currency peg

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Big Debt Crises by Ray Dalio

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The money printing occurs in two classic waves—central banks first provide liquidity to stressed institutions, and then they conduct large-scale asset purchases to broadly stimulate the economy. Below we show the average real exchange rate versus trade partners, which reflects the strength/weakness of a currency relative to the country’s trade partners. Typically, governments with gold-, commodity-, or foreign-currency-pegged money systems are forced to have tighter monetary policies to protect the value of their currency than governments with fiat monetary systems. But eventually the debt contractions become so painful that they relent, break the link, and print (i.e., either they abandon these systems or change the amount/pricing of the commodity that they will exchange for a unit of money).

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To further build faith in the new currency… …The central bank built up large reserves of foreign currency assets. They were able to do this by borrowing foreign exchange from the Allies and encouraging German citizens who had fled the currency during the hyperinflation to repatriate their savings. Earlier one-off measures (e.g., the short-lived currency peg, capital controls) hadn’t been enough—Germany needed a comprehensive and aggressive policy shift that abolished the currency, accepted hard backing, and placed extreme limits on monetization, credit creation, and government spending. It helped that years of economic crisis had made the public eager to find a currency that they could actually use.

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capital inflows/outflows: The movement of money and credit across borders to buy capital/investment assets (like bonds, currency, equities, a factory, etc.). Foreigners buying/selling a country’s assets are ‘inflows’ and domestic players buying/selling foreign assets are ‘outflows.’ core inflation: Inflation that excludes the prices of especially volatile goods, such as commodities. currency peg: An exchange rate policy in which a country tries to keep its currency at a fixed value to another currency, a mix of currencies, or an asset such as gold. current account balance: Exports minus imports plus net income receipts. Think of it as essentially being net income (income minus expenses).

The Asian Financial Crisis 1995–98: Birth of the Age of Debt by Russell Napier

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The strength of the blade was increased by this metallurgical process. The strength of a currency peg is based upon a psychological process. Norman Lamont can vouch for the fact that there is little which can add stability to a currency peg when the psychological strength dissolves. The strength of a currency peg is tempered in a psychological ‘fire’. The collapse of the Mexican peso created such a ‘fire’ and sent it raging through the world’s currency markets. Having passed through the flames, the surviving currency pegs have been tempered and thus strengthened. The rupiah/US dollar crawling peg, one of the world’s weakest pegs, has been one of the biggest beneficiaries of the tempering process.

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The tumble in the market up to that date had been caused by a growing belief that the Thai government was prepared to follow the deflationary option. So is the stock market’s reaction to the devaluation an overreaction? Yes. The currency movement augurs a more accommodative monetary policy. With the currency peg straitjacket removed, interest rates can be adjusted in line with domestic economic conditions. However, the currency adjustment produced an 1100bp rise in overnight baht interest rates! Such an initial reaction is not surprising as many domestic actors have been genuinely surprised by the government’s announcement.

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The pledge to provide subsidised lending to corporate Thailand (assuming this is baht denominated) is an inherent recognition that the authorities will resort to the printing presses. Given the dynamics above, it seems unlikely that the next few months will see a dramatic decline in interest rates (from Monday’s levels) and the defeat of the forces of deflation. An orderly retreat from the currency peg means a gradual decline in interest rates and it will be some time before bankers’ spreads have been rebuilt to such a level that results in the recapitalisation of the financial system. Within this adjustment period, credit growth will continue to slow and financial distress will accelerate. Listed companies will go bankrupt.

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

"World Economic Forum" Davos, Alan Greenspan, Asian financial crisis, bank run, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, borderless world, Bretton Woods, BRICs, British Empire, business climate, buy and hold, capital controls, Carmen Reinhart, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-border payments, currency manipulation / currency intervention, currency peg, currency risk, Daniel Kahneman / Amos Tversky, deal flow, Deng Xiaoping, diversification, diversified portfolio, Dr. Strangelove, Fall of the Berlin Wall, family office, financial innovation, floating exchange rates, full employment, game design, German hyperinflation, Gini coefficient, global rebalancing, global reserve currency, Great Leap Forward, guns versus butter model, high net worth, income inequality, interest rate derivative, it's over 9,000, John Meriwether, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, low interest rates, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, Money creation, money market fund, money: store of value / unit of account / medium of exchange, Myron Scholes, Network effects, New Journalism, Nixon shock, Nixon triggered the end of the Bretton Woods system, offshore financial centre, oil shock, one-China policy, open economy, paradox of thrift, Paul Samuelson, power law, price mechanism, price stability, private sector deleveraging, proprietary trading, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, Ronald Reagan, short squeeze, sovereign wealth fund, special drawing rights, special economic zone, subprime mortgage crisis, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, time value of money, too big to fail, value at risk, vertical integration, War on Poverty, Washington Consensus, zero-sum game

With memories of Tiananmen fresh in their minds and the historical memory of over a century of chaos, the leadership knew the survival of the Communist Party and the continuation of political stability depended on job creation; everything else in Chinese policy would be subordinate to that goal. The surest way to rapid, massive job creation was to become an export powerhouse. The currency peg was the means to this end. For the Communist Party of China, the dollar-yuan peg was an economic bulwark against another Tiananmen Square. By 1992, reactionary elements in China opposed to reform again began to push for a dismantling of Deng’s special economic zones and other programs. In response, a visibly ailing and officially retired Deng Xiaoping made his famous New Year’s Southern Tour, a personal visit to major industrial cities, including Shanghai, which generated support for continued economic development and which politically disarmed the reactionaries.

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For the IMF, it was more like a reprieve. As late as 2006 many international monetary experts seriously questioned the purpose and continued existence of the IMF. In the 1950s and 1960s, it had provided bridge loans to countries suffering temporary balance of payments difficulties to allow them to maintain their currency peg to the dollar. In the 1980s and 1990s it had assisted developing economies suffering foreign exchange crises by providing finance conditioned upon austerity measures designed to protect foreign bankers and bondholders. Yet with the elimination of gold, the rise of floating exchange rates and the piling up of huge surpluses by developing countries, the IMF entered the twenty-first century with no discernable mission.

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From June 2010 through January 2011, yuan revaluation had moved at about a 4 percent annualized rate and Chinese inflation was moving at a 5 percent annualized rate so the total increase in the Chinese cost structure by adding revaluation and inflation was 9 percent. Projected over several years, this meant that the dollar would decline over 20 percent relative to the yuan in terms of export prices. This was exactly what Senator Chuck Schumer and other critics in the United States had been calling for. China now had no good options. If it maintained the currency peg, the Fed would keep printing and inflation in China would get out of control. If China revalued, it might keep a lid on inflation, but its cost structure would go up when measured in other currencies. The Fed and the United States would win either way. While revaluation and inflation might be economic equivalents when it came to increasing costs, there was one important difference.

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

External Commitments: Currency Pegs, Unions, and the Gold Standard Historically, government often looked for other external commitment devices that make it difficult to inflate away the public debt. The basic idea underlying the use of external commitment devices is rather simple. A country pegs the value of its own currency to some anchor—either foreign currency or a commodity (gold)—over whose value it has little control. If the value of the anchor does not change too quickly, and if the peg is credible, then the domestic currency will also remain stable. From Currency Pegs to Currency Unions Many countries around the world tie or have tied the real value of their currency to a foreign currency (or a basket of currencies).

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Printed in the United States of America 13579108642 Contents 1 Introduction 1 PART I: POWER SHIFTS AND GERMAN-FRENCH DIFFERENCES 2 Power Shifts 17 Lethargy of European Institutions 18 The First Power Shift: From Brussels to National Capitals 20 The Second Power Shift: To Berlin-Paris and Ultimately to Berlin 27 After the Power Shift 33 3 Historical Roots of German-French Differences 40 Cultural Differences 41 Federalism versus Centralism 43 Mittelstand versus National Champions 48 Collaborative versus Confrontational Labor Unions 51 Historical Inflation Experiences 54 4 German-French Differences in Economic Philosophies 56 Fluid Traditions: Switch to Opposites 56 German Economic Tradition 59 French Economic Tradition 67 International Economics 74 PART II: MONETARY AND FISCAL STABILITY: THE GHOST OF MAASTRICHT 5 Rules, Flexibility, Credibility, and Commitment 85 Time-Inconsistency: Ex Ante versus Ex Post 86 External Commitments: Currency Pegs, Unions, and the Gold Standard 89 Internal Commitments: Reputation and Institutional Design 91 Managing Current versus Avoiding Future Crisis 94 6 Liability versus Solidarity: No-Bailout Clause and Fiscal Union 97 The No-Bailout Clause 98 Fiscal Unions 100 Eurobonds 111 Policy Recommendations 115 7 Solvency versus Liquidity 116 Buildup of Imbalances and the Naked Swimmer 117 Solvency 118 Liquidity 119 Crossing the Rubicon via Default 125 Sovereign-Debt Restructuring and Insolvency Mechanism 126 Fiscal Push: Increasing Scale and Scope of EFSF and ESM 127 Monetary Push 131 Policy Recommendations 133 8 Austerity versus Stimulus 135 The Fiscal Multiplier Debate 137 The Output Gap versus Unsustainable Booms Debate 143 Politics Connects Structural Reforms and Austerity 145 The European Policy Debate on Austerity versus Stimulus 148 Lessons and Policy Recommendations 153 PART III: FINANCIAL STABILITY: MAASTRICHT’S STEPCHILD 9 The Role of the Financial Sector 157 Traditional Banking 159 Modern Banking and Capital Markets 162 Cross-Border Capital Flows and the Interbank Market 166 10 Financial Crises: Mechanisms and Management 173 Financial Crisis Mechanisms 175 Crisis Management: Monetary Policy 185 Crisis Management: Fiscal Policy and Regulatory Measures 194 Ex Ante Policy: Preventing a Crisis 206 11 Banking Union, European Safe Bonds, and Exit Risk 210 Banking in a Currency Union 211 Safe Assets: Flight-to-Safety Cross-Border Capital Flows 222 Redenomination and Exit Risks 226 Policy Recommendations 233 PART IV: OTHERS’ PERSPECTIVES 12 Italy 237 Battling Economic Philosophies within Italy 237 Mezzogiorno: Convergence or Divergence within a Transfer Union 239 Italy’s Economic Challenges 242 Politics and Decline 245 13 Anglo-American Economics and Global Perspectives 249 Diverging Traditions 251 The United States: The Politics of Looking for Recovery 261 The United Kingdom: Brexit and the Politics of Thinking Outside Europe 267 China and Russia 279 Conclusion 286 14 The International Monetary Fund (IMF) 287 The IMF’s Philosophy and Crisis Management 289 The IMF’s Initial Involvement in the Euro Crisis 295 The IMF and the Troika 300 A Change in the IMF’s Leadership 304 Loss of Credibility: Muddling Through, Delayed Greek PSI 306 15 European Central Bank (ECB) 313 The ECB before the Crisis: Institutional Design and Philosophy 315 The ECB’s Early Successes and Defeats 325 The ECB and Conditionality 331 Lending and Asset Purchase Programs 343 Single Supervisory Mechanism (SSM) for European Banks 368 Taking Stock: Where Does the ECB Stand?

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In particular, this chapter tries to answer the following questions: •What advantages do rules have in avoiding and managing crises, and what are their costs? •How do rules help to overcome time-inconsistency problems—that countries find it advantageous to first create the impression that they would do one thing but ex post do another? •Historically, how were the gold standard, currency pegs, and other external commitment devices used to find the right balance between containing time-inconsistency problems and maintaining flexibility? •How can reputation replace external commitment devices? •How can delegation to an independent central bank help to overcome time-inconsistency problems?

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

"there is no alternative" (TINA), "World Economic Forum" Davos, Alan Greenspan, bank run, banking crisis, barriers to entry, battle of ideas, behavioural economics, Berlin Wall, Bretton Woods, business cycle, buy and hold, capital controls, carbon tax, Carmen Reinhart, cashless society, central bank independence, centre right, cognitive dissonance, collapse of Lehman Brothers, collective bargaining, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, currency peg, dark matter, David Ricardo: comparative advantage, disintermediation, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial innovation, full employment, George Akerlof, Gini coefficient, global supply chain, Great Leap Forward, Growth in a Time of Debt, housing crisis, income inequality, incomplete markets, inflation targeting, information asymmetry, investor state dispute settlement, invisible hand, Kenneth Arrow, Kenneth Rogoff, knowledge economy, light touch regulation, low interest rates, manufacturing employment, market bubble, market friction, market fundamentalism, Martin Wolf, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, neoliberal agenda, new economy, open economy, paradox of thrift, pension reform, pensions crisis, price stability, profit maximization, purchasing power parity, quantitative easing, race to the bottom, risk-adjusted returns, Robert Shiller, Ronald Reagan, Savings and loan crisis, savings glut, secular stagnation, Silicon Valley, sovereign wealth fund, the payments system, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, trickle-down economics, Washington Consensus, working-age population

There is a simple answer to this apparent puzzle: a fatal decision, in 1992, to adopt a single currency, without providing for the institutions that would make it work. Good currency arrangements cannot ensure prosperity, but flawed currency arrangements can lead to recessions and depressions. And among the kinds of currency arrangements that have long been associated with recessions and depressions are currency pegs, where the value of one country’s currency is fixed relative to another or relative to a commodity. America’s depression at the end of the 19th century was linked to the gold standard, where every country pegged its currency’s value to gold and, therefore, implicitly to each other’s currencies: with no new large discoveries of gold, its scarcity was leading to the fall of prices of ordinary goods in terms of gold—to what we call today deflation.3 In effect, money was becoming more valuable.

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The economic costs of these crises are enormous; they are felt not only in the high unemployment and lost output today but in lower growth for years—in some cases, decades. Such crises have happened repeatedly, with the euro crisis being only the most recent and worst example. In chapter 2, for instance, I described the Argentine crisis in 2001–2002. It is easy to understand why such crises are so common with currency pegs. If somehow the exchange rate becomes too high, there will be a trade deficit, with imports exceeding exports. This deficit has to be financed somehow, offset by what are called capital inflows. These can take the form of debt or direct investments. The problems posed by debt are most obvious: eventually the debt reaches so high a level that creditors’ sentiments begin to change.

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For the sake of Europe, for the sake of the world, let us hope that Europe sets out to do so. NOTES Preface 1 More precisely, around 45 percent at the start of 2016, according to Eurostat. 2 The address was published as Robert E. Lucas Jr., “Macroeconomic Priorities,” American Economic Review 93, no. 1 (2003): 1–14; the quote appears on p. 1. 3 With every country’s currency pegged to gold, the value of each currency relative to the other was also fixed. 4 Bryan uttered this phrase in his July 9, 1896, speech at the Democratic National Convention in Chicago. 5 See Barry Eichengreen, Golden Fetters: The Gold Standard and the Great Depression, 1919–1939 (New York: Oxford University Press, 1992). 6 The equivalent value for US and China GDPs are $17.9 trillion and $11.0 trillion, respectively.

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

In this, they were simply following on from what they had been doing in Asia for a few years; the long-established Bankers Trust Asian Emerging Markets team were now our colleagues and the model for our new unit. Why did clients invest in these markets? The answer was to get much higher returns than in developed markets for – it was thought – very little extra risk. The reason they thought this was because of currency pegging. A major risk when you invest in any foreign market, but most particularly in emerging markets, is that while your investment can do well in foreign currency terms, if that currency depreciates against your own you can end up losing. You can hedge with FX products but they are costly if the market perceives a large risk and so much of the benefit of higher returns is wiped out.

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The ‘one-day p99’ VaR for the fund in late summer 1997 was around $100 million – a huge number, but peanuts compared to their multibillion-dollar capital.12 It would take a ‘ten sigma event’ (translation – something occurring randomly once in several lifetimes of the universe) for the fund to be wiped out in a year.13 Assuming, that is, that the future behaved itself and resembled the past. A crisis in Asia was the first sign that this assumption might not hold. A Bit of a Drawdown Asia’s ‘Tiger’ economies were touted as the success story of the 1990s. Currency pegs, introduced over the previous decade, had been designed to provide reduced risk: reduced risk for foreign lenders who could rest easy that their high returns in local currency would not be devalued away, and reduced risk for local borrowers who could access the lower interest rates available in US dollars without the prospect of a stronger dollar making their repayments unaffordable in their own currency.

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Derivatives, the offspring of growing computer power, played an important role in this explosion of debt, which, unlike the 1980s, was no longer dominated by bank lending but rather by foreign direct investment (FDI), in large part to private firms.16 Money was lent, often using complex variants of the total return swap, in ways that were not transparent to the rest of the market. VaR models added to the problem. Because of Asian currencies’ pegs to the US dollar, which allowed only small price variations around a central rate, their volatilities, calculated by looking back over historical data series, were very low. For example, in the three years prior to June 1997 when the crisis started, the average volatility of the Thai baht to US dollar exchange rate had been around 3.7 per cent.

Austerity: The History of a Dangerous Idea by Mark Blyth

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

That gave the German economy the advantage in producing less-than-great stuff too, thereby undercutting competitors in products lower down, as well as higher up the value-added chain.47 Add to this contemporary German wages, which have seen real declines over the 2000s, and you have an economy that is extremely hard to keep up with. On the other side of this one-way bet were the financial markets. They looked at less dynamic economies, such as the United Kingdom and Italy, that were tying themselves to the deutsche mark and saw a way to make money. The only way to maintain a currency peg is to either defend it with foreign exchange reserves or deflate your wages and prices to accommodate it. To defend a peg you need lots of foreign currency so that when your currency loses value (as it will if you are trying to keep up with the Germans), you can sell your foreign currency reserves and buy back your own currency to maintain the desired rate.

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Soros could do this because he knew that there was no way the United Kingdom or Italy could be as competitive as Germany without serious price deflation to increase cost competitiveness, and that there would be only so much deflation and unemployment these countries could take before they either ran out of foreign exchange reserves or lost the next election. Indeed, the European Exchange Rate Mechanism was sometimes referred to as the European “Eternal Recession Mechanism,” such was its deflationary impact. In short, attempts to maintain an anti-inflationary currency peg fail because they are not credible on the following point: you cannot run a gold standard (where the only way to adjust is through internal deflation) in a democracy.48 Well, you can try, and the Europeans building the EU are nothing if not triers. Following the Exchange Rate Mechanism debacle, in a scene reminiscent of one in Monty Python’s movie The Holy Grail in which the king tells his son that “they said you couldn’t build a castle on a swamp, so I did it anyway, and it fell down, so I did it again, and it fell down, so I did it again, and it fell down,” the Europeans decided to go one step further than pegging to the deutsche mark—they would all become German by sharing the same currency and the same monetary policy.

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Ordoliberal Europe When the rest of Europe stagnated in the late 1970s, Germany suffered the least and recovered the quickest of all the major European states.35 Its ability to withstand the inflationary pressures of the period became the model for other European states: first, through the abortive currency pegs to the deutsche mark of the 1980s and 1990s; second, through the incorporation of ordoliberal principles into the ECB constitution and the EU Commission’s competition-focused policies; and third, through the rules-based approach to governing the Euro project. From the Maastricht convergence criteria to the Stability and Growth Pact to the proposed new fiscal treaty—it’s all about the economic constitution—the rules, the ordo.36 For example, the centrality of competitiveness as the key to growth is a recurrent EU motif.

Money Mischief: Episodes in Monetary History by Milton Friedman

Bretton Woods, British Empire, business cycle, classic study, currency peg, double entry bookkeeping, fiat currency, financial innovation, fixed income, floating exchange rates, foreign exchange controls, full employment, German hyperinflation, income per capita, law of one price, Money creation, money market fund, oil shock, price anchoring, price stability, Savings and loan crisis, systematic bias, Tax Reform Act of 1986, transaction costs

., [>] Forrest, William, [>] France avoids hyperinflation, [>]–[>] bimetallic standard in, [>], [>], [>], [>], [>], [>], [>]–[>], [>], [>], [>] gold standard in, [>], [>], [>]–[>], [>], [>] monetary reforms in, [>], [>] Revolution, [>], [>], [>] Franco-Prussian War (1870–71), [>], [>], [>] Free coinage eliminated, [>]–[>], [>] significance of, [>]–[>] Free-silver issue deflation and, [>]–[>] political opposition to, [>] political support for, [>], [>], [>] in presidential campaign of 1896, [>], [>], [>], [>]–[>], [>], [>], [>]–[>], [>]–[>], [>] Friedman, Milton 8c Anna Schwartz, A Monetary History of the United States, 1867–1960, [>], [>], [>], [>], [>], [>] Froman, Lewis, "Bimetallism Reconsidered," [>] Furness, William Henry, III, The Island of Stone Money, [>]–[>] Germany Allied occupation of, [>]–[>] gold standard in, [>], [>], [>], [>]–[>], [>], [>] hyperinflation in, [>]–[>], [>], [>], [>], [>] inflation rates in, [>]–[>], [>]–[>], [>], [>] postwar recovery in, [>] Giffen, Sir Robert, The Case Against Bimetallism, [>]–[>] Gold demonetized, [>]–[>] nonmonetary use of, [>]–[>], [>], [>] Roosevelt raises legal price of, [>] Gold-exchange standard, [>], [>] Gold points, [>], [>] Gold-silver price ratio, [>]–[>], [>]–[>], [>]–[>], [>]–[>], [>]–[>], [>]–[>] effect of silver standard on, [>]–[>] fixed by market, [>], [>], [>] in Great Britain, [>]–[>] legally defined, [>], [>] market points in, [>], [>] naive estimate of, under bimetallic standard (hypothetical continuation of), [>]–[>] political component of, [>]–[>], [>]–[>], [>], [>]–[>], [>], [>]–[>] Gold standard, [>]–[>], [>], [>], [>], [>], [>] adopted by Western nations, [>], [>], [>], [>]–[>], [>], [>]–[>], [>], [>], [>], [>] Coinage Act (1873) and, [>]–[>] and deflation, [>]–[>], [>]–[>], [>]–[>] economic effects of, [>], [>] industrialized nations abandon (1930s), [>], [>], [>] and international exchange rates, [>]–[>], [>] and low-value coins, [>] Redish on, [>]–[>] vs. silver standard, [>]–[>], [>]–[>], [>], [>]–[>], [>]–[>] Gold strikes, economic effects of, [>]–[>], [>], [>], [>], [>]–[>], [>]–[>], [>], [>], [>] Goods and services, output of, money supply and, [>]–[>], [>], [>] natural limits, [>] Government revenues from bonds, [>]–[>], [>] from inflation, [>]–[>], [>]–[>], [>] Government spending, and money supply, [>]–[>], [>], [>] Great Britain attempts to peg pound to German mark, [>]–[>] bimetallic standard in, [>], [>], [>], [>], [>], [>] goes off gold standard (1931), [>]–[>], [>] gold-silver price ratio in, [>]–[>] gold standard in, [>], [>]–[>], [>]–[>], [>]–[>] inflation rates in, [>], [>]–[>], [>]–[>], [>], [>] monetary reform in (1690s), [>] U.S. sells silver to, [>] Greek coinage, as commercial standard, [>]–[>] Greenback inflation, Civil War and, [>], [>]–[>], [>], [>]–[>], [>]–[>], [>] Greenback party, [>], [>] Greenback standard, [>], [>], [>]–[>], [>] Gresham's law, [>], [>] Hamilton, Alexander and Coinage Act of 1792, [>]–[>] supports bimetallic standard, [>]–[>], [>] Treasury Report on the Establishment of the Mint (1791), [>] Hanna, Mark, [>] Hetzel, Robert, on inflation cure, [>]–[>] High Price of Bullion, The (Ricardo), [>] History of Bimetallism in the United States, The (Laughlin), [>] History of Economic Analysis (Schumpeter), [>] Hofstadter, Richard, [>] Hong Kong currency pegged to British pound in, [>] currency pegged to U.S. dollar in, [>]–[>], [>] monetary policies of, [>]–[>] Hume, David, [>]–[>], [>] Hungary, hyperinflation in, [>] Hunt brothers, silver speculation by, [>] Hyperinflation, [>], [>], [>]. See also Inflation in Argentina, [>]–[>], [>], [>] in Bolivia, [>], [>], [>] in Brazil, [>]–[>], [>]–[>], [>]–[>], [>], [>] as cause of totalitarianism, [>]–[>] causes of, [>]–[>] in Chile, [>], [>], [>], [>], [>], [>] in China, [>], [>]–[>], [>], [>] following World War I, [>], [>], [>], [>]–[>], [>], [>], [>], [>], [>], [>] following World War II, [>]–[>], [>], [>], [>], [>], [>], [>], [>], [>], [>] in Germany, [>]–[>], [>], [>], [>], [>] in Hungary, [>] in Israel, [>], [>]–[>], [>] in Mexico, [>] in Nicaragua, [>] and paper money, [>]–[>] in Russia, [>]–[>], [>] war and, [>], [>] Income, nominal, [>] Income flow, [>], [>], [>]–[>], [>] India goes off gold standard (1931), [>] gold standard in, [>] silver standard in, [>], [>], [>], [>], [>], [>] Inflation.

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It requires no financial operations by the Hong Kong currency board to keep it there, other than to live up to its obligation to give 7.8 Hong Kong dollars for 1 U.S. dollar, and conversely. And it can always do so because it holds a volume of U.S. dollar assets equal to the dollar value of the Hong Kong currency outstanding. An alternative arrangement is the one adopted by Chile and Israel: exchange rates between national currencies pegged at agreed values, the values to be maintained by the separate national central banks by altering ("coordinating" is the favorite term) domestic monetary policy appropriately. Many proponents of a common European currency regard a system of pegged exchange rates, such as the current European Monetary System (EMS), as a step toward a unified currency.

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

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

At the height of the sterling crisis, John Major effectively bought sterling from Stan Druckenmiller at a price both knew to be absurd. Major did this for a reason that appears nowhere in financial texts: He wanted to force political rivals to share responsibility for devaluation. Druckenmiller’s coup also served to show that currency pegs were vulnerable in a world of deep and liquid markets. During the 1950s and 1960s, the system of fixed currencies worked well because regulations restricted the flow of capital across borders; but now that these controls were gone, it was time for governments to accept the limits to their power over money.

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Attempts to have it both ways via “flexible pegs” such as the exchange-rate mechanism were likely to backfire: The contrast between the United States and Europe illustrated the point vividly. When the Bush administration had tried and failed to lift the dollar in August, no calamity had ensued; the dollar was floating anyway, so there was no sudden break in its fortunes. But the currency pegs of Finland, Italy, Britain, and Sweden were a different matter; they presented speculators with targets that were too appealing to pass up, exposing their economies to wrenching dislocations. In committing to the exchange-rate mechanism, European governments had made a promise that they lacked the ability to keep.

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They had bottled up currency movements until a power greater than themselves had blown the cork into their faces. The implications of a world featuring Druckenmiller and other macro investors were not immediately absorbed by policy makers. As happens after every financial crisis, the first instinct was to vilify the markets rather than to learn the awkward lessons that they teach: in this case, that currency pegs were dangerous. The week after the pound’s devaluation, when the French franc came under pressure, French finance minister Michel Sapin suggested that troublemaking traders should be guillotined, as during the French revolution.52 The following summer, after the exchange rate mechanism suffered another round of disruptions, French premier Edouard Balladur argued that governments had an economic and moral responsibility to curb speculators.

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

If workers expect inflation to be 10 per cent, they will demand 10 per cent wage increases. That will push up the costs of businesses, forcing companies to increase prices. So the expectation of high inflation will by itself create inflation. In contrast, if workers expect the central bank to control inflation because of a need to maintain a currency peg, they will demand less in the way of wage increases. And that will reduce the cost pressures on businesses. The problem with such pegs, however, is the same one that confronted countries during the gold standard era. There may be occasions when one has to choose between maintaining the peg and avoiding a recession in the domestic economy.

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The result was one of the biggest migrations in history as rural workers moved to the big cities. Much of the rest of the world may have abandoned the Bretton Woods approach but China did not. The Chinese Communist party had no intention of letting their interest or exchange rates be controlled by the markets; they opted for capital controls and a managed currency, pegged to the dollar. The corollary of this policy was that they accumulated a massive current-account surplus which (being China) the government controlled. These foreign-exchange reserves were then held in Treasury bonds and bills, making it easier for the US to finance its trade deficit. In his book Fixing Global Finance, Financial Times columnist Martin Wolf argues convincingly that the ‘savings glut’ of China and others was more responsible for the imbalance than American profligacy. 3 His argument is that a low level of real interest rates indicated an excess of desired saving over investment.

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Another possibility is that QE has proved more successful in reflating the economies of the developing world than the developed. Countries which peg their currency to the dollar effectively import US monetary policy, since investors are enticed by the prospect of higher returns with reduced currency risk. Inevitably, a currency peg also means that interest rates in the pegged countries cannot diverge too far from each other (unless, like the Chinese, you have extensive capital controls). In 2010, many developing countries found themselves dealing with rising inflation rates, driven by higher commodity prices. In some cases, they also experienced sharply higher property prices and booming equity markets.

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

"World Economic Forum" Davos, Alan Greenspan, algorithmic trading, asset-backed security, bank run, banking crisis, Bear Stearns, Bernie Madoff, Black Swan, Bretton Woods, BRICs, British Empire, business cycle, buy and hold, collateralized debt obligation, computer age, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency peg, diversification, Doha Development Round, energy security, financial deregulation, financial engineering, financial innovation, fixed income, Francis Fukuyama: the end of history, George Gilder, Glass-Steagall Act, housing crisis, Hyman Minsky, imperial preference, income inequality, index arbitrage, index fund, interest rate derivative, interest rate swap, Joseph Schumpeter, junk bonds, Kenneth Rogoff, large denomination, Long Term Capital Management, low interest rates, market bubble, Martin Wolf, Menlo Park, Michael Milken, military-industrial complex, Minsky moment, mobile money, money market fund, Monroe Doctrine, moral hazard, mortgage debt, Myron Scholes, new economy, oil shale / tar sands, oil shock, old-boy network, peak oil, plutocrats, Ponzi scheme, profit maximization, prosperity theology / prosperity gospel / gospel of success, Renaissance Technologies, reserve currency, risk tolerance, risk/return, Robert Shiller, Ronald Reagan, Satyajit Das, Savings and loan crisis, shareholder value, short selling, sovereign wealth fund, stock buybacks, subprime mortgage crisis, The Chicago School, Thomas Malthus, too big to fail, trade route

The alternative pursued in the late 1990s, which may yet boomerang, was to debase the consumer price index statistics maintained by the federal Bureau of Labor Statistics (BLS). This tinkering did not go unanswered. By 2007, most top officials of the central banks or new sovereign wealth funds of China, Japan, Russia, Saudi Arabia, Qatar, Kuwait, and the United Arab Emirates, nations with major U.S. dollar holdings or local currencies pegged to the dollar, would have heard of California-based Bill Gross, managing director of the Pacific Investment Management Company (PIMCO). Sometimes called the world’s leading bond investor, billionaire Gross was colloquially known as “the bond king.” Were he to send these bureaucrats notes saying, “My sense is that the [U.S.]

…

Global respect for the United States slumped drastically in 2002 and following the invasion of Iraq, and then again in 2005-7 as the survey data in the appendix so unfortunately illustrates. The value of the U.S. dollar has followed pretty much the same course. Between the deepening dislike of the United States in much of the Muslim world and the decline of the greenback, Persian Gulf states that once reinvested most of their oil revenues in U.S. bonds and kept their currencies pegged to the dollar no longer believe that Washington is a capital city that keeps faith. Given U.S. dollar policy in 2007, it is easy to see why. Ill repute from selling “contaminated” mortgage-backed securities and structured investment packages has been a body blow to Wall Street, damaging bank profits and prestige.

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The last several years have seen mounting evidence of a global mercantilist or state-capitalist resurgence in more than a dozen economic dimensions: spreading resource nationalism, government-run national oil companies; a shrinking private oil market; internal energy subsidies; energy alliances that double as military organizations (the SCO); export subsidies; currency pegging; mercantilist buildups of Asian central bank currency reserves; the overshadowing of private investors by Asian sovereign wealth funds; the enlargement of foreign state-owned portions of Western commercial banks and investment banks; the mimicry of early-twentieth-century dollar diplomacy by twenty-first-century renminbi, ruble, and even Venezuelan bolivar diplomacy; political reregulation of capital flows; and apparent Third World success in hobbling or stalling two market triumphalist enforcement mechanisms—the International Monetary Fund and the World Trade Organization.

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

Being on gold may also have reduced the costs of borrowing by committing governments to pursue prudent fiscal and monetary policies. The difficulty of pegging currencies to a single commodity based standard, or indeed to one another, is that policymakers are then forced to choose between free capital movements and an independent national monetary policy. They cannot have both. A currency peg can mean higher volatility in short-term interest rates, as the central bank seeks to keep the price of its money steady in terms of the peg. It can mean deflation, if the supply of the peg is constrained (as the supply of gold was relative to the demand for it in the 1870s and 1880s). And it can transmit financial crises (as happened throughout the restored gold standard after 1929).

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The average 295 basis point spread between Argentine and British bonds in the 1880s scarcely compensated investors like the Barings for the risks they were running by investing in Argentina. In the same way, the average 664 basis point spread between Argentine and US bonds from 1998 to 2000 significantly underpriced the risk of default as the Cavallo currency peg began to crumble. When the default was announced, the spread rose to 5,500; by March 2002 it exceeded 7,000 basis points. After painfully protracted negotiations (there were 152 varieties of paper involved, denominated in six different currencies and governed by eight jurisdictions) the majority of approximately 500,000 creditors agreed to accept new bonds worth roughly 35 cents on the dollar, one of the most drastic ‘haircuts’ in the history of the bond market.68 So successful did Argentina’s default prove (economic growth has since surged while bond spreads are back in the 300-500 basis point range) that many economists were left to ponder why any sovereign debtor ever honours its commitments to foreign bondholders.69 The Resurrection of the Rentier In the 1920s, as we have seen, Keynes had predicted the ‘euthanasia of the rentier’, anticipating that inflation would eventually eat up all the paper wealth of those who had put their money in government bonds.

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The answer is that, until recently, the best way for China to employ its vast population was through exporting manufactures to the insatiably spendthrift US consumer. To ensure that those exports were irresistibly cheap, China had to fight the tendency for the Chinese currency to strengthen against the dollar by buying literally billions of dollars on world markets - part of a system of Asian currency pegs that some commentators dubbed Bretton Woods II.109 In 2006 Chinese holdings of dollars almost certainly passed the trillion dollar mark. (Significantly, the net increase of China’s foreign exchange reserves almost exactly matched the net issuance of US Treasury and government agency bonds.) From America’s point of view, meanwhile, the best way of keeping the good times rolling in recent years has been to import cheap Chinese goods.

Losing Control: The Emerging Threats to Western Prosperity by Stephen D. King

"World Economic Forum" Davos, Admiral Zheng, Alan Greenspan, asset-backed security, barriers to entry, Berlin Wall, Bernie Madoff, Bretton Woods, BRICs, British Empire, business cycle, capital controls, Celtic Tiger, central bank independence, collateralized debt obligation, corporate governance, credit crunch, crony capitalism, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, demographic dividend, demographic transition, Deng Xiaoping, Diane Coyle, Fall of the Berlin Wall, financial deregulation, financial innovation, fixed income, foreign exchange controls, Francis Fukuyama: the end of history, full employment, G4S, George Akerlof, German hyperinflation, Gini coefficient, Great Leap Forward, guns versus butter model, hiring and firing, income inequality, income per capita, inflation targeting, invisible hand, Isaac Newton, junk bonds, knowledge economy, labour market flexibility, labour mobility, liberal capitalism, low interest rates, low skilled workers, market clearing, Martin Wolf, mass immigration, Meghnad Desai, Mexican peso crisis / tequila crisis, Naomi Klein, new economy, old age dependency ratio, Paul Samuelson, Ponzi scheme, price mechanism, price stability, purchasing power parity, rent-seeking, reserve currency, rising living standards, Ronald Reagan, Savings and loan crisis, savings glut, Silicon Valley, Simon Kuznets, sovereign wealth fund, spice trade, statistical model, technology bubble, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Market for Lemons, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, transaction costs, Washington Consensus, We are all Keynesians now, women in the workforce, working-age population, Y2K, Yom Kippur War

When the Federal Reserve sets interest rates, it’s doing so not just for the US but also for huge chunks of the emerging world, whether it likes it or not. By ignoring their needs, global monetary conditions can end up either too tight or too loose. Fourth, monetary sovereignty is a myth. Whether through currency pegs, carry trades, unexpected price shocks or any one of a number of other examples, central banks are, individually, not as powerful as they’d like to believe. The gravitational pull being exercised by the emerging markets should change for ever the cosy Western attitudes towards monetary policy.

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In effect, it reduces the monetary sovereignty of nation states while allowing them to maintain sovereignty in other areas, at least to the extent allowable under European Union law. Importantly, those who join the euro have voting rights on monetary policy. Unlike other currency arrangements – full-scale dollarizations and the various currency pegs arrangements described in Chapter 5 – membership of the euro gives a country a seat at the policy table. There is a loss of sovereignty, but it is not a complete loss. Meanwhile, the trials and tribulations of currency upheavals are, at least in theory, permanently removed.1 To date, euro membership is confined to members of the European Union and is contingent on countries meeting specified ‘convergence criteria’.

The Politics of Bitcoin: Software as Right-Wing Extremism by David Golumbia

3D printing, A Declaration of the Independence of Cyberspace, Affordable Care Act / Obamacare, Alvin Toffler, Big Tech, bitcoin, blockchain, Burning Man, Californian Ideology, Cody Wilson, crony capitalism, cryptocurrency, currency peg, digital rights, distributed ledger, Dogecoin, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, Extropian, fiat currency, Fractional reserve banking, George Gilder, Ian Bogost, jimmy wales, John Perry Barlow, litecoin, Marc Andreessen, Modern Monetary Theory, Money creation, money: store of value / unit of account / medium of exchange, Mont Pelerin Society, new economy, obamacare, Peter Thiel, Philip Mirowski, printed gun, risk tolerance, Ronald Reagan, Satoshi Nakamoto, seigniorage, Silicon Valley, Singularitarianism, smart contracts, Stewart Brand, technoutopianism, The Chicago School, Travis Kalanick, Vitalik Buterin, WikiLeaks

Bitcoin advocates make repeated reference to the superiority of gold-backed money, despite the fact that governments fixed even the price of gold at many moments in history to tame volatility, and in the face of current stories about gold and silver prices being part of the Libor price-fixing scandal.[3] This preference for gold versus what they somewhat inaccurately call the “fiat currency” of nation-states only shows the ideological nature of their assertions, since gold exists right now, is widely traded and can be untraceable, largely resistant to counterfeiting, and yet is widely used (though not as a currency peg) by the very nation-states and central banks that Bitcoin advocates say they are in the process of dismantling. Just as revealing are statements like those by self-described “currency trader and economics nerd” Brian Kelly, who in The Bitcoin Big Bang inaccurately attributes the threefold nature of money to currency, and despite this, after laying out the case that Bitcoin only serves the medium-of-exchange function, suggests that “we are too tethered to the conventional definition of a currency as a medium of exchange, a store of value, and a unit of account” (2015, 13).

Grave New World: The End of Globalization, the Return of History by Stephen D. King

"World Economic Forum" Davos, 9 dash line, Admiral Zheng, air freight, Alan Greenspan, Albert Einstein, Asian financial crisis, bank run, banking crisis, barriers to entry, Berlin Wall, Bernie Sanders, bilateral investment treaty, bitcoin, blockchain, Bonfire of the Vanities, borderless world, Bretton Woods, Brexit referendum, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collateralized debt obligation, colonial rule, corporate governance, credit crunch, currency manipulation / currency intervention, currency peg, currency risk, David Ricardo: comparative advantage, debt deflation, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, Edward Snowden, eurozone crisis, facts on the ground, failed state, Fall of the Berlin Wall, falling living standards, floating exchange rates, Francis Fukuyama: the end of history, full employment, George Akerlof, global supply chain, global value chain, Global Witness, Great Leap Forward, hydraulic fracturing, Hyman Minsky, imperial preference, income inequality, income per capita, incomplete markets, inflation targeting, information asymmetry, Internet of things, invisible hand, Jeremy Corbyn, joint-stock company, Kickstarter, Long Term Capital Management, low interest rates, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, middle-income trap, moral hazard, Nixon shock, offshore financial centre, oil shock, old age dependency ratio, paradox of thrift, Peace of Westphalia, plutocrats, post-truth, price stability, profit maximization, quantitative easing, race to the bottom, rent-seeking, reserve currency, reshoring, rising living standards, Ronald Reagan, Savings and loan crisis, Scramble for Africa, Second Machine Age, Skype, South China Sea, special drawing rights, technology bubble, The Great Moderation, The Market for Lemons, the market place, The Rise and Fall of American Growth, trade liberalization, trade route, Washington Consensus, WikiLeaks, Yom Kippur War, zero-sum game

Think, for example, of the Mexican tequila crisis in the mid-1990s, the Asian crisis shortly thereafter, the 1998 Russian debt default, the collapse of Argentina’s currency board at the turn of the century and, most obviously, the global financial crisis. Given these experiences, an increasing number of emerging nations began to reject currency peg arrangements as a way of advertising their financial probity. Many shifted to floating currency arrangements, aware that attempts to fix foreign exchange rates in a world of free-flowing cross-border capital had only given rise to repeated booms and busts. And it is not only emerging nations that have had this problem.

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Constantinople retaliated, issuing coins with the emperor relegated to the reverse and Jesus Christ on the front. Of the three surviving gold coins from the reign of Offa, king of Mercia from 757 to 796, one is a copy of an Abbasid dinar of 774, with Latin on one side and Arabic on the other, perhaps an early attempt at a currency peg arrangement: at the time, England was, at best, an emerging market and, for many, not to be trusted. Meanwhile, there were plenty of opportunities for currency debasement. Before the advent of fiat money, coins themselves were made of precious metal, mostly gold and silver. Some coins were ‘clipped’, thereby reducing the precious metal content (one reason why, even today, many coins have ridged edges).

How an Economy Grows and Why It Crashes by Peter D. Schiff, Andrew J. Schiff

Alan Greenspan, Bear Stearns, Bretton Woods, business climate, currency peg, hiring and firing, indoor plumbing, low interest rates, offshore financial centre, price stability, Robert Shiller, technology bubble

This gives a competitive opportunity to countries with weak currencies to start selling some of their products into that market. When they sell more, demand for their currencies rises. This currency counterweight should keep runaway trade imbalances in check. But the dollar’s reserve status, and the decision of the Chinese government to maintain the currency peg, has gummed up the machinery and has allowed the situation to grow dangerously out of kilter. CHAPTER 13 CLOSING THE FISH WINDOW Eventually, as Fish Reserve Notes continued to pour out of Usonia and pile up on islands throughout the ocean, some foreign holders began questioning the ability of Usonia to redeem them with actual fish.

The Road to Ruin: The Global Elites' Secret Plan for the Next Financial Crisis by James Rickards

"World Economic Forum" Davos, Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, Bayesian statistics, Bear Stearns, behavioural economics, Ben Bernanke: helicopter money, Benoit Mandelbrot, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black Swan, blockchain, Boeing 747, Bonfire of the Vanities, Bretton Woods, Brexit referendum, British Empire, business cycle, butterfly effect, buy and hold, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, cellular automata, cognitive bias, cognitive dissonance, complexity theory, Corn Laws, corporate governance, creative destruction, Credit Default Swap, cuban missile crisis, currency manipulation / currency intervention, currency peg, currency risk, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, debt deflation, Deng Xiaoping, disintermediation, distributed ledger, diversification, diversified portfolio, driverless car, Edward Lorenz: Chaos theory, Eugene Fama: efficient market hypothesis, failed state, Fall of the Berlin Wall, fiat currency, financial repression, fixed income, Flash crash, floating exchange rates, forward guidance, Fractional reserve banking, G4S, George Akerlof, Glass-Steagall Act, global macro, global reserve currency, high net worth, Hyman Minsky, income inequality, information asymmetry, interest rate swap, Isaac Newton, jitney, John Meriwether, John von Neumann, Joseph Schumpeter, junk bonds, Kenneth Rogoff, labor-force participation, large denomination, liquidity trap, Long Term Capital Management, low interest rates, machine readable, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, Minsky moment, Money creation, money market fund, mutually assured destruction, Myron Scholes, Naomi Klein, nuclear winter, obamacare, offshore financial centre, operational security, Paul Samuelson, Peace of Westphalia, Phillips curve, Pierre-Simon Laplace, plutocrats, prediction markets, price anchoring, price stability, proprietary trading, public intellectual, quantitative easing, RAND corporation, random walk, reserve currency, RFID, risk free rate, risk-adjusted returns, Robert Solow, Ronald Reagan, Savings and loan crisis, Silicon Valley, sovereign wealth fund, special drawing rights, stock buybacks, stocks for the long run, tech billionaire, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Bayes, Thomas Kuhn: the structure of scientific revolutions, too big to fail, transfer pricing, value at risk, Washington Consensus, We are all Keynesians now, Westphalian system

Bretton Woods participants were allowed to use capital controls to maintain dollar reserves and limit volatile capital flows in order to support their obligations under the fixed rate system. Capital controls in major Western economies were lifted in stages beginning in 1958. Full convertibility of all major currencies was not achieved until 1964. Currency pegs to the dollar were not immutable. Members could apply for exchange rate adjustments under IMF supervision. The IMF would first offer to make temporary funding available to the nation whose currency was under stress. The goal was to give that nation time to make structural reforms to improve its balance of trade, and bolster foreign exchange reserves so the peg could be maintained.

…

Acute eurodollar interbank funding problems at major Italian banks beginning in June 2016 are additional straws in the wind. Net sales of U.S. Treasury securities by China, Russia, and Saudi Arabia in the first half of 2016 were evidence of those nations’ need to obtain dollars to satisfy capital outflow demands or maintain nonsustainable currency pegs. The most intriguing piece of evidence for a dollar shortage is the tangled trio of prices in five-year TIPS, gold, and ten-year Treasury notes. TIPS stands for Treasury Inflation Protected Securities, a special type of Treasury note where the principal is indexed to inflation. This means the TIPS yield is a real yield; there is no need to add an inflation premium to a nominal yield because principal is already protected against inflation.

Unfinished Business by Tamim Bayoumi

Alan Greenspan, algorithmic trading, Asian financial crisis, bank run, banking crisis, Basel III, battle of ideas, Bear Stearns, behavioural economics, Ben Bernanke: helicopter money, Berlin Wall, Big bang: deregulation of the City of London, book value, Bretton Woods, British Empire, business cycle, buy and hold, capital controls, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, currency manipulation / currency intervention, currency peg, Doha Development Round, facts on the ground, Fall of the Berlin Wall, financial deregulation, floating exchange rates, full employment, Glass-Steagall Act, Greenspan put, hiring and firing, housing crisis, inflation targeting, junk bonds, Just-in-time delivery, Kenneth Rogoff, liberal capitalism, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, market bubble, Martin Wolf, moral hazard, oil shale / tar sands, oil shock, price stability, prisoner's dilemma, profit maximization, quantitative easing, race to the bottom, random walk, reserve currency, Robert Shiller, Rubik’s Cube, Savings and loan crisis, savings glut, technology bubble, The Great Moderation, The Myth of the Rational Market, the payments system, The Wisdom of Crowds, too big to fail, trade liberalization, transaction costs, value at risk

The Werner Report was part of an effort to deepen as well as widen the European Community to create a counterweight to the US dollar. Unlike the earlier gold standard, the Bretton Woods system set up at the end of World War II involved a two-tiered global system, with the dollar pegged to gold and other currencies pegged to the dollar. Since the dollar was the major international reserve asset (with sterling playing a smaller and diminishing role as the British Empire faded) the United States was guaranteed a steady increase in demand for its assets as the need for reserves expanded along with the global economy.

…

This led to an influx of plants with large amounts of machinery that benefited from subsidies but created few jobs for unemployed East Germans. The Bundesbank responded to German economic overheating by raising interest rates aggressively, which left Germany’s partners with the conundrum of how far to raise rates to defend the currency peg at the cost of slowing growth. The final outcome of these strains was a crisis in the Exchange Rate Mechanism that resulted in the ejection of the British pound and the Italian lira in 1992 (the lira rejoined in 1996) followed by a face-saving widening of the intervention bands from 2¼ percent to 15 percent to avoid French ejection in 1993.

Postcapitalism: A Guide to Our Future by Paul Mason

air traffic controllers' union, Alan Greenspan, Alfred Russel Wallace, bank run, banking crisis, banks create money, Basel III, basic income, Bernie Madoff, Bill Gates: Altair 8800, bitcoin, Bletchley Park, Branko Milanovic, Bretton Woods, BRICs, British Empire, business cycle, business process, butterfly effect, call centre, capital controls, carbon tax, Cesare Marchetti: Marchetti’s constant, Claude Shannon: information theory, collaborative economy, collective bargaining, commons-based peer production, Corn Laws, corporate social responsibility, creative destruction, credit crunch, currency manipulation / currency intervention, currency peg, David Graeber, deglobalization, deindustrialization, deskilling, discovery of the americas, disinformation, Downton Abbey, drone strike, en.wikipedia.org, energy security, eurozone crisis, factory automation, false flag, financial engineering, financial repression, Firefox, Fractional reserve banking, Frederick Winslow Taylor, fulfillment center, full employment, future of work, game design, Glass-Steagall Act, green new deal, guns versus butter model, Herbert Marcuse, income inequality, inflation targeting, informal economy, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Internet of things, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Perry Barlow, Joseph Schumpeter, Kenneth Arrow, Kevin Kelly, Kickstarter, knowledge economy, knowledge worker, late capitalism, low interest rates, low skilled workers, market clearing, means of production, Metcalfe's law, microservices, middle-income trap, Money creation, money: store of value / unit of account / medium of exchange, mortgage debt, Network effects, new economy, Nixon triggered the end of the Bretton Woods system, Norbert Wiener, Occupy movement, oil shale / tar sands, oil shock, Paul Samuelson, payday loans, Pearl River Delta, post-industrial society, power law, precariat, precautionary principle, price mechanism, profit motive, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, RFID, Richard Stallman, Robert Gordon, Robert Metcalfe, scientific management, secular stagnation, sharing economy, Stewart Brand, structural adjustment programs, supply-chain management, technological determinism, The Future of Employment, the scientific method, The Wealth of Nations by Adam Smith, Transnistria, Twitter Arab Spring, union organizing, universal basic income, urban decay, urban planning, vertical integration, Vilfredo Pareto, wages for housework, WikiLeaks, women in the workforce, Yochai Benkler

It is, though few will admit it, ‘Damn, nobody believes in our state any more.’ The entire system is dependent on the credibility of the state that issues the notes. And in the modern global economy that credibility rests not just on single states but on a multilayered system of debts, payment mechanisms, informal currency pegs, formal currency unions like the Euro, and huge reserves of foreign exchange accumulated by states as insurance in case the system collapses. The real problem with fiat money comes if, or when, this multilateral system falls apart. But that lies in the future. For now, what we know is that fiat money – when combined with free-market economics – is a machine for producing boom-and-bust cycles.

…

The system was overtly stacked in favour of the USA: not only was it the biggest economy in the world, it had an infrastructure undamaged by the war and – for now – the highest productivity. It also got to appoint the boss of the Fund. The system was also stacked in favour of inflation. Because the link to gold was indirect, because there was leeway in the currency peg, and because the rules on balanced trade and structural reform were loose, the system was designed to produce inflation. This was recognized by the free-market right even before the train to Bretton Woods left the station. The journalist Henry Hazlitt, a confidant of free-market guru Ludwig von Mises, railed against the plan in the New York Times: ‘It would be difficult to think of a more serious threat to world stability and full production than the continual prospect of a uniform world inflation to which the politicians of every country would be so easily tempted.’15 But this was a system also stacked against high finance.

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

3D printing, agricultural Revolution, Alan Greenspan, Anthropocene, Apollo 11, back-to-the-land, banking crisis, banks create money, Bear Stearns, biodiversity loss, Bretton Woods, business cycle, carbon footprint, Carmen Reinhart, clean water, cloud computing, collateralized debt obligation, computerized trading, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, David Graeber, David Ricardo: comparative advantage, degrowth, dematerialisation, demographic dividend, Deng Xiaoping, Elliott wave, en.wikipedia.org, energy transition, falling living standards, financial deregulation, financial innovation, Fractional reserve banking, full employment, Gini coefficient, Glass-Steagall Act, global village, green transition, happiness index / gross national happiness, I think there is a world market for maybe five computers, income inequality, intentional community, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Jevons paradox, Kenneth Rogoff, late fees, liberal capitalism, low interest rates, mega-rich, military-industrial complex, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, naked short selling, Naomi Klein, Negawatt, new economy, Nixon shock, offshore financial centre, oil shale / tar sands, oil shock, peak oil, Ponzi scheme, price stability, private military company, quantitative easing, reserve currency, ride hailing / ride sharing, rolling blackouts, Ronald Reagan, short selling, special drawing rights, systems thinking, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, trade liberalization, tulip mania, WikiLeaks, working poor, world market for maybe five computers, zero-sum game

In 1999, most members of the European Union opted into a common currency, the euro, that floated in value like the Japanese yen. One of the motives for this historic monetary unification was the desire for a stronger currency that would be more stable and competitive relative to the US dollar. For decades, China has been one of the countries that kept its currency pegged to the dollar at a fixed rate. This enabled the country to keep its currency’s value low, making Chinese exports cheap and attractive — especially to the United States. However, for smaller countries, fixed exchange rates have meant vulnerability to currency attacks. If speculators decide to sell large amounts of a country’s currency, that country can defend its currency’s value only by holding a large cache of foreign reserves sufficient to keep its fixed exchange rate in place.

…

See Marvin Friend, “A Short History of US Monetary Policy,” The Powell Center, powellcenter.org/econEssay/history.html. 23. Bill Black, “The EU’s New Bailout Plan Will Exacerbate Political Crises,” Business Insider, posted December 13, 2010. 24. See Wikipedia.org, “Foreign Exchange Market.” 25. To read more, see Edward Harrison, “Currencies Pegged to the Dollar Under Pressure to Drop Peg,” CreditWritedowns.com, posted October 13, 2009; Michael Hudson, “Why the US Has Launched a New Financial World War — And How the Rest of the World Will Fight Back,” alternet.org, posted October 12, 2010. 26. Michael Sauga and Peter Müller, “The US Has Lived on Borrowed Money For Too Long,” an interview with German Finance Minister Schäuble, Spiegel online, posted November 8, 2010. 27.

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 less they succeed, the more they’re tried. There is no “exit”.’17 Not every monetary innovation was concocted in Washington, DC. The Bank of England came up with ‘credit easing’. The ECB had its ‘long-term refinancing operations’, ‘securities markets programme’ and ‘outright monetary transactions’. The currency pegs of the Danish and Swiss central banks provided them with an excuse to buy foreign securities with newly printed money. The Bank of Japan, which had been the first to initiate quantitative easing (in March 2001), later came up with ‘quantitative and qualitative easing’, to which it added ‘yield-curve control’.18 While interest rates in the United States and the rest of the Anglophone world never went below the ‘zero lower bound’, central banks in Europe and Japan crossed the Rubicon, venturing into the unknown territory of negative rates.

…

It was only fitting, therefore, that the world’s oldest central bank should also be the first to put negative interest rates into practice. In July 2009 – less than a year after the Lehman’s bankruptcy– the Riksbank set a rate of minus 0.25 per cent on deposits. Once the taboo was broken, other central banks followed suit. In July 2012, Denmark introduced a negative interest rate to help maintain the krone’s currency peg with a crisis-stricken euro. Two years later, the European Central Bank, whose nineteen members of the monetary union contained a population of some 340 million persons, brought its own deposit rate below zero. Switzerland followed. Having long rejected calls for negative rates, the Bank of Japan shocked financial markets by announcing in January 2016 that it too would impose a negative rate on deposits.

…

., 181 Egypt, 77, 78, 255, 262 Einstein, Albert, 8 Elizabeth II, Queen, 114 Ellington Capital Management, 223 Emden, Paul, 80* emerging markets: Brazilian crash (2012–13), 257–8; BRICs, 254–5, 257–8; capital controls return after 2008, 262, 291; capital flight from (starting 2015), 262, 285–6; demand for industrial commodities, 128; epic corruption scandals, 258; and extended supply chains, 261; flooding across South East Asia (2010), 255; ‘Fragile Five’, 258–9; growth of foreign exchange reserves, 252, 253, 254–5, 256; impact of ultra-low interest rates on, xxiii, 253–60, 262–3; international carry Trade, 137, 237–8; overheating during 2010, 255, 256; post-crisis capital flows into, xxiii, 253–9, 262–3; and recent phase of globalization, 260–61; recovery from 2008 crisis, 124; and savings glut hypothesis, 129, 268–9; ‘second phase of global liquidity’ after 2008 crisis, 253–9, 262–3; and taper tantrum (June 2013), xxiii, 137, 239, 256–7, 259, 263; Turkish debt, 258–60; vulnerability to US monetary policy, 137, 262–3, 267–8 see also China employment/labour markets, xx, 151–2, 240, 260–61, 260*, 296; after 2008 crisis, 210, 211; new insecurity, 211, 298 Erdogan, Recep Tyyip, 259 European Central Bank (ECB), 144, 145, 147, 239, 240, 293; inflation targeting, 119, 120, 122–3; and quantitative easing, 146, 241, 242; sets negative rate, 147, 192–3, 244, 299 European Union, 187, 241, 262 Eurozone, 124, 150–51, 226; and political sovereignty, 293, 293†; sovereign debt crisis (from 2010), 144–8, 226, 238, 239, 241, 273, 293 Evans, David Morier, 73 Evelyn, John, 36, 45 Evergrande (Chinese developer), 279, 288, 310 executive compensation schemes, 152, 162, 163–4, 170, 204, 206, 207 Extinction Rebellion, 201 ExxonMobil, 166 Fang’s Money House, Wenzhou, 281–2 farming: agricultural cycle, 11, 14, 88; and ‘Bank of John Deere’, 167; barley loans in ancient Mesopotamia, 5–6, 6*, 7, 8, 10, 11, 14; bubbles in post-crisis decade, 173; in China, 283; and language of interest, 4–5; loans related to consumption, 6, 25; US deflation of 1890s, 99 Federal Reserve, US: asymmetrical approach to rates, 136–7; as carry trader, 222; cognitive dissonance in, 118–19; Federal Reserve Act (1914), 83; ‘forgotten depression’ (1921), 84, 86, 100, 143; forward guidance policy, 131*, 133, 238, 239, 240, 241; and Gold Exchange Standard, 85, 87, 90*; the ‘Greenspan put’, 111, 186; impact on foreign countries, 137, 239, 240–41, 255–6, 259, 262–3, 267–8, 285; inflation targeting, 119, 120, 241; Long Island meeting (1927), 82–3, 88, 92; mandates of, 240, 262; and March 2020 crash, 305–6; Objectives of Monetary Policy (1937), 97; Open Market Committee (FOMC), 109, 112–13, 115†, 120, 164, 228, 238, 239, 240; Operation Twist (2011), 131*, 238; parallel with US Forest Service, 154–5; and post-Great War inflation, 84; as the ‘price of leverage’, xxi–xxii; quantitative easing by, 12*, 76, 131*, 137, 175, 215, 228, 236, 238, 239–40, 241; raised rates announcement (2015), 138, 239; reaches ‘zero lower bound’ (2008), 243–4; response to 1929 Crash, 98, 100, 101, 108; suggested as responsible for 2008 crisis, 116–17, 118–19, 155, 204, 226–7; TALF fund, 175; taper tantrum (June 2013), xxiii, 137, 239, 256–7, 259, 263; ultra-easy money after 2008 crisis, xxi, 60, 124, 131–8, 146, 149, 152–5, 181–3, 206–17, 221–4, 230, 235–41, 243–4, 262, 291–2; Paul Volcker runs, 108–9, 145; Janet Yellen runs, 120 see also Bernanke, Ben; Greenspan, Alan Feldstein, Martin, 119 Ferri, Giovanni, 277* Fetter, Frank, 30 Field, Alexander, The Great Leap Forward, 142–3 financial crisis (2008): accelerates financialization, 182–3; and complex debt securities, 116, 117–18, 231; ‘crunch porn’ on causes of, 114; economists who anticipated crisis, 113–14, 132; failure of unconventional monetary policies after, xxi, xxii, 43–4, 291–4, 298–9, 301–3; Fed’s monetary policy as suggested cause, 116–17, 118–19, 155, 204, 226–7; generational impact of, 211–12, 213; as ‘giant carry trade gone wrong’, 253–5; global causes of, 117–18; Icelandic recovery from, 301–2; and inequality, 204, 205–17, 299; interest at lowest level in five millennia during, xxi, 243–4, 247; Law’s System compared to, 49, 60–61; low/stable inflation at time of, 134, 135; monetary policy’s role in run-up downplayed, 115–16, 115*, 115†; and quoting of Bagehot, 76; recovery of lost industrial output after, 124; regulatory interpretation of, 114–15, 117; and return of the state, 292–5, 297, 298; return to ‘yield-chasing’ after, 221–6, 230–31, 233–4, 237–8; the rich as chief beneficiaries of, 206–10; savings glut hypothesis, 115–16, 117, 126, 128–9, 132, 191, 252, 268–9; ‘second phase of global liquidity’ after, 253–9, 262–3; unwinding of carry trades during, 221, 227; warnings from BIS economists before, 113–14, 131–4, 135–9 see also Great Recession financial derivatives market, 225–6 financial engineering: buybacks, 53, 152, 163–6, 167, 169, 170–71, 183, 224; crowding out of real economy by, 158–9, 160, 166–71, 182–3, 185, 237; ‘funding gap’ as impetus, 164, 176–7, 291; merger ‘tsunami’ after 2008 crisis, 160–63, 161*, 168–70, 237, 298; ‘promoter’s profit’ concept, 158–9, 160, 161, 164; and ‘shareholder value’, 163–6, 167, 170–71; Truman Show as allegory for bubble economy, 185–7; use of leverage, 111, 116, 149, 155, 158–71, 204, 207, 223, 237, 291; zaitech in Japan, 106, 182, 185 financial repression: in China, 264–5, 265*, 266–81, 268*, 283, 286–9, 292; and inequality, 287–8; McKinnon coins term, 264; political aspects, 265, 265*, 286–9, 292; returns to West after 2008 crisis, 291–3; after Second World War, 290–91, 302 financial sector: bond markets as ‘broken (2014), 227; complex securitizations, 116, 117–18, 221, 227, 231; decades-long bull market from early 1980s, 203–4; economics as fundamentally monetary, 132, 138–9; Edmunds’ ‘New World Wealth Machine’, 181–2; expansion in 1920s USA, 203; finance as leading growth, 266; financial mania of 1860s, 72–4, 75–6; fixed-income bonds, 68–9, 193, 219, 222, 225, 226; foreign securities/loans, 66, 77–8, 91; investment trusts appear (1880s), 79; liquidity traps, 114; mighty borrowers within, 202; profits bubble in post-crisis USA, 183, 183†, 185, 211; robber baron era in USA, 156–9, 203; stability as destabilizing, 82, 143, 233, 263, 285; stock market bubble in post-crisis decade, 175–7, 176*; trust companies in US, 83–4, 84*; US bond market ‘flash crash’ (2014), 138; and volatility, 153, 228–30, 233, 234, 254, 304, 305; volatility as asset class, 229–30, 229*, 233, 234, 304, 305; ‘Volmageddon’ (5 February 2018), 229–30, 234 see also banking and entries for individual institutions/events financial system, international: Asian crisis, 114, 252, 278; Basel banking rules, 232; Borio on ‘persistent expansionary bias’, 262–3; complex mortgage securities, 116, 117–18; crash (12 March 2020), 304–6; ‘excess elasticity’ of, 137; global financial imbalances, 137, 138; Louvre Accord (1987), 105–6; stock market crash (October 1987), 106, 110–11, 229 financialization, 162–71, 182–3, 185, 203–8, 237 Fink, Larry, 209, 246 Finley, Sir Moses, Economy and Society in Ancient Greece (1981), 18* fire-fighting services, 154–5 First World War, 84, 85 Fisher, Irving: and debt-deflation, 98–9, 100, 119, 280; first to refer to ‘real’ interest rate, 88–9, 219*; founds Stable Money League (1921), 87, 96; and Gesell’s rusting money, 243, 246; on interest, 29–30, 82, 189, 189*, 201; losses in 1929 crash, 94; monetarist view of 1929 Crash, 98–9, 100, 101, 108; ‘money illusion’ concept, 87*; on nature’s production, 4–5; on negative interest, 246; The Theory of Interest, xxiv, xxv, xxvi*, 16, 173 Fisher, Peter, 194 Fisher, Richard, 164 Fitzgerald, F. Scott, 203 Florence, 21–3 ‘Fordism’, 89 Fordyce, Alexander, 63 foreign exchanges, xxv; currencies pegged to the dollar, 251, 252, 253; dollar as global reserve currency, xxiii, 118, 239, 251–2, 253, 261, 262–3, 267; French currency during Mississippi bubble, 56–7; growth of reserves, 252, 253, 254–5, 256; international bills of exchange, 24; Louvre Accord (1987), 105–6; printing of money to acquire reserves, 137, 252; Shanghai Accord (2016), 241, 241*; undervalued Chinese yuan, 267–8, 270, 271 Forest Service, US, 154–5 France: 1848 Revolution, xix; allocation of capital in Bretton Woods era, 291; French Louisiana, 50, 52; Law and depreciated government debt, 48, 50, 51–2, 59, 65, 69; Law and paper money, xxii, 47, 52, 55–8; Law as Finance Minister, 46, 57; Law establishes General Bank (1716), 49–50; Law’s Mississippi Company, 46, 50–61, 65, 68, 172–3, 178, 202–3, 273, 286, 298, 308; Les Trente Glorieuses, 302; and long-term bonds, 225; Palais Mazarin, Paris, 54, 54*; rentier term, 7; Revolutionary/Napoleonic Wars, 41–2, 69–70; Royal Bank, 50, 52, 53, 57, 58; war with England (1690s), 38 Francis, Pope, 201, 213 Franklin, Benjamin, Advice to a Young Tradesman (1748), xviii, 22, 28, 190 fraud, 64, 80, 149 free market economics, 95–6, 295–6 Freud, Lucien, 208 Frick, Henry, 157–8 Fridson, Martin, 146 Friedman, Milton, 98, 99, 101, 131 Fugger, Jakob, 202 Fullarton, John, 67–8, 71, 75 Gage, Lyman, 83, 311 Galai, Dan, 228–9 Galbraith, John Kenneth, 287 Galiani, Ferdinando, 218–19, 220, 221, 222, 233 GameStop (retailer), 307 Garber, Peter, 60 Gehringer, Agnieszka, 134–5 Geithner, Tim, 76 General Electric, 156, 157, 159, 170–71 General Motors, 90, 166–7 General Strike (UK, 1926), 86 Genoa, 22, 23, 35, 47–8, 49 George, Henry, 243, 246, 260* Gergy, Jacques Vincent, Count of, 60 Germany, 7, 159, 225, 291, 299; economy in 1920s, 82, 91, 92, 93; and Eurozone crisis, 144–5; negative interest rates in, 192–3, 245; Wirtschaftswunder, 302 Gesell, Silvio, 242–3, 246, 294 ‘gig economy’, 149 Gladstone, William, 40, 72, 76* Glahn, Richard von, 265* Glass–Steagall Act, 232 Global Asset Management, 228, 228* globalization: feedback loop with interest rates, 260–61, 311; first wave of (from 1860s), 260, 311; global aspect of inflation, 122; and great bubbles of history, 263; political backlash against in West, 261; recent phase (from 1980), 260–61, 311 Goetzmann, William, 8†, 14, 60, 247 Gold Exchange Standard, 11, 85, 85*, 86, 87, 90*, 261 Gold Standard, 43, 82, 84–5, 85*, 86, 98, 99, 133, 251 Goldman Sachs, 175, 255, 258 Goodhart, Charles, 105, 121, 127, 246 Gopinath, Gita, 144 Gordon, Robert, 128 Goschen, George, 77, 78–9 Goschen conversion (1888), 65*, 79 Graham, Benjamin, 90–91 Grant, Albert, 73 Grant, James, 82, 118, 141, 148, 191, 194, 230–31, 297; on Fed’s dual mandate, 155; on negative-yielding bonds, 226; on radical monetary gimmicks, 242; on regulation, 232; The Forgotten Depression, 100 Grantham, Jeremy, 183 Great Depression, 98–101, 98*, 105, 108, 125–6, 129, 142–3, 299 see also Wall Street Crash (October 1929) Great Fire of London (1666), 33 the ‘Great Moderation’, 112 Great Recession, 146, 152–3, 181–2, 206–17, 221–4; and secular stagnation argument, 124–5, 126–8, 131; slow recovery in developed world, 124–5, 126–9, 131–2, 150–53, 298–9, 304; and support for democracy, 299 see also financial crisis (2008) Greece, 144–5, 147, 148*, 253, 262, 293; ancient/classical, 6, 9, 10–11, 11*, 13, 13, 17–18, 18†, 20, 200, 200*, 219 Green, Sir Philip, 197 Greensill, Lex, 228* Greenspan, Alan, 110, 132, 226; Fed’s focus on near-term inflation, 110–14; interest rates under, 110–15, 117, 134–5, 134*, 162, 186, 190–91, 204, 226–7, 238, 252–3, 267 Gresham’s Law, 145–6, 224 Griffin, Ken, 209 Gross, Bill, 217, 221, 235, 236, 246 Grotius, Hugo, 40 Guinness (Irish brewer), 79 Gundlach, Jeffrey, 246 Gupta, Sanjeev, 228* H2O (investment company), 228 Hadley, Arthur, 140, 157 Haldane, Andrew, 168, 232, 233, 311 Hamilton, Earl J., 48, 58, 58* Hammurabi’s Code, 9 Hanauer, Nick, 217 Hankey, Thomson, Principles of Banking, 75–6 Hansen, Alvin, 124–5, 126, 127, 128, 129 Harding, William, 84 Harman, Jeremiah, 66 Harriman, Edward H., 157, 158 Hartnett, Michael, 200 Hawtrey, Ralph, 87 Hayek, Friedrich: and concept of time, 32, 95; critique of monetary policy in 1920s, 92, 96, 96*, 101, 105, 108, 114, 133; and deflation/inflation, 100, 101, 105, 113, 133–4, 302; and inequality, 296, 299; interpretation of 1929 Crash, 101, 105; on money, 294, 295, 297*, 312; and ‘natural rate’ of interest, 32, 96, 96*, 133, 269; rejects price stabilization policy, 92, 96, 96*, 108, 133; view of intellectuals, 297, 302–3; view of interest, 297–8, 301; The Denationalisation of Money (1990), 297*; Monetary Theory and the Trade Cycle (1929), 96; ‘The Pretence of Knowledge’ (Nobel prize lecture), 302–3; The Road to Serfdom (1944), 295–6, 298, 302 Haywood, Tim, 228* Hazlitt, Henry, Economics in One Lesson (1946), xx hedge funds, 166, 169–70, 183, 207, 209, 229, 304 Heinz, H.

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

Roosevelt won a landslide victory against Herbert Hoover, with the Democrats also taking large majorities in both Houses of Congress. However, FDR didn’t assume office until March 1933 and in the meantime, bank failures continued. It was widely believed that FDR would devalue the dollar or leave the gold standard altogether. It was costly to maintain a currency peg to gold, especially when the economy was in serious trouble. This encouraged the large-scale conversion of dollars into gold, putting further pressure on the banking system as dollar deposits were withdrawn. One of FDR’s first acts on taking office was a week-long banking holiday from which 5,000 banks never reopened their doors.

…

Even though that was a crisis involving developed economies, there are similar features to the Latin American episode. Many Britons still recall Black Wednesday, when sterling and other currencies, such as the Italian lira, left the peg to the Deutschmark (DM) that they had signed up to two years earlier. A loss of market confidence meant that to keep their currencies pegged would have meant raising interest rates to unacceptable levels if investors were to be persuaded to buy sterling and maintain the exchange-rate peg. UK interest rates had reached 15 per cent, and the impact on economic growth of staying in the ERM would simply have been too detrimental during a recession.

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

Roosevelt won a landslide victory against Herbert Hoover, with the Democrats also taking large majorities in both Houses of Congress. However, FDR didn’t assume office until March 1933 and in the meantime, bank failures continued. It was widely believed that FDR would devalue the dollar or leave the gold standard altogether. It was costly to maintain a currency peg to gold, especially when the economy was in serious trouble. This encouraged the large-scale conversion of dollars into gold, putting further pressure on the banking system as dollar deposits were withdrawn. One of FDR’s first acts on taking office was a week-long banking holiday from which 5,000 banks never reopened their doors.

…

Even though that was a crisis involving developed economies, there are similar features to the Latin American episode. Many Britons still recall Black Wednesday, when sterling and other currencies, such as the Italian lira, left the peg to the Deutschmark (DM) that they had signed up to two years earlier. A loss of market confidence meant that to keep their currencies pegged would have meant raising interest rates to unacceptable levels if investors were to be persuaded to buy sterling and maintain the exchange-rate peg. UK interest rates had reached 15 per cent, and the impact on economic growth of staying in the ERM would simply have been too detrimental during a recession.

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

Thai state initiatives to liberalize and expand its financial sector (underwritten by high interest rates and the pegging of the baht to the US dollar) induced ever more foreign lending, which “served the interest of various fractions of local and transnational financial capital in different ways.”36 Growth rates averaging almost 9 percent in the decade before the onset of the crisis were also fueled by the domestic real-estate bubble produced by the alliance of Japanese developers with the Thai capitalists and army generals who controlled the construction industry. China’s devaluation of the renminbi in 1994 and the devaluation of the yen in 1995 particularly affected Thailand’s pattern of cheap exports. The Bank of Thailand responded by using its reserves to defend the currency peg with the dollar, making it especially vulnerable to any outflow of capital. All it took to produce a massive run on the baht and a collapse in Thai asset prices was a suggestion from the Japanese Finance Ministry in early 1997 that it might hike interest rates to halt the yen’s fall. In short order, the massive capital flows that had earlier poured in were suddenly a dangerous liability.

…

Even more foreboding was the prospect that developing states might resort to extensive exchange controls, just as Malaysia did two weeks after the Russian default. Indicative of the breadth of the contagion was that international banks, which had earlier in the year shifted capital from Asia to Latin America, now began to pull their loans, and especially demanded higher premiums on Brazil’s bonds, fearing that its currency peg to the dollar would have to be abandoned. But the depth of the contagion had already been registered on Wall Street, as a massive flight to the safety of US Treasury bonds after the Russian default precipitated a sharp upward revaluation of risk in bond and foreign-exchange markets, and in the derivative markets based on them.

…

In contrast to what had been so common in the 1990s, it was quite remarkable that, before 2007, the Bush administration faced only two serious financial crises, both occurring in its first year.6 Like Rubin before him with the Mexican crisis, O’Neill had barely settled into his office at the Treasury when he was confronted by the outbreak of the most severe financial crisis in modern Turkish history. With the Turkish government’s attempts to maintain a currency peg undermined by financial markets’ response to its rising public debt, there was no question of letting the markets decide the fate of this crucially strategic US ally. But the US Treasury was content to leave it to the IMF, which had provided conditional loans to Turkey on eighteen occasions since 1958, to contain the Turkish crisis.7 Nevertheless, when the Argentine crisis came to a head only six months later, in August 2001, the Treasury’s behavior “encapsulated the degree to which the United States was making policy for the IMF.”

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

"World Economic Forum" Davos, Affordable Care Act / Obamacare, Alan Greenspan, Asian financial crisis, asset allocation, Ayatollah Khomeini, bank run, banking crisis, Bear Stearns, Ben Bernanke: helicopter money, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, Bretton Woods, BRICs, business climate, business cycle, buy and hold, capital controls, Carmen Reinhart, central bank independence, centre right, collateralized debt obligation, collective bargaining, complexity theory, computer age, credit crunch, currency peg, David Graeber, debt deflation, Deng Xiaoping, diversification, Dr. Strangelove, Edward Snowden, eurozone crisis, fiat currency, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, Flash crash, floating exchange rates, forward guidance, G4S, George Akerlof, global macro, global reserve currency, global supply chain, Goodhart's law, Growth in a Time of Debt, guns versus butter model, Herman Kahn, high-speed rail, income inequality, inflation targeting, information asymmetry, invisible hand, jitney, John Meriwether, junk bonds, Kenneth Rogoff, labor-force participation, Lao Tzu, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, low interest rates, mandelbrot fractal, margin call, market bubble, market clearing, market design, megaproject, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mutually assured destruction, Nixon triggered the end of the Bretton Woods system, obamacare, offshore financial centre, oil shale / tar sands, open economy, operational security, plutocrats, Ponzi scheme, power law, price stability, public intellectual, quantitative easing, RAND corporation, reserve currency, risk-adjusted returns, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Satoshi Nakamoto, Silicon Valley, Silicon Valley startup, Skype, Solyndra, sovereign wealth fund, special drawing rights, Stuxnet, The Market for Lemons, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, too big to fail, trade route, undersea cable, uranium enrichment, Washington Consensus, working-age population, yield curve

Experiments are typically conducted by controlling certain variables among all participants and measuring differences in the factors that are not controlled. The first control variable in this real-world experiment is that neither the BELLs nor the GIIPS devalued their currencies. The BELLs have maintained a local currency peg to the euro and have not devalued. Indeed, Estonia actually joined the euro on January 1, 2011, at the height of anti-euro hysteria, and Latvia joined on January 1, 2014. The second control variable is the depth of the economic collapse in both the BELLs and the GIIPS beginning in 2008 and continuing into 2009.

…

Syed Abul Basher, “Regional Initiative in the Gulf: Search for a GCC Currency,” paper presented at the International Institute for Strategic Studies Seminar, Bahrain, September 30, 2012, http://www.iiss.org/en/events/geo-economics%20seminars/geo-economics%20seminars/archive/currencies-of-power-and-the-power-of-currencies-38db. A logical extension, then, of the SDR basket approach . . . : The author is indebted to Dr. Syed Abul Basher for the suggestion and explication of the SDR-plus-oil approach to the currency peg, ibid. the United States would continue its loose monetary policy . . . : Ben S. Bernanke, “U.S. Monetary Policy and International Implications,” remarks at IMF–Bank of Japan seminar, Tokyo, October 14, 2012, http://www.federalreserve.gov/newsevents/speech/bernanke20121014a.htm. “Today most advanced economies remain . . .”: Ben S.

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

The euro had previously been perceived as an irreversible currency union – like the United States, where nobody thinks that a default by the state of California or the city of Detroit will lead to it abandoning the dollar. Instead, the euro became, in effect, a system of fixed exchange rates that is extremely costly – but not impossible – to break. In the exchange-rate mechanism (ERM), which preceded the euro, speculation about devaluation was expressed as pressure on a currency peg (as during the ERM crisis in 1992–3); now it was expressed as pressure on sovereign bond yields and bank funding costs as capital fled vulnerable eurozone economies to Germany. This capital flight caused interest rates to soar and credit to contract across southern Europe, deepening the recession.

…

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

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

All currency systems are subject to a trilemma, in which countries can choose two options but not all three. The three options are a fixed exchange rate, an independent monetary policy, and free capital movement. Under the gold standard, the currency was fixed and capital could flow freely. But monetary policy had to be adjusted in order to maintain the currency peg, with interest rates rising or falling regardless of domestic economic conditions. The Bretton Woods system chose a different pairing. Exchange rates were fixed but countries had freedom (with some limits) to adjust their own monetary policy. The only way such a system could work was by restricting capital flows.

…

In a world where the most talented employees are mobile, and where companies can shift production to other countries with ease, it is hard for politicians to push up tax rates very far. Finance reigns supreme Under the Bretton Woods system, capital movements were restricted because of the need to protect currency pegs. But once currencies were free to float, there was no need to retain these restrictions. The US, Canada, Germany and Switzerland all abolished controls quite quickly; Britain followed suit under the Thatcher government. This shift fitted into the philosophy espoused by Milton Friedman. If capital was free to move, it could be invested in the most profitable opportunities around the world, and this would improve economic growth in the long term.

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

He faced an unpleasant choice: He could either raise interest rates in a British economy that was failing to recover from its wartime doldrums, tightening the national money supply and thereby slowing growth and encouraging unrest. Or he could risk a crisis of the pound, if people lost confidence that Britain could keep its currency pegged to gold. The dilemma was compounded by Norman’s miserable relationship with his counterpart in Paris, Banque de France governor Émile Moreau, who had made life difficult for the British by hoarding huge quantities of gold. The divide between Norman and Moreau was deeper than mere policy disputes.

…

The Quantum Fund, which they ran, sold pounds to anyone who could buy—the Bank of England when the London markets were open, investors around the world the rest of the time. Soon others started to dump sterling too. The Bank of England could keep buying, but the more it bought, the more British taxpayers stood to lose if the nation eventually did abandon its currency peg. That Wednesday, Prime Minister John Major’s government made an emergency decision to hike interest rates a stunning 2 full percentage points, then hiked them by another 3 percentage points on Thursday. It hoped to reverse the sell-off and leave the speculators with egg on their face, even at the risk of devastating British economic growth.

Global Governance and Financial Crises by Meghnad Desai, Yahia Said

Asian financial crisis, bank run, banking crisis, Bretton Woods, business cycle, capital controls, central bank independence, corporate governance, creative destruction, credit crunch, crony capitalism, currency peg, deglobalization, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, floating exchange rates, frictionless, frictionless market, German hyperinflation, information asymmetry, Japanese asset price bubble, knowledge economy, liberal capitalism, liberal world order, Long Term Capital Management, low interest rates, market bubble, Meghnad Desai, Mexican peso crisis / tequila crisis, moral hazard, Nick Leeson, Nixon triggered the end of the Bretton Woods system, oil shock, open economy, Post-Keynesian economics, price mechanism, price stability, Real Time Gross Settlement, rent-seeking, short selling, special drawing rights, structural adjustment programs, Tobin tax, transaction costs, Washington Consensus

Also, the Southeast Asian three’s heavier dependence on FDI in gross domestic capital formation, especially for manufacturing investments, probably also limited the development of domestic entrepreneurship as well as many other indigenous economic capabilities due to greater reliance on foreign capabilities, associated with FDI (Jomo et al. 1997). After mid-1995, the Southeast Asian currency pegs to the US dollar – which had enhanced the region’s competitiveness as the dollar declined for a decade after the 1985 Plaza accord – became a growing liability as the yen began to depreciate once again. Stronger currencies meant higher production costs, especially with the heavy reliance on imported inputs from East Asia, as well as reduced export price competitiveness, lower export growth and increased current account deficits.

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

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

The economic recovery continuously undershot their expectations, compounding concerns not only about effectiveness but also about the eventual exit process itself—including the management of market expectations, the persistence of large central bank balance sheets, and how to coordinate all this with other government agencies (particularly the fiscal agencies).3 These concerns were summarized bluntly in the 2014 Annual Report of the Bank for International Settlements (known as the central bank of central banks) when it referred to prospects for a “bumpy exit” as central banks found it “difficult to ensure a smooth normalization.”4 And it was confirmed a few months later with the messy exit in January 2015 of the Swiss National Bank from a currency peg arrangement designed to reduce the exposure of Switzerland to the Eurozone crisis. Rather than pivot from financial normalization to full recovery, the Eurozone stalled in a multiple 1 percent zone—a low economic growth of 1 percent, “low-flation” of 1 percent, and the more generalized problem within the advanced world of the top 1 percent of the population capturing the vast majority of the income and wealth gains.

Mastering Blockchain: Unlocking the Power of Cryptocurrencies and Smart Contracts by Lorne Lantz, Daniel Cawrey

air gap, altcoin, Amazon Web Services, barriers to entry, bitcoin, blockchain, business logic, business process, call centre, capital controls, cloud computing, corporate governance, creative destruction, cross-border payments, cryptocurrency, currency peg, disinformation, disintermediation, distributed ledger, Dogecoin, Ethereum, ethereum blockchain, fault tolerance, fiat currency, Firefox, global reserve currency, information security, initial coin offering, Internet of things, Kubernetes, litecoin, low interest rates, Lyft, machine readable, margin call, MITM: man-in-the-middle, multilevel marketing, Network effects, offshore financial centre, OSI model, packet switching, peer-to-peer, Ponzi scheme, prediction markets, QR code, ransomware, regulatory arbitrage, rent-seeking, reserve currency, Robinhood: mobile stock trading app, Ross Ulbricht, Satoshi Nakamoto, Silicon Valley, Skype, smart contracts, software as a service, Steve Wozniak, tulip mania, uber lyft, unbanked and underbanked, underbanked, Vitalik Buterin, web application, WebSocket, WikiLeaks

Tether The most well-known project built on Omni is Tether. It encompasses a use case that is incredibly important in the cryptocurrency world: how to represent a stable asset class in an ecosystem of volatile tokens. Tether is a digital blockchain cryptocurrency, and its aim is to provide a stable reserve currency pegged to the US dollar. According to the Tether whitepaper, one Tether token is pegged to one US dollar. Real-world assets do present a problem when represented on a blockchain. That is, how do you actually peg the value of that asset in tokenized form? Tether claims to be backed by the US dollar, but unfortunately other than its website listing balances, there is little evidence that there really is one US dollar in a bank account for every tether in circulation.

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

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

Ecuador: Consumer Prices and Weighted Trading-partner Prices at the Current Exchange Rate, December 1997–December 2001 1990 consumer prices = 100 170.00 1100 160.00 Weighted trading- partner prices 150.00 900 Consumer prices Exchange - rate floated 140.00 130.00 700 120.00 110.00 500 Real- effective exchange rate 100.00 90.00 300 80.00 Dollarization announcement Dec-01 Sep-01 Jun-01 Mar-01 Dec-00 Sep-00 Jun-00 Mar-00 Dec-99 Dep-99 Jun-99 Mar-99 Dec-98 Sep-98 Jun-98 Mar-98 70.00 Dec-97 100 Source: International Monetary Fund. The price-level increase after dollarization in Ecuador was not a unique experience. Many former Soviet republics had similar experiences when they established new currencies upon leaving the ruble area. Estonia, for example, set up a currency board in the early 1990s with its new national currency pegged to the German mark. The authorities found it difficult to determine the “right” exchange rate, especially since the ruble had depreciated sharply in the previous months, and the new currency turned out substantially undervalued at the rate chosen. Although Estonia’s currency board complied closely with textbook rules, the initial undervaluation led to annual price-level increases on the order of 15 percent for several years until parity was reached.

Poorly Made in China: An Insider's Account of the Tactics Behind China's Production Game by Paul Midler

barriers to entry, corporate social responsibility, currency peg, deal flow, Deng Xiaoping, disintermediation, full employment, illegal immigration, Kickstarter, language acquisition, new economy, out of africa, price discrimination, unpaid internship, urban planning

Chinese factory owners looked for small excuses as a way of gaining minor advantages. However when there were real, substantive changes in the marketplace, these same factories found the will to keep their prices firm. The United States had been pressuring China to appreciate its currency, and China finally announced in 2004 that it would revise the currency peg, under which the U.S. dollar equaled 8.26 renminbi. In connection with the revision, the U.S. dollar would be devalued by about 3 percent against the renminbi. Every factory that I was working with then pointed to the major news announcement and sent out a notice saying that their prices would be increased by 3 percent.

Birth of the Euro by Otmar Issing

accounting loophole / creative accounting, behavioural economics, Bretton Woods, business climate, business cycle, capital controls, central bank independence, currency peg, currency risk, financial innovation, floating exchange rates, full employment, inflation targeting, information asymmetry, labour market flexibility, labour mobility, low interest rates, market fundamentalism, money market fund, moral hazard, oil shock, open economy, price anchoring, price stability, purchasing power parity, reserve currency, Robert Solow, Y2K, yield curve

Such cases are referred to as ‘euroisation’, whereby the adoption of the currency rests on a unilateral decision by the country concerned. As with the The euro as an international currency • 181 US dollar (‘dollarisation’), such decisions lie outside the control of the central bank issuing the currency. The forms taken by currency pegs range from currency boards through participation in the European exchange rate mechanism (ERM) to arrangements in which the euro has a significant weight in the respective currency basket (as for example in Russia). Table 7 illustrates the regional character of the euro’s role as anchor currency.

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

Absent any link with gold or any other commodity, money became nothing more than a promise, created by fiat by the state issuing it. The value of a currency would now be determined by the forces of supply and demand. Rather than having to limit the amount of money they were creating in order to maintain a currency peg, states would be able to create as much money as they liked, accounting only for the threat of inflation. Private banks were also now free to create currency on their behalf in the form of credit, constrained only by domestic regulation. The collapse of Bretton Woods represented the final step away from a system of commodity money, which has been the norm for most of human history, and towards fiat and credit money, which now dominate all other forms of money.

Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe by Greg Ip

Affordable Care Act / Obamacare, Air France Flight 447, air freight, airport security, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, behavioural economics, Boeing 747, book value, break the buck, Bretton Woods, business cycle, capital controls, central bank independence, cloud computing, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, Daniel Kahneman / Amos Tversky, diversified portfolio, double helix, endowment effect, Exxon Valdez, Eyjafjallajökull, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, foreign exchange controls, full employment, global supply chain, hindsight bias, Hyman Minsky, Joseph Schumpeter, junk bonds, Kenneth Rogoff, lateral thinking, Lewis Mumford, London Whale, Long Term Capital Management, market bubble, Michael Milken, money market fund, moral hazard, Myron Scholes, Network effects, new economy, offshore financial centre, paradox of thrift, pets.com, Ponzi scheme, proprietary trading, quantitative easing, Ralph Nader, Richard Thaler, risk tolerance, Ronald Reagan, Sam Peltzman, savings glut, scientific management, subprime mortgage crisis, tail risk, technology bubble, TED Talk, The Great Moderation, too big to fail, transaction costs, union organizing, Unsafe at Any Speed, value at risk, William Langewiesche, zero-sum game

The quiet period was quiet in part because financial freedom was tightly circumscribed. For years after the Second World War, many countries limited how much money residents could take in or out of the country or invest in another country’s stocks and bonds. The purpose of these capital controls was to tamp down the big flows of money that made it harder to keep currencies pegged to one another, as the postwar monetary system required. They were also intended to force savers to fund investments at home by making it harder to seek better returns abroad. The strategy worked, but it was burdensome: for a while Britons couldn’t take more than £100 when they traveled abroad, and Americans paid a tax when they bought foreign stocks and Treasury bills.

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

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

The growing supply of dollar-denominated IOUs that is the necessary result of ongoing U.S. money production has been absorbed, not by voluntary acts of saving on the part of independent foreign individuals, but by political authorities that have accumulated them as monetary reserves, and, via a de facto currency peg, monetized them by printing matching amounts of their own paper money. Thus, a drop in international purchasing power of the initially inflating currency has been arrested. Monetary expansion in the United States could proceed further without a loss of purchasing power for the dollar on international markets.

We Need New Stories: Challenging the Toxic Myths Behind Our Age of Discontent by Nesrine Malik

"World Economic Forum" Davos, affirmative action, Affordable Care Act / Obamacare, barriers to entry, Bernie Sanders, Black Lives Matter, Boris Johnson, Brexit referendum, British Empire, centre right, cognitive dissonance, continuation of politics by other means, currency peg, disinformation, Donald Trump, fake news, feminist movement, financial independence, Francis Fukuyama: the end of history, gender pay gap, gentrification, ghettoisation, glass ceiling, illegal immigration, invisible hand, Jeremy Corbyn, mass immigration, moral panic, Nate Silver, obamacare, old-boy network, opioid epidemic / opioid crisis, Overton Window, payday loans, planetary scale, Ponzi scheme, public intellectual, race to the bottom, Ronald Reagan, Saturday Night Live, sexual politics, Steve Bannon, Steven Pinker, The Bell Curve by Richard Herrnstein and Charles Murray, Thomas L Friedman, transatlantic slave trade

And these are the people who are now responsible for framing the dangers of Trumpism.’ If it were a real market, their stalls would have been shut down long ago. The analogy is further stretched by the fact that real marketplaces actually require a lot of regulation. There are anti-monopoly rules, there are interest rate fixes and, in many markets, artificial currency pegs. In the press, publishing and the business of ideas dispersal in general, there are players that are deeply entrenched and networked, and so the supply of ideas reflects their power. In a world where funding and lobbying groups can sponsor public opinion makers from university all the way through to publication of their first book, where lazy or time-stressed TV producers keep returning to the same voices for their commentary, and where publishers and top media executives tend to come broadly from the same pool, social class and universities, it is inevitable that there is a failure of curation.

Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace by Matthew C. Klein

Alan Greenspan, Albert Einstein, Asian financial crisis, asset allocation, asset-backed security, Berlin Wall, Bernie Sanders, Branko Milanovic, Bretton Woods, British Empire, business climate, business cycle, capital controls, centre right, collective bargaining, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, deglobalization, deindustrialization, Deng Xiaoping, Donald Trump, Double Irish / Dutch Sandwich, Fall of the Berlin Wall, falling living standards, financial innovation, financial repression, fixed income, full employment, George Akerlof, global supply chain, global value chain, Great Leap Forward, high-speed rail, illegal immigration, income inequality, intangible asset, invention of the telegraph, joint-stock company, land reform, Long Term Capital Management, low interest rates, Malcom McLean invented shipping containers, manufacturing employment, Martin Wolf, mass immigration, Mikhail Gorbachev, Money creation, money market fund, mortgage debt, New Urbanism, Nixon triggered the end of the Bretton Woods system, offshore financial centre, oil shock, open economy, paradox of thrift, passive income, reserve currency, rising living standards, Robert Shiller, Ronald Reagan, savings glut, Scramble for Africa, sovereign wealth fund, stock buybacks, subprime mortgage crisis, The Nature of the Firm, The Wealth of Nations by Adam Smith, Tim Cook: Apple, trade liberalization, Wolfgang Streeck

The Chinese government could have offset some of those foreign inflows by loosening its outbound capital controls and allowing Chinese savers to buy foreign assets. Liberalization, however, would have threatened the government’s control of the economy and financial system. Beijing therefore chose to buy trillions of dollars of foreign exchange reserves to sustain its currency peg. Between 1996 and the eve of the global financial crisis, SAFE spent $1.8 trillion accumulating foreign reserves, roughly two-thirds of which were invested in the United States. After the global financial crisis, the Chinese government spent another $2 trillion accumulating even more foreign assets to prevent its currency from appreciating further.30 Outside of East Asia, the major buyers of reserve assets have been commodity exporters, mainly the oil and gas producers of the Arabian Peninsula, Norway, and Russia.

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Nassim Nicholas Taleb

Alan Greenspan, Antoine Gombaud: Chevalier de Méré, availability heuristic, backtesting, behavioural economics, Benoit Mandelbrot, Black Swan, commoditize, complexity theory, corporate governance, corporate raider, currency peg, Daniel Kahneman / Amos Tversky, discounted cash flows, diversified portfolio, endowment effect, equity premium, financial engineering, fixed income, global village, hedonic treadmill, hindsight bias, junk bonds, Kenneth Arrow, Linda problem, Long Term Capital Management, loss aversion, mandelbrot fractal, Mark Spitznagel, Market Wizards by Jack D. Schwager, mental accounting, meta-analysis, Michael Milken, Myron Scholes, PalmPilot, Paradox of Choice, Paul Samuelson, power law, proprietary trading, public intellectual, quantitative trading / quantitative finance, QWERTY keyboard, random walk, Richard Feynman, risk free rate, road to serfdom, Robert Shiller, selection bias, shareholder value, Sharpe ratio, Steven Pinker, stochastic process, survivorship bias, too big to fail, Tragedy of the Commons, Turing test, Yogi Berra

Actually, wouldn’t it be better if the length of movies were kept a secret? The Scrambling of Messages Besides its effect on well-being, uncertainty presents tangible informational benefits, particularly with the scrambling of potentially damaging, and self-fulfilling, messages. Consider a currency pegged by a central bank to a fixed rate. The bank’s official policy is to use its reserves to support it by buying and selling its currency in the open market, a procedure called intervention. But should the currency rate drop a tiny bit, people will immediately get the message that the intervention failed to support the currency and that the devaluation is coming.

Why It's Still Kicking Off Everywhere: The New Global Revolutions by Paul Mason

anti-globalists, back-to-the-land, balance sheet recession, bank run, banking crisis, Berlin Wall, business cycle, capital controls, capitalist realism, centre right, Chekhov's gun, citizen journalism, collapse of Lehman Brothers, collective bargaining, creative destruction, credit crunch, Credit Default Swap, currency manipulation / currency intervention, currency peg, disinformation, do-ocracy, eurozone crisis, Fall of the Berlin Wall, floating exchange rates, foreign exchange controls, Francis Fukuyama: the end of history, full employment, ghettoisation, illegal immigration, informal economy, land tenure, Leo Hollis, low skilled workers, mass immigration, means of production, megacity, Mohammed Bouazizi, Naomi Klein, Network effects, New Journalism, Occupy movement, price stability, quantitative easing, race to the bottom, rising living standards, short selling, Slavoj Žižek, Stewart Brand, strikebreaker, union organizing, We are the 99%, Whole Earth Catalog, WikiLeaks, Winter of Discontent, women in the workforce, working poor, working-age population, young professional

But in March 1930, as the Wall Street Crash cratered the German economy, a cross-party coalition government of the centre-left and -right collapsed. It was replaced by the first of three ‘appointed’ governments, led by Hein-rich Brüning and designed to prevent either the communists or the now-growing Nazis gaining power. Faced with a recession, Brüning followed a policy of austerity while keeping Germany’s currency pegged to the Gold Standard (much as Greece as follows a policy of austerity dictated by euro membership). This made the recession worse. As unemployment rocketed, so did the Nazi vote: in a shock breakthrough they came second in the elections of September 1930, with 18 per cent. But Brüning was determined to maintain order: he cracked down on both the right and left, banning the Nazi paramilitary organization, the sturmabteilung, along with the rival communist uniformed groups.

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 his view, the reason was that ‘the monetary system of a people reflects all that the people wants, does, endures, is, and that simultaneously the monetary system of a people exercises a significant influence upon its economic activity and its destiny in general’.1 For many years, China has been driven to maintain the stability of its currency, partly for economic purposes, but also to anchor expectations at home about the management of money and finance, and to build trust abroad in the Renminbi itself, and in the Chinese foreign exchange rate regime. It is, in effect, a form of soft power. During the Asian crisis in 1997–98, the IMF and other bodies urged China to devalue, but China resisted the path followed by several Asian governments, whose currency pegs had proven unsustainable. It is true that China was different from its Asian neighbours. The Renminbi was not freely convertible, and China neither experienced significant capital flows from overseas, nor allowed capital to leave China freely. Never-theless, China’s concern was to build trust in its reputation as a stabilising force, to be a leader in east and Southeast Asia, and ultimately to develop a Renminbi bloc with other Asian countries, albeit to the chagrin of Japan, South Korea and Taiwan.

MegaThreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them by Nouriel Roubini

"World Economic Forum" Davos, 2021 United States Capitol attack, 3D printing, 9 dash line, AI winter, AlphaGo, artificial general intelligence, asset allocation, assortative mating, autonomous vehicles, bank run, banking crisis, basic income, Bear Stearns, Big Tech, bitcoin, Bletchley Park, blockchain, Boston Dynamics, Bretton Woods, British Empire, business cycle, business process, call centre, carbon tax, Carmen Reinhart, cashless society, central bank independence, collateralized debt obligation, Computing Machinery and Intelligence, coronavirus, COVID-19, creative destruction, credit crunch, crony capitalism, cryptocurrency, currency manipulation / currency intervention, currency peg, data is the new oil, David Ricardo: comparative advantage, debt deflation, decarbonisation, deep learning, DeepMind, deglobalization, Demis Hassabis, democratizing finance, Deng Xiaoping, disintermediation, Dogecoin, Donald Trump, Elon Musk, en.wikipedia.org, energy security, energy transition, Erik Brynjolfsson, Ethereum, ethereum blockchain, eurozone crisis, failed state, fake news, family office, fiat currency, financial deregulation, financial innovation, financial repression, fixed income, floating exchange rates, forward guidance, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, future of work, game design, geopolitical risk, George Santayana, Gini coefficient, global pandemic, global reserve currency, global supply chain, GPS: selective availability, green transition, Greensill Capital, Greenspan put, Herbert Marcuse, high-speed rail, Hyman Minsky, income inequality, inflation targeting, initial coin offering, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invention of movable type, Isaac Newton, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, junk bonds, Kenneth Rogoff, knowledge worker, Long Term Capital Management, low interest rates, low skilled workers, low-wage service sector, M-Pesa, margin call, market bubble, Martin Wolf, mass immigration, means of production, meme stock, Michael Milken, middle-income trap, Mikhail Gorbachev, Minsky moment, Modern Monetary Theory, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Mustafa Suleyman, Nash equilibrium, natural language processing, negative equity, Nick Bostrom, non-fungible token, non-tariff barriers, ocean acidification, oil shale / tar sands, oil shock, paradox of thrift, pets.com, Phillips curve, planetary scale, Ponzi scheme, precariat, price mechanism, price stability, public intellectual, purchasing power parity, quantitative easing, race to the bottom, Ralph Waldo Emerson, ransomware, Ray Kurzweil, regulatory arbitrage, reserve currency, reshoring, Robert Shiller, Ronald Reagan, Salesforce, Satoshi Nakamoto, Savings and loan crisis, Second Machine Age, short selling, Silicon Valley, smart contracts, South China Sea, sovereign wealth fund, Stephen Hawking, TED Talk, The Great Moderation, the payments system, Thomas L Friedman, TikTok, too big to fail, Turing test, universal basic income, War on Poverty, warehouse robotics, Washington Consensus, Watson beat the top human players on Jeopardy!, working-age population, Yogi Berra, Yom Kippur War, zero-sum game, zoonotic diseases

But there’s a treacherous catch to this tool, as well. Exchange rates tied to a foreign currency like the US dollar widen an emerging market trade deficit when the currency is pegged at an overvalued level and/or exports fetch lower prices, as when the price of commodities exported by that small economy falls. Then, if that currency peg to the US dollar collapses because of an untenable trade deficit, the dollar debt of a small emerging market rises in real terms. Indeed, if Argentina borrows from abroad in US dollars and its currency then depreciates, the real value of such a foreign currency debt expressed in local currency—the peso—sharply increases; this is what is referred to as the balance sheet effect of currency mismatches.

The Bitcoin Standard: The Decentralized Alternative to Central Banking by Saifedean Ammous

"World Economic Forum" Davos, Airbnb, Alan Greenspan, altcoin, bank run, banks create money, bitcoin, Black Swan, blockchain, Bretton Woods, British Empire, business cycle, capital controls, central bank independence, Charles Babbage, conceptual framework, creative destruction, cryptocurrency, currency manipulation / currency intervention, currency peg, delayed gratification, disintermediation, distributed ledger, Elisha Otis, Ethereum, ethereum blockchain, fiat currency, fixed income, floating exchange rates, Fractional reserve banking, full employment, George Gilder, Glass-Steagall Act, global reserve currency, high net worth, initial coin offering, invention of the telegraph, Isaac Newton, iterative process, jimmy wales, Joseph Schumpeter, low interest rates, market bubble, market clearing, means of production, military-industrial complex, Money creation, money: store of value / unit of account / medium of exchange, moral hazard, Network effects, Paul Samuelson, peer-to-peer, Peter Thiel, price mechanism, price stability, profit motive, QR code, quantum cryptography, ransomware, reserve currency, Richard Feynman, risk tolerance, Satoshi Nakamoto, scientific management, secular stagnation, smart contracts, special drawing rights, Stanford marshmallow experiment, The Nature of the Firm, the payments system, too big to fail, transaction costs, Walter Mischel, We are all Keynesians now, zero-sum game

From then on, economic depressions became a regular and painful part of the economy, recurring every few years and providing justification for growing government intervention to handle their fallout. A good example of the benefits of sound money can be found looking at the fate of the Swiss economy, the last bastion of sound money, which had kept its currency pegged to gold until its ill‐fated decision to abandon global neutrality and join the International Monetary Fund in 1992. Before that date, the unemployment rate had always been practically zero, virtually never exceeding 1%. After they joined the IMF, whose rules prevent governments from tying their currency's value to gold, the Swiss economy began to experience the pleasures of Keynesian funny money, with unemployment rate rising to 5% within a few years, rarely ever dropping below 2%.

Stakeholder Capitalism: A Global Economy That Works for Progress, People and Planet by Klaus Schwab, Peter Vanham

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 3D printing, additive manufacturing, agricultural Revolution, air traffic controllers' union, Anthropocene, Apple II, Asian financial crisis, Asperger Syndrome, basic income, Berlin Wall, Big Tech, biodiversity loss, bitcoin, Black Lives Matter, blockchain, blue-collar work, Branko Milanovic, Bretton Woods, British Empire, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, car-free, carbon footprint, carbon tax, centre right, clean tech, clean water, cloud computing, collateralized debt obligation, collective bargaining, colonial rule, company town, contact tracing, contact tracing app, Cornelius Vanderbilt, coronavirus, corporate governance, corporate social responsibility, COVID-19, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, cuban missile crisis, currency peg, cyber-physical system, decarbonisation, demographic dividend, Deng Xiaoping, Diane Coyle, digital divide, don't be evil, European colonialism, Fall of the Berlin Wall, family office, financial innovation, Francis Fukuyama: the end of history, future of work, gender pay gap, general purpose technology, George Floyd, gig economy, Gini coefficient, global supply chain, global value chain, global village, Google bus, green new deal, Greta Thunberg, high net worth, hiring and firing, housing crisis, income inequality, income per capita, independent contractor, industrial robot, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invisible hand, James Watt: steam engine, Jeff Bezos, job automation, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, Khan Academy, Kickstarter, labor-force participation, lockdown, low interest rates, low skilled workers, Lyft, manufacturing employment, Marc Benioff, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, Martin Wolf, means of production, megacity, microplastics / micro fibres, Mikhail Gorbachev, mini-job, mittelstand, move fast and break things, neoliberal agenda, Network effects, new economy, open economy, Peace of Westphalia, Peter Thiel, precariat, Productivity paradox, profit maximization, purchasing power parity, race to the bottom, reserve currency, reshoring, ride hailing / ride sharing, Ronald Reagan, Salesforce, San Francisco homelessness, School Strike for Climate, self-driving car, seminal paper, shareholder value, Shenzhen special economic zone , Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, social distancing, Social Responsibility of Business Is to Increase Its Profits, special economic zone, Steve Jobs, Steve Wozniak, synthetic biology, TaskRabbit, The Chicago School, The Future of Employment, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the scientific method, TikTok, Tim Cook: Apple, trade route, transfer pricing, Uber and Lyft, uber lyft, union organizing, universal basic income, War on Poverty, We are the 99%, women in the workforce, working poor, working-age population, Yom Kippur War, young professional, zero-sum game

And even then, it endured another four decades of authoritarian and isolationist rule before entering its liberal and democratic era. Finally, Indonesia's first attempt to benefit from global markets backfired in 1997, when the Asian financial crisis pushed its economy in a severe recession: starting in Thailand, speculators massively bet against the ability of Southeast Asian nations to maintain their currency pegs, leading to severe devaluation, a soaring public debt, and an economic recession from Indonesia to Malaysia to the Philippines. It was financial globalization gone bad. Still, the story of Indonesia in recent years can be called a success story of globalization. According to the World Bank, Indonesia's prudent economic management helped push poverty to a record low of under one in ten by the end of 2018, and trade was one of the sectors contributing most to Indonesia's growth.5 Many people in the streets of Jakarta and Bandung won't necessarily name their country's openness to trade as the reason for their optimism—they simply are happy life is going better for them.

Stakeholder Capitalism: A Global Economy That Works for Progress, People and Planet by Klaus Schwab

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 3D printing, additive manufacturing, agricultural Revolution, air traffic controllers' union, Anthropocene, Apple II, Asian financial crisis, Asperger Syndrome, basic income, Berlin Wall, Big Tech, biodiversity loss, bitcoin, Black Lives Matter, blockchain, blue-collar work, Branko Milanovic, Bretton Woods, British Empire, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, car-free, carbon footprint, carbon tax, centre right, clean tech, clean water, cloud computing, collateralized debt obligation, collective bargaining, colonial rule, company town, contact tracing, contact tracing app, Cornelius Vanderbilt, coronavirus, corporate governance, corporate social responsibility, COVID-19, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, cuban missile crisis, currency peg, cyber-physical system, decarbonisation, demographic dividend, Deng Xiaoping, Diane Coyle, digital divide, don't be evil, European colonialism, Fall of the Berlin Wall, family office, financial innovation, Francis Fukuyama: the end of history, future of work, gender pay gap, general purpose technology, George Floyd, gig economy, Gini coefficient, global supply chain, global value chain, global village, Google bus, green new deal, Greta Thunberg, high net worth, hiring and firing, housing crisis, income inequality, income per capita, independent contractor, industrial robot, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invisible hand, James Watt: steam engine, Jeff Bezos, job automation, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, Khan Academy, Kickstarter, labor-force participation, lockdown, low interest rates, low skilled workers, Lyft, manufacturing employment, Marc Benioff, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, Martin Wolf, means of production, megacity, microplastics / micro fibres, Mikhail Gorbachev, mini-job, mittelstand, move fast and break things, neoliberal agenda, Network effects, new economy, open economy, Peace of Westphalia, Peter Thiel, precariat, Productivity paradox, profit maximization, purchasing power parity, race to the bottom, reserve currency, reshoring, ride hailing / ride sharing, Ronald Reagan, Salesforce, San Francisco homelessness, School Strike for Climate, self-driving car, seminal paper, shareholder value, Shenzhen special economic zone , Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, social distancing, Social Responsibility of Business Is to Increase Its Profits, special economic zone, Steve Jobs, Steve Wozniak, synthetic biology, TaskRabbit, The Chicago School, The Future of Employment, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the scientific method, TikTok, Tim Cook: Apple, trade route, transfer pricing, Uber and Lyft, uber lyft, union organizing, universal basic income, War on Poverty, We are the 99%, women in the workforce, working poor, working-age population, Yom Kippur War, young professional, zero-sum game

And even then, it endured another four decades of authoritarian and isolationist rule before entering its liberal and democratic era. Finally, Indonesia's first attempt to benefit from global markets backfired in 1997, when the Asian financial crisis pushed its economy in a severe recession: starting in Thailand, speculators massively bet against the ability of Southeast Asian nations to maintain their currency pegs, leading to severe devaluation, a soaring public debt, and an economic recession from Indonesia to Malaysia to the Philippines. It was financial globalization gone bad. Still, the story of Indonesia in recent years can be called a success story of globalization. According to the World Bank, Indonesia's prudent economic management helped push poverty to a record low of under one in ten by the end of 2018, and trade was one of the sectors contributing most to Indonesia's growth.5 Many people in the streets of Jakarta and Bandung won't necessarily name their country's openness to trade as the reason for their optimism—they simply are happy life is going better for them.

The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy by Stephanie Kelton

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, Alan Greenspan, American Society of Civil Engineers: Report Card, Apollo 11, Asian financial crisis, bank run, Bernie Madoff, Bernie Sanders, blockchain, bond market vigilante , book value, Bretton Woods, business cycle, capital controls, carbon tax, central bank independence, collective bargaining, COVID-19, currency manipulation / currency intervention, currency peg, David Graeber, David Ricardo: comparative advantage, decarbonisation, deindustrialization, discrete time, Donald Trump, eurozone crisis, fiat currency, floating exchange rates, Food sovereignty, full employment, gentrification, Gini coefficient, global reserve currency, global supply chain, green new deal, high-speed rail, Hyman Minsky, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, Isaac Newton, Jeff Bezos, liquidity trap, low interest rates, Mahatma Gandhi, manufacturing employment, market bubble, Mason jar, Modern Monetary Theory, mortgage debt, Naomi Klein, National Debt Clock, new economy, New Urbanism, Nixon shock, Nixon triggered the end of the Bretton Woods system, obamacare, open economy, Paul Samuelson, Phillips curve, Ponzi scheme, Post-Keynesian economics, price anchoring, price stability, pushing on a string, quantitative easing, race to the bottom, reserve currency, Richard Florida, Ronald Reagan, San Francisco homelessness, shareholder value, Silicon Valley, Tax Reform Act of 1986, trade liberalization, urban planning, working-age population, Works Progress Administration, yield curve, zero-sum game

This policy mix amounts to recommending that the developing country forsake any effort to enhance its monetary sovereignty. Whatever the intention, the actual results from this package are perverse: when countries sacrifice monetary sovereignty but cannot acquire sufficient foreign currency to defend the target exchange rate, their currency pegs collapse, potentially causing a downward spiral, as governments, businesses, and even households cannot favorably convert domestic currency to repay debts denominated in foreign currency.29 Hyperinflation can set in, as the exchange rate plummets, and the cost of crucial imports skyrocket in price.

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

Then another one. And another. Four auctions total, unfilled. The government of Mexico was failing to fund itself. Yields on its existing debt kept climbing. Bad and getting worse, fast. “As they got higher, people got concerned that if they got too high, Mexico would say no más, we’re going to abandon our currency peg and maybe default on our debt,” recalls former Pimco partner Brynjo. All the while, Pimco sat there with a moderate amount of Mexico’s bonds. Not too big, but not insignificant. A modest but vested interest in the country not falling to pieces. With yields climbing, bond prices had dropped, so Pimco was looking at a “paper” loss on its books—a loss it would have to recognize if it sold the debt.

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

"World Economic Forum" Davos, affirmative action, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, Berlin Wall, biodiversity loss, Black Swan, Bretton Woods, business cycle, capital controls, carbon credits, carbon tax, Cass Sunstein, central bank independence, classic study, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, currency risk, Daniel Kahneman / Amos Tversky, debt deflation, declining real wages, deindustrialization, diversification, energy security, Erik Brynjolfsson, Fall of the Berlin Wall, financial engineering, financial innovation, floating exchange rates, foreign exchange controls, full employment, Gini coefficient, Glass-Steagall Act, global macro, global reserve currency, global village, high net worth, high-speed rail, Home mortgage interest deduction, housing crisis, index fund, inflation targeting, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), inverted yield curve, invisible hand, Just-in-time delivery, Kenneth Rogoff, Long Term Capital Management, low interest rates, Mahatma Gandhi, Martin Wolf, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, military-industrial complex, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mortgage tax deduction, Network effects, new economy, Nicholas Carr, oil shale / tar sands, oil shock, open economy, passive investing, payday loans, peak oil, Ponzi scheme, post-oil, precautionary principle, price stability, private sector deleveraging, proprietary trading, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, reserve currency, Richard Thaler, risk/return, Robert Shiller, Ronald Reagan, Savings and loan crisis, sovereign wealth fund, special drawing rights, subprime mortgage crisis, technology bubble, The Great Moderation, Thomas Kuhn: the structure of scientific revolutions, Tobin tax, too big to fail, total factor productivity, trade liberalization, Tragedy of the Commons, Washington Consensus, Westphalian system, WikiLeaks, women in the workforce, yield curve

COST OF CAPITAL: The required return that is necessary to make a capital budgeting project worth pursuing. CREDIT CRUNCH: A period of time when credit is costly and/or difficult to obtain. CROWDING-OUT EFFECT: The reduction in private consumption or investment that occurs because of an increase in government expenditures. CURRENCY PEG: A publicly announced fixed exchange rate that is often made against a major currency or basket of currencies and maintained by monetary authorities. CURRENCY SPECULATION: The process of buying, selling, and/or holding currencies in order to make a profit from favorable exchange rate fluctuations.

Efficiently Inefficient: How Smart Money Invests and Market Prices Are Determined by Lasse Heje Pedersen

activist fund / activist shareholder / activist investor, Alan Greenspan, algorithmic trading, Andrei Shleifer, asset allocation, backtesting, bank run, banking crisis, barriers to entry, Bear Stearns, behavioural economics, Black-Scholes formula, book value, Brownian motion, business cycle, buy and hold, buy low sell high, buy the rumour, sell the news, capital asset pricing model, commodity trading advisor, conceptual framework, corporate governance, credit crunch, Credit Default Swap, currency peg, currency risk, David Ricardo: comparative advantage, declining real wages, discounted cash flows, diversification, diversified portfolio, Emanuel Derman, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, financial engineering, fixed income, Flash crash, floating exchange rates, frictionless, frictionless market, global macro, Gordon Gekko, implied volatility, index arbitrage, index fund, interest rate swap, junk bonds, late capitalism, law of one price, Long Term Capital Management, low interest rates, managed futures, margin call, market clearing, market design, market friction, Market Wizards by Jack D. Schwager, merger arbitrage, money market fund, mortgage debt, Myron Scholes, New Journalism, paper trading, passive investing, Phillips curve, price discovery process, price stability, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, random walk, Reminiscences of a Stock Operator, Renaissance Technologies, Richard Thaler, risk free rate, risk-adjusted returns, risk/return, Robert Shiller, selection bias, shareholder value, Sharpe ratio, short selling, short squeeze, SoftBank, sovereign wealth fund, statistical arbitrage, statistical model, stocks for the long run, stocks for the long term, survivorship bias, systematic trading, tail risk, technology bubble, time dilation, time value of money, total factor productivity, transaction costs, two and twenty, value at risk, Vanguard fund, yield curve, zero-coupon bond

If they believe that a currency band is stable, they may bet on mean-reversion, buying the currency as it nears its lower bound and selling it close to its upper bound. Figure 11.1. The distribution of quarterly excess returns from the currency carry trade. Source: Brunnermeier, Nagel, and Pedersen (2008). More dramatically, macro traders may bet that a currency peg will break, as George Soros famously did when he “broke the Bank of England” in 1992. This is a story often told, but let me mention here that such a trade has a negative carry. Said differently, the carry trade will be positioned in the opposite direction. To defend a currency under attack, the central bank must raise the local interest rate (as the Bank of England did in 1992).

The Future Is Asian by Parag Khanna

3D printing, Admiral Zheng, affirmative action, Airbnb, Amazon Web Services, anti-communist, Asian financial crisis, asset-backed security, augmented reality, autonomous vehicles, Ayatollah Khomeini, barriers to entry, Basel III, bike sharing, birth tourism , blockchain, Boycotts of Israel, Branko Milanovic, British Empire, call centre, capital controls, carbon footprint, cashless society, clean tech, clean water, cloud computing, colonial rule, commodity super cycle, computer vision, connected car, corporate governance, CRISPR, crony capitalism, cross-border payments, currency peg, death from overwork, deindustrialization, Deng Xiaoping, Didi Chuxing, Dissolution of the Soviet Union, Donald Trump, driverless car, dual-use technology, energy security, European colonialism, factory automation, failed state, fake news, falling living standards, family office, financial engineering, fixed income, flex fuel, gig economy, global reserve currency, global supply chain, Great Leap Forward, green transition, haute couture, haute cuisine, illegal immigration, impact investing, income inequality, industrial robot, informal economy, initial coin offering, Internet of things, karōshi / gwarosa / guolaosi, Kevin Kelly, Kickstarter, knowledge worker, light touch regulation, low cost airline, low skilled workers, Lyft, machine translation, Malacca Straits, Marc Benioff, Mark Zuckerberg, Masayoshi Son, megacity, megaproject, middle-income trap, Mikhail Gorbachev, money market fund, Monroe Doctrine, mortgage debt, natural language processing, Netflix Prize, new economy, off grid, oil shale / tar sands, open economy, Parag Khanna, payday loans, Pearl River Delta, prediction markets, purchasing power parity, race to the bottom, RAND corporation, rent-seeking, reserve currency, ride hailing / ride sharing, Ronald Reagan, Salesforce, Scramble for Africa, self-driving car, Shenzhen special economic zone , Silicon Valley, smart cities, SoftBank, South China Sea, sovereign wealth fund, special economic zone, stem cell, Steve Jobs, Steven Pinker, supply-chain management, sustainable-tourism, synthetic biology, systems thinking, tech billionaire, tech worker, trade liberalization, trade route, transaction costs, Travis Kalanick, uber lyft, upwardly mobile, urban planning, Vision Fund, warehouse robotics, Washington Consensus, working-age population, Yom Kippur War

The Asianization of the World The legacy of the nineteenth-century Europeanization and twentieth-century Americanization of the world is that most nations have been shaped by the West in some significant way: European colonial borders and administration, US invasions or military assistance, a currency pegged to the US dollar, American software and social media, and so forth. Billions of people have acquired personal and psychological connections to the West. They have English or French as a first or second language, have relatives in America, Canada, or Great Britain, cheer for an English Premier League football team, never miss films starring their favorite Hollywood actor or actress, and follow the ins and outs of US presidential politics.

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

Albert Einstein, AOL-Time Warner, Asian financial crisis, asset allocation, asset-backed security, backtesting, banking crisis, Bear Stearns, Bernie Madoff, Black Swan, bond market vigilante , book value, Bretton Woods, BRICs, British Empire, business cycle, business process, buy and hold, capital asset pricing model, capital controls, central bank independence, collateralized debt obligation, commoditize, commodity super cycle, commodity trading advisor, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, diversification, diversified portfolio, equity premium, equity risk premium, family office, fiat currency, fixed income, follow your passion, full employment, George Santayana, global macro, Greenspan put, Hyman Minsky, implied volatility, index fund, inflation targeting, interest rate swap, inventory management, inverted yield curve, invisible hand, junk bonds, Kickstarter, London Interbank Offered Rate, Long Term Capital Management, low interest rates, market bubble, market fundamentalism, market microstructure, Minsky moment, moral hazard, Myron Scholes, North Sea oil, open economy, peak oil, pension reform, Ponzi scheme, prediction markets, price discovery process, price stability, private sector deleveraging, profit motive, proprietary trading, purchasing power parity, quantitative easing, random walk, Reminiscences of a Stock Operator, reserve currency, risk free rate, risk tolerance, risk-adjusted returns, risk/return, savings glut, selection bias, Sharpe ratio, short selling, SoftBank, sovereign wealth fund, special drawing rights, statistical arbitrage, stochastic volatility, stocks for the long run, stocks for the long term, survivorship bias, tail risk, The Great Moderation, Thomas Bayes, time value of money, too big to fail, Tragedy of the Commons, transaction costs, two and twenty, unbiased observer, value at risk, Vanguard fund, yield curve, zero-sum game

What was your first setback as a trader? The market always teaches you a lesson, and the first setback that I recall was due to concerns about a Chinese devaluation in 1997. After much research, one of my trades was fading risk premium in Chinese currency forwards on the thesis that China would not adjust its fixed currency peg. I was fading probably 1 to 2 percent annualized risk premium in the renminbi forward market when the Thai baht devalued. Frankly, it was a very sound thesis. But suddenly there was speculation of a Chinese devaluation, which I found confounding and astonishing because a large, sudden move occurred in the forward points of something that had been pegged for a long time.

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

accounting loophole / creative accounting, Alan Greenspan, Albert Einstein, Asian financial crisis, asset-backed security, Bear Stearns, beat the dealer, Black Swan, Black-Scholes formula, Bretton Woods, BRICs, Brownian motion, business logic, business process, buy and hold, buy low sell high, call centre, capital asset pricing model, collateralized debt obligation, commoditize, complexity theory, computerized trading, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, currency peg, currency risk, disinformation, disintermediation, diversification, diversified portfolio, Edward Thorp, Eugene Fama: efficient market hypothesis, Everything should be made as simple as possible, financial engineering, financial innovation, fixed income, Glass-Steagall Act, Haight Ashbury, high net worth, implied volatility, index arbitrage, index card, index fund, interest rate derivative, interest rate swap, Isaac Newton, job satisfaction, John Bogle, John Meriwether, junk bonds, locking in a profit, Long Term Capital Management, low interest rates, mandelbrot fractal, margin call, market bubble, Marshall McLuhan, mass affluent, mega-rich, merger arbitrage, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mutually assured destruction, Myron Scholes, new economy, New Journalism, Nick Leeson, Nixon triggered the end of the Bretton Woods system, offshore financial centre, oil shock, Parkinson's law, placebo effect, Ponzi scheme, proprietary trading, purchasing power parity, quantitative trading / quantitative finance, random walk, regulatory arbitrage, Right to Buy, risk free rate, risk-adjusted returns, risk/return, Salesforce, Satyajit Das, shareholder value, short selling, short squeeze, South Sea Bubble, statistical model, technology bubble, the medium is the message, the new new thing, time value of money, too big to fail, transaction costs, value at risk, Vanguard fund, volatility smile, yield curve, Yogi Berra, zero-coupon bond

‘We use sophisticated cross hedge and proxy models? Didn’t you have correlation hedges in your day, old timer?’ The traders were using baskets of dollars, yen and European currencies to hedge Asian markets. The Asian rates were ‘pegged’ and ‘managed’ by the central banks. The end came swiftly. In 1997, the currency pegs collapsed; the market found a new ‘level’; the traders were carried out in body bags. Modellers mused about ‘paradigm shifts’ and ‘discontinuous markets’. Some banks had been smart, they had just matched trades between two suicidal players. This didn’t help: the people who entered into the transactions were affected by amnesia.

Shutdown: How COVID Shook the World's Economy by Adam Tooze

2021 United States Capitol attack, air freight, algorithmic trading, Anthropocene, Asian financial crisis, asset-backed security, Ayatollah Khomeini, bank run, banking crisis, Basel III, basic income, Ben Bernanke: helicopter money, Benchmark Capital, Berlin Wall, Bernie Sanders, Big Tech, bitcoin, Black Lives Matter, Black Monday: stock market crash in 1987, blue-collar work, Bob Geldof, bond market vigilante , Boris Johnson, Bretton Woods, Brexit referendum, business cycle, business process, business process outsourcing, buy and hold, call centre, capital controls, central bank independence, centre right, clean water, cognitive dissonance, contact tracing, contact tracing app, coronavirus, COVID-19, credit crunch, Credit Default Swap, cryptocurrency, currency manipulation / currency intervention, currency peg, currency risk, decarbonisation, deindustrialization, Donald Trump, Elon Musk, energy transition, eurozone crisis, facts on the ground, failed state, fake news, Fall of the Berlin Wall, fear index, financial engineering, fixed income, floating exchange rates, friendly fire, George Floyd, gig economy, global pandemic, global supply chain, green new deal, high-speed rail, housing crisis, income inequality, inflation targeting, invisible hand, It's morning again in America, Jeremy Corbyn, junk bonds, light touch regulation, lockdown, low interest rates, margin call, Martin Wolf, mass immigration, mass incarceration, megacity, megaproject, middle-income trap, Mikhail Gorbachev, Modern Monetary Theory, moral hazard, oil shale / tar sands, Overton Window, Paris climate accords, Pearl River Delta, planetary scale, Potemkin village, price stability, Productivity paradox, purchasing power parity, QR code, quantitative easing, remote working, reserve currency, reshoring, Robinhood: mobile stock trading app, Ronald Reagan, secular stagnation, shareholder value, Silicon Valley, six sigma, social distancing, South China Sea, special drawing rights, stock buybacks, tail risk, TikTok, too big to fail, TSMC, universal basic income, Washington Consensus, women in the workforce, yield curve

They inflicted heavy losses on importers, who had to pay more for their goods, and on those who were unfortunate or unwise enough to have borrowed in dollars. A sudden devaluation, if it gathered momentum, might overshoot. Then the national authorities would have no alternative but to hike interest rates, amplifying the pain. To moderate these risks, what was warranted was not a rigid defense of a particular currency peg, but intervention to moderate the pace of exchange rate movements. For this the authorities needed ample foreign exchange reserves. From the beginning of the millennium, China’s reserves rose to a peak in 2014 of $4 trillion. No one could match that, but Thailand, Indonesia, Russia, and Brazil all accumulated large foreign exchange reserves too.

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

Alan Greenspan, Albert Einstein, bank run, banking crisis, Bear Stearns, Black Swan, book value, Bretton Woods, British Empire, business cycle, buy and hold, California gold rush, Carl Icahn, Carmen Reinhart, central bank independence, classic study, commoditize, conceptual framework, Cornelius Vanderbilt, corporate governance, corporate raider, creative destruction, cuban missile crisis, currency peg, debt deflation, falling living standards, fiat currency, financial deregulation, financial innovation, financial intermediation, floating exchange rates, Ford Model T, Fractional reserve banking, full employment, Glass-Steagall Act, global reserve currency, housing crisis, interchangeable parts, invention of radio, Kenneth Rogoff, laissez-faire capitalism, land bank, liquidity trap, low interest rates, means of production, military-industrial complex, Money creation, money: store of value / unit of account / medium of exchange, moral hazard, mutually assured destruction, Nixon triggered the end of the Bretton Woods system, non-tariff barriers, oil shock, Paul Samuelson, payday loans, plutocrats, price stability, pushing on a string, quantitative easing, rent-seeking, reserve currency, Ronald Reagan, Savings and loan crisis, special drawing rights, Suez canal 1869, Suez crisis 1956, The Chicago School, The Great Moderation, too big to fail, trade liberalization, transcontinental railway, Upton Sinclair, women in the workforce

Since the fiat paper dollar was the center of the post-WWII financial world, America’s ultimate victory in the Cold War was assured. But as with the Civil War, the cost of victory has been extremely high. The Dollar’s Golden Age The 1950s and 1960s are considered the golden age of modern American culture, albeit one that existed in a highly controlled economy. Today the idea of using price controls or a currency peg to manage an economy may be considered laughable, effectively creating a target of opportunity for George Soros and other global speculators—the modern day heirs of Jay Gould—to attack. But in the restricted financial markets of the 1950s and 1960s, when much of the global economy was still recovering from decades of depression and war, the system of pegging other currencies to the dollar appeared to work, at least initially.

All the Money in the World by Peter W. Bernstein

Albert Einstein, anti-communist, AOL-Time Warner, Bear Stearns, Berlin Wall, Bill Gates: Altair 8800, book value, call centre, Carl Icahn, Charles Lindbergh, clean tech, Cornelius Vanderbilt, corporate governance, corporate raider, creative destruction, currency peg, David Brooks, Donald Trump, estate planning, Fairchild Semiconductor, family office, financial engineering, financial innovation, George Gilder, high net worth, invisible hand, Irwin Jacobs: Qualcomm, Jeff Bezos, job automation, job-hopping, John Markoff, junk bonds, Larry Ellison, Long Term Capital Management, Marc Andreessen, Martin Wolf, Maui Hawaii, means of production, mega-rich, Menlo Park, Michael Milken, Mikhail Gorbachev, new economy, Norman Mailer, PageRank, Peter Singer: altruism, pez dispenser, popular electronics, Quicken Loans, Renaissance Technologies, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Sand Hill Road, school vouchers, Search for Extraterrestrial Intelligence, shareholder value, short squeeze, Silicon Valley, Silicon Valley billionaire, Silicon Valley startup, SoftBank, stem cell, Stephen Hawking, Steve Ballmer, Steve Jobs, Steve Wozniak, tech baron, tech billionaire, Teledyne, the new new thing, Thorstein Veblen, too big to fail, traveling salesman, urban planning, wealth creators, William Shockley: the traitorous eight, women in the workforce

Instead, he relied on his own investment savvy, garnered from newspapers and an army of paid informants around the globe who worked in central banks and on trading desks. Charges of insider trading61 have dogged him.†14 In 1992 he became infamous when he shorted the British pound, betting that its value would drop. The pound was part of the European currency peg, which obliged Common Market countries to value their currencies within close reach of one another. The British government tried to prop up the pound to keep it near the stronger German mark, buying it heavily and raising interest rates despite high unemployment—to no avail. Britain was forced to withdraw from the European Exchange Rate Mechanism (ERM), the pound plunged, and Soros’s $20 billion hedge—the idea of his chief investment officer, Stanley Druckenmiller—made him $1 to $2 billion.

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

As usual, the booms flattered fiscal positions: Estonia’s net public debt was minus 4 per cent of GDP in 2007, Latvia’s 5 per cent and Lithuania’s 11 per cent. Then came the four horsemen of financial crises: ‘sudden stops’ in capital inflows, asset-price collapses, recessions and fiscal deficits. In response, the Baltics decided to stick to currency pegs and embrace austerity. A substantial rescue package was also negotiated for Latvia in late 2008, with support from the European Union, the International Monetary Fund, the Nordic countries and others. Yet some doubted whether the programme would work. Olivier Blanchard, the IMF’s economic counsellor, stated in June 2013 that ‘Many, including me, believed that keeping the peg was likely to be a recipe for disaster, for a long and painful adjustment at best, or more likely, the eventual abandonment of the peg when failure became obvious.’12 He was wrong.

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

activist fund / activist shareholder / activist investor, Alan Greenspan, Albert Einstein, Asian financial crisis, banks create money, Bretton Woods, British Empire, business cycle, capital controls, Charles Lindbergh, currency manipulation / currency intervention, currency peg, deindustrialization, European colonialism, facts on the ground, fiat currency, financial independence, floating exchange rates, full employment, global reserve currency, imperial preference, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Rogoff, lateral thinking, low interest rates, margin call, means of production, Michael Milken, money: store of value / unit of account / medium of exchange, Monroe Doctrine, New Journalism, Nixon triggered the end of the Bretton Woods system, open economy, Paul Samuelson, Potemkin village, price mechanism, price stability, psychological pricing, public intellectual, reserve currency, road to serfdom, seigniorage, South China Sea, special drawing rights, Suez canal 1869, Suez crisis 1956, The Great Moderation, the market place, trade liberalization, Works Progress Administration

Senators Charles Schumer and Lindsey Graham attacked the Chinese practice, declaring that “one of the fundamental tenets of free trade is that currencies should float.” This contradicted not only the intellectual history of economics, but the tenet that guided the United States at Bretton Woods.34 There is a common thread running through White’s blueprint for Bretton Woods in 1944, Nixon’s closing of the gold window in 1971, Rubin’s hailing of the Chinese currency peg in 1998, and Geithner’s condemnation of it in 2009: whether the United States supports fixed or floating exchange rates at any given point in time is determined by which will give it a more competitive dollar. Whereas such elasticity of principle can be rationalized from a narrow perspective of U.S. national interest, it is more difficult to reconcile with enduring foreign confidence in a dollar-based global monetary system.

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

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

Capital flight begins with locals, I suspect, because they have better access to intelligence about local conditions. They can pick up informal signs—struggling businesses, looming bankruptcies—long before these trends show up in the official numbers that most big foreign institutions rely on. Balance of payments data show that during Mexico’s “tequila crisis” in December 1994, when the currency peg against the dollar came unstuck, locals started to switch out of pesos and into dollars more than eighteen months before the sudden devaluation. Years later Russians began to pull money out of their country more than two years before the ruble collapsed in August 1998. Savvy locals are also often the first to return.

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

Alan Greenspan, Asian financial crisis, asset allocation, behavioural economics, Berlin Wall, Black Monday: stock market crash in 1987, Bretton Woods, Brownian motion, business cycle, buy and hold, buy the rumour, sell the news, capital asset pricing model, capital controls, continuous double auction, currency peg, Deng Xiaoping, discrete time, diversified portfolio, Elliott wave, Erdős number, experimental economics, financial engineering, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, global village, implied volatility, index fund, information asymmetry, intangible asset, invisible hand, John von Neumann, joint-stock company, law of one price, Louis Bachelier, low interest rates, mandelbrot fractal, margin call, market bubble, market clearing, market design, market fundamentalism, mental accounting, moral hazard, Network effects, new economy, oil shock, open economy, pattern recognition, Paul Erdős, Paul Samuelson, power law, quantitative trading / quantitative finance, random walk, risk/return, Ronald Reagan, Schrödinger's Cat, selection bias, short selling, Silicon Valley, South Sea Bubble, statistical model, stochastic process, stocks for the long run, Tacoma Narrows Bridge, technological singularity, The Coming Technological Singularity, The Wealth of Nations by Adam Smith, Tobin tax, total factor productivity, transaction costs, tulip mania, VA Linux, Y2K, yield curve

These maxima are followed by sharp corrections triggered by and following the abandonment by Thailand of the fixed-exchange rate system after strong attacks on its currency. When the Thailand domino fell, three other Asian countries immediately got caught up in the turmoil: the Philippines, Indonesia, and Malaysia. None had situations as bad as Thailand, but they all had currencies pegged to a strong dollar, so they were hit hard. Such financial contagion is based on the same mechanisms as that leading to speculative bubbles. Investors’ and lenders’ moods follow regime shifts: when times are good, they think less about risk and focus on potential gain. When something bad happens, they start worrying about risk again, and the whole structure of hope and greed that had driven the market up collapses.

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

The Bank of France did not show the restraint towards the United States that they had shown to the British, and together with other members of the gold bloc converted $750 million of US dollar deposits into gold. The deflationary pressure exerted by this reduction in US gold holdings, and by the depreciation of the British pound and of the currencies pegged to the pound, weakened the US banking system. The New York Fed did not ask for help or even for forbearance in the conversion of US dollar deposits into gold. The code of the central banker calls for a stiff upper lip, reminiscent of Walter Mitty refusing the blindfold before the firing squad.

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

addicted to oil, air freight, airline deregulation, Alan Greenspan, Albert Einstein, asset-backed security, bank run, Berlin Wall, Black Monday: stock market crash in 1987, Bretton Woods, business cycle, business process, buy and hold, call centre, capital controls, carbon tax, central bank independence, collateralized debt obligation, collective bargaining, compensation consultant, conceptual framework, Corn Laws, corporate governance, corporate raider, correlation coefficient, cotton gin, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cuban missile crisis, currency peg, currency risk, Deng Xiaoping, Dissolution of the Soviet Union, Doha Development Round, double entry bookkeeping, equity premium, everywhere but in the productivity statistics, Fall of the Berlin Wall, fiat currency, financial innovation, financial intermediation, full employment, Gini coefficient, Glass-Steagall Act, Hernando de Soto, income inequality, income per capita, information security, invisible hand, Joseph Schumpeter, junk bonds, labor-force participation, laissez-faire capitalism, land reform, Long Term Capital Management, low interest rates, Mahatma Gandhi, manufacturing employment, market bubble, means of production, Mikhail Gorbachev, moral hazard, mortgage debt, Myron Scholes, Nelson Mandela, new economy, North Sea oil, oil shock, open economy, open immigration, Pearl River Delta, pets.com, Potemkin village, price mechanism, price stability, Productivity paradox, profit maximization, purchasing power parity, random walk, Reminiscences of a Stock Operator, reserve currency, Right to Buy, risk tolerance, Robert Solow, Ronald Reagan, Savings and loan crisis, shareholder value, short selling, Silicon Valley, special economic zone, stock buybacks, stocks for the long run, Suez crisis 1956, the payments system, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, Tipper Gore, too big to fail, total factor productivity, trade liberalization, trade route, transaction costs, transcontinental railway, urban renewal, We are all Keynesians now, working-age population, Y2K, zero-sum game

I recall looking across the table at Cavallo at another G20 meeting and wondering whether he was aware that the lending backstop to the peso would remain a source of support only if it was not used in excess. 342 More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright. LATIN AMERICA AND POPULISM Maintaining that large dollar buffer would likely have enabled the currency peg to hold indefinitely However, the political system of Argentina could not resist using the abundance of seemingly costless dollars in attempts to accommodate constituents' demands. Gradually but inexorably the buffer of dollar-borrowing capacity was drawn down. Dollars often were borrowed to sell for pesos in a futile effort to support the peso-dollar parity.

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

The appearance of stability offered by a fixed exchange rate encouraged a large inflow of foreign funds, which helped to stoke up domestic economic activity, creating an unbalanced trade account funded from abroad. Banks that acted as the conduit for foreign funds boomed. This set up the crisis.22 When international investors lost confidence, the result was a devastating sudden stop. Then the central bank’s foreign exchange reserves would drain and it would have no option but to let the currency peg go. Stability would give way to a disastrous devaluation. Those who got their money out first would be saved. Those who had borrowed in foreign currency would face bankruptcy. This was the saga of the 1990s: 1994 in Mexico; 1997 in Malaysia, South Korea, Indonesia and Thailand; 1998 in Russia; 1999 in Brazil.

Crucible: The Long End of the Great War and the Birth of a New World, 1917-1924 by Charles Emmerson

Albert Einstein, anti-communist, British Empire, continuation of politics by other means, currency peg, disinformation, Eddington experiment, Etonian, European colonialism, Ford Model T, ghettoisation, Isaac Newton, land reform, Mahatma Gandhi, Monroe Doctrine, Mount Scopus, new economy, plutocrats, strikebreaker, Suez canal 1869, trade route, W. E. B. Du Bois

The boss of the Reichsbank boasts that, armed with enough zeroes, paper and ink, the bank will soon be able to issue, almost every day, banknotes of a value equal to the entire current stock in circulation. But despite–or because of–this ever-increasing flood of money, no one ever seems to have enough. Each banknote printed reduces the value of the rest. Local communities try to escape the madness by creating their own currencies pegged to something–anything–which can still be trusted as a store of value. Some become fantastically rich in these months; most become poor. They look for scapegoats. PAMPLONA, SPAIN–PARIS: While André Breton is fishing in Brittany, and Albert and his son are sailing in the Baltic, Hadley Hemingway is five months pregnant and Ernest has a new hobby.

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

As the Thai baht followed the greenback up, Thailand lost competitiveness and its trade deficit swelled alarmingly. To pay for the excess of imports over exports, Thailand resorted to borrowing from foreigners. But this strategy could be sustained for only so long, and pretty soon speculators woke up to the fact that it was a matter of time before the currency peg shattered. The speculators sold baht aggressively, and their prophecy fulfilled itself. On July 1, 1997, the peg duly broke and the currency began a headlong fall, causing the economy to shrink by one sixth and transferring more than $1 billion of Thai savings from the central bank to the speculators.10 Once Thailand fell, the panic spread to its neighbors.

Reaganland: America's Right Turn 1976-1980 by Rick Perlstein

8-hour work day, Aaron Swartz, affirmative action, air traffic controllers' union, airline deregulation, Alan Greenspan, Alistair Cooke, Alvin Toffler, American Legislative Exchange Council, anti-communist, Apollo 13, Ayatollah Khomeini, Berlin Wall, Bernie Sanders, Boeing 747, Brewster Kahle, business climate, clean water, collective bargaining, colonial rule, COVID-19, creative destruction, crowdsourcing, cuban missile crisis, currency peg, death of newspapers, defense in depth, Deng Xiaoping, desegregation, disinformation, Donald Trump, Dr. Strangelove, energy security, equal pay for equal work, facts on the ground, feminist movement, financial deregulation, full employment, global village, Golden Gate Park, guns versus butter model, illegal immigration, In Cold Blood by Truman Capote, index card, indoor plumbing, Internet Archive, invisible hand, Julian Assange, Kitchen Debate, kremlinology, land reform, low interest rates, Marshall McLuhan, mass immigration, military-industrial complex, MITM: man-in-the-middle, Monroe Doctrine, moral panic, multilevel marketing, mutually assured destruction, New Journalism, oil shock, open borders, Peoples Temple, Phillips curve, Potemkin village, price stability, Ralph Nader, RAND corporation, rent control, road to serfdom, Robert Bork, Robert Solow, rolodex, Ronald Reagan, Rosa Parks, Saturday Night Live, Silicon Valley, Suez crisis 1956, three-martini lunch, traveling salesman, unemployed young men, union organizing, unpaid internship, Unsafe at Any Speed, Upton Sinclair, upwardly mobile, urban decay, urban planning, urban renewal, wages for housework, walking around money, War on Poverty, white flight, WikiLeaks, Winter of Discontent, yellow journalism, Yom Kippur War, zero-sum game

Wanniski left those niceties to the hacks he dismissed as “academic theoreticians”—just about every school of which he managed to insult for missing “what some would call a ‘Copernican revolution’ in economic policy.” What was it these “economic doctors of Cambridge and Chicago” failed to understand? That stagflation could be easily fixed. Just combine tight money (ideally, via a “common simulated currency” pegged to the value of gold) and “fiscal ease”; in other words, radical tax cuts. Though Wanniski only called them “implied” tax cuts: for once the economy was “optimized by putting the unemployed resources to work,” they weren’t like tax cuts at all, because everyone would become richer. And unlike every other existing theory on fixing inflation, Mundell and Laffer’s “would not involve a period of suffering by the world’s population in order to achieve improvement.”