through military or political pressure.

militarism 1–2 military power 6, 106 military spending 109–10 Mitterrand, François 63, 67 mobile phones 118, 121–2 monetary policy, UK 66 money advance of 86–7 creation of 83–5 national 115–16 value 163 money-capital 77–8 money-capitalists, and financial institutions 76–7 money-dealing capital 79 money-dealing capitalists 76–7, 77–8 money-market securities 76–7 Monopolies Commission 119–20 monopolistic companies 118 monopoly 90, 97 anti-monopoly policies 119–20 banks position 139 contemporary 121–3, 124, 125 and imperialism 100, 117–21 Lenin’s analysis 117–18 measure of 122–3 and mergers and acquisitions 122 network analysis 123, 124, 125 monopoly capitalism 93 monopoly power 119, 120, 126–7 Morgenthau, Henry 26–7, 36 mortgage-backed securities 140 mortgage loans 83, 143, 151 Mossadegh, Mohammad 59 Motorola 122 Murdoch, Rupert 113 national economy Hilferding’s analysis 93–4 state regulation 115–16 National Security Agency (US) 59 NEC 122 neoliberalism 13 Netherlands, the 205 network analysis, monopoly 123, 124, 125 network centrality 206 New Development Bank 18, 222–3 New York 185 bond market 49 development as financial centre 36–40 disadvantages 37–8, 40 foreign securities market 48 New York Federal Reserve 164 New York Times 173 New Zealand 31, 58, 60 Nokia 121–2 non-financial businesses 143 Northern Rock crisis, 2007 85, 116 North Sea oil 66, 69 nouveaux riches, the 78 NYSE Euronext 216 Obama, Barack 227 Occupy Movement, the 102 October 1987 stock market crash xi Office for National Statistics 138 Office of Fair Trading 120 offshore financial centres 205, 208 oil prices 55–7 oligarchs 78, 216 Olympic Games, 2012 120 OPEC 55–6 current account surplus 56–7 eurocurrency bank deposits 57 oil revenues 66 Orange 180 organised capitalism 95 Otis Elevator 121 outsourcing 98, 118–19 overdrafts 79–80 ownership stake, return on equity (RoE) 129–30 Oxfam 215 Panitch, Leo 14–17, 18 parasitism constructive 213–14 financial 95–7, 227–8 global 97–102 Lenin’s analysis 97–102 Marx’s analysis 95–7, 98 Paris 46, 47 patents 126 Paulson, Hank 125 pension funds 82–3, 99, 135 assets 103 PetroChina 222 petrodollars 55 Plaza Accord, the 68 policy-makers 13 political power 117 political pressures 6 portfolio flows 198–9, 199 portfolio investment 118, 201, 201, 202–3 portfolio investment theory 131 power 7–8, 100–2, 126–7.


pages: 318 words: 99,524

Why Aren't They Shouting?: A Banker’s Tale of Change, Computers and Perpetual Crisis by Kevin Rodgers

Alan Greenspan, algorithmic trading, bank run, banking crisis, Basel III, Bear Stearns, Berlin Wall, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black-Scholes formula, buy and hold, buy low sell high, call centre, capital asset pricing model, collapse of Lehman Brothers, Credit Default Swap, currency peg, currency risk, diversification, Fall of the Berlin Wall, financial innovation, Financial Instability Hypothesis, fixed income, Flash crash, Francis Fukuyama: the end of history, Glass-Steagall Act, Hyman Minsky, implied volatility, index fund, interest rate derivative, interest rate swap, invisible hand, John Meriwether, latency arbitrage, law of one price, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, Minsky moment, money market fund, Myron Scholes, Northern Rock, Panopticon Jeremy Bentham, Ponzi scheme, prisoner's dilemma, proprietary trading, quantitative easing, race to the bottom, risk tolerance, risk-adjusted returns, Silicon Valley, systems thinking, technology bubble, The Myth of the Rational Market, The Wisdom of Crowds, Tobin tax, too big to fail, value at risk, vertical integration, Y2K, zero-coupon bond, zero-sum game

Shortly afterwards, both entities were declared bankrupt. On 6 August, the American Home Mortgage Investment Corporation (a retail mortgage lender) also went bankrupt. Ameriquest went on 31 August. By mid-September, on my side of the Atlantic and with money markets now in meltdown, the mortgage lender Northern Rock was the scene of the first bank run in the UK for 150 years. By now, volatility and fear had returned with a vengeance to equity, bond and FX markets after years of gradually increasing calm. It was clear that the previous period of unusual stability was just the water rushing from the beach before a tsunami.

I think this explains why there is a quite weak correlation between pay and failure in the 2007–8 crisis.19 Some firms paid extravagantly well and blew up (e.g. Lehman); some paid equally well and were in good enough shape to be called on as a buyer of last resort for other failing banks (e.g. JPMorgan). Others, like the UK’s Northern Rock, paid their staff really rather poorly in banking terms but were first over the cliff. The other things that motivate individuals – trying to get paid well relatively speaking or trying to get promoted – spurred the gradual move to immoderate risk-taking, independent of the lure of instant riches.

Appendix 1: Euromoney FX Survey – Market Shares 1996–2015 Appendix 2: A Timeline of Events Mentioned in the Text Date Event 1973, May Black and Scholes option-pricing paper 1986, October ‘Big Bang’ regulatory regime in the UK 1987, October Stock market crash 1990, August Iraq invades Kuwait 1992, September ERM crisis, ‘Black Wednesday’ 1993, Summer Second ERM crisis 1993, Autumn Hedge fund LTCM set up 1994, February Federal Reserve unexpected rate rise; bond crash 1995 Deutsche Bank investment banking build-out starts 1996, May Bankers Trust settles with Procter and Gamble 1997, May Election of Tony Blair’s New Labour government in UK 1997, July Thailand devalues the baht 1997, October First big sell-off in Russian bonds 1998, August Russia defaults and devalues 1998, September Failure of LTCM 1998, November Deutsche Bank bids for Bankers Trust 1999, January Creation of the euro 1999 Merger of Prebon Yamane and Marshalls 1999, June Bankers Trust taken over by Deutsche Bank 1999, November Gramm–Leach–Bliley Act in the US repeals Glass–Steagall 2000, Spring Deutsche Bank wins Euromoney FX poll for first time 2001, September 9/11 attacks on World Trade Center and Pentagon 2003, Autumn EBS launches dealing API 2004, Spring Launch of EBS Prime 2005, May Deutsche Bank wins 2004 Euromoney poll 2005, Summer Barclays launch Precision Pricing; EBS opens to funds 2006, April EBS bought by ICAP 2006, July Deutsche Bank buys MortgageIT 2007, July Ratings agencies begin to downgrade CDOs 2007, September Run on Northern Rock 2008, September Collapse of Lehman Brothers 2008, October Introduction of the TARP; start of global recession 2010, May Flash Crash 2012, August Failure of Knight Capital; Collapse of EURCHF to 1.0000 2012, September SNB imposes EURCHF floor (cap on value of Swiss franc) 2013, December Closure of Deutsche Bank’s Commodities department 2015, January SNB abandons the EURCHF floor Notes Chapter 1 1 ‘Deutsche Bank Guide to Currency Indices’, George Saravelos et al., October 2007, p14, http://cbs.db.com/new/docs/DBGuideToFXIndices.pdf 2 ‘Interdealer Broking History’, Tullett Prebon, http://www.tullettprebon.com/about/about_ourstory.aspx Chapter 3 1 ‘Electronic Platforms in Foreign Exchange Trading’, Celent E-Forex Report 2007, Figure 10, https://forex-pdf.com/doc/1610--electronic-platforms-in-foreign-exchange-trading/?


pages: 348 words: 82,499

DIY Investor: How to Take Control of Your Investments & Plan for a Financially Secure Future by Andy Bell

asset allocation, bank run, Bear Stearns, Black Monday: stock market crash in 1987, buy and hold, collapse of Lehman Brothers, credit crunch, currency risk, diversification, diversified portfolio, estate planning, eurozone crisis, fixed income, high net worth, hiring and firing, Isaac Newton, junk bonds, Kickstarter, lateral thinking, low interest rates, money market fund, Northern Rock, passive investing, place-making, quantitative easing, selection bias, short selling, South Sea Bubble, technology bubble, transaction costs, Vanguard fund

And if your PIBS have a call date then there is always the risk that the issuing building society will buy them back at face value when that date comes around. When PIBS go wrong When many PIBS were launched back in the early 1990s, a number of investors assumed they were as rock-solid as the building societies that issued them. Unfortunately for those who bought PIBS from Northern Rock and Bradford & Bingley, they were. The interest rates offered were huge. Northern Rock issued PIBS paying 12.6 per cent a year, while Bradford & Bingley issued PIBS paying 13 per cent and 11.6 per cent. To be fair, interest rates were considerably higher back then than they are today, and rates like this were not uncommon. Both of these lenders’ PIBS were converted to PSBs when each of the building societies demutualised.

Co-op Bank, Smile, Britannia. Coventry Building Society, Stroud & Swindon. Halifax, Bank of Scotland, Intelligent Finance, Birmingham Midshires, AA, Saga. HSBC, First Direct. Lloyds TSB, Cheltenham & Gloucester. Nationwide, Cheshire, Derbyshire, Dunfermline Building Societies. Santander, Cahoot. Virgin Money, Northern Rock. Yorkshire Bank, Clydesdale Bank. Yorkshire, Barnsley, Chelsea, Norwich & Peterborough Building Societies, Egg. Overseas banks Banks based within the European Union have a similar level of investor protection – 100,000. But beware of banks that are not based in the EU as they do not have the same level of investor protection, as investors found out the hard way when banks based in Iceland and the Isle of Man collapsed in 2008.

For full details of the top ethical funds on the market, including their ethical policies and company-filtering techniques, go to www.fairinvestment.co.uk/investing_in_ethical_funds.aspx. Investment strategies to be avoided Buying shares that have fallen a long way on the belief that ‘surely they will bounce back’ There is no guarantee they will, and in all likelihood the company is on the way out. It happened to a friend, who bought £10,000-worth of Northern Rock in 2008 when their shares were at 75p, having been over 1200p a year earlier. A few months later his money had gone forever. Short-term plays on the Footsie Again, just because the FTSE 100 has fallen two days in a row doesn’t mean it will bounce back the next. You may say, ‘Yes it does, that happened yesterday’.


pages: 523 words: 111,615

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

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

. ∞ Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 CONTENTS Overview PART ONE: CHALLENGES ONE Happiness TWO Nature THREE Posterity FOUR Fairness FIVE Trust PART TWO: OBSTACLES SIX Measurement SEVEN Values EIGHT Institutions PART THREE: MANIFESTO NINE The Manifesto of Enough Acknowledgments Notes References Illustration Credits Index The Economics of Enough OVERVIEW In mid-september 2007 my sister phoned me to ask whether she should withdraw her savings from the bank and put the money somewhere else—and if so, where would be safe. She was with Northern Rock, and there was an old-fashioned run on the bank. It was unable to meet customers’ demand for withdrawals and had to ask the Bank of England to lend it the cash. The television news showed lines of anxious depositors hoping to take out all their funds. It was the first full-fledged bank run in living memory in the United Kingdom.

It was the first full-fledged bank run in living memory in the United Kingdom. I told her that the government would bail out all the depositors, as it would be political suicide to do anything else. My sister ignored my advice (although it ultimately turned out to be right) and joined the line outside her local branch. As for Northern Rock, it had to be taken over by the British government. A year later, in September 2008, the investment bank Lehman Brothers collapsed. Within a day or two, as financial markets around the world plunged, it was clear that this bankruptcy threatened to bring down the entire global financial system like a house of cards.

By 2002 it was almost worthless and the assets it held were sold to other companies. These are the biggest corporate and financial collapses of recent times but there have been others. They have included long-established and respected names and have occurred in Europe and elsewhere—Parmalat in Italy, Northern Rock and Royal Bank of Scotland in the United Kingdom, Satyam in India. Enron was a relatively new creation but many other companies that vanished in recent times were formed in the nineteenth century or even earlier. These recent examples were destroyed by the dynamite of innovative financial transactions, which were powerfully destructive, especially when used with criminal intent to defraud.


pages: 471 words: 124,585

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

Admiral Zheng, Alan Greenspan, An Inconvenient Truth, Andrei Shleifer, Asian financial crisis, asset allocation, asset-backed security, Atahualpa, bank run, banking crisis, banks create money, Bear Stearns, Black Monday: stock market crash in 1987, Black Swan, Black-Scholes formula, Bonfire of the Vanities, Bretton Woods, BRICs, British Empire, business cycle, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, classic study, collateralized debt obligation, colonial exploitation, commoditize, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, deglobalization, diversification, diversified portfolio, double entry bookkeeping, Edmond Halley, Edward Glaeser, Edward Lloyd's coffeehouse, equity risk premium, financial engineering, financial innovation, financial intermediation, fixed income, floating exchange rates, Fractional reserve banking, Francisco Pizarro, full employment, Future Shock, German hyperinflation, Greenspan put, Herman Kahn, Hernando de Soto, high net worth, hindsight bias, Home mortgage interest deduction, Hyman Minsky, income inequality, information asymmetry, interest rate swap, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, iterative process, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", John Meriwether, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour mobility, Landlord’s Game, liberal capitalism, London Interbank Offered Rate, Long Term Capital Management, low interest rates, market bubble, market fundamentalism, means of production, Mikhail Gorbachev, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, Naomi Klein, National Debt Clock, negative equity, Nelson Mandela, Nick Bostrom, Nick Leeson, Northern Rock, Parag Khanna, pension reform, price anchoring, price stability, principal–agent problem, probability theory / Blaise Pascal / Pierre de Fermat, profit motive, quantitative hedge fund, RAND corporation, random walk, rent control, rent-seeking, reserve currency, Richard Thaler, risk free rate, Robert Shiller, rolling blackouts, Ronald Reagan, Savings and loan crisis, savings glut, seigniorage, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spice trade, stocks for the long run, structural adjustment programs, subprime mortgage crisis, tail risk, technology bubble, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Bayes, Thomas Malthus, Thorstein Veblen, tontine, too big to fail, transaction costs, two and twenty, undersea cable, value at risk, W. E. B. Du Bois, Washington Consensus, Yom Kippur War

Mr Banks is duly sacked, prompting the tragic lament that he has been ‘brought to wrack and ruin in his prime’. These words might legitimately have been echoed by Adam Applegarth, the former chief executive of the English bank Northern Rock, who suffered a similar fate in September 2007 as customers queued outside his bank’s branches to withdraw their cash. This followed the announcement that Northern Rock had requested a ‘liquidity support facility’ from the Bank of England. The financial crisis that struck the Western world in the summer of 2007 provided a timely reminder of one of the perennial truths of financial history.

The liquidity crisis that some commentators had been warning about for at least a year struck in August 2007, when American Home Mortgage filed for bankruptcy, BNP Paribas suspended three mortgage investment funds and Countrywide Financial drew down its entire $11 billion credit line. What scarcely anyone had anticipated was that defaults on subprime mortgages by low-income households in cities like Detroit and Memphis could unleash so much financial havoc:aw one bank (Northern Rock) nationalized; another (Bear Stearns) sold off cheaply to a competitor in a deal underwritten by the Fed; numerous hedge funds wound up; ‘write-downs’ by banks amounting to at least $318 billion; total anticipated losses in excess of one trillion dollars. The subprime butterfly had flapped its wings and triggered a global hurricane.

The cooperative banking sector has seen the most change in recent years, with high levels of consolidation (especially following the Savings and Loans crisis of the 1980s), and most institutions moving to shareholder ownership. But the only species that is now close to extinction in the developed world is the state-owned bank, as privatization has swept the world (though the nationalization of Northern Rock suggests the species could make a come-back). In other respects, the story is one of speciation, the proliferation of new types of financial institution, which is just what we would expect in a truly evolutionary system. Many new ‘mono-line’ financial services firms have emerged, especially in consumer finance (for example, Capital One).


pages: 207 words: 86,639

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

Abraham Maslow, Alan Greenspan, Alvin Toffler, Apollo 11, Asian financial crisis, back-to-the-land, banking crisis, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, capital controls, carbon footprint, carbon tax, clean water, collateralized debt obligation, colonial rule, Community Supported Agriculture, congestion charging, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Crossrail, delayed gratification, deskilling, digital divide, en.wikipedia.org, energy transition, financial deregulation, financial exclusion, financial innovation, full employment, garden city movement, Glass-Steagall Act, green new deal, happiness index / gross national happiness, if you build it, they will come, income inequality, informal economy, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, John Elkington, junk bonds, Kickstarter, land bank, land reform, light touch regulation, loss aversion, mega-rich, microcredit, Mikhail Gorbachev, Money creation, mortgage debt, neoliberal agenda, new economy, North Sea oil, Northern Rock, offshore financial centre, oil shock, peak oil, pension time bomb, pensions crisis, profit motive, purchasing power parity, quantitative easing, Ronald Reagan, seigniorage, Simon Kuznets, sovereign wealth fund, special drawing rights, systems thinking, the long tail, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, trickle-down economics, Vilfredo Pareto, Washington Consensus, wealth creators, working-age population

By July 2007, Standard & Poor was threatening to cut its ratings on $12 billion of sub-prime debt. A month later, the European Central Bank was pumping €95 billion into the money markets, as the flow of interbank lending, which banks need to deal with day-to-day withdrawals while their deposits are out on loan, all but dried up. A month after that, reports that Northern Rock was looking for emergency financial support from the Bank of England led to the first run on a British bank for over a century, with the alien sight of savers queuing for hours in the rain outside branches. Since then, as we know, the crisis accelerated until most of the investment banks on Wall Street had disappeared, and – spurred by the bankruptcy of Lehman Brothers – most of the banks in Europe and North America were forced to accept state bail outs and partial state control, or went cap in hand to the sovereign wealth funds in the Middle East, to avoid bankruptcy.

A truly resilient financial system has a multitude of financial actors, making diverse investments and taking different kinds of risks so that if one is hit by crisis, the others aren’t dragged down with it. It is no accident that the safest UK bank according to its safe financial reserves (so-called Tier 1 capital) is the Nationwide – a mutually owned building society. The government is set to own great swathes of our APPENDICES 163 financial system: Northern Rock, RBS, Lloyds TSB, HBOS. It should take the chance to demerge these behemoths that grew so complicated that they couldn’t keep track of our money or their own money. A rich, diverse ecology of different economic systems is needed, not a banking monoculture of giant actors which, when they topple, threaten us all. 2 Segregate financial markets – by separating activities such as trading and retail banking A central plank of the process of financial de-regulation has been the removal of restrictions on what activities different institutions can undertake.

(John Kenneth) 41, 51 gambling 14–15, 152 Gandhi, Mohandas (Mahatma) 18, 19, 21, 110, 112 Gates, Bill 141 Gates, Jeff 141–2 GDP (gross domestic product) 10, 32, 36–40, 42, 43, 54, 79 alternatives to 40–2, 43 bad measure of success 10, 37, 55, 78 INDEX global 141 UK 4 see also growth genetically modified crops see GM crops Germany 33, 50, 58 Gladwell, Malcolm 68 Global Barter Clubs 57, 58 global commons 113, 148 global currencies 56, 61, 120, 147–8 global greenback 61 global warming 3, 3–4, 115, 155 see also climate change globalization 8, 28, 143, 153 see also interdependence GM (genetically modified) crops 91, 117, 119, 140–1 Goetz, Stephan 124 gold standard 8, 143 Good Life, The (BBC sitcom) 69 goods, local 19, 109, 110 Goodwin, Fred 142 government borrowing 37–8, 49–50, 58, 62, 141 governments 2, 28, 116, 129, 158 creating money 58–9, 62, 90 propping up banking system 6, 7 Graham, Benjamin 120 Grameen Bank 26, 143–4, 153 Great Barrington (Massachusetts) 57, 151–2, 153 Great Depression 3, 36, 57 green bonds 157 green collar jobs 106, 157 Green Consumer Guide, The (Elkington and Hailes, 1988) 26, 69, 72 green economics 23, 100, 117 green energy 26, 97, 102–3, 114, 156, 157 Green New Deal 156–8 green taxation 153 greenhouse gas emissions 3–4, 115, 148 gross domestic product see GDP Gross National Happiness 43 growth 2, 11, 12–13, 23, 36–7, 38–40, 42, 43 185 bad measure of success 10, 158 maximizing 25 and poverty 4, 39–40, 81–2 and progress 39, 78 wealth defined in terms of 32 and well-being 4–5 see also GDP guilds 80, 80–1 happiness 12, 18, 29, 41, 43, 45–6 Happy Planet Index 32–3, 34, 43 Hard Times (Dickens, 1854) 36 HBOS 7 health 46, 72, 78, 96, 115, 129 health costs 117 healthcare 13, 33, 44 hedge funds 5, 7, 97, 120 Helsinki (Finland) 102 HIV/AIDS 70, 111, 135, 148 Honduras 139, 141 house prices 36, 46, 79, 83, 91, 126–7, 151 London 53, 54, 91 see also mortgages Howard, Ebenezer 105, 158 HSBC 5 human interaction 67–8, 74 human needs 20, 24, 67, 86 human rights 110–11, 116, 147 ill-health 35, 38, 46 ‘illth’ 29, 35 IMF (International Monetary Fund) 27, 82, 91, 135–6, 139, 143, 147, 147–8 incomes 24, 37, 43, 44, 78, 79, 81 and happiness 45–6 inequalities 37, 81, 82, 142 of poorest 4, 81, 82, 112, 142 Index of Sustainable Economic Welfare see ISEW India 82, 91, 110, 119, 136, 139–40, 153 indigenous knowledge 82, 117 inequality 4, 81–2, 96, 112–13, 116 inflation 8, 22, 58, 90 information technology 58, 59, 115 186 THE NEW ECONOMICS intellectual property 82, 91, 110, 113, 116, 117 interdependence 111–20, 135–8 Keynes on 19, 109, 110, 115, 143 see also globalization interest 8, 11, 11–12, 58, 77, 157 interest rates 144, 144–5 interest-free money 43, 73, 84, 90 intergenerational equity 25, 117 international bankruptcy 147 International Monetary Fund see IMF investment 14, 45, 53, 60, 104, 118, 137–8 ethical 26, 69–70, 74, 154 involvement 71, 75, 128–30 Iraq 49, 60, 136 ISEW (Index of Sustainable Economic Welfare) 40–1, 43, 78 Islamic banking 58, 90, 146 islands, small 31–2, 33–4 Italy 33, 119–20, 138 Ithaca hours currency 57, 58 It’s a Wonderful Life (film, Capra, 1946) 38 Jacobs, Jane 56, 110, 126 Jaffe, Bernie 126 Japan 26, 50, 91, 113, 119, 128 Jefferson, Thomas 18, 20 Jersey 52, 53 Jones, Allan 103 Jubilee Debt campaign 137 junk bonds 1, 142–3 just-in-time 123–4, 155 Keynes, John Maynard 2, 13–14, 15, 17, 21, 37, 55 on interdependence 19, 109, 110, 115, 143 international currency 61, 120 on local production 19, 109, 110 on ‘practical men’ as ‘slaves of some defunct economist’ 10, 35, 67, 87, 159 Keynesian economics 8, 18, 22, 27, 28 Kinney, Jill 130 Knowsley (Merseyside) 104 Kropotkin, Peter 18 Krugman, Paul 52 land 19, 82, 96 land tax 43 landfill 97, 98, 100, 107 Layard, Richard 41 Lehigh Hospital (Pennsylvania) 129 Letchworth Garden City (Hertfordshire) 105 lets (local exchange and trading systems) 57 liberalism 18, 19, 27 Lietaer, Bernard 56, 61, 120 life 19, 29, 55, 69, 86, 91 need for meaning 42, 75 life expectancy 31, 32–3, 82 life poverty 82–3 life satisfaction 31, 33, 41, 42 Lima (Peru) 130–1 Linton, Michael 57, 58 Living Economy, The (Ekins, 1986) 24–5 LM3 (Local Money 3) 60, 104–5 loans see debt Local Alchemy programme 152–3 local circulation of money 103–5, 107, 124, 151–2 local currencies 26, 56, 57, 58, 59, 60, 151–2, 153 local economies 26, 81, 85, 86, 105–7, 118, 124, 133 local exchange and trading systems (lets) 57 local food 2, 118, 119–20, 151 local governments 6, 44, 60 local life 4, 81, 158 Local Money 3 see LM3 local production 109, 116, 118 local savings schemes 61 local shops 75, 82–3, 104, 124, 124–5, 126, 151 supermarkets and 80, 105, 125 local wealth 14, 53–4 localization 155–6, 159 London 52, 53, 61, 97, 102, 103 house prices 53, 54, 91 traffic speed 65–6 INDEX London Underground 147 Lutzenberger, Jose 26 Macmillan Cancer Care 88–9 McRobie, George 22, 24 mainstream 4–5, 26, 154, 159–60 see also economics Malawi 135–6, 137 Malaysia 51 Manchester United 155 manipulated debt 139–41 markets 10, 12, 51, 70, 158 financial 1–2, 52, 53, 55, 138, 154–5 free 22, 85, 112–13 new economics and 67, 72–5, 85 Marsh Farm estate (Luton) 104–5, 152–3 Maslow, Abraham 67 materialism 12, 46–7 Max-Neef, Manfred 24 Maxwell, Robert 143 MDGs (Millennium Development Goals) 39, 136 Mead, Margaret 129 meaning, need for 42, 75 measurement problem 36–40 measuring 12, 42, 55, 85 success 2, 8, 10, 43, 44, 55, 154, 156, 158 value 10, 15, 29, 53, 59, 115 wealth 32, 37–40, 53–4 well-being 4, 18, 32–3, 34, 43 mechanics, Cuban 95–6, 97 medieval economics 78–80, 80–1 mega-rich 120, 141, 142 mental health 4, 35, 36, 46, 68, 83 Merck 99 micro-credit 26, 143–4, 145, 146, 151, 153 Milkin, Michael 142 Millennium Development Goals see MDGs minimum wage 92 misery, of UK young people 35–6 Mishan, E.J. 40 Mogridge, Martin 65–6, 74 Mondragon (Spain), cooperatives 153 money 8, 11, 13, 18, 27, 29, 36, 95 187 as a bad measure 10, 15, 18, 53, 59, 90, 143, 154 creating 7, 56–7, 58–9, 84, 90, 120, 138, 147 designed for money markets 53 economics and 25, 127 externalities 35 and life 55, 86, 154, 159 local circulation 103–5, 107, 124, 151–2 means to an end 15 new economics view 15, 59–60, 89 new ways of organizing 56–60 re-using 103–5 replacing with well-being 42 slowing down 51–2, 60 too little 57 types of 14–15, 57, 59, 120 and value 10, 15, 53, 59 and wealth 15, 19, 32, 38, 78 and well-being 18, 21, 81 see also GDP; growth; price; trickle down money flows 26, 50–2, 60, 103–5, 107, 124, 136–8 money markets 1–2, 52, 53, 55, 138, 154–5 money poverty 81–2 money system 7–8, 50–6, 60 monopolies 8, 20, 83, 84–6, 89–90, 125–6, 133, 146 Monsanto 85, 140 moral philosophy 12, 19, 72–3 morality 8, 18, 28, 74, 115 economics and 12, 19, 22 Morris, William 18, 78, 151 mortgages 1, 4, 5–6, 6, 7, 46, 91 working to pay 46, 68, 73, 77–8, 79, 81, 83, 84, 89, 126–7, 140 see also house prices motivations 4–5, 11, 67–9, 70, 71, 72, 73, 75 multinationals 14, 61, 84–5, 90, 137–8, 139, 143 multiple currencies 58, 59–60, 60, 90 multiplier effect 103–5 Murdoch, Rupert 52 188 THE NEW ECONOMICS Myers, Norman 117 Nanumaea (Tuvalu) 34 national accounting 37–8, 38–9 national debt 49–50, 83, 84, 139, 141 national grid 102, 106 National Health Service see NHS natural capital 3, 99 natural resources 22, 40, 43, 84, 97–8 needs 20, 24, 25, 67, 75, 86 basic 25, 89, 91–2, 115 nef (the new economics foundation) 24, 26, 45, 71, 104, 131–2, 145 Local Alchemy programme 152–3 see also Happy Planet Index; LM3 ‘neo-liberal’ policies 8, 27–8 Nether Wallop (Hampshire) 80, 81 The Netherlands 58, 106, 138 New Century 5 New Deal for Communities 152 New Deal (US) 157 new economics 2–3, 9–10, 18–19, 28–9, 59, 153–4, 159–60 Cuba as object lesson 96–7 history of 9–10, 18–19, 21–7 and the mainstream 26 as new definition of wealth 15 principles 35, 157–8 new economics foundation see nef New York City 52, 128 News Corporation 52 NHS (National Health Service) 87, 114, 131 Northern Rock 6 Nottingham 35 Nu-Spaarpas experiment 106 Obama, Barack 154, 157 obsolescence, built-in 98, 100, 101 odious debt 146 offshore assets 136–7 offshore financial centres 52–3, 61 oil 3, 96, 115, 117, 155 Oil Legacy Fund 157 orchards 111, 112, 115, 124 organic food 26 Ostrom, Elinor 127 out-of-town retailing 75, 80, 123, 132 overconsumption 32, 40, 44, 113 Owen, Robert 57 ownership 11, 46, 60, 91, 118, 156 paid work 87–9, 92 palm oil 112 Partners in Health 130–1 peak oil 3, 96, 117, 155 Pearce, David 25–6, 98, 115 Peasants’ Revolt (1381) 18 pensions 7, 44, 61, 73, 155 people, as assets 15, 57–8, 128–9, 130, 131 permit trading 45, 117–18, 148 personal carbon allowances 45, 117–18 personal debt 7, 36, 83–4, 91, 140, 141 Petrini, Carlo 119–20 Pettifor, Ann 135, 137 philanthropy 130, 133 policy makers 28, 35, 73, 87, 90 assumptions of 67, 68, 73, 128 Keynes on 10, 35, 67, 87, 159 political agenda 42–7 politicians 11, 54, 159 politics, new 159 pollution 10, 35, 37, 40, 98, 112, 114 by GM genes 91, 117, 119 poor 29, 145–6 Porritt, Jonathon 23 post-autistic economics 9–10, 71–2 poverty 4, 23, 35, 79–80, 81–2, 127 economic system and 13–14, 18, 29, 81–2, 154 interdependence leading to 111–15 reduction 39–40, 51–2, 61, 116, 124–5 poverty gap 4, 52–3, 78, 82 power 10, 12, 25, 28, 53, 141–2 corporate 20, 28, 85 monopoly power 83, 89–90, 125–6, 146 power relationships 29, 114 price 10, 67, 72, 73, 115, 153 Price, Andrew 132 INDEX prices 80, 156, 158 Pritchard, Alison 23 product life cycle 97–8, 101 professionals 130, 132, 133, 159 profits 12, 13, 99 progress 36, 37–8, 39, 43, 44, 77–8, 81–2, 84 Proudhon, Pierre-Joseph 120 psychology, economics and 67–8, 71, 72–3 public goods 148 public sector commissioning 131–2, 133 public services 45, 74, 127–32, 158 public transport 66, 74 ‘purchasing power parity’ 81 Putnam, Robert 126–7, 127–8 189 retirement 46, 73 see also pensions rewarded work 88 rewards 7, 8, 11, 25, 92, 141, 142 roads 66, 115 Robertson, James 17, 22, 23, 55, 145 Rockefeller, John D. 28 Roman Catholic church 19, 21, 117 Roosevelt, Eleanor 96 Roosevelt, Franklin Delano 157 Rotterdam (The Netherlands) 106 rubbish 97–105 Rupasingha, Anil 124 Rushey Green surgery (London) 131 Ruskin, John 17–18, 18, 29, 35, 78, 81 Russia 110 qoin system 58 rainforests 4, 10, 111, 112 ‘rational man’ assumption 10, 71 RBS 142 re-use 97, 99, 100–5 Reagan, Ronald 22, 27 real money, generating 120 ‘real’ wealth 2, 32, 36–40 reciprocity 44, 128, 128–30, 133 see also co-production recycling 97, 98, 100–1, 105–6, 106–7 redistribution 19, 27, 52, 96 regeneration 27, 104, 105, 107, 116, 124, 128 regional currencies 58, 59, 60 regulation 129, 156 competition 85, 113, 125, 126, 133 financial sector 53, 85, 157 relationships 4, 69, 83, 128–30 remittances 137 Rendell, Matt 33 renewable energy 26, 97, 102, 102–3, 114, 156, 157 repair 97, 98, 101, 105, 107 resources 32, 43, 97–8, 99, 100–1, 114, 158 local 25, 115 natural 22, 40, 43, 84, 97–8 St Louis (Missouri) 131 Samoa 34 Sane (South African New Economics) 58 saving seeds 91, 117, 119, 141 savings 7, 46, 73, 90, 157 schools 131 Schor, Juliet 83 Schumacher, E.F.


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, book value, 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, Glass-Steagall Act, 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, proprietary trading, regulatory arbitrage, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Satyajit Das, Savings and loan crisis, shareholder value, sovereign wealth fund, subprime mortgage crisis, technology bubble, The Market for Lemons, the payments system, too big to fail, Upton Sinclair, Yogi Berra

One example is the behavior of the London interbank offered rate (LIBOR), an index for the rates that London banks charge each other in unsecured borrowing and lending. Before August 2007, the difference between LIBOR and an interest rate for lending that was considered riskless was around 10 basis points (0.01 percent). On September 14, 2007, the day that the Bank of England announced emergency funding for Northern Rock, one of the largest mortgage lenders in the United Kingdom, the difference reached 85 basis points. The difference reached an all-time high (until then) of 108 basis points on December 6, 2007; another high of 83 basis points on March 17, 2008, after the collapse of Bear Stearns, and finally a record 365 basis points on October 10, 2008, after the turmoil caused by the Lehman bankruptcy.

Laux and Leuz (2009) and Barth and Landsman (2010) suggest that in 2008 the problem was due not so much to the use of fair-value accounting as to the reactions of banks, investors, and regulators to the results of applying these rules. Haldane (2011c) calls for a different accounting regime for banks. We further discuss the issues around the book and market value of banks in Chapter 6 and 7. 27. The problems of Germany’s Industriekreditbank and Sächsische Landesbank and the U.K.’s Northern Rock appeared as early as August 2007 (see Hellwig 2009). Over the twelve months that followed, the downward spiral in asset markets destroyed the solvency of many other highly indebted banks. 28. Briefly in this chapter, and more fully in Chapter 10, we discuss how money market funds developed and how they came to play such a key role in the interconnectedness of the system (see Fink 2008 and Goodfriend 2011). 29.

In addition, it had guarantees and other commitments with a contractual amount of $316 billion, of which the amount carried onto the balance sheet was only $4 billion. 8. On Enron, see Healy and Palepu (2003) and McLean and Elkind (2004). 9. This was the case with Germany’s Industriekreditbank and Sächsische Landesbank and the United Kingdom’s Northern Rock (see Hellwig 2009). Thiemann (2012) discusses why supervisors let banks get away with these commitments. 10. See Brady et al. (2012). 11. The numbers are based on the 10-K form for 2011 (see note 7 above) that JPMorgan Chase filed with the SEC, particularly note 3 in the report (p. 189). Under the U.S.


pages: 476 words: 139,761

Kleptopia: How Dirty Money Is Conquering the World by Tom Burgis

active measures, Anton Chekhov, banking crisis, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, Boris Johnson, Brexit referendum, British Empire, collapse of Lehman Brothers, coronavirus, corporate governance, COVID-19, credit crunch, Credit Default Swap, cryptocurrency, disinformation, do-ocracy, Donald Trump, energy security, Etonian, failed state, fake news, Gordon Gekko, high net worth, Honoré de Balzac, illegal immigration, invisible hand, Julian Assange, liberal capitalism, light touch regulation, lockdown, Mark Zuckerberg, Martin Wolf, Michael Milken, Mikhail Gorbachev, Mohammed Bouazizi, Northern Rock, offshore financial centre, Right to Buy, Ronald Reagan, Skype, sovereign wealth fund, trade route, WikiLeaks

And there was something else, something deeper – Nigel sensed it faintly, with a shiver – connected somehow to what was happening to money: far away, the screams of the tortured, the silence of the dead. 2 A Feast Whitehall, February 2008 In February 2008, while it was just about still possible to pretend the crisis wasn’t happening, a tall, lean billionaire with a thin face and receding hair made his way to the Banqueting House on Whitehall. Around the corner, in Downing Street, the chancellor of the exchequer was nationalising a failed bank, Northern Rock. Here, as across the West, the bailout of the financial system had begun, a transfer of public wealth to private pockets that ranked in scale alongside the one that had made this and many other billionaires’ fortune the previous decade. Crisis was all around, but the chamber of rare beauty into which the oligarch now stepped was a place apart.

The decision went up to BSI’s bosses in Switzerland, who agreed that the London office could take them on. Nigel was kept apart from the bankers, in his own office. He was signing off on their requests to open accounts for clients and shift their money around the world but he had little idea who the clients were or where their money was coming from. Outside, the crisis was getting worse. Northern Rock showed you how it was going to go: the enormous losses bankers had run up while enriching themselves would be borne by the public. But Nigel noticed something else that was happening in parallel. The banks seemed to be splitting open, their tricks revealed for all to see. And yet, quietly, more and more money was going to ground.

He knew that BSI’s London office had already received a private warning from the Financial Services Authority that it was conducting insufficient checks on the origins of its ‘high risk’ clients’ money. That was back in 2004, before he joined the bank. On September 11 he wrote to his bosses again, suggesting that he be kept on because he had worked at the City regulator, which ‘is being obliged to supervise firms more closely in the aftermath of Northern Rock and the credit crunch’. To no avail: after the Lehman weekend, Nigel’s boss wrote to him to confirm that he was being dismissed and that there was no job for him elsewhere at BSI. His last day would be a fortnight hence. Still Nigel did not relent. He explained that most of the bank’s London clients were using the same techniques – creating sham companies, avoiding paper trails – that had come to light in the UBS scandal.


pages: 329 words: 95,309

Digital Bank: Strategies for Launching or Becoming a Digital Bank by Chris Skinner

algorithmic trading, AltaVista, Amazon Web Services, Any sufficiently advanced technology is indistinguishable from magic, augmented reality, bank run, Basel III, bitcoin, Bitcoin Ponzi scheme, business cycle, business intelligence, business process, business process outsourcing, buy and hold, call centre, cashless society, clean water, cloud computing, corporate social responsibility, credit crunch, cross-border payments, crowdsourcing, cryptocurrency, demand response, disintermediation, don't be evil, en.wikipedia.org, fault tolerance, fiat currency, financial innovation, gamification, Google Glasses, high net worth, informal economy, information security, Infrastructure as a Service, Internet of things, Jeff Bezos, Kevin Kelly, Kickstarter, M-Pesa, margin call, mass affluent, MITM: man-in-the-middle, mobile money, Mohammed Bouazizi, new economy, Northern Rock, Occupy movement, Pingit, platform as a service, Ponzi scheme, prediction markets, pre–internet, QR code, quantitative easing, ransomware, reserve currency, RFID, Salesforce, Satoshi Nakamoto, Silicon Valley, smart cities, social intelligence, software as a service, Steve Jobs, strong AI, Stuxnet, the long tail, trade route, unbanked and underbanked, underbanked, upwardly mobile, vertical integration, We are the 99%, web application, WikiLeaks, Y2K

Unfortunately, this is being called into question, thanks to the new regulations around best execution and transparency, which implies broker-dealers don’t always act in their client’s best interests (really?!). This trust has also been tested by Enron, Worldcom, Parmalat and such like, and is being tested again in the credit crunch. In fact, the recent admission by the Bank of England that they didn’t understand the financial markets anymore, in light of the Northern Rock collapse, is shocking. When the regulators and co-ordinators of the financial markets lose their understanding, something has to change. Buyology therefore means knowing the why, how, what and when ingredients of buying, and ensuring you position your business to always be there at the right time, with the right words ... there’s a song with that phrase and the next line is “and you’ll be mine”.

It’s not an easy thing. It’s scary. People need help with managing their money and for them, the branch is the place to go. Not everyone will do this online and remote these days, as they want to have someone to talk to about money, and that’s what the branch gives them. It is the reason why Virgin acquired Northern Rock’s branches and why Marks & Spencer is opening branches with HSBC and why Tesco is opening branches. Without branches you cannot grow a banking business, and you wouldn’t pay millions for bricks and mortar branches if the bricks and mortar branches did not matter. This is all well and good, but those who are anti-branch say that they were designed in the 18th century for a market of three hundred years ago and are not fit for purpose today, as the world has become digitised and the next generation customer just does not think this way.

Until this date, a lot of the commercial transactions taking place in Second Life, where people converted real US dollars to Linden dollars, were for gambling purposes apparently. Therefore, the closure of gambling denizens in the virtual world meant that folks immediately started to take money out of the virtual banks, a bit like Northern Rock but worse. So imagine you are Andre Sanchez in Sao Paulo, the one-man band behind the virtual Ginko Bank. You have over a million real US dollars on account, translated into around 275 million Linden Dollars that you are managing for the Second Life community. Suddenly, your customers demand their money be converted back to real dollars, and you drown in their demands so you just close down the virtual bank, leaving punters with losses of around $750,000 in real life.


pages: 369 words: 94,588

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

accounting loophole / creative accounting, Alan Greenspan, anti-communist, Asian financial crisis, bank run, banking crisis, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, call centre, capital controls, cotton gin, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, deskilling, equal pay for equal work, European colonialism, failed state, financial innovation, Frank Gehry, full employment, gentrification, Glass-Steagall Act, global reserve currency, Google Earth, Great Leap Forward, Guggenheim Bilbao, Gunnar Myrdal, guns versus butter model, Herbert Marcuse, illegal immigration, indoor plumbing, interest rate swap, invention of the steam engine, Jane Jacobs, joint-stock company, Joseph Schumpeter, Just-in-time delivery, land reform, liquidity trap, Long Term Capital Management, market bubble, means of production, megacity, microcredit, military-industrial complex, Money creation, moral hazard, mortgage debt, Myron Scholes, new economy, New Urbanism, Northern Rock, oil shale / tar sands, peak oil, Pearl River Delta, place-making, Ponzi scheme, precariat, reserve currency, Ronald Reagan, Savings and loan crisis, sharing economy, Shenzhen special economic zone , Silicon Valley, special drawing rights, special economic zone, statistical arbitrage, structural adjustment programs, subprime mortgage crisis, technological determinism, the built environment, the market place, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, Thorstein Veblen, Timothy McVeigh, too big to fail, trickle-down economics, urban renewal, urban sprawl, vertical integration, white flight, women in the workforce

As the venerable ex-chair of the Federal Reserve, Paul Volcker (who five years earlier, along with several other knowledgeable commentators, had predicted financial calamity if the US government did not force the banking system to reform its ways) noted, never before had things gone downhill ‘quite so fast and quite so uniformly around the world’. The rest of the world, hitherto relatively immune (with the exception of the United Kingdom, where analogous problems in the housing market had earlier surfaced such that the government had been forced to nationalise a major lender, Northern Rock, early on), was dragged precipitously into the mire generated primarily by the US financial collapse. At the epicentre of the problem was the mountain of ‘toxic’ mortgage-backed securities held by banks or marketed to unsuspecting investors all around the world. Everyone had acted as if property prices could rise for ever.

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

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


pages: 782 words: 187,875

Big Debt Crises by Ray Dalio

Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, basic income, Bear Stearns, Ben Bernanke: helicopter money, break the buck, Bretton Woods, British Empire, business cycle, buy the rumour, sell the news, capital controls, central bank independence, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, currency risk, declining real wages, equity risk premium, European colonialism, fiat currency, financial engineering, financial innovation, foreign exchange controls, German hyperinflation, global macro, housing crisis, implied volatility, intangible asset, it's over 9,000, junk bonds, Kickstarter, land bank, large denomination, low interest rates, manufacturing employment, margin call, market bubble, market fundamentalism, military-industrial complex, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Northern Rock, Ponzi scheme, price stability, private sector deleveraging, purchasing power parity, pushing on a string, quantitative easing, refrigerator car, reserve currency, risk free rate, Savings and loan crisis, short selling, short squeeze, sovereign wealth fund, subprime mortgage crisis, too big to fail, transaction costs, universal basic income, uptick rule, value at risk, yield curve

The first was that some European banks (most notably the British bank Northern Rock) had come to rely on money markets for short-term wholesale funding. When that source of funding began to dry up in the summer of 2007, Northern Rock experienced a classic “run,” with depositors lining up to withdraw funds for three straight days in the middle of September.16 The UK had a similar deposit insurance scheme as the US, but with a lower cap on insured deposits (£35,000). To stem the run, the British government guaranteed all of Northern Rock’s deposits. The second mechanism resulted from the investments that many European banks had made in subprime securitizations.

–New York Times September 14, 2007 Credit Fears Ease, and Markets Climb -New York Times September 14, 2007 British Lender Offered Emergency Loan “The British government said it had authorized the Bank of England to provide a ‘liquidity support facility’ of unspecified size to Northern Rock, a mortgage lender based in Newcastle, England, that has expanded aggressively in recent years...Northern Rock’s need for emergency financing represents a significant broadening of the effects of the crisis in global financial markets, analysts said, because until now problems at European banks have stemmed mostly from their direct exposure to United States subprime loans.”


pages: 417 words: 97,577

The Myth of Capitalism: Monopolies and the Death of Competition by Jonathan Tepper

"Friedman doctrine" OR "shareholder theory", Affordable Care Act / Obamacare, air freight, Airbnb, airline deregulation, Alan Greenspan, bank run, barriers to entry, Berlin Wall, Bernie Sanders, Big Tech, big-box store, Bob Noyce, Boston Dynamics, business cycle, Capital in the Twenty-First Century by Thomas Piketty, citizen journalism, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, compensation consultant, computer age, Cornelius Vanderbilt, corporate raider, creative destruction, Credit Default Swap, crony capitalism, diversification, don't be evil, Donald Trump, Double Irish / Dutch Sandwich, Dunbar number, Edward Snowden, Elon Musk, en.wikipedia.org, eurozone crisis, Fairchild Semiconductor, Fall of the Berlin Wall, family office, financial innovation, full employment, gentrification, German hyperinflation, gig economy, Gini coefficient, Goldman Sachs: Vampire Squid, Google bus, Google Chrome, Gordon Gekko, Herbert Marcuse, income inequality, independent contractor, index fund, Innovator's Dilemma, intangible asset, invisible hand, Jeff Bezos, Jeremy Corbyn, Jevons paradox, John Nash: game theory, John von Neumann, Joseph Schumpeter, junk bonds, Kenneth Rogoff, late capitalism, London Interbank Offered Rate, low skilled workers, Mark Zuckerberg, Martin Wolf, Maslow's hierarchy, means of production, merger arbitrage, Metcalfe's law, multi-sided market, mutually assured destruction, Nash equilibrium, Network effects, new economy, Northern Rock, offshore financial centre, opioid epidemic / opioid crisis, passive investing, patent troll, Peter Thiel, plutocrats, prediction markets, prisoner's dilemma, proprietary trading, race to the bottom, rent-seeking, road to serfdom, Robert Bork, Ronald Reagan, Sam Peltzman, secular stagnation, shareholder value, Sheryl Sandberg, Silicon Valley, Silicon Valley billionaire, Skype, Snapchat, Social Responsibility of Business Is to Increase Its Profits, SoftBank, Steve Jobs, stock buybacks, tech billionaire, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, undersea cable, Vanguard fund, vertical integration, very high income, wikimedia commons, William Shockley: the traitorous eight, you are the product, zero-sum game

Not everyone can run trade surpluses at the same time, and not everyone can be a creditor at the same time. Your consumption is my income, and your borrowing is my lending. In the summer of 2007, long lines of depositors started forming outside the bank Northern Rock in London. It was the first bank run in Britain since 1866. Ironically, the panic started when the Bank of England said Northern Rock was in fine shape and that it would stand by the bank. Problems can only be believed when they are officially denied. Immediately customers were alerted to problems and demanded the return of their deposits.34 Every depositor was behaving in a perfectly rational way, yet when all of them showed up to get their cash at the same time, they were causing the very bankruptcy they sought to avoid.

., 39 Mukherjee, Siddhartha, 167 Munger, Charlie, 2 Murdoch, Rupert, 133 “My Fellow Zillionaires” (Hanauer), 231–232 N Nakaji, Peter, 35–36 Nash, John, 26 National Dairy Holdings, price fixing, 119 Nationally Recognized Statistcal Rating Organization (NRSRO), 183–184 Navalny, Alexei, 92 Nazis, trusts (commonality), 137 NBCUniversal, Comcast purchase, 6–7 NBC Universal, market dominance, 133 Net investment (nonfinancial businesses), 205f Netscape, Microsoft (impact), 93 Net wealth shares (United States), 230f Network Effects, 15, 98 self-reinforcement, 103–104 Nevins, Allan, 156 New Deal, 78 “New Poor,” 230–231 News Corporation, market dominance, 133 News Feed (Facebook), impact, 99–100 Nixon, Richard, 157 Noesser, Gary, 28 Noncompete agreements (noncompetes) spread, 84 state enforcement, absence, 70f worker percentage, 69f Nonfinancial businesses, net investment, 205f Northern Rock, panic, 17–18 Northern Securities Company, formation, 196 Noyce, Robert, 66–67 NSC, antitrust case, 196 O Obama, Barack, 95–96, 161, 165, 190 reverse revolvers, 191–192 Occupational licensing, excess (impact), 83 Occupy Wall Street movement, 211–212 Ogden, Aaron, 137 Ohlhausen, Maureen K., 83 Old Republic, market dominance, 135 Oligopolies, 15, 125–136 Buffett perspective, 201 court decision, 30 ownership, 201 reputation, problem, 5 Olney, Richard, 191 “On Being the Right Size” (Haldane), 49 Online advertising, duopolies, 123–124 Operating systems, Microsoft market share, 117 Optimism, essence, 229 OptumRx, market dominance, 130 Ordoliberalism, 153, 238 Organisation for Economic Co-operation and Development (OECD), study, 23 Organisms, growth phases, 52f Orphan Drug Act (1983), 175 Orwell, George, 113 Ownership, concentration, 199 P Page, Larry, 68 Panic of 1907, 195–196, 208–209 Pasquale, Frank, 123 Passive investing, 201 Passive investments, contest, 203 Passively managed assets, share, 202f Patents, 171–172, 246 annual issuance (US), 173f problems, 172–173 protection, congressional removal, 246 Walt Disney, impact, 173–174 Paulson, Henry, 190 Payment systems, duopolies, 122 PayPal eBay release, 56 founding, 4 value, 118 Pearson, Michael, 168–169 Peltzman, Sam, 224 Perfect markets, belief, 155 Perkins, Charles E., 191 Personal information, Facebook control, 117 Pharmaceutical Research and Manufacturers of America, drug lobbying, 187 Pharmacy benefit managers (PBMs) market, 115–116 oligopolies, 130–131 Philippon, Thomas, 56 Phone companies, oligopolies, 126–127 Phone operating systems, duopolies, 123 Pierce, Justin, 40–41 Pike, Chris, 226 Piketty, Thomas, 214–217 diagnosis, 228 income chart, 224 Pipes, basis, 122 “Pitchforks Are Coming…for Us Plutocrats” (Hanauer), 232 Planck, Max, 165 “Planning Outline for the Construction of a Social Credit System” (China), 111–112 Platform companies, 97–98 Political activity, 248 Political freedom, 143–144, 233 Porter, Michael, 14 Posner, Richard, 156 Potsdam Treaty, 150–151 Poultry industry, oligopolies, 132–133 Power balance, 217 concentration, 141 imbalance, 74 Predatory pricing, punishment (laws), 244 Premier, market dominance, 130 Price-fixing, allegations, 131 Price leadership, 43–44 Prices, increase, 40–45 mergers, impact, 44 Prisoner's Dilemma, The, 27–28 Privacy, importance, 247–248 Productivity companies, impact, 54 growth, reduction, 53f low level, impact, 48–49 reduction, 47–56 wages, contrast, 222 Profitability increase, 51 investment, contrast, 57f Profits, lobbying/regulation (relationship), 188 ProPublica study, 104 Protestant Ethic and the Spirit of Capitalism, The, (Weber), 76 Q Queen, Edward, 14 R Raff, Adam, 87–88, 94 Railroads control, farmer resentment, 140 mergers, 120f monopolies/local monopolies, 119 Randall, James, 21 RCA, innovation, 55 Reagan, Nancy, 159 Reagan, Ronald, 46, 158–161 antitrust revolution, 224–225 Reback, Gary, 94 Reed's Law, 98 Reflections on the Revolution in France (Burke), 239 RegData, usage, 180, 188 Regulation lobbying/profits, correlation, 188 profits, correlation, 181 usage, 167, 245–246 Regulatory capture, avoidance, 245 Reich, Robert, 197 Republic Services Group, 3 Return-free filing system, IRS implementation, 126 Returns, company lobbying (comparison), 187f Reverse revolvers, 191–192 Revolt of the Elites, The, (Lasch), 58 Revolutions, appearance, 230–231 Revolving door, 190f, 193f avoidance, 245 Reynolds, Glenn, 183 Rhodes, Cecil, 24 Ricardo, David, 58 Richards, Tyler, 179 Robber barons impact, 111 term, usage, 139 Rock, Edward, 209 Rockefeller, John D., 111, 126, 139–143, 208, 240 Roosevelt, Franklin Delano, 146, 224 New Deal, 78 Roosevelt, Theodore, 141–143, 193, 234 trust fighting, 239–240 Royal Bank of Scotland, rate rigging, 25 Rural areas, lag, 72f S Salop, Steven, 39, 225 Sandberg, Sheryl, 114 Sanders, Bernie, 212, 231 Sarnoff's Law, 98 Saving Capitalism (Reich), 197 Saxenian, AnnaLee, 67 Scale (West), 51 Schäuble, Wolfgang, 17 Schiantarelli, Fabio, 181 Schmalensee, Richard, 106 Schmalz, Marin, 199 Schmidt, Eric, 68, 96, 114 Schumpeter, Joseph, 4–5 Schweitzer, Arthur, 148 Search engine, building, 118 Searches, monopolies/local monopolies, 118 Secular stagnation, 56 Seeds, monopolies/local monopolies, 119, 121 Servan-Schreiber, Jean-Jacques, 4 Service Corporation International (SCI), market dominance, 121–122 Share buybacks, 206 limitation, 247 Shareholders, 246–247 manager representation, 79 Sherman Act of 1890, 7, 140–144, 157, 160, 237 Sherman, John, 140, 195 Shockley, William, 65–67 Signaling, 30 Silicon Valley, disparagement, 87 Simon, Hermann, 29–30 Singer, Paul, 203–204 Skilling, Jeffrey, 14 SkyChefs, wage laws fines, 78 Small banks, disappearance, 181–182 Small firms, disappearance, 47 Small-scale businesses, job creation, 50 Smith, Adam, 7, 22, 35, 38, 63, 191 invisible hand, 38 Smith, Brad, 94 Smith, William French, 158 Snap, Initial Public Offerings, 107 Snowden, Edward, 112 Social networks, monopolies/local monopolies, 117–118 Society, regulations (service), 245 Soros, George, 113 Sprint, phone market dominance, 126–127 Square-cube law, 49–50 Staggers Rail Act (1980), 119 Staltz, André, 102 Standard Oil market control, 90–91 Supreme Court dissolution, 142 Standard & Poor's 500(S&P500), Big 3 ownership, 203f Startups advertising, 107 dynamics, 106–107 reduction, 45–47 Stationers Company, The, 235 Statute of Monopolies (England), 172 Steele, Helena, 102 Steinbaum, Marshall, 38, 72 Sterling Jewelers, claims (filing), 80 Stewart, market dominance, 135 Stigler, George, 155 Stiles, T.J., 138–139 Stock markets, success, 218 Stock ownership income, impact, 197 US percentage, 201 Stocks company retirement, 207 options, manager purchase, 247 Stoppelman, Jeremy, 108 Strikes, wage growth (association), 80f Strouse, Jean, 208 Structure of Scientific Revolutions, The, (Kuhn), 165 Summers, Larry, 56 Superstar firms, rise, 40 Suslow, Valerie Y., 25 Sustainable prosperity, 208 Sweetland, Kyle, 83 Swipe fees, dispute, 122 Switching costs (reduction), rules (creation), 246 T Tabakovic, Haris, 192 Taibbi, Matt, 102 Takedown notices, filing, 99 Tap Dancing to Work (Buffett), 1 Tax preparation, oligopolies, 125–126 Technology companies market capitalization, 90–91 monopolies, profits, 114 Tecu, Isabel, 199 Teles, Steven M., 174, 188 Temporary work, empowerment, 75 Temporary workers, poverty l ine, 75 Tesla, Nikola, 67, 195 TEVA Pharmaceuticals, generic drug release, 176 Thiel, Peter, 4–5 Third-party services, sale, 245 Thomas, Diana, 180 Time Warner Cable, Comcast purchase (FTC prevention), 165 Time Warner, market dominance, 133 Tit for Tat, 28–29 Title insurance, oligopolies, 135–136 T-Mobile, phone market dominance, 126–127 “Tobacco Trust,” 142 Toll roads, impact, 111 Trademarks, theft, 102 Trade, restraints, 68 “Traitorous Eight,” 66, 84 TransDigm, company acquisition/price increases, 184–186 Trickle-down monetary policies, 219 Trotsky, Leon (rehabilitation), 212 True Believer (Hoffer), 230 Truman, Harry (monopoly condemnation), 146 Trump, Donald (election), 212 Trusts antitrust enforcement budget, 160f challenges, 141 creation, 142 Nazis, commonality, 137 Turf wars, 21 U Unionization, collapse, 83 Unions decrease, 84f membership, income distribution (contrast), 79f restrengthening, 78 United States banking mergers, 128f banks, owners (ranking), 200f economy, entrepreneurialship (reduction), 46f federal government, relationship/revolving door, 190f, 193f grocery market, competitiveness, 32 healthcare, monopolies/oligopolies (prevalence), 131–132 income inequality, 214f, 225f job markets, examination, 38 markets, passively managed assets (share), 202f Morganizing, 195 net wealth shares, 230f optimism, essence, 229 patents, annual issuance, 173f public companies, collapse (number), 10f wages leading indicator, perception (variation), 64f United States v.


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, book value, Boris Johnson, Bretton Woods, BRICs, British Empire, business cycle, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, clean tech, 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, Ford Model T, forward guidance, full employment, Gini coefficient, global supply chain, Great Leap Forward, 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, land bank, liquidity trap, low interest rates, 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

On the contrary, as late as 2006, ECB President Trichet welcomed the fact that investors were willing to lend to the Greek government on almost as good terms as to Germany’s as evidence of the euro’s success.53 This convergence of bond yields, in turn, was validated by the ECB’s collateral lending rules, which treated all eurozone government bonds as if they were “risk-free”. As for the Bank of England, when Northern Rock suffered the ignominy of a run in September 2007, the first on a British bank since the nineteenth century, it was asleep at the wheel. While central bankers provided the rocket fuel, financial regulators allowed bankers to drive faster with souped-up engines, while skimping on safety measures.

Back home, banks’ reckless lending, mostly against the perceived security of booming house prices, saw British households pile on record amounts of debt, rising from 108 per cent of their disposable income in 2000 to a whopping 170 per cent in early 2008.391 When the US housing bubble burst, bank lending froze and then UK house prices slumped too, one bank after another toppled. The first was Northern Rock, an overextended local bank that pumped out cheap, risky mortgages financed by short-term debt, which suffered a run in September 2007 and was eventually nationalised in February 2008. Days after the collapse of Lehman Brothers in September 2008, HBOS, a retail bank similarly laid low by wild mortgage lending financed with fickle debt, was rescued through a government-brokered takeover by Lloyds TSB, a more conservative lender seduced by the prospect of dominating high-street banking.

Since small and medium-sized enterprises represent 99.9 per cent of businesses in Britain, account for 60 per cent of private sector jobs and 50 per cent of businesses’ turnover, this has been a big brake on growth.432 A wise government would have forced banks to tackle their balance-sheet problems. Or it would have bypassed them by directing the banks that it nationalised (Northern Rock) or controlled (RBS) to lend more to creditworthy businesses. Instead, government efforts to boost bank lending have tried to tackle the symptoms of the problem rather than the cause, with predictably disappointing results. First came Project Merlin, a corporatist deal with Britain’s four biggest banks in February 2011 that failed to boost lending.


pages: 566 words: 155,428

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

Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, bank run, banking crisis, banks create money, Bear Stearns, book value, 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, Glass-Steagall Act, 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, low interest rates, market bubble, market clearing, market fundamentalism, McMansion, Minsky moment, 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, proprietary trading, quantitative easing, Ralph Waldo Emerson, Robert Shiller, Robert Solow, 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, vertical integration, working-age population, yield curve, Yogi Berra

At its September 18 meeting, the FOMC qualified its view that “the tightening of credit conditions has the potential to . . . restrain economic growth” by adding that “some inflation risks remain.” It was a finely balanced assessment of risks—far too balanced, given the emerging realities. Just five days earlier, the Bank of England had intervened massively to save Northern Rock, a huge savings institution, from the first bank run in Britain since 1866.* Things were coming unglued in England. Our problems here were strikingly similar. Could we be far behind? While the Fed’s speed made the ECB look like the proverbial tortoise watching the hare, this particular hare wasn’t actually running that fast.

c Mudd was replaced by Herbert Allison, who then moved to the Treasury Department. d Syron was replaced by David Moffett, who served only until March 2009. WE’RE NOT IN KANSAS ANYMORE The post-Lehman panic spread rapidly beyond U.S. borders. The United Kingdom, of course, was deeply enmeshed in the financial crisis well before Lehman failed. It had stopped the run on Northern Rock, improvised a deposit insurance system on short notice, and either rescued or nationalized most of its big banks. Banks in Ireland lent recklessly during the property boom and were carrying huge unrealized losses prior to the Lehman bankruptcy. This “open secret” was laid bare in a very rough way when Lehman collapsed.

See Foreclosures refinancing, precollapse, 38 Mozilo, Angelo, 164, 305 Naked CDS, 66, 280, 302 National Commission on Fiscal Responsibility and Reform, 397 National Economic Council (NEC), 214, 216 Negative amortization loans, 71 Negative net worth, 103–4 New Century Financial Corporation, 69 New Deal reforms for housing crisis, 324–25 regulatory agencies created, 265–66, 288 New jobs tax credit (NJTC), 229–30 News, and efficient markets hypothesis, 64–65, 103 Newton, Isaac, 47 NINJA loans, 70 Nominal interest rates, 376–78 Nonbank lenders shadow banking system, 59–64 unregulated and subprimes, 59 Nonrecourse loans for commercial paper, 147–48 for troubled asset purchases, 206–7 Northern Rock, 95, 168 Notional values, derivatives, 62 Obama, Barack, 212–20 Affordable Care Act (2010), 406 on AIG bailout, 138 backlash against, 347–48 bipartisan goals of, 220, 227 Dodd-Frank Act of 2010, 303–19 economic conditions upon election, 212, 218, 346–47 economic Dream Team, 214–17 election of 2008, 203–4 federal budget deficit efforts, 396–400 and fiscal cliff, 360 foreclosure mitigation efforts, 332–38 payroll tax cuts, 360 policy agenda, scope of, 218–20, 361 regulatory reform agenda of, 291–98 shortcomings regarding crisis, 217, 218, 220, 256–57, 325, 357–58, 361, 439, 440 stimulus package, 223–36 on Volcker Rule, 312 Occupy Wall Street, 7, 363 O’Donnell, Christine, 362 Office of Federal Housing Enterprise Oversight (OFHEO), 117–18 Office of the Comptroller of the Currency (OCC), 275, 302 regulatory failure of, 57–58 Office of Thrift Supervision (OTS), 131–32, 275, 302 O’Neal, E.


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, Les Trente Glorieuses, light touch regulation, Long Term Capital Management, low interest rates, manufacturing employment, market bubble, market clearing, Martin Wolf, Minsky moment, 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

There was a stark illustration of this problem in 2007 when the BBC News at Ten programme reported that Northern Rock, a bank based in the north-east of England, was in talks about emergency funding from the Bank of England. The next day depositors were queuing to withdraw their money. In turn, the sight of those queues made other depositors fearful, encouraging them to withdraw their money. Meanwhile, those who banked online were attempting, and failing because of a system overload, to do the same thing. Eventually, it took an announcement by the government that it would guarantee all deposits (initially up to £35,000 and then up to £50,000) to bring the run to a halt. The Northern Rock panic was not as bad as it might have been.

leverage leveraged buyout Lewis, Michael Liberal Democrat party (UK) Liberal Party (UK) life expectancy life-cycle theory Little Dorrit lire Live 8 concert Lloyd George, David Lombard Odier Lombard Street Research London School of Economics Long Term Capital Management longevity Louis XIV, King of France Louis XV, King of France Louvre accord Lucas, Robert Lucullus, Roman general Luxembourg Macaulay, Thomas McCarthy, Cormac Macdonald, James MacDonald, Ramsay McKinsey McNamara, Robert Madoff, Bernie Malthusian trap Mandelson, Peter Marais, Matthieu Marco Polo Mares, Arnaud Marks & Spencer Marshall, George Marshall Aid Marshalsea Prison Mauro, Paolo May, Sir George means/media of exchange Medicaid Medicare Mellon, Andrew mercantilism Merchant of Venice, The Meriwether, John Merkel, Angela Merton, Robert Mexico Mill, John Stuart Milne-Bailey, Walter Minsky, Hyman Mises, Ludwig von Mississippi Project Mitterrand, Francois Mobutu, Joseph Mongols monetarism monetary policy monetary targets money markets money supply Moody’s Moore’s Law moral hazard Morgan Stanley Morgenthau, Henry Morrison, Herbert mortgages mortgage-backed bonds Multilateral Debt Relief Initiative Napier, Russell Napoleon, emperor of France Napoleonic Wars Nasser, president of Egypt National Association of Home Builders National Association of Realtors National Association of Security Dealers Netherlands New Century New Hampshire New Jersey Newton, Sir Isaac New York Times New Zealand Nixon, Richard Norman, Montagu North Carolina Northern Ireland Northern Rock North Korea North Rhine Westphalia, Germany Norway Obama, Barack odious debt Odysseus OECD d’Orléans, duc Ottoman Empire output gap Overstone, Lord overvalued currency owner-equivalent rent Papandreou, George paper money paradox of thrift Paris club Passfield, Lord (Sidney Webb) Paulson, Hank pawnbroking pension age pension funds pensions Pepin the Short Perot, Ross Perry, Rick Persians Peter Pan Philip II, King of Spain Philip IV, King of France PIGS countries PIMCO Plaza accord Poland Ponzi, Charles Ponzi scheme population growth populism portfolio insurance Portugal pound Prasad, Eswar precious metals Price-earnings ratio primary surplus Prince, Chuck principal-agent problem printing money private equity property market protectionism Protestant work ethic public choice theory public-sector workers purchasing power parity pyramid schemes Quaintance, Lee quantitative easing (QE) Quincy, Josiah railway mania Rajan, Raghuram Rand, Ayn Reagan, Ronald real bills theory real interest rates Record, Neil Reformation, the Reichsbank Reichsmark Reid, Jim Reinhart, Carmen renminbi Rentenmark rentiers reparations Republican Party reserve currency retail price index retirement revaluation Revolutionary War Ridley, Matt Roberts, Russell Rogoff, Kenneth Romanovs Roosevelt, Franklin D.


pages: 872 words: 259,208

A History of Modern Britain by Andrew Marr

air freight, Albert Einstein, anti-communist, battle of ideas, Beeching cuts, Big bang: deregulation of the City of London, Bletchley Park, Bob Geldof, Bretton Woods, British Empire, Brixton riot, clean water, collective bargaining, computer age, congestion charging, cuban missile crisis, deindustrialization, Etonian, falling living standards, fear of failure, Fellow of the Royal Society, financial independence, floating exchange rates, full employment, gentleman farmer, Herbert Marcuse, housing crisis, illegal immigration, Kickstarter, liberal capitalism, Live Aid, loadsamoney, market design, mass immigration, means of production, Mikhail Gorbachev, millennium bug, Neil Kinnock, Nelson Mandela, new economy, North Sea oil, Northern Rock, offshore financial centre, open borders, out of africa, Parkinson's law, Piper Alpha, post-war consensus, Red Clydeside, reserve currency, Right to Buy, road to serfdom, Ronald Reagan, Silicon Valley, strikebreaker, upwardly mobile, Winter of Discontent, working poor, Yom Kippur War

It was the first run on a bank in this country for 140 years. The new chancellor, Alastair Darling, promised to guarantee all savers’ funds in Northern Rock – though not elsewhere – in order to shore up the stability of the banking system. The Bank of England injected money into the system to provide some more lubrication. A search began to find a private buyer who would take over Northern Rock without being completely underwritten by the taxpayer. And another search began to find who was to blame. The management of Northern Rock? American banks? The Bank of England, which had reacted slowly to the early signs of trouble? Most attention focussed on the prime minister, who had created the new system of banking regulation early in his time as chancellor.

By far the most ominous event was the revelation than an adventurous building society, based in the north-east of England, had been forced to go to the Bank of England for emergency support. What had happened to Northern Rock, Britain’s fifth-largest provider of mortgages, was the direct consequence of those ‘sub-prime’ problems in America earlier in the year. Mud and ice were spreading through the Western banking system as banks, wondering how much bad debt others were exposed to, stopped lending readily to one another. The lubrication began to fail, and because Northern Rock had lent so much money so aggressively, it was first in trouble. Its bosses resigned, but not before the world had watched huge queues of people across Britain waiting to get their money out.

Most attention focussed on the prime minister, who had created the new system of banking regulation early in his time as chancellor. In the end, the building society had to be nationalised – a whiff of the Seventies. The Northern Rock crisis began just when pressure was mounting on Brown to call an early general election. Things came to a head at the Labour party conference at Bournemouth. Some of the cabinet ministers closest to him were convinced that by going to the country in October 2007, capitalizing on his summer successes, he could win a clear and substantial majority over the Tories. But he hesitated.


pages: 586 words: 160,321

The Euro and the Battle of Ideas by Markus K. Brunnermeier, Harold James, Jean-Pierre Landau

"there is no alternative" (TINA), Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, bank run, banking crisis, battle of ideas, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Bretton Woods, Brexit referendum, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Celtic Tiger, central bank independence, centre right, collapse of Lehman Brothers, collective bargaining, credit crunch, Credit Default Swap, cross-border payments, currency peg, currency risk, debt deflation, Deng Xiaoping, different worldview, diversification, Donald Trump, Edward Snowden, en.wikipedia.org, Fall of the Berlin Wall, financial deregulation, financial repression, fixed income, Flash crash, floating exchange rates, full employment, Future Shock, German hyperinflation, global reserve currency, income inequality, inflation targeting, information asymmetry, Irish property bubble, Jean Tirole, Kenneth Rogoff, Les Trente Glorieuses, low interest rates, Martin Wolf, mittelstand, Money creation, money market fund, Mont Pelerin Society, moral hazard, negative equity, Neil Kinnock, new economy, Northern Rock, obamacare, offshore financial centre, open economy, paradox of thrift, pension reform, Phillips curve, Post-Keynesian economics, price stability, principal–agent problem, quantitative easing, race to the bottom, random walk, regulatory arbitrage, rent-seeking, reserve currency, risk free rate, road to serfdom, secular stagnation, short selling, Silicon Valley, South China Sea, special drawing rights, tail risk, the payments system, too big to fail, Tyler Cowen, union organizing, unorthodox policies, Washington Consensus, WikiLeaks, yield curve

Because of this funding structure, capital flows into the periphery could dry up and reverse quickly. Still, this is not a feature unique to international capital flows, as much within-country funding is also interbank and wholesale. Just consider, for example, Northern Rock, a UK bank that suffered a bank run in 2007. It was reliant on wholesale funding, and it was precisely this reliance that made Northern Rock so vulnerable to a run. Other UK banks also relied on wholesale funding, but the larger banks had European subsidiaries that had access to ECB liquidity at a time when the Bank of England was reluctant to provide liquidity out of moral hazard concerns.

Another important debate about a euro-wide banking union was the scope of the supervisory mechanism. While Germans insisted that the scope should be limited, leaving national supervisory boards some powers, notably over small banks, such as savings and loans, France also wanted to put small banks under European supervision. It argued that small banks can also be systemic, like Northern Rock in the United Kingdom. The fact that most banks in France are large banks, that is, national champions, may have also played a role in this position. Another debate was whether and to what extent macroprudential regulation should be Europeanized. While the crisis regulation had previously focused on the soundness of each bank separately, after the crisis, the focus shifted to the soundness of the whole financial system.

., 257 Moscovici, Pierre, 37 Müller-Armack, Alfred, 62 multiplier effects, 137–42 Münchau, Wolfgang, 63, 268 Mundell, Robert, 103 Müntefering, Franz, 163 Nakamura, Emi, 142 Naples (Italy), 50 Napoleon (emperor, France), 40 Napolitano, Giorgio, 246–47, 336 national central banks (NCBs), 321; ECB and, 323; information shared between ECB and, 370 National Front (France), 37, 39 natural gas, 284–85 Nazis, economic policies of, 59–61 negative interest rates, 359–60 neoliberalism, 73 Netherlands, 36, 151 Neue Zürcher Zeitung (newspaper), 64 New Deal programs, 102 New Development Bank (NDB), 312 New Keynesian models, 142, 145, 187 New Red Brigades (Italy), 244 New York Stock Exchange (NYSE), 346–47 Nicole, Pierre, 57 no-bailout clause. See Maastricht Treaty Northern Rock (UK bank), 170 Nouy, Daniele, 371 Noyer, Christian, 48, 272 nuclear power, 71 Obama, Barack, 246, 252, 381; Merkel and, 307–8; Spain and, 261–62 Obama administration, 275; on Greek exit, 230 Odysseus, 88 oil, prices of, 364, 367 Olson, Mancur, 52, 377 openness, 105 optimal currency area, 103 Ordoliberalism, 61–67, 238, 290 Organization for Economic Cooperation in Europe, 250 “original sin,” 105–6 Osborne, George, 270, 275, 279 Outright Monetary Transactions (OMT) program, 123–25, 191–92, 346, 352–59; creation of, 5, 313 Pakistan, 295 Papademos, Lucas, 246, 336, 352 Papandreou, George, 246, 298, 336 Paradox of Prudence, 179 Paradox of Thrift, 179 Paulson, Henry, 166 Pellegrini, 239–40 pensions, in Italy, 244–45 Perroux, François, 58 Philip II (king, Spain), 96 Philippon, Thomas, 113 Piaf, Edith, 268 Piketty, Thomas, 72, 73 Pinotti, Paolo, 240–41 planning, in France, 70–74 plucking model, 143 Podemos (Spanish party), 232 Podemos party (Spain), 38 Poland, 43, 147, 275 Portugal: anti-austerity party in, 38; bank failures in, 201–2; downgrading of credit rating of, 347; IMF program for, 308 Pottier, Eugène, 52 pound (British currency), 81–82 Precautionary and Liquidity Line (PLL) facility, 310 price stability: ECB mandate on, 316–21; See also inflation private sector involvement (PSI): Deauville meeting on, 29, 307; ECB’s opposition to, 328–31; IMF on, 299 Prodi, Romano, 243 Putin, Vladimir, 266, 286; Berlusconi and, 285; after global financial crisis, 283; on tax on Cypriot bank deposits, 199 Putnam, Robert, 50, 261 quantitative and qualitative monetary easing (QQE), 364 quantitative easing (QE), 114, 190–91, 344, 346, 361–67 Radicova, Iveta, 130 Rajoy, Mariano, 32, 94, 151 Ramey,.


pages: 193 words: 11,060

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

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

Employment rights are as relevant to investment banking as elsewhere, and so too are intellectual property rights, as will be seen in Chapter 5. Consequentialist ethics Another area of concern heightened by the financial crisis relates to consequentialist ethics. On 14 September 2007, the UK government Developing an Ethical Approach to Investment Banking 43 decided to bail out the failing retail bank Northern Rock, which came under state ownership. The UK Government decided that the negative consequences of allowing this bank to collapse were too great for society to bear, and so it decided to take over the bank to protect the investments of individuals and institutions. Exactly one year later, the US government took the opposite decision with regard to the investment bank Lehman, although it had previously come to the aid of the failing Federal National Mortgage Association and Federal Home Loan Mortgage Corporation (Fannie Mae and Freddie Mac).

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


pages: 267 words: 74,296

Unhappy Union: How the Euro Crisis - and Europe - Can Be Fixed by John Peet, Anton La Guardia, The Economist

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

It said a shortage of liquidity made the assets impossible to value. Any doubts that Europe would feel the force of the financial crisis were quickly dispelled. A few days earlier IKB, a German bank that had played recklessly with asset-backed investments, had been bailed out; a month later there was a run on Northern Rock, a British lender that would eventually be nationalised. Trichet’s quick and firm response prompted the Financial Times to pick him in December 2007 as its “Person of the Year”. It was the bankruptcy of Lehman Brothers on September 15th 2008 that really caused global panic. The decision by Ireland a fortnight later to extend an unlimited guarantee to all banking debt provoked both anger at a rash move that was sucking deposits from the rest of Europe and a scramble by other countries to issue their own guarantees.

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


pages: 232 words: 76,830

Dreams of Leaving and Remaining by James Meek

"World Economic Forum" Davos, Affordable Care Act / Obamacare, agricultural Revolution, anti-communist, bank run, Boris Johnson, Brexit referendum, centre right, Corn Laws, corporate governance, Donald Trump, Elon Musk, Etonian, full employment, global supply chain, illegal immigration, Jeff Bezos, Jeremy Corbyn, Leo Hollis, low skilled workers, Martin Wolf, mega-rich, Neil Kinnock, North Sea oil, Northern Rock, obamacare, offshore financial centre, race to the bottom, Ronald Reagan, savings glut, Shenzhen special economic zone , Skype, sovereign wealth fund, special economic zone, Stephen Hawking, working-age population

The anti-austerity camp believes it would have made a difference in the 2015 election if Labour had made more effort to defend its record and expose the silliness of accusations that Brown was a spendthrift with the public purse. Perhaps. But not everyone makes a clear distinction between the Brown who managed the Treasury carefully – which he did – and the Brown who did not act to stop the banks pursuing the demented expansion of their balance sheets. Which he also did. When, in 2007, Northern Rock had to be rescued by the Labour government after it suffered the first bank run in Britain since the nineteenth century, it turned out that the bank’s management had bundled together much of its future income stream from people making monthly mortgage repayments and used it as collateral to borrow £49 billion from around the world, with which it created more mortgages.

When, in 2007, Northern Rock had to be rescued by the Labour government after it suffered the first bank run in Britain since the nineteenth century, it turned out that the bank’s management had bundled together much of its future income stream from people making monthly mortgage repayments and used it as collateral to borrow £49 billion from around the world, with which it created more mortgages. It did this via a so-called charitable trust called Granite, based in the offshore tax haven of Jersey, which used, as its nominal charity, a tiny organisation from the North-East that helps those with Down’s syndrome. Northern Rock never bothered to tell the charity its name was being exploited in this way. It didn’t occur to the bank or the regulators that there was any problem with what they were doing. Why would it? There were pages on the Treasury’s own website explaining how it should be done. Labour can’t pretend it didn’t know, or shouldn’t have known, what was going on.


pages: 225 words: 11,355

Financial Market Meltdown: Everything You Need to Know to Understand and Survive the Global Credit Crisis by Kevin Mellyn

Alan Greenspan, asset-backed security, bank run, banking crisis, Bernie Madoff, bond market vigilante , bonus culture, Bretton Woods, business cycle, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, deal flow, disintermediation, diversification, fiat currency, financial deregulation, financial engineering, financial innovation, financial intermediation, fixed income, foreign exchange controls, Francis Fukuyama: the end of history, George Santayana, global reserve currency, Greenspan put, Home mortgage interest deduction, inverted yield curve, Isaac Newton, joint-stock company, junk bonds, Kickstarter, liquidity trap, London Interbank Offered Rate, long peace, low interest rates, margin call, market clearing, mass immigration, Money creation, money market fund, moral hazard, mortgage tax deduction, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, paradox of thrift, pattern recognition, pension reform, pets.com, Phillips curve, plutocrats, Ponzi scheme, profit maximization, proprietary trading, pushing on a string, reserve currency, risk tolerance, risk-adjusted returns, road to serfdom, Ronald Reagan, shareholder value, Silicon Valley, South Sea Bubble, statistical model, Suez canal 1869, systems thinking, tail risk, The Great Moderation, the long tail, the new new thing, the payments system, too big to fail, value at risk, very high income, War on Poverty, We are all Keynesians now, Y2K, yield curve

However, the simple fact is that no private clearing house has ever collapsed during a financial crisis. The history of formal regulation is less stellar. The United States has experienced two devastating structural financial crises and several lesser ones since the Federal Reserve was set up. The Northern Rock bank run in England (the first since 1866) happened after the U.K. abolished the old clearing house ‘‘club’’ and took up formal regulation. LONDON BECOMES MONEY MARKET TO THE WORLD The result of all these accidents of history was that England became the first national economy based on credit.

., 103, 105, 121, 164 Mortgages, 7, 18, 25, 35, 41, 55–58, 61–64, 66, 71–73, 110, 113, 121, 130–134, 142, 165, 176, 185, 187 NASDAQ, 165 National Accounts (US), 6, 113 National Bank Act of 1864 (US), 38 negotiable instrument, 10, 33, 35, 38–39, 130, 145 New Deal, 56, 114, 117, 126, 128, 130, 141–143, 154, 158–159, 162–163, 166, 176, 181–182, 184, 187, 189 Newton, Sir Isaac, 137 Nikkei, stock index, 168, 171 Nixon, Richard M., 154–155 Northern Rock, 86 NOW (Negotiable Order of Withdrawal) account, 130 off-shore banking centers, 150 open market operations, 107–108, 145 OPM or ‘‘Other People’s Money,’’ 15–19, 22, 26–27, 39, 46, 61, 71, 87–88, 92–93, 104, 129, 144–145, 150, 165, 167 Index ‘‘options,’’ 54–55, 75, 77 overdraft, 37–38, 61, 78, 89–90 Pac-Man banking, 157, 159 panics, xix–xx, 2, 5, 19, 45, 48, 98, 102, 109–10, 121, 136, 140–141, 150, 164, 183; of 1873, 5, 103; of 1907, 103; of 2008, 52; use of, 139 ‘‘paper money,’’ xiv–xvi, 14, 29, 33, 35, 83, 97.


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, behavioural economics, 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, low interest rates, margin call, Mark Zuckerberg, McMansion, Minsky moment, 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, subprime mortgage crisis, tail risk, Thales of Miletus, the long tail, transaction costs, Tunguska event, unbanked and underbanked, underbanked, Vanguard fund, web application

The interbank markets, where banks loan money to each other, had suddenly seized up, as institutions realized that they could not be sure of the standing of their counterparties. Something unexpected was happening to the moneymaking machine. My very first week in the job coincided with a deposit run at Northern Rock, a British lender that came unstuck when it could no longer fund itself in the markets. Some of my earliest interviews on the beat were with people dusting off the manual on how to deal with bank runs. Organizing guide ropes inside bank branches was one tactic: better that than have people spill out onto the street, signaling to others that they should join the line.

., 32 Keys, Benjamin, 48 Kharroubi, Enisse, 79 Kickstarter, 172 King, Stephen, 99 Klein, David, 182 Krugman, Paul, xv Lahoud, Sal, 166 Lang, Luke, 153, 161–162 Laplanche, Renaud, 179, 184, 188, 190, 193–194, 196–197 Latency, 53 Law of large numbers, 17 Layering, 57 Left-digit bias, 46 Lehman Brothers, x, 44, 65 Lending direct, 84 marketplace, 184 payday, 200 relationship-based, 11, 151, 206–208 secured, xiv, 76 unsecured, 206 See also Loans; Peer-to-peer lending Lending Club, 172, 179–180, 182–184, 187, 189, 194–195, 197 Leonardo of Pisa (Fibonacci), 19 Lerner, Josh, 59 Lethal pandemic, risk-modeling for demographic profile, 230 exceedance-probability curve, 231–232, 232 figure 3 historical data, 228–229 infectiousness and virulence, 229–230 location of outbreak, 230–231 Leverage, 51, 70–71, 80, 186, 188 Leverage ratio, 76–77 Lewis, Michael, 57 Liber Abaci or Book of Calculation (Fibonacci), 19 LIBOR (London Interbank Offered Rate), 41 Liebman, Jeffrey, 98 Life expectancy government reaction to, 128–129 projections of, 124–127, 126 figure 2 ratio of young to older people, 127–128 Life-insurance policies, 142 Life-settlements industry, 142–143 Life table, 20 Limited liability, 212 Liquidity, 12–14, 39, 185–186 List, John, 109 The Little Book of Behavioral Investing (Montier), 156 Lo, Andrew, 113–115, 117–123 Loans low-documentation, 48–49 secured, 76 small business, 181, 216 student, 164, 166–167, 169–171, 182 syndicated, 41 Victory Loans, 28 See also Lending; Peer-to-Peer lending Logistic regression, 201 London, early fire insurance in, 16–17 London, Great Fire of, 16 London Interbank Offered Rate (LIBOR), 41 Long-Term Capital Management, 123 Longevity, betting on, 143–144 Loss aversion, 136 Lotteries, 212, 213 Low-documentation loans, 48–49 Lumni, 165, 168, 175 Lustgarten, Anders, 111 Lynn, Jeff, 160–161 Mack, John, 180 Mahwah, New Jersey, 52, 53 Marginal borrowers assessment of, 216–217 behavioral finance and, 208–214 industrialization of credit, 206 microfinance and, 203 savings schemes, 209–214 small businesses, 215–219 unsecured lending to, 206 Wonga, 203, 205, 208 Marginal borrowers (continued) ZestFinance, 199, 202, 205–206 Maritime piracy, solutions to, 151–152 Maritime trade, role of in history of finance, 3, 7–8, 14, 17, 23 Market makers, 15–16, 55 MarketInvoice, 195, 207, 217–218 Marketplace lending, 184 Markowitz, Harry, 118 Massachusetts, use of inflation-protected bonds in, 26 Massachusetts, use of social-impact bonds in, 98 Matching engine, 52 Maturity transformation, 12–13, 187–188, 193 McKinsey & Company, ix, 42 Mercator Advisory Group, 203 Merrill, Charles, 28 Merrill, Douglas, 199, 201 Merrill Lynch, 28 Merton, Robert, 31, 113–114, 123–124, 129–132, 142, 145 Mian, Atif, 204 Michigan, University of, financial survey by, 134–135 Microfinance, 203 Micropayment model, 217 Microwave technology, 53 The Million Adventure, 213–214 Minsky, Hyman, 42 Minsky moment, 42 Mississippi scheme, 36 Mitchell, Justin, 166–167 Momentum Ignition, 57 Monaco, modeling risk of earthquake in, 227 Money, history of, 4–5 Money illusion, 73–74 Money laundering, 192 Money-market funds, 43, 44 Monkeys, Yale University study of loss aversion with, 136 Montier, James, 156–157 Moody, John, 24 Moody’s, 24, 235 Moore’s law, 114 Morgan Stanley, 188 Mortgage-backed securities, 49, 233 Mortgage credit by ZIP code, study of, 204 Mortgage debt, role of in 2007–2008 crisis, 69–70 Mortgage products, unsound, 36–37 Mortgage securitization, 47 Multisystemic therapy, 96 Munnell, Alicia, 129 Naked credit-default swaps, 143 Nature Biotechnology, on drug-development megafunds, 118 “Neglected Risks, Financial Innovation and Financial Fragility” (Gennaioli, Shleifer, and Vishny), 42 Network effects, 181 New York, skyscraper craze in, 74–75 New York City, prisoner-rehabilitation program in, 108 New York Stock Exchange (NYSE), 31, 52, 53, 61, 64 New York Times, Merrill Lynch ad in, 28 Noncorrelated assets, 122 Nonprofits, growth of in United States, 105–106 Northern Rock, x NYMEX, 60 NYSE Euronext, 52 NYSE (New York Stock Exchange), 31, 52, 53, 61, 64 OECD (Organization for Economic Co-operation and Development), 128, 147 Oldfield, Sean, 67–68, 80–84 OnDeck, 216–218 One Service, 94–95, 105, 112 Operating expense ratio, 188–189 Options, 15, 124 Order-to-trade ratios, 63 Oregon, interest in income-share agreements, 172, 176 Organization for Economic Co-operation and Development (OECD), 128, 147 Overtrading, 24 Packard, Norman, 60 Pandit, Vikram, 184 Park, Sun Young, 233 Partnership mortgage, 81 Pasion, 11 Pave, 166–168, 173, 175, 182 Payday lending Consumer Financial Protection Bureau, survey on, 200 information on applicants, acquisition of, 202 underwriting of, 201 PayPal, 219 Peak child, 127 Peak risk, 228 Peer-to-peer lending advantages of, 187–189 auction system, 195 big investors in, 183 borrowers, assessment of, 197 in Britain, 181 commercial mortgages, 181 CommonBond, 182, 184, 197 consumer credit, 181 diversification, 196 explained, 180 Funding Circle, 181–182, 189, 197 investors in, 195 Lending Club, 179–180, 182–184, 187, 189, 194–195, 197 network effects, 181 ordinary savers and, 184 Prosper, 181, 187, 195 RateSetter, 181, 187, 196 Relendex, 181 risk management, 195–197 securitization, 183–184, 196 Peer-to-peer lending (continued) small business loans, 181 SoFi, 184 student loans, 182 Zopa, 181, 187, 188, 195 Pensions, cost of, 125–126 Perry, Rick, 142–143 Peterborough, England, social-impact bond pilot in, 90–92, 94–95, 104–105, 112 Petri, Tom, 172 Pharmaceuticals, decline of investment in, 114–115 Piracy Reporting Centre, International Maritime Bureau, 151 Polese, Kim, 210 Poor, Henry Varnum, 24 “Portfolio Selection” (Markowitz), 118 Prediction Company, 60–61 Preferred shares, 25 Prepaid cards, 203 Present value of cash flows, 19 Prime borrowers, 197 Prince, Chuck, 50–51, 62 Principal-agent problem, 8 Prisoner rehabilitation programs, 90–91, 94–95, 98, 108, 112 Private-equity firms, 69, 85, 91, 105, 107 Projection bias, 72–73 Property banking crises and, xiv, 69 banking mistakes involving, 75–80 behavioral biases and, 72–75 dangerous characteristics of, 70–72 fresh thinking, need for, xvii, 80 investors’ systematic errors in, 74–75 perception of as safe investment, 76, 80 Prosper, 181, 187, 195 Provisioning funds, 187 Put options, 9, 82 Quants, 19, 63, 113 QuickBooks, 218 Quote stuffing, 57 Raffray, André-François, 144 Railways, affect of on finance, 23–25 Randomized control trials (RCTs), 101 Raphoen, Christoffel, 15–16 Raphoen, Jan, 15–16 RateSetter, 181, 187, 196 RCTs (randomized control trials), 101 Ready for Zero, 210–211 Rectangularization, 125, 126 figure 2 Regulation NMS, 61 Reinhart, Carmen, 35 Reinsurance, 224 Relendex, 181 Rentes viagères, 20 Repurchase “repo” transactions, 15, 185 Research-backed obligations, 119 Reserve Primary Fund, 44 Retirement, funding for anchoring effect, 137–138 annuities, 139 auto-enrollment in pension schemes, 135 auto-escalation, 135–136 conventional funding, 127–128 decumulation, 138–139 government reaction to increased longevity, 128–129 home equity, 139–140 life expectancy, projections of, 124–127, 126 figure 2 life insurance policies, cash-surrender value of, 142 personal retirement savings, 128–129, 132–133 replacement rate, 125 reverse mortgage, 140–142 savings cues, experiment with, 137 SmartNest, 129–131 Reverse mortgages, 140–142 Risk-adjusted returns, 118 Risk appetite, 116 Risk assessment, 24, 45, 77–78, 208 Risk aversion, 116, 215 Risk-based capital, 77 Risk-based pricing model, 176 Risk management, 55, 117–118, 123, 195–197 Risk Management Solutions, 222 Risk sharing, 8, 82 Risk-transfer instrument, 226 Risk weights, 77–78 Rogoff, Kenneth, 35 “The Role of Government in Education” (Friedman), 165 Roman Empire business corporation in, 7 financial crisis in, 36 forerunners of banks in, 11 maritime insurance in, 8 Rotating Savings and Credit Associations (ROSCAs), 209–210 Roulette wheel, use of in experiment on anchoring, 138 Royal Bank of Scotland, 186 Rubio, Marco, 172 Russia, mortgage market in, 67 S-curve, in diffusion of innovations, 45 Salmon, Felix, 155 Samurai bonds, 27 Satsuma Rebellion (1877), 27 Sauter, George, 58 Save to Win, 214 Savings-and-loan crisis in US (1990s), 30 Savings cues, experiment with, 137 Scared Straight social program, 101 Scholes, Myron, 31, 123–124 Science, Technology, and Industry Scoreboard of OECD, 147 Securities and Exchange Commission (SEC), 54, 56, 57, 58, 64 Securities markets, 14 Securitization, xi, 20, 37–38, 117–122, 183–184, 196, 236 Seedrs, 160–161 Sellaband, 159 Shared equity, 80–84 Shared-equity mortgage, 84 Shepard, Chris, xii–xiii Shiller, Robert, xv–xvi, 242 Shleifer, Andrei, 42, 44 Short termism, 58 SIBs.


pages: 421 words: 128,094

King of Capital: The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone by David Carey

"World Economic Forum" Davos, activist fund / activist shareholder / activist investor, asset allocation, banking crisis, Bear Stearns, Bonfire of the Vanities, business cycle, Carl Icahn, carried interest, collateralized debt obligation, corporate governance, corporate raider, credit crunch, deal flow, diversification, diversified portfolio, financial engineering, fixed income, Future Shock, Gordon Gekko, independent contractor, junk bonds, low interest rates, margin call, Menlo Park, Michael Milken, mortgage debt, new economy, Northern Rock, risk tolerance, Rod Stewart played at Stephen Schwarzman birthday party, Sand Hill Road, Savings and loan crisis, sealed-bid auction, Silicon Valley, sovereign wealth fund, Teledyne, The Predators' Ball, éminence grise

The same month Germany’s IKB Deutsche Industriebank, which had invested heavily in American subprime securities, had to be bailed out. In Britain, which had seen its own subprime boom, there was a run on the giant British savings bank Northern Rock in September 2007 when it could not sell new debt to fund itself. As newspapers filled with photos of depositors lined up around the block at Northern Rock branches waiting to retrieve their money, the British government finally stepped in. Until the spring of 2007, there had been a collective sense of denial about the mortgage problems and a persistent hope that they would not spread to other types of debt.

Treasury Department and the Federal Reserve Bank scrambled to cobble together bailouts of financial institutions such as Lehman Brothers, Merrill Lynch, and American International Group in the autumn of 2008, they dialed up Blackstone and others, seeking both money and ideas. Private equity firms were also at the table when the British treasury and the Bank of England tried to rescue Britain’s giant, failing savings bank Northern Rock. (Ultimately the shortfalls at those institutions were too great for even the biggest private funds to remedy.) The U.S. government again turned to private equity in 2009 to help fix the American auto industry. As its “auto czar,” the Obama administration picked Steven Rattner, the founder of the private equity firm Quadrangle Group, and to help oversee the turnaround of General Motors Corporation, it named David Bonderman, the founder of Texas Pacific Group, and Daniel Akerson, a top executive of Carlyle Group, to the carmaker’s board of directors.


pages: 545 words: 137,789

How Markets Fail: The Logic of Economic Calamities by John Cassidy

Abraham Wald, Alan Greenspan, Albert Einstein, An Inconvenient Truth, Andrei Shleifer, anti-communist, AOL-Time Warner, asset allocation, asset-backed security, availability heuristic, bank run, banking crisis, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, Black-Scholes formula, Blythe Masters, book value, Bretton Woods, British Empire, business cycle, capital asset pricing model, carbon tax, Carl Icahn, centralized clearinghouse, collateralized debt obligation, Columbine, conceptual framework, Corn Laws, corporate raider, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Daniel Kahneman / Amos Tversky, debt deflation, different worldview, diversification, Elliott wave, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, Garrett Hardin, George Akerlof, Glass-Steagall Act, global supply chain, Gunnar Myrdal, Haight Ashbury, hiring and firing, Hyman Minsky, income per capita, incomplete markets, index fund, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Nash: game theory, John von Neumann, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kickstarter, laissez-faire capitalism, Landlord’s Game, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, Louis Bachelier, low interest rates, mandelbrot fractal, margin call, market bubble, market clearing, mental accounting, Mikhail Gorbachev, military-industrial complex, Minsky moment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Myron Scholes, Naomi Klein, negative equity, Network effects, Nick Leeson, Nixon triggered the end of the Bretton Woods system, Northern Rock, paradox of thrift, Pareto efficiency, Paul Samuelson, Phillips curve, Ponzi scheme, precautionary principle, price discrimination, price stability, principal–agent problem, profit maximization, proprietary trading, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, RAND corporation, random walk, Renaissance Technologies, rent control, Richard Thaler, risk tolerance, risk-adjusted returns, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, shareholder value, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical model, subprime mortgage crisis, tail risk, Tax Reform Act of 1986, technology bubble, The Chicago School, The Great Moderation, The Market for Lemons, The Wealth of Nations by Adam Smith, too big to fail, Tragedy of the Commons, transaction costs, Two Sigma, unorthodox policies, value at risk, Vanguard fund, Vilfredo Pareto, wealth creators, zero-sum game

Many more-visible financial institutions also struggled to find financing. In late August, Countrywide Financial secured a $2 billion capital injection from Bank of America. Northern Rock, Britain’s fifth-biggest mortgage lender, wasn’t so lucky. The bank, which was based in Newcastle, a city in the northeast of England, didn’t have any direct connection to the U.S. subprime market, but its practice of raising large amounts of money from other financial institutions had prompted questions about its viability. In the middle of September, many of Northern Rock’s depositors started queuing up to withdraw their savings. The British government, fearing the depositors’ panic would spread, agreed to rescue the bank.

Newton, Isaac New York Cotton Exchange New Yorker, The New York Mets baseball team New York State Common Retirement Fund New York Stock Exchange New York Times, The Book Review New York University (NYU) Stern School of Business New York Yankees baseball team Nightingale, Florence “NINJA” mortgage loans Nixon, Richard Nobel Prize noise traders Nordhaus, William Northern Rock Norway Nothaft, Frank Obama, Barack Objectivist Newsletter, The October Revolution oligopoly “On an Economic Equation System and a Generalization of the Brouwer Fixed Point Theorem” (von Neuman) O’Neal, Stan On Liberty (Mill) Only Yesterday (Allen) “On the Economic Theory of Socialism” (Lange) “On the Impossibility of Informationally Efficient Markets” (Grossman and Stiglitz) Organisation for Economic Cooperation and Development Organization of Petroleum Exporting Countries (OPEC) O’Rourke, Kevin O’Toole, Bob Ove Arup Ownit Mortgage Solutions Oxford University Pacific Investment Management Company Padilla, Mathew paradox of thrift Pareto, Vilfredo Pareto efficiency Parker Brothers Pasternak, Boris Paulson, Henry “Hank” Pearl Harbor, Japanese attack on Pender, Kathleen Penn Square Bank Pennsylvania, University of, Wharton School of Business Pentagon Papers, The Pericles Phelps, Edmund Philadelphia 76ers basketball team Philippines Phillips, A.


pages: 611 words: 130,419

Narrative Economics: How Stories Go Viral and Drive Major Economic Events by Robert J. Shiller

agricultural Revolution, Alan Greenspan, Albert Einstein, algorithmic trading, Andrei Shleifer, autism spectrum disorder, autonomous vehicles, bank run, banking crisis, basic income, behavioural economics, bitcoin, blockchain, business cycle, butterfly effect, buy and hold, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, central bank independence, collective bargaining, computerized trading, corporate raider, correlation does not imply causation, cryptocurrency, Daniel Kahneman / Amos Tversky, debt deflation, digital divide, disintermediation, Donald Trump, driverless car, Edmond Halley, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, fake news, financial engineering, Ford Model T, full employment, George Akerlof, germ theory of disease, German hyperinflation, Great Leap Forward, Gunnar Myrdal, Gödel, Escher, Bach, Hacker Ethic, implied volatility, income inequality, inflation targeting, initial coin offering, invention of radio, invention of the telegraph, Jean Tirole, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, litecoin, low interest rates, machine translation, market bubble, Modern Monetary Theory, money market fund, moral hazard, Northern Rock, nudge unit, Own Your Own Home, Paul Samuelson, Philip Mirowski, plutocrats, Ponzi scheme, public intellectual, publish or perish, random walk, Richard Thaler, Robert Shiller, Ronald Reagan, Rubik’s Cube, Satoshi Nakamoto, secular stagnation, shareholder value, Silicon Valley, speech recognition, Steve Jobs, Steven Pinker, stochastic process, stocks for the long run, superstar cities, The Rise and Fall of American Growth, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, theory of mind, Thorstein Veblen, traveling salesman, trickle-down economics, tulip mania, universal basic income, Watson beat the top human players on Jeopardy!, We are the 99%, yellow journalism, yield curve, Yom Kippur War

None of the questions used to construct these indexes asks respondents about the risk of a banking panic or a sudden stampede of investors, reflecting the changed narrative about business. But the change is not total, and financial panic narratives still have a chance to be rekindled, as we saw, for example, in the United Kingdom with the Northern Rock bank in 2007, the first banking panic there since 1866. Crowd Psychology Goes Viral Financial panic narratives have a strong psychological component, and a key concept here is crowd psychology. By the middle of the nineteenth century, Charles Mackay’s popular 1841 book Memoirs of Extraordinary Popular Delusions began to attract public attention to crowd psychology.

Ultimately, how do narratives of the Great Depression affect how we think about economic downturns today? Consider a narrative-based chronology of the 2007–9 world financial crisis, which taps into stories about nineteenth-century bank runs that were virtually synonymous with financial crises. After the Great Depression, bank runs were thought to be cured. The Northern Rock bank run in 2007, the first UK bank run since 1866, brought back the old narratives of panicked depositors and angry crowds outside closed banks. The story led to an international skittishness, to the Washington Mutual (WaMu) bank run a year later in the United States, and to the Reserve Prime Fund run a few days after that in 2008.

See also brain Newcomb, Anthony, 35 “New Deal,” coined by Stuart Chase, 185 The New Financial Order (Shiller), 38 news media: creative during major stock market corrections, 75; economic narratives spread through, 3, 21; improving retention with narrative presentation, 77; international economic narratives and, 110; marketing-driven, 61–62; in modified SIR model, 297; reminding public on anniversaries of events, 76; searching for words and phrases in, x Nixon, Richard, 173 normalcy, 244, 252 North, Douglass, 14 Northern Rock bank run in 2007, 119, 135 novels: classical symphony as, 35; understanding human experience and, 16. See also fiction Noyes, Alexander Dana, 127, 164, 231 Nudge (Thaler and Sunstein), 278 nudge units, 277–78 NVIDIA Corporation, 20 O’Barr, William M., 15 Occupy Wall Street protest, 8, 225 office workplace: automation of, 204; labor-saving machinery narrative and, 186 Ohanian, Lee E., 132 oil embargo of 1973, 256 one-hit wonders, 41–42 Only Yesterday (Allen), ix–xi, 139 organ donation, narrative presentation of, 78 overlapping generations model, 24–25, 27f, 303n8 overproduction or underconsumption theory, 187–92 “Ownership Society” (Bush reelection slogan), 155 oxytocin, 54 Oz: The Great and Powerful (film), 172 Palme, Olof, 48–49 panic: at beginning of World War I, 93–94; creation of Federal Reserve and, 117; in financial crisis, 55–56, 86; following complacency, 55–56; Great Depression seen as, 128; inflation in 1970s and, 262; stock prices and, 228.


pages: 275 words: 84,980

Before Babylon, Beyond Bitcoin: From Money That We Understand to Money That Understands Us (Perspectives) by David Birch

"World Economic Forum" Davos, agricultural Revolution, Airbnb, Alan Greenspan, bank run, banks create money, bitcoin, blockchain, Bretton Woods, British Empire, Broken windows theory, Burning Man, business cycle, capital controls, cashless society, Clayton Christensen, clockwork universe, creative destruction, credit crunch, cross-border payments, cross-subsidies, crowdsourcing, cryptocurrency, David Graeber, dematerialisation, Diane Coyle, disruptive innovation, distributed ledger, Dogecoin, double entry bookkeeping, Ethereum, ethereum blockchain, facts on the ground, fake news, fault tolerance, fiat currency, financial exclusion, financial innovation, financial intermediation, floating exchange rates, Fractional reserve banking, index card, informal economy, Internet of things, invention of the printing press, invention of the telegraph, invention of the telephone, invisible hand, Irish bank strikes, Isaac Newton, Jane Jacobs, Kenneth Rogoff, knowledge economy, Kuwabatake Sanjuro: assassination market, land bank, large denomination, low interest rates, M-Pesa, market clearing, market fundamentalism, Marshall McLuhan, Martin Wolf, mobile money, Money creation, money: store of value / unit of account / medium of exchange, new economy, Northern Rock, Pingit, prediction markets, price stability, QR code, quantitative easing, railway mania, Ralph Waldo Emerson, Real Time Gross Settlement, reserve currency, Satoshi Nakamoto, seigniorage, Silicon Valley, smart contracts, social graph, special drawing rights, Suez canal 1869, technoutopianism, The future is already here, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, wage slave, Washington Consensus, wikimedia commons

The British government then, as in 2008, had to respond. It suspended the Bank Act of 1844 to allow banks to pay out in paper money rather than gold, which kept them going, but they were not too big to fail and the famous Overend & Gurney went down. When it suspended payments after a run on 10 May 1866 (the last run on a British bank until the Northern Rock debacle) it not only ruined its own shareholders but caused the collapse of about 200 other companies (including other banks). The directors were, incidentally, charged with fraud, but they got off as the judge said that they were merely idiots, not criminals. The railway companies at the time held the same commanding position in the world’s largest economy as companies such as Apple and Exxon do in the United States today, so the impact on UK plc was substantial.

When your builder offers you crystal meth and you pay him, you are participating in the black economy. They define a total ‘shadow economy’ as the sum of the black and grey economies. They consider the financial crisis as one explanation of the growth in cash held but reject it. Looking at the detailed figures shows that there was a jump in cash held outside of banks around the time of the Northern Rock affair, but as public confidence in the banks was restored fairly quickly, and the impact of low interest rates on hoarding behaviour seems pretty marginal, there must be some other explanation for why the amount of cash out there kept rising. Two rather obvious factors that do seem to support the shape of the sterling cash curve are the increase in VAT to 20 per cent and the continuing rise in self-employment, both of which serve to reinforce the contribution of cash to the shadow economy.


pages: 332 words: 81,289

Smarter Investing by Tim Hale

Albert Einstein, asset allocation, buy and hold, buy low sell high, capital asset pricing model, classic study, collapse of Lehman Brothers, corporate governance, credit crunch, currency risk, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, Donald Trump, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, eurozone crisis, fiat currency, financial engineering, financial independence, financial innovation, fixed income, full employment, Future Shock, implied volatility, index fund, information asymmetry, Isaac Newton, John Bogle, John Meriwether, Long Term Capital Management, low interest rates, managed futures, Northern Rock, passive investing, Ponzi scheme, purchasing power parity, quantitative easing, random walk, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, South Sea Bubble, technology bubble, the rule of 72, time value of money, transaction costs, Vanguard fund, women in the workforce, zero-sum game

In general, the higher the risk of not getting your money back and the longer the time you lend your money for, the higher the rate of interest you will expect to be paid by the borrower. When you next place a bank deposit, remember that you are lending your money to the bank. Perhaps in this context, Icesave’s and Northern Rock’s high deposit rates were telling a useful story – their strategies were risky. The fortunes of a company are highly uncertain over time, which can result in wide movements in the price of a company’s shares as the market absorbs the latest release of information and how this will impact on the company’s future earnings.

market capitalisation emerging markets market efficiency market returns market risk, 2nd equities, 2nd market timing, 2nd, 3rd, 4th, 5th and DIY investors winning points from market-based returns market-beating strategies see active management/managers markets falling trying and failing to beat the market, 2nd, 3rd, 4th Marshall, Ray maturity (interest rate) risk, 2nd Meriwether, John Modern Portfolio Theory (MPT), 2nd money-weighted returns Morningstar, 2nd MPT (Modern Portfolio Theory) MSCI Emerging Markets Index MSCI World Index mutual funds, 2nd, 3rd MVO (means-variance optimisation) software Myners Report National Savings Certificates nest eggs noise and confusion reducing, 2nd Northern Rock Norway OEICs (open-ended investment companies), 2nd, 3rd, 4th lifestyle, risk-managed product choices off-menu assets, 2nd commodity futures gold hedge funds, 2nd, 3rd private equity, 2nd structured products, 2nd on-menu assets, 2nd, 3rd bonds commercial property defensive asset classes developed global equity markets emerging markets Return Engine asset classes smaller companies value equities online brokerage accounts, 2nd, 3rd, 4th, 5th administration optimisation software passive investors, 2nd fund costs index lifestyle/risk-managed funds product choices passive index fund providers vs active investors, 2nd, 3rd Paulson, John pensions active funds, 2nd contribution rates investing for retirement, 2nd estimating how much to save misselling target date funds tax on performance active managers and performance over time short-term, 2nd see also risk and return philanthropic works philosophy-free investing Piattelli-Palmarini, Massimo pitfalls for investors portfolio choices, 2nd financial capacity for losses financial need to take risk and gold risk profile/emotional tolerance for losses six Smarter portfolios summary matrix portfolio construction, 2nd, 3rd 90/10 portfolios approach to blended, 2nd bonds, 2nd, 3rd Defensive Mix diversification, 2nd, 3rd, 4th, 5th global, 2nd, 3rd, 4th, 5th, 6th and DIY investors emerging markets, 2nd, 3rd, 4th, 5th, 6th equity market diversifiers, 2nd growth-oriented Return Engine, 2nd long-term investors Modern Portfolio Theory (MPT), 2nd non-GBP currency exposure, 2nd past and future events smaller and value companies, 2nd, 3rd see also asset mix portfolios and DIY investors implementation, 2nd, 3rd maintenance, 2nd obsessive monitoring of rebalancing, 2nd, 3rd smarter and the stockbroking model taking an income from in retirement see also asset mix private equity, 2nd probability problems product choices, 2nd building-block benchmark choices choosing your market benchmark/proxy exchange-traded funds (ETFs) global home bias index-fund investing investment trusts lifestyle/risk-managed OEICs, 2nd mapping funds to passive products target date funds unit trusts/OEICs, 2nd product engineering psychometric testing, 2nd, 3rd rational thinking, 2nd, 3rd avoiding irrational behaviour REITs (global real estate), 2nd, 3rd, 4th, 5th return and risk characteristics, 2nd residual risk retirement, investing for, 2nd estimating how much to save return capture Return Engine asset classes developed global equity markets performance portfolio construction, 2nd returns and the average investor bonds conventional inflation-linked commodity futures developed global equity markets emerging markets on equities, and industry costs estimating future gold hedge funds improving on investment policy returns market returns and market timing market-based money-weighted REITs (global real estate), 2nd return history of building blocks time-weighted value equities see also risk and return risk, 2nd, 3rd, 4th bonds, 2nd choices of asset classes currency risk defensive assets equity risk, 2nd, 3rd five key investment risk factors and global diversification handling and hazards limited choices market risk, 2nd and portfolio choices REITs, 2nd residual risk-free assets smaller companies value equities, 2nd risk profiling, 2nd, 3rd psychometric testing risk and return, 2nd bonds conventional inflation-linked commodity futures defensive assets developed global equity markets emerging markets gold hedge funds and portfolio construction private equity REITs, 2nd Return Engine asset classes, 2nd smaller companies, 2nd structured products value equities, 2nd, 3rd risk tolerance and portfolio choices, 2nd risk-managed OEICs ROF (rip off factor) Samsung Electronics saving for retirement versus smarter investing, 2nd school fees Schwab, Charles Schwed, Fred, 2nd securities selection of, 2nd and active managers transfers to online accounts Selftrade Sharpe, William, 2nd, 3rd Shiller, Robert Siegel, Laurence Sinquefield, Rex Sippdeal Sipps smaller companies portfolio construction, 2nd, 3rd product choices, 2nd, 3rd benchmarks return and risk characteristics, 2nd size risk, 2nd the small-cap premium, 2nd, 3rd Spain Standard Chartered Bank stock market crashes stockbroking model strategic asset allocation structural risk on bonds structured products, 2nd and dividends principal protection risk and return Swensen, David, 2nd, 3rd, 4th, 5th on hedge funds on private equity tactical asset allocation see market timing Tanous, Peter target date funds taxes, 2nd, 3rd DIY investors, 2nd, 3rd, 4th personal allowances TER (total expense ratio) time-weighted returns Tobin, James Separation Theorem, 2nd ‘too good to be true’ investments, 2nd top-down approach total equity market total-expense ratios tracker funds see index funds tracking error fees and costs contributing to management experience effect on replication methods affecting size contributing to turnover contributing to Trump, Donald Tversky, Amos, 2nd unit trusts, 2nd, 3rd, 4th United Kingdom active funds, research on performance, 2nd equity funds and diversification industry costs of product choices underperforming the market FTSE 100 Index, 2nd, 3rd, 4th FTSE All-Share Index, 2nd, 3rd, 4th, 5th FTSE Index-linked gilts gilts, 2nd, 3rd, 4th, 5th, 6th and global equity markets index-linked investor behaviour and portfolio construction, global diversification tax breaks United States behaviour of average investors CGM Focus Fund equity fund performance index tracker funds private equity research on active management Russell 1000 Index treasuries Wilshire 5000 university fees value companies, 2nd, 3rd dividends outperformance of growth stocks portfolio construction, 2nd, 3rd product choices, 2nd benchmarks return and risk characteristics, 2nd, 3rd past returns Vanguard, 2nd, 3rd research on UK actively managed funds, 2nd venture capital, 2nd Vinik, Jeff Vodafone volatility bonds equity markets wealth creation ‘get rich, slow’ process wealth-destroying behaviour, 2nd, 3rd zero-sum game and hedge funds and investment philosophy, 2nd ‘A book of investment wisdom and common sense for the ages.


pages: 304 words: 80,965

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

activist fund / activist shareholder / activist investor, Admiral Zheng, banking crisis, Basel III, Bear Stearns, behavioural economics, Bernie Madoff, Black Swan, buy and hold, Carl Icahn, centralized clearinghouse, clean water, compensation consultant, computerized trading, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crowdsourcing, David Brooks, Dissolution of the Soviet Union, diversification, diversified portfolio, en.wikipedia.org, financial engineering, financial innovation, financial intermediation, fixed income, Flash crash, Glass-Steagall Act, income inequality, index fund, information asymmetry, invisible hand, John Bogle, Kenneth Arrow, Kickstarter, light touch regulation, London Whale, Long Term Capital Management, moral hazard, Myron Scholes, Northern Rock, passive investing, Paul Volcker talking about ATMs, payment for order flow, performance metric, Ponzi scheme, post-work, principal–agent problem, rent-seeking, Ronald Coase, seminal paper, shareholder value, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical model, Steve Jobs, the market place, The Wealth of Nations by Adam Smith, transaction costs, Upton Sinclair, value at risk, WikiLeaks

Carola Frydman and Dirk Jenter, “CEO Compensation,” Rock Center for Corporate Governance at Stanford University Working Paper no. 77 (March 19, 2010): “The literature provides ample evidence that CEO compensation and portfolio incentives are correlated with a wide variety of corporate behaviors, from investment and financial policies to risk taking and manipulation”; Lucian Bebchuk and Yaniv Grinstein, “Firm Expansion and CEO Pay,” National Bureau of Economic Research Working Paper no. 11886 (November 2005). 30. Bebchuk and Grinstein, “Firm Expansion and CEO Pay.” 31. In the United Kingdom, for example, it was RBS, which had embarked on rapid acquisition, and HBOS and Northern Rock, which had been aggressive in the market place, who found themselves in greatest trouble. 32. “Governing Banks” (Global Governance Forum/International Finance Corporation, 2010). 33. Upton Sinclair, “I, Candidate for Governor: And How I Got Licked” (University of California Press, 1994). (Originally printed 1936.) 34.

See National Employment Savings Trust (NEST) Nestor, Stilpon, 43 Netherlands, 90, 111, 113 collective pension system in, 60, 197, 199, 209, 264n6 fund governance regulation in, 108–9 pension beneficiaries and investment returns, 265n20 New York Stock Exchange: average holding period of traded stock, 63 financial services as percent of, 16 high-frequency trading and, 88 New York Times (newspaper), 77, 88 Nippon, 18 Normal curve, 161–63, 260n18, 261n38 real world phenomena and, 172–73 Northern Rock, 245n31 Nusseibeh, Saker, 140 One-way market for financial assets, 240n31 Ontario Teachers’ Pension Plan, 59, 111 Opportunities, fiduciary duty and, 140 Organisation for Economic Co-operation and Development, 109 Outcomes, measuring success using, 132 Oversight: regulation and, 150–51 trust in government and, 141 Owner, use of term, 235n25 Ownership: agency capitalism and, 74–80 capitalism and, 62, 83–93, 243n2 changing conception of, 62–63 corporate governance and, 22 derivatives and, 80–83, 93 economic attention deficit hyperactivity disorder and loss of, 63–68 election of directors and, 78–79 exercised by financial agents, 230 for long-term investors, 87 individual investor’s use of technology and, 90–92 institutional investors and, 3–4, 249n3 portfolio management function and, 246n36 promoting culture of, in investment, 222–24 tax policy and, 92 Oxford University, 122 Passive investing, 45 Pax World, 77 Pay for performance, institutional investors and, 112–13 Payments system, banks and, 16–17, 20, 22, 211–12 Pension funds: collective, 197, 199, 209, 263n1, 264n3, 264n6, 266n28 commonsense, 194–96, 199–202 fees, 97–98, 195–96, 233n5 governance of, 100–101, 104–6, 107–9 investment strategy, 195, 196 People’s Pension, 202–11 portability of, 196 purpose of, 194 regulation of, 107–9, 251n22 shift from defined benefit to defined contribution plans, 99–100, 104–5 time frame and, 207 Webster and Wallace’s, 14, 199–202, 209.


pages: 82 words: 24,150

The Corona Crash: How the Pandemic Will Change Capitalism by Grace Blakeley

Anthropocene, asset-backed security, basic income, Big Tech, bond market vigilante , Bretton Woods, business cycle, capital controls, carbon tax, central bank independence, coronavirus, corporate governance, COVID-19, creative destruction, credit crunch, crony capitalism, debt deflation, decarbonisation, degrowth, deindustrialization, don't be evil, financial deregulation, Francis Fukuyama: the end of history, full employment, gig economy, global pandemic, global value chain, green new deal, Greenspan put, income inequality, informal economy, inverted yield curve, invisible hand, Jeff Bezos, liberal capitalism, light touch regulation, lockdown, low interest rates, Martin Wolf, Modern Monetary Theory, moral hazard, move fast and break things, Network effects, North Sea oil, Northern Rock, offshore financial centre, pensions crisis, Philip Mirowski, post-war consensus, price mechanism, quantitative easing, regulatory arbitrage, rent control, reshoring, Rishi Sunak, savings glut, secular stagnation, shareholder value, social distancing, structural adjustment programs, too big to fail, universal basic income, unorthodox policies, Washington Consensus, yield curve

But despite all this, by June the Great Lockdown was being eased, stock markets had recovered most of their losses and commentators began once again to talk up the likelihood of a V-shaped recovery. There is always a point in the middle of a crisis when people convince themselves that the worst is over – call it the eye of the storm. The FTSE 100 rallied in the immediate aftermath of the run on Northern Rock in 2007, even though it was obvious by that point that many other banks were just as vulnerable to a deterioration in credit conditions. After the first wave of the Spanish flu in 1918, people convinced themselves that the worst was over, only to be hit with another, more severe wave just a few months later.1 It seems clear that, at the time of this writing, the global economy is in the eye of the Covid-19 storm.


pages: 585 words: 151,239

Capitalism in America: A History by Adrian Wooldridge, Alan Greenspan

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, agricultural Revolution, air freight, Airbnb, airline deregulation, Alan Greenspan, American Society of Civil Engineers: Report Card, Asian financial crisis, bank run, barriers to entry, Bear Stearns, Berlin Wall, Blitzscaling, Bonfire of the Vanities, book value, Bretton Woods, British Empire, business climate, business cycle, business process, California gold rush, Charles Lindbergh, cloud computing, collateralized debt obligation, collective bargaining, Corn Laws, Cornelius Vanderbilt, corporate governance, corporate raider, cotton gin, creative destruction, credit crunch, debt deflation, Deng Xiaoping, disruptive innovation, Donald Trump, driverless car, edge city, Elon Musk, equal pay for equal work, Everybody Ought to Be Rich, Fairchild Semiconductor, Fall of the Berlin Wall, fiat currency, financial deregulation, financial engineering, financial innovation, fixed income, Ford Model T, full employment, general purpose technology, George Gilder, germ theory of disease, Glass-Steagall Act, global supply chain, Great Leap Forward, guns versus butter model, hiring and firing, Ida Tarbell, income per capita, indoor plumbing, informal economy, interchangeable parts, invention of the telegraph, invention of the telephone, Isaac Newton, Jeff Bezos, jimmy wales, John Maynard Keynes: technological unemployment, Joseph Schumpeter, junk bonds, Kenneth Rogoff, Kitchen Debate, knowledge economy, knowledge worker, labor-force participation, land bank, Lewis Mumford, Louis Pasteur, low interest rates, low skilled workers, manufacturing employment, market bubble, Mason jar, mass immigration, McDonald's hot coffee lawsuit, means of production, Menlo Park, Mexican peso crisis / tequila crisis, Michael Milken, military-industrial complex, minimum wage unemployment, mortgage debt, Myron Scholes, Network effects, new economy, New Urbanism, Northern Rock, oil rush, oil shale / tar sands, oil shock, Peter Thiel, Phillips curve, plutocrats, pneumatic tube, popular capitalism, post-industrial society, postindustrial economy, price stability, Productivity paradox, public intellectual, purchasing power parity, Ralph Nader, Ralph Waldo Emerson, RAND corporation, refrigerator car, reserve currency, rising living standards, road to serfdom, Robert Gordon, Robert Solow, Ronald Reagan, Sand Hill Road, savings glut, scientific management, secular stagnation, Silicon Valley, Silicon Valley startup, Simon Kuznets, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, stem cell, Steve Jobs, Steve Wozniak, strikebreaker, supply-chain management, The Great Moderation, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, total factor productivity, trade route, transcontinental railway, tulip mania, Tyler Cowen, Tyler Cowen: Great Stagnation, union organizing, Unsafe at Any Speed, Upton Sinclair, urban sprawl, Vannevar Bush, vertical integration, War on Poverty, washing machines reduced drudgery, Washington Consensus, white flight, wikimedia commons, William Shockley: the traitorous eight, women in the workforce, Works Progress Administration, Yom Kippur War, young professional

Alas, Ozymandias had feet of clay: Lehman had invested massively in real estate and real-estate-related instruments, and when the housing market collapsed, so did the company. The financial crisis had been gathering strength long before Lehman’s collapse. In August 2007, BNP Paribas, a French bank, blocked withdrawals from its subprime mortgage funds. In September 2007, Britons lined up to take their money out of Northern Rock, a Newcastle-based bank, in the country’s first bank run since the collapse of Overend, Gurney and Company in 1866, a collapse that had inspired Walter Bagehot to write his great book on central banking, Lombard Street (1873). The Bank of England was eventually forced to take the bank into public ownership.

Even with the breakdown of sophisticated risk management models and the failures of the credit rating agencies, the financial system would have held together had the third bulwark against crisis—the regulatory system—functioned effectively. But under the pressure of the crisis, the regulatory system also failed. This was not just an American problem. The highly praised UK Financial Services Authority failed to anticipate the bank run that threatened Northern Rock. The global credit rating agencies bestowed ratings that implied triple-A future smooth sailing for many highly toxic derivative products. The Basel Committee on Banking Supervision, representing regulatory authorities from the world’s major financial systems, promulgated a set of capital rules that failed to foresee the need that arose at the height of the crisis for much larger capital and liquidity buffers.

See also populism Nazi Germany, 4, 16, 186, 188, 271, 285 Netscape, 335, 354 New Deal, 25–26, 89, 187, 242–62, 415, 454 evaluation of, 248–62 New Economic Plan, 306 New Orleans Canal Bank, 79 New Republic, 178, 289–90 Newton, Isaac, 32, 163 New York City, 11, 32, 106, 215, 322–23, 392–93 New York Cotton Exchange, 79 New Yorker, 195 New York Port Authority, 412 New York Stock Exchange, 138, 143, 220–21 New York Tribune, 73, 130 Nike, 347 Nineteenth Amendment, 179 Nixon, Richard, 26, 299, 300, 302, 305–10, 318–19 Norris, Frank, 177 Norris, George, 231 Norris-La Guardia Act of 1932, 250 North American Free Trade Agreement (NAFTA), 230, 344, 346–47 Northern Pacific Railway, 114–15, 182 Northern Rock, 374, 384 North Korea, 82, 267 Novak, Michael, 333 Noyce, Robert, 351, 353 nylon, 265 OAPEC (Organization of Arab Petroleum Exporting Countries), 308–9 Obama, Barack, 406 obesity, 428 oil (oil industry), 49, 101–3, 128–29, 132–33 fracking revolution, 356–59 price of kerosene and crude oil, 102, 102 oil shocks, 103, 307–9, 313 Oklahoma!


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, Glass-Steagall Act, 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, Les Trente Glorieuses, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, low interest rates, mandatory minimum, margin call, market bubble, market clearing, market fragmentation, Martin Wolf, Mexican peso crisis / tequila crisis, Minsky moment, 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, proprietary trading, 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, subprime mortgage crisis, 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, vertical integration, very high income, winner-take-all economy, zero-sum game

Worse, contrary to what proponents of the new market-based financial system had long and, alas, all too persuasively argued, risk had been distributed not to those best able to bear it, but to those least able to understand it.7 Examples turned out to include IKB, an ill-managed German Landesbank, and no fewer than eight Norwegian municipalities.8 These plucked chickens duly panicked when it became clear what, in their folly, they had been persuaded to buy. On 13 September 2007, Northern Rock, a specialized UK mortgage-lender, which had been offering home loans of up to 125 per cent of the value of property and 60 per cent of whose total lending was financed by short-term borrowing, suffered the first large depositor ‘run’ on a British bank since the nineteenth century.9 Ultimately, the Labour government nationalized Northern Rock – paradoxically, very much contrary to the company’s wishes. Reliance on short-term loans from financial markets, rather than deposits, for funding of long-term illiquid assets had, it soon turned out, become widespread.

Before 2000, unlike in the US, securitised credit had played a small role in the UK mortgage market but by 2007, 18% of UK mortgage credit was funded through securitization … But the UK also saw the rapid growth of on-balance sheet mortgage lending, with UK banks expanding their loan books more rapidly than deposit bases, placing increasing reliance on wholesale funding. At the aggregate level, this implied a significant increase in overseas bank financing of the UK current-account deficit. A crucial feature of the UK system in the run-up to the crisis, was therefore the rapid growth of a number of specific banks – Northern Rock, Bradford & Bingley, Alliance and Leicester and HBOS – which were increasingly reliant on the permanent availability of a large-scale interbank funding and/or on their continuous ability to securitise and sell down rapidly accumulating credit assets, particularly in the mortgage market.25 Second, banking went global.


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, Cambridge Analytica, Carmen Reinhart, centre right, classic study, David Ricardo: comparative advantage, disinformation, Dominic Cummings, Donald Trump, eurozone crisis, experimental subject, fake news, feminist movement, Francis Fukuyama: the end of history, full employment, Glass-Steagall Act, Growth in a Time of Debt, illegal immigration, invisible hand, John Bercow, Kenneth Rogoff, liberal world order, low interest rates, 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

And if they could not be used as collateral, there would be no funding. That signified a general liquidity freeze: a bank run the size of the world. In September 2007, the British bank Northern Rock failed. Savers queued up outside its branches trying to take their money out. It seemed like a replay of the Great Depression, when lack of confidence in banks had pulverised the economy. But in fact, 80 per cent of Northern Rock’s funding had nothing to do with the queueing depositors. It wasn’t even particularly exposed to subprime lending. Its problem was that it relied on the money markets for funding. And they were closing down.

See also Nazism national sovereignty 1 Native Americans 1 nativism 1 natural monopolies 1 natural price 1 natural rights 1, 2 Nazism 1, 2, 3, 4, 5, 6, 7, 8, 9 Necker, Jacques 1, 2, 3 Nedelsky, Jennifer 1 The Netherlands, Party for Freedom 1 New Deal 1, 2, 3 New Model Army 1, 2, 3, 4, 5, 6 New Right 1 news 1, 2 newspapers 1, 2, 3, 4, 5 NGO boats 1 Nicolson, Harold 1 non-conformity 1 North American Free Trade Agreement (NAFTA) 1 Northern Ireland 1 Northern League (Lega Nord) 1, 2, 3 Northern Rock 1 novels 1 nudges 1 Oates, Titus 1 Obama, Barack 1, 2, 3, 4, 5, 6 offence 1 Okin, Susan Moller 1 Old Order Amish community 1 Olitskaia, Ekaterina 1 online shaming 1 Open Casket (Schutz painting) 1 Open Society Foundations 1 Operation Swamp 1 2 Operation Themis 1 Operation Triton 1 Operation Vaken 1 Orbán, Viktor 1, 2, 3, 4, 5, 6 Ordinance for the Regulating of Printing 1 Orenstein, Peggy 1 Orwell, George character and early life 1 A Clergyman’s Daughter 1 development of liberal values 1 Down and Out in Paris and London 1 on England 1, 2 identity and belonging 1, 2, 3, 4 language and propaganda 1 The Lion and the Unicorn 1 on nationalist tendency 1, 2 national identity 1 Nineteen Eighty-Four 1, 2 Notes on Nationalism 1 patriotism 1 police in Burma and elephant 1 on religion 1 The Road to Wigan Pier 1 Spanish Civil War 1 writings 1 Osborne, George 1 outrage 1 Overton, Richard 1, 2, 3, 4, 5, 6, 7, 8 The Arraignment of Mr.


pages: 101 words: 24,949

The London Problem: What Britain Gets Wrong About Its Capital City by Jack Brown

Big bang: deregulation of the City of London, Black Lives Matter, Boris Johnson, coronavirus, COVID-19, Crossrail, deindustrialization, Dominic Cummings, Donald Trump, Edward Glaeser, Etonian, gentrification, gig economy, Gordon Gekko, knowledge economy, lockdown, New Urbanism, Northern Rock, post-war consensus, quantitative easing, remote working, Richard Florida, sceptred isle, superstar cities, working-age population, zero-sum game

In 2006, the chancellor of the Exchequer, Gordon Brown, cited London (meaning the City) as a shining example to the nation: ‘The message London’s success sends out to the whole British economy is that we will succeed if like London we think globally.’32 The following June, he told the City: ‘Britain needs more of the vigour, ingenuity, and aspiration that you already demonstrate is the hallmark of your success.’33 New Labour’s regional policy did much good, with several of the regional development agencies proving particularly successful, but the gap between the north and south of England remained.34 And the decade-long wave of economic growth that the nation had been riding was about to crash. Crash and coalition Just months after Brown’s second speech, the run on Northern Rock began, the first major manifestation of the global financial crash of 2007–8 in the UK. The crash had a huge and direct effect on relations between the capital and the rest of the nation. As historian Peter Mandler noted, ‘bankers and politicians were blamed … but the rest of the country paid the price.’35 The capital – the home of both groups – bore the brunt of the criticism, but London’s ‘guilty’ did not appear to suffer the consequences.


pages: 355 words: 92,571

Capitalism: Money, Morals and Markets by John Plender

activist fund / activist shareholder / activist investor, Alan Greenspan, Andrei Shleifer, asset-backed security, bank run, Berlin Wall, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Black Swan, bond market vigilante , bonus culture, Bretton Woods, business climate, business cycle, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, computer age, Corn Laws, Cornelius Vanderbilt, corporate governance, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, discovery of the americas, diversification, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, Fall of the Berlin Wall, fiat currency, financial engineering, financial innovation, financial intermediation, Fractional reserve banking, full employment, Glass-Steagall Act, God and Mammon, Golden arches theory, Gordon Gekko, greed is good, Hyman Minsky, income inequality, industrial research laboratory, inflation targeting, information asymmetry, 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.", James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, labour market flexibility, liberal capitalism, light touch regulation, London Interbank Offered Rate, London Whale, Long Term Capital Management, manufacturing employment, Mark Zuckerberg, market bubble, market fundamentalism, mass immigration, means of production, Menlo Park, money market fund, moral hazard, moveable type in China, Myron Scholes, Nick Leeson, Northern Rock, Occupy movement, offshore financial centre, paradox of thrift, Paul Samuelson, plutocrats, price stability, principal–agent problem, profit motive, proprietary trading, quantitative easing, railway mania, regulatory arbitrage, Richard Thaler, rising living standards, risk-adjusted returns, Robert Gordon, Robert Shiller, Ronald Reagan, savings glut, shareholder value, short selling, Silicon Valley, South Sea Bubble, spice trade, Steve Jobs, technology bubble, The Chicago School, The Great Moderation, the map is not the territory, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, tulip mania, Upton Sinclair, Veblen good, We are the 99%, Wolfgang Streeck, zero-sum game

The Republic felt the effects of this, and took very extensive measures, but to no avail.36 Today, bank runs usually take a different form. Big depositors such as companies, pension funds and other financial institutions simply decide not to renew lending lines or certificates of deposit, so an ailing bank finds that its sources of funds dry up. Notwithstanding that, the British bank Northern Rock actually experienced in 2007 an old-style run in which worried retail depositors queued up outside branches to withdraw their money. Either way, the reality is that all money lenders that operate on the basis of fractional reserve banking are inherently technically bankrupt. Hence the quip generally attributed to Henry Ford: ‘It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before morning.’

E. 1 morbidity syndrome 1 More, Thomas 1, 2 Morgan, John Pierpont 1 Mozart 1, 2 Mussolini 1 Mutual Assured Production (Richard Katz) 1 Mynors, Humphrey 1 Napoleonic Wars 1 Nash, Ogden 1, 2 Native Americans 1 Nazi Germany 1 Netherlands 1 New Deal 1, 2 New Testament 1 Newton, Isaac 1, 2, 3 Nicholas Nickleby (Dickens) 1, 2, 3 Nigeria 1 Norquist, Grover 1 North, Roger 1 North and South (Mrs Gaskell) 1 North Korea 1 Northern Rock (UK) 1 Novalis 1 Nuffield, Lord 1 Obama, Barack 1, 2 Occupy movement 1, 2 oil states 1 da l’Osta, Andrea 1, 2 outsourcing 1, 2 paper currency 1 Parker, Dorothy 1 Pascal, Blaise 1, 2 Past and Present (Thomas Carlyle) 1 Paulson, John 1 Peasants’ Revolt (England) 1 pension funds 1 Pepys, Samuel 1 Peruzzi family 1 perverse incentives 1, 2 Petronius 1 Picasso 1, 2 Piketty, Thomas 1 Pitt, William the Elder 1 Pitt, William the Younger 1 Plato 1, 2, 3 Political Discourses (Hume) 1 Politics (Aristotle) 1, 2, 3, 4, 5 poll taxes 1 Pope, Alexander 1, 2, 3, 4, 5 Portugal 1 positional goods 1 Poussin, Nicolas 1 Prell, Michael 1 Priestley, Joseph 1 printing 1 Proposition 1 (California) 2 Protestant Ethic and the Spirit of Capitalism (Weber) 1 Prussia 1, 2, 3 public sector debt 1 R.


pages: 312 words: 93,836

Barometer of Fear: An Insider's Account of Rogue Trading and the Greatest Banking Scandal in History by Alexis Stenfors

Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, Big bang: deregulation of the City of London, bonus culture, capital controls, collapse of Lehman Brothers, credit crunch, Credit Default Swap, Eugene Fama: efficient market hypothesis, eurozone crisis, financial deregulation, financial innovation, fixed income, foreign exchange controls, game design, Gordon Gekko, inflation targeting, information asymmetry, interest rate derivative, interest rate swap, London Interbank Offered Rate, loss aversion, mental accounting, millennium bug, Nick Leeson, Northern Rock, oil shock, Post-Keynesian economics, price stability, profit maximization, proprietary trading, regulatory arbitrage, reserve currency, Rubik’s Cube, Snapchat, Suez crisis 1956, the market place, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, work culture , Y2K

Because if you think that others will become afraid that the bank will run out of cash, it might be rational to empty your own savings account first. The typical illustration of a bank run is a picture of a very long queue outside a bank branch or an ATM. The images look similar, whether they are black and white and taken in New York or Berlin during the 1930s, outside Northern Rock in Newcastle in 2007, or somewhere in Greece during the summer of 2015. Before the fear spreads to the public, however, the atmosphere in the dealing rooms has already changed. Trading has turned into a situation in which the hot potato is passed around from trader to trader, from bank to bank.

., General Theory of Employment, 102 Kipling, Rudyard, 127 KLIBOR (Kuala Lumpur), 37 Knight, Angela, 107 Lapavitsas, Costas, 6–7 layering, 204 Leeson, Nick, 250 ‘legacy issues’, 236 Lehman Brothers, 2, 10, 48–9, 59, 105, 162, 272; bankruptcy filing, 160; collapse of aftermath, 96 Lewis, Ken, 164 LIBOR, 19, 28, 76–7, 104, 127, 130, 147, 209, 234, 265; anti-competitive process, 186; banking lobby regulated, 180–1; ‘barometer of fear’, 96; benchmark significance, 192, 225; central banks perfection assumption, 49; controls deception, 184; crisis-induced ‘stickiness’, 106; crucial price, 13; daily individual quotes, 97; derivatives, see below; ‘Eurodollar futures’ origin, 126; FCA regulated, 282; ‘fear’ index, 15; fixing panels, see below; future direction of, 38; inaccuracy possibilities, 74; interbank money market gauge, 39; jurisdiction issue, 115; manipulation, 7, 12, 14, 78; manipulation impossibility assumption, 81; market-determined perception, 88, 149; mechanism, 104; minute change importance, 73; new unpredictability, 62; 1980s invention, 111; objective process ‘evidence’, 148; perception of, 119; players as referees, 80; post 2007 interest, 53; pre-2013 unregulated, 118; predicting difficulty, 70; regulatory oversight lack, 179; retail credit impact, 277; sanctioned secrecy, 181–2; savings and borrowings dominance, 107; scandal breaking, 81; state measure use, 151; three-months, 71; ‘too big to fail’, 279; use of limited post-scandal, 278 LIBOR derivatives market, 8, 45, 137–8, 232; autonomous development of, 111; banks made, 125; ‘community’, 190; -FX connected, 189; imaginary money market, 148; increased abstraction of, 144–6 LIBOR panel banks, 74–5, 79, 98, 118, 172, 282; -LIBOR implications, 52 big banks dominated, 173, 179–80; fixing process, 75; membership criteria, 184–5; punishment idea, 108; post-scandal membership, 186 LIBOR scandal, 77, 152, 167, 245; correctness attempts, 277; post- definition unchanged, 278; breaking of, 81; Wall Street Journal on, 238 LIBOR-OIS spread(s), 51, 54–5, 99, 151 LIFFE, 126–7 liquidity: and credit crunch 2008, 2; credit issues, 45; informal norms need, 284; provision ‘duty’ 229; risk, 42–3, 55, 70 Lloyds Bank, 153, 183; LIBOR fine, 83 long/short positions, 26 Lukes, Steven, 186 makers, price, 24 Malaysia, financial crisis, 36 Mankell, Henning, 235 ‘marked to market’ trading books, 62 market, the financial: ‘colour’ 202; ‘conventions’, 228–33; ‘courtroom’, 171; interbank spread choosing ‘image’, 229; liquidity risk, 42–3; making, see below; perfections of, 15; relationships dependent, 225–6; risks limits management failure, 281 market makers/making, 24, 72, 117, 201, 206, 217, 226–7, 257; ‘ability’, 185; cash-settled derivatives, 133; failure to manage, 281; NIBOR IRS, 132; profession of, 200; two-way price quoting, 228; visibility of, 202 Martin Brokers, 85 Mathew, Jonathan, 139 McAdams, Richard, 231 McDermott, Tracey, 282 Meitan Tradition, 100, 175 Merita Bank, 56 Merrill Lynch, 2–3, 8–9, 12, 46, 49, 59–60, 62, 64, 69, 92–3, 96, 140, 153, 155, 160–1, 164, 188, 272, 285; Bank of America takeover, 67; bonuses, 10, 162–3; financial centre, 48; International Bank Limited Dublin, 4; mismarking, 68; risk taking encouraged, 281; silence rule, 242 Midland Montagu (Midland Bank Stockholm Branch), 20, 22–3, 27, 29; Stockholm, 22, 29 ‘Millenium bug’ fears, LIBOR impact, 44 mismarking, 9 mistakes, fear of, 26 Mollenkamp, Carrick, 98 ‘monetary transmission mechanism’, 39 money market(s): decentralised, 224; freeze, 110; international basis, 112; ‘risk premium’, 42; stable illusion-making, 106; -state link, 224 Moody’s, 96 morals, 66; morality, 69 Morgan Stanley, 49, 193, 223, 272 mortgage bonds, 21 NASDAQ stock exchange, transparency, 220 New York 2001 attacks, 263 New York Times, 4, 9, 11, 163, 241, 243 NIBOR (Norwegian Interbank Offered Rate), 28, 72, 130–1; fixing dates, 76; inaccurate fixing, 74; IRS market, 132; new unpredictability, 62; one month IRS market, 136 nicknames, use of, 25–6 Nordbanken, nationalised, 27 Nordic bank branches, 30 Norges Bank, NIBOR use, 152 Norinchukin Bank, 153 Northern Rock, Newcastle queues, 109 Norway, banking system, 131 ‘objective’ fact, LIBOR, 149 ‘off-balance-sheet’, trading, 137–8 official interest rate, predicting, 38 OIS (overnight index swap), 51; see also LIBOR-OIS one month IRS market, 136 OPEC (Organization of the Petroleum Exporting Countries), US dollar surpluses, 113 options desk, FX, 214 ‘over-the-counter’ trades, 63 derivatives, 129, 134; interest rate options, 130; markets, 227 Philippines, financial crisis, 37 Philips, cassette launch, 111 PIBOR (Paris Interbank Offered Rate), 19, 127 post scandals, reforms, 282 price(s), as interactions, 200; brokers indications role, 87; ‘resolution hypothesis’, 218 primary dealers, 175, 178 privacy, individual rights to, 167 Rabobank, LIBOR fine, 83, 153, 282 RBC, bank, 223 RBS, bank, 92, 153, 185, 188, 192, 220–1, 223, 284; LIBOR scandal fine, 83 reciprocity: -and trust, 226, 284; informal agreements, 228 regret, fear of, 258 regulatory arbitrage: Eurodollar market prompting, 118; platform for, 114 ‘reputation’, 185 respect, among traders, 267 Reuters, 19, 79, 151; Dealing, 41, 195, 260; Dealing 2000–2, 29, 34, 194; indicative prices, 62; screen price, 53 risk, 135; buzz of, 261–2; limits breaking, 274; ‘loss aversion’, 255; managers, 253; organizational limits, 250; pressures for, 63 risk taking: addictive, 262; enjoyment of, 260; fear control, 263; increase, 73; individualistic, 262; reward anticipation, 254; reward interpretation, 259; supervision need, 253 risk takers, 270; respect among, 268–9 Robert, Alain, 260 ‘rogue traders’, 1, 237; ‘bad apples’ narrative, 237, 240, 246, 279; fame, 252; fascination with, 246; losses, 259; ranking list, 250; risk list, 251; scandals, 258; stigma, 247 rogue trading, 274; definitions, 249; labelling, 248; risk link, 250 Royal Bank of Canada, 153 RP Martins, 153 rules of the game, loyalty to, 25 ‘run-throughs’, 87–9, 226–7 Russia, financial crisis, 36 Ryan, Ian, 3, 9, 68 Sanford C.


Future Files: A Brief History of the Next 50 Years by Richard Watson

Abraham Maslow, Albert Einstein, bank run, banking crisis, battle of ideas, Black Swan, call centre, carbon credits, carbon footprint, carbon tax, cashless society, citizen journalism, commoditize, computer age, computer vision, congestion charging, corporate governance, corporate social responsibility, deglobalization, digital Maoism, digital nomad, disintermediation, driverless car, epigenetics, failed state, financial innovation, Firefox, food miles, Ford Model T, future of work, Future Shock, global pandemic, global supply chain, global village, hive mind, hobby farmer, industrial robot, invention of the telegraph, Jaron Lanier, Jeff Bezos, knowledge economy, lateral thinking, linked data, low cost airline, low skilled workers, M-Pesa, mass immigration, Northern Rock, Paradox of Choice, peak oil, pensions crisis, precautionary principle, precision agriculture, prediction markets, Ralph Nader, Ray Kurzweil, rent control, RFID, Richard Florida, self-driving car, speech recognition, synthetic biology, telepresence, the scientific method, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Turing test, Victor Gruen, Virgin Galactic, white flight, women in the workforce, work culture , Zipcar

There were people queuing down high streets all over the country trying to get their cash out, until the government agreed to use taxpayers’ money to guarantee their savings. It effectively said that it would bail out anyone who invested 140 FUTURE FILES in a major UK financial institution that had forgotten that there should be some balance between borrowing and lending. The problem, of course, was that Northern Rock was too clever by half. Instead of using branch deposits to fund growth it used the global money market, which in turn relies on securitization to transfer risk. As a result the bank, which was essentially a local UK lender, became embroiled in the US subprime mortgage fiasco. Could such a situation happen again?

A 311 Index ‘O’ Garage 170 3D printers 56 accelerated education 57 accidents 159, 161–6, 173, 246 ACNielsen 126 adaptive cruise control 165 Adeg Aktiv 50+ 208 advertising 115–16, 117, 119 Africa 70, 89, 129, 174, 221, 245, 270, 275, 290, 301 ageing 1, 10, 54, 69, 93, 139, 147–8, 164, 188, 202, 208, 221, 228–9, 237, 239, 251, 261, 292, 295, 297–8 airborne networks 56 airlines 272 allergies 196–7, 234, 236 Alliance Against Urban 4x4s 171 alternative energy 173 alternative futures viii alternative medicine 244–5 alternative technology 151 amateur production 111–12 Amazon 32, 113–14, 121 American Apparel 207 American Express 127–8 androids 55 Angola 77 anti-ageing drugs 231, 237 anti-ageing foods 188 anti-ageing surgery 2, 237 antibiotics 251 anxiety 10, 16, 30, 32, 36, 37, 128, 149, 179, 184, 197, 199, 225, 228, 243, 251, 252, 256, 263, 283–4, 295–6, 300, 301, 305 Apple 61, 115, 121, 130, 137–8, 157 Appleyard, Bryan 79 Argentina 210 Armamark Corporation 193 artificial intelliegence 22, 40, 44, 82 131, 275, 285–6, 297, 300 Asda 136, 137 Asia 11, 70, 78, 89, 129, 150, 174, 221, 280, 290, 292 Asimov, Isaac 44 Asos.com 216 asthma 235 auditory display software 29 Australia 20–21, 72–3, 76, 92, 121, 145, 196, 242, 246, 250, 270, 282 Austria 208 authenticity 32, 37, 179, 194, 203–11 authoritarianism 94 automated publishing machine (APM) 114 automation 292 automotive industry 154–77 B&Q 279 baby boomers 41, 208 bacterial factories 56 Bahney, Anna 145 Bahrain 2 baking 27, 179, 195, 199 Bangladesh 2 bank accounts, body double 132 banknotes 29, 128 banks 22, 123, 135–8, 150, 151 virtual 134 Barnes and Noble 114 bartering 151 BBC 25, 119 Become 207 Belgium 238 313 314 benriya 28 Berlusconi, Silvio 92 Best Buy 223 biofuel 64 biomechatronics 56 biometric identification 28, 35, 52, 68, 88, 132 bionic body parts 55 Biosphere Expeditions 259 biotechnology 40, 300 blended families 20 blogs 103, 107, 109, 120 Blurb 113 BMW 289 board games 225 body double bank accounts 132 body parts bionic 55 replacement 2, 188, 228 Bolivia 73 Bollywood 111 books 29, 105, 111–25 boomerang kids 145 brain transplants 231 brain-enhancing foods 188 Brazil 2, 84, 89, 173, 247, 254, 270, 290 Burger King 184 business 13, 275–92 Bust-Up 189 busyness 27, 195, 277 Calvin, Bill 45 Canada 63, 78, 240 cancer 251 car sharing 160, 169, 176 carbon credits 173 carbon footprints 255 carbon taxes 76, 172 cars classic 168–9 driverless 154–5 flying 156, 165 hydrogen-powered 12, 31, 157, 173 pay-as-you-go 167–8 self-driving 165 cascading failure 28 cash 126–7, 205 cellphone payments 129, 213 cellphones 3, 25, 35, 51, 53, 120, 121, FUTURE FILES 129, 156, 161, 251 chicken, Christian 192 childcare robots 57 childhood 27, 33–4, 82–3 children’s database 86 CHIME nations (China, India, Middle East) 2, 10, 81 China 2, 10, 11, 69–72, 75–81, 88, 92–3, 125, 137, 139–40, 142, 151, 163, 174–5, 176, 200, 222, 228, 247, 260, 270–71, 275, 279, 295, 302 choice 186–7 Christian chicken 192 Christianity, muscular 16, 73 Chrysler 176 cinema 110–11, 120 Citibank 29, 128 citizen journalism 103–4, 108 City Car Club 168 Clarke, Arthur C. 58–9 Clarke’s 187 classic cars 168–9 climate change 4, 11, 37, 43, 59, 64, 68, 74, 77–9, 93, 150, 155, 254, 257, 264, 298–9 climate-controlled buildings 254, 264 cloning 38 human 23, 249 CNN 119 coal 176 Coca-Cola 78, 222–3 co-creation 111–12, 119 coins 29, 128, 129 collective intelligence 45–6 Collins, Jim 288 comfort eating 200 Comme des Garçons 216 community 36 compassion 120 competition in financial services 124–5 low-cost 292 computers disposable 56 intelligent 23, 43 organic 56 wearable 56, 302 computing 3, 33, 43, 48, 82 connectivity 3, 10, 11, 15, 91, 120, Index 233, 261, 275–6, 281, 292, 297, 299 conscientious objection taxation 86 contactless payments 123, 150 continuous partial attention 53 control 36, 151, 225 convenience 123, 178–9, 184, 189, 212, 223, 224 Coren, Stanley 246 corporate social responsibility 276, 282, 298 cosmetic neurology 250 Costa Rica 247 Craig’s List 102 creativity 11, 286; see also innovation credit cards 141–3, 150 crime 86–9 forecasting 86–7 gene 57, 86 Croatia 200 Crowdstorm 207 Cuba 75 cultural holidays 259, 273 culture 11, 17–37 currency, global 127, 151 customization 56, 169, 221–2, 260 cyberterrorism 65, 88–9 Cyc 45 cynicism 37 DayJet 262 death 237–9 debt 123–4, 140–44, 150 defense 63, 86 deflation 139 democracy 94 democratization of media 104, 108, 113 demographics 1, 10, 21, 69, 82, 93, 202, 276, 279–81, 292, 297–8 Denmark 245 department stores 214 deregulation 11, 3 Destiny Health 149 detox 200 Detroit Project 171 diagnosis 232 remote 228 digital downloads 121 evaporation 25 315 immortality 24–5 instant gratification syndrome 202 Maoism 47 money 12, 29, 123, 126–7, 129, 132, 138, 150, 191 nomads 20, 283 plasters 241 privacy 25, 97, 108 readers 121 digitalization 37, 292 Dinner by Design 185 dirt holidays 236 discount retailers 224 Discovery Health 149 diseases 2, 228 disintegrators 57 Disney 118–19 disposable computers 56 divorce 33, 85 DNA 56–7, 182 database 86 testing, compulsory 86 do-it-yourself dinner shops 185–6 dolls 24 doorbells 32 downshifters 20 Dream Dinners 185 dream fulfillment 148 dressmaking 225 drink 178–200 driverless cars 154–5 drugs anti-ageing 231, 237 performance-improving 284–5 Dubai 264, 267, 273 dynamic pricing 260 E Ink 115 e-action 65 Earthwatch 259 Eastern Europe 290 eBay 207 e-books 29, 37, 60, 114, 115, 302 eco-luxe resorts 272 economic collapse 2, 4, 36, 72, 221, 295 economic protectionism 10, 15, 72, 298 economy travel 272 316 Ecuador 73 education 15, 18, 82–5, 297 accelerated 57 lifelong learning 290 Egypt 2 electricity shortages 301 electronic camouflage 56 electronic surveillance 35 Elephant 244 email 18–19, 25, 53–4, 108 embedded intelligence 53, 154 EMF radiation 251 emotional capacity of robots 40, 60 enclosed resorts 273 energy 72, 75, 93 alternative 173 nuclear 74 solar 74 wind 74 enhancement surgery 249 entertainment 34, 121 environment 4, 10, 11, 14, 64, 75–6, 83, 93, 155, 171, 173, 183, 199, 219–20, 252, 256–7, 271, 292, 301 epigenetics 57 escapism 16, 32–3, 121 Estonia 85, 89 e-tagging 129–30 e-therapy 242 ethical bankruptcy 35 ethical investing 281 ethical tourism 259 ethics 22, 24, 41, 53, 78, 86, 132, 152, 194, 203, 213, 232, 238, 249–50, 258, 276, 281–2, 298–9 eugenics 252 Europe 11, 70, 72, 81, 91, 141, 150, 174–5, 182, 190, 192, 209 European Union 15, 139 euthanasia 238, 251 Everquest 33 e-voting 65 experience 224 extended financial families 144 extinction timeline 9 Facebook 37, 97, 107 face-recognition doors 57 fakes 32 family 36, 37 FUTURE FILES family loans 145 fantasy-related industries 32 farmaceuticals 179, 182 fast food 178, 183–4 fat taxes 190 fear 10, 34, 36, 38, 68, 150, 151, 305 female-only spaces 210–11, 257 feminization 84 financial crisis 38, 150–51, 223, 226, 301 financial services 123–53, 252 trends 123–5 fish farming 181 fixed-price eating 200 flashpacking 273 flat-tax system 85–6 Florida, Richard 36, 286, 292 flying cars 165 food 69–70, 72, 78–9, 162, 178–201 food anti-ageing 188 brain-enhancing 188 fast 178, 183–4 functional 179 growing your own 179, 192, 195 history 190–92 passports 200 slow 178, 193 tourism 273 trends 178–80 FoodExpert ID 182 food-miles 178, 193, 220 Ford 169, 176, 213, 279–80 forecasting 49 crime 86–7 war 49 Forrester Research 132 fractional ownership 168, 175, 176, 225 France 103, 147, 170, 189, 198, 267 Friedman, Thomas 278–9, 292 FriendFinder 32 Friends Reunited 22 frugality 224 functional food 179 Furedi, Frank 68 gaming 32–3, 70, 97, 111–12, 117, 130, 166, 262 Gap 217 Index gardening 27, 148 gas 176 GE Money 138, 145 gendered medicine 244–5 gene silencing 231 gene, crime 86 General Motors 157, 165 Generation X 41, 281 Generation Y 37, 41, 97, 106, 138, 141–2, 144, 202, 208, 276, 281, 292 generational power shifts 292 Genes Reunited 35 genetic enhancement 40, 48 history 35 modification 31, 182 testing 221 genetics 3, 10, 45, 251–2 genomic medicine 231 Germany 73, 147, 160, 170, 204–5, 216–17, 261, 267, 279, 291 Gimzewski, James 232 glamping 273 global currency 127 global warming 4, 47, 77, 93, 193, 234 globalization 3, 10, 15–16, 36–7, 63–7, 72–3, 75, 81–2, 88, 100, 125, 139, 143, 146, 170, 183, 189, 193–5, 221, 224, 226, 233–4, 247–8, 263, 275, 278–80, 292, 296, 299 GM 176 Google 22, 61, 121, 137, 293 gout 235 government 14, 18, 36, 63–95, 151 GPS 3, 15, 26, 50, 88, 138, 148, 209, 237, 262, 283 Grameen Bank 135 gravity tubes 57 green taxes 76 Greenpeace 172 GRIN technologies (genetics, robotics, internet, nanotechnology) 3, 10, 11 growing your own food 178, 192, 195 Gucci 221 Gulf States 125, 260, 268 H&M 217 habitual shopping 212 Handy, Charles 278 317 Happily 210 happiness 63–4, 71–2, 146, 260 health 15, 82, 178–9, 199 health monitoring 232, 236, 241 healthcare 2, 136, 144, 147–8, 154, 178–9, 183–4, 189–91, 228–53, 298; see also medicine trends 214–1534–7 Heinberg, Richard 74 Helm, Dieter 77 Heritage Foods 195 hikikomori 18 hive mind 45 holidays 31, 119; see also tourism holidays at home 255 cultural 259 dirt 236 Hollywood 33, 111–12 holographic displays 56 Home Equity Share 145 home baking 225 home-based microgeneration 64 home brewing 225 honesty 152 Hong Kong 267 hospitals 228, 241–3, 266 at home 228, 238, 240–42 hotels 19, 267 sleep 266 human cloning 23, 249 Hungary 247 hybrid humans 22 hydrogen power 64 hydrogen-powered cars 12, 31, 157, 173 Hyperactive Technologies 184 Hyundai 170 IBM 293 identities, multiple 35, 52 identity 64, 71 identity theft 88, 132 identity verification, two-way 132 immigration 151–2, 302 India 2, 10, 11, 70–72, 76, 78–9, 81, 92, 111, 125, 135, 139, 163, 174–5, 176, 247, 249–50, 254, 260, 270, 275, 279, 302 indirect taxation 86 318 individualism 36 Indonesia 2, 174 industrial robots 42 infinite content 96–7 inflation 151 information overlead 97, 120, 159, 285; see also too much information innovation 64, 81–2, 100, 175, 222, 238, 269, 277, 286–8, 291, 297, 299 innovation timeline 8 instant gratification 213 insurance 123, 138, 147–50, 154, 167, 191, 236, 250 pay-as-you-go 167 weather 264 intelligence 11 embedded 53, 154 implants 229 intelligent computers 23, 43 intelligent night vision 162–3 interaction, physical 22, 25, 97, 110, 118, 133–4, 215, 228, 243, 276, 304 interactive media 97, 105 intergenerational mortgages 140, 144–5 intermediaries 123, 135 internet 3, 10, 11, 17–18, 25, 68, 103, 108, 115–17, 124, 156, 240–41, 261, 270, 283, 289, 305 failure 301 impact on politics 93–4 sensory 56 interruption science 53 iPills 240 Iran 2, 69 Ishiguro, Hiroshi 55 Islamic fanaticism 16 Italy 92, 170, 198–9 iTunes 115, 130; see also Apple Japan 1, 18, 26, 28–9, 54–5, 63, 80–81, 114, 121, 128–9, 132, 140, 144–5, 147, 174, 186, 189, 192, 196, 198, 200, 209–10, 223, 240, 260, 264, 271, 279, 291 jetpacks 60 job security 292 journalism 96, 118 journalism, citizen 103–4, 107 joy-makers 57 FUTURE FILES Kaboodle 207 Kapor, Mitchell 45 Kenya 128 keys 28–9 Kindle 60, 121 Kramer, Peter 284 Kuhn, Thomas 281 Kurzweil, Ray 45 Kuwait 2 labor migration 290–91 labor shortages 3, 80–81, 289–90 Lanier, Jaron 47 laser shopping 212 leisure sickness 238 Let’s Dish 185 Lexus 157 libraries 121 Libya 73 life-caching 24, 107–8 lighting 158, 160 Like.com 216 limb farms 249 limited editions 216–17 live events 98, 110, 304 localization 10, 15–16, 116, 128, 170, 178, 189, 193, 195, 215, 220, 222–3, 224, 226, 255, 270, 297 location tagging 88 location-based marketing 116 longevity 188–9, 202 Longman, Philip 71 low cost 202, 219–22 luxury 202, 221, 225, 256, 260, 262, 265–6, 272 machinamas 112 machine-to-machine communication 56 marketing 115–16 location-based 116 now 116 prediction 116 Marks & Spencer 210 Maslow, Abraham 305–6 masstigue 223 materialism 37 Mayo Clinic 243 McDonald’s 130, 168, 180, 184 McKinsey 287 Index meaning, search for 16, 259, 282, 290, 305–6 MECU 132 media 96–122 democratization of 104, 108, 115 trends 96–8 medical outsourcing 247–8 medical tourism 2, 229, 247 medicine 188, 228–53; see also healthcare alternative 243–4 gendered 244–5 genomic 231 memory 229, 232, 239–40 memory loss 47 memory pills 231, 240 memory recovery 2, 228–9, 239 memory removal 29–30, 29, 240 Menicon 240 mental health 199 Meow Mix 216 Merriman, Jon 126 metabolomics 56 meta-materials 56 Metro 204–5 Mexico 2 micromedia 101 micro-payments 130, 150 Microsoft 137, 147, 293 Middle East 10, 11, 70, 81, 89, 119, 125, 129, 139, 174–5, 268, 301 migration 3, 11, 69–70, 78, 82, 234, 275, 290–91 boomerang 20 labor 290–91 Migros 215 military recruitment 69 military vehicles 158–9 mind-control toys 38 mindwipes 57 Mitsubishi 198, 279 mobile payments 123, 150 Modafinil 232 molecular biology 231 monetization 118 money 123–52 digital 12, 29, 123, 126–7, 129, 132, 138, 150, 191 monitoring, remote 154, 168, 228, 242 monolines 135, 137 319 mood sensitivity 41, 49, 154, 158, 164, 187–8 Morgan Stanley 127 mortality bonds 148 Mozilla Corp. 289 M-PESA 129 MTV 103 multigenerational families 20 multiple identities 35, 52 Murdoch, Rupert 109 muscular Christianity 16, 73 music industry 121 My-Food-Phone 242 MySpace 22, 25, 37, 46, 97, 107, 113 N11 nations (Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, Philippines, Turkey, Vietnam) 2 nanoelectronics 56 nanomedicine 32 nanotechnology 3, 10, 23, 40, 44–5, 50, 157, 183, 232, 243, 286, 298 napcaps 56 narrowcasting 109 NASA 25, 53 nationalism 16, 70, 72–3, 139, 183, 298, 302 natural disasters 301 natural resources 2, 4, 11, 64, 298–9 Nearbynow 223 Nestlé 195 Netherlands 238 NetIntelligence 283 networkcar.com 154 networks 28, 166, 288 airborne 56 neural nets 49 neuronic whips 57 neuroscience 33, 48 Neville, Richard 58–9 New Economics Foundation 171 New Zealand 265, 269 newspapers 29, 102–9, 117, 119, 120 Nigeria 2, 73 Nike 23 nimbyism 63 no-frills 224 Nokia 61, 105 Norelift 189 320 Northern Rock 139–40 Norwich Union 167 nostalgia 16, 31–2, 51, 169–70, 179, 183, 199, 203, 225, 303 now marketing 116 nuclear annihilation 10, 91 nuclear energy 74 nutraceuticals 179, 182 Obama, Barack 92–3 obesity 75, 190–92, 199, 250–51 oceanic thermal converters 57 oil 69, 72–3, 93, 151, 174, 176, 272, 273, 301 Oman 2, 270 online relationships 38 organic computers 56 organic food 200, 226 osteoporosis 235 outsourcing 224, 292 Pakistan 2 pandemics 4, 10, 16, 59, 72, 128, 232, 234, 272, 295–7, 301 paper 37 parasite singles 145 passwords 52 pictorial 52 pathogens 233 patient simulators 247 patina 31 patriotism 63, 67, 299 pay-as-you-go cars 167–8 pay-as-you-go insurance 167 payments cellphone 129, 213 contactless 123, 150 micro- 130, 150 mobile 123, 150 pre- 123, 150 PayPal 124, 137 Pearson, Ian 44 performance-improving drugs 284–5 personal restraint 36 personal robots 42 personalization 19, 26, 56, 96–8, 100, 102–3, 106, 108–9, 120, 138, 149, 183, 205–6, 223, 244–5, 262, 267, 269 Peru 73 FUTURE FILES Peters, Tom 280 Pharmaca 244 pharmaceuticals 2, 33, 228, 237 Philippines 2, 212, 290 Philips 114 Philips, Michael 232–3 photographs 108 physical interaction 22, 25, 97, 110, 118, 133–4, 215, 228, 243, 276, 304 physicalization 96–7, 101–2, 106, 110, 120 pictorial passwords 52 piggy banks 151 Pink, Daniel 285 plagiarism 83 polarization 15–16, 285 politics 37, 63–95, 151–2 regional 63 trends 63–5 pop-up retail 216, 224 pornography 31 portability 178, 183–4 power shift eastwards 2, 10–11, 81, 252 Prada 205–6, 216 precision agriculture 181–2 precision healthcare 234–7 prediction marketing 116 predictions 37, 301–2 premiumization 223 pre-payments 123, 150 privacy 3, 15, 41, 50, 88, 154, 165–7, 205, 236, 249, 285, 295 digital 25, 97, 108 Procter & Gamble 105, 280 product sourcing 224 Prosper 124, 135 protectionism 67, 139, 156, 220, 226, 301 economic 10, 15, 72, 299 provenance 178, 193, 226 proximity indicators 32 PruHealth 149 psychological neoteny 52 public ownership 92 public transport 171 purposeful shopping 212 Qatar 2 quality 96–7, 98, 101, 109 Index quantum mechanics 56 quantum wires 56 quiet materials 56 radiation, EMF 251 radio 117 randominoes 57 ranking 34, 83, 109, 116, 134, 207 Ranking Ranqueen 186 reality mining 51 Really Cool Foods 185 rebalancing 37 recession 139–40, 202, 222 recognition 36, 304 refrigerators 197–8 refuge 121 regeneration 233 regional food 200 regional politics 63 regionality 178, 192–3 regulation 124, 137, 143 REI 207 Reid, Morris 90 relationships, online 38 religion 16, 58 remote diagnosis 228 remote monitoring 154, 168, 228, 242 renting 225 reputation 34–5 resistance to technology 51 resorts, enclosed 273 resource shortages 11, 15, 146, 155, 178, 194, 254, 300 resources, natural 2, 4, 11, 64, 73–4, 143, 298–9 respect 36, 304 restaurants 186–8 retail 20–21, 202–27, 298 pop-up 216, 224 stealth 215 theater 214 trends 202–3 Revkin, Andy 77 RFID 3, 24, 50, 121, 126, 149, 182, 185, 192, 196, 205 rickets 232 risk 15, 124, 134, 138, 141, 149–50, 162, 167, 172, 191, 265, 299–300, 303 Ritalin 232 321 road pricing 166 Robertson, Peter 49 robogoats 55 robot department store 209 Robot Rules 44 robotic assistants 54, 206 concierges 268 financial advisers 131–2 lobsters 55 pest control 57 soldiers 41, 55, 60 surgery 35, 41, 249 robotics 3, 10, 41, 44–5, 60, 238, 275, 285–6, 292, 297 robots 41, 54–5, 131, 237, 249 childcare 57 emotional capacity of 40, 60 industrial 42 personal 42 security 209 therapeutic 41, 54 Russia 2, 69, 72, 75, 80, 89, 92–3, 125, 174, 232, 254, 270, 295, 302 safety 32, 36, 151, 158–9, 172–3, 182, 192, 196 Sainsbury’s 215 Salt 187 sanctuary tourism 273 satellite tracking 166–7 Saudi Arabia 2, 69 Schwartz, Barry 186 science 13, 16, 40–62, 300 interruption 53 trends 40–42 scramble suits 57 scrapbooking 25, 108, 225 Sears Roebuck 137 seasonality 178, 193–4 second-hand goods 224 Second Life 133, 207–8 securitization 124, 140 security 16, 31, 151 security robots 209 self-driving cars 165 self-medication 242 self-publishing 103, 113–14 self-reliance 35, 75 self-repairing roads 57 322 self-replicating machines 23, 44 Selfridges 214 sensor motes 15, 50, 196 sensory internet 56 Sharia-based investment 125 Shop24 209 shopping 202–27 habitual 212 laser 212 malls 211–5 purposeful 212 slow 213 social 207 Shopping 2.0 224 short-wave scalpels 57 silicon photonics 56 simplicity 169–70, 179, 186, 202, 218, 224, 226, 272 Singapore 241 single-person households 19–20, 202–3, 208–9, 221, 244, 298, 304 skills shortage 293, 302 sky shields 57 sleep 159–60, 188, 228, 231, 246–7, 265 sleep debt 96, 266 sleep hotels 266 sleep surrogates 57 slow food 178, 193 slow shopping 213 slow travel 273 smart devices 26–7, 28, 32, 35, 44, 50, 56, 57, 164, 206, 207 smart dust 3, 15, 50, 196 smartisans 20 Smartmart 209 snakebots 55 social networks 97, 107, 110, 120, 133, 217, 261 social shopping 207 society 13, 15–16, 17–37 trends 15–16 Sodexho 193 solar energy 74 Sony 114, 121 South Africa 84, 149, 242 South America 82, 270 South Korea 2, 103, 128–9 space ladders 56 space mirrors 47 space tourism 271, 273 FUTURE FILES space tugs 57 speed 164, 202, 209, 245, 296–7 spirituality 16, 22, 282, 298, 306 spot knowledge 47 spray-on surgical gloves 57 St James’s Ethics Centre 282 stagflation 139 starch-based plastics 64 stealth retail 215 stealth taxation 86 Sterling, Bruce 55 storytelling 203 Strayer, David 161 street signs 162–3 stress 32, 96, 235, 243, 245–6, 258–9, 265, 257–9, 275, 277, 283–5 stress-control clothing 57 stupidity 151, 302 Stylehive 207 Sudan 73 suicide tourism 236 Super Suppers 185 supermarkets 135–6, 184–6, 188, 191–2, 194, 202–3, 212, 215, 218–19, 224, 229 surgery 2, 31 anti-ageing 2, 237 enhancement 249 Surowiecki, James 45 surveillance 35, 41 sustainability 4, 37, 74, 181, 193–5, 203, 281, 288, 298–9 Sweden 84 swine flu 38, 251, 272 Switzerland 168, 210, 215 synthetic biology 56 Taco Bell 184 Tactical Numerical Deterministic Model 49 tagging, location 86, 88 Taiwan 81 talent, war for 275, 279, 293; see also labor shortages Target 216 Tasmania 267 Tata Motors 174, 176 taxation 85–6, 92, 93 carbon 76, 172 conscientious objection 86 Index fat 190 flat 85–6 green 76 indirect 86 stealth 86 Tchibo 217 technology 3, 14–16, 18, 22, 26, 28, 32, 37, 40–62, 74–5, 82–3, 96, 119, 132, 147–8, 154, 157, 160, 162, 165–7, 178, 182, 195–8, 208, 221, 229, 237, 242–3, 249, 256, 261, 265–6, 268, 275–6, 280, 283–4, 292, 296–7, 300 refuseniks 30, 51, 97 trends 40–42 telemedicine 228, 238, 242 telepathy 29 teleportation 56 television 21, 96, 108, 117, 119 terrorism 67, 91, 108, 150, 262–3, 267, 272, 295–6, 301 Tesco 105, 135–6, 185, 206, 215, 219, 223 Thailand 247, 290 therapeutic robots 41, 54 thermal imaging 232 things that won’t change 10, 303–6 third spaces 224 ThisNext 207 thrift 224 Tik Tok Easy Shop 209 time scarcity 30, 96, 102, 178, 184–6, 218, 255 time shifting 96, 110, 116 time stamps 50 timeline, extinction 9 timeline, innovation 8 timelines 7 tired all the time 246 tobacco industry 251 tolerance 120 too much choice (TMC) 29, 202, 218–19 too much information (TMI) 29, 51, 53, 202, 229; see also information overload tourism 254–74 cultural 273 ethical 259 food 273 323 local 273 medical 2, 229, 247 sanctuary 273 space 271, 273 suicide 238 tribal 262 Tourism Concern 259 tourist quotas 254, 271 Toyota 48–9, 157 toys, mind-control 38 traceability 195 trading down 224 transparency 3, 15, 143, 152, 276, 282, 299 transport 15, 154–77, 298 public 155, 161 trends 154–6 transumerism 223 travel 2, 3, 11, 148, 254–74 economy 272 luxury 272 slow 273 trends 254–6 trend maps 6–7 trends 1, 5–7, 10, 13 financial services 123–5 food 178–80 healthcare 228–9 media 96–8 politics 63–5 retail 202–3 science and technology 40–42 society 15–16 transport 154–6 travel 254–6 work 275–7 tribal tourism 262 tribalism 15–16, 63, 127–8, 183, 192, 220, 260 trust 82, 133, 137, 139, 143, 192, 203, 276, 282–3 tunnels 171 Turing test 45 Turing, Alan 44 Turkey 2, 200, 247 Twitter 60, 120 two-way identity verification 132 UAE 2 UFOs 58 324 UK 19–20, 72, 76, 84, 86, 90–91, 100, 102–3, 105, 128–9, 132, 137, 139–42, 147–9, 150, 163, 167–8, 170–71, 175, 185, 195–6, 199, 200, 206, 210, 214–16, 238, 259, 267–8, 278–9, 284, 288 uncertainty 16, 30, 34, 52, 172, 199, 246, 263, 300, 303 unemployment 151 Unilever 195 University of Chicago 245–6 urban rental companies 176 urbanization 11, 18–19, 78, 84, 155, 233 Uruguay 200 US 1, 11, 19–21, 23, 55–6, 63, 67, 69, 72, 75, 77, 80–83, 86, 88–90, 92, 104–5, 106, 121, 129–33, 135, 139–42, 144, 147, 149, 150, 151, 162, 167, 169–71, 174, 185, 190–3, 195, 205–6, 209, 211, 213, 216, 218, 220, 222–3, 237–8, 240–8, 250, 260, 262, 267–8, 275, 279–80, 282–4, 287, 291 user-generated content (UGC) 46, 97, 104, 289 utility 224 values 36, 152 vending machines 209 Venezuela 69, 73 verbal signatures 132 VeriChip 126 video on demand 96 Vietnam 2, 290 Vino 100 113 Virgin Atlantic 261 virtual adultery 33 banks 134 economy 130–31 protests 65 reality 70 sex 32 stores 206–8 vacations 32, 261 worlds 157, 213, 255, 261, 270, 305 Vocation Vacations 259–60 Vodafone 137 voice recognition 41 voice-based internet search 56 voicelifts 2, 237 FUTURE FILES Volkswagen 175 voluntourism 259 Volvo 164 voting 3, 68, 90–91 Walgreens 244 Wal-Mart 105, 136–7, 215, 219–20, 223, 244, 282 war 68–9, 72 war for talent 275, 279; see also labor shortages war forecasting 49 water 69–70, 74, 77–9, 199 wearable computers 55 weather 64 weather insurance 264 Web 2.0 93, 224 Weinberg, Peter 125 wellbeing 2, 183, 188, 199 white flight 20 Wikipedia 46, 60, 104 wild swimming 273 Wilson, Edward O. 74 wind energy 74 wine producers 200 wisdom of idiots 47 Wizard 145 work 275–94 trends 275–94 work/life balance 64, 71, 260, 277, 289, 293 worldphone 19 xenophobia 16, 63 YouTube 46, 103, 107, 112 Zara 216–17 Zipcar 167 Zopa 124, 134


pages: 305 words: 98,072

How to Own the World: A Plain English Guide to Thinking Globally and Investing Wisely by Andrew Craig

Airbnb, Alan Greenspan, Albert Einstein, asset allocation, Berlin Wall, bitcoin, Black Swan, bonus culture, book value, BRICs, business cycle, collaborative consumption, diversification, endowment effect, eurozone crisis, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Future Shock, index fund, information asymmetry, joint-stock company, Joseph Schumpeter, Long Term Capital Management, low cost airline, low interest rates, Market Wizards by Jack D. Schwager, mortgage debt, negative equity, Northern Rock, offshore financial centre, oil shale / tar sands, oil shock, passive income, pensions crisis, quantitative easing, Reminiscences of a Stock Operator, road to serfdom, Robert Shiller, Russell Brand, Silicon Valley, smart cities, stocks for the long run, the new new thing, The Wealth of Nations by Adam Smith, Yogi Berra, Zipcar

Put another way, this is a classic example of “greater fool theory”. As long as there was a “greater fool” and an equally foolish bank willing to fund them, the market carried on going up, even though people were making quite ridiculous decisions about the “value” of the property they were buying. The Northern Rock situation in the UK was a direct result of this. In the US the whole edifice began crashing down in 2007, as more and more people were unable to fund their mortgage payments. We have seen how this has played out in the US: the most overheated markets, such as Miami and Los Angeles, have seen prices fall as much as 70 per cent.

Mortgages enable individuals to control an asset with a value significantly more than the deposit they have saved. In a strong market this is obviously great news for the investor; for the last several years it was common practice to be able to buy a property with only a deposit of between 5 and 10 per cent. Lenders such as Northern Rock were even offering 110 per cent mortgages, effectively lending buyers their deposit. In a strong market, this is good news for property investors. If you can put down £25,000 (or even less) to control a £250,000 property, for example, and that asset then increases in value sufficiently fast, you can build real wealth very quickly.


pages: 354 words: 99,690

Thinking About It Only Makes It Worse: And Other Lessons From Modern Life by David Mitchell

bank run, Boris Johnson, British Empire, cakes and ale, cognitive dissonance, collapse of Lehman Brothers, credit crunch, don't be evil, double helix, Downton Abbey, Dr. Strangelove, Etonian, eurozone crisis, Golden age of television, haute cuisine, high-speed rail, Julian Assange, lateral thinking, Northern Rock, Ocado, offshore financial centre, payday loans, plutocrats, profit motive, Russell Brand, sensible shoes, Skype, The Wisdom of Crowds, WikiLeaks

So the country’s development producers have been racking their brains to think of other careers that can be staffed using television shows. Here are just a few of the ideas currently being considered by broadcasters. Bankers You Can Bank on Me! is a collaboration between Channel 4 and HM Treasury. Alistair Darling has given us an unprecedented challenge: we’ve got just 16 weeks to run Northern Rock into the ground. We’re on a quest to find the next generation of ludicrously overpaid alpha males bent on bringing down civilisation with their fecklessness! Just when most bankers are repenting, resigning or both, we’ll scour the country’s estate agencies and lap-dancing clubs for their replacements.

sketch of 1 closest we’ve come to electing a genocidal maniac, 1 and Iraq invasion 1, 2 Blatter, Sepp 1 Blears, Hazel 1 Bloom, Godfrey 1 Blumenthal, Heston 1 Boat Race 1 body weight 1 bottom-wiping 1 Bowers, Judge Peter 1, 2 Box of Delights, The 1 Boyle, Danny 1 Boyle, Frankie 1, 2, 3 Boyle, Susan 1 BP 1, 2 BPP 1, 2 BPPP no such thing Brady, Karren 1 “brainchild” 1 see also words, new, favourite and not so favourite Brand, Russell 1, 2 Branson, Richard 1, 2 Brazil 1 Brett, Jeremy 1 Bristow, Keith 1 Britain’s Next Top Model 1 British National Party (BNP) 1 British Rail 1, 2 British Retail Consortium 1 Brittin, Max 1 Brooker, Charlie 1 Brooks, Mel 1 Brown, Gordon 1, 2, 3, 4, 5 and Boyle’s health 1 Cable’s overrated joke concerning 1 Chilcott Inquiry set up by 1 crises in government of 1 election date confirmed by 1 Brown, Sarah 1 Brunel, Isambard Kingdom 1 Burley, Aiden, Nazi outfit hiring of 1 Burnham, Andy 1 Bush, George W. 1 and Iraq invasion 1 Butlin’s 1, 2 Byrne, Justin 1 Cable, Vince 1 Call the Midwife 1 Cambridge Union Society 1 Cameron, David 1, 2, 3, 4, 5, 6 appearance of 1 appearing to make an effort 1 “change” mantra of 1 and “nasty party” image 1 old Tory background of 1 and platitudes over policies 1 refusing to say anything positive about burglars 1 and UK’s military agreements with France 1 unfitness of, for government 1 Camilla, Duchess of Cornwall 1, 2 Campbell, Alastair 1 Carey, George, and use of the phrase “political correctness gone mad” 1 Carling Black Label, its contribution to world heritage 1 Carlyle, Robert, pants of 1 Carmichael, Laura 1 Carry On at Your Convenience 1 Carry On Up the Khyber 1 Cash in the Attic 1 Catherine, Duchess of Cambridge, filmed having sex (in my imagination) 1 Cavill, Henry 1, 2, 3 Cerf, Vinton 1 Chamberlain, Neville 1 change 1 as Cameron mantra 1 Charles II 1 Charles, Prince of Wales 1, 2 chefs, irritating nature of 1 Cheltenham Science Festival 1 Chilcott Inquiry 1 Chilcott, Sir John 1, 2 China 1 Christmas cards, and the industrialisation of good cheer 1 Chuckle Brothers, televised death of 1 Churchill, Winston 1, 2, 3, 4 Cif/Jif 1 Civil Nuclear Constabulary 1 Clarkson, Jeremy 1, 2 Cleese, John 1 Clegg, Nick 1, 2, 3 breaker of promises 1 and Chilcott Inquiry 1 in leadership debates 1 rowing machine of 1 Cock Jesus 1 Coe, Seb 1 Cole, Cheryl 1 Cole, Sir Henry 1 Comic Relief 1 Communications Data Bill 1, 2 conflict, media’s obsession with 1 Connery, Sean 1 Consignia 1 cookery programmes 1 Cookie Monster 1 Countdown 1, 2 Courage brewery 1 Courage, John, serendipitous name of 1 Coventry City FC 1 Cowboy Trap 1 Cowell, Simon 1 Cox, Dr Lynne 1 Coyote, Wile E. 1, 2 Craig, Daniel 1 credit crunch, see global financial crisis Crest 1 Crick, Francis 1 Crowe, Russell 1 Curtis, Richard 1 Dad’s Army 1 Daily Mail 1, 2, 3, 4 Daily Mirror 1, 2 Daily Planet 1 Daily Telegraph 1 Daly, Tess 1 Darling, Alistair 1 dating 1 via websites 1, 2 Davies, Toby 1 Davis, Paul 1 Dawkins, Richard 1 daytime television 1 de Francisco, Juan 1 de Mooi, CJ, fictional cookery of 1 De Niro, Robert 1, 2 Deepwater Horizon, oil spill in, see Gulf of Mexico Dennis, Hugh 1 Dent, Susie 1, 2 Dexter, Colin 1 Diamond, Bob 1 Disney 1, 2, 3 DNA 1 Doctor Who 1, 2, 3 Dr Strangelove 1 Doctors 1 dogs, dyed to look like other animals as solution to biodiversity crisis 1 Double Falsehood 1 Dowler, Milly 1 Downfall 1 Downton Abbey 1, terribleness and enjoyability of 1, 2 Duffy, Lisa 1 East Midlands, laudable self-loathing of 1 EasyJet 1, 2 Ebdon, Peter, similarity to Vladimir Putin 1 education: and Bibles in schools 1 and students’ complaints 1 and teachers’ pay 1, 2 teaching of history 1 universities 1 Edward II 1 Elizabeth II 1, 2, 3, 4, 5 diamond jubilee of 1, 2 Guardian article on 1, 2 “went bonkers” over corgis’ food 1 see also monarchy Ellison, Jane 1 Elms, Mark 1, 2 Emberg, Bella 1 emigrating and happiness 1 Empire of the Sun 1 Endeavour 1 England soccer team 1, 2 English Heritage 1 English Tourist Board, see Visit England Estinel, Martin 1 Eton College 1 Evans, Sir Richard 1 exercise, women’s attitude towards 1 Facebook: and anonymous messages 1 and food 1 fairytales 1 Fall and Rise of Reginald Perrin, The, remake of 1 Fallon, Michael 1 fan fiction 1 Fantastic Four, The 1 Farage, Nigel 1, 2, 3 and “nasty party” image 1 Farmer, Colin 1 fashion: anti- 1 invoking, as marketing 1 Fawlty Towers 1 Ferguson, Niall 1 Ferrari, Nick 1 Figes, Orlando 1, 2 Financial Services Authority 1, 2 Findus, horse in lasagnes of 1, 2 Fish, Michael 1, 2 fish stocks 1 fitness (and lack of) 1, 2 Flintoff, Andrew 1 Flintstones, The 1, 2 food: and advertising 1, 2 budget 1 cereals 1 horse, not beef 1 and Michelin 1 and neo-Nazis 1 and social media 1 football, and colour of strip 1 Forth Bridge 1 Fournier, Mark 1 Fowler, Steve 1 Fox, Emilia 1 France, UK’s military agreements with 1 Frasier 1, 2 Freegard, Siobhan 1 Freud, Matthew 1 Full Monty, The 1 G, Ali 1 Gaddafi, Col. 1 Gangnam Style 1 Gant, Charles 1 Garfield, Andrew 1 Gascoigne, Paul 1 Gauthier, Alexandre 1 gay people: and B&B owners 1 and football 1 Markovic’s insults against 1 and marriage 1 Silvester’s insults against 1 general elections: 1992 1 1997 1 2010: Brown confirms date of 1 crises preceding 1 DM’s ludicrous predictions concerning 1 and leaders’ wives 1 leadership debates preceding 1 UKIP manifesto for 1 Genesis, Book of 1 Germany: and Hitler salute 1 post-WW 1 2 Gingritch, Callista 1 Gingritch, Newt, meretricious shittiness of 1, 2 Girlguiding UK 1 Glass, Ira 1 global financial crisis 1, 2, 3, 4, 5 and bankers 1, 2 and silver linings 1 gold 1 Goldman Sachs 1, 2 Good Life restaurant 1 Google 1 Android OS of, new name for 1 “Don’t Be Evil” motto of 1 and poppies 1 tax avoidance by 1, 2 Google Street View 1 Goujon, Gilles 1 Gove, Michael 1, 2 and Bibles 1 and WW 1 grammar 1, 2 see also punctuation Grant, Hugh 1 Gray, Andy 1 Grayling, Chris 1 Great British Bake-Off, The 1 Great Expectations 1 Griffin, Nick, crowd-pleasing bankruptcy of 1 Griffiths, Helen 1 Gruffalo, The 1 Guardian 1, 2, 3, 4 DM slated on website of 1 Guides, see Girlguiding UK Guinness, Alec 1 Gulf of Mexico, oil spill in (Deepwater Horizon) 1, 2 Gyngell, Skye, annoyance at critical acclaim of 1 Hague, Fld Mshl Douglas 1 Halifax, Lord 1, 2, 3 Hall, Sir Peter 1 Hamill, Mark 1 Hamlet cigars 1 Hammond, Richard 1 Hare, David 1 Harris, Evan 1 Harry, Prince: party gear of 1 as TV-show idea 1 Harry Potter books/films 1 Hart, Miranda 1 hashtags 1 Hay Festival 1 Hayward, Tony 1 Heart Attack Grill 1 Heat 1 Henry IV of France 1 Henry VIII 1 Heroes 1 Heyhoe Flint, Rachael 1 Hill, Amanda 1 Hillsborough 1 history, teaching of 1 Hitler, Adolf 1 Tussauds likeness of 1 Hoddesdon 1 Hoffman, Dustin 1 Hollande, François, comic love life of 1 Holocaust Educational Trust 1 homelessness 1 Homes Under the Hammer 1 homophobia 1 horsemeat scandal, and why DM is glad it happened 1 Howe, Geoffrey 1 HS2 1 Huhne, Chris 1, 2 Humphrys, John 1, 2 Hunt, Jeremy 1, 2, 3 Hunt, Tristram 1 Hurley, Liz 1 Iceland (company) 1 Idle, Eric 1 Incredibles, The 1 India 1 Inspector Morse 1, 2 internet dating 1, 2 Iraq: invasion of 1 Chilcott Inquiry into 1 IT consultants, as TV-show idea 1 James Bond films 1, 2, 3 Casino Royale 1 Skyfall 1 Janner, Lord 1, 2 Jenkin, Bernard 1 Jif/Cif 1 Jodrell Bank 1 Johnson, Boris 1, 2, 3, 4, 5, 6 Jordan, Queen of 1 Jowell, Tessa 1, 2 Katz, Ian 1, 2 Kellogg’s 1 Kelly, Sir Christopher 1, 2 Kennedy, Charles 1 Kent, Clark 1 Richard Keys, inability to believe that women can understand the offside rule of 1 King, Ledley 1 King’s Speech, The 1 KitKat 1, 2 see also Google: Android OS of Lagerling, John 1 Land Girls 1 Lange, Steffen 1, 2 Langfield, Joanna 1 Leicester City FC 1 Leicester, University of 1 Lewis 1, 2, 3 Lidl 1 Lineker, Gary 1 Lion Bar, retail backlash against fashion industry orchestrated by 1 Liverpool FC 1 Lobdell, Scott 1 Logan, Gaby 1 London Fashion Week 1 Lords, House of, as TV-show idea 1 Louis XIV 1, 2 Louis XVI 1 Lucas, George 1, 2, 3, 4 Lucasfilm 1 Lumley, Joanna 1 Lygo, Carl 1 Lyons, Sir Michael 1 McCluskey, Len 1 McDonald’s 1, 2 McGregor, Ewan 1 Macmillan, Margaret, discomfort with Michael Gove’s admiration of 1 Macpherson, Elle 1 Madame Tussauds, horrible use of language, high entrance fee and general disappointing nature of 1 Madness of King George, The 1 Magic Roundabout, The 1 Magnetar 1, 2 Major, John 1, 2 Manchester United FC 1 Mandelson, Lord 1 Marathon/Snickers 1 Margaret Thatcher: The Long Walk to Finchley 1 marketing, see advertising and marketing Markovic, Vlatko 1 Martin, Steve 1 Massey, Sian 1 Mastermind 1 Matrix, The 1 media: BBC knocked by 1, 2 conflict-obsessed 1 Met Office 1 Michelin stars 1 Midas, King 1 Miliband, David 1, 2 Miliband, Ed 1, 2 and platitudes over policies 1 and presentation skills 1 on Shapps 1 and something-for-nothing culture 1 Miller, Maria 1 Milligan, Spike 1 Mind 1 Minder 1 Mr T 1 Mitchell, Andrew 1, 2 Mo 1 Molotov’s Magic Lantern (Polonsky) 1 Mona Lisa 1, 2 monarchy 1, 2 see also Elizabeth II money 1 as gold 1 Monocled Mutineer, The 1 Moore, Roger 1 Morgan, Nicky 1 Morrissey, Margaret 1 MPs: expenses fiddles of 1, 2, 3 salaries of 1 Mrs Brown 1 Mugabe, Robert, unfair aspersions cast on the punctuality of 1, 2 Mullin, Chris 1 Mumsnet 1 Muppet Show, The 1 Muppets, The 1 Murdoch, Rupert 1 Murphy, Eddie 1 Murray, Andy 1 My Family 1 Mystery Men 1 Napoleon I 1 National Crime Agency 1 National Federation of Fishermen’s Organisations, beef with Royal Mail of 1 National Health Service (NHS) 1 most efficient 1, 2 National Lottery 1 National Victims’ Association, Christmas party of 1 Nationwide 1 Nazis 1 and Cookie Monster 1 uniforms of 1, 2 neologisms, see words, new, favourite and not so favourite Nestlé 1 and powdered milk 1 Netmums 1 New Statesman 1 New York Times 1 News of the World 1 Newsnight 1 Nighy, Bill 1 No Ordinary Family 1 Noor, Queen 1 Northern Rock 1 “Not in My Front Yard” campaign 1 Obama, Barack 1, 2 inauguration of 1 Obama, Michelle 1 Observer 1, 2, 3 Office, The 1 offside rule 1 Oh! What a Lovely War 1 O’Leary, Michael 1, 2 Olsen, Jimmy 1 Olympic Games 1 London (2012) 1 One Show, The 1 online reviews 1 Only Fools and Horses 1 Operation Yewtree 1 opinions 1 Orange 1 O’Rourke, Ray 1 Osborne, George 1, 2 blaming economic problems on snow 1 Our Friends in the North 1 Outnumbered 1, 2 Oxford English Dictionary 1 Panorama 1 Paralympics 1 Parents Outloud 1 Parsons, Nicholas, left on oil rig by Chinese 1 Patterson, James 1 Paxman, Jeremy 1, 2 Peep Show 1 Peppa Pig 1 Petersham Nurseries Cafe 1 Phantom Menace 1 Philpott, William 1 phone-hacking scandal 1 photography 1 and privacy 1 Pickles, Eric 1 Piss Christ 1 Player-Bishop, Jill 1 “Plebgate” 1, 2 Plymouth 1 pole-dancing 1 police: deteriorating public image of 1 and Hillsborough 1 and phone-hacking scandal 1 and “Plebgate” 1 and Tasers 1 Police Federation 1, 2, 3 political parties, funding of 1 politicians, and comedy 1 Polonsky, Rachel 1 Pontin’s 1, 2 poppies 1 sparkly 1 white 1 Pottermore.com 1, 2, 3 Premier League 1 Pride and Prejudice 1 private sector 1 punctuation 1, 2 apostrophes 1, 2, 3 Putin, Vladimir, similarity to Peter Ebdon of 1 Queen, The 1 Queen’s English Society 1 Rainbow 1 Ramsay, Gordon 1, 2 Rantzen, Esther 1 rebranding 1 of cattle 1 of government departments 1 of products 1 Reeves, Rachel 1, 2 Reggie Perrin 1 Reitemeier, Bob 1 religion: and art 1 display of symbols of 1 research 1 Research Excellence Framework 1, 2 Responsibility Deal 1, 2 Return of the Jedi 1, 2 Richard II 1 Richard III 1 Richard, Cliff 1 Robinson, Tony 1 Romeo and Juliet (Shakespeare) 1 as TV-show idea 1 Romney, Ann 1 Rooney, Wayne 1, 2, 3 Ross, Jonathan 1, 2 Rowling, JK 1, 2 Royal Bank of Scotland 1, 2 Royal Mail 1, 2 Rumpole stories 1 RuPaul’s Drag Race 1 Ryanair 1, 2 Saatchi, Charles 1, 2 “Sachsgate” 1 Salisbury, Lord 1 same-sex marriage 1 Samuel Johnson Prize 1 Santorum, Karen 1 Savile, Jimmy 1 School of Saatchi 1 Scott, Andrew 1 Scouts 1 Sellers, Peter 1 Sergeant, John 1 Serrano, Andres 1, 2 Service, Robert 1 Sesame Street 1 Sewell, Brian, horror at artistic success of Al-Qaida of 1 Shakespeare, William 1, 2 Shapps, Grant 1 Sheffield, Prof.


pages: 371 words: 98,534

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

"World Economic Forum" Davos, 3D printing, 9 dash line, Admiral Zheng, AlphaGo, 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, general purpose technology, Gini coefficient, global reserve currency, Great Leap Forward, 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, Minsky moment, 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, vertical integration, Washington Consensus, women in the workforce, working-age population, zero-sum game

In fact in important respects, they matter more. Few banks fail because they are insolvent, in the sense that their assets are worth less than their liabilities. But they can and do fail when they become illiquid, and can’t raise deposits or borrow funds in the financial markets any more. This is precisely what happened to the British bank Northern Rock in 2007, which was one of the first financial institutions to fail in the build-up to the financial crisis. Other bigger institutions, such as Bear Stearns and Lehman Brothers, would later fail in the same way. The liabilities of the financial sector, then, are what we really need to focus on because banks are always vulnerable to so-called ‘funding shocks’, since their business revolves around mismatches in the maturities of their assets and liabilities.

–China Strategic and Economic Dialogue (i) Hua Guofeng (i) Huangpu district (Shanghai) (i) Huawei (i), (ii), (iii), (iv) hukou (i), (ii), (iii), (iv) Human Freedom Index (i) Human Resources and Social Security, Ministry of (i) Hunan (i) Hungary (i), (ii), (iii), (iv) ICORs (incremental capital-output ratios) (i), (ii), (iii) n4 IMF Article IV report (i) on broadening and deepening of financial system (i) China urged to devalue (i) China’s integration and (i) concern over smaller banks (i) concern over WMPs (i) credit gaps (i) credit intensity (i) GP research (i) ICOR (i) n4 laissez-faire ideas (i) pensions, healthcare and GDP research (i), (ii), (iii) Renminbi reserves (i) risky corporate loans (i) Special Drawing Rights (i), (ii), (iii), (iv), (v) WAPs (i) immigrants see migrants income inequality (i) India Adam Smith on (i) ASEAN (i) BRI misgivings (i) BRICS (i), (ii) comparative debt in (i) demographic dividend (i) economic freedom level (i) frictions with (i) Nobel Prize (i) pushing back against China (i) regional allies of (i) SCO member (i) Indian Ocean access to ports (i) African rail projects and (i) Chinese warships enter (i) rimland (i) shorelines (i) Indo-Pacific region (i), (ii) Indonesia Asian crisis (i) BRI investment (i) debt and GDP (i) GDP (i) rail transport projects (i) RCEP (i) retirement age (i) trade with China (i) Industrial and Commercial Bank of China (i), (ii) Industrial Revolution (i), (ii) industrialisation (i), (ii) Industry and Information Technology, Minister of (i) infrastructure (i), (ii), (iii), (iv) Initial Public Offerings (IPOs) (i) Inner Mongolia (i), (ii) innovation (i), (ii) Inquiry into the Nature and Causes of the Wealth of Nations (Adam Smith) (i) Institute for International Finance (i) institutions (i), (ii) insurance companies (i), (ii), (iii) intellectual property (i) interbank funding (i), (ii), (iii), (iv), (v) investment (i), (ii), (iii) Iran (i) Ireland (i), (ii), (iii) Iron Curtain (i) ‘iron rice bowl’ (i) Israel (i), (ii) Italy (i), (ii), (iii) Jakarta (i), (ii) Japan acts of aggression by (i) aftermath of war (i) ASEAN (i) between the wars (i) bond market (i) Boxer Rebellion and (i) Chiang Kai-shek fights (i) China and (i) China’s insecurity (i) credit gap comparison (i) dispute over Diaoyu islands (i), (ii) export-led growth (i), (ii) financial crisis (i) friction with (i) full-scale war with China (i), (ii) growth (i) high-speed rail (i) India and (i) Liaodong peninsula (i) Manchuria taken (i), (ii), (iii) Mao fights (i) middle- to high-income (i) migrants to (i) Okinawa (i) old-age dependency ratio (i) pensions, healthcare and GDP research (i) pushing back against China (i) RCEP (i) Renminbi block, attitude to (i) research and development (i) rimland (i) robots (i) seas and islands disputes (i) Shinzō Abe (i) TPP (i) trade and investment from (i) yen (i) Jardine Matheson Holdings (i) Jiang Zemin 1990s (i) Deng’s reforms amplified (i), (ii), (iii) influence and allies (i) Xiao Jianhua and (i) Johnson, Lyndon (i) Julius Caesar (i) Kamchatka (i) Kashgar (i) Kashmir (i) Kazakhstan (i), (ii) Ke Jie (i) Kenya (i) Keynes, John Maynard (i) Kharas, Homi (i) Kissinger, Henry (i), (ii), (iii), (iv) Korea (i), (ii), (iii) see also North Korea; South Korea Korean War (i), (ii) Kornai, János (i), (ii), (iii) n16 Kowloon (i), (ii) Krugman, Paul (i) Kunming (i) Kuomintang (KMT) (i), (ii) Kyrgyzstan (i) Kyushu (i) labour productivity (i) land reform (i) Laos (i), (ii), (iii) Latin America (i), (ii), (iii) Lattice Semiconductor Corporation (i) leadership (i) Leading Small Groups (LSGs) (i), (ii), (iii), (iv) Lee Kuan Yew (i) Lee Sodol (i) Legendary Entertainment (i) Lehman Brothers (i) lending (i) Leninism governance tending to (i) late 1940s (i) party purity (i) Xi’s crusade on (i), (ii) Lenovo (i), (ii) Lewis, Arthur (i) Lewis turning point (i) LGFVs (local government financing vehicles) (i) Li Keqiang (i), (ii) Liaodong peninsula (i), (ii) LinkedIn (i) Liu He (i), (ii), (iii) Liu Xiaobo (i) local government (i), (ii), (iii) London (i), (ii), (iii) Luttwak, Edward (i), (ii), (iii) Macartney, Lord George (i), (ii), (iii) Macau (i), (ii) Made in China 2025 (MIC25) ambitious plans (i) importance of (i) mercantilism (i) priority sectors (i) robotics (i) Maddison, Angus (i), (ii), (iii) n3 (C1) Maghreb (i) major banks see individual entries Malacca, Straits of (i) Malay peninsula (i) Malaysia ASEAN member (i) Asian crisis (i) high growth maintenance (i) Nine-Dash Line (i) rail projects (i), (ii) Renminbi reserves (i) TPP member (i) trade with (i) Maldives (i) Malthus, Thomas (i), (ii) Manchuria Communists retake (i) Japanese companies in (i) Japanese puppet state (i), (ii), (iii) key supplier (i) North China Plain and (i) Pacific coast access (i) Russian interests (i) targeted (i) Manhattan (i), (ii) see also New York Mao Zedong arts and sciences (i) China stands up under (i) China under (i) Communist Party’s grip on power (i) consumer sector under (i) Deng rehabilitated (i) Deng, Xi and (i) east wind and west wind (i) Great Leap Forward (i) industrial economy under (i) nature of China under (i) People’s Republic proclaimed (i) positives and negatives (i) property rights (i) women and the workforce (i) Xi and (i) Maoism (i) Mar-a-Lago (i) Mark Antony (i) Market Supervision Administration (i) Marshall Plan (i), (ii) Marxism (i), (ii), (iii), (iv) Mauritius (i) May Fourth Movement (i) McCulley, Paul (i) n18 Mediterranean (i) Menon, Shivshankar (i) mergers (i) MES (market economy status (ii)) Mexico completion of education rates (i) debt comparison (i) GDP comparison (i) NAFTA (i) pensions comparison (i) TPP member (i) US border (i) viagra policy (i) Middle East (i), (ii), (iii) middle-income trap (i), definition (i) evidence and argument for (i) governance (i) hostility to (i) hukou system (i) lack of social welfare for (i) low level of (i) migrant factory workers (i) patents and innovation significance (i) significance of technology tech strengths and weaknesses (i) total factor productivity focus (i) vested and conflicted interests (i) ultimate test (i) World Bank statistics (i) migrants (i), (ii), (iii), (iv), (v) Ming dynasty (i) Minsky, Hyman (i) mixed ownership (i), (ii) Modi, Narendra (i) Mombasa (i) monetary systems (i) Mongolia (i), (ii) Monogram (i) Moody’s (i) Morocco (i) mortality rates (i) see also population statistics mortgages (i) motor cars (i), (ii) Moutai (i) Mundell, Robert (i) Muslims (i) Mutual Fund Connect (i) Myanmar ASEAN (i) Chinese projects (i) disputes (i) low value manufacturing moves to (i) Qing Empire in (i) ‘string of pearls’ (i) ‘Myth of Asia’s Miracle, The’ (Paul Krugman) (i) NAFTA (North American Free Trade Agreement) (i) Nairobi (i) Namibia (i) Nanking (i) Treaty of (i), (ii) National Bureau of Statistics fertility rates (i) GDP figures (i) ICOR estimate (i), (ii), (iii) n4 SOE workers (i) National Cyberspace Work Conference (i) National Development and Reform Commission (i), (ii), (iii) National Financial Work Conferences (i) National Health and Family Planning Commission (i) National Medium and Long-Term Plan for the Development of Science and Technology (i) National Natural Science Foundation (i) National People’s Congress 2007 (i) 2016 (i) 2018 (i), (ii), (iii), (iv) National People’s Party of China (i) National Science Foundation (US) (i) National Security Commission (i) National Security Strategy (US) (i), (ii) National Supervision Commission (i), (ii), (iii), (iv) Needham, Joseph (i) Nepal (i), (ii) Netherlands (i) New Development Bank (i), (ii) New Eurasian Land Bridge (i) New Territories (i), (ii) New York (i) see also Manhattan New Zealand (i), (ii), (iii) Next Generation AI Development Plan (i) Nigeria (i) Nine-Dash Line (i) Ningpo (i) Nixon, Richard (i) Nobel Prizes (i), (ii) Nogales, Arizona (i) Nogales, Sonora (i) Nokia (i) non-communicable disease (i) non-performing loans (i), (ii), (iii), (iv), (v), (vi) North China Plain (i) North Korea (i) see also Korea Northern Rock (i) Norway (i) Nye, Joseph (i) Obama, Barack Hu Jintao and (i) Pacific shift recognised (i) Renminbi (i) US and China (i), (ii) OECD (Organisation for Economic Co-operation and Development) China’s ranking (i) GDP rates for pension and healthcare (i) GP doctors in (i) tertiary education rates (i) US trade deficit with China (i) Office of the US Trade Representative (i) Official Investment Assistance (Japan) (i) Okinawa (i) old-age dependency ratios (i), (ii), (iii) Olson, Mancur (i) Oman (i) one-child policy (i), (ii) Opium Wars financial cost of (i) First Opium War (i), (ii), (iii) Qing dynasty defeated (i) Oriental Pearl TV Tower, Shanghai (i) Pacific (i), (ii), (iii) Padma Bridge (i) Pakistan Economic Corridor (i) long-standing ally (i) Renminbi reserves (i) SCO member (i) ‘string of pearls’ (i) Paris (i) Party Congresses see numerical list at head of index patents (i) Peking (i), (ii), (iii) see also Beijing pensions (i) People’s Bank of China see also banks cuts interest rates again (i) floating exchange rates (i) lender of last resort (i), (ii) long term governor of (i) new rules issued (i) new State Council committee coordinates (i) places severe restrictions on banks (i) publishing Renminbi values (i) Renminbi/dollar rate altered (i) repo agreements (i) sells dollar assets (i) stepping in (i) Zhou Xiaochuan essay (i) People’s Daily front-page interview (i), (ii) on The Hague tribunal (i) riposte to Soros (i) stock market encouragement (i) People’s Liberation Army (i), (ii) Persia (i) Persian Gulf (i), (ii) Peru (i) Pettis, Michael (i) n12 Pew Research (i) Peyrefitte, Alain (i) Philippines (i), (ii), (iii), (iv) Piraeus (i) PISA (Programme for International Student Assessment) (i) Poland (i), (ii), (iii) ‘Polar Silk Road’ (i) Politburo (i), (ii), (iii), (iv) pollution (i) Polo, Marco (i) Pomeranz, Kenneth (i) population statistics (i) see also ageing trap; WAP (working-age population) consequences of ageing (i) demographic dividends (i), (ii) hukou system and other effects (i) low fertility (i), (ii), (iii) migrants (i), (ii) old-age dependency ratios (i), (ii), (iii) one-child policy (i), (ii) places with the most ageing populations (i) rural population (i) savings trends (i) technology and (i) under Mao (i) women (i) Port Arthur (i) Port City Colombo (i), (ii) Portugal (i), (ii), (iii), (iv) pricing (i), (ii) private ownership (i), (ii) productivity (i), (ii) Propaganda, Department of (i) property (i) property rights (i) Puerto Rico (i) Punta Gorda, Florida (i) Putin, Vladimir (i) Qianlong, Emperor (i) Qing dynasty (i), (ii), (iii) Qingdao (i) Qualcomm (i) Qualified Domestic Institutional Investors (i), (ii) Qualified Foreign Institutional Investors (i), (ii) Qiushi, magazine (i) rail network (i), (ii) RCEP (Regional Comprehensive Economic Partnership) (i), (ii), (iii) real estate (i), (ii) reform authoritative source warns of need for (i), (ii) different meaning from West (i) of economy via rebalancing (i), (ii) as embraced by Deng Xiaoping (i) fiscal, foreign trade and finance (i), (ii) Hukou (i) of ownership (i) state-owned enterprises (i) third plenum announcements (i) in Xi Jinping’s China (i) ‘Reform and Opening Up’ (Deng Xiaoping) (i), (ii), (iii) regulations and regulatory authorities (financial) (i), (ii) Reinhart, Carmen (i) Renminbi (i) 2015 mini-devaluation and capital outflows (i), (ii) appreciates (i) banking system’s assets in (i) bloc for (i) capital flight risk (i) devaluation (i), (ii), (iii), (iv) dim sum bonds (i) efforts to internationalise (i) end of peg (i) foreign investors and (i) fully convertible currency, a (i) growing importance of (i) IMF’s Special Drawing Rights (i) Qualified Institutional Investors (i) in relation to reserves (i) Renminbi trap (i), (ii), (iii), (iv) share of world reserves (i) significance of (i), (ii) Special Drawing Rights and (i), (ii) US dollar and (i), (ii), (iii), (iv), (v) repo markets (i), (ii) research and development (R&D) (i), (ii) Resources Department (i) retirement age (i) Rhodium Group (i) rimland (i) Robinson, James (i) robots (i) Rogoff, Kenneth (i) Roman Empire (i) Rotterdam (i) Rozelle, Scott (i) Rudd, Kevin (i) Rudong County (i) Rumsfeld, Donald (i) Rural Cooperative Medical Scheme (i) rural workers (i) Russia see also Soviet Union 19th century acquisitions (i), (ii) ageing population (i) BRI and (i) BRICS (i), (ii), (iii) C929s (i) China’s view of (i) early attempts at trade (i) fertility rates (i) Human Freedom Index (i) middle income trap and (i) Pacific sea ports (i) Polar Silk Road (i) Renminbi reserves (i) SCO member (i) Ryukyu Islands (i) Samsung (i) San Francisco (i) SASAC (i), (ii) Saudi Arabia (i) savings (i), (ii), (iii) Scarborough Shoal (i) Schmidt, Eric (i) Schumpeter, Joseph (i) SCIOs (i) Second Opium War (i) Second World War China and Japan (i), (ii) economic development since (i) Marshall Plan (i), (ii) US and Japan (i) Senkaku islands see Diaoyu islands separatism (i), (ii) Serbia (i) service sector (i), (ii) Seventh Fleet (US) (i) SEZs (special economic zones) (i), (ii), (iii), (iv) shadow banks (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix) n18 see also banks Shandong (i), (ii) Shanghai 1st Party Congress (i) arsenal (i) British influence in (i) central bank established (i) Deng’s Southern Tour (i) firms halt trading (i) income per head (i) interbank currency market (i) PISA scores (i) pollution (i) property price rises (i) stock market (i), (ii), (iii) Western skills used (i) Shanghai Composite Index (i), (ii) Shanghai Cooperation Organisation (SCO) (i), (ii), (iii) Shanghai Free Trade Zone (i), (ii), (iii) Shanghai–Hong Kong Bond Connect Scheme (i) Shanghai–Hong Kong Stock Connect Scheme (i), (ii) Shanghai World Financial Centre (i) Shenzhen first foreign company in (i) n3 (Intro.)


pages: 349 words: 98,868

Nervous States: Democracy and the Decline of Reason by William Davies

active measures, Affordable Care Act / Obamacare, Amazon Web Services, Anthropocene, bank run, banking crisis, basic income, Black Lives Matter, Brexit referendum, business cycle, Cambridge Analytica, Capital in the Twenty-First Century by Thomas Piketty, citizen journalism, Climategate, Climatic Research Unit, Colonization of Mars, continuation of politics by other means, creative destruction, credit crunch, data science, decarbonisation, deep learning, DeepMind, deindustrialization, digital divide, discovery of penicillin, Dominic Cummings, Donald Trump, drone strike, Elon Musk, failed state, fake news, Filter Bubble, first-past-the-post, Frank Gehry, gig economy, government statistician, housing crisis, income inequality, Isaac Newton, Jeff Bezos, Jeremy Corbyn, Johannes Kepler, Joseph Schumpeter, knowledge economy, loss aversion, low skilled workers, Mahatma Gandhi, Mark Zuckerberg, mass immigration, meta-analysis, Mont Pelerin Society, mutually assured destruction, Northern Rock, obamacare, Occupy movement, opioid epidemic / opioid crisis, Paris climate accords, pattern recognition, Peace of Westphalia, Peter Thiel, Philip Mirowski, planetary scale, post-industrial society, post-truth, quantitative easing, RAND corporation, Ray Kurzweil, Richard Florida, road to serfdom, Robert Mercer, Ronald Reagan, sentiment analysis, Silicon Valley, Silicon Valley billionaire, Silicon Valley startup, smart cities, Social Justice Warrior, statistical model, Steve Bannon, Steve Jobs, tacit knowledge, the scientific method, Turing machine, Uber for X, universal basic income, University of East Anglia, Valery Gerasimov, W. E. B. Du Bois, We are the 99%, WikiLeaks, women in the workforce, zero-sum game

Reactions against expertise may seem like an irrational rejection of truth itself, yet they are more often a rejection of the broader political edifice from which society is governed. It’s not just truth that is at stake but the manner in which feelings of security and trust are generated. The NAO put the cost of the bank rescue package at £850 billion, over half of Britain’s GDP at the time. This sum covered the purchase of shares in RBS, Lloyds, and Northern Rock banks, plus the provision of guarantees, insurance of assets, liquidity provisions, and loans to the financial sector. The government was able to do this thanks to a vast increase in public borrowing, which saw the UK’s national debt roughly double between 2007 and 2011. The rescue of the financial sector was dramatic and unprecedented, occurring through a series of rapid decisions made among a small group of senior politicians and advisers, often late at night or over weekends while the banks were closed.

., Martin Luther, 21, 224 knowledge economy, 84, 85, 88, 151–2, 217 known knowns, 132, 138 Koch, Charles and David, 154, 164, 174 Korean War (1950–53), 178 Kraepelin, Emil, 139 Kurzweil, Ray, 183–4 Labour Party, 5, 6, 65, 80, 81, 221 Lagarde, Christine, 64 Le Bon, Gustave, 8–12, 13, 15, 16, 20, 24, 25, 38 Le Pen, Marine, 27, 79, 87, 92, 101–2 Leadbeater, Charles, 84 Leeds, West Yorkshire, 85 Leicester, Leicestershire, 85 Leviathan (Hobbes), 34, 39, 45 liberal elites, 20, 58, 88, 89, 161 libertarianism, 15, 151, 154, 158, 164, 173, 196, 209, 226 Liberty Fund, 158 Libya, 143 lie-detection technology, 136 life expectancy, 62, 68–71, 72, 92, 100–101, 115, 224 Lindemann, Frederick Alexander, 1st Viscount Cherwell, 138 Lloyds Bank, 29 London, England bills of mortality, 68–71, 75, 79–80, 81, 89, 127 Blitz (1940–41), 119, 143, 180 EU referendum (2016), 85 Great Fire (1666), 67 Grenfell Tower fire (2017), 10 and gross domestic product (GDP), 77, 78 housing crisis, 84 insurance sector, 59 knowledge economy, 84 life expectancy, 100 newspapers, early, 48 Oxford Circus terror scare (2017), ix–x, xiii, 41 plagues, 67–71, 75, 79–80, 81, 89, 127 Unite for Europe march (2017), 23 London School of Economics (LSE), 160 loss aversion, 145 Louis XIV, King of France, 73, 127 Louisiana, United States, 151, 221 Ludwig von Mises Institute, 154 MacLean, Nancy, 158 Macron, Emmanuel, 33 mainstream media, 197 “Make America Great Again,” 76, 145 Manchester, England, 85 Mann, Geoff, 214 maps, 182 March For Our Lives (2018), 21 March for Science (2017), 23–5, 27, 28, 210, 211 marketing, 14, 139–41, 143, 148, 169 Mars, 175, 226 Marxism, 163 Massachusetts Institute of Technology (MIT), 179 Mayer, Jane, 158 McCarthy, Joseph, 137 McGill Pain Questionnaire, 104 McKibben, William “Bill,” 213 Megaface, 188–9 memes, 15, 194 Menger, Carl, 154 mental illness, 103, 107–17, 139 mercenaries, 126 Mercer, Robert, 174, 175 Mexico, 145 Million-Man March (1995), 4 mind-reading technology, 136 see also telepathy Mirowski, Philip, 158 von Mises, Ludwig, 154–63, 166, 172, 173 Missing Migrants Project, 225 mobilization, 5, 7, 126–31 and Corbyn, 81 and elections, 81, 124 and experts, 27–8 and Internet, 15 and Le Bon’s crowd psychology, 11, 12, 16, 20 and loss, 145 and Napoleonic Wars, xv, 127–30, 141, 144 and Occupy movement, 5 and populism, 16, 22, 60 and violence, opposition to, 21 Moniteur Universel, Le, 142 monopoly on violence, 42 Mont Pelerin Society, 163, 164 moral emotion, 21 morphine, 105 multiculturalism, 84 Murs, Oliver “Olly,” ix Musk, Elon, 175, 176, 178, 183, 226 Nanchang, Jiangxi, 13 Napoleonic Wars (1803–15), 126–30 chappe system, 129, 182 and conscription, 87, 126–7, 129 and disruption, 170–71, 173, 174, 175, 226 and great leader ideal, 146–8 and intelligence, 134 and mobilization, xv, 126–30, 141, 144 and nationalism, 87, 128, 129, 144, 183, 211 and propaganda, 142 Russia, invasion of (1812), 128, 133 Spain, invasion of (1808), 128 National Aeronautics and Space Administration (NASA), 23, 175 National Audit Office (NAO), 29–30 national citizenship, 71 National Defense Research Committee, 180 National Health Service (NHS), 30, 93 National Park Service, 4 National Security Agency (NSA), 152 national sovereignty, 34, 53 nationalism, 87, 141, 210–12 and conservatism, 144 and disempowerment, 118–19 and elites, 22–3, 60–61, 145 ethnic, 15 and health, 92, 211–12, 224 and imagined communities, 87 and inequality, 78 and loss, 145 and markets, 167 and promises, 221 and resentment, 145, 197, 198 and war, 7, 20–21, 118–19, 143–6, 210–11 nativism, 61 natural philosophy, 35–6 nature, 86 see also environment Nazi Germany (1933–45), 137, 138, 154 Netherlands, 48, 56, 129 Neurable, 176 neural networking, 216 Neuralink, 176 neurasthenia, 139 Neurath, Otto, 153–4, 157, 160 neurochemistry, 108, 111, 112 neuroimaging, 176–8, 181 Nevada, United States, 194 new atheism, 209 New Orleans, Louisiana, 151 New Right, 164 New York, United States and climate change, 205 and gross domestic product (GDP), 78 housing crisis, 84 JFK Airport terror scare (2016), x, xiii, 41 knowledge economy, 84 September 11 attacks (2001), 17, 18 New York Times, 3, 27, 85 newspapers, 48, 71 Newton, Isaac, 35 Nietzsche, Friedrich, 217 Nixon, Robert, 206 no-platforming, 22, 208 Nobel Prize, 158–9 non-combatants, 43, 143, 204 non-violence, 224 North Atlantic Treaty Organization (NATO), 123, 145, 214 North Carolina, United States, 84 Northern Ireland, 43, 85 Northern League, 61 Northern Rock, 29 Norwich, Norfolk, 85 nostalgia, xiv, 143, 145, 210, 223 “Not in my name,” 27 nuclear weapons, 132, 135, 137, 180, 183, 192, 196, 204 nudge techniques, 13 Obama, Barack, 3, 24, 76, 77, 79, 158, 172 Obamacare, 172 objectivity, xiv, 13, 75, 136, 223 and crowd-based politics, 5, 7, 24–5 and death, 94 and Descartes, 37 and experts, trust in, 28, 32, 33, 51, 53, 64, 86, 89 and Hayek, 163, 164, 170 and markets, 169, 170 and photography, 8 and Scientific Revolution, 48, 49 and statistics, 72, 74, 75, 82, 88 and telepathic communication, 179 and war, 58, 125, 134, 135, 136, 146 Occupy movement, 5, 10, 24, 61 Oedipus complex, 109 Office for National Statistics, 63, 133 Ohio, United States, 116 oil crisis (1973), 166 “On Computable Numbers” (Turing), 181 On War (Clausewitz), 130 Open Society and Its Enemies, The (Popper), 171 opiates, 105, 116, 172–3 opinion polling, 65, 80–81, 191 Orbán, Viktor, 87, 146 Organisation for Economic Co-operation and Development (OECD), 72 Oxford, Oxfordshire, 85 Oxford Circus terror scare (2017), ix–x, xiii, 41 Oxford University, 56, 151 OxyContin, 105, 116 pacifism, 8, 20, 44, 151 pain, 102–19, 172–3, 224 see also chronic pain painkillers, 104, 105, 116, 172–3 Palantir, 151, 152, 175, 190 parabiosis, 149 Paris climate accord (2015), 205, 207 Paris Commune (1871), 8 Parkland attack (2018), 21 Patriot Act (2001), 137 Paul, Ronald, 154 PayPal, 149 Peace of Westphalia (1648), 34, 53 peer reviewing, 48, 139, 195, 208 penicillin, 94 Pentagon, 130, 132, 135, 136, 214, 216 pesticides, 205 Petty, William, 55–9, 67, 73, 85, 167 pharmacology, 142 Pielke Jr., Roger, 24, 25 Piketty, Thomas, 74 Pinker, Stephen, 207 plagues, 56, 67–71, 75, 79–80, 81, 89, 95 pleasure principle, 70, 109, 110, 224 pneumonia, 37, 67 Podemos, 5, 202 Poland, 20, 34, 60 Polanyi, Michael, 163 political anatomy, 57 Political Arithmetick (Petty), 58, 59 political correctness, 20, 27, 145 Popper, Karl, 163, 171 populism xvii, 211–12, 214, 220, 225–6 and central banks, 33 and crowd-based politics, 12 and democracy, 202 and elites/experts, 26, 33, 50, 152, 197, 210, 215 and empathy, 118 and health, 99, 101–2, 224–5 and immediate action, 216 in Kansas (1880s), 220 and markets, 167 and private companies, 174 and promises, 221 and resentment, 145 and statistics, 90 and unemployment, 88 and war, 148, 212 Porter, Michael, 84 post-traumatic stress disorder (PTSD), 111–14, 117, 209 post-truth, 167, 224 Potsdam Conference (1945), 138 power vs. violence, 19, 219 predictive policing, 151 presidential election, US (2016), xiv and climate change, 214 and data, 190 and education, 85 and free trade, 79 and health, 92, 99 and immigration, 79, 145 and inequality, 76–7 and Internet, 190, 197, 199 “Make America Great Again,” 76, 145 and opinion polling, 65, 80 and promises, 221 and relative deprivation, 88 and Russia, 199 and statistics, 63 and Yellen, 33 prisoners of war, 43 promises, 25, 31, 39–42, 45–7, 51, 52, 217–18, 221–2 Propaganda (Bernays), 14–15 propaganda, 8, 14–16, 83, 124–5, 141, 142, 143 property rights, 158, 167 Protestantism, 34, 35, 45, 215 Prussia (1525–1947), 8, 127–30, 133–4, 135, 142 psychiatry, 107, 139 psychoanalysis, 107, 139 Psychology of Crowds, The (Le Bon), 9–12, 13, 15, 16, 20, 24, 25 psychosomatic, 103 public-spending cuts, 100–101 punishment, 90, 92–3, 94, 95, 108 Purdue, 105 Putin, Vladimir, 145, 183 al-Qaeda, 136 quality of life, 74, 104 quantitative easing, 31–2, 222 quants, 190 radical statistics, 74 RAND Corporation, 183 RBS, 29 Reagan, Ronald, 15, 77, 154, 160, 163, 166 real-time knowledge, xvi, 112, 131, 134, 153, 154, 165–70 Reason Foundation, 158 Red Vienna, 154, 155 Rees-Mogg, Jacob, 33, 61 refugee crisis (2015–), 60, 225 relative deprivation, 88 representative democracy, 7, 12, 14–15, 25–8, 61, 202 Republican Party, 77, 79, 85, 154, 160, 163, 166, 172 research and development (R&D), 133 Research Triangle, North Carolina, 84 resentment, 5, 226 of elites/experts, 32, 52, 61, 86, 88–9, 161, 186, 201 and nationalism/populism, 5, 144–6, 148, 197, 198 and pain, 94 Ridley, Matt, 209 right to remain silent, 44 Road to Serfdom, The (Hayek), 160, 166 Robinson, Tommy, ix Roosevelt, Franklin Delano, 52 Royal Exchange, 67 Royal Society, 48–52, 56, 68, 86, 133, 137, 186, 208, 218 Rumsfeld, Donald, 132 Russian Empire (1721–1917), 128, 133 Russian Federation (1991–) and artificial intelligence, 183 Gerasimov Doctrine, 43, 123, 125, 126 and information war, 196 life expectancy, 100, 115 and national humiliation, 145 Skripal poisoning (2018), 43 and social media, 15, 18, 199 troll farms, 199 Russian Revolution (1917), 155 Russian SFSR (1917–91), 132, 133, 135–8, 155, 177, 180, 182–3 safe spaces, 22, 208 Sands, Robert “Bobby,” 43 Saxony, 90 scarlet fever, 67 Scarry, Elaine, 102–3 scenting, 135, 180 Schneier, Bruce, 185 Schumpeter, Joseph, 156–7, 162 Scientific Revolution, 48–52, 62, 66, 95, 204, 207, 218 scientist, coining of term, 133 SCL, 175 Scotland, 64, 85, 172 search engines, xvi Second World War, see World War II securitization of loans, 218 seismology, 135 self-employment, 82 self-esteem, 88–90, 175, 212 self-harm, 44, 114–15, 117, 146, 225 self-help, 107 self-interest, 26, 41, 44, 61, 114, 141, 146 Semi-Automatic Ground Environment (SAGE), 180, 182, 200 sentiment analysis, xiii, 12–13, 140, 188 September 11 attacks (2001), 17, 18 shell shock, 109–10 Shrecker, Ted, 226 Silicon Fen, Cambridgeshire, 84 Silicon Valley, California, xvi, 219 and data, 55, 151, 185–93, 199–201 and disruption, 149–51, 175, 226 and entrepreneurship, 149–51 and fascism, 203 and immortality, 149, 183–4, 224, 226 and monopolies, 174, 220 and singularity, 183–4 and telepathy, 176–8, 181, 185, 186, 221 and weaponization, 18, 219 singularity, 184 Siri, 187 Skripal poisoning (2018), 43 slavery, 59, 224 smallpox, 67 smart cities, 190, 199 smartphone addiction, 112, 186–7 snowflakes, 22, 113 social indicators, 74 social justice warriors (SJWs), 131 social media and crowd psychology, 6 emotional artificial intelligence, 12–13, 140–41 and engagement, 7 filter bubbles, 66 and propaganda, 15, 18, 81, 124 and PTSD, 113 and sentiment analysis, 12 trolls, 18, 20–22, 27, 40, 123, 146, 148, 194–8, 199, 209 weaponization of, 18, 19, 22, 194–5 socialism, 8, 20, 154–6, 158, 160 calculation debate, 154–6, 158, 160 Socialism (Mises), 160 Society for Freedom in Science, 163 South Africa, 103 sovereignty, 34, 53 Soviet Russia (1917–91), 132, 133, 135–8, 177, 180, 182–3 Spain, 5, 34, 84, 128, 202 speed of knowledge, xvi, 112, 124, 131, 134, 136, 153, 154, 165–70 Spicer, Sean, 3, 5 spy planes, 136, 152 Stalin, Joseph, 138 Stanford University, 179 statactivism, 74 statistics, 62–91, 161, 186 status, 88–90 Stoermer, Eugene, 206 strong man leaders, 16 suicide, 100, 101, 115 suicide bombing, 44, 146 superbugs, 205 surveillance, 185–93, 219 Sweden, 34 Switzerland, 164 Sydenham, Thomas, 96 Syriza, 5 tacit knowledge, 162 talking cure, 107 taxation, 158 Tea Party, 32, 50, 61, 221 technocracy, 53–8, 59, 60, 61, 78, 87, 89, 90, 211 teenage girls, 113, 114 telepathy, 39, 176–9, 181, 185, 186 terrorism, 17–18, 151, 185 Charlottesville attack (2017), 20 emergency powers, 42 JFK Airport terror scare (2016), x, xiii, 41 Oxford Circus terror scare (2017), ix–x, xiii, 41 September 11 attacks (2001), 17, 18 suicide bombing, 44, 146 vehicle-ramming attacks, 17 war on terror, 131, 136, 196 Thames Valley, England, 85 Thatcher, Margaret, 154, 160, 163, 166 Thiel, Peter, 26, 149–51, 153, 156, 174, 190 Thirty Years War (1618–48), 34, 45, 53, 126 Tokyo, Japan, x torture, 92–3 total wars, 129, 142–3 Treaty of Westphalia (1648), 34, 53 trends, xvi, 168 trigger warnings, 22, 113 trolls, 18, 20–22, 27, 40, 123, 146, 148, 194–8, 199, 209 Trump, Donald, xiv and Bannon, 21, 60–61 and climate change, 207 and education, 85 election campaign (2016), see under presidential election, US and free trade, 79 and health, 92, 99 and immigration, 145 inauguration (2017), 3–5, 6, 9, 10 and inequality, 76–7 “Make America Great Again,” 76, 145 and March for Science (2017), 23, 24, 210 and media, 27 and opinion polling, 65, 80 and Paris climate accord, 207 and promises, 221 and relative deprivation, 88 and statistics, 63 and Yellen, 33 Tsipras, Alexis, 5 Turing, Alan, 181, 183 Twitter and Corbyn’s rallies, 6 and JFK Airport terror scare (2016), x and Oxford Circus terror scare (2017), ix–x and Russia, 18 and sentiment analysis, 188 and trends, xvi and trolls, 194, 195 Uber, 49, 185, 186, 187, 188, 191, 192 UK Independence Party, 65, 92, 202 underemployment, 82 unemployment, 61, 62, 72, 78, 81–3, 87, 88, 203 United Kingdom austerity, 100 Bank of England, 32, 33, 64 Blitz (1940–41), 119, 143, 180 Brexit (2016–), see under Brexit Cameron government (2010–16), 33, 73, 100 Center for Policy Studies, 164 Civil Service, 33 climate-gate (2009), 195 Corbyn’s rallies, 5, 6 Dunkirk evacuation (1940), 119 education, 85 financial crisis (2007–9), 29–32, 100 first past the post, 13 general election (2015), 80, 81 general election (2017), 6, 65, 80, 81, 221 Grenfell Tower fire (2017), 10 gross domestic product (GDP), 77, 79 immigration, 63, 65 Irish hunger strike (1981), 43 life expectancy, 100 National Audit Office (NAO), 29 National Health Service (NHS), 30, 93 Office for National Statistics, 63, 133 and opiates, 105 Oxford Circus terror scare (2017), ix–x, xiii, 41 and pain, 102, 105 Palantir, 151 Potsdam Conference (1945), 138 quantitative easing, 31–2 Royal Society, 138 Scottish independence referendum (2014), 64 Skripal poisoning (2018), 43 Society for Freedom in Science, 163 Thatcher government (1979–90), 154, 160, 163, 166 and torture, 92 Treasury, 61, 64 unemployment, 83 Unite for Europe march (2017), 23 World War II (1939–45), 114, 119, 138, 143, 180 see also England United Nations, 72, 222 United States Bayh–Dole Act (1980), 152 Black Lives Matter, 10, 225 BP oil spill (2010), 89 Bush Jr. administration (2001–9), 77, 136 Bush Sr administration (1989–93), 77 Bureau of Labor, 74 Central Intelligence Agency (CIA), 3, 136, 151, 199 Charlottesville attack (2017), 20 Civil War (1861–5), 105, 142 and climate change, 207, 214 Clinton administration (1993–2001), 77 Cold War, see Cold War Defense Advanced Research Projects Agency (DARPA), 176, 178 Defense Intelligence Agency, 177 drug abuse, 43, 100, 105, 115–16, 131, 172–3 education, 85 Federal Bureau of Investigation (FBI), 137 Federal Reserve, 33 Fifth Amendment (1789), 44 financial crisis (2007–9), 31–2, 82, 158 first past the post, 13 Government Accountability Office, 29 gross domestic product (GDP), 75–7, 82 health, 92, 99–100, 101, 103, 105, 107, 115–16, 158, 172–3 Heritage Foundation, 164, 214 Iraq War (2003–11), 74, 132 JFK Airport terror scare (2016), x, xiii, 41 Kansas populists (1880s), 220 libertarianism, 15, 151, 154, 158, 164, 173 life expectancy, 100, 101 March For Our Lives (2018), 21 March for Science (2017), 23–5, 27, 28, 210 McCarthyism (1947–56), 137 Million-Man March (1995), 4 National Aeronautics and Space Administration (NASA), 23, 175 National Defense Research Committee, 180 National Park Service, 4 National Security Agency (NSA), 152 Obama administration (2009–17), 3, 24, 76, 77, 79, 158 Occupy Wall Street (2011), 5, 10, 61 and opiates, 105, 172–3 and pain, 103, 105, 107, 172–3 Palantir, 151, 152, 175, 190 Paris climate accord (2015), 205, 207 Parkland attack (2018), 21 Patriot Act (2001), 137 Pentagon, 130, 132, 135, 136, 214, 216 presidential election (2016), see under presidential election, US psychiatry, 107, 111 quantitative easing, 31–2 Reagan administration (1981–9), 15, 77, 154, 160, 163, 166 Rumsfeld’s “unknown unknowns” speech (2002), 132 Semi-Automatic Ground Environment (SAGE), 180, 182, 200 September 11 attacks (2001), 17, 18 Tea Party, 32, 50, 61, 221 and torture, 93 Trump administration (2017–), see under Trump, Donald unemployment, 83 Vietnam War (1955–75), 111, 130, 136, 138, 143, 205 World War I (1914–18), 137 World War II (1939–45), 137, 180 universal basic income, 221 universities, 151–2, 164, 169–70 University of Cambridge, 84, 151 University of Chicago, 160 University of East Anglia, 195 University of Oxford, 56, 151 University of Vienna, 160 University of Washington, 188 unknown knowns, 132, 133, 136, 138, 141, 192, 212 unknown unknowns, 132, 133, 138 “Use of Knowledge in Society, The” (Hayek), 161 V2 flying bomb, 137 vaccines, 23, 95 de Vauban, Sébastien Le Prestre, Marquis de Vauban, 73 vehicle-ramming attacks, 17 Vesalius, Andreas, 96 Vienna, Austria, 153–5, 159 Vietnam War (1955–75), 111, 130, 136, 138, 143, 205 violence vs. power, 19, 219 viral marketing, 12 virtual reality, 183 virtue signaling, 194 voice recognition, 187 Vote Leave, 50, 93 Wainright, Joel, 214 Wales, 77, 90 Wall Street, New York, 33, 190 War College, Berlin, 128 “War Economy” (Neurath), 153–4 war on drugs, 43, 131 war on terror, 131, 136, 196 Watts, Jay, 115 weaponization, 18–20, 22, 26, 75, 118, 123, 194, 219, 223 weapons of mass destruction, 132 wearable technology, 173 weather control, 204 “What Is An Emotion?”


pages: 117 words: 31,221

Fred Schwed's Where Are the Customers' Yachts?: A Modern-Day Interpretation of an Investment Classic by Leo Gough

Albert Einstein, banking crisis, Bernie Madoff, book value, corporate governance, discounted cash flows, disinformation, diversification, fixed income, index fund, John Bogle, junk bonds, Long Term Capital Management, Michael Milken, Northern Rock, passive investing, Ralph Waldo Emerson, random walk, short selling, South Sea Bubble, The Nature of the Firm, the rule of 72, The Wealth of Nations by Adam Smith, transaction costs, young professional

~ PROSECUTOR IN THE BARLOW CLOWES CASE Although the better regulated countries, of which Britain is one (although you might not think so), provide various compensation schemes to protect investors, there are always exceptions (things that aren’t covered by the scheme) and it often takes years before you get all or part of your money back. From January 2010, the FSA (the UK’s regulator) has covered investments of up to £50,000 with the scheme. But having to wait and worry is no fun, which is why there was a run on the Northern Rock bank in 2007; people didn’t have much confidence in the compensation scheme, and rightly so! What can we do to avoid these kinds of problems? There is no cast iron method for avoiding loss, but here are a few things you can do to minimise the risks: First, don’t put all your savings into one scheme.


pages: 358 words: 106,729

Fault Lines: How Hidden Fractures Still Threaten the World Economy by Raghuram Rajan

"World Economic Forum" Davos, accounting loophole / creative accounting, Alan Greenspan, Andrei Shleifer, Asian financial crisis, asset-backed security, assortative mating, bank run, barriers to entry, Bear Stearns, behavioural economics, Bernie Madoff, Bretton Woods, business climate, business cycle, carbon tax, Clayton Christensen, clean water, collapse of Lehman Brothers, collateralized debt obligation, colonial rule, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, currency risk, diversification, Edward Glaeser, financial innovation, fixed income, floating exchange rates, full employment, Glass-Steagall Act, global supply chain, Goldman Sachs: Vampire Squid, Greenspan put, illegal immigration, implied volatility, income inequality, index fund, interest rate swap, Joseph Schumpeter, Kaizen: continuous improvement, Kenneth Rogoff, knowledge worker, labor-force participation, Long Term Capital Management, longitudinal study, low interest rates, machine readable, market bubble, Martin Wolf, medical malpractice, microcredit, money market fund, moral hazard, new economy, Northern Rock, offshore financial centre, open economy, Phillips curve, price stability, profit motive, proprietary trading, Real Time Gross Settlement, Richard Florida, Richard Thaler, risk tolerance, Robert Shiller, Ronald Reagan, Savings and loan crisis, school vouchers, seminal paper, short selling, sovereign wealth fund, tail risk, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile, Vanguard fund, women in the workforce, World Values Survey

One possibility is to retain deposit insurance for small and medium-sized banks in return for their paying a fair insurance premium, but to reduce it progressively for larger banks until it is eliminated. Clearly, if banks are seen as too big to fail, eliminating deposit insurance is moot, as the bank will be bailed out anyway. The United Kingdom deposit insurance system, which was partial, did not prevent Northern Rock from getting into trouble or the government from coming to the rescue. The point of eliminating deposit insurance, however, is to make depositors think before they make a bank too big. Unlike depositors in the United Kingdom (where all bank deposits were partially insured, and therefore depositing in a large bank was significantly safer), depositors in large banks under my proposal would have the choice between being fully insured in a small bank and largely uninsured in a large bank.

., See also JP Morgan Morrice, Brad mortgage-backed securities: credit risk of Fannie Mae and Freddie Mac issues federal purchases of held by banks investors in ratings of risks of, subprime mortgages in tail risks of tranches of mortgage brokers mortgage insurance mortgages: defaults on deregulation of thrift industry FHA foreclosures of historical evolution of interest rates on predatory lending traditional lending process for, See also subprime mortgage market motivations multilateral financial institutions: influence of lending by reforms of See also International Monetary Fund; World Bank mutual fund management companies national home ownership strategy, See also home ownership nationalism Nehru, Jawaharlal New Century Financial New Deal New York City No Child Left Behind Act of noncognitive skills Northern Rock Obama, Barack Obama administration Office of Thrift Supervision O’Neal, Stanley opportunities organizational capital ownership society, See also home ownership Park Chung Hee Paulson, Henry J. Paulson, John PBOC. See People’s Bank of China Pension Benefit Guarantee Corporation pensions People’s Bank of China (PBOC) Peugeot Phillips curve physicians: malpractice suits and salaries of See also health care Pinto, Edward A Plan of the English Commerce (Defoe) Plaza Accord (1945) political fault lines politics: economics and of immigration pressures for easy credit, pressures for fiscal stimulus Poole, Keith populist credit expansion Populist movement poverty: cycle of in developing countries family instability and opportunities for escape from Prasad, Eswar predatory lending prices: food functions of, See also asset prices; housing market; inflation Prince, Charles professional credentials proprietary trading protectionism racism rating agencies Rato, Rodrigo de recession of: Federal Reserve responses to fiscal stimulus response to jobless recovery from recessions: of of cleansing role of jobless recoveries from Keynesian policies and overreactions to political pressure for economic stimulus during redundancy, in financial systems reforms: in access to credit in Brazil in China in deposit insurance educational fault lines addressed by of Federal Reserve financial in global economic governance goals of guiding principles of of health insurance in housing finance of incentives in India of monetary policy of multilateral financial institutions, need for reducing government intervention reducing search for tail risk regulatory tort of unemployment benefits regulation: antitrust cycle-proof enforcement of failures of history of laissez-faire ideology and in New Deal reforms of See also deregulation regulation, banking: capital requirements central bank responsibilities for cognitive capture and Community Reinvestment Act effectiveness of enforcement of history of of new products reforms of resolution of bank failures risk monitoring and transparency of relationship capitalism.


pages: 350 words: 109,220

In FED We Trust: Ben Bernanke's War on the Great Panic by David Wessel

Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Bear Stearns, Berlin Wall, Black Swan, break the buck, business cycle, central bank independence, credit crunch, Credit Default Swap, crony capitalism, debt deflation, Fall of the Berlin Wall, financial engineering, financial innovation, financial intermediation, fixed income, full employment, George Akerlof, Glass-Steagall Act, Greenspan put, housing crisis, inflation targeting, information asymmetry, junk bonds, London Interbank Offered Rate, Long Term Capital Management, low interest rates, market bubble, Michael Milken, money market fund, moral hazard, mortgage debt, new economy, Northern Rock, price stability, quantitative easing, Robert Shiller, Ronald Reagan, Saturday Night Live, Savings and loan crisis, savings glut, Socratic dialogue, too big to fail

Britain had witnessed its first bank run in a century, humiliating Mervyn King at the Bank of England. King had chided the Fed and ECB for rushing to pump money into credit markets. Doing so “encourages herd behavior and increases the intensity of future crises,” he charged. Then in response to a run on a bank misleadingly named Northern Rock — which employed a Countrywide-like strategy of borrowing in short-term markets to finance mortgages that it planned to sell to securities markets — King had been forced to do in the markets what other central banks had. In Washington, the ghost of Greenspan loomed as he released his memoir with an appearance on 60 Minutes, an excerpt in Newsweek, and headlines nearly everywhere days before the FOMC meeting.

The Dow Jones Industrial Average had its best day since 2003, rising 2.5 percent. In Fedspeak, the aggressive half-point move amounted to “taking out insurance,” preemptively cutting interest rates to reduce the risk of a nightmare scenario becoming reality. Especially in the wake of the run on Northern Rock, the Fed needed — as Geithner often put it — to get the ratio of drama to impact right. Too much drama, and the Fed conveyed unsettling panic. Too little action, and the Fed looked wimpy. The September rate cut was one instance in the Great Panic where the Fed appeared to hit the ratio exactly right.


pages: 363 words: 107,817

Modernising Money: Why Our Monetary System Is Broken and How It Can Be Fixed by Andrew Jackson (economist), Ben Dyson (economist)

Alan Greenspan, bank run, banking crisis, banks create money, Basel III, Bretton Woods, business cycle, call centre, capital controls, cashless society, central bank independence, credit crunch, David Graeber, debt deflation, double entry bookkeeping, eurozone crisis, financial exclusion, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, Fractional reserve banking, full employment, Greenspan put, Hyman Minsky, inflation targeting, informal economy, information asymmetry, intangible asset, land bank, land reform, London Interbank Offered Rate, low interest rates, market bubble, market clearing, Martin Wolf, means of production, Money creation, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, negative equity, Northern Rock, Post-Keynesian economics, price stability, profit motive, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, risk-adjusted returns, Savings and loan crisis, seigniorage, shareholder value, short selling, South Sea Bubble, technological determinism, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, unorthodox policies

In practice, wholesale funders are typically able to withdraw their own funds from a bank before members of the public, and therefore tend to enjoy 'seniority' in terms of repayment as a result of their better access to information and the slower speed of normal depositors (due to deposit insurance). As Huang and Ratnovski (2010) explain in an IMF working paper: “This was the main reason why in almost all recent bank failures (e.g., Continental Illinois, Northern Rock, IndyMac) short-term wholesale financiers were able to exit ahead of retail depositors without incurring significant losses. Interestingly, the well-publicized retail run on Northern Rock took place only after the bank had nearly exhausted its liquid assets to pay off the exit of short-term wholesale funds.” Box 2.E - Repos (Sale and Repurchase Agreements) The standard method by which the Bank of England creates reserves is through what is known as a sale and repurchase agreement (a 'repo').


pages: 385 words: 111,807

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

"there is no alternative" (TINA), Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, antiwork, AOL-Time Warner, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Bear Stearns, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, Charles Babbage, collateralized debt obligation, colonial rule, Corn Laws, corporate governance, corporate raider, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, discovery of the americas, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, falling living standards, financial deregulation, financial engineering, financial innovation, flying shuttle, Ford Model T, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Akerlof, Gini coefficient, Glass-Steagall Act, global value chain, Goldman Sachs: Vampire Squid, Gordon Gekko, Great Leap Forward, greed is good, Gunnar Myrdal, Haber-Bosch Process, happiness index / gross national happiness, high net worth, income inequality, income per capita, information asymmetry, intangible asset, interchangeable parts, interest rate swap, inventory management, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, laissez-faire capitalism, land bank, land reform, liberation theology, manufacturing employment, Mark Zuckerberg, market clearing, market fundamentalism, Martin Wolf, means of production, Mexican peso crisis / tequila crisis, Neal Stephenson, Nelson Mandela, Northern Rock, obamacare, offshore financial centre, oil shock, open borders, Pareto efficiency, Paul Samuelson, post-industrial society, precariat, principal–agent problem, profit maximization, profit motive, proprietary trading, purchasing power parity, quantitative easing, road to serfdom, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, scientific management, Scramble for Africa, search costs, shareholder value, Silicon Valley, Simon Kuznets, sovereign wealth fund, spinning jenny, structural adjustment programs, The Great Moderation, The Market for Lemons, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Vilfredo Pareto, Washington Consensus, working-age population, World Values Survey

Even though the belief may be totally unfounded – as was the case with the Fidelity Fiduciary Bank – it will become a ‘self-fulfilling prophecy’ if enough account holders think and act in this way. This situation is known as a bank run. We have seen examples of it in the wake of the 2008 global financial crisis. Customers queued up in front of Northern Rock bank branches in the UK, while online depositors in the UK and the Netherlands clogged up the website of Icesave, the internet arm of the collapsing Icelandic bank Landsbanki. Banking is a confidence trick (of a sort), but a socially useful one (if managed well) So, is banking a confidence trick?

If the bank has a solvency crisis, which means that the total value of its liabilities exceeds that of its assets, no amount of central bank lending will fix the problem. Either the bank will go bankrupt or require a government bail-out, which happens when the government injects new capital into the troubled bank (as happened with Northern Rock and Icesave). Government bail-out of banks has become highly visible after the 2008 crisis, but it is a practice that has been going on throughout the history of capitalism. Shoring up confidence further: deposit insurance and prudential regulation A country can also shore up confidence in its banks through deposit insurance, as well as through central banking.


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

"Friedman doctrine" OR "shareholder theory", 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, behavioural economics, Ben Bernanke: helicopter money, Big bang: deregulation of the City of London, book value, 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, fake news, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, forward guidance, Fractional reserve banking, full employment, Gini coefficient, Glass-Steagall Act, Goodhart's law, Growth in a Time of Debt, guns versus butter model, 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, Kondratiev cycle, labour market flexibility, labour mobility, land bank, law of one price, liberal capitalism, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, long and variable lags, low interest rates, market clearing, market friction, Martin Wolf, means of production, Meghnad Desai, 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, nudge theory, 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, proprietary trading, public intellectual, 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, technological determinism, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, tontine, too big to fail, trade liberalization, value at risk, Washington Consensus, yield curve, zero-sum game

is much less serious than a solvency crisis; temporary funds from the central bank can alleviate a liquidity crisis, but are of no use if the bank is insolvent. Still, the two are somewhat related. In the period 2007–8, confusion over who was solvent and who was not meant that banks stopped lending to each other, drying up their principal source of liquidity; this led to the bank run on the UK’s Northern Rock in 2007. Similarly, illiquidity can force a bank into insolvency if its financing costs exceed the interest it receives on its assets, or if it has to ‘fire-sell’ its assets in order to pay its debts on time. Leverage A bank’s leverage is the ratio of its debt to its equity. It can be expressed either as a ratio of assets to capital (say, 25:1) or as the percentage of assets that are backed by capital (4 per cent).

Such separation would reduce ‘moral hazard’: risky lending would not be publicly insured against loss. The problem is that the core activity of retail banks has become the mortgage business. It was the retail not the ‘shadow banking’ sector which initiated the banking crisis of 2007: the British bank Northern Rock, which had to be rescued by the government and nationalized early in 2008, provided mortgages for a quarter of the population. Securitization made this supposedly safe business unexpectedly risky. Functional separation on its own will do little to check the credit cycle generated by mortgage-lending or limit taxpayer liability for its excesses. 362 r e i n v e n t i ng p ol i t ic a l e c onom y Compelling banks to hold mortgages for a period of years, plus a big boost to social house-building, would cool this particular inflammation.

., 171, 208 Napoleonic wars, 43, 45–8, 80, 81, 84 national debt and 2007–8 crash, 76, 217–18, 219–20, 223–4, 224, 225–36, 237 British experience (1692–2012), 77 British long-term securities, 43 ‘burden on future generations’ fallacy, 236 bust at end of Lawson boom, 193 in eighteenth-century Britain, 80–81 four big spikes (since 1815), 84 and ‘Geddes Axe’ (1920s), 108 Alexander Hamilton on, 92 international bond markets, 90–92, 235 in Keynesian era, 156, 159–60, 161 Merkel’s ‘Swabian housewife’, 236 and modern tax systems, 32 monetary financing of deficits, 246–7, 285 during Napoleonic wars, 45–8 nineteenth-century money lenders, 90–91, 332 ‘off-budget’ accounting, 108–9 and PFI, 222–3 post-crash deficit, 226–33, 229, 237–9, 328, 352 public sector net borrowing (PSNB), 185, 227–8, 237, 238 Reagan’s budget deficits, 186, 190–91 recession of early 1980s, 186–7, 191 sinking fund, 83, 84, 85, 106, 108, 112, 114, 355 Sinking Fund Act (1875), 114 Smith and Ricardo’s view, 81–2, 83–4, 109, 110 ‘structural’ or ‘cyclically-adjusted’ deficit, 237–41, 238 US in 1950s/60s, 159–60, 161 Victorian fiscal constitution, 85–8, 86 and warfare, 83 483 i n de x nationalism, 17, 92, 95, 351, 371–3, 375 nationalization, 15–16, 142, 158 during 2008 crisis, 217 Labour’s renationalization proposals, 356 naval power, 78, 79–80, 87 Navigation Acts, British, 78 neo-classical economics tradition, xviii and 2008 collapse, 310–16, 328 comparisons with Keynesian view, 204, 204 and deregulation of banking, 310–11 distribution in perfect markets of, 292 formula for multiplier, 134–6 and Friedman, 177–83 and growth in inequality, 245–6 in Hutchison’s continua, 349 and Keynes, 122–3, 128 Keynesian synthesis, 172, 173–4, 201–2 microeconomics of Walras, 10, 173, 181, 385 model of rationality, 120 ‘natural’ rate of unemployment, 2, 163, 195, 197, 208, 232–3 and New Consensus, 199 and ‘optimal’ rate of investment, 368 pivotal role of banks ignored, 311 Solow growth model, 293 theoretical abolition of Keynesianism, 201 wage-adjustment story, 107, 108, 115, 121–2, 123, 128, 130, 132, 172 see also classical economics tradition; New Classical economics neo-liberal ideology ‘anti-state’ deception of, 93 capture of politics by, 6, 16–17, 292 and Eurozone constitution, 274 and Eurozone design flaw, 376, 377 implosion of growth model, 305 need for jettisoning of, 351, 367 term coined by Rustow (1938), 175 totalitarianism as original target, 175–6 as unchallenged since Cold War, 374 Netherlands, 78 New Classical economics and 2008 collapse, 2–3, 5 DSGE modelling, 196, 211–12 and erroneous austerity arguments, 232–4 and growth in inequality, 4 inflation targeting, 2 and microeconomics of Walras, 10 ‘natural’ rate of unemployment, 2, 195, 197, 208, 232–3 New Classical economics – (c0nt.) and neo-liberal capture of politics, 6, 16–17 and policies of austerity, 3 pre-crash models/mindset of 2000s, 212–13, 221, 229–35, 310–16 REH as analytic core of, 194–7, 385–6 synthesis with New Keynesians, 195–7, 199–201, 202 and unimpeded financial markets, 5, 6–7 unrealism of assumptions, 200, 310–16, 321–2 victory of in 1970s, 16–17 New Consensus, 9, 196–8, 202 based on supply not demand, 200 Brown constitution, 221–3 main features of, 199–201 primacy of monetary policy, 200–201, 212 ‘Washington consensus’, 198 484 i n de x New Keynesianism, 195–7, 199, 200, 201, 202, 212, 358 Brown constitution, 221–3, 227 and inflation targeting, 196, 251 ‘new stagnation’ theorists, 151 New Zealand, 188 Newton, Isaac, 42, 43, 47–8 Nielsen, Robert, 389 Niemeyer, Sir Otto, 108 Nixon, Richard, 153, 162 Norman, George, 49 Norman, Montagu, 115 North, Douglass, 198–9 Northern Rock, 317, 319*, 362 Obama, Barack, 225, 241–2, 274 O’Brien, Denis, 78 Office for Budgetary Responsibility (OBR), 228, 229–30, 237 oil prices, 271, 272 oil price shock (1973–4), 166–7, 189, 190 price spike (1980–82), 189, 190 OPEC surpluses, 308, 332 Orbán, Viktor, 373 Osborne, George, 114, 227–8, 229, 231, 233 and cost of austerity, 243–4, 244, 245 crucial mistake in austerity policy, 229–30 ‘deficit’ obsession of, 237 and Reinhart-Rogoff work, 232 and ‘structural’ deficit, 237–9 output gaps, 144, 197, 212–13, 229, 235, 237, 258, 286 ‘over-consumption’ theory, Austrian, 296 Overstone, Lord, 49 Palley, Thomas, 302–3, 304, 305 Papandreou (Greek Prime Minister), 324 Pareto-efficiency, 290, 291 Paulson, Henry, 217 Peel, Robert, 47–8, 86 Péreire brothers, 91 Pettifor, Ann, 246, 309 Pettis, Michael, 339 Petty, William, 28 Phillips, A.


pages: 829 words: 187,394

The Price of Time: The Real Story of Interest by Edward Chancellor

"World Economic Forum" Davos, 3D printing, activist fund / activist shareholder / activist investor, Airbnb, Alan Greenspan, asset allocation, asset-backed security, assortative mating, autonomous vehicles, balance sheet recession, bank run, banking crisis, barriers to entry, Basel III, Bear Stearns, Ben Bernanke: helicopter money, Bernie Sanders, Big Tech, bitcoin, blockchain, bond market vigilante , bonus culture, book value, Bretton Woods, BRICs, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, cashless society, cloud computing, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, commodity super cycle, computer age, coronavirus, corporate governance, COVID-19, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cryptocurrency, currency peg, currency risk, David Graeber, debt deflation, deglobalization, delayed gratification, Deng Xiaoping, Detroit bankruptcy, distributed ledger, diversified portfolio, Dogecoin, Donald Trump, double entry bookkeeping, Elon Musk, equity risk premium, Ethereum, ethereum blockchain, eurozone crisis, everywhere but in the productivity statistics, Extinction Rebellion, fiat currency, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, Flash crash, forward guidance, full employment, gig economy, Gini coefficient, Glass-Steagall Act, global reserve currency, global supply chain, Goodhart's law, Great Leap Forward, green new deal, Greenspan put, high net worth, high-speed rail, housing crisis, Hyman Minsky, implied volatility, income inequality, income per capita, inflation targeting, initial coin offering, intangible asset, Internet of things, inventory management, invisible hand, Japanese asset price bubble, Jean Tirole, Jeff Bezos, joint-stock company, Joseph Schumpeter, junk bonds, Kenneth Rogoff, land bank, large denomination, Les Trente Glorieuses, liquidity trap, lockdown, Long Term Capital Management, low interest rates, Lyft, manufacturing employment, margin call, Mark Spitznagel, market bubble, market clearing, market fundamentalism, Martin Wolf, mega-rich, megaproject, meme stock, Michael Milken, Minsky moment, Modern Monetary Theory, Mohammed Bouazizi, Money creation, money market fund, moral hazard, mortgage debt, negative equity, new economy, Northern Rock, offshore financial centre, operational security, Panopticon Jeremy Bentham, Paul Samuelson, payday loans, peer-to-peer lending, pensions crisis, Peter Thiel, Philip Mirowski, plutocrats, Ponzi scheme, price mechanism, price stability, quantitative easing, railway mania, reality distortion field, regulatory arbitrage, rent-seeking, reserve currency, ride hailing / ride sharing, risk free rate, risk tolerance, risk/return, road to serfdom, Robert Gordon, Robinhood: mobile stock trading app, Satoshi Nakamoto, Satyajit Das, Savings and loan crisis, savings glut, Second Machine Age, secular stagnation, self-driving car, shareholder value, Silicon Valley, Silicon Valley startup, South Sea Bubble, Stanford marshmallow experiment, Steve Jobs, stock buybacks, subprime mortgage crisis, Suez canal 1869, tech billionaire, The Great Moderation, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thorstein Veblen, Tim Haywood, time value of money, too big to fail, total factor productivity, trickle-down economics, tulip mania, Tyler Cowen, Uber and Lyft, Uber for X, uber lyft, Walter Mischel, WeWork, When a measure becomes a target, yield curve

The influx of foreign capital funded a current account deficit equivalent to a quarter of Icelandic GDP. fn2 On 7 August 2007, the French bank BNP Paribas suspended redemptions on three funds that owned US mortgage securities. Cut off from the international capital markets, Northern Rock, a mid-sized British bank, closed its doors a few months later. Northern Rock’s was the first English bank run since Overend Gurney’s collapse of 1866. (See Viral Acharya and Sascha Steffen, ‘The Banking Crisis as a Giant Carry Trade Gone Wrong’, VoxEu, 23 May 2013.) fn3 Jeremy Grantham, ‘Time to Wake Up: Days of Abundant Resources and Falling Prices are Over Forever’, GMO Quarterly Letter, April 2011.

., 96–7 neo-Keynesian economists, 87* Nero, Roman Emperor, 20 New Haven Railroad, 159 New Paradigm (Goldilocks Economy), 111 new technologies: in 1920s, 89, 90, 96, 100; in 1930s USA, 142–3; in China, 276, 284; and ‘creative destruction’ idea, 140; and demand for capital, 125, 126, 127; digital, 127–8, 149–50, 151–2, 176, 177, 179, 204, 276, 283; digital currencies concept, 294, 312; Dotcom bubble, 111–12, 136–7, 176, 204; FAANGs, 176; low marginal costs in New Economy, 127–8; mass-production techniques, 142; meme stocks, 307; in robber baron era, 158–9; ‘Second Machine Age’ narratives, 128, 151–2; and stock market bubbles, 176; zombies slow adoption of, 153 New Zealand, 119 NFTs (‘nonfungible tokens’), 308 Nietzsche, Friedrich, 218 Nigeria, 262 Norman, Montagu, 82–3, 86, 87, 92, 93, 110, 232* North, Sir Dudley, 37, 40, 236† Northern Rock, 253† Norway, 239 Obama, Barack, 213 Office for Financial Research, US, 164 OGX Petróleo e Gás, 257 Olson, Mancur, 117 Ordos (Inner Mongolian city), 274 Organisation for Economic Co-operation and Development (OECD), 146 Origo, Iris, 21, 22 Orléans, Elisabeth Charlotte, Duchess of, 51, 56 Orlik, Tom, 89*, 270 OTX Classic Car Index, 210 Overend Gurney, collapse of (1866), 72–4, 75–6, 77 Overstone, Samuel Jones-Loyd, Lord, 63 Palmstruch, Johan, 244 Park Chung-hee, 267 Pearson, Michael, 161, 169 Pension Benefits Guarantee Corporation, US, 197 pensions: ballooning deficits in post-crisis decade, 195–8, 211; defined benefit plans, 195–7; defined contribution plans, 197; liability hedging by corporate funds, 198; and low-interest regimes, xxi, 190, 194, 195–8, 211, 237, 245; ‘retirement gaps’, 198; state pensions, 197; widespread use of dubious assumptions, 197 People’s Bank of China, 265, 266, 267–8, 270, 271, 272, 281, 282, 282*, 284–5, 289 Petrobras, 225, 257, 258 Pettis, Michael, 269, 278–9, 278*, 287* Petty, Sir William, 31, 40, 173 Peyrefitte, Alain, 265 Philippe II, Duke of Orléans, 48, 49–50, 51, 56, 57 Phillips, Chester, 96–7 Pigou, Arthur, 131 Piketty, Thomas, 205, 216–17 PIMCO, 113*, 217, 221, 235, 236 plague, bubonic, 33 ‘platform companies’, 161 Plato, 200* Plaza Accord (1985), 241*, 271 Poland, 253 Pole, Thornton & Company, 66 Ponzi, Carlo, 90 Ponzi schemes/structures, 166, 230*, 284–5, 284*, 312 Poole, William, 116, 246 populism, resurgence of, xxii, 299 Portnoy, Dave, 308–9 Portugal, 144–5, 245 Potter, William, 47 Powell, J.


pages: 474 words: 120,801

The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being in Charge Isn’t What It Used to Be by Moises Naim

"World Economic Forum" Davos, additive manufacturing, AOL-Time Warner, barriers to entry, Berlin Wall, bilateral investment treaty, business cycle, business process, business process outsourcing, call centre, citizen journalism, Clayton Christensen, clean water, collapse of Lehman Brothers, collective bargaining, colonial rule, conceptual framework, corporate governance, creative destruction, crony capitalism, deskilling, disinformation, disintermediation, disruptive innovation, don't be evil, Evgeny Morozov, failed state, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, illegal immigration, immigration reform, income inequality, income per capita, intangible asset, intermodal, invisible hand, job-hopping, Joseph Schumpeter, Julian Assange, Kickstarter, Lewis Mumford, liberation theology, Martin Wolf, mega-rich, megacity, military-industrial complex, Naomi Klein, Nate Silver, new economy, Northern Rock, Occupy movement, open borders, open economy, Peace of Westphalia, plutocrats, price mechanism, price stability, private military company, profit maximization, prosperity theology / prosperity gospel / gospel of success, radical decentralization, Ronald Coase, Ronald Reagan, seminal paper, Silicon Valley, Skype, Steve Jobs, The Nature of the Firm, Thomas Malthus, too big to fail, trade route, transaction costs, Twitter Arab Spring, vertical integration, Washington Consensus, WikiLeaks, World Values Survey, zero-sum game

Plc (which was Abbey National Plc until Spain’s Banco Santander bought it in 2004)—dominated the sector.2 But in the last few years, public concerns fueled by the financial crisis and scandals like the rigging of interest rates by Barclays and the complicity in illicit money transfers (HSBC, and Standard Chartered) have created a backlash, which in turn sparked a wave of new regulations that limits the autonomy these banks traditionally enjoyed. Moreover, new players such as British entrepreneur Richard Branson, whose Virgin Money bought up the ailing Northern Rock Plc and aims to become a consumer powerhouse, are indicative of new competitive pressures the traditional megaplayers in banking are facing. As one analyst told Bloomberg Markets in 2012, “There is more structural change going on in the U.K. market than at any time in recent history.”3 But the big challengers to the dominant big banks are the hedge funds and other new financial players that have access to resources as deep as those of the large banks yet can move faster and with far more flexibility.

., 164 Netherlands, 89, 90, 92, 142, 145, 151, 189 New Pact Power of God Church, 194 New Delhi, 6, 82 New Orleans, 28, 207 News Corporation, 7, 174, 212 Newspaper industry, 162, 212, 214 New York University, 91, 164 New Yorker, 4 New York Stock Exchange (NYSE), 188, 191 New York Times, 2, 29, 59, 149, 162 New Zealand, 32, 86, 96 Nicaragua, 155 Nicola, Stefan, 178 Niche marketing/business, 179, 198 Nieman Journalism Lab, 215 Nietzsche, Friedrich, 15–16 Nigeria, 9, 97, 103, 147, 148, 195, 196 Niknejad, Kelly Golnoush, 100 Nobel Prize, 36, 43, 80, 100 Nokia, 179 Nongovernmental organizations (NGOs), 4, 5, 104–105, 134, 145, 158, 240, 241 government organized, 153–154 Nordland, Rod, 117 Norilsk, 175 Norris, Pippa, 67, 68 North Africa, 57, 249, 251, 254 North Korea, 24, 122, 154 Northern League, 89 Northern Rock Plc, 161 Norton, Quinn, 181 Norway, 96 Novogratz, Jacqueline, 211 Nuclear issues, 13, 23, 24, 109, 131, 132, 133, 138, 144, 150, 158, 176, 226 Nunavut, 97 Nutrition, 10, 56 Nye, Joe, 125, 137 Obama, Barack, 48, 59, 132, 147, 214, 241–242 Obiko Pearson, Natalie 178 Obligation, 11, 26 Occupy Wall Street movement, 12, 242 Odom, William (General), 53 O’Donnell, Christine, 79 Office Depot, 175 Ohnsman, Alan, 166 Oil, 44, 50, 68, 145, 146, 147, 166, 175, 186, 216, 236.


pages: 453 words: 117,893

What Would the Great Economists Do?: How Twelve Brilliant Minds Would Solve Today's Biggest Problems by Linda Yueh

3D printing, additive manufacturing, Asian financial crisis, augmented reality, bank run, banking crisis, basic income, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bike sharing, bitcoin, Branko Milanovic, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, clean water, collective bargaining, computer age, Corn Laws, creative destruction, credit crunch, Credit Default Swap, cryptocurrency, currency peg, dark matter, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, endogenous growth, everywhere but in the productivity statistics, export processing zone, Fall of the Berlin Wall, fear of failure, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, fixed income, forward guidance, full employment, general purpose technology, Gini coefficient, Glass-Steagall Act, global supply chain, Great Leap Forward, Gunnar Myrdal, Hyman Minsky, income inequality, index card, indoor plumbing, industrial robot, information asymmetry, intangible asset, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, laissez-faire capitalism, land reform, lateral thinking, life extension, low interest rates, low-wage service sector, manufacturing employment, market bubble, means of production, middle-income trap, mittelstand, Money creation, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, Nelson Mandela, non-tariff barriers, Northern Rock, Occupy movement, oil shale / tar sands, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, Productivity paradox, purchasing power parity, quantitative easing, RAND corporation, rent control, rent-seeking, reserve currency, reshoring, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, school vouchers, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, special economic zone, Steve Jobs, technological determinism, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, total factor productivity, trade liberalization, universal basic income, unorthodox policies, Washington Consensus, We are the 99%, women in the workforce, working-age population

In the 2008 crisis, we were at the cusp of the first potential systemic banking failure since the 1929 crash that had led to the passage of Glass–Steagall in the first place. European banks were exposed to US sub-prime mortgages and some had also borrowed from US wholesale money markets. It meant that European bank lending became less reliant on deposits since they could access the same cheap money as the Americans. When Northern Rock failed in 2007, it was the first bank run in Britain in more than a century. The UK is closely linked to US financial markets and also faced the prospect of a systemic banking collapse during the 2008 crisis. So, did central banks act sufficiently to avoid repeating the mistakes of the 1929 crash?

joint-stock companies Jones, Homer Journal of Economic Perspectives Journal of Political Economy JPMorgan Juncker Plan Kahn, Richard Kant, Immanuel Keynes, John Maynard and the backlash against globalization and the Bloomsbury Group and Bretton Woods System and budget deficits counter-cyclical policies and crowding out on depression/recession The Economic Consequences of the Peace fiscal activism and Friedman The General Theory of Employment, Interest and Money and government spending on government’s role in economy and Hayek and investors Keynesian revolution legacy life and times of and Marshall and Niemeyer and paradox of thrift at Paris Peace Conference Prices and Production and public investment and Robbins Robinson and Keynes/Keynesian economics and Schumpeter and ‘socializing investment’ A Tract on Monetary Reform and the Treasury A Treatise on Money wealth Keynes, John Neville Khrushchev, Nikita Knight, Frank Kodak Korea North South Krugman, Paul Krupp Kuznets, Simon labour force growth labour productivity and work incentive laissez-faire landowners Lassalle, Ferdinand Latin America currency crisis (1981–82) see also specific countries League of Nations Lehman Brothers Lenin, Vladimir Leontief, Wassily Lewis, Arthur Lewis, Barbara (‘Bobby’) Life Extension Institute Linda for Congress BBC documentary London London School of Economics and Political Science London Stock Exchange Long Depression (1880s) Lopokova, Lydia Louis XIV LSE see London School of Economics and Political Science Lucas, Jr, Robert Ma, Jack (Ma Yun) Maastricht Treaty macroprudential policy see also central banks; financial stability Malaysia Malthus, Thomas Manchester Mandela, Nelson manufacturing additive (3D printing) automation in China and deindustrialization GDP contribution in UK German high-tech and industrialization see also industrialization Japan ‘manu-services’ ‘March of the Makers’ mass-manufactured goods and national statistics reshoring rolling back deindustrialization process and Smith trade patterns changed by advanced manufacturing US Mao Zedong Maoism ‘March of the Makers’ marginal utility analysis marginalism market forces/economy ‘Big Bang’ (1986) competition see competition and economic equilibrium see economic equilibrium emerging economies see emerging economies Hayek and the supremacy of market forces ‘invisible hand’ and laissez-faire and Marx 4 self-righting markets supply and demand see supply and demand Marshall, Alfred on approach to economics and the backlash against globalization and the Cambridge School and decentralization Economics of Industry and education’s role in reducing inequality and inequality and Keynes and laissez-faire legacy life and times of marginal utility analysis and Marx and poverty Principles of Economics and utility theory Marshall, Mary, née Paley Marx, Heinrich Marx, Henriette, née Pressburg Marx, Jenny, née von Westphalen Marx, Karl and agriculture and the backlash against globalization Capital and capitalism and China and class Communist Manifesto (with Engels) communist theories A Contribution to the Critique of Political Economy doctoral thesis The Eighteenth Brumaire of Louis Bonaparte and Engels journalism life and times of and Marshall and rate of profit and Ricardo and Russia on service sector workers surplus value theory and the Young Hegelians Marx, Laura Marx, Louise Marxism and the Austrian School and unemployment see also Marx, Karl Mason, Edward mathematical economics Mauritius May, Theresa Meade, James median income Menger, Carl mercantilist policies see also Corn Laws Merkel, Angela Mexico middle class China and economic growth and economic inequality and European revolutionaries income and industrialization and Keynes and Heinrich Marx as proportion of world population and Schumpeter social resentment US Mill, James Mill, John Stuart On Liberty Principles of Political Economy Minsky, Hyman Mises, Ludwig von Mitchell, Wesley mobile phones/smartphones monetarism see also Friedman, Milton monetary policy and Friedman tools see also quantitative easing (QE) see also central banks monopolies and Marx natural and Robinson and Schumpeter and Smith and Sraffa monopsony Mont Pelerin Society Morgenthau, Henry mortgage-backed securities (MBS) mortgage lending and the 2008 financial crisis sub-prime Myanmar Myrdal, Gunnar Napoleon I Napoleon III Napoleonic Wars national/official statistics China UK US national debt Austria and central banks China and creditors and debt forgiveness and deficits euro area and foreign exchange reserves and investment Japan major economies owed to foreigners and quantitative easing and Ricardian equivalent UK US Vietnam National Health Service (UK) National Infrastructure Commission (UK) Navigation Acts neoclassical economics convergence hypothesis ‘neoclassical synthesis’ New Neoclassical Synthesis see also Fisher, Irving; Marshall, Alfred; Solow, Robert Neoclassical Synthesis see also Samuelson, Paul New Classicists see also Lucas, Jr, Robert New Deal New Institutional Economics see also North, Douglass New Keynesians see also Stiglitz, Joseph New Neoclassical Synthesis New Rhineland News (Cologne) New Rhineland News: Review of Political Economy (London) new trade theory New York Herald New York Times New York Tribune Newcomb, Simon Newsweek Niemeyer, Sir Otto Nissan Nixon, Richard Nokia non-tariff barriers (NTBs) Nordhaus, William North, Douglass and the backlash against globalization and development challenges doctoral thesis The Economic Growth of the United States from 1790 to 1860 and institutions Institutions, Institutional Change and Economic Performance life and times of Nobel Prize path dependence theory and Smith North, Elizabeth, née Case North Korea Northern Rock Oak Ridge National Laboratory Obama, Barack Occupy movement oil industry Organisation for Economic Co-operation and Development (OECD) Osborne, George Overseas Development Institute (ODI) Oxford University Balliol College Paine, Thomas Paley, Mary Paris Peace Conference path dependence theory see also North, Douglass Peel Banking Act Philips, Lion Philips (electronics company) physical capital Physiocrats Pigou, Arthur Cecil Piketty, Thomas pin-making Pinochet, Augusto Ponzi finance populism Portugal poverty aid and development see economic development challenges eradication/reduction frictional and Marshall and Marx and median income people lifted from in South Africa productivity and agriculture ‘benign neglect’ of Britain’s productivity puzzle and computers and economic growth and education and factor reallocation and Germany and Hayek incentives and industry/industrial revolution and innovation and investment Japan and jobs labour see labour productivity and land low and Marshall moving into higher sectors of and pricing raising and Schumpeter and secular stagnation slow economic and productivity growth and the future and specialization and technology total factor productivity and trade and wages Prohibition protectionism agricultural see also Corn Laws Navigation Acts public-private partnerships public investment and Keynes public spending general government spending see government spending public investment see public investment squeeze see also austerity Puerto Rico quantitative easing (QE) Quantity Theory of Money see also Friedman, Milton; monetarism; Equation of Exchange Rand, Ayn RAND Corporation rate of profit rational expectations theory Reagan, Ronald recession/depression debt-deflation theory of depression Great Depression see Great Depression (1930s) Great Recession (2009) Greece ‘hangover theory’ of Hayek on and Keynes Long Depression (1880s) second recession (1937–38: recession within the Depression) in UK 1970s redistribution Regional Comprehensive Economic Partnership (RCEP) Reich, Robert reindustrialization Reisinger, Anna Josefina Remington Rand rent-seeking research and development (R&D) investment China Research in Motion (RIM) retail trade Rhineland News Ricardian equivalence Ricardo, David and the backlash against globalization and class comparative advantage theory and the Corn Laws Essay on the Influence of a Low Price of Corn on the Profits of Stock The High Price of Bullion international trade theory as a landlord life and times of as a loan contractor and Marx On the Principles of Political Economy and Taxation and Schumpeter and Smith wealth Ricardo, Priscilla Robbins, Lionel Robinson, Austin Robinson, James Robinson, Joan The Accumulation of Capital and the AEA and the backlash against globalization and communism Economic Philosophy The Economics of Imperfect Competition Essays in the Theory of Employment and imperfect competition Introduction to the Theory of Employment and Keynes and Keynesian economics life and times of and monopolies monopsony theory and Schumpeter and unemployment wage determination theory robotics Rodrik, Dani Rolls-Royce Roosevelt, Franklin D New Deal Russia 1905 Revolution and Lenin and Marx Samsung Samuelson, Paul and the backlash against globalization Economics factor-price equalization theorem Nobel Prize savings for capital investment and inflation and Keynes and the ‘paradox of thrift’ Say, Jean-Baptiste Schmoller, Gustav von Schumpeter, Anna, née Reisinger Schumpeter, Gladys, née Seaver Schumpeter, Joseph and the backlash against globalization as banker/investor Business Cycles and capitalism Capitalism, Socialism and Democracy ‘creative destruction’, innovation and ‘The Crisis of the Tax State’ and the Econometric Society economics and entrepreneurs on Fisher and Hayek History of Economic Analysis and Keynes legacy life and times of The Nature and Content of Theoretical Economics and perfect competition and Ricardo and Robinson Theory of Economic Development wealth Schumpeter, Romaine Elizabeth, née Boody Schumpeter Group of Seven Wise Men Schwartz, Anna Jacobson Schwarzenegger, Arnold Scottish Enlightenment Seaver, Gladys Ricarde see Schumpeter, Gladys secular stagnation self-interest services sector China and deindustrialization financial services see financial services global trade in services human capital investment invisibility of liberalization ‘manu-services’ and Marx move away from and national statistics output measurement productivity and innovation and Smith Trade in Services Agreement (TiSA) UK US shadow banking Shiller, Robert silver Singapore Skidelsky, Robert skill-biased technical change skills shortage small and medium-sized enterprises (SMEs) smartphones/mobile phones Smith, Adam and the backlash against globalization as Commissioner of Customs for Scotland economic freedom on ‘invisible hand’ of market forces and laissez-faire economics legacy life and times of and manufacturing and Marx and North and Physiocracy on rate of profit and rebalancing the economy and Ricardo and the services sector and state intervention The Theory of Moral Sentiments The Wealth of Nations social capital social networks social services socialism communist see communism vs welfare state capitalism Solow, Barbara (‘Bobby’), née Lewis Solow, Robert and the backlash against globalization with Council of Economic Advisers doctoral thesis economic growth model ‘How Economic Ideas Turn to Mush’ John Bates Clark Medal and Keynesian economics life and times of Nobel Prize Presidential Medal of Freedom and technological progress Sony Sorrell, Sir Martin South Africa South Korea Soviet Union and China Cold War collapse of see also Russia Spain specialization spontaneous order Sraffa, Piero stagflation Stanley Black & Decker state government regulation intervention in the economy laissez-faire STEM (science, technology, engineering and mathematics) workers sterling Stigler, George Stiglitz, Joseph stocks and Fisher and interest rates US railroad Strachey, Lytton Strahan, William Strong, Benjamin Sturzenegger, Federico Summers, Lawrence supply and demand see also market forces/economy: ‘invisible hand’ Sustainable Development Goals (SDGs) Taiwan Tanzania tariffs taxation and austerity devolved powers of flat for government deficit spending before Great Depression and inequality and investment Japan and Marshall negative income tax to pay off national debt Pigouvian tax progressive and Reagan redistribution through Schumpeter on Smith on Taylor, John Taylor, Overton H.


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, classic study, credit crunch, Daniel Kahneman / Amos Tversky, debt deflation, deindustrialization, Etonian, eurozone crisis, falling living standards, full employment, Gini coefficient, Greenspan put, growth hacking, 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 interest rates, 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

Few outside the financial sector discerned the first whispers of a credit crunch during that notably wet English summer,2 but then September brought something unseen since 1866 – a run on a British bank. It was not yet obvious that the queues of savers that formed outside branches of the smallish, provincial Northern Rock represented a threat to the financial universe as we knew it. But a year later – almost to the day – Lehman Brothers came crashing down in New York, heralding the start of the most catastrophic phase of the crisis. Within weeks, America's biggest insurer, AIG, the Washington Mutual Bank and Britain's own financial giant, RBS, would be respectively bailed out, bust, and bought up by the taxpayer.

(i), (ii) Gallup polls (i), (ii), (iii), (iv) Galton, Francis (i) GDP (gross domestic product) (i), (ii), (iii), (iv) Geithner, Tim (i) gender divide (i) General Social Survey (GSS) (i), (ii), (iii) generational divide (i), (ii), (iii), (iv), (v) Gen X (i), (ii), (iii) Gen Y (i) Germany employment protection (i), (ii) human unhappiness (i), (ii), (iii), (iv) inequality (i) social networks (i), (ii), (iii) social security (i), (ii) unemployment (i) girls, employment of (i) graduates (i), (ii), (iii) The Grapes of Wrath (Steinbeck) (i) Great Depression change in GDP (i), (ii) crime rates (i) death rates (i) Europe (i) and Great Recession (i), (ii), (iii), (iv), (v) growth and national income (i) human unhappiness (i), (ii), (iii) hysteresis (i) lynchings (i) polarised public opinion (i), (ii) public policy (i) social mood (i) social networks (i), (ii), (iii) social security (i), (ii), (iii) Steinbeck on (i) unemployment (i), (ii), (iii), (iv) ‘Great Gatsby Curve’ (i) Great Hanshin earthquake (i) Great Recession change in GDP (i), (ii) economic gap (i) and Great Depression (i), (ii), (iii), (iv), (v) growth and national income (i), (ii) human unhappiness (i), (ii), (iii), (iv), (v), (vi) long shadow of class action (i) future generations (i) overview (i) unemployment (i) young people (i) low-grade jobs (i), (ii) polarised public opinion (i), (ii), (iii) post-recession agenda (i) Cameron conundrum (i) future policy (i) polarisation (i) public policy (i), (ii) social mood (i) social networks (i), (ii), (iii), (iv), (v), (vi) social security (i) start of (i) unemployment (i), (ii), (iii), (iv), (v) uneven impact (i) Greece (i), (ii), (iii) Greenberg Quinlan Rosner (i), (ii) Greenspan, Alan (i) Gregg, Paul (i) growth see economic growth Hacker, Jacob (i) Hansard (i) Hansard Society (i) happiness (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) Happiness (Layard) (i) ‘Happy Days Are Here Again’ song (i) hardship (i), (ii), (iii), (iv), (v), (vi), (vii) Hatton, Timothy (i), (ii) health (i), (ii), (iii), (iv), (v), (vi), (vii) healthcare (i), (ii), (iii), (iv) ‘hedonic treadmill’ (i) helping (informal volunteering) (i), (ii), (iii) Help to Buy (i) heritability of unemployment (i) Heritage Foundation (i), (ii) Hills, Sir John (i) Hispanic community (i), (ii) home ownership (i), (ii) Hoover, Herbert (i), (ii), (iii) household incomes (i), (ii), (iii), (iv), (v) household leverage (i) housing costs (i), (ii), (iii), (iv) home ownership (i), (ii) housing benefit (i) poverty (i) social housing (i) wealth reduction (i) human unhappiness (i) family life (i) overview (i) public policy (i) suicide (i) unemployment (i) well-being data (i) working population (i) hysteresis (i), (ii) identity (i), (ii) immigration (i), (ii), (iii), (iv) incapacity benefit (i), (ii), (iii), (iv), (v) income (i), (ii), (iii), (iv), (v) income distribution (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) income support (i), (ii) inequality (i) causes (i) economic gap (i) income distribution (i), (ii) job insecurity (i) life satisfaction (i) polarised public opinion (i), (ii), (iii), (iv), (v) post-recession agenda (i), (ii), (iii), (iv), (v) poverty (i) public policy (i), (ii) social mobility (i), (ii), (iii) social security (i) unemployment (i) inflation (i), (ii), (iii) informal volunteering (helping) (i), (ii), (iii) insecurity austerity (i) class divide (i) human unhappiness (i), (ii), (iii) job insecurity (i) pay gap (i) polarised public opinion (i) post-recession agenda (i), (ii), (iii) social networks (i), (ii) unemployment (i) Institute for Employment Research (i) Institute for Fiscal Studies (IFS) (i), (ii), (iii), (iv), (v), (vi) intergenerational income (i) investment (i) Ipsos MORI (i), (ii) Ireland (i) isolation (i), (ii) Italy (i), (ii) Japan (i), (ii), (iii), (iv), (v), (vi) Jarrow March (i) job insecurity see insecurity Jobseeker's Allowance (i), (ii), (iii), (iv) jobs growth (i), (ii), (iii), (iv) Kahn, Lisa (i) Kan, Naoto (i) Kantar (i) Keynes, John Maynard (i), (ii), (iii), (iv), (v) King, Mervyn (i) Kobe (i) Komarovsky, Mirra (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) Krueger, Alan (i), (ii) Krugman, Paul (i) Labour Force Survey (i) labour market (i), (ii) labour productivity (i), (ii), (iii) ladder of opportunity (i) Layard, Richard (i) Lehman Brothers (i), (ii) Leunig, Tim (i) Lewis, Michael (i), (ii) life expectancy (i), (ii), (iii), (iv), (v) life satisfaction (i), (ii), (iii), (iv), (v) Lilley, Peter (i) living standards (i), (ii), (iii), (iv), (v), (vi) Li, Yaojun (i) loans (i), (ii), (iii), (iv), (v) London (i), (ii), (iii), (iv), (v), (vi), (vii) lone parents (i), (ii), (iii), (iv) long-term unemployment (i), (ii), (iii), (iv) low-grade jobs (i), (ii), (iii), (iv), (v), (vi), (vii) Machin, Stephen (i) Macmillan, Harold (i) macroeconomic policy (i) male employment (i), (ii), (iii), (iv), (v) male suicide (i) manufacturing (i), (ii), (iii) ‘marginalised’ workers (i) Marie Antoinette (i) Marienthal hardship (i), (ii), (iii) human unhappiness (i), (ii), (iii), (iv), (v) neighbours informing on each other (i) social networks and groups (i) unemployment (i), (ii), (iii), (iv) marriage rates (i), (ii), (iii) medical bills (i) medical staff (i) mental health (i), (ii), (iii), (iv) Mexico (i) middle class (i), (ii) migration (i) minimum wage (i), (ii), (iii), (iv), (v), (vi) mobility (i), (ii), (iii), (iv) monetary policy (i), (ii) money-saving activities (i) money supply (i) money worries (i), (ii), (iii) mortality rates (i), (ii) motivation (i) National Child Development Survey (NCDS) (i), (ii) National Conference on Citizenship (i) National Government (i) National Housing Federation (i) national income (i), (ii), (iii) National Longitudinal Survey of Youth (i) necessities (i), (ii) NEETs (not in education, employment or training) (i) neighbourliness (i), (ii), (iii) neoliberalism (i) net worth (i) New Deal (i), (ii) New Labour (i), (ii) New Right (i), (ii) New York Times (i) New Zealand (i) Nixon, Richard (i) Northern Rock (i) North–South divide (i), (ii), (iii), (iv) Obama, Barack (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) Occupy (i) OECD see Organisation for Economic Co-operation and Development old age (i), (ii), (iii) O'Loughlan, Joel (i), (ii) optimism (i), (ii), (iii) Organisation for Economic Co-operation and Development (OECD) (i), (ii), (iii), (iv), (v), (vi), (vii) Orwell, George (i), (ii), (iii), (iv) Osborne, George (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) Packer, George (i) Pakistani community (i) parental income (i), (ii), (iii) parenting (i), (ii), (iii), (iv) parent–teacher associations (PTAs) (i), (ii), (iii) participation careers (i), (ii), (iii), (iv) part-time work (i), (ii) path dependency (i) pay squeeze (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix) Peck, Don (i) pensions (i), (ii), (iii), (iv), (v) People's Budget (1909) (i) Personal Responsibility and Work Opportunity Reconciliation Act (i) Pew Center (i), (ii), (iii) Philip, Prince (i) Philpott, Mick (i) The Pinch (Willetts) (i) polarised public opinion (i) desired level of inequality (i) divided communities (i) economic divide (i) genetic discrimination in healthcare (i) post-recession agenda (i) social security (i), (ii) solidarity (i), (ii), (iii), (iv) unemployment (i) policy see public policy postal deliveries (i) poverty absolute poverty (i), (ii), (iii), (iv), (v), (vi) debt (i) health (i) housing costs (i), (ii) income distribution (i) losing face (i), (ii) low-grade jobs (i), (ii) post-recession agenda (i), (ii), (iii), (iv) public policy (i), (ii) relative poverty (i), (ii) social security (i), (ii) UK (i), (ii), (iii) unemployment (i), (ii) uneven impact of recessions (i) US (i), (ii), (iii), (iv) working population (i), (ii) poverty pay (i), (ii), (iii), (iv) pregnancy (i), (ii) Prescott, John (i) Priestley, J.B.


The City on the Thames by Simon Jenkins

Ascot racecourse, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Boris Johnson, bread and circuses, Brexit referendum, British Empire, clean water, computerized trading, congestion charging, Corn Laws, cross-subsidies, Crossrail, deindustrialization, estate planning, Frank Gehry, gentrification, housing crisis, informal economy, Isaac Newton, Jane Jacobs, John Snow's cholera map, light touch regulation, Louis Blériot, negative equity, new economy, New Urbanism, Northern Rock, Peace of Westphalia, place-making, railway mania, Richard Florida, Right to Buy, South Sea Bubble, sovereign wealth fund, strikebreaker, the built environment, The Death and Life of Great American Cities, the market place, Traffic in Towns by Colin Buchanan, upwardly mobile, urban renewal, Winter of Discontent, women in the workforce

Few thought that pride might be coming before a fall. 26 Constructs of Vanity 2008 to the present Johnson’s star ascendant In 2008 London was hit by a banking failure originating in America and soon consuming all Europe. It saw the worst collapse of financial confidence since the 1930s, and pushed Britain into a brief but severe recession. As on similar occasions before, London survived relatively unscathed. Though a provincial bank, Northern Rock, failed, none was allowed to go bust in London thanks to government support for two of the most prominent, RBS and Lloyds. The outgoing Labour government of Gordon Brown (2007–10) and the incoming coalition of David Cameron and Nick Clegg (2010–15) pumped liquidity into the credit system and forestalled serious harm.

., Lady Chatterley’s Lover 260 Lawson, Nigel, Baron Lawson of Blaby 293 Layton and Shear’s (shop) 128 LCC see London County Council Le Corbusier (Charles-Édouard Jeanneret) 121, 241, 253 Le Nôtre, André 85, 144 Lea (river) 19, 329 Lea Valley 319, 327, 329 Leadenhall market 9, 163, 283–4 Leeds 149, 188; town hall 188 Lehár, Franz 182 Lehmann, Rosamond 231 Leicester, Robert Sidney, 2nd Earl of 84 Leicester, Thomas Coke, 1st Earl of 105 Leicester Square 84, 97, 276 Leighton, Frederic, 1st Baron 179 Leighton House 179 Lely, Sir Peter 89 Leonardo da Vinci 62 Letchworth 225 Levellers 65 Levy, Joe 245, 256, 258, 314 Lewes, Battle of (1264) 31 Lewisham 144, 210; Pepys estate 253, 322 Leytonstone 210 Liberty’s (department store) 222 libraries 189, 201, 213, 300; British Library 145, 250 lighting, street 120, 126, 147, 176, 184, 201 Lilburne, John 65 Limehouse 95, 131, 207, 208, 261; Link tunnel 294 Lincoln’s Inn 42, 62 Lincoln’s Inn Fields 62, 70–71, 120, 128, 197, 333; theatres 69–70, 128 Lipton, Sir Stuart 312, 314 listed status (of buildings) 203, 240, 265, 280, 282 literary life 36–7, 52–3, 98, 107, 127, 160–61, 180, 186, 231–2, 261–2, 300–301 Little Ice Age 87 Littlewood, Joan 262 Liverpool 131, 156, 242, 261, 278, 318 Liverpool Street station 148, 166, 254 livery companies see guilds and livery companies Livingstone, Ken: leader of GLC 287–9; mayor 309–12, 315–16, 317, 323 Lloyd, Mary 143 Lloyd Baker estate 143 Lloyd George, David (later 1st Earl Lloyd-George of Dwyfor) 212, 214, 217–18, 222, 240 Lloyds Bank 315 Lloyd’s insurance exchange 93, 131 Locke, John 70; Two Treatises of Government 90 Lollardy 38 Lombard Street 32 Londinium (Roman city) 9–14 London, origins of name 8 London Assembly 309 London and Birmingham Railway 156–7, 165, 168 London Bridge: current bridge 227; ‘old’ London Bridge (1209–1831) 28, 51, 87, 113, 114; Rennie’s bridge 227; Roman era 10; Saxon era 20 ‘London Bridge is Falling Down’ (nursery rhyme) 20 London Bridge station 156, 165, 166, 167 London, Chatham and Dover Railway 165 London College of Fashion 329 London County Council (LCC): abolition 227, 263; elections 191, 202, 218, 227; formation 190–92; hospitals, control of 224, 240, 248; housing estates 202, 223, 228, 252, 253, 269; post-war planning and redevelopment 247, 250–51, 254, 255–9, 277; powers 190, 201–2, 224, 263 London Docklands Development Corporation (LDDC) 292, 293, 295 London Eye 289, 312 London Legacy Development Corporation (post-2012 Olympics) 328–9 London Overground (rail line) 307–8 London Passenger Transport Board (LPTB) 228–9; see also London Transport; Transport for London ‘London Pride’ (song) 236 London Residuary Body (post-GLC) 289 London School of Economics (LSE) 197, 240, 316; cities survey (2005) 320 London and South-Western Railway 157, 166, 194 London Transport 264, 275, 285; see also London Passenger Transport Board; Transport for London London University 250, 284; Senate House 227, 234 London Wall 13, 243, 254 London Wildlife Trust 320 Long Acre 61, 283 Long Parliament (1640–60) 63–4, 67 Longleat House 52 Lord Chamberlain’s Men (theatre company) 52 Lord, Thomas 142 Lord Mayor’s Show 29 Lord’s cricket ground 142, 194–5 Los Angeles 211, 302 Lots Road Power Station 203 Louis XIV, King of France 88, 89, 106, 241 Louis XVI, King of France 119, 303 Louis Philippe I, King of the French 172 Lovat Lane, St Mary-at-Hill Church 80–81, 338 Lower Thames Street 243, 280, 284–5 Lowndes family 140 LSD (drug) 276–7 LSE see London School of Economics Lubetkin, Berthold 232 Ludgate 11, 26 Ludgate Circus 337 Ludgate Hill 8, 16, 165, 337 Lundenwic (post-Roman settlement) 8, 15–16, 83, 197 Luther, Martin 38, 44, 66, 109 Luton 251 Lutyens, Sir Edwin 209 Lyceum Theatre 182 Lyons’ Corner Houses (restaurants) 200 M25 motorway 303 Macaulay, Thomas Babington, 1st Baron 68 Macclesfield, Charles Gerard, 1st Earl of 84 MacCormac, Sir Richard 294 MacDonald, Ramsay 219, 225, 228 McIntosh, Andrew, Baron McIntosh of Haringey 287 Macmillan, Harold (later 1st Earl of Stockton) 249, 257 Mafeking, siege of (1900) 195, 217 Magna Carta 29 Magnus the Martyr, St 21 Maida Vale 199; Elgin Avenue 179 Maiden Lane 282 Maidenhead 300 Maidstone 251 Major, Sir John 275, 290, 299, 308, 314 Mall, The 132, 196–7 Manchester 2, 148, 149, 188, 307, 318; railways 156, 194, 318; town hall 188 Mandelson, Peter, Baron 305–6 Manor Park 210 Mansion House 113, 116, 195, 217, 309 Mantegna, Andrea 62 maps 50–51, 80; Tube map 229 Marble Arch 146, 325 Mark, Sir Robert 277 market gardening 15, 51, 83, 100, 139, 140, 169, 182 Marlborough, John Churchill, 1st Duke of 89, 93 Marlborough House 147, 197 Marlowe, Christopher 52 Marriott, Oliver, The Property Boom 245–6, 249–50, 254 MARS (Modern Architectural Research Group) 241 Marseilles, Unité d’Habitation 253 Marshall, Sir Frank (later Baron Marshall of Leeds) 287 Marshall, Sir James 270 Marshall & Snelgrove (department store) 180, 189 Marshalsea prison 35, 160 Martin, Sir Leslie 252, 266 Marx, Karl 3, 171–2, 193, 206; Communist Manifesto 172 Mary I, Queen 47, 49 Mary II, Queen 88–9, 90–91 Mary Queen of Scots 57 Mary of Modena, Queen Consort 88, 89 Marylebone 94, 102–3, 104, 105, 123–5, 199, 250, 264, 306; churches 137; see also Portland estate; Portman estate Marylebone Lane 102, 123 Marylebone Road 104, 194, 199, 316; Castrol House 280; Holy Trinity Church 137; St Marylebone parish church 137; see also New Road Maryon Wilson, Sir Thomas 183 Maryon Wilson family 182 Mason, Hugh 128 masquerades 108, 127, 138 Massie, Joseph 113–14 match girls’ strike (1888) 189 Matcham, Frank 200 Matilda, Empress 28 Matthew, Sir Robert 252 Mayfair 72, 94, 99, 100–101, 121, 147, 220, 339; Berkeley Square 73, 103–4, 123, 220–21, 259, 334; Grosvenor Square 73, 103, 118, 123, 126, 187, 230, 259; Hay Hill 100, 125; Hill Street 124; Mount Street 65; Park Street 199 Mayhew, Henry 159, 187; balloon ascent over London 171; London Labour and London Poor 159–60, 334 mayoralty (Lord Mayor of City of London) 28–9, 309 mayoralty (Mayor of London) 308–9, 318 Mazzini, Giuseppe 172 MBW see Metropolitan Board of Works Mecklenburgh Square 125 Medway (river), Dutch raid (1667) 74 Melbourne 320 Melbury Road 179 Mellitus, Bishop of London 17–18 Mercers, Worshipful Company of 46, 143 Mercers’ School 46 Merchant Taylors’ School 46 Merton 230 Methodism 109, 136 Methodist Central Hall 199, 239 ‘Metroland’ 229–30 Metropolitan Asylums Board 176, 218, 224 Metropolitan Board of Works (MBW) 163–4, 168, 173, 177, 183, 189, 190, 263, 308 Metropolitan Line 104, 167–8, 169, 194, 204, 229 Metropolitan Police 148, 218, 277, 318; criminal investigation department (CID) 277 Metternich, Klemens von 172 mews 71, 73, 180, 205 Mexico City 326 Middlesex Guildhall 198 Mile End, Tredegar Square 143 Mile End Road 181 ‘milk and bun’ shops 200 Mill, John Stuart 188 Mill Hill 229 Millbank 100, 113, 127; council housing estates 202, 223; prison 145 Millbank Tower 311 Millennium Dome 247 Milton, John 65 Minister for London (government ministerial post) 288, 289 Minorca 94 Minton, Anna 336 MIPIM (construction industry fair) 313 Misuse of Drugs Act (1971) 277 Mithras (god) 11, 14, 338 ‘mob, the’ 2, 35–6, 64, 68, 95–6, 116–18, 149, 192; see also riots modernism (architecture) 121, 232, 241, 246, 252–3, 285 Mods (youth subculture) 261 Molière 108 Monck, George (later 1st Duke of Albemarle) 67, 84 Monet, Claude 186 Montagu, Elizabeth 103, 124 Montagu, John, 2nd Duke of 117 Montagu Square 124 Montesquieu 106 Montfichet Castle 26–7 Montfort, Simon de, 6th Earl of Leicester 31 Montpelier Square 139 Monument 194, 284 Moore, Rowan 336–7 Moorfields 60, 76, 109 Moorgate 104 Moravian Church 136 More, Sir Thomas 40, 44 Morgan Stanley (bank) 296 Mornington Crescent 230 Morrison, Herbert, Baron Morrison of Lambeth 218, 219, 225, 227–8, 240, 249, 287 mortality, infant: London 111, 112, 176, 216; Paris 173 Moscow 174, 311, 320; Kremlin 99 motorways 228, 242, 279–80; M25 303; ‘Motorway Box’ 242, 279–80, 281, 282, 283 Mount Street 65 Moya, Hidalgo 252 Mozart, Wolfgang Amadeus 128; Don Giovanni 128 Mudchute 294 Muggeridge, Malcolm 217 Muggletonians 66 Munich Agreement (1938) 224, 234 Murdoch, Rupert 292 Murrow, Ed 237 Museum of London 8, 11, 76, 79, 255 music 67, 108, 128, 213, 248, 261; see also opera music halls 181, 216 Muslims 275, 305 Mylne, Robert 120 Mytens, Daniel 59 Nabarro, Sir Gerald 259, 271 Nairn, Ian 262 Nantes, Edict of, revocation (1685) 88 Naples 33 Napoleon I, Emperor 130, 132, 241 Napoleon III, Emperor 172, 173, 243 Napoleonic wars 124, 130–31, 137 Narrow Street 131 Nash, John 95, 132–6, 139, 142, 144–6, 333; All Souls Church, Langham Place 135; Buckingham Palace 144, 145, 146; Carlton House Terrace 144, 283; Regent Street 83, 133–5, 144, 147, 221–2; Regent’s Park 103, 133, 134, 135–6; St James’s Park 144–5; United Service Club 137–8 National Gallery 146, 236 National Health Service 240 National Liberal Club 177 National Theatre 247 NatWest Tower 310 Naval and Military (‘In and Out’) Club 147, 221 Neale, Thomas 84 Nelson, Horatio, 1st Viscount 130, 146 New Bond Street 339 New Covent Garden Market 281 New Cross 210, 307 New Ideal Homestead (housebuilder) 232 New London Architecture (independent forum; NLA) 316, 325, 326 New Model Army 65 New Oxford Street 256 New Road 104, 124, 125, 132, 134, 137, 144, 157, 165, 167, 168; see also Euston Road; Marylebone Road New Scotland Yard 198, 283 new towns 243, 251, 269 New York: Central Park 174; comparisons with London 261, 262, 302, 316, 320, 321, 324; financial services industry 239, 297; immigrant population 274; Long Island 324; population density 320; property legislation 313; property taxes 321; terrorist attacks 304; transport 202, 310, 316 New Zealand House 257 Newbury, Battle of (1643) 65 Newcastle, John Holles, 1st Duke of 102 Newcastle-upon-Tyne 278 Newfoundland 94 Newgate 11; prison 35, 76, 110 Newham, Borough of 267, 298–9, 336 newspapers and journalism 93, 98, 105, 213, 282, 292–3, 300, 307; see also printing trade Newsweek (magazine) 262, 302 Newton, Sir Isaac 70 Newton, William 62 nightclubs 261, 277 Nine Elms 157, 166, 328; American embassy 328; New Covent Garden Market 281 NLA see New London Architecture Nonconformists see Dissenters and Nonconformists Nonsuch Palace/Park 51, 230–31 Norfolk, Thomas Howard, 3rd Duke of 45, 190 Norfolk estate 284 Norfolk House 127, 227 Norman, Montagu, 1st Baron 236 Normans 2, 21, 22, 24–9 North, Frederick, Lord 117, 118 North Circular (road) 228, 242 North Kensington 272, 275, 279; Grenfell Tower 322; Ladbroke estate 141–2, 170, 280, 328; see also Notting Hill Northampton, John de 35–6, 38 Northampton, William Compton, 1st Earl of 143 Northampton, William Compton, 6th Marquess of 220 Northampton estate 143, 187, 220 Northern Line 193–4, 203, 327 Northern Rock (bank) 315 Northumberland, Alan Percy, 8th Duke of 220 Northumberland Avenue 177, 246 Northumberland House 177 Norwich 57 Norwich Union (insurance company) 249 Notting Hill 192, 194, 242, 256, 272, 275; Hillgate village 185; Hippodrome 142; Kensington Park Gardens 170; Ladbroke estate 141–2, 170, 280, 328; Stanley Crescent 170 Notting Hill carnival 261, 275 Nottingham 148, 278 Nottingham House see Kensington Palace Offa, King of Mercia 18 Offenbach, Jacques 182 Ogilby, John 80 oil crisis (1973) 276 Olaf, St 20, 21 Old Bailey 199 Old Curiosity Shop 197 Old Sarum 13 Old Street 307 Old Vic Theatre 181, 185 Olsen, Donald 101, 178, 211–12, 335 Olympia and York (property development company) 293 Olympic Games: (1948) 239; (2012) 303, 316, 319, 328 omnibuses see buses Onslow, George, 1st Earl of 190 OPEC (Organization of the Petroleum Exporting Countries) 276 opera 67, 108, 174, 180, 181–2, 195, 200 Orleans House 172 Ormonde, James Butler, 1st Duke of 72 Orwell, George 192, 208 Osborne, George 315, 317 Osborne, John 261 Osterley Park 49, 123 Outer Temple 42 Overend, Gurney and Company (bank), collapse (1866) 175 Oxford and Mortimer, Robert Harley, 1st Earl of 102, 103 Oxford and Mortimer, Edward Harley, 2nd Earl of 102 Oxford and Mortimer, Henrietta, Countess of (née Holles) 102 Oxford Circus 134, 317 Oxford Street (earlier Tyburn Road) 65, 100, 104, 126, 180, 187, 194; Pantheon 127; Selfridge’s 187, 198, 200 Oxford University 70, 88 Paddington 104, 112, 136, 141, 144, 187, 250, 325, 339; station 165, 166, 167, 169 Paine, Tom 129 Pakistani immigrants 275 Palace of Westminster 91, 145–6, 152–4, 164; Big Ben 154, 179; Great Hall 27, 31, 63, 152; St Stephen’s Chapel 63 Pall Mall 85, 147; clubs 137–8; New Zealand House 257, 280; Schomberg House 94 Palladianism 59, 84, 105, 106, 113, 122, 132, 156 Palladium (theatre) 200 Pantheon (Oxford Street) 127 Panton, Thomas 84 papacy 17, 27, 38, 44, 48 Paris: Commune (1871) 191, 192; cultural life 106–7, 180, 239; financial services industry 296; Industrial Exhibition (1844) 170; planning and redevelopment 51, 70, 134, 173–4, 175, 180, 221, 241, 320, 326; political life 3; population density and totals 26, 33, 40, 173; during Revolution 129–30; rivalry with London 126, 129, 132, 135, 261, 275, 302; skyline 265; slums 3, 173, 221; transport 144, 202, 310; see also Paris (landmarks and places) Paris (landmarks and places): Champs-Élysées 132, 197; Eiffel Tower 316; Panthéon 152–3; Place de la Concorde 144; Place des Vosges 61; Rue de Rivoli 200; Tour Montparnasse 265; Tuileries 85, 99; Versailles 85 Park Lane 220; Hilton Hotel 257, 265, 290; Saddle Room (club) 261 Park Royal industrial estate 206, 228 Parliament Hill Fields 5, 183 Parliament Square 120, 197, 198, 205, 304 Passport to Pimlico (film) 248 Paternoster Square 251, 280 patron saint of London 18 paving of streets 119–20, 140, 155, 156, 254 Paxton, Sir Joseph 170 ‘pea-souper smogs’ 259 Peabody, George 187, 223 Peabody housing trust 187–8, 269–70, 321 Peacock, Elizabeth 79 Pearl Insurance Company 249 Pearson, Charles 167–8 Peasants’ Revolt (1381) 35–6, 64 Peckham 210, 242, 307 Peel, Sir Robert 148, 161 Peking (Beijing) 173, 174 Pelli, César 293 Penton, Henry 143 Pentonville 143, 279 Pentonville Road 104 Pepys, Samuel 73–5, 106 Perivale 232 ‘permissive society’ (1960s) 260–62 Peter Jones (department store) 181 Petition of Right (1628) 61, 63, 90 Petrarch 36 Petre, Joseph, 17th Baron 220 Petty, Sir William 60, 77–8 Pevensey 24 Pevsner, Sir Nikolaus 80, 196, 201, 222 Philip II, King of Spain 47, 48, 89 Phillimore estate 323 Piano, Renzo 311 Piccadilly 70, 84, 125, 126–7, 147, 199, 220–21, 284; Albany 127; Burlington House 102, 105; Fortnum & Mason 128; ‘In and Out’ (Naval and Military) Club 147, 221; Ritz Hotel 198, 200, 220; St James’s Church 110; see also Royal Academy of Arts Piccadilly Circus 133, 134–5, 222, 277; proposed redevelopment 257, 281, 282, 283 Piccadilly Hotel 199, 221–2 Piccadilly Line 203 Pick, Frank 229 Pimlico 140–41, 153, 165–6, 169, 250; Churchill Gardens estate 252; Lillington Gardens estate 268 Pinero, Sir Arthur Wing 182 Pinnacle (22 Bishopsgate; skyscraper) 310, 312 Pinter, Harold 261 Pitt, William the Elder (later 1st Earl of Chatham) 115, 116, 118 Pitt, William the Younger 118–19, 129 Place, Francis 149, 193 Placentia Palace 51 plagues: Roman era 12; Black Death (14th century) 33–4, 35, 40, 66; Great Plague (1665) 1, 73–5, 80; see also cholera planning and building controls: 16th century 55–6; 17th century 59–60, 62, 77–9, 83, 333; 18th century 94, 99, 119–20, 121–2; 19th century 156, 188; 1900–45 222–3, 226–7, 230, 232–3; 1945–60 240–44, 246, 249, 255, 327, 334–5; 1960s 262–3, 263–4, 265, 270–71, 273; 1970s 278–86, 326–7; 1980s and 1990s 289, 292, 314; 21st century 83, 309, 310–14, 325–7, 335 pleasure gardens 108, 127, 128, 181 policing 36, 95, 110–12, 115, 148, 264, 276–7, 304–5, 308, 318 Polish immigrants 172, 207 poll tax 289–90 pollution 77, 86, 87, 163, 186, 244–5, 324, 337; Great Stink (1858) 164, 259; ‘pea-souper smogs’ 259 ‘Pont Street Dutch’ (architectural style) 179 Poor Law (1834) 151–2, 154, 160, 176, 224; guardians 151–2, 188–9, 190, 191, 192, 224 Pope, Alexander 92, 106, 107, 108 Poplar 131, 207, 218–19, 251, 289, 293, 294, 295; Robin Hood Gardens 251, 323 population density 320, 338 population totals: 17th century 57–8, 83, 96; 18th century 96, 111, 112, 126; 19th century 143, 167; 20th century 196, 207, 229, 233, 268, 285, 306; 21st century 1, 233, 306; Norman and medieval 26, 33, 40; Roman era 11; Tudor 40, 41, 47–8 Port of London Authority 206; building 199 Porter, David 123 Porter, Roy 50, 193, 300 Portland, Hans Willem, 1st Earl of 89, 103 Portland, Margaret, Duchess of (née Harley) 102–3 Portland, William Bentinck, 2nd Duke of 103 Portland, William Bentinck, 4th Duke of 132 Portland estate 103, 124, 132, 134, 179, 199 Portland Place 124, 134, 135, 227, 249 Portman, Henry 123, 124 Portman estate 123–4, 137, 250 Portman Square 73, 123–4, 250, 259 Portobello Road 261 portraiture 36, 59, 89, 128 Portsmouth 160 Poultry 19, 26 Powell, Enoch 274 Powell, Geoffry see Chamberlin, Powell and Bon (architectural practice) Powell, Jonathan 303 Powell, Sir Philip 252 Prague 38 Pratt, Sir Roger 84 Pre-Raphaelite movement 178, 179 ‘prefabs’ (prefabricated housing) 240 prehistory 7–8 Presbyterians 66, 136 Prescott, John, Baron 311 Presley, Elvis 248 Price, Sir Henry 245 Price, Richard 136 Priestley, J.


pages: 701 words: 199,010

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

affirmative action, Alan Greenspan, asset-backed security, automated trading system, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Black-Scholes formula, Bob Litterman, business cycle, buttonwood tree, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, corporate governance, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, delta neutral, discounted cash flows, diversification, diversified portfolio, family office, financial engineering, financial innovation, financial intermediation, fixed income, Flash crash, full employment, Gini coefficient, Glass-Steagall Act, global macro, high net worth, hindsight bias, housing crisis, implied volatility, income inequality, interest rate derivative, interest rate swap, John Meriwether, Kickstarter, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low interest rates, low skilled workers, managed futures, margin call, market design, market fundamentalism, merger arbitrage, Mexican peso crisis / tequila crisis, Mitch Kapor, money market fund, moral hazard, mortgage debt, Myron Scholes, National best bid and offer, negative equity, Northern Rock, Occupy movement, oil shock, price stability, proprietary trading, quantitative easing, quantitative hedge fund, quantitative trading / quantitative finance, Ralph Waldo Emerson, regulatory arbitrage, Renaissance Technologies, risk free rate, risk tolerance, risk-adjusted returns, Robert Shiller, Ronald Reagan, Sam Peltzman, Savings and loan crisis, Sharpe ratio, short selling, sovereign wealth fund, speech recognition, statistical arbitrage, statistical model, survivorship bias, systematic trading, tail risk, The Great Moderation, too big to fail, transaction costs, value at risk, yield curve, zero-coupon bond

$1.3 billion Lehman financing to Broadway Real Estate Partners to acquire 237 Park Avenue June 2007 $1.2 billion Lehman financing to Apollo Investment Corp. for a private stake of Innkeepers USA Trust $1.1 billion Lehman financing to Thomas Properties Group to acquire the EOP Austin portfolio $1.7 billion Lehman financing for the acquisition of Northern Rock’s commercial real estate portfolio July 2007 $1.5 billion Lehman financing to ProLogis to acquire the Dermody industrial portfolio $2.9 billion Lehman financing for the acquisition of the Coeur Defense office building August 2007 $1.0 billion Lehman financing for the acquisition of Northern Rock’s commercial real estate portfolio October 2007 $1.5 billion Lehman financing to Blackstone for its acquisition of Hilton Hotels $5.4 billion Lehman financing for the acquisition of the Archstone Smith Trust Lehman would have been better off if it had stopped the money machine immediately after Fuld and Nagioff’s meeting.

By investing an additional 20% in mortgages, the bank would improve its capital adequacy ratio under Basel II as compared to Basel I, absent the investment. This modified incentive to buy mortgages is one of the reasons that U.S. on-balance-sheet mortgages grew from 6% of GDP to 20% of GDP from 2004 to 2008. This occurred in other countries as well. The British government took over the lender Northern Rock on February 22, 2008, due to subprime mortgage troubles. In July 2007, the bank increased its dividend. CEO Adam Applegarth’s reason? “Because we had just completed our Basel II two-and-a-half-year process and…it meant we had surplus capital and therefore that could be repatriated to shareholders through increasing the dividend.”13 Banks exploited Basel II’s reduced capital charges for AAA-securitized assets.


pages: 823 words: 206,070

The Making of Global Capitalism by Leo Panitch, Sam Gindin

accounting loophole / creative accounting, active measures, airline deregulation, Alan Greenspan, anti-communist, Asian financial crisis, asset-backed security, bank run, banking crisis, barriers to entry, Basel III, Bear Stearns, Big bang: deregulation of the City of London, bilateral investment treaty, book value, Branko Milanovic, Bretton Woods, BRICs, British Empire, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon credits, Carmen Reinhart, central bank independence, classic study, collective bargaining, continuous integration, corporate governance, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, dark matter, democratizing finance, Deng Xiaoping, disintermediation, ending welfare as we know it, eurozone crisis, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, foreign exchange controls, full employment, Gini coefficient, Glass-Steagall Act, global value chain, guest worker program, Hyman Minsky, imperial preference, income inequality, inflation targeting, interchangeable parts, interest rate swap, Kenneth Rogoff, Kickstarter, land reform, late capitalism, liberal capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low interest rates, manufacturing employment, market bubble, market fundamentalism, Martin Wolf, means of production, military-industrial complex, money market fund, money: store of value / unit of account / medium of exchange, Monroe Doctrine, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, new economy, Nixon triggered the end of the Bretton Woods system, non-tariff barriers, Northern Rock, oil shock, precariat, price stability, proprietary trading, quantitative easing, Ralph Nader, RAND corporation, regulatory arbitrage, reserve currency, risk tolerance, Ronald Reagan, Savings and loan crisis, scientific management, seigniorage, shareholder value, short selling, Silicon Valley, sovereign wealth fund, special drawing rights, special economic zone, stock buybacks, structural adjustment programs, subprime mortgage crisis, Tax Reform Act of 1986, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, vertical integration, very high income, Washington Consensus, We are all Keynesians now, Works Progress Administration, zero-coupon bond, zero-sum game

As late as July 2007, Tim Geithner at the New York Federal Reserve and Hank Paulson at the Treasury were still playing their appointed role of trying to calm markets with reassuring speeches about the housing slump being “at or near bottom,” and financial markets outside the US being “now deeper and more liquid than they used to be.”31 But by this time an unraveling of financial positions and credit chains was already producing a liquidity crunch in the US commercial paper and money markets that had become so pivotal in global finance. It was the difficulty of raising funds on these markets that forced France’s largest bank, BNS Paribas, on August 9, 2007, to suspend payments due on three of its investment funds. By September Northern Rock, the UK’s fifth-largest lender, had gone to the Bank of England for emergency support, leading to a classic bank run. Within days the UK government had guaranteed Northern Rock’s deposits, and the Bank of England announced that it would provide loans to keep the bank going and extend the same support to other banks. Although President Bush declared in a major speech on the crisis at the end of August that “the government has got a role to play—but it’s limited,” the Treasury had by the beginning of that month already switched to full crisis-management mode, with Paulson “in hourly contact with the Fed, other officials in the administration, finance ministries and regulators overseas and people on Wall Street.”32 Meanwhile, the Fed was in contact with the European Central Bank, the Bank of Japan, and the Bank of England about the role they would all play as lenders of last resort.

Taggart, 206, 210 Mussa, Michael, 253, 417n82 mutual funds, 149, 169, 177, 201, 265, 270, 284, 289 Nader, Ralph, 308 NAFTA, 17, 216, 227–9, 251, 269–71, 409n92, 412n15, 413n26, 420n21 NASDAQ, 199, 305 National Association of Manufacturers, 34, 60, 208 National Advisory Council (NAC), 79, 91, 93 National Bank of San Diego, 152 National Economic Council (NEC), 250–1 National Industry Recovery Act (NIRA), 58–9, 359n50 National Labor Relations Act, 59 National Labour Relations Board, 60–1, 172 National Recovery Administration (NRA), 58–9, 62 National Security Council, 95, 151, 216, 422n66 NSC–68, 95 NATO, 11, 95, 218, 282 Naughton, David, 431n83 Negri, Antonio, 26, 341n3 neoliberalism, 14–17, 97, 102, 117, 165, 172, 195, 216–8, 228–9, 254, 258–60, 267, 279–80, 286–8, 328–30, 338–9 Netherlands (Holland), 70, 72, 97, 253 New Century Financial, 307, 311 New Deal, 46, 56, 58–61, 69–70, 359n41, 361n63 Banking Acts, 57, 59 business attitude to, 60–1 capital flow uncontrolled by, 78, 92 containment of, 80 erosion of, 120–2, 170, 397–8n54 grand truce with capital, 62, 73, 91 growth in public employment, 62, 361n69 and state power, 61–3, 390n69 New York: center of global finance, 57, 71, 78, 118, 158, 250, 367n48 Federal Reserve Bank of, 43, 51, 57, 86, 123–4, 146, 150, 153, 167, 177–8, 180–1, 210, 238, 240, 250, 260, 263–4, 268, 301, 304, 311, 313–4, 320, 325 Stock Exchange, 138, 180, 200 structural adjustment for, 165 Newstadt, Eric, 178 Nicaragua, 41, 56 Nixon, Richard (administration of), 13, 124, 127, 130, 133, 138–41, 144, 148–52, 155–8, 167–9, 387n45, 388n50 Northern Rock, 312 Novak, William J., 351n33 Obama, Barack (administration of), 256, 301, 320–3, 329, 334 O’Connor, James, 384n2 Occupy Wall Street, 340 Office of Comptroller of the Currency (OCC), 121–2, 142, 152–4, 170, 174, 178, 265, 325, 396n38, 409n94, 415n56 OECD, 107, 116, 124, 126, 208, 212, 219, 243, 251, 257–60, 278, 288, 297, 425n106 Code of Liberalization of Capital Movements, 116, 126, 243 oil, 103–4, 167–8, 189, 214, 219, 358n30, 392n99, 414n45 O’Neil, Paul, 301, 303, 311, 435n8 Open Door policy, 6, 11, 19, 35–7, 40–1, 49, 67, 74, 80, 87, 94, 104, 294, 343–4n16, 345n29, 358n30, 368n58, 370n81 Ozgercin, Kevin, 337n27, 374n39 Panitch, Leo, 341n1, 348n8, 444–5n19 Papademos, Lucas, 444n18 Pardee, Scott, 158 PATCO strike, 172 Paulson, Henry, 301, 311–2, 316, 439n54 Pauly, Louis, 357n28 Penn Central, 139, 169, 399n80 Pentagon/War Department, vii, 27, 147, 258 pension funds/plans, 84–5, 121, 140, 148–9, 165, 172, 176–7, 192, 199, 204, 216, 270, 284, 289–90, 306, 321 Peschek, Joseph, 393n2 Peterson, Peter G., 400n94 Philippines, 36, 38, 41, 105, 213 Pijl, Kees van der, 374n40 Pinochet, Augusto, 216 Piven, Frances Fox, 352n44 Plaza Accord, 183, 209–10, 407n67 Pohl, Karl Otto, 407n67 Poland, 51, 217, 243, 278, 281, 417n81 Polanyi, Karl, 2, 25, 36, 356n17 Pollin, Robert, 347n44 Porter, Tony, 411n1 Portillo, Jose Lopez, 214 Post, Charles, 348n6 Poulantzas, Nicos, 13, 115, 342n9, 345n26, 346n37, 371n6, poverty, 276, 279, 299 Prebisch, Raul, 105 predatory lending, 307 President’s Working Group on Financial Markets, 181, 268, 313, privatization, 175, 197, 200, 203, 214, 216–8, 228, 241–2, 244, 251, 261–2, 288, 328, 434n7 Prodi, Roman, 200 production (manufacturing): 30, 38, 40, 49, 54, 83, 85, 104, 114, 121, 135, 184, 186–9, 191, 196, 220, 275–6, 286–7, 291, 311, 401n99 ‘American system of manufacturing’, 27 in China, 294, 297 in developed countries, 100–1, 275 in developing countries, 211–4, 216 decline of, 402n122 integrated networks of, 10–11, 115–6, 193–202, 275–6, 280, 284, 287–9, 293, 297, 311, 319 and financialization, 290 during Depression, 54, 81 restructured after 1945, 81–2, 84, 100–1 restructuring after crisis of 1970s, 188–191, 281 US share of total, 28–9, 42, 50–2, 81, 102, 288–9 productivism, 62, 84, 90, 98, 101 productivity, 29, 137, 185, 191, 271, 290, 310, 370n3, 375n44, 375n52, 385n13, 385n17 profit, 6, 174, 183–4, 187–8, 204, 400n96, 401n100 and corporations, 187–8, 283–9, 292, 306, 310, 329, 337 crisis of (1970s), 16, 133, 135, 141 and financialization, 290 growth (1950s), 85, 114 recovery (1980s/1990s), 174, 186, 401n99 ‘profit squeeze’, 20, 135, 141384n12, 385n17 Progressive movement, 33–5, 47–8 protectionism, 2, 69, 182, 207, 224–5, 319, 388n50 public spending, 58, 62, 82, 133, 152, 158, 303, 307, 320, 329 railroads, 28, 30, 33, 38, 40, 62, 349n17 deregulation, 169 strikes, 83, 141 Rajan, Rhaguram, 436n19 Reagan, Ronald, 15, 17, 171–2, 176, 178 Reciprocal Trade Agreement, 69, 224 Reconstruction Finance Corporation, 62 Recovery and Reinvestment Act (2009), 320 Red Line Agreement (1928) 103, 358n30 Regan, Don, 208, 393n5, 399n75 regulation, 55, 57, 59, 120–2, 150, 154, 242, 267, 390n69 as deregulation, 170 finance strengthened by, 59, 268 most extensive in US, 267, 396n38, 428n11 increase of (1980s), 178 overwhelmed by finance, 138, 169, 173, 178, 397–8n54 post–2007 crisis, 322–4, 327, 338 ‘takings’ doctrine, 227–31, 413n18 Regulation Q, 57, 118, 121, 128–9, 139–40, 169–70, 205 Reich, Robert, 269 Reigle–Neal Interstate Banking Act (1994), 423n85 Reinhart, Carmen, 419n7 Reinsch, Paul, 37–8 renminbi, 299, 326 Republican party/administrations, 7, 34–5, 46, 49, 55–7, 61–2, 73, 78, 130, 141, 155, 165, 179, 252, 269 research & development, 147, 186, 276, 288, 364n19, 389n62 Resolution Trust Corporation, 173, 320 Reuther, Walter, 84, 136 Roach, Stephen, 423n81 Robertson, Justin, 422n68 Robinson, Ian, 227 Robinson, Joan, 79 Robinson, H.L., 384n5 Robinson, Ronald, 342–3n12 Robinson, William, 345n26, 409n92, 410n103 Rockefeller, David, 48, 57, 262 Rockefeller, Nelson, 143 Rosenberg, Emily, 39 Rogers, William, 158 Riugrok, Winfried, 345n26 Roosa, Robert, 124–7, 143 Root, Elihu, 39, 354n.64 Roosevelt, Franklin Delano (FDR, administration of), 54–63, 69–71, 102, 361n63, 365n30 business attitudes to, 60–1 inaugural address, 56 and state power, 61–3 on unemployment, 5 workers’ support for, 60 Roosevelt, Theodore (administration of), 39–40 Rubin, Robert, 18, 142, 175, 248, 251–2, 254, 257, 260–3, 269, 277, 301, 303, 330, 418n2, 418n4, 424n86, 424n94 Rude, Chris, 170, 238 Ruggie, John, 344n21 Russia, 37, 48, 218, 243–4, 262–3, 336, 417n82 S&Ls (savings and loans, thrifts) 57, 129, 140, 152, 169, 173 See also banks; credit; finance; mortgages Saad Filho, Alfredo, 416n65 Sablowski, Thomas, 405n27 Salomon Brothers, 146, 175–6, 228, 388n55, 394n10 Sarai, David, 355n77 Sarbanes–Oxley Act (2002), 305 Sassen Saskia, 341n1, 341n2, 345n23, 411n3 Saudi Arabia, 103, 156, 219, 280, 392n99 Saxon, James, 122 Schiller, Karl, 146 Schmidt, Helmut, 197, 200 Schneiderman, David, 413n32 Schrempp, Jurgen, 201 Schwartz, Herman, 436n25 Seabrooke, Jeremy, 134, 147, Seattle anti-globalization protest (1999), 271, 301, 425n106 Secondary Mortgage Market Enhancement Act (1984), 173 securities, 148, 205, 266, 270, 285, 306, 309 Securities and Exchange Commission (SEC), 59, 122, 148–9, 199, 268, 290, 324, 385n19 securitization, 120, 139, 207, 252, 266, 270, 306, 309, 311 Servan–Schreiber, Jean–Jacques, 113, 378n4, 379n8 Shaikh, Anwar, 385n13 Shultz, George, 148, 231, 294, 296, 389n65 Simon, William, 144, 146, 153, 155–8, 165, 169, 388n55, 392n99, 393n111, 394n10 Simmons, Beth, 415n.54 Sinclair, Timothy, 416n60 Singer, Daniel, 198 Single European Act, 198, 201 Skidelsky, Robert, 70, 133, 367n55 Sklair, Leslie, 345n26 Skocpol.


Paint Your Town Red by Matthew Brown

banking crisis, Bernie Sanders, Black Lives Matter, Boris Johnson, call centre, capitalist realism, COVID-19, crowdsourcing, decarbonisation, deindustrialization, Donald Trump, fear of failure, financial exclusion, G4S, gentrification, gig economy, global supply chain, green new deal, housing crisis, hydroponic farming, lockdown, low interest rates, mittelstand, Murray Bookchin, new economy, Northern Rock, precariat, remote working, rewilding, too big to fail, wage slave, working-age population, zero-sum game

It follows similar principles in terms of its ownership structure and its focus on ensuring that money stays in the local economy, but in every other respect, it resembles a traditional high-street bank in terms of the range of services it offers to customers. What it doesn’t do, however, is engage in the kind of financial speculation that led to a run on Northern Rock in 2009 and created a series of “too-big-to-fail” banks that then needed to be bailed out by the taxpayer. Because they are so much bigger, and because they need to comply with sets of complex regulations, people’s banks or mutuals take longer than credit unions to set up, but their impact on the economy is also much greater.


pages: 460 words: 122,556

The End of Wall Street by Roger Lowenstein

"World Economic Forum" Davos, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, benefit corporation, 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, Glass-Steagall Act, 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, low interest rates, 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

Given that even a single bond issuer may have thousands of lenders, the potential for a chain-reaction panic is clear. Lenders not only fear for the borrower, but for the borrower’s borrowers—and for how a panic would affect them all. (Industrial markets, by contrast, are far less interconnected.) Several issues in the fall of ’07 gave Paulson and Bernanke reason to worry about systemic risk. In September, Northern Rock, one of the biggest mortgage banks in England, failed and was forced to avail itself of a government bailout; meanwhile, its depositors rushed to get their money out, reenacting the seminal drama of the Great Depression. “The bank is not short of assets,” the BBC pronounced rather optimistically, “but they [the assets] are tied up in loans to homeowners.”

See socialization New Century Mortgage New Deal new finance, failure of new normal New York City New York Federal Reserve Bank AIG and as arm of Federal Reserve Bear Stearns and building of Citigroup and Lehman Brothers and response to financial crisis role of New York State, AIG and New York Stock Exchange New York Times NINA loans Northern Rock Obama, Barack Obama administration Office of Federal Housing Enterprise Oversight (OFHEO) Office of the Comptroller of the Currency Office of Thrift Supervision O’Neal, Stanley Bank of America and compensation of efforts to sell Merrill Lynch resignation of golden parachute of Goldman Sachs, obsession with golf playing by Kenneth Lewis and lack of oversight by Merrill Lynch board and personality and character of Orange County Oros, John Ownit Mortgage Solutions Pandit, Vikram panic causes of efforts to stem failure to halt global Morgan Stanley and repercussions of Wall Street’s susceptibility to Partnoy, Frank Paterson, David Paulson, Henry (Hank) AIG and Bear Stearns bailout and Ben Bernanke and Lloyd Blankfein and George W.


pages: 620 words: 214,639

House of Cards: A Tale of Hubris and Wretched Excess on Wall Street by William D. Cohan

Alan Greenspan, asset-backed security, Bear Stearns, book value, call centre, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, deal flow, Deng Xiaoping, diversification, Financial Instability Hypothesis, fixed income, Glass-Steagall Act, Hyman Minsky, Irwin Jacobs, Jim Simons, John Meriwether, junk bonds, Long Term Capital Management, low interest rates, margin call, merger arbitrage, Michael Milken, money market fund, moral hazard, mortgage debt, mutually assured destruction, Myron Scholes, New Journalism, Northern Rock, proprietary trading, Renaissance Technologies, Rod Stewart played at Stephen Schwarzman birthday party, Savings and loan crisis, savings glut, shareholder value, sovereign wealth fund, stock buybacks, too big to fail, traveling salesman, uptick rule, vertical integration, Y2K, yield curve

THE CAYNE MUTINY he problem for Bear Stearns, as the fall rolled on, was that events were no longer happening in a vacuum. The cancer that had been revealed in Bear's two hedge funds in June had now metastasized and spread throughout the world. On September 13, Northern Rock, one of the largest retail banks in England, sought liquidity support from the Bank of England. Four days later, the Bank of England guaranteed all of the bank's deposits. (Shortly thereafter, Northern Rock was nationalized.) On September 25, Moody's warned that the subprime “infection” had spread to companies such as AMBAC and MBIA that insure bonds of other companies and that these insurers would need more capital.

If Dimon, for whatever reason, balked at making the deal, the federal government would have only two choices: let Bear face liquidation and brace for the consequences reverberating across the global financial system, or take full control of the firm itself, much as the British government had done a month earlier when it nationalized Northern Rock, the large British mortgage lender. Neither was a palatable option. Finally, one of the more compelling reasons for Schwartz's call to Dimon was sheer proximity. JPMorgan's headquarters was literally across 47th Street from Bear Stearns. Even if others had the slightest interest— for instance, Wells Fargo, or Bank of America—their corporate brain trusts were in San Francisco and Charlotte, respectively.


pages: 513 words: 141,153

The Spider Network: The Wild Story of a Math Genius, a Gang of Backstabbing Bankers, and One of the Greatest Scams in Financial History by David Enrich

Bear Stearns, Bernie Sanders, Black Monday: stock market crash in 1987, call centre, centralized clearinghouse, computerized trading, Credit Default Swap, Downton Abbey, eat what you kill, electricity market, Flash crash, Glass-Steagall Act, Goldman Sachs: Vampire Squid, information asymmetry, interest rate derivative, interest rate swap, London Interbank Offered Rate, London Whale, Long Term Capital Management, Michael Milken, Navinder Sarao, Nick Leeson, Northern Rock, Occupy movement, performance metric, profit maximization, proprietary trading, Savings and loan crisis, tulip mania, work culture , zero-sum game

In the United States, banks were starting to teeter as borrowers fell behind and then defaulted on their mortgages. In Europe, funds run by BNP Paribas, which made the mistake of investing in products linked to those American mortgages, were collapsing. In England, customers were lining up to pull their money out of troubled mortgage lender Northern Rock. These were the early tremors in what would soon become an extraordinary, globe-swallowing earthquake. These were crazy times. Tighe didn’t care. Her stomach was unsettled, and she wanted to get back to sunbathing. But Hayes wouldn’t leave her alone. He looked at the terrace’s tiled floor and the sparkling pool and the hazy blue sky.

., 43, 174 Mississippi River, 249 Mocek, Gregory, xiii, 262–63 Mohammad Reza Pahlavi, 25–26, 28 Mollenkamp, Carrick, 188–91, 193, 196–98 Moorfields Eye Hospital, 258 Morgan Stanley, 128, 212 Morton, Andrew, x application to join Tibor, 270 at Citigroup, 260–61 Hayes firing, 302, 304–5 interest-rate derivatives, 260–61 Libor investigation, 291, 293–96 Libor manipulation, 281–82 Mossaddegh, Mohammad, 26 Mullens & Company, 12–13 “muppets,” 123–24 Murphy & McGonigle, 400 Muyskens, Nate, 326–27, 328–29 NASA, 184 NatWest Three, 373–74 New England Patriots, 43 New Year’s Eve, 209–10, 265 New York City Transit Authority, 202 New York Mafia, 311 New York Times, 399 Nicholls, David, x, 79, 192–93, 220, 457 Nicholson, Jack, 153, 154 Nishimura, Nanci, 254–56, 431–32 Northern Rock, 139 Obama, Barack, 243, 248–49, 267–68, 268 Obie, Stephen, xii, 201–3 background of, 201–2 Libor investigation, 254, 257, 262–66, 271, 313, 322–23 Barclays recordings, 262–63, 264, 266 update on, 400 Ocean Colour Scene (band), 3 Oddie, Simon, 214 Office of Fair Trading (OFT), 332–33 oil price fixing scandal, 200 Oklahoma Police Pension & Retirement System (OPPRS), 114 Old Rectory, 337–38, 363–64, 368, 380, 381, 384, 391, 393 O’Leary, Ben, ix, 110, 126, 330 O’Leary, Peter, ix, 110–12 O’Leary, Tim, 10, 13, 16, 110 Orcel, Andrea, 372 Organisation of African Unity, 39 Ospel, Marcel, 81 overnight index swaps, 103, 142 Oxford University, 14, 40 Pac-Man, 104, 110 Park, Robertson, xiii, 266–69, 323, 324–25, 333, 400 Pearce, Ivan, xiii, 348, 372 Peng, Scott, 184–87, 217 background of, 184 at Citigroup, 186–87 interest in Libor, 186–87 “Is Libor Broken?”


pages: 419 words: 130,627

Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase by Duff McDonald

"World Economic Forum" Davos, Alan Greenspan, AOL-Time Warner, bank run, Bear Stearns, Blythe Masters, Bonfire of the Vanities, book value, business logic, centralized clearinghouse, collateralized debt obligation, conceptual framework, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Exxon Valdez, financial innovation, fixed income, G4S, Glass-Steagall Act, Greenspan put, housing crisis, interest rate swap, Jeff Bezos, John Meriwether, junk bonds, Kickstarter, laissez-faire capitalism, Long Term Capital Management, margin call, market bubble, Michael Milken, money market fund, moral hazard, negative equity, Nelson Mandela, Northern Rock, profit motive, proprietary trading, Renaissance Technologies, risk/return, Rod Stewart played at Stephen Schwarzman birthday party, Saturday Night Live, sovereign wealth fund, statistical model, Steve Ballmer, Steve Jobs, technology bubble, The Chicago School, too big to fail, Vanguard fund, zero-coupon bond, zero-sum game

While JPMorgan Chase had chased market share during the credit boom—by loosening loan covenants or adjusting pricing downward along with the rest of the herd—their relatively disciplined approach had left Dimon and his operating committee in position to pick off a weakened competitor or two if the turmoil continued. In January, JPMorgan Chase had bought $4.3 billion in reverse mortgages from the struggling U.K. bank Northern Rock at a steep discount. “We are one of the few people that everyone knows are open for business and ready to work on some of these things,” Bill Winters said at the time. On the afternoon of March 13, in fact, a number of executives, including the chief financial officer Mike Cavanagh and Charlie Scharf, sat in an eighth-floor conference room at 270 Park Avenue, getting ready to go to Seattle the following Monday.

., x, 87, 203, 222, 260, 277, 315 Morgan Stanley, ix, 25–26, 32, 69, 72–73, 112, 182, 190, 195, 204–5, 208, 209, 216, 241, 272, 275, 282, 285, 288, 292 Morgan Stanley Dean Witter, 94, 115 Morgenson, Gretchen, 254–55 Morris, Charles, 227 mortgages, 57–58, 109, 155, 205–6, 209–15, 232–38, 246, 266, 275, 277, 290, 297, 306, 309, 311, 322–23 Munger, Charlie, 323 Murdoch, Rupert, 243 mutual funds, 78–79, 266 Myojin, Sugar, 108 Nasdaq price-fixing scandal, 84–85, 135 National Association of Mortgage Brokers, 233 National Financial Partners (NFP), 83 NationsBank, 103 Newsweek, 179 New York, 95, 285, 286 New York Daily News, 296 New Yorker, 212 New York Stock Exchange (NYSE), 84, 203, 264–65, 310–11 New York Times, 17, 18, 51, 60, 73, 75–77, 79, 82, 103, 109, 128, 254–55, 261, 263, 265, 288, 290, 296, 309, 311, 312, 316 Nierenberg, Mike, 270 NINJA loans, 233 Nocera, Joe, 312 Nomura Holdings, 285 Norris, Floyd, 109 Northern Rock, 246 Novak, David, 149, 183 Obama, Barack, 153, 241, 301, 313, 316–18 Office of Thrift Supervision (OTS), 290–92, 295, 298 oil industry, 210, 241, 308–9 Olympia & York, 21 O’Meara, Chris, 279 O’Neal, Stan, 182, 213, 221, 222, 230, 232, 304 Overlander, Craig, 270 PaineWebber, 57 Pandit, Vikram, 259, 261, 281, 299, 300, 324 Panitch, Mike, 80 Papademetriou, Panos, 1, 2, 49–50 Parr, Gary, 70, 175, 176, 245, 246–47, 252–53, 255, 258 Paul, Jeremy, 4, 5, 62–63, 215, 325 Paulson, Henry, ix, 115, 138, 182, 229, 247, 250, 255, 257–58, 264, 273, 280, 282, 285, 287, 288, 294, 300, 315, 327 Paulson & Co., 268 Pearson, Andrall, 25, 37–38, 135, 149 Pearson, Richard, 38 PHH Corp., 234 Philip Morris, 104 Plumeri, Joseph, 23, 63, 70, 71–72, 74, 124, 150, 201, 221 Plutarch, 157 Posner, Brian, 54, 55, 139–40, 142 Potoma, Peter, 17 Price, Bob, 32, 46 Priceline.com, 138, 150, 165, 166 Primerica, 48–65, 63, 70, 72, 98 Prince, Chuck, 35, 90, 115, 120–21, 122, 126, 128, 150, 168, 178, 184, 185, 195, 201, 206–7, 222, 228–30, 232, 276, 304 Protective Life Corp., 216 Prudential Insurance, 19 Prudential Securities, 177, 182 public-private investment program (PPIP), 314 Purcell, Phil, 84–85, 112, 115, 182 Puth, David, 218 Quattrone, Frank, 164 Rabobank, 243, 244 Rand, Ayn, 86 Ranieri, Lewis, 212 Rattner, Steven, 223 Real Deal, The (Weill), 34, 45, 56, 74, 77, 115, 120, 128–29, 164, 220 real estate, 57–58, 109, 154, 155, 205–15, 219, 223–28, 232–38, 246, 251–52, 266, 275, 277, 290, 297–98, 302–3, 306, 309, 311, 322–23 recessions, economic, 20, 45, 52, 86, 152, 306, 318 Redmond, Andrea, 146, 186 Redstone, Sumner, 243 Reed, John, 98–142, 160–61 Reinhard, J.


pages: 494 words: 132,975

Keynes Hayek: The Clash That Defined Modern Economics by Nicholas Wapshott

airport security, Alan Greenspan, banking crisis, Bear Stearns, Bretton Woods, British Empire, business cycle, collective bargaining, complexity theory, creative destruction, cuban missile crisis, Francis Fukuyama: the end of history, full employment, Gordon Gekko, greed is good, Gunnar Myrdal, if you build it, they will come, Isaac Newton, Joseph Schumpeter, Kickstarter, liquidationism / Banker’s doctrine / the Treasury view, means of production, military-industrial complex, Mont Pelerin Society, mortgage debt, New Journalism, Nixon triggered the end of the Bretton Woods system, Northern Rock, Paul Samuelson, Philip Mirowski, Phillips curve, price mechanism, public intellectual, pushing on a string, road to serfdom, Robert Bork, Robert Solow, Ronald Reagan, Simon Kuznets, The Chicago School, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Malthus, trickle-down economics, Tyler Cowen, War on Poverty, We are all Keynesians now, Yom Kippur War

The nervousness among bankers frightened bank customers and prompted the first run on a bank in Britain since the mid-nineteenth century. Northern Rock, a savings and loan turned bank that borrowed extensively on the open market, could not obtain enough credit to satisfy savers’ withdrawals. Crowds besieged the bank’s branches, demanding their savings be returned. To prevent the panic from spreading to other financial institutions, the British government nationalized Northern Rock. It was a warning to banks around the world, most of which held tainted bundles of debt. Widespread panic ensued in financial institutions, and among savers and investors, on both sides of the Atlantic.


pages: 458 words: 136,405

Protest and Power: The Battle for the Labour Party by David Kogan

Bear Stearns, Berlin Wall, Bernie Sanders, Boris Johnson, Bretton Woods, Brexit referendum, Brixton riot, centre right, crowdsourcing, Donald Trump, Etonian, F. W. de Klerk, falling living standards, financial independence, full employment, imperial preference, Jeremy Corbyn, means of production, Mikhail Gorbachev, Neil Kinnock, Nelson Mandela, Northern Rock, open borders, race to the bottom, Ronald Reagan, wealth creators, Winter of Discontent, Yom Kippur War

The seeds of economic chaos were being sown in September 2007 when Northern Rock ran into trouble and was finally bailed out by the government in February 2008. The US investment bank, Bear Stearns, was also rescued by JP Morgan. In March 2008, the US Treasury secretary, Hank Paulson, stated, ‘I do believe that the worst is likely to be behind us.’ The unseen and unexpected contagion of subprime had only just begun. Brown, as chancellor and then prime minster, had presided over a decade of growth and sound fiscal management. The statistics from 1997 to 2007 on the economy were extremely favourable. Northern Rock was the forerunner to a crisis within the global banking system that was unlike anything seen for seventy years.


pages: 166 words: 49,639

Start It Up: Why Running Your Own Business Is Easier Than You Think by Luke Johnson

Albert Einstein, barriers to entry, Bear Stearns, Bernie Madoff, business cycle, collapse of Lehman Brothers, compensation consultant, Cornelius Vanderbilt, corporate governance, corporate social responsibility, creative destruction, credit crunch, false flag, financial engineering, Ford Model T, Grace Hopper, happiness index / gross national happiness, high net worth, James Dyson, Jarndyce and Jarndyce, Jarndyce and Jarndyce, Kickstarter, mass immigration, mittelstand, Network effects, North Sea oil, Northern Rock, patent troll, plutocrats, Ponzi scheme, profit motive, Ralph Waldo Emerson, Silicon Valley, software patent, stealth mode startup, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, traveling salesman, tulip mania, Vilfredo Pareto, wealth creators

One of the diseases that grips institutions is the ‘safety in numbers’ philosophy – in other words, neurotic risk avoidance at all costs. This is the belief that as long as you follow the crowd – even if they’re quite wrong – you can’t be criticized for your work. Company boards and committees can make astounding errors thanks to peer pressure and the desire to conform – look at Northern Rock or Bear Stearns. Yet as General MacArthur said, ‘There is no security on this earth. Only opportunity.’ I have studied the careers of a number of great entrepreneurs, and all of them followed Franklin D. Roosevelt’s belief in ‘bold, persistent experimentation’. And good old Thomas Edison again, while on his way to doing things like founding General Electric, said, ‘I have not failed.


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, Glass-Steagall Act, housing crisis, Hyman Minsky, income inequality, invisible hand, Kenneth Rogoff, labor-force participation, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, low interest rates, 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

and arsenal for dealing with future crises, 118, 120 background, 13 and Bear Stearns rescue, 48, 50–51, 54 and Countrywide sale, 39 and early stages of financial crises, 33 and expansion of emergency authorities, 80–81 “Geithner put” condition, 101 and Lehman failure, 63, 65, 66, 67 and merger efforts, 77 and onset of financial crisis, 1, 30–31 and policy responses to crisis, 96, 97–101, 105, 106–7 and post-crisis reforms, 112, 116 and shortcomings of U.S. regulatory regime, 28 and spark of crisis, 16 and TARP, 93 and Term Securities Lending Facility, 44 and theoretical approaches to financial crises, 35 General Electric, 69 General Motors, 95, 97, 105, 208 Glass-Steagall Act, 115 global impact of financial crisis, 16, 129, 195–98 “global savings glut,” 16 GMAC, 22, 102, 180, 208 Goldman Sachs and Bear Stearns rescue, 51, 53 collateral Treasuries held by, 20–21 and expansion of crisis, 75, 77–78, 157 government investment in, 176 and Lehman failure, 64, 69 and merger efforts, 77 and Paulson’s background, 13 private capital raised during crisis, 175, 181 Goldstone, Larry, 44 Gorton, Gary, 31 Government Accountability Office (GAO), 115 government-sponsored enterprises (GSEs) and acceleration of crisis, 23 and Fannie Mae/Freddie Mac conservatorship, 56–57 and migration of risk outside regulatory system, 150 and onset of financial crisis, 155, 156 and recovery from crisis, 210 refinancing and loan modification programs, 194 and shortcomings of U.S. regulatory regime, 27–28 and taxpayer profit from rescue, 208 See also Fannie Mae; Freddie Mac Gramm-Leach-Bliley Act, 27 Great Depression Bernanke’s scholarship on, 13, 109 and federal intervention in financial system, 60 and Fed policies, 35 financial crisis compared to, 1, 5–6, 110, 200 and history of financial crises, 33 and model for stress tests, 101, 180 and small bank failures, 115 and U.S. regulatory regime, 29–30 “Great Moderation,” 146 guarantee programs, 164 “haircuts,” 74, 81–82, 87–88, 90, 93, 100, 127 hedge funds, 13, 31, 63, 71 herd mentality, 15–16, 117 Hiring Incentives to Restore Employment Act, 187 history of prior financial crises, 11–12 Home Affordable Modification Program (HAMP), 105–6, 163, 190, 192, 194 Home Affordable Refinance Program (HARP), 105–6, 163, 190, 193, 194 Hope Now, 190, 194 House Financial Services Committee, 54 household debt levels, 16 household wealth, 200, 216n Housing and Economic Recovery Act, 58–59, 185 housing market and causes of financial crisis, 4 and Fannie Mae/Freddie Mac conservatorship, 54–60 and fiscal stimulus efforts, 103 homeowner relief efforts, 80, 92, 97, 107 home ownership ideal, 29 home prices, 4, 108, 148, 154, 190, 200, 204, 216n and legacy of financial crisis, 123 and onset of financial crisis, 30 and policy responses to crisis, 105, 161, 189–94 and post-crisis reforms, 112 and resolution of financial crisis, 110 and spark of crisis, 18 See also mortgage market hyperinflation, 6, 109 income inequality, 12, 125, 143 IndyMac Bank, 54, 69, 71, 81, 190 inflation, 35–36, 147 insurance and acceleration of crisis, 22 and AIG rescue, 71, 72 and expansion of crisis, 76, 77 insured deposits, 22–23 and Lehman failure, 69 and models for future crisis management, 127 and TARP, 102 See also Federal Deposit Insurance Corporation (FDIC) interbank lending, 84–85 interest rates coordinated interest rate cuts, 197 and legacy of financial crisis, 123–24 long-term trends, 147 and policy responses to crisis, 97, 105–6, 163 and role of central banks, 34 and stimulus programs, 43 and vulnerability of financial system, 14 International Monetary Fund (IMF), 102, 198 investment banks, 4, 22, 47–48, 69, 77 It’s a Wonderful Life (film), 14 James, Bill, 76 JPMorgan Chase and Bear Stearns rescue, 49–50, 53–54 and expansion of crisis, 47 and expansion of emergency authorities, 81 government investment in, 176 and Lehman failure, 62 and onset of financial crisis, 155 and post-crisis reforms, 115 private capital raised during crisis, 175, 181 Keynesian stimulus, 44, 111–12, 123 Kindleberger, Charles, 11–12 King, Mervyn, 35, 89 labor force, 12, 141, 142 Lacker, Jeffrey, 36 Latin American debt crisis, 37 layoffs, 95, 108 Lazear, Edward, 70 Lehman Brothers and acceleration of crisis, 22 Archstone-Smith acquisition, 40 and arsenal for dealing with future crises, 121 and Bear Stearns rescue, 47–48, 51, 53 and causes of financial crisis, 4 and expansion of crisis, 75, 157 failure and rescue efforts, 61–62, 62–71 and Fannie Mae/Freddie Mac conservatorship, 60 management firings, 73 and policy responses to crisis, 168, 169, 176 and politics of crisis management, 9 and post-crisis reforms, 115 and spark of crisis, 18 lending practices, 17, 29, 40, 56 Lenin, Vladimir, 5 leverage and acceleration of crisis, 20–25 and Bear Stearns rescue, 47 and causes of financial crisis, 3 and current state of financial system, 6, 7 and Lehman failure, 63 and politics of crisis management, 126–27 and post-crisis reforms, 112, 117–18 and prevention of financial crises, 110–11 and recovery from crisis, 210 and roots of financial crisis, 12 and shortcomings of U.S. regulatory regime, 25–26, 28–29 and spark of crisis, 16, 19 “liar” loans, 17 Libor-OIS spread, 153, 155, 201 liquidity and Bear Stearns rescue, 48, 53 and Countrywide sale, 38–39 and current state of financial system, 6 and expansion of crisis, 75, 76, 158 Fed programs promoting, 42 and Lehman failure, 69 and onset of financial crisis, 32 and overleverage in financial system, 21 and policy responses to crisis, 161, 164, 166 and post-crisis reforms, 112–13 and recovery from crisis, 202 and regulation shortcomings, 26 and roots of financial crisis, 13 and TARP, 87, 90 and Term Securities Lending Facility, 44–45 and theoretical approaches to financial crises, 35, 36–37 loan loss rates, 145 loan modification programs, 105–7, 192, 193, 194 loan originators, 17–18 loan-servicing industry, 106 lobbying, 27 local budgets, 188 Lombard Street (Bagehot), 34 Long-Term Capital Management, 13, 40, 64 low-income borrowers, 17 Mack, John, 77 Maiden Lane, 50, 179, 208, 217n manias, 111, 112 margin requirements, 4, 22, 114, 126 maturity transformation, 14, 16, 23, 117 McCain, John, 80, 82 McCarthy, Callum, 67 McConnell, Meg, 118 media coverage of financial crisis, 65, 98 memory of financial crises, 3, 4, 125–26 mergers, 67, 77, 114 Merrill Lynch and Bear Stearns rescue, 51, 53 and causes of financial crisis, 4 and expansion of crisis, 75, 157 and foreign investment, 41 government investment in, 176 and instability of financial system, 84 and Lehman failure, 61, 64, 66–67 management firings, 73 and post-crisis reforms, 115 private capital raised during crisis, 175, 181 and TARP, 95, 96 and write-down of troubled assets, 40–41 Mexico, 37 middle-class insecurity, 125 Middle-Class Tax Relief and Job Creation Act, 187 Minsky, Hyman, 13 Mitsubishi, 78 monetary policy and legacy of financial crisis, 123–24 and onset of financial crisis, 43–44 and policy responses to crisis, 161, 163, 183–88 and prevention of financial crises, 111–12 and TARP, 89 money market funds and acceleration of crisis, 22 and expansion of crisis, 76–77 and migration of risk outside regulatory system, 150 and policy responses to crisis, 163, 171 and stress tests, 102 and TARP, 87 and taxpayer profit from rescue, 208 monoline insurers, 44 moral hazard and AIG rescue, 74 and Bear Stearns rescue, 51, 52 and current state of financial system, 8 and early stages of financial crises, 33 and Fannie Mae/Freddie Mac conservatorship, 56 and Federal Deposit Insurance Corporation (FDIC) Deposit Insurance Fund, 81–82 and shortcomings of U.S. regulatory regime, 28 and theoretical approaches to financial crises, 36, 37–38 Morgan Stanley and Bear Stearns rescue, 51, 53 credit default swaps, 75 and expansion of crisis, 77, 78, 157 and Fannie Mae/Freddie Mac conservatorship, 59 and foreign investment, 41 government investment in, 176 and Lehman failure, 64, 69 and onset of financial crisis, 156 private capital raised during crisis, 175, 181 mortgage-backed securities (MBS) and causes of financial crisis, 4 and legacy of financial crisis, 123 and policy responses to crisis, 106, 163, 190, 191 and roots of financial crisis, 12 and spark of crisis, 17 mortgage market and Bear Stearns rescue, 53 and causes of financial crisis, 3–4 and Fannie Mae/Freddie Mac conservatorship, 55–60 and instability of financial system, 85 loan modification programs, 105–7, 192, 193, 194 and long-term interest rates, 147 mortgage-related assets, 21 and policy responses to crisis, 103–7, 169, 189–94 and quantitative easing, 103–4 and recovery from crisis, 203 and shortcomings of U.S. regulatory regime, 27, 29 and spark of crisis, 16–20 See also housing market; mortgage-backed securities Mozilo, Angelo, 38–39 National Bureau of Economic Research, 43 nationalization of financial institutions, 54–60, 86, 91, 98, 100, 107, 182 negotiation of relief efforts, 65 Nevada housing market, 19 New York Fed, 26, 28, 64, 66, 118 New York Times, 70 “NINJA” loans, 17 no-documentation loans, 29 nonbanks and acceleration of crisis, 22–24 and AIG rescue, 72 and arsenal for dealing with future crises, 118–20 and bank holding companies, 216n and Bear Stearns rescue, 47, 48–50, 52, 53–54 and Countrywide sale, 39 and expansion of crisis, 76 and Lehman failure, 61, 63 and migration of risk outside regulatory system, 150 and policy responses to crisis, 162, 173 and post-crisis reforms, 113–14, 115 and shortcomings of U.S. regulatory regime, 26–27, 211 and Term Securities Lending Facility, 44–45 See also specific institutions Northern Rock, 155 Obama, Barack and arsenal for dealing with future crises, 120, 124 election, 93 and government response to crisis, 80, 82, 93, 103–7 and legacy of financial crisis, 124 and onset of financial crisis, 1 and policy responses to crisis, 163 and politics of crisis management, 9 and post-crisis reforms, 113 and TARP, 96–98, 100, 105, 107 Office of the Comptroller of the Currency (OCC), 23, 59 Office of Thrift Supervision (OTS), 23, 71, 116 optimism, 18, 117 “orderly liquidation authority,” 121 “originate-to-distribute” mortgage model, 17–18 overconfidence, 12–13, 125–26 overnight funding, 24 panics and Bear Stearns rescue, 49 causes of, 3 contagion effect of, 37, 111 inherent vulnerability to, 13–16 and Lehman failure, 70 and onset of financial crisis, 2, 31–32 and post-crisis reforms, 112 and prevention of financial crises, 111 and TARP, 87 and toxic mortgage assets, 41 Paulson, Henry M., Jr.


pages: 468 words: 145,998

On the Brink: Inside the Race to Stop the Collapse of the Global Financial System by Henry M. Paulson

Alan Greenspan, asset-backed security, bank run, banking crisis, Bear Stearns, break the buck, Bretton Woods, buy and hold, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, Doha Development Round, fear of failure, financial engineering, financial innovation, fixed income, housing crisis, income inequality, junk bonds, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, money market fund, moral hazard, Northern Rock, price discovery process, price mechanism, regulatory arbitrage, Ronald Reagan, Saturday Night Live, Savings and loan crisis, short selling, sovereign wealth fund, technology bubble, too big to fail, trade liberalization, young professional

After investors stopped buying asset-backed commercial paper in the wake of August’s credit meltdown, it was harder for people to get all kinds of loans—credit cards or loans for cars and college. The banks, forced to put on their balance sheets loans previously financed by asset-backed commercial paper, suddenly became stingy with new credits. Throughout the fall of 2007, the markets remained tight and unpredictable. In mid-September, British mortgage lender Northern Rock sought emergency support from the Bank of England, sparking a run on deposits. Coincidentally, I had scheduled a trip to France and the U.K. just a couple of days later, flying first to Paris on September 16 to meet with President Nicolas Sarkozy and his finance minister, Christine Lagarde. I noted how the French leader took a political approach to the financial markets.

., France, Switzerland, and Germany, they concluded that Treasury’s suspicions were correct: European banking was weaker than officials were letting on. On February 17, just a few days after President Bush signed the stimulus bill, U.K. chancellor of the Exchequer Alistair Darling announced that the British government would nationalize Northern Rock. The credit crisis had pushed the big mortgage lender to the brink of failure. In the U.S., the markets continued to slip, troubled by oil prices, a weakening dollar, and ongoing concerns about credit. Over the week of March 3–7, the Dow lost almost 373 points, ending at 11,894—far below the 14,000 of the preceding October.


pages: 462 words: 150,129

The Rational Optimist: How Prosperity Evolves by Matt Ridley

"World Economic Forum" Davos, 23andMe, Abraham Maslow, agricultural Revolution, air freight, back-to-the-land, banking crisis, barriers to entry, Bernie Madoff, British Empire, call centre, carbon credits, carbon footprint, carbon tax, Cesare Marchetti: Marchetti’s constant, charter city, clean water, cloud computing, cognitive dissonance, collateralized debt obligation, colonial exploitation, colonial rule, Corn Laws, Cornelius Vanderbilt, cotton gin, creative destruction, credit crunch, David Ricardo: comparative advantage, decarbonisation, dematerialisation, demographic dividend, demographic transition, double entry bookkeeping, Easter island, Edward Glaeser, Edward Jenner, electricity market, en.wikipedia.org, everywhere but in the productivity statistics, falling living standards, feminist movement, financial innovation, flying shuttle, Flynn Effect, food miles, Ford Model T, Garrett Hardin, Gordon Gekko, greed is good, Hans Rosling, happiness index / gross national happiness, haute cuisine, hedonic treadmill, Herbert Marcuse, Hernando de Soto, income inequality, income per capita, Indoor air pollution, informal economy, Intergovernmental Panel on Climate Change (IPCC), invention of agriculture, invisible hand, James Hargreaves, James Watt: steam engine, Jane Jacobs, Jevons paradox, John Nash: game theory, joint-stock limited liability company, Joseph Schumpeter, Kevin Kelly, Kickstarter, knowledge worker, Kula ring, Large Hadron Collider, Mark Zuckerberg, Medieval Warm Period, meta-analysis, mutually assured destruction, Naomi Klein, Northern Rock, nuclear winter, ocean acidification, oil shale / tar sands, out of africa, packet switching, patent troll, Pax Mongolica, Peter Thiel, phenotype, plutocrats, Ponzi scheme, precautionary principle, Productivity paradox, profit motive, purchasing power parity, race to the bottom, Ray Kurzweil, rent-seeking, rising living standards, Robert Solow, Silicon Valley, spice trade, spinning jenny, stem cell, Steve Jobs, Steven Pinker, Stewart Brand, supervolcano, technological singularity, Thales and the olive presses, Thales of Miletus, the long tail, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, Tragedy of the Commons, transaction costs, ultimatum game, upwardly mobile, urban sprawl, Vernor Vinge, Vilfredo Pareto, wage slave, working poor, working-age population, world market for maybe five computers, Y2K, Yogi Berra, zero-sum game

The world banking system has lurched to the brink of collapse; an enormous bubble of debt has burst; world trade has contracted; unemployment is rising sharply all around the world as output falls. The immediate future looks bleak indeed, and some governments are planning further enormous public debt expansions that could hurt the next generation’s ability to prosper. To my intense regret I played a part in one phase of this disaster as non-executive chairman of Northern Rock, one of many banks that ran short of liquidity during the crisis. This is not a book about that experience (under the terms of my employment there I am not at liberty to write about it). The experience has left me mistrustful of markets in capital and assets, yet passionately in favour of markets in goods and services.

Kung people 44, 135, 136–7 Kuznets curve 106 Kwakiutl people 92 Lagos 322 Lagrange Point 346 lakes, acidification of 305–6 Lamalera people 87 Lancashire 214, 217, 232, 263 Landes, David 223, 406 Lang, Tim 392 language: and exchange 58; genes for 55; Indo-European 129; and isolationism 73; Neanderthals 4, 55; numbers of languages 73; as unique human development 4 Laos 209 lapis lazuli 162, 164 Lascaux caves, France 6 lasers 272 Lassa fever 307 Laurion, Attica 171 Law, John 29, 259 Lawson, Nigel, Baron 331 Lay, Ken 29, 385 Layard, Richard 25 lead 167, 174, 177, 213 Leadbetter, Charles 290 Leahy, Michael 92 leather 70, 122, 167, 176 Lebanon 167 LeBlanc, Steven 137 LEDs (light-emitting diodes) 21–2 lentils 129 Leonardo da Vinci 196, 251 Levy, Stephen 355 Liang Ying (farm worker) 220 liberalism 108, 109–110, 290 Liberia 14, 316 libertarianism 106 Libya 171 lice 68 lichen 75 life expectancy: in Africa 14, 316, 422; in Britain 13, 15, 284; improvements in 12, 14, 15, 17–18, 205, 284, 287, 298, 316; in United States 298; world averages 47 Life (magazine) 304 light, artificial 13, 16, 17, 20–22, 37, 233, 234, 240, 245, 272, 368 light-emitting diodes (LEDs) 21–2 Limits to Growth (report) 303–4, 420 Lindsey, Brink 102, 109 linen 216, 218 lions 43, 87 literacy 106, 201, 290, 353, 396 Liverpool 62, 283 local sourcing (of goods) 35, 41–2, 149, 392; see also food miles Locke, John 96 Lodygin, Alexander 272 Lombardy 178, 196 Lomborg, Björn 280 London 12, 116, 186, 199, 218, 222, 282; as financial centre 259 longitude, measurement of 261 Longshan culture 397 Los Angeles 17, 142 Lothal, Indus valley 162, 164 Louis XI, King of France 184 Louis XIV, King of France 36, 37, 38, 184, 259 Lowell, Francis Cabot 263 Lübeck 180 Lucca 178, 179 Lunar Society 256 Luther, Martin 102 Luxembourg 331 Lyon 184 Macao 183 MacArthur, General Douglas 141 Macaulay, Thomas Babington, 1st Baron 11, 285–7, 359 McCloskey, Deirdre 109, 366–7 Mace, Ruth 73 McEwan, Ian 47 Machiguenga people 87 MacKay, David 342 McKendrick, Neil 224 McKibben, Bill 293 Macmillan, Harold, 1st Earl of Stockton 16 McNamara, Robert 203 mad-cow disease (vCJD) 280, 308 Madagascar 70, 299 Maddison, Angus 180 Maddox, John 207 Madoff, Bernard 28–9 Maghribis 178, 180 magnesium 213 maize 126, 146–7, 153, 155, 156, 163; for biofuel 240, 241 malaria 135, 157, 275, 299, 310, 318, 319, 331, 336, 353, 428, 429 Malawi 40–41, 132, 316, 318 Malawi, Lake 54 Malay Peninsula 66 Malaysia 35, 89, 242, 332 Mali 316, 326 Malinowski, Bronislaw 134 malnutrition 154, 156, 337 Maltese Falcon, The (film) 86 Malthus, Robert 139, 140, 146, 191, 249, 303 Malthusianism 141, 193, 196, 200, 202, 401 mammoths 68, 69, 71, 73, 302 Manchester 214, 218, 283 Mandell, Lewis 254 manganese 150, 213 mangoes 156, 327, 392 Manhattan 83 manure 147, 150, 198, 200, 282 Mao Zedong 16, 187, 262, 296, 311 Marchetti, Cesare 345–6 Marcuse, Herbert 291 Marie-Antoinette, Queen of France 199 markets (in capital and assets) 9, 258–60 markets (in goods and services): and collective betterment 9–10, 36–9, 103–110, 115–16, 281; disdain for 102–3, 104, 291–2, 358; etiquette and ritual of 133–4; and generosity 86–7; global interdependence 42–3; market failure 182, 250; ‘perfect markets’ 249–50; and population control 210–211; and preindustrial economies 133–4; and trust 98–100, 103; and virtue 100–104, 105; see also bartering; exchange; trade Marne, River 234 Martu aborigines 62 Marx, Karl 102, 104, 107–8, 291, 406 Marxism 101, 217–18, 319, 356 Maskelyne, Nevil 221 Maudslay, Henry 221 Mauritius 187, 316 Mauryan empire 172–3, 201, 357 Maxwell, James Clerk 412 measles 14, 135, 310 meat eating 51, 60, 62, 68–9, 126, 147, 156, 241, 376 Mecca 177 Mediterranean Sea: prehistoric settlements 56, 68–9, 159; trade 89, 164, 167–8, 169, 171, 176, 178 meerkats 87 Mehrgarh, Baluchistan 162 Mehta, Suketa 189 Meissen 185 memes 5 Menes, Pharaoh of Egypt 161 mercury 183, 213, 237 Mersey, River 62 Merzbach valley, Germany 138 Mesopotamia 38, 115, 158–61, 163, 177, 193, 251, 357; see also Assyrian empire; Iraq metal prices, reductions in 213 Metaxas, Ioannis 186 methane 140, 329, 345 Mexico: agriculture 14, 123, 126, 142, 387; emigration to United States 117; hurricanes 335; life expectancy 15; nature conservation 324; swine flu 309 Mexico City 190 Meyer, Warren 281 Mezherich, Ukraine 71 mice 55, 125 Michelangelo 115 Microsoft (corporation) 24, 260, 268, 273 migrations: early human 66–70, 82; rural to urban 158, 188–9, 210, 219–20, 226–7, 231, 406; see also emigration Milan 178, 184 Miletus 170–71 milk 22, 55, 97, 135 Mill, John Stuart 34, 103–4, 108, 249, 274, 276, 279 Millennium Development goals 316 Miller, Geoffrey 44, 274 millet 126 Mills, Mark 244 Ming empire 117, 181–4, 260, 311 Minoan civilisation 166 Mississippi Company 29 Mittal, Lakshmi 268 mobile phones 37, 252, 257, 261, 265, 267, 297, 326–7 Mohamed (prophet) 176 Mohawk Indians 138–9 Mohenjo-Daro, Indus valley 161–2 Mojave Desert 69 Mokyr, Joel 197, 252, 257, 411, 412 monarchies 118, 162, 172, 222 monasteries 176, 194, 215, 252 Monbiot, George 291, 311, 426 money: development of 71, 132, 392; ‘trust inscribed’ 85 Mongolia 230 Mongols 161, 181, 182 monkeys 3, 57, 59, 88; capuchins 96–7, 375 monopolies 107, 111, 166, 172, 182 monsoon 174 Montesquieu, Charles, Baron de 103 moon landing 268–9, 275 Moore, Gordon 221, 405 Moore, Michael 291 Morgan, J.P. 100 Mormonism 205 Morocco 53, 209 Morse, Samuel 272 mortgages 25, 29, 30, 323; sub-prime 296 Moses 138 mosquito nets 318 ‘most favoured nation’ principle 186 Moyo, Dambisa 318 Mozambique 132, 316 Mozart, Wolfgang Amadeus 267 Mugabe, Robert 262 Mumbai 189, 190 murder 14, 20, 85, 88, 106, 118, 201 Murrays’ Mills, Manchester 214 music 70, 115, 266–7, 326 Myceneans 166 Nairobi 322 Namibia 209, 324 Napoleon I 184 NASA 269 Nashville 326 Nassarius shells 53, 56, 65 National Food Service 268 National Health Service 111, 261 nationalisation (of industry) 166, 182 nationalism 357 native Americans 62, 92–3, 138–9 Natufians 125 natural selection 5–6, 27, 49–50, 350 nature conservation 324, 339; see also wilderness land, expansion of Neanderthals 3, 4, 53, 55, 64, 65, 68, 71, 79, 373, 378 Nebuchadnezzar 169 needles 43, 70 Nehru, Jawaharlal 187 Nelson, Richard 5 Nepal 15, 209 Netscape (corporation) 259 New Deal 109 New Guinea: agriculture 123, 126, 387; languages 73; malaria 336; prehistoric 66, 123, 126; tribes 87, 92, 138 New York 12, 16, 83, 169, 190 New York Times 23, 295, 305 New Zealand 17, 35, 42, 70 Newcomen, Thomas 244, 256 newspapers 270, 295; licensing copyrights 267 Newsweek (magazine) 329 Newton, Sir Isaac 116, 256 nickel 34, 213 Niger 208–9, 210, 324 Nigeria 15, 31, 99, 117, 210, 236, 316 Nike (corporation) 115, 188 Nile, River 161, 164, 167, 171 nitrogen fertlisers 140, 146, 147, 149–50, 155, 305 nitrous oxide 155 Nobel Peace Prize 143, 280 ‘noble savage’ 43–4, 135–8 Norberg, Johann 187 Nordau, Max 288 Nordhaus, William 331 Norte Chico civilisation 162–3 North, Douglass 324, 397 North Carolina 219–20 North Korea 15, 116–17, 187, 333 North Sea 180, 185 North Sentinel islanders 67 Northern Rock (bank) 9 Northumberland 407 Norton, Seth 211 Norway 97–8, 332, 344 Norwich 225 nostalgia 12–13, 44, 135, 189, 284–5, 292 Novgorod 180 Noyce, Robert 221, 405 nuclear accidents 283, 293–4, 308, 345, 421 nuclear power 37, 236, 238, 239, 245, 246, 343, 344, 345 nuclear war, threat of 280, 290, 299–300, 333 Obama, Barack 203 obesity 8, 156, 296, 337 obsidian 53, 92, 127 occupational safety 106–7 ocean acidification 280, 340–41 ochre 52, 53, 54, 92 octopi 3 Oersted, Hans Christian 272 Oetzi (mummified ‘iceman’) 122–3, 132–3, 137 Ofek, Haim 131 Ohalo II (archaeological site) 124 oil: and ‘curse of resources’ 31, 320; drilling and refining 242, 343; and generation of electricity 239; manufacture of plastics and synthetics 237, 240; pollution 293–4, 385; prices 23, 238; supplies 149, 237–8, 280, 281, 282, 296, 302–3 old age, quality of life in 18 olive oil 167, 169, 171 Olson, Ken 282 Omidyar, Pierre 99 onchoceriasis 310 open-source software 99, 272–3, 356 Orang Asli people 66 orang-utans 60, 239, 339 organic farming 147, 149–52, 393 Orinoco tar shales, Venezuela 238 Orma people 87 ornament, personal 43, 52, 53, 54, 70, 71, 73 O’Rourke, P.J. 157 Orwell, George 253, 290, 354 Ostia 174 otters 297, 299 Otto I, Holy Roman emperor 178 Ottoman empire 161 Oued Djebanna, Algeria 53 oxen 130, 136, 195, 197, 214–15 oxytocin (hormone) 94–5, 97–8 ozone layer 280, 296 Paarlberg, Robert 154 Pacific islanders 134 Pacific Ocean 184 Paddock, William and Paul 301 Padgett, John 103 Page, Larry 114 Pagel, Mark 73 Pakistan 142–3, 204, 300 palm oil 57–8, 239, 240, 242, 339 Pan Am (airline) 24 paper 282, 304 Papin, Denis 256 papyrus 171, 175 Paraguay 61 Pareto, Vilfredo 249 Paris 215, 358; electric lighting 233; restaurants 264 parrots 3 Parsons, Sir Charles 234 Parthian empire 161 Pasadena 17 Pataliputra 173 patents 223, 263, 264–6, 269, 271, 413–14 patriarchy 136 Paul, St 102 PayPal (e-commerce business) 262 peacocks 174 peanuts 126 peat 215–16 Peel, Sir Robert 185 Pemberton, John 263 pencils 38 penicillin 258 Pennington, Hugh 308 pensions 29, 40, 106 Periplus of the Erythrean Sea, The 174 Persia 89, 161, 171, 177 Persian Gulf 66, 164, 340, 429 Peru 97–8, 126, 162–3, 320, 387; silver 31, 132, 183–4 pessimism: and belief in turning points in history 287–9, 301, 311; natural pessimism of human nature 294–5; in nineteenth century 283–8; in twentieth century 281, 282, 288–91, 292–4, 296–308, 328–9; in twenty-first century 8–9, 17, 28, 281–2, 291–2, 308–311, 314–15; ubiquity of 280–85, 291–2, 294–7, 341, 352 pesticides 151–2, 154, 155, 336; DDT 297–8, 299; natural 298–9 Peto, Richard 298 Petty, Sir William 185, 199, 254, 256 pharmaceutical industry 260, 266 philanthropy 92, 105, 106, 295, 318–19, 356 Philip II, King of Spain 30–31 Philip II of Macedon 171 Philippines 61–2, 89, 234 Philistines 166, 170, 396 Phillips, Adam 103, 292 Phoenicians 166–70, 177 photography 114, 283, 386 physiocrats 42 pi, calculation of 173 pig farming 135, 145, 148, 197 Pinnacle Point, South Africa 52, 83 Pisa 115, 178 plagues 135, 176, 195–6, 197; forecasts of 280, 284, 307–310; see also Black Death plastics 237, 240, 270 Plate, River 186 platinum 213 Plato 292 Plautus 44 ploughing 129–30, 136, 145, 150, 195, 197, 198, 215 pneumonia 13, 353 Polanyi, Karl 164–5 polar bears 338–9 polio 261, 275, 310 political fragmentation 170–73, 180–81, 184, 185 pollution: effects on wildlife 17, 297, 299, 339; and industrialisation 218; pessimism about 293–4, 304–6; reduction in 17, 106, 148, 279, 293–4, 297, 299 polygamy 136 Pomeranz, Kenneth 201–2 Ponzi, Charles 29 Ponzi schemes 28–9 population control policies 202–4, 210–211 population growth: and food supply 139, 141, 143–4, 146–7, 192, 206, 208–9; global population totals 3, 12, 14, 191, 206, 332; and industrialisation 201–2; and innovation 252; pessimism about 190, 193, 202–3, 281, 290, 293, 300–302, 314; population explosions 8, 139, 141, 202, 206, 281; and specialisation 192–3, 351; see also birth rates; demographic transition; infant mortality; life expectancy porcelain 181, 183, 184–5, 225, 251 Porritt, Jonathan 314 Portugal 75, 183, 184, 317, 331 Post-it notes 261 Postrel, Virginia 290–91 potatoes 199 Potrykus, Ingo 154 pottery 77, 158, 159, 163, 168, 177, 225, 251 Pound, Ezra 289 poverty: and charitable giving 106; current levels 12, 15, 16–17, 41, 316, 353–4; and industrialisation 217–20; pessimism about 280, 290, 314–15; reduction in 12, 15, 16–17, 290; and self-sufficiency 42, 132, 200, 202, 226–7; solutions to 8, 187–8, 316–17, 322, 326–8, 353–4 Prebisch, Raul 187 preservatives (in food) 145 Presley, Elvis 110 Priestley, Joseph 256 printing: on paper 181, 251, 252, 253, 272; on textiles 225, 232 prisoner’s dilemma game 96 property rights 130, 223, 226, 320, 321, 323–5 protectionism 186–7, 226 Ptolemy III 171 Pusu-Ken (Assyrian merchant) 165–6 putting out system 226, 227, 230 pygmy people 54, 67 Pythagoras 171 Quarterly Review 284 quasars 275 Quesnay, François 42 racial segregation 108 racism 104, 415 radioactivity 293–4, 345 radios 264–5, 271 railways 252; and agriculture 139, 140–41; opposition to 283–4; speed of 283, 286; travel costs 23 rainforests 144, 149, 150, 240, 243, 250–51, 338 Rajan, Raghuram 317 Rajasthan 162, 164 Ramsay, Gordon 392 rape seed 240 Ratnagar, Shereen 162 ravens 69 Rawls, John 96 Read, Leonard 38 recession, economic 10, 28, 113, 311 reciprocity 57–9, 87, 95, 133 Red Sea 66, 82, 127, 170, 174, 177 Rees, Martin 294 Reformation 253 refrigeration 139 regress, technological 78–84, 125, 181–2, 197–200, 351, 380 Reiter, Paul 336, 428 religion 4, 104, 106, 170, 357, 358, 396; and population control 205, 207–8, 211; see also Buddhism; Christianity; Islam Rembrandt 116 Renaissance 196 research and development budgets, corporate 260, 262, 269 Research in Motion (company) 265 respiratory disease 18, 307, 310 restaurants 17, 37, 61, 254, 264 Rhine, River 265–6 rhinoceroses 2, 43, 51, 68, 73 Rhodes, Cecil 322 Ricardo, David 75, 169, 187, 193, 196, 249, 274 rice 32, 126, 143, 146–7, 153, 154, 156, 198 Rifkin, Jeremy 306 Riis, Jacob 16 Rio de Janeiro, UN conference (1992) 290 risk aversion 294–5 Rivers, W.H.R. 81 Rivoli, Pietra 220, 228 ‘robber-barons’ 23–4, 100, 265–6 Rockefeller, John D. 23, 281 Rocky Mountains 238 Rogers, Alex 340 Roman empire 161, 166, 172, 173–5, 184, 214, 215, 259–60, 357 Rome 158, 175 Romer, Paul 269, 276–7, 328, 354 Roosevelt, Franklin D. 109 Roosevelt, Theodore 288 Rosling, Hans 368 Rothschild, Nathan 89 Rousseau, Jean-Jacques 43, 96, 104, 137 Royal Institution 221 rubber 220 rule of law 116–18, 325 Rumford, Benjamin Thompson, Count 221 rural to urban migration 158, 188–9, 210, 219–20, 226–7, 231, 406 Ruskin, John 104 Russia, post-Soviet 14; oil and gas production 31, 37; population decline 205 Russia, prehistoric 71, 73 Russia, Tsarist 216, 229, 324 Rwanda 14, 316 rye 124, 125, 199, 224, 286 Sachs, Jeffrey 208 Saddam Hussein 161 Sahel region 123, 334 Sahlins, Marshall 133, 135 Sahul (landmass) 66, 67 Salisbury, Wiltshire 194 Salk, Jonas 38, 261 salmon 297 Salmon, Cecil 142 saltpetre 140 Sanger, Frederick 412 Sanskrit 129 São Paulo 190, 315 Sargon of Akkad 164 SARS virus 307, 310 satellites 252, 253 satnav (satellite navigation systems) 268 Saudi Arabia 238 Saunders, Peter 102 Schumpeter, Joseph 113–14, 227, 260, 276, 302 science, and innovation 255–8, 412 Scientific American 280 Scotland 103, 199–200, 227, 263, 315 scrub jays 87 scurvy 14, 258 sea level, changes in 128, 314, 333–4 Seabright, Paul 93, 138 seals (for denoting property) 130 search engines 245, 256, 267 Second World War 289 segregation, racial 108 Seine, River 215 self-sufficiency 8, 33–5, 39, 82, 90, 133, 192, 193, 351; and poverty 41–2, 132, 200, 202, 226–7 selfishness 86, 87, 93–4, 96, 102, 103, 104, 106, 292 Sematech (non-profit consortium) 267–8 Sentinelese people 67 serendipity 257, 346 serfs 181–2, 222 serotonin 156, 294 sexism 104, 136 sexual division of labour 61–5, 136, 376 sexual reproduction 2, 6, 7, 45, 56, 271; of ideas 6–7, 270–72 Sforza, house of 184 Shady, Ruth 162 Shakespeare, William 2; The Merchant of Venice 101, 102 Shang dynasty 166 Shapiro, Carl 265 sheep 97, 176, 194, 197 Shell (corporation) 111 shellfish 52, 53, 62, 64, 79, 92, 93, 127, 163, 167 Shennan, Stephen 83, 133 Shermer, Michael 101, 106, 118 ship-building 185, 229; see also boat-building shipping, container 113, 253, 386 Shirky, Clay 356 Shiva, Vandana 156 Siberia 145 Sicily 171, 173, 178 Sidon 167, 170 Siemens, William 234 Sierra Leone 14, 316 Silesia 222 silicon chips 245, 263, 267–8 Silicon Valley 221–2, 224, 257, 258, 259, 268 silk 37, 46, 172, 175, 178, 179, 184, 187, 225 Silk Road 182 silver 31, 132, 164, 165, 167, 168, 169, 171, 177, 183–4, 213 Silver, Lee 122–3 Simon, Julian 83, 280, 303 Singapore 31, 160, 187 Skhul, Israel 53 slash-and-burn farming 87, 130 slave trade 167, 170, 177, 229, 319, 380; abolition 214, 221 slavery 34, 214–15, 216, 407; ancient Greece 171; hunter-gatherer societies 45, 92; Mesopotamia 160; Roman empire 174, 176, 214; United States 216, 228–9, 415; see also anti-slavery sleeping sickness 310, 319 Slovakia 136 smallpox 13, 14, 135, 310; vaccine 221 smelting 131–2, 160, 230 smiling 2, 94 Smith, Adam 8, 80, 96, 101, 104, 199, 249, 272, 350; Das Adam Smith Problem 93–4; Theory of Moral Sentiments 93; The Wealth of Nations vii, 37–8, 39, 56, 57, 93, 123, 236, 283 Smith, Vernon 9, 90, 192 smoke, indoor 13, 338, 342, 353, 429 smoking 297, 298 Smoot-Hawley Tariff Act 186 soap 176, 215 social networking websites 262, 268, 356 socialism 106, 115, 357, 406 software, computer 99, 257, 272–3, 304, 356 solar energy 216, 243, 244 solar power 234–5, 238, 239, 245–6, 343, 344–5, 408 solar wind 346 solid-state electronics 257 Solomon, Robert 94 Solow, Robert 276 Somalia 14, 316, 337, 353 songbirds 55 Sony (corporation) 261 sorghum 126, 156 South Africa: agriculture 154; economy 316, 322; life expectancy 316; pre-historic 52, 53, 54, 83 South Korea 15, 31, 116–17, 187, 212, 322 South Sea Company 29 Southey, Robert 284–5 Soviet Union 16, 107, 109, 289, 299, 318, 324 soybeans 147, 148, 155, 156, 242 space travel 268–9, 275, 282 Spain: agriculture 129; climate 334; Franco regime 186, 289; Peruvian silver 30–31, 183–4; tariffs 222 spears 6, 43, 48, 50, 52, 70, 80, 81, 91 specialisation: by sex 61–5, 136, 376; and division of labour 7, 33, 38, 46, 61–5, 175; and exchange 7, 10, 33, 35, 37–8, 46, 56, 58, 75, 90, 132–3, 350–52, 355, 358–9; and innovation 56, 71–2, 73–4, 76–7, 119, 251; and population growth 192–3, 351; and rule of law 116, 117–18 speech 2, 55; see also language Spencer, Herbert 108 Spengler, Oswald 289 sperm counts 280, 293, 329 spice trade 167, 175, 176, 177, 179, 185 Spinoza, Baruch de 116 Sputnik 282 squashes (vegetables) 126, 163 Sri Lanka 35, 38, 66, 205, 208, 299 Stalin, Joseph 16, 262 stamp seals 130 Stangler, Dane 294 steam engines 126, 214, 221, 228, 231–2, 244, 256, 258, 270, 271, 413–14 steamships 139, 253, 283 Stein, Gil 159 Stein, Herb 281 stem-cell research 358 Stephenson, George 256, 412 Steptoe, Patrick 306 sterilisation, coerced 203–4 Stern (magazine) 304 Stern, Nicholas, Baron 330–31, 332, 425 Stiner, Mary 64, 69 storms 314, 333, 335 Strabo 174 string 70 strokes (cerebral accidents) 18 Strong, Maurice 311 Subramanian, Arvind 317 subsidies: farming 188, 328; renewable energy supplies 344 subsistence farming 87, 138, 175–6, 189, 192, 199–200 substantivism 164–5 suburbia 108, 110, 190 Sudan 316 suffrage, universal 107 sugar 179, 202, 215 sugar beet 243 sugar cane 240, 241, 242 Sun Microsystems (corporation) 259 Sunda (landmass) 66 sunflowers 126 Sungir, Russia 71, 73 superconductivity, high-temperature 257 Superior, Lake 131 supermarkets 36, 112, 148, 268, 292, 297 surfboards 273 Sussex 285 Swan, Sir Joseph 234, 272 Swaziland 14 Sweden 17, 184, 229, 305, 340, 344 Swift, Jonathan 121, 240 Switzerland 264 swords, Japanese 198–9 Sybaris 170–71 symbiosis 75, 351 synergy 6, 101 Syria 124, 130, 164, 174 Szilard, Leo 412 Tahiti 169 Taiwan 31, 187, 219, 322 Talheim, Germany 138 Tanzania 316, 325, 327–8; Hadza people 61, 63, 87 Tapscott, Don 262 Tarde, Gabriel 5 tariffs 185–7, 188, 222–3 taro (vegetable plant) 126 Tartessians 169 Tasman, Abel 80 Tasmania 78–81, 83–4 Tattersall, Ian 73 Taverne, Dick, Baron 103 taxation: carbon taxes 346; and charitable giving 319; and consumption 27; and declining birth rates 211; early development of 160; and housing 25; and innovation 255; and intergenerational transfer 30; Mauryan empire 172; Roman empire 184; United States 25 Taylor, Barbara 103 tea 181, 182, 183, 202, 327, 392 telegraph 252–3, 257, 272, 412 telephones 252, 261; charges 22–3, 253; mobile 37, 252, 257, 261, 265, 267, 297, 326–7 television 38, 234, 252, 268 Telford, Thomas 221 Tennessee Valley Authority 326 termites 75–6 terrorism 8, 28, 296, 358 Tesco (retail corporation) 112 Tesla, Nikola 234 text messaging 292, 356 Thailand 320, 322 Thales of Miletus 171 Thames, River 17 thermodynamics 3, 244, 256 Thiel, Peter 262 Thiele, Bob 349 Thoreau, Henry David 33, 190 3M (corporation) 261, 263 threshing 124, 125, 130, 153, 198; machines 139, 283 thumbs, opposable 4, 51–2 Thwaites, Thomas 34–5 Tiberius, Roman emperor 174, 259 tidal and wave power 246, 343, 344 Tierra del Fuego 45, 62, 81–2, 91–2, 137 tigers 146, 240 timber 167, 216, 229; trade 158, 159, 180, 202 time saving 7, 22–4, 34–5, 123 Timurid empire 161 tin 132, 165, 167, 168, 213, 223, 303 ‘tipping points’ 287–9, 290, 291, 293, 301–2, 311, 329 Tiwi people 81 Tokyo 190, 198 Tol, Richard 331 Tooby, John 57 tool making: early Homo sapiens 53, 70, 71; machine tools 211, 221; Mesopotamian 159, 160; Neanderthals 55, 71, 378; Palaeolithic hominids 2, 4, 7, 48–51; technological regress 80 Torres Strait islanders 63–4, 81 tortoises 64, 68, 69, 376 totalitarianism 104, 109, 181–2, 290 toucans 146 Toulouse 222 Townes, Charles 272 ‘toy trade’ 223 Toynbee, Arnold 102–3 tractors 140, 153, 242 trade: and agriculture 123, 126, 127–33, 159, 163–4; early human development of 70–75, 89–93, 133–4, 159–60, 165; female-centred 88–9; and industrialisation 224–6; and innovation 168, 171; and property rights 324–5; and trust 98–100, 103; and urbanisation 158–61, 163–4, 167; see also bartering; exchange; markets trade unions and guilds 113, 115, 223, 226 trademarks 264 traffic congestion 296 tragedy of the commons 203, 324 Trajan, Roman Emperor 161 transistors 271 transport costs 22, 23, 24, 37, 229, 230, 253, 297, 408 transport speeds 22, 252, 253, 270, 283–4, 286, 287, 296 trebuchets 275 Tressell, Robert 288 Trevithick, Richard 221, 256 Trippe, Juan 24 Trobriand islands 58 trust: between strangers 88–9, 93, 94–8, 104; and trade 98–100, 103, 104; within families 87–8, 89, 91 Tswana people 321, 322 tungsten 213 Turchin, Peter 182 Turkey 69, 130, 137 Turnbull, William (farm worker) 219 Turner, Adair, Baron 411 turning points in history, belief in 287–9, 290, 291, 293, 301–2, 311, 329 Tuscany 178 Tyneside 231 typhoid 14, 157, 310 typhus 14, 299, 310 Tyre 167, 168–9, 170, 328 Ubaid period 158–9, 160 Uganda 154, 187, 316 Ukraine 71, 129 Ulrich, Bernd 304 Ultimatum Game 86–7 unemployment 8, 28, 114, 186, 289, 296 United Nations (UN) 15, 40, 205, 206, 290, 402, 429 United States: affluence 12, 16–17, 113, 117; agriculture 139, 140–41, 142, 219–20; biofuel production 240, 241, 242; birth rates 211, 212; civil rights movement 108, 109; copyright and patent systems 265, 266; credit crunch (2008) 9, 28–9; energy use 239, 245; GDP, per capita 23, 31; Great Depression (1930s) 31, 109, 192; happiness 26–7; immigration 108, 199–200, 202, 259; income equality 18–19; industrialisation 219; life expectancy 298; New Deal 109; oil supplies 237–8; pollution levels 17, 279, 304–5; poverty 16–17, 315, 326; productivity 112–13, 117; property rights 323; rural to urban migration 219; slavery 216, 228–9, 415; tax system 25, 111, 241; trade 186, 201, 228 Upper Palaeolithic Revolution 73, 83, 235 urbanisation: and development of agriculture 128, 158–9, 163–4; global urban population totals 158, 189, 190; and population growth 209–210; and trade 158–61, 163–4, 167, 189–90; see also rural to urban migration Uruguay 186 Uruk, Mesopotamia 159–61, 216 vaccines 17, 287, 310; polio 261, 275; smallpox 221 Vandals 175 Vanderbilt, Cornelius 17, 23, 24 vCJD (mad-cow disease) 280, 308 Veblen, Thorstein 102 Veenhoven, Ruut 28 vegetarianism 83, 126, 147, 376 Venezuela 31, 61, 238 Venice 115, 178–9 venture capitalists 223, 258, 259 Veron, Charlie 339–40 Victoria, Lake 250 Victoria, Queen 322 Vienna exhibition (1873) 233–4 Vietnam 15, 183, 188 Vikings 176 violence: decline in 14, 106, 201; homicide 14, 20, 85, 88, 106, 118, 201; in pre-industrial societies 44–5, 136, 137–9; random 104 Visby, Gotland 180 vitamin A 353 vitamin C 258 vitamin D 129 Vivaldi, Antonio 115 Vladimir, Russia 71 Vogel, Orville 142 Vogelherd, Germany 70 voles 97 Voltaire 96, 103, 104, 256 Wagner, Charles 288 Wal-Mart (retail corporation) 21, 112–14, 263 Wales 132 Wall Street (film) 101 Walton, Sam 112–13, 263 Wambugu, Florence 154 war: in Africa 316; in hunter-gatherer societies 44–5; threat of nuclear war 280, 290, 299–300; twentieth-century world wars 289, 309; unilateral declarations of 104 water: contaminated 338, 353, 429; pricing of 148; supplies 147, 280, 281, 324, 334–5; see also droughts; irrigation water snakes 17 watermills 176, 194, 198, 215, 216–17, 234 Watson, Thomas 282 Watt, James 221, 244, 256, 271, 411, 413–14 wave and tidal power 246, 343, 344 weather forecasting 3, 4, 335 weather-related death rates 335–6 Wedgwood, Josiah 105, 114, 225, 256 Wedgwood, Sarah 105 weed control 145, 152 Weiss, George David 349 Weitzman, Martin 332–3 Welch, Jack 261 welfare benefits 16, 106 Wellington, Arthur Wellesley, 1st Duke of 89 Wells, H.G. 65, 313, 352, 354 West Germany 289–90 West Indies 202, 216, 310 Western Union (company) 261 Westinghouse, George 234 whales 6, 281, 302 whaling 87, 185, 281 wheat 42, 71, 124, 125, 129, 139, 140, 146–7, 149, 153, 156, 158, 161, 167, 300–301; new varieties 141–3 Wheeler, Sir Mortimer 162 wheels, invention of 176, 274 Whitehead, Alfred North 255 Wikipedia (online encyclopedia) 99, 115, 273, 356 Wilberforce, William 105, 214 Wilder, Thornton 359 wilderness land, expansion of 144, 147, 148, 239, 337–8, 347, 359 wildlife conservation 324, 329 William III, King 223 Williams, Anthony 262 Williams, Joseph 254 Williams, Rowan, Archbishop of Canterbury 102 Wilson, Bart 90, 324 Wilson, E.O. 243, 293 Wiltshire 194 wind power 239, 246, 343–4, 346, 408 wolves 87, 137 women’s liberation 108–9 wool 37, 149, 158, 167, 178, 179, 194, 224 working conditions, improvements in 106–7, 114, 115, 188, 219–20, 227, 285 World Bank 117, 203, 317 World Health Organisation 336–7, 421 World Wide Web 273, 356 World3 (computer model) 302–3 Wrangham, Richard 59, 60 Wright brothers 261, 264 Wright, Robert 101, 175 Wrigley, Tony 231 Y2K computer bug 280, 290, 341 Yahgan Indians 62 Yahoo (corporation) 268 Yangtze river 181, 199, 230 Yeats, W.B. 289 yellow fever 310 Yellow river 161, 167 Yemen 207, 209 Yir Yoront aborigines 90–91 Yong-Le, Chinese emperor 183, 184, 185 Yorkshire 285 Young, Allyn 276 young people, pessimism about 292 Young, Thomas 221 Younger Dryas (climatic period) 125 Yucatan 335 Zak, Paul 94–5, 97 Zambia 28, 154, 316, 317, 318, 331 zero, invention of 173, 251 zero-sum thinking 101 Zimbabwe 14, 28, 117, 302, 316 zinc 213, 303 Zuckerberg, Mark 262 Acknowledgements It is one of the central arguments of this book that the special feature of human intelligence is that it is collective, not individual – thanks to the invention of exchange and specialisation.


pages: 226 words: 58,341

The New Snobbery by David Skelton

assortative mating, banking crisis, Black Lives Matter, Boris Johnson, Brexit referendum, British Empire, call centre, centre right, collective bargaining, coronavirus, corporate governance, corporate social responsibility, COVID-19, critical race theory, David Brooks, defund the police, deindustrialization, Etonian, Extinction Rebellion, financial deregulation, gender pay gap, glass ceiling, housing crisis, income inequality, Jeremy Corbyn, job automation, knowledge economy, lockdown, low skilled workers, market fundamentalism, meritocracy, microaggression, new economy, Northern Rock, open borders, postindustrial economy, race to the bottom, rent-seeking, Richard Florida, Right to Buy, rising living standards, shareholder value, social distancing, Social Justice Warrior, TED Talk, TikTok, wealth creators, women in the workforce

The first, deindustrialisation, saw massive economic dislocation, widespread unemployment, greater insecurity and, ultimately, greater dependence on both unskilled work and the public sector. Decades later, the highest levels of ‘worklessness’ were in those places that were most reliant on heavy industry. Just as many of these places had started to recover from the first hammer blow, the banking crash delivered another hit. The sight of people queuing outside Northern Rock in anticipation of the first run on a British bank since the 1930s was particularly devastating because it happened outside a financial establishment that had gone from a respected and solid local institution and lender to north-eastern industry to one that had gambled so recklessly they literally bet the bank and lost.


pages: 218 words: 62,889

Sabotage: The Financial System's Nasty Business by Anastasia Nesvetailova, Ronen Palan

Alan Greenspan, algorithmic trading, bank run, banking crisis, barriers to entry, Basel III, Bear Stearns, Bernie Sanders, big-box store, bitcoin, Black-Scholes formula, blockchain, Blythe Masters, bonus culture, Bretton Woods, business process, collateralized debt obligation, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, critique of consumerism, cryptocurrency, currency risk, democratizing finance, digital capitalism, distributed ledger, diversification, Double Irish / Dutch Sandwich, en.wikipedia.org, Eugene Fama: efficient market hypothesis, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, gig economy, Glass-Steagall Act, global macro, Gordon Gekko, high net worth, Hyman Minsky, independent contractor, information asymmetry, initial coin offering, interest rate derivative, interest rate swap, Joseph Schumpeter, junk bonds, Kenneth Arrow, litecoin, London Interbank Offered Rate, London Whale, Long Term Capital Management, margin call, market fundamentalism, Michael Milken, mortgage debt, new economy, Northern Rock, offshore financial centre, Paul Samuelson, peer-to-peer lending, plutocrats, Ponzi scheme, Post-Keynesian economics, price mechanism, regulatory arbitrage, rent-seeking, reserve currency, Ross Ulbricht, shareholder value, short selling, smart contracts, sovereign wealth fund, Thorstein Veblen, too big to fail

The Telegraph wrote: ‘It seems extraordinary that Barclays and RBS are so desperate to buy this second division bank at such a massive premium when the world’s best banks, such as Goldman Sachs and Morgan Stanley, are off 14pc and 27pc respectively in the past month.’34 Most experts agreed that ABN’s share price had been overvalued because of the bidding competition. It was estimated: ‘Without the bid interest ABN shares would probably plummet 40pc.’35 On 5 October 2007 Barclays officially pulled out. By that time the financial crisis had already engulfed Bear Stearns and Northern Rock. Observers saw the obvious disadvantages of acquiring ABN, but nevertheless recognized that Barclays was under pressure to expand. The New York Times, for example, wrote that losing this bid meant that ‘Barclays will now have to come up with a plan to continue to grow and meet expectations of investors.’36 The comment shows, once more, that even in the midst of a crisis the quality of acquired assets mattered little compared to the short-term gains of eliminating competitors. 9 BEWARE GOOD ADVICE Deutsche’s Helping Hand in Iceland ‘Think twice before pursuing the €72bn acquisition of ABN AMRO,’ John Cryan, then a UBS deals banker, is said to have told RBS in August 2007.1 RBS did not heed the advice.


pages: 247 words: 60,543

The Currency Cold War: Cash and Cryptography, Hash Rates and Hegemony by David G. W. Birch

"World Economic Forum" Davos, Alan Greenspan, algorithmic management, AlphaGo, bank run, Big Tech, bitcoin, blockchain, Bretton Woods, BRICs, British Empire, business cycle, capital controls, cashless society, central bank independence, COVID-19, cross-border payments, cryptocurrency, Diane Coyle, disintermediation, distributed ledger, Donald Trump, driverless car, Elon Musk, Ethereum, ethereum blockchain, facts on the ground, fault tolerance, fiat currency, financial exclusion, financial innovation, financial intermediation, floating exchange rates, forward guidance, Fractional reserve banking, global reserve currency, global supply chain, global village, Hyman Minsky, information security, initial coin offering, Internet of things, Jaron Lanier, Kenneth Rogoff, knowledge economy, M-Pesa, Mark Zuckerberg, market clearing, market design, Marshall McLuhan, mobile money, Money creation, money: store of value / unit of account / medium of exchange, moral hazard, Network effects, new economy, Northern Rock, one-China policy, Overton Window, PalmPilot, pattern recognition, Pingit, QR code, quantum cryptography, race to the bottom, railway mania, ransomware, Real Time Gross Settlement, reserve currency, Satoshi Nakamoto, seigniorage, Silicon Valley, smart contracts, social distancing, sovereign wealth fund, special drawing rights, subscription business, the payments system, too big to fail, transaction costs, Vitalik Buterin, Washington Consensus

It did so by suspending the Bank Act of 1844, allowing banks to pay out in paper money rather than gold, which kept them going; however, they were not ‘too big to fail’, and the famous bank Overend Gurney went under. When it suspended payments after a run on 10 May 1866 (which was, as frequently noted, the last run on a British bank until the Northern Rock debacle), Overend Gurney not only ruined its own shareholders, but also caused the collapse of about 200 other companies (including other banks).22 The railway companies were huge, and a great many ordinary people had invested in them. When their directors went to see the prime minister in 1867 to request the companies be nationalized to stop them from collapsing (because they could not pay back their loans or attract new capital),23 they were not met by Gordon Brown surrounded by advisers (who happened to be bankers), tea and sympathy, followed by the suspension of competition law.


pages: 543 words: 157,991

All the Devils Are Here by Bethany McLean

Alan Greenspan, Asian financial crisis, asset-backed security, bank run, Bear Stearns, behavioural economics, Black-Scholes formula, Blythe Masters, break the buck, buy and hold, call centre, Carl Icahn, collateralized debt obligation, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, diversification, Dr. Strangelove, Exxon Valdez, fear of failure, financial innovation, fixed income, Glass-Steagall Act, high net worth, Home mortgage interest deduction, interest rate swap, junk bonds, Ken Thompson, laissez-faire capitalism, Long Term Capital Management, low interest rates, margin call, market bubble, market fundamentalism, Maui Hawaii, Michael Milken, money market fund, moral hazard, mortgage debt, Northern Rock, Own Your Own Home, Ponzi scheme, proprietary trading, quantitative trading / quantitative finance, race to the bottom, risk/return, Ronald Reagan, Rosa Parks, Savings and loan crisis, shareholder value, short selling, South Sea Bubble, statistical model, stock buybacks, tail risk, Tax Reform Act of 1986, telemarketer, the long tail, too big to fail, value at risk, zero-sum game

In early August, American Home Mortgage Investment Corporation, which was unable to sell its commercial paper, filed for bankruptcy. A few weeks later, Countrywide had to draw down that line of credit, signaling it was in trouble. On August 21, an auction of four-week Treasury bills nearly failed because the demand was so massive it overwhelmed the dealers. In mid-September, the British bank Northern Rock had to be rescued by the Bank of England. The banks were all announcing huge write-downs while frantically trying to raise additional capital—something Paulson was pushing them to do. But the new capital was quickly overwhelmed by yet more losses. The SIVs that some banks had all used to off-load debt and lower their capital requirements were foundering as the money market funds began dumping their commercial paper.

See Derivatives; Mortgage-backed securities (MBS); Subprime mortgage-backed securities (subprime MBS) Mozilo, Angelo biographical information and Countrywide collapse exit package homeownership as mission SEC fraud charges style/personality of subprimes, view of See also Countrywide Financial Mozilo, Mark Mudd, Daniel during collapse Fannie under on Johnson era Multisector CDO National Association of Affordable Housing Lenders National Community Reinvestment Coalition Nationally Recognized Statistical Ratings Organization (NRSROs) National Predatory Lending Task Force Nayden, Denis Netting out Nevins, Lou New Century New Century Financial collapse of fraud, view of Goldman deals growth of Merrill buyout plan Nicolaus, Stifel Norell, Lars Norma Northern Rock Noto, Tom Obama, Barack Arnall supported by regulatory actions Off-balance sheet investments Office of Federal Housing Enterprise Oversight (OFHEO) establishment of under Falcon Fannie, regulatory weakness Fannie accounting fraud investigation and GSEs collapse See also Federal Housing Finance Agency Office of the Comptroller of the Currency (OCC) preemption policy subprime crackdown Office of Thrift Supervision (OTS) Long Beach discrimination case preemption policy subprime guidelines subprimes, neglect of issue O’Neal, Stan biographical information and CDO collapse CDO exposure, ignorance about Kronthal firing leaves Merrill Merrill Lynch under Patrick/Zakaria firing risk encouraged by and sale of Merrill Semerci hired by style/personality of See also Merrill Lynch O’Neill, Sandler Option One Orkin, Michael Overcollateralization Ownit Parekh, Ketan Park, Gene Parker, Ed Partnership offices Patrick, Deval Patrick, Tom Paulson, Henry, Jr.


pages: 239 words: 68,598

The Vanishing Face of Gaia: A Final Warning by James E. Lovelock

Ada Lovelace, Alan Greenspan, An Inconvenient Truth, butterfly effect, carbon footprint, Clapham omnibus, cognitive dissonance, continuous integration, David Attenborough, decarbonisation, discovery of DNA, disinformation, Edward Lorenz: Chaos theory, Garrett Hardin, Henri Poincaré, Herman Kahn, Intergovernmental Panel on Climate Change (IPCC), mandelbrot fractal, mass immigration, megacity, Northern Rock, ocean acidification, oil shale / tar sands, phenotype, Pierre-Simon Laplace, planetary scale, quantum entanglement, short selling, Stewart Brand, Tragedy of the Commons, University of East Anglia, Virgin Galactic

Perhaps some time in the past the asset manager who cared for your pension fund showed you a growth curve for your investments that rose smoothly without a break from now until 2050; but now you would be full of doubt about so smooth and continuous a progress and would know that growth can be interrupted by Northern Rocks and Lehman Brothers strewn along the way and even fall into the chasm of a global recession. Yet we are asked to believe that temperature will rise smoothly for another forty years, unless of course we put the carbon dioxide in the atmosphere somewhere else. You may think that climate and economic forecasts have little in common, but they do: both systems are complex and non‐linear and can change suddenly and unexpectedly.


pages: 210 words: 65,833

This Is Not Normal: The Collapse of Liberal Britain by William Davies

Airbnb, basic income, Bernie Sanders, Big bang: deregulation of the City of London, Black Lives Matter, Boris Johnson, Cambridge Analytica, central bank independence, centre right, Chelsea Manning, coronavirus, corporate governance, COVID-19, credit crunch, data science, deindustrialization, disinformation, Dominic Cummings, Donald Trump, double entry bookkeeping, Edward Snowden, fake news, family office, Filter Bubble, Francis Fukuyama: the end of history, ghettoisation, gig economy, global pandemic, global village, illegal immigration, Internet of things, Jeremy Corbyn, late capitalism, Leo Hollis, liberal capitalism, loadsamoney, London Interbank Offered Rate, mass immigration, moral hazard, Neil Kinnock, Northern Rock, old-boy network, post-truth, postnationalism / post nation state, precariat, prediction markets, quantitative easing, recommendation engine, Robert Mercer, Ronald Reagan, sentiment analysis, sharing economy, Silicon Valley, Slavoj Žižek, statistical model, Steve Bannon, Steven Pinker, surveillance capitalism, technoutopianism, The Chicago School, Thorstein Veblen, transaction costs, universal basic income, W. E. B. Du Bois, web of trust, WikiLeaks, Yochai Benkler

That would necessarily have produced far-reaching political change, for the simple reason that another rescue of the status quo wouldn’t have been viable. Instead, crisis has emanated from outside of the financial sector altogether, from democracy itself. For Britain, June 2016 might provide the full-stop at the end of a paragraph that began with September 2008 (or arguably a year earlier with Northern Rock). Historians may well look at Lehmans and Brexit as entangled with each other in various ways, but the exact causal connections between the first and second ‘prongs’ of the capitalist crisis are far from clear. What I think we can say instead is that both are consequences of the rise of finance from the 1980s onwards.


pages: 708 words: 176,708

The WikiLeaks Files: The World According to US Empire by Wikileaks

affirmative action, anti-communist, banking crisis, battle of ideas, Boycotts of Israel, Bretton Woods, British Empire, capital controls, central bank independence, Chelsea Manning, colonial exploitation, colonial rule, corporate social responsibility, credit crunch, cuban missile crisis, Deng Xiaoping, drone strike, Edward Snowden, energy security, energy transition, European colonialism, eurozone crisis, experimental subject, F. W. de Klerk, facts on the ground, failed state, financial innovation, Food sovereignty, Francis Fukuyama: the end of history, full employment, future of journalism, high net worth, invisible hand, Julian Assange, Kickstarter, liberal world order, Mikhail Gorbachev, millennium bug, Mohammed Bouazizi, Monroe Doctrine, Nelson Mandela, no-fly zone, Northern Rock, nuclear ambiguity, Philip Mirowski, post-war consensus, RAND corporation, Ronald Reagan, Seymour Hersh, Silicon Valley, South China Sea, statistical model, Strategic Defense Initiative, structural adjustment programs, too big to fail, trade liberalization, trade route, UNCLOS, UNCLOS, uranium enrichment, vertical integration, Washington Consensus, WikiLeaks, zero-sum game, éminence grise

The negative publicity was even more damaging for the company when a former employee who had supplied the incriminating information came forward in 2011 with thousands more documents pertaining to high-net-worth clients, which he said would shed more light on the company’s practices7 and on the wealthy individuals avoiding tax. Among the other corporate targets of WikiLeaks over the years have been Kaupthing Bank, Peruvian oil dealers, Northern Rock, and Barclays Bank. WikiLeaks was also passed information on Bank of America and British Petroleum that it was unable to publish, partly because it lacked the resources to carry out a thorough fact-check. All of this by itself may simply constitute some good old-fashioned muck-raking journalism, exposing corporate malpractice and its almost inevitable corollaries of political corruption and repression.

Michael 335–7 Mubarak, Hosni 30, 32, 36–40 Mugabe, Robert 481 Mujahedin-e-Khalq, the 251, 339 Mukhin, Aleksey 214 Mulet, Edmond 61 Multilateral Agreement on Investment 136 Muslim Brotherhood 36, 38, 39, 41, 47–8 Myanmar 458, 460–2, 470 Myers, Richard 378 Nabucco pipeline 247, 248 Nation (newspaper) 427, 514, 533 national archives 5 National Democratic Institute (NDI) 519 National Endowment for Democracy (NED) 29, 30, 39, 40, 129, 484, 519 National Intelligence Council 66 National Intelligence Estimate (NIE), 1995 331 Nationalist Republican Alliance (ARENA) 486 National Lawyers Guild 95 National Salvation Front, Syria 303 National Security Archive 66 national security religiosity 6–10 National Security Strategy, 2002 445 national self-determination 26–7 NATO 16, 212, 238–42, 245; and Afghanistan 372, 382, 384, 388, 389 Negroponte, John 84, 354–5 neoliberalism 57, 59–60, 64 Netanyahu, Benjamin 264, 266, 267–70, 271, 274, 281, 282, 286–7, 326–8, 335 Nethercutt Amendment, the 162, 177 Neumann, Ronald E. 166 New People’s Army 464 New Republic 216–17 Newsnight (TV program) 197, 198 New START Treaty negotiations 231–4 Newsweek (magazine) 88 New World Order 46 New York Times 11, 88–9, 148, 184, 333, 335, 398–9, 411–12, 420, 426, 431, 445–6, 474 Nicaragua 18, 26, 50, 51, 57, 57–8, 60, 123, 484, 516, 542; Contra war 306; democracy promotion 493–4, 496; elections, 1990 58; occupation, 1912 52; US intervention 492–7 Nicaraguan Liberal Alliance (ALN) 495–6 Nikel, Rolf 205–6 Nixon, Richard 63, 66, 67, 119–20, 471–2 Non-Aligned Movement 460 Nonproliferation Treaty Review Conference, 2009 460 Noriega, Roger 23, 173 North American Free Trade Agreement (NAFTA) 121 Northern Rock 115 North Korea 23, 395, 458, 460; ICBM development 226, 229, 333–4, 410, 423; nuclear-weapons 397, 420, 423; and South Korea 396–7, 420–4 Ntaganda, Bosco 178 nuclear-weapons 217–19, 223–5, 231–6, 413; Israel 295; North Korea 397, 420, 423 Nuclear-Weapons-Free Zone in the Middle East (MENWFZ) 291–2 nuclear-weapons treaties 213, 224, 231–4, 291–2 Nyýazow, Saparmyrat 24 Obama, Barack 156, 225, 408–9, 482; and Afghanistan 382–4; antiwar platform 401; applepie rhetoric 24–5; China policy 455–8; East Asia policy 395–6; engagement with ICC 177–80; and Guantánamo 101; and the Honduran coup, 2009 71–2, 73; Iran policy 326; Israel policy 271, 283, 323, 326–8; and Japan 408–19; Middle East policy 41; missile-defense program 331; and Mubarak 38–9; and North Korea 423–4; Palestinian negotiations 326–8; Southeast Asia policy 446–50, 467–9; and South Korea 397; Syria policy 297–8, 314, 320–21; and torture prosecutions 160; and Tunisia 35; and the Ukraine crisis 210; UN speech, May 2011 47 Ocampo, Luis Moreno 179 Office of Public Safety 101 Office of Transition Initiatives (OTI) 517–18, 519, 520, 523, 525 oil 42, 127, 128, 148–9, 245–6, 454–5, 515, 530–4, 535–7 Okinawa 398, 417, 426, 427, 428–32 Omar, Abu, abduction 206–8 Operation Condor 69 Operation Enduring Freedom – Philippines 445 Organization of American States (OAS) 71, 128, 483 Ortega, Daniel 492, 493, 495, 496–7, 516, 542 Oslo Accords 265, 277, 327 Ottawa Treaty 379 Oxfam 123 P5+1 15, 286, 294, 328 Pacific Alliance 529 Pakistan 75 Palacio, Alfredo 175, 176–7 Palestine 39, 42, 179, 265–7; elections 266; security 272–3; statehood rights 271–4; two-state solution 272 Palestinian Authority (PA) 179–80, 265–6, 276, 293, 328.


pages: 662 words: 180,546

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

"there is no alternative" (TINA), Adam Curtis, Alan Greenspan, Alvin Roth, An Inconvenient Truth, Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, bond market vigilante , bread and circuses, Bretton Woods, Brownian motion, business cycle, capital controls, carbon credits, 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, democratizing finance, 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, Glass-Steagall Act, 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, public intellectual, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, savings glut, school choice, sealed-bid auction, search costs, Silicon Valley, South Sea Bubble, Steven Levy, subprime mortgage crisis, 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, tontine, too big to fail, transaction costs, Tyler Cowen, vertical integration, Vilfredo Pareto, War on Poverty, Washington Consensus, We are the 99%, working poor

As Jenny Turner reminisced in the London Review of Books, “People imagined that a crash, when it came, would act like Occam’s Razor, cutting out the hedge funds and leaving the world a little saner . . .” Who among us back then did not suspect that the collapse of Bear Stearns, Lehman Brothers, AIG, Northern Rock, Lloyd’s Bank, Anglo Irish Bank, Kaupthing, Landsbanki, Glitnir (and a parade of lesser institutions) would at least cut through the smarmy triumphalism of those who claimed to fully comprehend the workings of the globalized economy? Such a simultaneous worldwide collapse, first of finance, then of the rest of economic activity, had up till then been the hallmark of conspiracy theorists, apocalypse mongers, and some unreconstructed historical materialists.

See Mont Pèlerin Society (MPS) Mulligan, Casey Mundell, Robert Murdoch, Rupert Murketing MySpace Myth of the Rational Market (Fox) N NAFTA (North American Free Trade Agreement) Nassirian, Barmak National Academy National Bureau of Economic Research (NBER) National Economic Council National Health Service National Income and Product Accounts National Institutes of Health National Public Radio (NPR) National Science Foundation (NSF) National Transportation and Safety Board NBER (National Bureau of Economic Research) Neoclassical econimics as empty Neoclassical economists Neoliberal Ascendancy Neoliberal Follies Neoliberal Thought Collective (NTC) about on agency bolstering of connection between economics profession and “conservatism,” “constructivism” in core insight of on crime current topography of defense mechanisms of doctrines for on economic crisis emergency executive committee meeting on equality exercising hostility toward federal government and Federal Reserve on Fannie Mae and Freddie Mac Foucault on on freedom Friedman on function of geoengineering and “good society,” major ambition of membership of on neuroenhancers normalization of everyday sadism orthodox macroeconomics and parallels between Seekers and persistence of on personhood political mobilizations of Radin on on “risk,” Russian doll structure of sociological structure of success stories think tanks affiliated with Thirteen Commandments writings of members of Neoliberalism Alternatives to Crisis response Defined Distinguished from neoclassical econimics Left epithet Premature obituaries for Netflix New Age New Deal New Disrespect New Economic Thinking New Industrial State (Galbraith) “New Keynesianism,” New Keynesians model New Knowledge Economy New Labour New Orthodox Seer New Right New Statesman New York Federal Reserve Bank New York Review of Books New York Times New York University (NYU) New Yorker Newbery, David on “investments,” News Corporation Newshour Newsnight Newsweek Nietzsche, Friedrich “The Night they Re-read Minsky,” Nik-Khah, Edward Nine Lives of Neoliberalism Nobel Prize Nobelists Nocera, Joe Nolan, Christopher A Non-Random Walk Down Wall Street (Lo and MacKinley) Northern Rock Nostradamus Codex Notre Dame, University of NPR (National Public Radio) NSF (National Science Foundation) NTC. See Neoliberal Thought Collective (NTC) Nugent, Ted NYU (New York University) O Obama, Barack Occam’s Razor Occupiers Occupy Handbook Occupy London Occupy Movement Occupy Wall Street (OWS) Odyssey (Homer) Old Thinking Oldham, Taki, Turf Wars Open questions Open Society The Open Society and Its Enemies (Popper) Oracle at Delphi Ordoliberalism Oreskes, Naomi Original Sin O’Rourke, Kevin Orszag, Peter Orwell, George Osborne, George Outsourced Self (Hochschild) OWS (Occupy Wall Street) P Page, Scott Palin, Sarah Pareto, Vilfredo Patterson, Scott, Dark Pools Paul, Ron Paulson, Hank Payday loans Payne, Christopher PBS Peck, Jamie Pecora, Ferdinand Perry, Rick Pesaran, Hashem Pew Economic Policy Group Financial Reform Project Philip Morris Phillips Curve Philosopher’s Stone Pimco Pinochet, Augusto Pinto, Edward Pissarides, Christopher Pity the Billionaire (Frank) Plant, Raymond Plato Plehwe, Dieter Ponzi scheme Poon, Martha Popper, Karl Portes, Richard Posner, Richard Power Auctions Predator Nation (Ferguson) Prediction as red herring Prescott, Edward C.


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, fear index, 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, low interest rates, 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, proprietary trading, 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

Mervyn King, governor of the Bank of England, had criticized the ECB and the Fed for overreacting after we pumped liquidity into the markets in early August, warning that we were creating dangerous moral hazard. He was less critical after September 14, when he had to provide similar assistance to Northern Rock, a mortgage lender that had become the target of England’s first bank run in nearly 150 years. On September 18, we cut the federal funds rate target by a half point, and the markets rallied. Financial tensions in Europe and the United States eased a bit. We cut another quarter point in October, and the markets continued to show signs of calm.

My instant reaction was no way—or, as I sometimes abbreviated it, NFW. The United Kingdom had separated its lender-of-last-resort function from its supervision function, with disastrous results; its central bank, lacking the situational awareness that comes with supervisory boots on the ground, badly underestimated the crisis and allowed a run to cripple Northern Rock. But after the President invited Dodd to the Oval Office and expressed similar NFW sentiments in more polite terms, Dodd changed his mind. He pushed us to be more practical, and to bend where we needed to, but he knew he needed the President to get the bill done. We had a similar uh-oh moment, with less satisfactory results, over derivatives regulation.


The Handbook of Personal Wealth Management by Reuvid, Jonathan.

asset allocation, banking crisis, BRICs, business cycle, buy and hold, carbon credits, collapse of Lehman Brothers, correlation coefficient, credit crunch, cross-subsidies, currency risk, diversification, diversified portfolio, estate planning, financial deregulation, fixed income, global macro, high net worth, income per capita, index fund, interest rate swap, laissez-faire capitalism, land tenure, low interest rates, managed futures, market bubble, merger arbitrage, negative equity, new economy, Northern Rock, pattern recognition, Ponzi scheme, prediction markets, proprietary trading, Right to Buy, risk tolerance, risk-adjusted returns, risk/return, short selling, side project, sovereign wealth fund, statistical arbitrage, systematic trading, transaction costs, yield curve

Many retail products, due to higher charges or poor-quality debt underpinning, suffered badly and many investors and their advisers were horrified to discover that their capital protection was secured on Lehman Brothers. Institutional products fared better (apart from a few secured on Icelandic bank debt), and despite the problems investors in structured products secured on Northern Rock and Bradford & Bingley had their debt investment underwritten by HM Government unlike investors in the permanent, preference and ordinary shares. The presence of these investments in portfolios, which often looked as awful as any normal equity investment, provided some reassurance to clients during bear markets as they could at least see a return of capital on a given date provided Megabank doesn’t default on its debt.


pages: 247 words: 74,612

For the Love of Money: A Memoir by Sam Polk

Bear Stearns, carried interest, Credit Default Swap, eat what you kill, fixed income, food desert, hiring and firing, Northern Rock, nuclear winter, Rosa Parks, SimCity

What I loved most of all was how close I got to sit to two billionaires and Sean, the kind of men I’d been reading about my whole life. But after I returned from Fire Island, things started to look different to me. If the market crash in 2007 had been a thunderstorm, the 2008 crash was like an earthquake and then a tsunami. In the first quarter of 2008, Countrywide (the largest US mortgage company), Northern Rock (the largest UK finance company), and Bear Stearns (a major US investment bank) all failed. It’s difficult to explain how surreal it was when Bear ­Stearns went down. Bear Stearns was one of the most prestigious, well-respected institutions on Wall Street; it dissolved over a single week. At the same time, a headline announced that Eliot Spitzer, New York’s moralizing governor, was part of a prostitution ring.


pages: 245 words: 75,397

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

"World Economic Forum" Davos, 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, deal flow, Donald Trump, Edward Thorp, family office, fear index, 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, inverted yield curve, Jeff Bezos, Jim Simons, junk bonds, Kenneth Rogoff, liquidity trap, lockdown, Long Term Capital Management, low interest rates, low skilled workers, margin call, market bubble, Masayoshi Son, Michael Milken, Mikhail Gorbachev, Minsky moment, 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, proprietary trading, quantitative easing, Reminiscences of a Stock Operator, reserve currency, Ronald Reagan, Ronald Reagan: Tear down this wall, Sharpe ratio, short selling, short squeeze, social distancing, SoftBank, statistical arbitrage, stock buybacks, The Great Moderation, TikTok, too big to fail, trickle-down economics, two and twenty, value at risk, Vision Fund, WeWork, yield curve, zero-sum game

Shit, can people get any food?” “Okay, keep me posted on what you hear.” Everyone always likes to talk about the black swans, the big ones. And somehow people always think they’ll somehow see them coming. But there are always precursors to the event that people miss, such as bankruptcies at Countrywide and Northern Rock that sent warning signs before the GFC. Even now, we’ve had our fair share of these precursors, the omens. The world has had a long string of one-offs, each nibbling at growth: trade wars, Chinese deleveraging, the European debt crisis … Fuck, how about all of the other signs: inverted yield curves, the repo markets, WeWork, and all the other bubble indicators?


pages: 439 words: 79,447

The Finance Book: Understand the Numbers Even if You're Not a Finance Professional by Stuart Warner, Si Hussain

AOL-Time Warner, book value, business intelligence, business process, cloud computing, conceptual framework, corporate governance, Costa Concordia, credit crunch, currency risk, discounted cash flows, double entry bookkeeping, forward guidance, intangible asset, Kickstarter, low interest rates, market bubble, Northern Rock, peer-to-peer lending, price discrimination, Ralph Waldo Emerson, shareholder value, supply-chain management, time value of money

A statement of compliance by directors should give investors confidence that they are operating in the best interests of the shareholders. Numerous company collapses have shaped the principles set out in the Code. High-profile UK corporate collapses included Maxwell Communications and Polly Peck in the early 1990s and Northern Rock and RBS during the financial crisis of the late 2000s. The more recent collapse of BHS has also in part been attributed to (poor) corporate governance in the organisation. In practice Compliance with the principles and provisions of the Code is not a legal requirement. Company directors are expected to comply with the recommendations or explain why they have decided not to.


pages: 261 words: 81,802

The Trouble With Billionaires by Linda McQuaig

"World Economic Forum" Davos, battle of ideas, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, British Empire, Build a better mousetrap, carried interest, Charles Babbage, collateralized debt obligation, computer age, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, Douglas Engelbart, Douglas Engelbart, employer provided health coverage, financial deregulation, fixed income, full employment, Gary Kildall, George Akerlof, Gini coefficient, Glass-Steagall Act, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of the telephone, invention of the wheel, invisible hand, Isaac Newton, Jacquard loom, John Bogle, Joseph-Marie Jacquard, laissez-faire capitalism, land tenure, lateral thinking, low interest rates, Mark Zuckerberg, market bubble, Martin Wolf, mega-rich, minimum wage unemployment, Mont Pelerin Society, Naomi Klein, neoliberal agenda, Northern Rock, offshore financial centre, Paul Samuelson, plutocrats, Ponzi scheme, pre–internet, price mechanism, proprietary trading, purchasing power parity, RAND corporation, rent-seeking, rising living standards, road to serfdom, Robert Solow, Ronald Reagan, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, trickle-down economics, Vanguard fund, very high income, wealth creators, women in the workforce

So GM paid roughly three times as much in 2007 to get results that were infinitely worse. Examples like this abound in business and the financial world. Indeed, the 2008 financial meltdown has brought the disconnect between executive performance and executive pay into sharp, tragicomic relief. In the UK, Adam Applegarth collected £10 million over five years as chief executive of Northern Rock, which he transformed into an ultra-aggressive mortgage lender, only to have it collapse in 2007. Joseph Cassano, who headed the credit default swaps team in London for financial giant AIG, received a $35 million bonus – even after it was clear that the swaps had nearly bankrupted AIG in the 2008 crash.


pages: 301 words: 88,082

The Great Tax Robbery: How Britain Became a Tax Haven for Fat Cats and Big Business by Richard Brooks

accounting loophole / creative accounting, bank run, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, carried interest, Celtic Tiger, collateralized debt obligation, commoditize, Corn Laws, corporate social responsibility, crony capitalism, cross-border payments, Double Irish / Dutch Sandwich, financial deregulation, financial engineering, haute couture, information security, intangible asset, interest rate swap, Jarndyce and Jarndyce, mega-rich, Northern Rock, offshore financial centre, race to the bottom, shareholder value, short selling, supply-chain management, The Chicago School, The Wealth of Nations by Adam Smith, transfer pricing, two and twenty

‘These measures are effectively a covert means of extending the tax base to raise revenue,’ bleated the CBI’s chief economic adviser Ian McCafferty in November 2005, adopting what was to prove a winning tax whinge formulation, ‘and have impacted on the UK’s attractiveness as a place to do business.’‌6 Later the same month Gordon Brown stood obligingly before the organization’s annual conference and delivered what would become his infamous promise of ‘not just a light touch, but a limited touch’ to business regulation. This model, he continued, ‘can be applied … to the regulation of financial services and indeed to the administration of tax’.‌7 Just as Northern Rock could gear up its perpetual mortgage machine undisturbed by irksome regulators, so multinational companies must be allowed to structure their tax affairs without too much hassle from prying tax inspectors. Brown’s fawning before the CBI precipitated yet another ‘review’, this time with Varney’s name at the top but in reality an extension of the 2001 exercise run by Hartnett, who sat sagely alongside Varney on the latest effort’s ‘consultative committee’.


pages: 310 words: 85,995

The Future of Capitalism: Facing the New Anxieties by Paul Collier

"Friedman doctrine" OR "shareholder theory", accounting loophole / creative accounting, Airbnb, An Inconvenient Truth, assortative mating, bank run, Bear Stearns, behavioural economics, Berlin Wall, Bernie Sanders, bitcoin, Bob Geldof, bonus culture, business cycle, call centre, central bank independence, centre right, commodity super cycle, computerized trading, corporate governance, creative destruction, cuban missile crisis, David Brooks, delayed gratification, deskilling, Donald Trump, eurozone crisis, fake news, financial deregulation, full employment, George Akerlof, Goldman Sachs: Vampire Squid, greed is good, income inequality, industrial cluster, information asymmetry, intangible asset, Jean Tirole, Jeremy Corbyn, job satisfaction, John Perry Barlow, Joseph Schumpeter, knowledge economy, late capitalism, loss aversion, Mark Zuckerberg, minimum wage unemployment, moral hazard, negative equity, New Urbanism, Northern Rock, offshore financial centre, out of africa, Peace of Westphalia, principal–agent problem, race to the bottom, rent control, rent-seeking, rising living standards, Robert Shiller, Robert Solow, Ronald Reagan, shareholder value, Silicon Valley, Silicon Valley ideology, sovereign wealth fund, The Wealth of Nations by Adam Smith, theory of mind, too big to fail, trade liberalization, urban planning, web of trust, zero-sum game

But an increase in the supply of housing needs to be gradual: a quantum increase would risk crashing house prices, plunging many young home owners into negative equity. Correspondingly, it makes sense to curb household growth by restoring restrictions on immigration. The credit frenzy unleashed by financial deregulation did not usher in nirvana – it ended in the regulatory disgrace of a bank run. The sight of depositors besieging the branches of Northern Rock was the first such spectacle in Britain for 150 years. As with a house building programme, change will need to be gradual, but its direction is unambiguous: we need to return to ceilings on the ratios of mortgages to income and of mortgages to deposits. It also makes sense to curb buy-to-let. The public benefit from home ownership warrants giving priority to those who want a house-as-home, over those who want a house-as-asset.


pages: 261 words: 86,905

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

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, asset allocation, Basel III, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, blood diamond, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collective bargaining, commoditize, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Dava Sobel, David Graeber, disintermediation, double entry bookkeeping, en.wikipedia.org, estate planning, fear index, financial engineering, financial innovation, Flash crash, forward guidance, Garrett Hardin, Gini coefficient, Glass-Steagall Act, global reserve currency, high net worth, High speed trading, hindsight bias, hype cycle, income inequality, inflation targeting, interest rate swap, inverted yield curve, Isaac Newton, Jaron Lanier, John Perry Barlow, joint-stock company, joint-stock limited liability company, junk bonds, Kodak vs Instagram, Kondratiev cycle, Large Hadron Collider, liquidity trap, London Interbank Offered Rate, London Whale, loss aversion, low interest rates, margin call, McJob, means of production, microcredit, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, negative equity, neoliberal agenda, New Urbanism, Nick Leeson, Nikolai Kondratiev, Nixon shock, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, oil shock, open economy, paradox of thrift, plutocrats, Ponzi scheme, precautionary principle, proprietary trading, purchasing power parity, pushing on a string, quantitative easing, random walk, rent-seeking, reserve currency, Richard Feynman, Right to Buy, road to serfdom, Ronald Reagan, Satoshi Nakamoto, security theater, shareholder value, Silicon Valley, six sigma, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, Steve Jobs, survivorship bias, The Chicago School, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tragedy of the Commons, trickle-down economics, two and twenty, Two Sigma, Tyler Cowen, Washington Consensus, wealth creators, working poor, yield curve

The banks suffered no consequences for their mistakes, and so had no incentives to avoid such mistakes in the future—a textbook example of moral hazard. It was worry about moral hazard that made the Bank of England slow to act when the first signs of the credit crunch appeared with the collapse of the bank Northern Rock in autumn 2007. The term is close to being an example of reversification, but perhaps it’s more like a simple obfuscation: what we’re really talking about is the bad guys getting away with it. mortgage The word literally means “dead pledge,” and if it were called that maybe more people would think twice about getting one.


pages: 278 words: 84,627

No Picnic on Mount Kenya: The Story of Three POWs' Escape to Adventure by Felice Benuzzi

Northern Rock

All we knew was what had been written about the fauna and flora by Lieutenant Colonel Stockley, that mention by an anonymous British major about the approach to the northern glaciers that ended in storms and buffaloes, the story of the papal cross placed on Lenana, and Giuseppe Brocherel’s exclamation, “It’s worse than Mount Kenya.” Far too little, really! Of Batian we knew only the name and the terrible northern rock faces seen through binoculars; Lenana we had only seen in photographs and we did not even know where exactly it was; we did not dream that there was a shelter; we did not know that Nelion even existed, nor did it ever occur to us that via its peak lay the common route to Batian. The names Batian and Lenana, however strange and harmonious, suggested nothing to us of the affairs of a fierce, indigenous race of warriors and herdsmen doomed to inevitable decline.


pages: 1,242 words: 317,903

The Man Who Knew: The Life and Times of Alan Greenspan by Sebastian Mallaby

airline deregulation, airport security, Alan Greenspan, Alvin Toffler, Andrei Shleifer, anti-communist, Asian financial crisis, balance sheet recession, bank run, barriers to entry, Bear Stearns, behavioural economics, Benoit Mandelbrot, Black Monday: stock market crash in 1987, bond market vigilante , book value, Bretton Woods, business cycle, central bank independence, centralized clearinghouse, classic study, collateralized debt obligation, conceptual framework, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, Dr. Strangelove, energy security, equity premium, fiat currency, financial deregulation, financial engineering, financial innovation, fixed income, Flash crash, forward guidance, full employment, Future Shock, Glass-Steagall Act, Greenspan put, Hyman Minsky, inflation targeting, information asymmetry, interest rate swap, inventory management, invisible hand, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", junk bonds, Kenneth Rogoff, Kickstarter, Kitchen Debate, laissez-faire capitalism, Lewis Mumford, Long Term Capital Management, low interest rates, low skilled workers, market bubble, market clearing, Martin Wolf, Money creation, money market fund, moral hazard, mortgage debt, Myron Scholes, Neil Armstrong, new economy, Nixon shock, Nixon triggered the end of the Bretton Woods system, Northern Rock, paper trading, paradox of thrift, Paul Samuelson, Phillips curve, plutocrats, popular capitalism, price stability, RAND corporation, Reminiscences of a Stock Operator, rent-seeking, Robert Shiller, Robert Solow, rolodex, Ronald Reagan, Saturday Night Live, Savings and loan crisis, savings glut, secular stagnation, short selling, stock buybacks, subprime mortgage crisis, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Tipper Gore, too big to fail, trade liberalization, unorthodox policies, upwardly mobile, We are all Keynesians now, WikiLeaks, women in the workforce, Y2K, yield curve, zero-sum game

Laissez-faire policies ought to be judged not against some imagined utopia of watertight rules, Greenspan was saying; rather, critics should reckon with the dispiriting reality of frayed red tape, the product of dysfunctional rulemaking in Washington. Invoking the recent collapse and nationalization of the British lender Northern Rock, Greenspan pressed his point. The failure of regulation was not just an American story; it was an international one. Regulation was always doomed because it was impossible to implement successfully. “How can we otherwise explain how the UK’s Financial Services Authority, whose effectiveness is held in such high regard, fumbled Northern Rock?” Greenspan asked. Or how to explain why “in the US, our best examiners have repeatedly failed over the years. These are not aberrations.”31 It was a reasonable riposte, but nobody was listening.

See Social Security reform commission National Community Reinvestment Coalition, 621 National Economic Council, 424, 578, 600, 609 National Industrial Conference Board, 35–38, 42–45, 61 National Press Club, 197–98 National Public Radio, 648, 654–55 National Review, 64, 69 National Science Foundation, 319 NationsBank, 526 “Negro problem,” 102–3, 107–10 New Deal, 18, 28–29, 52, 87, 144 New Economy, 464, 530, 537–38, 561, 566, 568, 594, 597, 637 New England, 371–74, 378, 381–85, 389, 553 New Frontier, 77, 87–88, 92, 94, 105–6, 124–25, 128–30, 133, 135, 137, 140, 145–46, 158, 182, 223 New Hampshire, 113, 383 New Jersey, 223, 231, 292 New Orleans, Louisiana, 151 New Republic, 235 New York City, 96, 130, 202, 496, 557, 571, 604 bailout of, 195–201, 205, 240, 283, 301, 303, 476, 519, 659, 676 Greenspan’s apartment in, 102–3, 370 Greenspan’s meetings in, 129, 164, 257 Greenspan’s offices in, 106, 136–37, 208 Greenspan’s social life in, 81–82, 269, 274, 304, 425–26, 470–74 Greenspan’s speeches in, 518, 520 Greenspan’s weekends in, 369–70 Nixon’s campaign in, 112, 118, 125–26 and stock market crashes, 345–49, 351, 355, 357, 360 Thatcher’s visit to, 178–79 See also Columbia University; New York University New York Commodities Exchange (Comex), 55, 130 New York Daily News, 198–99 New York Federal Reserve, 425 and 1987 crash, 351, 354, 356, 676–77 and banks, 467–68, 520–21, 630–33 under Corrigan, 343, 348, 354, 356, 386, 676 and Geithner, 630–33, 643, 679 and LTCM collapse, 538–42, 545 under McDonough, 485, 520–21, 534, 538, 606 role of, 328, 330 and Sept. 11, 2001, 585, 588–90 under Volcker, 282–83, 329 New York Financial Writers’ Association, 199 New York Post, 658 New York Stock Exchange, 355, 357–58, 387, 442, 505, 549, 589 New York Times, 18, 26–27, 36, 69–70, 133, 156–57, 163, 184–86, 214, 224, 264, 278, 298, 337, 372, 378, 386–87, 407–8, 415, 428, 451, 457, 476, 510, 525, 547, 565, 597–98, 602, 604, 610, 655, 672 New York Times forum, 301–4 New York University, 25, 28–36, 71, 212, 214, 432, 553, 593 New Yorker, 4, 254, 669 New Zealand, 380–81, 451, 455–56, 488, 504 Newark riots, 101–2, 106–7, 109–10 Newsweek, 156, 173–74, 286, 289, 457, 653 Nichols, Bruce, 313 nineteenth century, 159, 195, 236, 304, 594 banking in, 90–91 economy of, 303, 596 Greenspan’s admiration of, 60, 107, 293, 409, 672–74 high standard of living in, 595–96 industrialists of, 31, 60, 409, 672–74 Nixon Mudge Rose Guthrie Alexander & Mitchell, 108, 124 Nixon, Richard, 34, 95, 128, 151, 196, 225, 245, 310, 315, 379, 586 campaign of, 8, 112–26, 147, 150, 153–55, 224, 673 dirty tricks of, 4, 140–44, 163 ends military draft, 131, 133 finance reform of, 135–40, 147–53, 156, 162, 184, 212, 265, 523, 675 and gold, 145–46, 183, 226–27, 269 Greenspan advises, 3, 6, 102–3, 106–27, 129–31, 136, 140, 147, 154, 164, 166, 181, 271, 511, 523, 676 Greenspan on, 121, 124, 130, 146–48, 151–54, 156 and Kissinger, 182–83 and “Negro problem,” 102–3, 107–10, 112–17 nominates Greenspan chair, 155–57 resignation of, 161–62 See also Watergate: scandal Norman, Jessye, 564 Norman, Montagu, 615–16 North Carolina, 526 Northern Rock, 657–58 Novak, Bob, 422 nuclear arms race, 308 Oates, Marylouise, 511 objectivism, 66, 75, 85, 89–90, 93–95, 102–3, 123, 169 Objectivist Newsletter, 89, 94, 96 O’Connor, Frank, 95 Office of Thrift Supervision, 404, 534, 657 oil, 73, 395, 677 deals, 185–94, 244, 271 embargo, 153, 186, 188 in Iraq, 391, 394, 608, 653 prices, 185–90, 192–93, 392–93 See also OPEC Okun, Arthur, 288 Olds, Glenn, 117–18 Olson, Mark, 633 Omni Shoreham Hotel, 375–76 One Liberty Plaza, 585, 588–89 One New York Plaza, 136–37, 208, 220 O’Neill, Paul, 571–76, 580, 598–600, 607, 679 O’Neill, Tip, 280 online trading, 600–601 OPEC, 185–90, 192, 394 opinion polling, 113–14, 119–20, 122, 124, 199, 235, 500, 677 Options Exchange, 355 Orange County, California, 465–66, 468, 471, 530, 534 Organization Man, 63, 74–75 over-the-counter markets, 531–34, 538–39, 542–45, 601 Palmer House Hilton (Chicago), 252, 676 Paris, France, 28, 487 Parker, Charlie “Bird,” 23 Parkinson, Pat, 532–33 Pastore, John, 176 patriotism, 156, 165, 407, 544, 590 Patterson, James, 27 Paul, Ron, 521 Paulson, Hank, 659, 661, 663 Penn Central Transportation Co., 135–36, 139–40, 151, 196, 200, 301, 303, 476, 558, 619 pension funds, 200, 211, 272–73, 293, 536, 574, 596, 676 Pentagon, 132, 391, 584, 586 Pepper, Claude, 272–73, 275–77, 280–81 petroleum, 183 Phelan, John, 355–59 Philadelphia Federal Reserve, 377–78 Philadelphia Inquirer, 499 Phillips, A.


pages: 767 words: 208,933

Liberalism at Large: The World According to the Economist by Alex Zevin

"there is no alternative" (TINA), activist fund / activist shareholder / activist investor, affirmative action, Alan Greenspan, anti-communist, Asian financial crisis, bank run, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, business cycle, capital controls, carbon tax, centre right, Chelsea Manning, collective bargaining, Columbine, Corn Laws, corporate governance, corporate social responsibility, creative destruction, credit crunch, David Ricardo: comparative advantage, debt deflation, desegregation, disinformation, disruptive innovation, do well by doing good, Donald Trump, driverless car, Edward Snowden, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Francis Fukuyama: the end of history, full employment, Gini coefficient, Glass-Steagall Act, global supply chain, guns versus butter model, hiring and firing, imperial preference, income inequality, interest rate derivative, invisible hand, It's morning again in America, Jeremy Corbyn, John von Neumann, Joseph Schumpeter, Julian Assange, junk bonds, Khartoum Gordon, land reform, liberal capitalism, liberal world order, light touch regulation, Long Term Capital Management, low interest rates, market bubble, Martin Wolf, means of production, Michael Milken, Mikhail Gorbachev, Monroe Doctrine, Mont Pelerin Society, moral hazard, Naomi Klein, new economy, New Journalism, Nixon triggered the end of the Bretton Woods system, no-fly zone, Norman Macrae, Northern Rock, Occupy movement, Philip Mirowski, plutocrats, post-war consensus, price stability, quantitative easing, race to the bottom, railway mania, rent control, rent-seeking, road to serfdom, Ronald Reagan, Rosa Parks, Seymour Hersh, Snapchat, Socratic dialogue, Steve Bannon, subprime mortgage crisis, Suez canal 1869, Suez crisis 1956, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, trade liberalization, trade route, unbanked and underbanked, underbanked, unorthodox policies, upwardly mobile, War on Poverty, WikiLeaks, Winter of Discontent, Yom Kippur War, young professional

Seelye, ‘The Economist Names New Editor in Chief’, New York Times, 23 March 2006. 95.Burrell, ‘John Micklethwait’, Independent, 8 January 2007; Burrell, ‘John Micklethwait: “Republicans Had the Advantage, but They Wasted It With Sleaze”’, Independent, 3 November 2008. 96.‘Danger Time for America’, 14 January 2006. Wall Street was still burdened by excessive red tape. ‘What’s Wrong with Wall Street’, 25 November 2006. Late in 2007, it saw a possible credit crunch taking shape. But this was after Britain’s Northern Rock received its first bailout. Even then, the problem was a consumer spending slowdown, not a collapse of the banking sector. ‘Getting Worried Downtown’, 17 November 2007. 97.Mark Blyth, Austerity: The History of a Dangerous Idea, New York 2013, p. 26; John Authers, The Fearful Rise of Markets: Global Bubbles, Synchronized Meltdowns, and How to Prevent Them in the Future, London 2010, pp. 2–3, 18, 95.

‘Britain was always likely to get mauled in the credit crunch’: ‘Bagehot’, 16 October 2008. 102.See, ‘The Comeback Keynes’, Time, 23 October 2008; ‘The New Big Old Thing in Economics’, Wall Street Journal, 8 January 2009; Martin Wolf, ‘Keynes Offers Us the Best Way to Think about the Financial Crisis’, Financial Times, 23 December 2008. 103.‘Capitalism is the best economic system man has invented yet’: ‘Capitalism at Bay’, 16 October 2008. 104.Governments must bail out, but not exert control over, Fannie Mae and Freddie Mac in the US and Northern Rock in the UK. ‘Inside the Banks’, 24 January 2009; ‘A Short History of Modern Finance: Step by Step’, 16 October 2008. 105.‘The Banks Battle Back’, 29 May 2010; ‘Bare-Knuckle in Basel’, 29 May 2010; ‘Save the City’, 7 January 2012. 106.‘Bailing out Detroit would be a bad use of public money’: ‘Saving Detroit’, 15 November 2008. 107.13 February 2010; 8 May 2010; ‘Sometimes, Austerity Makes Sense’, 20 December 2010; ‘Pick Your Poison’, 17 June 2010. 108.


pages: 255 words: 92,719

All Day Long: A Portrait of Britain at Work by Joanna Biggs

Anton Chekhov, bank run, banking crisis, Bullingdon Club, call centre, Chelsea Manning, credit crunch, David Graeber, Desert Island Discs, Downton Abbey, emotional labour, Erik Brynjolfsson, financial independence, future of work, G4S, glass ceiling, industrial robot, job automation, land reform, low skilled workers, mittelstand, Northern Rock, payday loans, Right to Buy, scientific management, Second Machine Age, Sheryl Sandberg, six sigma, Steve Jobs, trickle-down economics, unpaid internship, wages for housework, Wall-E

Farming and rents have held up in the recession, despite a few more bad debtors, but he hasn’t sold any holiday lodges since 2009. He wouldn’t necessarily want to see the government, which is ‘stuffed for money like everyone else’, change: ‘To be fair, Tony Blair might have bankrupted us but he was certainly no enemy of people like me in the way that Miliband might be.’ Almost exactly three years after the run on Northern Rock, Downton Abbey, a TV series about an English country estate in the early twentieth century, aired on ITV in September 2010. The soothing Sunday evening soap opera made the country estate into a metaphor for the nation: the indebted Earl of Grantham must modernise; the kitchen maid must upskill; the rebellious daughter who crosses class lines must die of puerperal fever.


pages: 326 words: 91,532

The Pay Off: How Changing the Way We Pay Changes Everything by Gottfried Leibbrandt, Natasha de Teran

"World Economic Forum" Davos, Alan Greenspan, Ayatollah Khomeini, bank run, banking crisis, banks create money, Bear Stearns, Big Tech, bitcoin, blockchain, call centre, cashless society, Clayton Christensen, cloud computing, coronavirus, COVID-19, Credit Default Swap, cross-border payments, cryptocurrency, David Graeber, Donald Trump, Edward Snowden, Ethereum, ethereum blockchain, financial exclusion, global pandemic, global reserve currency, illegal immigration, information asymmetry, initial coin offering, interest rate swap, Internet of things, Irish bank strikes, Julian Assange, large denomination, light touch regulation, lockdown, low interest rates, M-Pesa, machine readable, Money creation, money: store of value / unit of account / medium of exchange, move fast and break things, Network effects, Northern Rock, off grid, offshore financial centre, payday loans, post-industrial society, printed gun, QR code, RAND corporation, ransomware, Real Time Gross Settlement, reserve currency, Rishi Sunak, Silicon Valley, Silicon Valley startup, Skype, smart contracts, sovereign wealth fund, special drawing rights, tech billionaire, the payments system, too big to fail, transaction costs, WikiLeaks, you are the product

This dichotomy, together with the future as envisioned by the major players in the current payments war, makes the what if facing some of the regulators (national and international) as existential as it is for the banks themselves. Our economies depend on payments, which is why we have regulators to oversee them. The authorities want to know that things won’t blow up à la Herstatt, Northern Rock or Lehman Brothers. They want to know that systems are being run sensibly; that they can withstand peaks and troughs – both financially and technologically. They want to know that systemic risk can be contained if and when disaster strikes; that backups exist, physical and virtual, and that these can withstand attacks – whether kinetic or cybernetic.


pages: 278 words: 91,332

Carmageddon: How Cars Make Life Worse and What to Do About It by Daniel Knowles

active transport: walking or cycling, autonomous vehicles, Bandra-Worli Sea Link, bank run, big-box store, bike sharing, Boeing 747, Boris Johnson, business cycle, car-free, carbon footprint, congestion charging, congestion pricing, coronavirus, COVID-19, Crossrail, decarbonisation, deindustrialization, Detroit bankruptcy, Donald Shoup, Donald Trump, driverless car, Elaine Herzberg, Elon Musk, first-past-the-post, Ford Model T, Frank Gehry, garden city movement, General Motors Futurama, gentrification, ghettoisation, high-speed rail, housing crisis, Hyperloop, Induced demand, James Watt: steam engine, Jane Jacobs, Jeremy Corbyn, Jevons paradox, Lewis Mumford, lockdown, Lyft, megacity, megastructure, New Urbanism, Northern Rock, parking minimums, Piers Corbyn, Richard Florida, ride hailing / ride sharing, safety bicycle, self-driving car, Silicon Valley, Southern State Parkway, Steve Jobs, TED Talk, Tesla Model S, The Death and Life of Great American Cities, the High Line, Traffic in Towns by Colin Buchanan, Uber and Lyft, uber lyft, upwardly mobile, urban planning, urban renewal, walkable city, white flight, white picket fence, Yom Kippur War, young professional

The result will, supposedly, be a big increase is the capacity of motorways, as people no longer have to travel several car lengths apart for safety reasons. Already, this is used as an argument for why investment in new public transport, such as trains, is redundant. In Britain Matt Ridley, a Conservative member of the House of Lords who was chairman of Northern Rock, the only British bank to suffer a bank run in more than a century, is among those who reckon that HS2, Britain’s new high-speed railway, will quickly be made redundant by autonomous vehicles. So too do the Taxpayers’ Alliance, a group that opposes any government spending on anything. In the immediate term, the problem with this is that despite decades of development, autonomous driving technology has scarcely improved enough to navigate normal suburban streets at 30 miles per hour.


pages: 920 words: 233,102

Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State by Paul Tucker

"Friedman doctrine" OR "shareholder theory", Alan Greenspan, Andrei Shleifer, bank run, banking crisis, barriers to entry, Basel III, battle of ideas, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Bretton Woods, Brexit referendum, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, conceptual framework, corporate governance, diversified portfolio, electricity market, Fall of the Berlin Wall, financial innovation, financial intermediation, financial repression, first-past-the-post, floating exchange rates, forensic accounting, forward guidance, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, George Akerlof, Greenspan put, incomplete markets, inflation targeting, information asymmetry, invisible hand, iterative process, Jean Tirole, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, liberal capitalism, light touch regulation, Long Term Capital Management, low interest rates, means of production, Money creation, money market fund, Mont Pelerin Society, moral hazard, Northern Rock, operational security, Pareto efficiency, Paul Samuelson, price mechanism, price stability, principal–agent problem, profit maximization, public intellectual, quantitative easing, regulatory arbitrage, reserve currency, risk free rate, risk tolerance, risk-adjusted returns, road to serfdom, Robert Bork, Ronald Coase, seigniorage, short selling, Social Responsibility of Business Is to Increase Its Profits, stochastic process, subprime mortgage crisis, tail risk, The Chicago School, The Great Moderation, The Market for Lemons, the payments system, too big to fail, transaction costs, Vilfredo Pareto, Washington Consensus, yield curve, zero-coupon bond, zero-sum game

The monetary authority cannot credibly deny that it will ensure that “the clearings go through,” their jargon for a day’s payments across the economy being completed. In a nutshell, the LOLR is pretty well certain to find itself at the scene of a financial disaster. Unsurprisingly, therefore, societies typically expect their central bank to give an account of how things could have come to such a pretty pass. After the collapse of Northern Rock in 2007, the front cover of the British edition of the Economist showed a photograph of the then governor of the Bank of England under the headline “The Bank That Failed.”19 Not a tryptich of central banker, regulator, and finance minister—the members of the UK’s then Tripartite Committee for Stability—but the first only.

., “Establishing Credible Rules”), Meltzer and his coauthors adopt essentially this approach, echoing Tucker, “Lender of Last Resort,” but framed within the rhetoric of “rules” preferred on parts of the US Right. 16 Tucker, “Repertoire.” 17 The “good collateral suffices” doctrine is a canard that central bankers espouse when apparently in self-destructive mode (Tucker, “Lender of Last Resort”). 18 Kynaston, City of London. 19 Tucker, “Regulatory Reform” and “Resolution of Financial Institutions.” 20 Breeden and Whisker, “Collateral.” 21 Where the unqualified bar on such lending does exist, the polity’s Money-Credit Constitution would prudently also bar liquidity transformation by or via nonbanks if it wishes to avoid the vortex. 22 Hawtrey, “Genoa Resolutions,” p. 292. More recently, Tarullo, “Shadow Banking.” 23 Tucker, “Central Banking in the Digital Age.” 24 This was the fatal flaw in the UK’s initial liquidity support to Northern Rock in 2007. 25 The objective in the 1913 act that created the Fed—of maintaining an “elastic currency”—does not provide much help. 26 Bank of England, Development of Market Operations, sections II and V–VII. 27 Betts, “Civil-Military Relations,” and Cohen, Supreme Command, pp. 8–9. 28 Simpson, War; especially chapter five, “Liberal Powers and Strategic Dialogue.” 29 It has been suggested that the UK could learn some lessons from the US in this area (de Waal, “Right People”). 30 Simpson, War, pp. 126–129. 31 For example, and bearing in mind that not all US “independent agencies” are independent, Bressman and Thompson, “Future of Agency Independence.” 32 Berlin, “Political Judgment.”


pages: 351 words: 102,379

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

"World Economic Forum" Davos, affirmative action, Alan Greenspan, Andy Kessler, Asian financial crisis, Bear Stearns, Berlin Wall, book value, break the buck, BRICs, business cycle, Carl Icahn, collapse of Lehman Brothers, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, deal flow, Dr. Strangelove, Emanuel Derman, Fall of the Berlin Wall, fear of failure, financial engineering, fixed income, Glass-Steagall Act, Goldman Sachs: Vampire Squid, housing crisis, indoor plumbing, invisible hand, junk bonds, Ken Thompson, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market bubble, Michael Milken, Mikhail Gorbachev, money market fund, moral hazard, naked short selling, NetJets, Northern Rock, oil shock, paper trading, proprietary trading, risk tolerance, Robert Shiller, rolodex, Ronald Reagan, Savings and loan crisis, savings glut, shareholder value, short selling, sovereign wealth fund, supply-chain management, too big to fail, uptick rule, value at risk, éminence grise

Paulson considered Darling more a politician than a businessman, and he had nothing like the experience that Paulson himself had had in financial markets. But he respected Darling’s judgment and admired the quick and decisive action he had taken a year earlier when Northern Rock, one of Britain’s biggest mortgage lenders, was on the brink of failing. Darling has prevented a run on the bank by authorizing the Bank of England to lend Northern Rock billions of dollars to guarantee its deposits. That incident had been an early wake-up call for Paulson. Darling, who had just ended a daylong meeting in Nice with other European finance ministers, made a bit of chitchat and, after an awkward pause, said that he was calling about Barclays.


pages: 346 words: 101,763

Confessions of a Microfinance Heretic by Hugh Sinclair

"World Economic Forum" Davos, accounting loophole / creative accounting, Bernie Madoff, colonial exploitation, en.wikipedia.org, end world poverty, financial innovation, financial intermediation, Gini coefficient, Global Witness, high net worth, illegal immigration, impact investing, inventory management, low interest rates, microcredit, Northern Rock, peer-to-peer lending, pirate software, Ponzi scheme, principal–agent problem, profit motive, Vision Fund

The moment the public loses faith in the ability of financial institutions to return their savings, their natural tendency is to remove money as soon as possible, a so-called “run on the bank” that would instigate the collapse itself. Governments rightly fear such panics and thus regulate who can take deposits from the general public. This is not a fear unique to poor African countries: consider the recent collapse of Northern Rock in England during the financial crisis, with queues of people withdrawing their funds from the bank, and the government doing everything it could to persuade the rest that their savings were safe. Or of Argentines queuing up for days outside banks in 2001. I needed to find out if FCC was allowed to take savings, and what it was doing with these deposits.


pages: 320 words: 96,006

The End of Men: And the Rise of Women by Hanna Rosin

affirmative action, call centre, cognitive dissonance, David Brooks, delayed gratification, edge city, facts on the ground, financial independence, hiring and firing, housing crisis, income inequality, informal economy, job satisfaction, low skilled workers, manufacturing employment, meta-analysis, new economy, New Urbanism, Norman Mailer, Northern Rock, post-work, postindustrial economy, purchasing power parity, Results Only Work Environment, Sheryl Sandberg, Silicon Valley, social intelligence, Stanford prison experiment, Steven Pinker, TED Talk, union organizing, upwardly mobile, white picket fence, women in the workforce, work culture , young professional

Ness, Why Girls Fight: Female Youth Violence in the Inner City (New York: New York University Press, 2010). A 2010 White House report on women and girls: “Women in America: Indicators of Social and Economic Well-Being,” p. 53. A recent British study showed: Marianne Hester, “Who Does What to Whom? Gender and Domestic Violence Perpetrators,” University of Bristol in association with the Northern Rock Foundation, June 2009. http://www.nr-foundation.org.uk/wp-content/uploads/2011/07/Who-Does-What-to-Whom.pdf. One British study found: John Mays, “Domestic Violence: The Male Perspective,” Parity, July 2010. http://www.parity-uk.org/RSMDVConfPresentation-version3A.pdf. One of the bombers was “emotionally distressed”: Andrew E.


Corbyn by Richard Seymour

anti-communist, banking crisis, battle of ideas, Bernie Sanders, Boris Johnson, Brexit referendum, British Empire, call centre, capital controls, capitalist realism, centre right, collective bargaining, credit crunch, Donald Trump, eurozone crisis, fake news, first-past-the-post, full employment, gender pay gap, gentrification, housing crisis, income inequality, Jeremy Corbyn, knowledge economy, land value tax, liberal world order, mass immigration, means of production, moral panic, Naomi Klein, negative equity, Neil Kinnock, new economy, non-tariff barriers, Northern Rock, Occupy movement, offshore financial centre, pension reform, Philip Mirowski, post-war consensus, precariat, quantitative easing, race to the bottom, rent control, Snapchat, stakhanovite, systematic bias, Washington Consensus, wealth creators, Winter of Discontent, Wolfgang Streeck, working-age population, éminence grise

In particular, having failed to call a snap election in 2007, he had seen Labour’s poll ratings decline and walked into a major global economic crisis for which Labour had to take responsibility and over which it had limited time to manage. Straw, who had rallied for Brown, later declared that he would have been a better prime minister.58 The looming problems with the global economy had not been totally invisible. As early as September 2007, Northern Rock – one of the UK’s subprime mortgage lenders – began to appeal to the Bank of England for liquidity support. The sectoral imbalances in the British economy, the weakness of its manufacturing base, pitiful levels of research & development, the ongoing slump in productivity only made up for by long working hours and an expanded workforce, and the housing bubble, had all been apparent for some considerable time before then.59 All of this, above all the centrality of debt and speculation to the British economic model, made the UK particularly susceptible to the credit crunch when it struck.


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, behavioural economics, Black Swan, Black-Scholes formula, bonus culture, book value, 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, fear index, financial innovation, fixed income, George Akerlof, Glass-Steagall Act, 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, proprietary trading, regulatory arbitrage, rent-seeking, Richard Thaler, risk free rate, risk tolerance, risk/return, Ronald Reagan, Salesforce, Savings and loan crisis, seminal paper, shareholder value, short selling, statistical model, subprime mortgage crisis, 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

The lie that bigger is better (and smarter) now stands exposed as one of the biggest governance flaws ever in the regulatory system. Shareholders and bonus-receiving bankers enjoyed the upside during the credit boom, and taxpayers became responsible for the downside in 2008. Defenders of the bank conglomerates point out that smaller banks, such as America’s IndyMac or Britain’s Northern Rock, also failed and cost taxpayers. But failures at that scale could be contained, while the failure of RBS or Citigroup could not. The large banks were able to play a game of chicken with governments, a stratagem that wasn’t an option for their smaller peers. Despite a populist backlash, the giants emerged largely intact from the Dodd-Frank bill.


pages: 367 words: 110,161

The Bond King: How One Man Made a Market, Built an Empire, and Lost It All by Mary Childs

Alan Greenspan, asset allocation, asset-backed security, bank run, Bear Stearns, beat the dealer, break the buck, buy and hold, Carl Icahn, collateralized debt obligation, commodity trading advisor, coronavirus, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, diversification, diversified portfolio, Edward Thorp, financial innovation, fixed income, global macro, high net worth, hiring and firing, housing crisis, Hyman Minsky, index card, index fund, interest rate swap, junk bonds, Kevin Roose, low interest rates, Marc Andreessen, Minsky moment, money market fund, mortgage debt, Myron Scholes, NetJets, Northern Rock, off-the-grid, pneumatic tube, Ponzi scheme, price mechanism, quantitative easing, Robert Shiller, Savings and loan crisis, skunkworks, sovereign wealth fund, stem cell, Steve Jobs, stocks for the long run, The Great Moderation, too big to fail, Vanguard fund, yield curve

The Bush administration tried to roll out new programs to help struggling homeowners. The Fed lowered interest rates by half a percentage point in September and, the next month, by another quarter of a percentage point. Subprime lenders went out of business. The job market started to shrink. There was a run on deposits at Northern Rock, in the United Kingdom. U.S. banks hit the Fed’s discount window. Merrill Lynch announced a $5.5 billion loss. No, wait, $8.4 billion. The U.S. Treasury pushed some banks (JPMorgan, Citigroup, Bank of America) to combine forces for a $100 billion “superfund” to signal support in the markets. Representatives convened to figure out how.


pages: 356 words: 106,161

The Glass Half-Empty: Debunking the Myth of Progress in the Twenty-First Century by Rodrigo Aguilera

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Alan Greenspan, Anthropocene, availability heuristic, barriers to entry, basic income, benefit corporation, Berlin Wall, Bernie Madoff, Bernie Sanders, bitcoin, Boris Johnson, Branko Milanovic, Bretton Woods, Brexit referendum, Capital in the Twenty-First Century by Thomas Piketty, capitalist realism, carbon footprint, Carmen Reinhart, centre right, clean water, cognitive bias, collapse of Lehman Brothers, Colonization of Mars, computer age, Corn Laws, corporate governance, corporate raider, creative destruction, cryptocurrency, cuban missile crisis, David Graeber, David Ricardo: comparative advantage, death from overwork, decarbonisation, deindustrialization, Deng Xiaoping, Doha Development Round, don't be evil, Donald Trump, Doomsday Clock, Dunning–Kruger effect, Elon Musk, European colonialism, fake news, Fall of the Berlin Wall, first-past-the-post, Francis Fukuyama: the end of history, fundamental attribution error, gig economy, Gini coefficient, Glass-Steagall Act, Great Leap Forward, green new deal, Hans Rosling, housing crisis, income inequality, income per capita, index fund, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jean Tirole, Jeff Bezos, Jeremy Corbyn, Jevons paradox, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, karōshi / gwarosa / guolaosi, Kenneth Rogoff, Kickstarter, lake wobegon effect, land value tax, Landlord’s Game, late capitalism, liberal capitalism, long peace, loss aversion, low interest rates, Mark Zuckerberg, market fundamentalism, means of production, meta-analysis, military-industrial complex, Mont Pelerin Society, moral hazard, moral panic, neoliberal agenda, Network effects, North Sea oil, Northern Rock, offshore financial centre, opioid epidemic / opioid crisis, Overton Window, Pareto efficiency, passive investing, Peter Thiel, plutocrats, principal–agent problem, profit motive, public intellectual, purchasing power parity, race to the bottom, rent-seeking, risk tolerance, road to serfdom, Robert Shiller, Robert Solow, savings glut, Scientific racism, secular stagnation, Silicon Valley, Silicon Valley ideology, Slavoj Žižek, Social Justice Warrior, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, Stanislav Petrov, Steven Pinker, structural adjustment programs, surveillance capitalism, tail risk, tech bro, TED Talk, The Spirit Level, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transatlantic slave trade, trolley problem, unbiased observer, universal basic income, Vilfredo Pareto, Washington Consensus, Winter of Discontent, Y2K, young professional, zero-sum game

Criticism of the system has also emerged from the right, based on the belief that the problem with free market capitalism is that it is not free enough. In this camp is libertarian New Optimist Matt Ridley, who when looking at the Occupy protesters camped around St Paul’s Cathedral in 2011 naturally laid the blame on government rather than the very markets he oversaw — he was chairman of Northern Rock during its subprime-related collapse in September 2007, the first British bank to suffer a run in over a century: The anti-capitalists, now more than 50 days outside St Paul’s, have a point: capitalism is proving unfair. But I would like to try to persuade them that the reason is because it is not free-market enough.


pages: 429 words: 120,332

Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens by Nicholas Shaxson

Asian financial crisis, asset-backed security, bank run, battle of ideas, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, call centre, capital controls, collapse of Lehman Brothers, computerized trading, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, David Ricardo: comparative advantage, Double Irish / Dutch Sandwich, export processing zone, failed state, financial deregulation, financial engineering, financial innovation, Fractional reserve banking, full employment, Glass-Steagall Act, Global Witness, Golden arches theory, high net worth, income inequality, Kenneth Rogoff, laissez-faire capitalism, land reform, land value tax, light touch regulation, Londongrad, Long Term Capital Management, low interest rates, Martin Wolf, Money creation, money market fund, New Journalism, Northern Rock, offshore financial centre, oil shock, old-boy network, out of africa, passive income, plutocrats, Ponzi scheme, race to the bottom, regulatory arbitrage, reserve currency, Ronald Reagan, shareholder value, Suez crisis 1956, The Spirit Level, too big to fail, transfer pricing, vertical integration, Washington Consensus

This is an easy way to make tax-free money—but it is dangerous too: You must “roll over” short-term loans every few days, replacing one loan with another. This is easy in the good times, but when lending dries up, as it did in 2007, you must still repay the short-term loans fast—but suddenly nobody will provide new loans to replace them. You can fall into default very quickly. This is exactly what brought down the British bank Northern Rock in 2007. Yet the Caymans regulator, Elmer said, took an extremist laissez-faire approach to these so-called maturity mismatches. “This is a short-term and long-term problem,” said Elmer. “From a regulatory point of view we couldn’t have done that in the UK or Switzerland. The Cayman Islands Monetary Authority (CIMA) should have picked that up.”


pages: 374 words: 113,126

The Great Economists: How Their Ideas Can Help Us Today by Linda Yueh

3D printing, additive manufacturing, Asian financial crisis, augmented reality, bank run, banking crisis, basic income, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bike sharing, bitcoin, Branko Milanovic, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, clean water, collective bargaining, computer age, Corn Laws, creative destruction, credit crunch, Credit Default Swap, cryptocurrency, currency peg, dark matter, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, endogenous growth, everywhere but in the productivity statistics, export processing zone, Fall of the Berlin Wall, fear of failure, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, fixed income, forward guidance, full employment, general purpose technology, Gini coefficient, Glass-Steagall Act, global supply chain, Great Leap Forward, Gunnar Myrdal, Hyman Minsky, income inequality, index card, indoor plumbing, industrial robot, information asymmetry, intangible asset, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, laissez-faire capitalism, land reform, lateral thinking, life extension, low interest rates, manufacturing employment, market bubble, means of production, middle-income trap, mittelstand, Money creation, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, Nelson Mandela, non-tariff barriers, Northern Rock, Occupy movement, oil shale / tar sands, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, Productivity paradox, purchasing power parity, quantitative easing, RAND corporation, rent control, rent-seeking, reserve currency, reshoring, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, school vouchers, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, special economic zone, Steve Jobs, technological determinism, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, total factor productivity, trade liberalization, universal basic income, unorthodox policies, Washington Consensus, We are the 99%, women in the workforce, working-age population

In the 2008 crisis, we were at the cusp of the first potential systemic banking failure since the 1929 crash that had led to the passage of Glass–Steagall in the first place. European banks were exposed to US sub-prime mortgages and some had also borrowed from US wholesale money markets. It meant that European bank lending became less reliant on deposits since they could access the same cheap money as the Americans. When Northern Rock failed in 2007, it was the first bank run in Britain in more than a century. The UK is closely linked to US financial markets and also faced the prospect of a systemic banking collapse during the 2008 crisis. So, did central banks act sufficiently to avoid repeating the mistakes of the 1929 crash?


pages: 457 words: 125,329

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

"Friedman doctrine" OR "shareholder theory", activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Airbnb, Alan Greenspan, bank run, banks create money, Basel III, behavioural economics, 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, carbon tax, Carmen Reinhart, carried interest, clean tech, Corn Laws, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, David Ricardo: comparative advantage, debt deflation, European colonialism, Evgeny Morozov, fear of failure, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, full employment, G4S, George Akerlof, Glass-Steagall Act, 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, low interest rates, margin call, Mark Zuckerberg, market bubble, means of production, military-industrial complex, Minsky moment, 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, proprietary trading, quantitative easing, quantitative trading / quantitative finance, QWERTY keyboard, rent control, rent-seeking, Robert Solow, 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, Solyndra, 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

These were derivatives, contracts on the future delivery of a financial instrument or commodity which allowed investors to make bets on their price movement; and securitizations, bundles of income-yielding instruments that turned these into tradable securities (and enabled their inclusion in derivative contracts). Commercial banks made a particular breakthrough in the early 2000s when they began to ‘securitize’ past lending to finance new lending. Home mortgages were the initial focus, enabling banks like the UK’s Northern Rock to grow their loans at unprecedented speed, and win political praise for making these loans available to households previously dismissed as too poor to borrow. After the 2008 financial crash - triggered in part by debt securitizations rendered worthless by default on the underlying mortgages - attention turned to securitizing other forms of obligation, among them ‘personal contract plans’ and other car loans, student loans and residential rents.


pages: 330 words: 117,313

On the Road by Jack Kerouac

jitney, Northern Rock, refrigerator car, traveling salesman

He reminisced about his recent trip to France. “Ah, Sal, if you could sit with me high in the Basque country with a cool bottle of Poignon Dix-neuf, then you’d know there are other things besides boxcars.” “I know that. It’s just that I love boxcars and I love to read the names on them like Missouri Pacific, Great Northern, Rock Island Line. By Gad, Major, if I could tell you everything that happened to me hitching here.” The Rawlinses lived a few blocks away. This was a delightful family—a youngish mother, part owner of a decrepit, ghost-town hotel, with five sons and two daughters. The wild son was Ray Rawlins, Tim Gray’s boyhood buddy.


pages: 428 words: 117,419

Cyclopedia by William Fotheringham

Berlin Wall, British Empire, carbon footprint, disinformation, Fall of the Berlin Wall, fixed-gear, flag carrier, gentleman farmer, intermodal, Kickstarter, Northern Rock, safety bicycle, éminence grise

• Étape Caledonia, 80 miles through the Scottish Highlands from the town of Pitlochry, the only UK event offering closed roads. In 2009, it was hit by saboteurs who strewed tacks on the road, causing over 50 punctures. • The Fred Whitton Challenge, in the Lake District, a 112-mile event starting and finishing at Coniston and including the climbs of Kirkstone, Honister, Whinlatter, Hardknott, and Wrynose passes. • Northern Rock Cyclone, the British round of Golden Bike, starting and finishing on the north side of Newcastle and taking in the moors of North East England. • Gran Fondo Nove Colli Marco Pantani, starting and finishing in Pantani’s birthplace of Cesenatico on the Adriatic Coast, and taking in nine tough ascents in the Apennines.


pages: 479 words: 113,510

Fed Up: An Insider's Take on Why the Federal Reserve Is Bad for America by Danielle Dimartino Booth

Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, bank run, barriers to entry, Basel III, Bear Stearns, Bernie Sanders, Black Monday: stock market crash in 1987, break the buck, Bretton Woods, business cycle, central bank independence, collateralized debt obligation, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, financial deregulation, financial engineering, financial innovation, fixed income, Flash crash, forward guidance, full employment, George Akerlof, Glass-Steagall Act, greed is good, Greenspan put, high net worth, housing crisis, income inequality, index fund, inflation targeting, interest rate swap, invisible hand, John Meriwether, Joseph Schumpeter, junk bonds, liquidity trap, London Whale, Long Term Capital Management, low interest rates, margin call, market bubble, Mexican peso crisis / tequila crisis, money market fund, moral hazard, Myron Scholes, natural language processing, Navinder Sarao, negative equity, new economy, Northern Rock, obamacare, Phillips curve, price stability, proprietary trading, pushing on a string, quantitative easing, regulatory arbitrage, Robert Shiller, Ronald Reagan, selection bias, short selling, side project, Silicon Valley, stock buybacks, tail risk, The Great Moderation, The Wealth of Nations by Adam Smith, too big to fail, trickle-down economics, yield curve

So much was taking place in world financial markets while I sat tight, safeguarding the growth of my double cargo until my December due date. The rolling disaster rippled around the world. Insomnia kept me up late. Instead of I Love Lucy reruns, I watched the BBC as thousands of Brits queued to withdraw one billion pounds from Northern Rock, the biggest UK bank run in over a century. Markets sniff out the weakest links in the system. The cost of protecting the debt of big U.S. investment banks became the train wreck I couldn’t stop watching. I began following bank credit default swaps. These insurance securities could be used to bet for or against the survival of any financial entity—for example, the sovereign debt of Iceland or the corporate bonds of General Motors.


pages: 435 words: 127,403

Panderer to Power by Frederick Sheehan

Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, book value, Bretton Woods, British Empire, business cycle, buy and hold, California energy crisis, call centre, central bank independence, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, deindustrialization, diversification, financial deregulation, financial innovation, full employment, Glass-Steagall Act, Greenspan put, guns versus butter model, inflation targeting, interest rate swap, inventory management, Isaac Newton, John Meriwether, junk bonds, low interest rates, margin call, market bubble, Mary Meeker, McMansion, Menlo Park, Michael Milken, money market fund, mortgage debt, Myron Scholes, new economy, Nixon triggered the end of the Bretton Woods system, Norman Mailer, Northern Rock, oil shock, Paul Samuelson, place-making, Ponzi scheme, price stability, reserve currency, rising living standards, Robert Solow, rolodex, Ronald Reagan, Sand Hill Road, Savings and loan crisis, savings glut, shareholder value, Silicon Valley, Silicon Valley startup, South Sea Bubble, stock buybacks, stocks for the long run, supply-chain management, supply-chain management software, The Great Moderation, too big to fail, transaction costs, trickle-down economics, VA Linux, Y2K, Yom Kippur War, zero-sum game

In London, he told the Daily Telegraph that “Britain is more exposed than we are [to mortgage defaults]—in the sense that you have a good deal more adjustable-rate mortgages.”17 That would seem to contradict his variable-rate advice in February 2004, when he advised Americans to look overseas, “where adjustable-rate mortgages are far more common.”18 His statement to the Telegraph was on September 17, in the midst of a bank run on Northern Rock, a British bank. He may not have heightened the hysteria sweeping Britain, but he could have kept his mouth shut. 14 Interview with Leslie Stahl, 60 Minutes, September 16, 2007. 15 Jane Wardell, “Greenspan Defends Subprime,” Associated Press, October 2, 2007. 16“World Markets Still Affected by Fear: Greenspan,” Le Figaro, September 23, 2007. 17“UK More Vulnerable than America to the Credit Crunch, Greenspan says,” Daily Te l eg raph (London), September 18, 2007.


pages: 388 words: 125,472

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

anti-communist, Asian financial crisis, autism spectrum disorder, bank run, battle of ideas, Big bang: deregulation of the City of London, bonus culture, Boris Johnson, Bretton Woods, British Empire, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, centre right, citizen journalism, collapse of Lehman Brothers, collective bargaining, disinformation, don't be evil, Edward Snowden, Etonian, eurozone crisis, falling living standards, Francis Fukuyama: the end of history, full employment, G4S, glass ceiling, hiring and firing, housing crisis, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, James Dyson, Jon Ronson, laissez-faire capitalism, land bank, light touch regulation, low interest rates, market fundamentalism, mass immigration, Monroe Doctrine, Mont Pelerin Society, moral hazard, Neil Kinnock, night-watchman state, Nixon triggered the end of the Bretton Woods system, Northern Rock, Occupy movement, offshore financial centre, old-boy network, open borders, Overton Window, plutocrats, popular capitalism, post-war consensus, profit motive, quantitative easing, race to the bottom, rent control, road to serfdom, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, stakhanovite, statistical model, subprime mortgage crisis, Suez crisis 1956, The Wealth of Nations by Adam Smith, transfer pricing, Tyler Cowen, union organizing, unpaid internship, Washington Consensus, We are all Keynesians now, wealth creators, Winter of Discontent

The City of London’s ability to manage the aftermath of the 2008 crash was helped by other forms of influence. A total of 134 Tory MPs and peers are currently or were once employed in the financial sector.28 One example is Matt Ridley, a popular science writer and self-described ‘rational optimist’, who inherited the chair of Northern Rock from his father. His ‘rational optimism’ appeared of little use when, under his stewardship, the bank collapsed and had to be bailed out by the taxpayer. At the beginning of 2013 he inherited his father’s viscountcy and became a Conservative peer. Around half of the donations to the Conservative Party come from the City.


pages: 382 words: 120,064

Bank 3.0: Why Banking Is No Longer Somewhere You Go but Something You Do by Brett King

3D printing, Abraham Maslow, additive manufacturing, Airbus A320, Albert Einstein, Amazon Web Services, Any sufficiently advanced technology is indistinguishable from magic, Apollo 11, Apollo 13, Apollo Guidance Computer, asset-backed security, augmented reality, barriers to entry, behavioural economics, bitcoin, bounce rate, business intelligence, business process, business process outsourcing, call centre, capital controls, citizen journalism, Clayton Christensen, cloud computing, credit crunch, crowdsourcing, disintermediation, en.wikipedia.org, fixed income, George Gilder, Google Glasses, high net worth, I think there is a world market for maybe five computers, Infrastructure as a Service, invention of the printing press, Jeff Bezos, jimmy wales, Kickstarter, London Interbank Offered Rate, low interest rates, M-Pesa, Mark Zuckerberg, mass affluent, Metcalfe’s law, microcredit, mobile money, more computing power than Apollo, Northern Rock, Occupy movement, operational security, optical character recognition, peer-to-peer, performance metric, Pingit, platform as a service, QR code, QWERTY keyboard, Ray Kurzweil, recommendation engine, RFID, risk tolerance, Robert Metcalfe, self-driving car, Skype, speech recognition, stem cell, telepresence, the long tail, Tim Cook: Apple, transaction costs, underbanked, US Airways Flight 1549, web application, world market for maybe five computers

It was no surprise, given the economic downturn, that Chase back-pedalled on those plans in its Q3 earnings call and then again in its Q4 earning call, bringing the number down to 1100, then 900 branches. The number of bank branches in the US peaked in 2010 and has been falling since—of course it remains to be seen whether this is the start of a trend, or simply a statistical anomaly. In the United Kingdom, the Royal Bank of Scotland, Northern Rock, Lloyds and HSBC are all reducing branch numbers. Lloyds has been trying to sell 632 of its branches now for close to 12 months at the asking price of approximately £4 billion, but has been unable to find serious interest. In the UK we have seen one branch closing every day since 1990,2 or more than 7000 in the last 20 years—that’s almost half of the 16,000 odd branches in 1990.


pages: 756 words: 120,818

The Levelling: What’s Next After Globalization by Michael O’sullivan

"World Economic Forum" Davos, 3D printing, Airbnb, Alan Greenspan, algorithmic trading, Alvin Toffler, bank run, banking crisis, barriers to entry, Bernie Sanders, Big Tech, bitcoin, Black Swan, blockchain, bond market vigilante , Boris Johnson, Branko Milanovic, Bretton Woods, Brexit referendum, British Empire, business cycle, business process, capital controls, carbon tax, Celtic Tiger, central bank independence, classic study, cloud computing, continuation of politics by other means, corporate governance, credit crunch, CRISPR, cryptocurrency, data science, deglobalization, deindustrialization, disinformation, disruptive innovation, distributed ledger, Donald Trump, driverless car, eurozone crisis, fake news, financial engineering, financial innovation, first-past-the-post, fixed income, gentrification, Geoffrey West, Santa Fe Institute, Gini coefficient, Glass-Steagall Act, global value chain, housing crisis, impact investing, income inequality, Intergovernmental Panel on Climate Change (IPCC), It's morning again in America, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", junk bonds, knowledge economy, liberal world order, Long Term Capital Management, longitudinal study, low interest rates, market bubble, minimum wage unemployment, new economy, Northern Rock, offshore financial centre, open economy, opioid epidemic / opioid crisis, Paris climate accords, pattern recognition, Peace of Westphalia, performance metric, Phillips curve, private military company, quantitative easing, race to the bottom, reserve currency, Robert Gordon, Robert Shiller, Robert Solow, Ronald Reagan, Scramble for Africa, secular stagnation, Silicon Valley, Sinatra Doctrine, South China Sea, South Sea Bubble, special drawing rights, Steve Bannon, Suez canal 1869, supply-chain management, 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 Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, total factor productivity, trade liberalization, tulip mania, Valery Gerasimov, Washington Consensus

My friend noticed they had an FT [Financial Times], so I bought it to see what was going on”—is scarcely believable given the tradition of the Chancellorship and the Treasury, though it was perhaps a sign of things to come in terms of the quality of the British policy response to Brexit. Darling cut short his holiday to return to Britain to attend to the collapse of Northern Rock bank. China is thankfully well ahead of a Majorca moment and may have already distilled a number of lessons from recent financial crises in the United States and Europe: resolve the situation of bad banks quickly, do not emerge from a debt crisis with an enlarged debt burden on the state, let individuals bear the costs of financial mistakes (this goes for businesspeople and bankers; more bankers were barred from the financial services industry in China in 2008 than in all of the developed world), and where at all possible allow investors to bear financial burdens of falling assets.


Adam Smith: Father of Economics by Jesse Norman

active measures, Alan Greenspan, Andrei Shleifer, balance sheet recession, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, 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, Cornelius Vanderbilt, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, David Ricardo: comparative advantage, deindustrialization, electricity market, 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, Glass-Steagall Act, 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, low interest rates, market bubble, market fundamentalism, Martin Wolf, means of production, mirror neurons, 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, public intellectual, purchasing power parity, random walk, rent-seeking, Richard Thaler, Robert Shiller, Robert Solow, 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

If savers all seek their deposits at once, however, the bank cannot meet the demand from cash on hand; and if the bank is not large enough, or cannot borrow enough in time from the money markets for other reasons to cover the shortfall, it will quickly fail. This is what happened with the collapse of Northern Rock in the UK and Washington Mutual in the US in 2008. Almost exactly the same process can operate with the failure of money market funds; and of bank lending to businesses against collateral, or trading on margin. A relatively small initial market movement can quickly become a rout, as occurred with the failures of the investment banks Bear Stearns and Lehman Brothers.


pages: 454 words: 134,482

Money Free and Unfree by George A. Selgin

Alan Greenspan, asset-backed security, bank run, banking crisis, barriers to entry, Bear Stearns, break the buck, Bretton Woods, business cycle, capital controls, central bank independence, centralized clearinghouse, Charles Lindbergh, credit crunch, Credit Default Swap, crony capitalism, disintermediation, Dutch auction, fear of failure, fiat currency, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, foreign exchange controls, Fractional reserve banking, German hyperinflation, Glass-Steagall Act, Hyman Minsky, incomplete markets, inflation targeting, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, large denomination, liquidity trap, Long Term Capital Management, low interest rates, market microstructure, Money creation, money market fund, moral hazard, Network effects, Northern Rock, oil shock, Paul Samuelson, Phillips curve, plutocrats, price stability, profit maximization, purchasing power parity, quantitative easing, random walk, rent-seeking, reserve currency, Robert Gordon, Robert Solow, Savings and loan crisis, savings glut, seigniorage, special drawing rights, The Great Moderation, the payments system, too big to fail, transaction costs, Tyler Cowen, unorthodox policies, vertical integration, Y2K

Under the TAF, bidding by individual participants was limited to 10 percent of total amounts being auctioned. 19. After sketching out my auction plan, I discovered much more carefully thought-out proposals in the same spirit by Lawrence Ausubel and Peter Cramton (2008) (for implementing the Troubled Asset Relief Program) and Paul Klemperer (2010) (to assist the Bank of England in combating the post-Northern-Rock credit crunch). In particular, the Ausubel and Cramton proposal goes beyond mine in including enhancements designed to allow for open market purchases of securities for which efficient reference prices are initially unascertainable. In soliciting the Klemperer proposal, the Bank of England asked that the design be one that it could also employ in normal times; in fact, it has been using the procedure regularly since the crisis.


pages: 517 words: 139,477

Stocks for the Long Run 5/E: the Definitive Guide to Financial Market Returns & Long-Term Investment Strategies by Jeremy Siegel

Alan Greenspan, AOL-Time Warner, Asian financial crisis, asset allocation, backtesting, banking crisis, Bear Stearns, behavioural economics, Black Monday: stock market crash in 1987, Black-Scholes formula, book value, break the buck, Bretton Woods, business cycle, buy and hold, buy low sell high, California gold rush, capital asset pricing model, carried interest, central bank independence, cognitive dissonance, compound rate of return, computer age, computerized trading, corporate governance, correlation coefficient, Credit Default Swap, currency risk, Daniel Kahneman / Amos Tversky, Deng Xiaoping, discounted cash flows, diversification, diversified portfolio, dividend-yielding stocks, dogs of the Dow, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, eurozone crisis, Everybody Ought to Be Rich, Financial Instability Hypothesis, fixed income, Flash crash, forward guidance, fundamental attribution error, Glass-Steagall Act, housing crisis, Hyman Minsky, implied volatility, income inequality, index arbitrage, index fund, indoor plumbing, inflation targeting, invention of the printing press, Isaac Newton, it's over 9,000, John Bogle, joint-stock company, London Interbank Offered Rate, Long Term Capital Management, loss aversion, machine readable, market bubble, mental accounting, Minsky moment, Money creation, money market fund, mortgage debt, Myron Scholes, new economy, Northern Rock, oil shock, passive investing, Paul Samuelson, Peter Thiel, Ponzi scheme, prediction markets, price anchoring, price stability, proprietary trading, purchasing power parity, quantitative easing, random walk, Richard Thaler, risk free rate, risk tolerance, risk/return, Robert Gordon, Robert Shiller, Ronald Reagan, shareholder value, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, stocks for the long run, survivorship bias, technology bubble, The Great Moderation, the payments system, The Wisdom of Crowds, transaction costs, tulip mania, Tyler Cowen, Tyler Cowen: Great Stagnation, uptick rule, Vanguard fund

Before the financial crisis, the LIBOR stayed very close (usually within 10 basis points) to the federal funds target. The first rumblings of trouble in the banking sector came in August 2007 when the LIBOR–fed funds spread jumped above 50 basis points in response to the BNP Paribas announcement of stopping fund redemptions and the problems at Northern Rock in the United Kingdom. Over the next 12 months, as the subprime crisis grew, the LIBOR-funds spread remained mostly between 50 and 100 basis points. But the LIBOR spread soared after the Lehman bankruptcy, and on October 10 the difference between the LIBOR and the fed funds rate reached an unheard-of 364 basis points.


pages: 613 words: 151,140

No Such Thing as Society by Andy McSmith

"there is no alternative" (TINA), anti-communist, Ayatollah Khomeini, Berlin Wall, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Bob Geldof, Boris Johnson, British Empire, Brixton riot, Bullingdon Club, call centre, cuban missile crisis, Etonian, F. W. de Klerk, Farzad Bazoft, feminist movement, fixed income, Francis Fukuyama: the end of history, friendly fire, full employment, glass ceiling, God and Mammon, greed is good, illegal immigration, index card, John Bercow, Kickstarter, liberal capitalism, light touch regulation, Live Aid, loadsamoney, long peace, means of production, Mikhail Gorbachev, mortgage debt, mutually assured destruction, negative equity, Neil Kinnock, Nelson Mandela, North Sea oil, Northern Rock, old-boy network, popular capitalism, Right to Buy, Ronald Reagan, Rubik’s Cube, Sloane Ranger, South Sea Bubble, spread of share-ownership, Stephen Fry, strikebreaker, Suez crisis 1956, The Chicago School, union organizing, upwardly mobile, urban decay, Winter of Discontent, young professional

If the building societies had restricted themselves to the service they had always provided, without borrowing on the money markets or becoming institutionally linked to investment banks, none would have been caught up in the crash of 2008. As it was, not one of the ten building societies that had converted to banks had survived on its own. Most had been bought up – Abbey by Santander in 2004, the Halifax by the Bank of Scotland, and so on. Northern Rock converted in 1997, and bankrupted itself by borrowing with a freedom that a building society could not have exercised. The last to demutualize was Bradford & Bingley, which had survived through every recession for 150 years, but in its new incarnation as a bank it went bust in just 8 years. The Trustee Savings Bank (TSB) was one of the biggest and most popular banking institutions in Scotland.


pages: 665 words: 146,542

Money: 5,000 Years of Debt and Power by Michel Aglietta

accelerated depreciation, Alan Greenspan, bank run, banking crisis, Basel III, Berlin Wall, bitcoin, blockchain, Bretton Woods, British Empire, business cycle, capital asset pricing model, capital controls, cashless society, central bank independence, circular economy, collapse of Lehman Brothers, collective bargaining, corporate governance, David Graeber, debt deflation, dematerialisation, Deng Xiaoping, double entry bookkeeping, energy transition, eurozone crisis, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, forward guidance, Francis Fukuyama: the end of history, full employment, German hyperinflation, income inequality, inflation targeting, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invention of writing, invisible hand, joint-stock company, Kenneth Arrow, Kickstarter, land bank, liquidity trap, low interest rates, margin call, means of production, Money creation, money market fund, moral hazard, Nash equilibrium, Network effects, Northern Rock, oil shock, planetary scale, plutocrats, precautionary principle, price stability, purchasing power parity, quantitative easing, race to the bottom, reserve currency, secular stagnation, seigniorage, shareholder value, special drawing rights, special economic zone, stochastic process, Suez crisis 1956, the payments system, the scientific method, tontine, too big to fail, trade route, transaction costs, transcontinental railway, Washington Consensus

Contagion leads to three categories of banking crises. The original crises are panics produced by the conversion of deposits into cash. These should normally be averted by way of deposit insurance. However, in numerous recent cases we have seen that this did not happen, from the run on deposits at Northern Rock in September 2008 to the much more recent eurozone banking crises in Cyprus and Greece. A second type of crisis results from settlement failures in interbank payments. In principle, these should also be avoided, if all systems operated through gross settlement in the money of a central bank that also plays the role of clearing house.


pages: 524 words: 155,947

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

accounting loophole / creative accounting, Ada Lovelace, agricultural Revolution, Airbnb, airline deregulation, Alan Greenspan, Andrei Shleifer, anti-communist, Apollo 11, assortative mating, autonomous vehicles, bank run, banking crisis, banks create money, basic income, Bear Stearns, Berlin Wall, Black Monday: stock market crash in 1987, Bletchley Park, Bob Noyce, Boeing 747, bond market vigilante , Branko Milanovic, Bretton Woods, Brexit referendum, British Empire, business cycle, call centre, capital controls, carbon footprint, carbon tax, Carl Icahn, 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, cross-border payments, currency peg, currency risk, debt deflation, DeepMind, Deng Xiaoping, discovery of the americas, Donald Trump, driverless car, Easter island, Erik Brynjolfsson, European colonialism, eurozone crisis, Fairchild Semiconductor, falling living standards, financial engineering, financial innovation, financial intermediation, floating exchange rates, flying shuttle, Ford Model T, Fractional reserve banking, Frederick Winslow Taylor, full employment, general purpose technology, germ theory of disease, German hyperinflation, gig economy, Gini coefficient, Glass-Steagall Act, global supply chain, global value chain, Gordon Gekko, Great Leap Forward, greed is good, Greenspan put, guns versus butter model, Haber-Bosch Process, Hans Rosling, Hernando de Soto, hydraulic fracturing, hydroponic farming, 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, Jon Ronson, Kenneth Arrow, Kula ring, labour market flexibility, land reform, land tenure, Lao Tzu, large denomination, Les Trente Glorieuses, liquidity trap, Long Term Capital Management, Louis Blériot, low cost airline, low interest rates, 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, Robert Solow, 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, Suez canal 1869, TaskRabbit, techlash, 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, world market for maybe five computers, Yom Kippur War, you are the product, zero-sum game

In August, BNP Paribas, a French bank, suspended trading in three similar funds. By this stage, the bad news was sufficiently worrying to prompt central banks to lend money to banks that were suffering from liquidity problems. The Fed also cut interest rates by half a percentage point. September 2007 saw a run on Northern Rock, a British bank that had been one of the most aggressive lenders in the UK housing market and also depended on the wholesale markets for finance. If that was a bad year, 2008 was much worse. In March, Bear Stearns needed to be rescued by J. P. Morgan (shades of 1907). The deal needed back-up financing by the Federal Reserve, which agreed to be responsible for up to $30bn of losses.


pages: 655 words: 156,367

The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era by Gary Gerstle

2021 United States Capitol attack, A Declaration of the Independence of Cyberspace, affirmative action, Affordable Care Act / Obamacare, air traffic controllers' union, Airbnb, Alan Greenspan, Alvin Toffler, anti-communist, AOL-Time Warner, Bear Stearns, behavioural economics, Bernie Sanders, Big Tech, Black Lives Matter, blue-collar work, borderless world, Boris Johnson, Brexit referendum, British Empire, Broken windows theory, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, collective bargaining, Cornelius Vanderbilt, coronavirus, COVID-19, creative destruction, crony capitalism, cuban missile crisis, David Brooks, David Graeber, death from overwork, defund the police, deindustrialization, democratizing finance, Deng Xiaoping, desegregation, Dissolution of the Soviet Union, Donald Trump, Electric Kool-Aid Acid Test, European colonialism, Ferguson, Missouri, financial deregulation, financial engineering, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, future of work, Future Shock, George Floyd, George Gilder, gig economy, Glass-Steagall Act, global supply chain, green new deal, Greenspan put, guns versus butter model, Haight Ashbury, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, Ida Tarbell, immigration reform, informal economy, invention of the printing press, invisible hand, It's morning again in America, Jeff Bezos, John Perry Barlow, Kevin Kelly, Kitchen Debate, low interest rates, Lyft, manufacturing employment, market fundamentalism, Martin Wolf, mass incarceration, Menlo Park, microaggression, Mikhail Gorbachev, military-industrial complex, millennium bug, Modern Monetary Theory, money market fund, Mont Pelerin Society, mortgage debt, mutually assured destruction, Naomi Klein, neoliberal agenda, new economy, New Journalism, Northern Rock, obamacare, Occupy movement, oil shock, open borders, Peter Thiel, Philip Mirowski, Powell Memorandum, precariat, price stability, public intellectual, Ralph Nader, Robert Bork, Ronald Reagan, scientific management, Seymour Hersh, sharing economy, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, social distancing, Steve Bannon, Steve Jobs, Stewart Brand, Strategic Defense Initiative, super pumped, technoutopianism, Telecommunications Act of 1996, The Bell Curve by Richard Herrnstein and Charles Murray, The Chicago School, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, Uber and Lyft, uber lyft, union organizing, urban decay, urban renewal, War on Poverty, Washington Consensus, We are all Keynesians now, We are the 99%, white flight, Whole Earth Catalog, WikiLeaks, women in the workforce, Works Progress Administration, Y2K, Yom Kippur War

The bill for this developing fiasco would shortly fall due. Crash Housing prices peaked in the summer of 2006 and then began to recede. At first it seemed as though this was a rather ordinary contraction that inevitably followed a boom. But by fall 2007 and spring 2008, there were signs of serious trouble. In September 2007 a British bank (Northern Rock) involved in mortgage securitization failed. In March 2008 the American investment house Bear Stearns itself stood at the edge of collapse, saved only by J. P. Morgan Chase’s decision to purchase it at a bargain basement price. The Bear Stearns balance sheet was so toxic that J. P. Morgan Chase demanded and received a $13 billion loan from the US Treasury and a commitment from the Fed to take on $30 billion of Bear Stearns’s worst assets.64 Soon after, word began reaching secretary of the treasury Henry Paulson that Fannie Mae and Freddie Mac might soon be facing a Bear Stearns–like reckoning.


pages: 614 words: 176,458

Meat: A Benign Extravagance by Simon Fairlie

agricultural Revolution, air gap, Albert Einstein, back-to-the-land, Boris Johnson, call centre, carbon credits, carbon footprint, Community Supported Agriculture, deindustrialization, en.wikipedia.org, food miles, Food sovereignty, Garrett Hardin, gentleman farmer, Haber-Bosch Process, household responsibility system, Hugh Fearnley-Whittingstall, informal economy, Intergovernmental Panel on Climate Change (IPCC), Just-in-time delivery, land reform, Mahatma Gandhi, Martin Wolf, megacity, military-industrial complex, Northern Rock, Panamax, peak oil, precautionary principle, refrigerator car, rewilding, scientific mainstream, sexual politics, stem cell, The Wealth of Nations by Adam Smith, trade liberalization, Tragedy of the Commons, University of East Anglia, upwardly mobile, women in the workforce, zero-sum game

Opponents of organic agriculture have not been slow to point this out. There is a camp of 800 scientists and pundits, including Norman Borlaug (the architect of the green revolution), James Lovelock (of Gaia fame), Dennis Avery (of the Hudson Institute) and Matt Ridley (the UK’s best known contrarian and former chairman of Northern Rock) who, under the aegis of the Center for Global Food Issues, have signed a declaration ‘In Support of Protecting Nature with High Yielding Farming and Forestry’.35 The gist of this declaration, laid out most explicitly in supporting information written by Dennis Avery, is that to provide sufficient nitrogen to feed the future population of 8.5 billion people which industrialization will spawn, we will have to resort not only to chemical fertilizers, but also to genetic manipulation.


pages: 603 words: 182,826

Owning the Earth: The Transforming History of Land Ownership by Andro Linklater

agricultural Revolution, Alan Greenspan, anti-communist, Anton Chekhov, Ayatollah Khomeini, Bear Stearns, Big bang: deregulation of the City of London, British Empire, business cycle, colonial rule, Corn Laws, Cornelius Vanderbilt, corporate governance, creative destruction, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, electricity market, facts on the ground, flying shuttle, Ford Model T, Francis Fukuyama: the end of history, full employment, Gini coefficient, Glass-Steagall Act, Google Earth, Great Leap Forward, income inequality, invisible hand, James Hargreaves, James Watt: steam engine, John Perry Barlow, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kibera, Kickstarter, land reform, land tenure, light touch regulation, market clearing, means of production, megacity, Mikhail Gorbachev, Mohammed Bouazizi, Monkeys Reject Unequal Pay, mortgage debt, Northern Rock, Peace of Westphalia, Pearl River Delta, plutocrats, Ponzi scheme, profit motive, quantitative easing, Ralph Waldo Emerson, refrigerator car, Right to Buy, road to serfdom, Robert Shiller, Ronald Reagan, spinning jenny, Suez canal 1869, The Chicago School, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, three-masted sailing ship, too big to fail, trade route, transatlantic slave trade, transcontinental railway, ultimatum game, wage slave, WikiLeaks, wikimedia commons, working poor

By 2008, it contributed a fifth of Britain’s GDP. In the wake of the crash, it also became clear that City practices had slithered beyond laxness to the borderline of corruption and malfeasance. Not only had three of Britain’s largest banks engaged in dealings that would have bankrupted them but for a taxpayers’ bailout—a fourth, Northern Rock, the smallest though hardly the most irresponsible, was allowed to go to the wall—but collectively London’s major banks had mis-sold financial services worth almost three billion dollars to their customers, had routinely lied about lending rates between themselves, and persistently and deliberately misled the city’s vestigial regulatory agencies about the way they conducted business.


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

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 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, behavioural economics, benefit corporation, Black Swan, blood diamond, 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, company town, 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, Ford Model T, Francis Fukuyama: the end of history, full employment, George Akerlof, George Gilder, Gini coefficient, Glass-Steagall Act, 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, low interest rates, 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, rolling blackouts, 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, subprime mortgage crisis, 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

Now consider the financial sector as a whole: it is again hard either to distinguish skill from luck or to align the interests of management, staff, shareholders, and the public. It is in the interests of insiders to game the system by exploiting the returns from higher probability events. This means that businesses will suddenly blow up when the low probability disaster occurs, as happened spectacularly at Northern Rock and Bear Stearns.”44 The syndrome is generalized across the entire American economy, and certainly not restricted to the financial sector. Indeed, a host of studies have caused compensation experts to conclude that much of the rise in executive pay across all sectors in recent decades is unjustified by performance.


pages: 840 words: 202,245

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

Abraham Maslow, accounting loophole / creative accounting, Alan Greenspan, AOL-Time Warner, Asian financial crisis, bank run, Bear Stearns, book value, Bretton Woods, business cycle, capital controls, Carl Icahn, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, desegregation, disintermediation, diversified portfolio, Donald Trump, financial deregulation, fixed income, floating exchange rates, Frederick Winslow Taylor, full employment, George Akerlof, Glass-Steagall Act, Greenspan put, Hyman Minsky, income inequality, index fund, inflation targeting, inventory management, invisible hand, John Bogle, John Meriwether, junk bonds, Kitchen Debate, laissez-faire capitalism, locking in a profit, Long Term Capital Management, low interest rates, market bubble, Mary Meeker, Michael Milken, minimum wage unemployment, MITM: man-in-the-middle, Money creation, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Myron Scholes, new economy, Nixon triggered the end of the Bretton Woods system, North Sea oil, Northern Rock, oil shock, Paul Samuelson, Philip Mirowski, Phillips curve, price stability, quantitative easing, Ralph Nader, rent control, road to serfdom, Robert Bork, Robert Shiller, Ronald Coase, Ronald Reagan, Ronald Reagan: Tear down this wall, scientific management, shareholder value, short selling, Silicon Valley, Simon Kuznets, tail risk, Tax Reform Act of 1986, technology bubble, Telecommunications Act of 1996, The Chicago School, The Great Moderation, too big to fail, union organizing, V2 rocket, value at risk, Vanguard fund, War on Poverty, Washington Consensus, Y2K, Yom Kippur War

Credit conditions in the United States were freezing up as investors stopped buying corporate and other bonds and bought U.S. Treasurys for safety. The Fed kept reducing the Fed funds rate until it reached almost zero at the end of 2009. That fall, the rating agencies downgraded mortgage bonds, and later that fall they started downgrading CDOs themselves. In September, Northern Rock, a giant British bank, was bailed out by its government. The two major insurers of mortgages, Ambac Assurance Corporation and MBIA Insurance Corporation, were also put on a credit watch list by the rating agencies. In early October, having recently assured investors all was fine, Merrill announced that it had to write down $5.5 billion of its assets, probably mostly mortgage securities.


Principles of Corporate Finance by Richard A. Brealey, Stewart C. Myers, Franklin Allen

3Com Palm IPO, accelerated depreciation, accounting loophole / creative accounting, Airbus A320, Alan Greenspan, AOL-Time Warner, Asian financial crisis, asset allocation, asset-backed security, banking crisis, Bear Stearns, Bernie Madoff, big-box store, Black Monday: stock market crash in 1987, Black-Scholes formula, Boeing 747, book value, break the buck, Brownian motion, business cycle, buy and hold, buy low sell high, California energy crisis, capital asset pricing model, capital controls, Carl Icahn, Carmen Reinhart, carried interest, collateralized debt obligation, compound rate of return, computerized trading, conceptual framework, corporate governance, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-border payments, cross-subsidies, currency risk, discounted cash flows, disintermediation, diversified portfolio, Dutch auction, equity premium, equity risk premium, eurozone crisis, fear index, financial engineering, financial innovation, financial intermediation, fixed income, frictionless, fudge factor, German hyperinflation, implied volatility, index fund, information asymmetry, intangible asset, interest rate swap, inventory management, Iridium satellite, James Webb Space Telescope, junk bonds, Kenneth Rogoff, Larry Ellison, law of one price, linear programming, Livingstone, I presume, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, low interest rates, market bubble, market friction, money market fund, moral hazard, Myron Scholes, new economy, Nick Leeson, Northern Rock, offshore financial centre, PalmPilot, Ponzi scheme, prediction markets, price discrimination, principal–agent problem, profit maximization, purchasing power parity, QR code, quantitative trading / quantitative finance, random walk, Real Time Gross Settlement, risk free rate, risk tolerance, risk/return, Robert Shiller, Scaled Composites, shareholder value, Sharpe ratio, short selling, short squeeze, Silicon Valley, Skype, SpaceShipOne, Steve Jobs, subprime mortgage crisis, sunk-cost fallacy, systematic bias, Tax Reform Act of 1986, The Nature of the Firm, the payments system, the rule of 72, time value of money, too big to fail, transaction costs, University of East Anglia, urban renewal, VA Linux, value at risk, Vanguard fund, vertical integration, yield curve, zero-coupon bond, zero-sum game, Zipcar

Harper, “Equity Valuation in the Czech Voucher Privatization Auctions,” Financial Management 29 (Winter 2000), pp. 77–100. 21W. L. Megginson and J. M. Netter, “From State to Market: A Survey of Empirical Studies on Privatization,” Journal of Economic Literature 39 (June 2001), p. 381. 22The credit crisis prompted a number of company nationalizations throughout the world, such as that of Northern Rock in the UK, Hypo Real Estate in Germany, Landsbanki in Iceland, and Anglo-Irish Bank in Ireland. 23Cerberus had previously purchased a controlling stake in GMAC, General Motors’ finance subsidiary. 24LBO and buyout funds also extract fees for arranging financing for their takeover transactions. 25The structure and compensation of private-equity partnerships are described in A.

., 684 Nokia, 512, 617–618 Nominal exchange rates, real exchange rates versus, 701–703 Nominal rates of interest, 59–63 inflation and, 62–63 real rates of interest versus, 59–63 Nominal returns, real returns versus, 699 Nomura (Japan), 363 Nondiversifiable risk. See Market risk Non-negotiable time deposits, 795, 796 Nonrecourse leases, 653 Norfolk Southern, 224 Norli, Ø, 392 Normal risk, 235–237 Norstar Bancorp, 812 Northern Rock, 845n Northwest Natural Gas Co., 86 Notes defined, 608 floating rate, 608 medium-term (MTNs), 628–629, 795, 796 Treasury, 47–49 Notional principal, 673–674 Notional value, 674–675 Novartis, 706 NPV. See Net present value (NPV) NTT (Nippon Telephone and Telegraph), 375, 845 Nuclear Regulatory Commission, 2 Nycomed, 806 NYSE Euronext, 76, 76n NYSE Euronext LIFFE, 668 O OATs (Obligations Assimilables du Trésor), 46–47 Obama, Barack, 67, 301, 338 O’Brien, T.


pages: 736 words: 233,366

Roller-Coaster: Europe, 1950-2017 by Ian Kershaw

airport security, anti-communist, Apollo 11, Ayatollah Khomeini, banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, Bretton Woods, Brexit referendum, British Empire, business cycle, centre right, colonial rule, cuban missile crisis, deindustrialization, Deng Xiaoping, Donald Trump, European colonialism, eurozone crisis, Exxon Valdez, failed state, Fall of the Berlin Wall, falling living standards, feminist movement, first-past-the-post, fixed income, floating exchange rates, foreign exchange controls, Francis Fukuyama: the end of history, full employment, Herbert Marcuse, illegal immigration, income inequality, Jeremy Corbyn, Johann Wolfgang von Goethe, labour market flexibility, land reform, late capitalism, Les Trente Glorieuses, liberal capitalism, liberation theology, low interest rates, low skilled workers, mass immigration, means of production, Mikhail Gorbachev, mutually assured destruction, Neil Armstrong, Nelson Mandela, Nixon triggered the end of the Bretton Woods system, North Sea oil, Northern Rock, oil shale / tar sands, oil shock, open borders, post-war consensus, precariat, price stability, public intellectual, quantitative easing, race to the bottom, reserve currency, rising living standards, road to serfdom, Ronald Reagan, Ronald Reagan: Tear down this wall, Sinatra Doctrine, Suez crisis 1956, The Chicago School, trade liberalization, union organizing, upwardly mobile, washing machines reduced drudgery, Washington Consensus, Winter of Discontent, young professional

Few Europeans were greatly alarmed in 2007 when news crossed the Atlantic that a number of big American investment banks were in trouble because of over-extending their high-risk credit on the purchase of properties, known as ‘sub-prime’, which buyers taking out big loans could have difficulty in repaying. An early sign of worry in Europe was the panic in Britain in September 2007 when depositors queued outside the branches of Northern Rock building society to withdraw their savings, forcing the British government to nationalize the faltering bank in February 2008. The panic quickly subsided. But so globally interdependent had the networks of investment and credit become that a crisis in the United States was bound to have consequences for the banking and finances of other countries, and for the world economy.


pages: 796 words: 242,660

This Sceptred Isle by Christopher Lee

agricultural Revolution, Berlin Wall, British Empire, colonial rule, Corn Laws, cuban missile crisis, Easter island, Edward Lloyd's coffeehouse, failed state, financial independence, flying shuttle, glass ceiling, half of the world's population has never made a phone call, James Hargreaves, James Watt: steam engine, Johannes Kepler, Khartoum Gordon, Khyber Pass, mass immigration, Mikhail Gorbachev, Monroe Doctrine, Nelson Mandela, new economy, Northern Rock, Ronald Reagan, sceptred isle, spice trade, spinning jenny, Suez canal 1869, Suez crisis 1956, The Wealth of Nations by Adam Smith, trade route, urban decay

1401 First Lollard Martyr 1403 Percy’s Revolt; Henry Percy killed at Shrewsbury 1406 James I of Scots 1409 Owen Glyndŵr 1411 Foundation of Guildhall in London 1413 Henry V 1415 Agincourt 1420 Treaty of Troyes; Paston Letters 1422 Henry VI 1429 Joan of Arc at Orléans 1437 James II of Scots 1450 Cade’s Rebellion 1453 End of Hundred Years War; Gutenberg Bible 1455 Wars of the Roses begin 1460 James III of Scots 1461 Edward IV c.1474 Caxton prints first book in English 1483 Richard III 1485 Henry VII; founding of the Yeomen of the Guard 1488 James IV of Scots 1492 Christopher Columbus reaches America 1509 Henry VIII marries Catherine of Aragon 1513 James V of Scots 1519 Charles V, Holy Roman Emperor 1527 Henry VIII fails in attempt to divorce Catherine of Aragon 1533 Henry VIII marries Anne Boleyn; Cranmer, Archbishop of Canterbury 1536 Henry VIII marries Jane Seymour; Wales annexed to England 1540 Henry VIII marries and divorces Anne of Cleves; marries Catherine Howard 1540 Henry VIII, King of Ireland 1542 Mary, Queen of Scots 1547 Edward VI 1549 First Book of Common Prayer 1553 Mary I 1556 Cranmer executed 1558 Elizabeth I 1561 Mary, Queen of Scots returns to Scotland from France 1562 British slave trade starts 1567 James VI, King of Scotland 1571 First anti-Catholic Penal Law 1580 Drake’s circumnavigation 1587 Mary, Queen of Scots executed 1596 Robert Cecil, Secretary of State 1600 British East India Company incorporated 1601 Essex executed 1603 James I 1603 Ralegh treason trial and imprisonment 1611 Authorized Version of the Bible 1616 Death of William Shakespeare 1618 Ralegh executed; Thirty Years War starts 1625 Charles I 1632 Lord Baltimore granted patent for the settlement of Maryland 1641 The Grand Remonstrance issued 1642 Civil War starts; Battle of Edgehill 1643 Battle of Newbury 1644 Battle of Marston Moor 1645 New Model Army established 1649 Charles I executed; massacres at Wexford and Drogheda 1651 Charles II crowned at Scone; Hobbes’ Leviathan published 1655 Jamaica captured 1658 Cromwell dies 1660 Charles II; Declaration of Breda; Pepys begins his diary 1662 The Royal Society; Boyle’s Law 1666 Fire of London 1670 Hudson’s Bay Company 1673 Test Act 1678 Bunyan’s Pilgrim’s Progress 1685 James II 1689 William III and Mary II 1690 Battle of the Boyne 1692 Massacre of Glencoe 1694 Bank of England 1695 Bank of Scotland 1702 Queen Anne 1704 Battle of Blenheim; capture of Gibraltar 1707 Union with Scotland 1714 George I 1719 Daniel Defoe’s Robinson Crusoe 1722 Walpole, first Prime Minister 1727 George II 1740 War of Austrian Succession; Arne composes ‘Rule Britannia’ 1742 Handel’s Messiah 1746 Battle of Culloden 1751 Clive captures Arcot 1755 Dr Johnson’s Dictionary 1756 Seven Years War 1759 General Wolfe dies at Battle of Quebec 1760 George III 1765 Stamp Act; Hargreaves’ spinning jenny 1767 Revd Laurence Stone’s Tristram Shandy 1768 Royal Academy of Arts founded 1772 Warren Hastings, first Governor General of Bengal 1773 Boston Tea Party 1774 Priestley isolates oxygen 1775 American Revolution – Lexington and Concord 1776 American Declaration of Independence 1779 Captain Cook killed in Hawaii 1780 Gordon Riots; Epsom Derby 1781 Battle of Yorktown 1783 Pitt the Younger PM 1788 Regency Crisis 1789 French Revolution 1792 Tom Paine’s The Rights of Man 1799 Napoleon 1801 Union with Ireland 1805 Trafalgar 1807 Abolition of Slave Trade Act 1815 Waterloo 1820 George IV 1828 University of London founded 1829 Catholic Emancipation Act 1830 William IV 1832 First Reform Act 1833 Abolition of slavery in British colonies Act 1834 Houses of Parliament burned down 1836 Births, Marriages & Deaths Act 1837 Queen Victoria 1838 Public Records Office founded 1839 Bed Chamber Crisis; Opium War 1840 Prince Albert; Treaty of Waitangi 1843 Joule’s First Law 1844 Rochdale Pioneers; first telegraph line in England 1846 Repeal of Corn Laws 1847 Marks and Engels’ The Communist Manifesto 1849 Punjab conquered 1850 Public libraries; Tennyson, Poet Laureate 1854 Crimean War; British Medical Association founded 1855 Daily Telegraph founded; Palmerston PM 1857 Sepoy Rebellion (Indian Mutiny); Trollope’s Barchester Towers 1858 Canning, first Viceroy of India 1859 Darwin’s On the Origin of Species 1861 Prince Albert dies; American Civil War 1865 Abraham Lincoln assassinated 1867 Second Reform Act; first bicycle 1868 TUC 1869 Suez Canal opened; Cutty Sark launched 1870 Death of Dickens 1876 Victoria made Empress of India 1880 Gladstone PM 1881 First Boer War 1884 Third Reform Act 1885 Gordon dies at Khartoum 1887 Queen Victoria’s Golden Jubilee 1891 Elementary school fees abolished 1895 Salisbury PM 1896 Daily Mail founded 1898 Omdurman 1899 Second Boer War 1900 Elgar’s Dream of Gerontius 1901 Edward VII 1903 Suffragettes 1904 Entente Cordiale 1908 Borstal opened 1909 Old Age Pensions 1910 George V 1914 Irish Home Rule; First World War 1916 Lloyd George PM 1918 RAF formed from Royal Flying Corps; Marie Stopes 1919 John Maynard Keynes’ Economic Consequences of the Peace 1920 Black and Tans; Anglican Church in Wales disestablished 1921 Irish Free State 1922 Bonar Law PM 1923 Baldwin PM 1924 First Labour Government (MacDonald PM); Baldwin PM; Lenin dies 1925 Britain joins Gold standard 1926 General Strike 1928 Women over twenty-one given vote 1929 The Depression; MacDonald PM 1931 National Government; Statute of Westminster 1932 British Union of Fascists 1933 Hitler 1935 Baldwin PM 1936 Edward VIII; George VI; Spanish Civil War 1937 Chamberlain PM 1938 Austria annexed by Germany; Air Raid Precautions (ARP) 1939 Second World War 1940 Battle of Britain; Dunkirk; Churchill PM 1942 Beveridge Report; fall of Singapore and Rangoon 1944 Butler Education Act; Normandy allied landings 1945 Attlee PM; Germany and Japan surrender 1946 UN founded; National Insurance Act; National Health Service 1947 India Independence; Pakistan formed 1948 Railways nationalized; Berlin Airlift; Ceylon (Sri Lanka) independence 1949 NATO; Irish Independence; Korean War 1951 Churchill PM 1952 Elizabeth II 1955 Eden PM; Cyprus Emergency 1956 Suez Crisis 1957 Macmillan PM 1958 Life Peerages; EEC 1959 Vietnam War; Fidel Castro 1960 Macmillan’s Wind of Change speech 1963 Douglas-Home PM; De Gaulle veto on UK EEC membership; Kennedy assassination 1964 Wilson PM 1965 Southern Rhodesia UDI 1967 Pound devalued 1969 Open University; Northern Ireland Troubles; Robin Knox-Johnston first solo, non-stop sailing circumnavigation 1970 Heath PM 1971 Decimal currency in UK 1972 Bloody Sunday, Northern Ireland 1973 Britain in EEC; VAT 1974 Wilson PM 1976 Callaghan PM; first Concorde passenger flight 1979 Thatcher PM; Rhodesian Settlement 1982 Falklands War 1985 Mikhail Gorbachev; Global warming – British report hole in ozone layer 1986 Chernobyl; Reagan–Gorbachev Zero missile summit 1987 Wall Street Crash 1988 Lockerbie 1989 Berlin Wall down 1990 John Major PM; Iraq invades Kuwait 1991 Gulf War; Helen Sharman first Briton in space; Tim Berners-Lee first website; collapse of Soviet Communism 1992 Maastricht Treaty 1994 Church of England Ordination of Women; Channel Tunnel opens 1995 British forces to Sarajevo 1996 Dolly the Sheep clone 1997 Blair PM; Diana Princess of Wales dies; Hong Kong returns to China 1998 Rolls-Royce sold to BMW; Good Friday Agreement 1999 Scottish Parliament and Welsh Assembly elections 2001 Terrorist attacks on New York 2002 Elizabeth the Queen Mother dies 2003 Second Gulf War 2004 Asian Tsunami 2005 Freedom of Information Act; Prince of Wales and Camilla Parker-Bowles wed; terrorist attacks on London 2006 Queen’s eightieth birthday 2007 Ministry of Justice created; Brown PM 2008 Northern Rock collapse 2009 Market crash; banks partly nationalized; MPs expenses scandal 2010 Cameron PM. First post-Second World War British Coalition Government Acknowledgements No book writes itself. Even revised versions and updates rely on people who encourage and those who help as a matter of course or because it is something they do every day, even without knowing who the author is or seeing the bigger picture.


pages: 1,544 words: 391,691

Corporate Finance: Theory and Practice by Pierre Vernimmen, Pascal Quiry, Maurizio Dallocchio, Yann le Fur, Antonio Salvi

"Friedman doctrine" OR "shareholder theory", accelerated depreciation, accounting loophole / creative accounting, active measures, activist fund / activist shareholder / activist investor, AOL-Time Warner, ASML, asset light, bank run, barriers to entry, Basel III, Bear Stearns, Benoit Mandelbrot, bitcoin, Black Swan, Black-Scholes formula, blockchain, book value, business climate, business cycle, buy and hold, buy low sell high, capital asset pricing model, carried interest, collective bargaining, conceptual framework, corporate governance, correlation coefficient, credit crunch, Credit Default Swap, currency risk, delta neutral, dematerialisation, discounted cash flows, discrete time, disintermediation, diversification, diversified portfolio, Dutch auction, electricity market, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, eurozone crisis, financial engineering, financial innovation, fixed income, Flash crash, foreign exchange controls, German hyperinflation, Glass-Steagall Act, high net worth, impact investing, implied volatility, information asymmetry, intangible asset, interest rate swap, Internet of things, inventory management, invisible hand, joint-stock company, joint-stock limited liability company, junk bonds, Kickstarter, lateral thinking, London Interbank Offered Rate, low interest rates, mandelbrot fractal, margin call, means of production, money market fund, moral hazard, Myron Scholes, new economy, New Journalism, Northern Rock, performance metric, Potemkin village, quantitative trading / quantitative finance, random walk, Right to Buy, risk free rate, risk/return, shareholder value, short selling, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, Steve Jobs, stocks for the long run, supply-chain management, survivorship bias, The Myth of the Rational Market, time value of money, too big to fail, transaction costs, value at risk, vertical integration, volatility arbitrage, volatility smile, yield curve, zero-coupon bond, zero-sum game

The 2008 crisis demonstrated the central role played by banks in the economy. They are suppliers of liquidity; they are also an indicator of investor risk aversion. The basic duty of a bank is to assess risk and repackage it while eliminating the diversifiable risk. Whatever their business model, the worst-managed players have been hit: Northern Rock, Fortis, Wachovia for retail banks; Bear Stearns, Lehman Brothers for investment banks; Citi for universal banks. There does not seem to be a better business model – some players are just better managed than others. Section 15.4 Theoretical framework: efficient markets An efficient market is one in which the prices of financial securities at any time ­rapidly reflect all available relevant information.


Great Britain by David Else, Fionn Davenport

active transport: walking or cycling, Albert Einstein, Beeching cuts, Boris Johnson, British Empire, call centre, car-free, carbon footprint, clean water, colonial rule, Columbine, congestion charging, country house hotel, credit crunch, Crossrail, David Attenborough, Etonian, food miles, gentrification, glass ceiling, global village, haute cuisine, high-speed rail, illegal immigration, Isaac Newton, James Watt: steam engine, Kickstarter, land reform, Livingstone, I presume, Mahatma Gandhi, mass immigration, mega-rich, negative equity, new economy, North Ronaldsay sheep, North Sea oil, Northern Rock, offshore financial centre, period drama, place-making, retail therapy, Skype, Sloane Ranger, South of Market, San Francisco, Stephen Hawking, the market place, three-masted sailing ship, trade route, transatlantic slave trade, upwardly mobile, urban planning, urban renewal, urban sprawl, Winter of Discontent

The ratio of household debt to national income in 2008 was 1.62, the highest of any major economy, and the total stock of consumer debt has trebled over the last 10 years – at £1,325 billion it is now greater than Britain’s GDP. The global credit crunch that began in late 2007 hit Britain hard. The nationalisation of Northern Rock and Bradford & Bingley – two major British banks – was followed by a massive taxpayer bailout of the financial sector, including the merger of HBOS with Lloyds TSB to create a megabank that holds one third of the country’s savings and current accounts. House prices tumbled, unemployment increased and, at the time of writing in late 2008, Britain’s economy was in a recession.