eurozone crisis

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pages: 1,066 words: 273,703

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

Affordable Care Act / Obamacare, Apple's 1984 Super Bowl advert, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, Boris Johnson, break the buck, Bretton Woods, BRICs, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, 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 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, housing crisis, Hyman Minsky, illegal immigration, immigration reform, income inequality, interest rate derivative, interest rate swap, Kenneth Rogoff, large denomination, light touch regulation, Long Term Capital Management, margin call, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, mittelstand, money market fund, moral hazard, mortgage debt, mutually assured destruction, negative equity, new economy, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shale / tar sands, old-boy network, open economy, paradox of thrift, Peter Thiel, Ponzi scheme, predatory finance, price stability, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, reserve currency, risk tolerance, Ronald Reagan, savings glut, secular stagnation, Silicon Valley, South China Sea, sovereign wealth fund, special drawing rights, structural adjustment programs, 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

See International Monetary Fund (IMF) India, 477, 483 Indonesia, 477, 483 Asian financial crisis and, 7, 32, 255–56, 261 capital controls adopted by, 475 financial crisis of 2008 and, 258–59 stimulus program, 258–59 Industrial and Commercial Bank of China, 249 inequality, 455–63 inflation, 11, 44–45 ING, 124 interest rates ECB rate increase 2011, 378–79 Fed’s rate hikes, 2015–2018, 590 Greenspan cuts, after dot-com bust and 9/11, 37–38, 55–56, 69–70 inverted yield curve, 2006, 70 taper tantrum of 2013, 472–82 Volcker’s raising of, 43–44 intergovernmentalism, 113, 114–15 International Monetary Fund (IMF), 17–18, 89, 127 acceptance of exchange controls, 475 Asian financial crisis, 261 banking crisis, 206, 401-2 Eastern European crisis, 127, 230–32, 235, 237, 491–93 eurozone crisis, 2010–12, Greece and, 323, 325, 332–34, 336, 340, 343, 344–45, 357, 377, 382–85, 388–89, 405, 413, 422, 424 eurozone crisis, 2015, Greece and 516–517, 520, 523, 527, 528–30 eurozone crisis Ireland and, 360, 364–65, 368, 398 eurozone crisis Italy and, 410–11 fiscal multiplier underestimated by, 423, 429–30 global imbalances, 40, 370 G20 agreement for expanded funding of, 270, 272 quota reallocation, 270, 272, 469, 479, 488 Ukraine and 2013–15, 493–94, 495–98, 500–1, 507–8 warns against Brexit, 550 investment banks, 51–54 Brexit and, 550–51 compensation at, 65 crises faced by, in 1990s and early 2000s, 53–54 funding of, 52–53 growth from 1970s, 51–53 products engineered by, 52 profits made by, 64–65 See also specific investment banks Iraq War, 3, 28, 115–16 Ireland, 83–84, 167, 337, 338 bank bailouts in, 185–86, 193 debt crisis in, 322, 323, 359–66 ECB forces austerity plan on, 362–65 household wealth lost in, 156 IMF and, 360, 364–65, 368, 398 real estate boom in, 105, 106, 107, 109 Irish Times, 363 Irwin, Neil, 215–17, 350 Italy, 322, 385 austerity program adopted in, 387 Cannes G20 and, 410–12 debt of, 386–87, 389 ECB’s bond buying program, 2011, 398–99 euro entry of, 94 eurozone crisis resolution, 2012 and, 431–37 Japan, 30, 158–59 Jay Z, 40 Johnson, Boris, 548, 552 J.P.

But, as senior economic officials of the EU will now publicly admit, this had no basis in economics.34 The sustainability of public debts may be a problem in the long term. Greece was insolvent. But excessive public debt was not the common denominator of the wider eurozone crisis. The common denominator was the dangerous fragility of an overleveraged financial system, excessively reliant on short-term market-based funding. The eurozone crisis was a massive aftershock of the earthquake in the North Atlantic financial system of 2008, working its way out with a time lag through the labyrinthine political framework of the EU.35 As one leading EU expert closely associated with the EU’s bailout programs has put it: “If we had taken the banks under central supervision then already [in 2008], we would have solved the problem at a stroke.”36 Instead the eurozone crisis expanded into a doom loop of private and public credit and a crisis of the European project as such.

Chapter 4 EUROZONE If Europe preferred not to highlight its role in the “American” financial crisis of 2008, covering its tracks was made easier by the fact that from 2010 Europe was consumed by its own “authentically” European crisis. The eurozone crisis followed directly on the footsteps of Wall Street and the US mortgage bust. But as conventionally understood, it is as if the Wall Street crisis and the eurozone disaster belong to different worlds. Whereas the US crisis involved overextended banks and mortgage borrowers impelled by greed and financial excess, the eurozone crisis would revolve around quintessentially European themes of public finance and national sovereignty. It would pit Greeks against Germans and reawaken memories of World War II. Both crisis narratives play to type: mercenary Americans, squabbling European nationalisms.


pages: 267 words: 74,296

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

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

A sense of direction towards integration, even if slow and conditional, would help stabilise the euro zone, restore confidence in markets that it is being repaired, provide incentives for reform and give citizens in the most stricken countries a sense of hope for a better future. It could help avoid the next crisis, or at least mitigate its impact. But Europe’s leaders have not proven to be endowed with long-term vision. So the best that can probably be hoped for is that the euro zone lurches from one crisis-induced reform to another. This will be unnecessarily costly and painful, but might somehow lead to a more coherent and workable system. But there is another possibility: that the euro zone, and the EU with it, will stumble from one crisis to the next until, exhausted, one or all of its members lose the will to preserve the single currency, and perhaps the wider project. Europeans like to point out that it took the United States more than two centuries, many crises and a civil war before it fully developed its model of federalism.

The process proved so messy and bitter that, even with hundreds of billions of euros committed to bail-outs, the currency several times came close to breaking up, potentially taking down the single market and perhaps the whole EU with it. The EU’s hope of becoming a global power dissolved as Europe became the world’s basket case. More than once, the United States forcibly pressed its transatlantic allies and economic partners to do more to fix their flawed currency union. At the time of writing, in March 2014, the euro zone has survived the financial crisis – an achievement in itself, but won at too high a price. The euro zone bottomed out of its double-dip recession in 2013. But despite signs of “Europhoria” in markets the danger is far from over. Among Europhiles and Eurosceptics alike, there is a growing belief that the euro has undermined, and may yet destroy, the European Union. Instead of promoting economic integration, euro-zone economies have diverged.

The crisis has also widened the democratic deficit in Europe, which the growing power of the European Parliament has been unable to fill, as explained in Chapter 9. Moreover, it has disrupted the core business of the EU that is often out of the headlines, from the single market to trade negotiations, as set out in Chapter 10, as well as the EU’s hope of exerting greater influence on world affairs, a sorry tale recounted in Chapter 11. The concluding Chapter 12 assesses the damage done by comparing the performance of the euro zone since the beginning of the global financial crisis with that of the United States. It tries to draw lessons from the upheaval and offers recommendations for reform. The main risks to the euro zone, and to the wider European Union, are now predominantly economic and political. The recovery is still weak, making it harder to bring down unacceptably high unemployment and leaving the euro zone vulnerable to a triple-dip recession, if not outright deflation.


pages: 438 words: 109,306

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

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

The powerful forces of international capital that brought the BIS into being, and which granted the bank its power and influence, are again triumphant. The BIS sits at the apex of an international financial system that is falling apart at the seams, but its officials argue that it does not have the power to act as an international financial regulator. Yet the BIS cannot escape its responsibility for the Euro-zone crisis. From the first agreements in the late 1940s on multilateral payments to the establishment of the Europe Central Bank in 1998, the BIS has been at the heart of the European integration project, providing technical expertise and the financial mechanisms for currency harmonization. During the 1950s, it managed the European Payments Union, which internationalized the continent’s payment system.

A common monetary policy, based on a shared currency, demanded a common fiscal policy with shared rules for government taxation and spending, Lamfalussy argued in a memo in January 1989, but there were no plans for this: In short, it would seem to me very strange if we did not insist on the need to make appropriate arrangements that would allow the gradual emergence, and the full operation once the EMU is completed, of a Community-wide macroeconomic fiscal policy which would be the natural complement to the common monetary policy of the Community.15 As Harold James notes, Lamfalussy’s memo was both “apposite and intellectually compelling.”16 It neatly summarized the contradiction of a transnational currency with no transnational fiscal policy—a contradiction that remains unresolved and has both triggered and fueled the Eurozone crisis. The following month, Lamfalussy, during a discussion of the kind of controlling and supervisory budgetary methods needed for EMU, even suggested adding the word “enforceable” to the final draft. His suggestion was not incorporated into the report. Nonetheless, even without a common fiscal policy, Lamfalussy argued that Europe must press ahead with monetary union, if only because the European Monetary System (EMS), which limited exchange rate variations, had fallen victim to the law of unintended consequences.

Central bankers should probably never be allowed to go anywhere in a limousine. They should take the Basel tram.”30 Those central bankers who implement austerity programs do not personally suffer the consequences. Jean-Claude Trichet served as president of the ECB from 2003 to 2011. Europe’s economies have slid into recession in part because of the ECB’s relentless demands to keep inflation below 2 percent. Despite his role in the unfolding Eurozone crisis, Trichet is now a much sought-after speaker on the international conference circuit. In May 2012 Trichet spoke at the Peterson Institute for International Economics in Washington, DC, offering his thoughts on the “Lessons from the Crisis.” To an outsider the scene seemed an extraordinary spectacle: as Spain’s economy began to collapse, neo-Nazis patrolled the streets of Athens, beating immigrants, and an entire generation of young Europeans faced years of unemployment and poverty.


EuroTragedy: A Drama in Nine Acts by Ashoka Mody

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

Many believed that European decisions, handed down without a democratic vetting process, were making already onerous social inequalities worse. By now, the votes showed, the young were also growing disenchanted with Europe. Ignoring these concerns and irritants, with eurozone banks enmeshed in the burgeoning global financial crisis, European leaders celebrated the first decade of the single currency in 2008. They took particular delight in ridiculing critics who had predicted that the euro would fail. Those celebrations proved premature. Eurozone’s Rolling Crisis: Policymakers Respond with Half-​Measures Already by mid-​2007, the gathering financial crisis in the United States had trapped several eurozone banks seduced by apparently easy pickings in the subprime market. By mid-​2008, at home in the eurozone, banks began to totter as property prices collapsed and economies fell into recession.

No one else mattered much, or at least mattered consistently.”160 Merkel, therefore, set the strategy for the eurozone’s crisis management. She relied on delays and ad hoc, last-​minute solutions, which stored up more trouble for the future. She waited until a catastrophic breakdown of the euro loomed, and then rallied the necessary support within her CDU party and in the Bundestag, impressing on those disinclined to go along with her that there was “no alternative” to the politically unpopular rescue measure.161 Merkel managed the euro crisis just as American presidents had dealt with the Vietnam War. She defused the immediate crisis but could not resolve its underlying causes. The eventual cost of the crisis and financial rescue went up, while resentment and growing animosity drove Europeans apart. But not just eurozone crisis management, Merkel was shaping the entire economic policy framework of eurozone member states.

The “southern” countries—​Greece, Italy, Portugal, and Spain—​which were most expected to benefit from the discipline, did not become more resilient to economic shocks and they did not move into higher and more stable growth trajectories. The promised benefits in terms of more trade within the eurozone did not materialize either. Even before the global financial crisis began in 2007, the share of within-​eurozone trade had started to decline, and that tendency accelerated as the crisis persisted. The inevitable adversity that would test the eurozone came as the global financial crisis in 2007 and then continued as multiple rolling eurozone banking and sovereign debt crises through to 2013. During these years, the euro caused the most damage in the weakest eurozone countries, widening existing income disparities between member nations.


pages: 376 words: 109,092

Paper Promises by Philip Coggan

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, balance sheet recession, bank run, banking crisis, barriers to entry, Berlin Wall, Bernie Madoff, Black Swan, 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, debt deflation, delayed gratification, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, falling living standards, fear of failure, financial innovation, financial repression, fixed income, floating exchange rates, full employment, German hyperinflation, global reserve currency, hiring and firing, Hyman Minsky, income inequality, inflation targeting, Isaac Newton, John Meriwether, joint-stock company, Kenneth Rogoff, Kickstarter, labour market flexibility, light touch regulation, Long Term Capital Management, manufacturing employment, market bubble, market clearing, Martin Wolf, 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, Plutocrats, Ponzi scheme, price stability, principal–agent problem, purchasing power parity, quantitative easing, QWERTY keyboard, railway mania, regulatory arbitrage, reserve currency, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, The Chicago School, The Great Moderation, The 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

PRECIOUS METALS PAPER MONEY BANKING MONEY Chapter 2 - Ignoring Polonius THE FUNCTIONS OF INTEREST BAD KINGS AND BAD DEBTS DEBT AND THE INDUSTRIAL AGE THE MORAL MAZE MONEY AND DEBT Chapter 3 - Going for Gold THE TRILEMMA THE GOLD STANDARD HOW THE STANDARD WORKED LENDERS OF LAST RESORT Chapter 4 - Money and the Depression A WORLD OUT OF IDEAS THE BANKERS’ RAMP THE US EXPERIENCE Chapter 5 - Dancing with the Dollar AVOIDING MISTAKES THE DOLLAR’S ROLE THE DEATH THROES Chapter 6 - Paper Promises THE RISE OF THE MONETARISTS POLICY IN A WORLD OF FLOATING RATES A MIXED SYSTEM EXCHANGE-RATE CHOICES THE EURO Chapter 7 - Blowing Bubbles FORTY YEARS OF BUBBLES THE MINSKY EFFECT THE SUB-PRIME BOOM BUBBLES, PAPER MONEY AND THE END OF BRETTON WOODS WHACK-A-MOLE DISGUISED INFLATION Chapter 8 - Riding the Gravy Train EFFICIENT-MARKET THEORY REGULATION THE BIGGER, THE BETTER A CHANGE OF ATTITUDE Chapter 9 - The Crisis Begins AS UNSAFE AS HOUSES CONSUMER DEBT CORPORATE DEBT Chapter 10 - Not So Risk-free POST-WAR DEBT CRISES THE CURRENT CRISIS THE EURO-ZONE CRISIS BAILOUT TIME THE HIDDEN DEBTS Chapter 11 - Bequeathing Our Debts BABY BUST THE UNRECOGNIZED LIABILITIES A NEW ATTITUDE ENERGY Chapter 12 - Paying the Bill AGGREGATING THE PROBLEM THE LONG VIEW WHERE DO WE GO FROM HERE? THE UNHOLY TRINITY INFLATION STAGNATION DEFAULT Chapter 13 - A New Order OPTIONS FOR CHANGE THE OUTLINES OF A SYSTEM PAPER PROMISES Notes Bibliography Index Copyright Page To Helena and Catherine, with apologies for the debts left by my generation Acknowledgements This book was inspired by my work on the Economist, in particular a special report on debt that was published in the summer of 2010.

As a result, while a fall in the pound might push up UK prices quite quickly, a fall in the dollar is less likely to lead to a rise in American inflation. However, as Martin Wolf has remarked, ‘The very factor that makes borrowing large sums relatively safe for Americans – that they are borrowing in a currency they can create at will – also makes borrowing riskier for their creditors.’8 As we shall discuss later, the US faced huge long-term fiscal challenges. THE EURO-ZONE CRISIS Europe, not the US, has been at the centre of the sovereign debt crisis. As outlined in Chapter 6, the euro had a number of design flaws, including a failure to impose fiscal or current-account discipline on member countries. This was a failure at both the public- and the private-sector level; for many years, investors were willing to buy the sovereign debt of peripheral euro-zone members on similar yields to those prevailing in Germany or the Netherlands regardless of the risk.


pages: 221 words: 46,396

The Left Case Against the EU by Costas Lapavitsas

anti-work, banking crisis, Bretton Woods, capital controls, central bank independence, collective bargaining, declining real wages, eurozone crisis, Francis Fukuyama: the end of history, global reserve currency, hiring and firing, neoliberal agenda, offshore financial centre, post-work, price stability, quantitative easing, reserve currency, Ronald Reagan, Washington Consensus, Wolfgang Streeck

‘Political Economy of the Greek Crisis’, Review of Radical Political Economics, forthcoming. Lapavitsas, C., A. Kaltenbrunner, D. Lindo, J. Michell, J.P. Painceira, E. Pires, J. Powell, A. Stenfors, and N. Teles 2010a. ‘Eurozone Crisis: Beggar Thyself and Thy Neighbour’, RMF Occasional Report, March, available at: http://erensep.org/2010/03/24/first-rmf-report-on-the-eurozone-crisis-beggar-thyself-and-thy-neighbour/#more-146 Lapavitsas, C., A. Kaltenbrunner, G. Lambrinidis, D. Lindo, J. Meadway, J. Michell, J.P. Painceira, E. Pires, J. Powell, A. Stenfors, and N. Teles 2010b. ‘The Eurozone between Austerity and Default’, RMF Occasional Report, September, available at: http://erensep.org/2010/09/24/second-rmf-report-on-the-eurozone-crisis-eurozone-between-austerity-and-default/#more-145 Lapavitsas, C., A. Kaltenbrunner, G. Lambrinidis, D. Lindo, J. Meadway, J. Michell, J.P.

Article 125 basically states that the EU will not assume responsibility for the obligations and burdens of a member state.32 There is little doubt that the Stability and Growth Pact failed to ensure the desired fiscal discipline. There is also no doubt that Article 125 has frayed considerably at the edges in the course of the Eurozone crisis, particularly after the bail-outs of Greece, Ireland, and Portugal, and the creation of the European Stability Mechanism (ESM). Loans were certainly extended among member states to facilitate dealing with a sovereign debt crisis, thus creating a risk of non-payment. But the core provision not to share mutually in the obligations of another member state has not been directly contradicted. Furthermore, in the course of the Eurozone crisis the Pact evolved into the ‘Six Pack’, the ‘Two Pack’, the Fiscal Compact, and so on, which have hardened disciplinary controls, with sanctions available to discipline ‘aberrant’ states.

By late 2009 the worst of the global crisis was over as global banking began to stabilize, and developing countries in particular returned to growth. But the recession and government intervention meant that large fiscal deficits had emerged and public debt had begun to accelerate. For the Southern periphery these developments were catastrophic since they ignited the Eurozone crisis in 2010.2 In narrow economic terms the Eurozone turmoil was a balance of payments crisis involving a sudden reversal of capital flows from abroad. This phenomenon has occurred frequently in developing countries in the decades since the 1980s, often taking the form of a ‘sudden stop’ crisis.3 Characteristic of such crises is that private international lenders (banks, other large financial institutions, etc.) stop lending to governments and even to private borrowers of countries that register combinations of large external deficits, fiscal deficits, and debts.


pages: 193 words: 48,066

The European Union by John Pinder, Simon Usherwood

Berlin Wall, BRICs, central bank independence, centre right, collective bargaining, Doha Development Round, eurozone crisis, failed state, illegal immigration, labour market flexibility, mass immigration, Neil Kinnock, Nelson Mandela, new economy, non-tariff barriers, open borders, price stability, trade liberalization, zero-sum game

While that remedy is not available to deal with the dollar’s dominance in the world system, the euro has developed into a significant countervailing monetary power, the Eurozone crisis notwithstanding. Thus the euro is another source of money with a different economic cycle, which can counteract the dollar’s influence when it works against other countries’ interests. This has been limited by two main factors. First, there is still an unclear arrangement for conducting external monetary policy, the responsibility being divided between the European Central Bank and the Council of finance ministers. Second, the continuing structural problems presented by the Eurozone crisis have also proved a very major distraction. So the Union has not yet made full use of the opportunity that the euro offers to replace American hegemony with a more equal relationship, such as the common commercial policy has long since done with respect to trade.

Its rotating presidency is an important function, both for the management of current business and for launching new projects. The President of the European Council is the closest that the Union has come to a national equivalent, representing the EU externally and providing a focus to the European Council’s work. Its first incumbent—former Belgian Prime Minister Herman Van Rompuy—has focused primarily on the managerial aspect of the post, helping to coordinate the response to the Eurozone crisis, and establishing a modus vivendi with the other institutions, most notably the Commission. The meetings themselves are confined to two presidents (of the European Council and the Commission) and the 28 heads of state and government, and usually the Union’s High Representative for Foreign Affairs. Outside the meeting room, they are surrounded by a vast media circus which presents the results to the citizens of different countries in radically different ways, with each leader seeking to make the best possible impression on their respective constituencies.

Outside the meeting room, they are surrounded by a vast media circus which presents the results to the citizens of different countries in radically different ways, with each leader seeking to make the best possible impression on their respective constituencies. The ‘Presidency Conclusions’ are issued after each meeting, usually in a lengthy document, sometimes with bulky annexes. 7. European Council, 1979: facing different ways The European Council itself initiates only a few of their decisions, and does not have time for thorough discussion of all that is put before it, especially when dealing with technical briefs, as in the Eurozone crisis. More typically, most of the detail and the ‘political guidelines’ emerge from the Union’s institutions, working with the European Council’s President. The Council of the European Union (or Council of Ministers, as it is usually known) is a more complicated body. Which minister attends a given meeting depends on the subject. The Council meets in approximately ten forms, including an Economic and Financial Council (Ecofin), an Agriculture Council, a Foreign Affairs Council (under the chair of the High Representative), and a General Affairs Council comprising the foreign ministers, which is supposed to coordinate the work of the other Councils, but is in practice hard put to control Councils of ministers from powerful departments of state.


pages: 524 words: 143,993

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

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

The economies of the UK and, far more so, Italy were still smaller than they had been prior to the crisis, as was the Eurozone as a whole. The US economy had managed to grow steadily from 2009, if weakly, by its own historic standards. Germany recovered strongly in 2009 and 2010, but grew weakly again after the middle of 2011, as the Eurozone crisis worsened. German policy bears much responsibility for this outcome, as Chapter Two will show. The French economy stagnated after a relatively mild recession in 2008 and 2009, while Italy’s went into a second deep plunge from 2011, as the Eurozone crisis took hold. The UK economy stagnated from the third quarter of 2010 to the beginning of 2013 when recovery started, this hiatus in the recovery being in part due to the coalition government’s ill-timed policy of austerity.54 Finally, the Japanese economy was remarkably volatile.

Largely as a result, the recovery proved weak or even withered away altogether in 2011 and 2012. For this unhappy outcome, the Eurozone crisis was partly responsible. It turned out to be the second act of the global financial crisis. It is, accordingly, the subject of the next chapter. 2 The Crisis in the Eurozone Whatever role the markets have played in catalysing the sovereign debt crisis, it is an indisputable fact that excessive state spending has led to unsustainable levels of debt and deficits that now threaten our economic welfare. Wolfgang Schäuble, German Finance Minister, 20111 Greece was the Eurozone’s Lehman. While the worst of the post-Lehman crisis was both severe and relatively brief, the aftermath of the Greek crisis was less severe but longer lasting. It triggered what turned out to be a long-running crisis, as fundamental weaknesses in the Eurozone’s economies and institutional structure were laid bare.

Behind the rising imbalances and the associated savings glut lay fundamental shifts in the world economy driven by liberalization, technology and ageing, and revealed in globalization, rising inequality and weak investment in high-income economies. Chapter Five will also look at how the combination of the credit bubble with the savings glut and the underlying design flaws drove the Eurozone into such a deep crisis. It will argue that one must understand the interaction of five elements: errors in design; errors in policymaking among creditor and debtor countries prior to the crisis; the fragility of finance, notably the banking system in Eurozone countries; mistakes of monetary policy; and failures to work out effective ways of dealing with the crisis when it hit. As a result, the risks of breakdown remain significant, with devastating potential effects on the economic stability of the continent.


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

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

At the beginning of the twentieth century, Max Weber took Enlightenment thinking one stage further with his attempt to explain the unique qualities that had led to such remarkable gains for northern Europe and, by implication, its offshoots in North America, Australia and New Zealand. Weber’s Protestant work ethic12 is an idea that continues to divide north and south Europe to this day. After all, Germany’s view on (largely Catholic) southern Europe’s difficulties – in a nutshell, that the Spanish, Greeks and Italians are lazy, feckless, and need to work harder13 – is one reason why a solution to the eurozone crisis that began in 2010 has proved so elusive. Others have not been afraid to follow in Weber’s path. David Landes discusses both Western economic success and other nations’ failure in his masterly The Wealth and Poverty of Nations. Niall Ferguson talks about ‘six killer apps’ to explain the West’s enduring success, in the process invoking Weber’s ideas.14 26 4099.indd 26 29/03/13 2:23 PM Taking Progress for Granted And it’s certainly true that living standards in the Western industrialized world are mostly very high, underlining the advantages of continued economic gains over many years.

While the UK’s performance was even more miserable, the early 1980s collapse provided a precedent of sorts (although, on that occasion, the recession was followed by a strong recovery, which is more 33 4099.indd 33 29/03/13 2:23 PM When the Money Runs Out than can be said for the UK’s experience following the financial crisis). Even financially conservative countries succumbed to ongoing disappointment. Although Germany’s decline in 2008 and early 2009 was followed by a strong trade-­led recovery, the momentum didn’t last: by 2012, German exporters were being hit by a collapse in demand in southern Europe as a global banking crisis evolved into a eurozone sovereign crisis. Absent a decent recovery, the process of repaying debt – of deleveraging – has been made all the more difficult. Having thought they could grow their way out of their debt difficulties, Western policy-­makers have been forced to rethink their plans. Worse, persistently low levels of economic activity have made it much more difficult to deliver on the promises made before the onset of the financial crisis.

Standard & Poor’s, the ratings agency, downgraded US government debt on 5 August 2011 from triple-­A to AA+, at the same time placing it on negative watch. It was the first such downgrade in the 70-­year history of US government debt ratings. The day before the downgrade, 10-­year Treasuries yielded 2.56 per cent. A year later, despite the downgrade and a blistering attack by S&P on the US Treasury Department’s fiscal plans, yields were a full percentage point lower. Alongside the effects on risk appetite of the eurozone crisis, quantitative easing had worked its magic. In effect, central banks are underwriting government debt, whether or not the public finances are in a healthy state. Investors know that the value of government bonds is guaranteed by central banks, at least in nominal terms. That guarantee makes government bonds even more attractive to risk-­averse investors. They end up following the central bank’s lead.


pages: 756 words: 120,818

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

"Robert Solow", 3D printing, Airbnb, algorithmic trading, bank run, banking crisis, barriers to entry, Bernie Sanders, bitcoin, Black Swan, blockchain, Boris Johnson, Branko Milanovic, Bretton Woods, British Empire, business cycle, business process, capital controls, Celtic Tiger, central bank independence, cloud computing, continuation of politics by other means, corporate governance, credit crunch, cryptocurrency, deglobalization, deindustrialization, disruptive innovation, distributed ledger, Donald Trump, eurozone crisis, financial innovation, first-past-the-post, fixed income, Geoffrey West, Santa Fe Institute, Gini coefficient, global value chain, housing crisis, income inequality, Intergovernmental Panel on Climate Change (IPCC), knowledge economy, liberal world order, Long Term Capital Management, longitudinal study, market bubble, minimum wage unemployment, new economy, Northern Rock, offshore financial centre, open economy, pattern recognition, Peace of Westphalia, performance metric, private military company, quantitative easing, race to the bottom, reserve currency, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, Scramble for Africa, secular stagnation, Silicon Valley, Sinatra Doctrine, South China Sea, South Sea Bubble, special drawing rights, supply-chain management, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, total factor productivity, trade liberalization, tulip mania, Valery Gerasimov, Washington Consensus

Its economy is vulnerable to several fault lines: the complex unprofitability and leverage of its state-owned enterprises, extremely high property prices, and the explosive wealth-management products in the financial services sector. The lessons of indebtedness are learned the hard way, but given that slower globalization implies lower growth, it is clear that the large world economies need to reduce debt levels and better manage risk taking. One discussion to emerge from the eurozone crisis centered on how countries might reduce debt. The main options are growing their economies, allowing inflation to rise, and restructuring the debt (note that as the eurozone crisis deepened, the thinking of bodies like the IMF on debt forgiveness changed and it adopted a more pragmatic, favorable view of debt restructuring, albeit too late for the likes of Greece and Ireland). The solutions that the European Union and IMF had cooked up for the eurozone as a whole—austerity being the lead one—have not worked well in reducing the debt burden.

The largest group involved in those debates, the Levellers, crafted arguments for equality and constitutional democracy, arguments that they framed as the “Agreements of the People.” Those agreements resonate today as the first popular, written expressions of constitutional democracy. With democracy now under attack, it is to the Levellers we must turn for inspiration. As political ruptures occurred across Europe during and after the eurozone crisis and as the 2016 US presidential campaign intensified, the Putney Debates and the Levellers who inspired them kept coming to my mind. One of the first texts on the Levellers I read was The World Turned Upside Down, by the historian and former master of Balliol College Christopher Hill. In it Hill tracks the emergence of radical political groups in mid-seventeenth-century England as they played a formative role in the emergence of democracy as we now know it.

Many, if not all, of my Greek friends have had the privilege of a third-level education outside Greece, usually at universities in the south of England: the City University of London, the University of Essex, Oxford University, and the London School of Economics. There is an apparent aversion among Greeks to their own educational system. An extreme case in point: the two individuals who dueled over Greece’s future in the heat of the eurozone crisis—George Papandreou, leader of the Panhellenic Socialist Movement (PASOK), and Antonis Samaras, leader of New Democracy—were roommates together at Amherst College. The cause and the effect is a poor education system, which is, correspondingly, held in very low esteem among Greeks. The consequence is that many young Greeks, once educated abroad, stay abroad. They are not invested in their country.


Cultural Backlash: Trump, Brexit, and Authoritarian Populism by Pippa Norris, Ronald Inglehart

affirmative action, Affordable Care Act / Obamacare, bank run, banking crisis, Berlin Wall, Bernie Sanders, Boris Johnson, Cass Sunstein, centre right, cognitive dissonance, conceptual framework, declining real wages, desegregation, Donald Trump, eurozone crisis, Fall of the Berlin Wall, feminist movement, first-past-the-post, illegal immigration, immigration reform, income inequality, job automation, knowledge economy, labor-force participation, land reform, liberal world order, longitudinal study, low skilled workers, mass immigration, meta analysis, meta-analysis, obamacare, open borders, open economy, post-industrial society, post-materialism, precariat, purchasing power parity, rising living standards, Ronald Reagan, sexual politics, Silicon Valley, statistical model, stem cell, War on Poverty, white flight, winner-take-all economy, women in the workforce, working-age population, World Values Survey, zero-sum game

The timing of major economic downturns, such as annual changes in levels of inflation and unemployment during these decades, correlates with upturns or downturns in cultural values across all cohorts. The impact of economic conditions can also vary substantially both across and within countries, as is illustrated by the dramatic contrasts between the impact of economic recession and exposure to the Eurozone debt crisis evident in Northern and Mediterranean European countries.2 Part IV compares 32 Western societies, examining how the financial crash in 2007/2008, and then the Eurozone debt crisis in 2009/2010, strengthened authoritarian and populist values among citizens living in the debtor economies most vulnerable to these shocks, such as Greece and Spain, 134 Economic Grievances while having less impact on creditor countries, such as Germany and the Netherlands. Values may also be shaped by the experience of living in economically depressed regions within a society, regardless of personal levels of prosperity.3 For everyone in a given area, rich or poor, can be affected – at least psychologically – by that area’s socio-­economic conditions.

The cultural and political impact of long-­term trends in economic globalization, opening markets to the flow of goods and labor across national borders, is expected to be deepened and accelerated by the shock of the financial and Eurozone debt crisis. The banking crash first struck in late 2007 and developed into a full-­blown crisis with the collapse of the investment bank Lehman Brothers on September 15, 2008. Many Americans lost their homes to foreclosure and house prices plummeted (in December 2008 the Case–Shiller home price index reported its largest price drop in its history), in scope and scale representing the worst downturn since the Great Recession of the 1930s.46 As a result, the US economy contracted from 2007 to 2009, as Figure 5.2 shows; millions were thrown out of work, countless companies went bankrupt, and consumer confidence nosedived. Like dominoes, the aftershocks spread across the Atlantic, catalyzing the Eurozone debt crisis in late 2009.47 Some members of Europe’s 19-­country euro-­currency union saw a sharp decline in GDP growth, which then recovered relatively fast, as shown by trends in annual GDP growth in Figure 5.2.

Anti-Immigration attitudes are measured in a standardized 100-­point scale by combining whether respondents thoughts that immigration was good or bad for the economy, for the country’s cultural life, and for making the country a better or worse place to live. Source: The European Social Survey, Cumulative File Rounds 1–7. N. 330,315 respondents in 32 European countries. Part II Authoritarian-Populist Values 195 and Cyprus have both the strongest authoritarian values and the greatest hostility to immigrants. Greece has been at the forefront of the Euro-­ zone debt crisis, and at the forefront of the refugee transit zone across the Mediterranean. Several Central and Eastern European countries such as Russia, Slovenia, and Slovakia were also high on both dimensions, although Poland and Bulgaria had more positive attitudes toward immigration. Many other countries were far more open toward immigration and far less authoritarian, including the Scandinavian countries and several Western European states such as Germany.


pages: 475 words: 155,554

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

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

Chapter 8 is the incredible story of Spain’s Gates of Hell, featuring extraordinary house-building, construction corruption and the collapse of the centuries-old caja savings bank system. The ninth chapter reflects on the Bank of England’s record and its experiment in quantitative easing. In Chapter 10 I pick at how Germany got to where it is today, and how that colours its response to the Eurozone crisis. Berlin is the new reluctant and mysterious centre of European power. After that, in Chapter 11, it is natural to turn to Frankfurt, and the home of the powerful European Central Bank, in whose hands the world economy seems disproportionately to rest. Chapter 12 takes us on a global hunt for carbon and the impact on our environment and living standards, from Iraq to Siberia to India and the City.

Greece in and of itself should have been an irrelevance. Greece could have been completely bailed out with minimal impact on the rest of Europe. But Greece was a testing ground. And it had the power to infect market perception of other countries, such as Italy and Spain, which really did matter. Lee Buchheit was present at all these negotiations, advising the Greek government. At first he thought that the pre-PSI 2010 Eurozone approach to Greece reflected a view that the crisis was temporary, that it would eventually ‘evaporate’, and therefore northern Europe’s taxpayers could be put at risk lending money to repay their creditors on time and in full. ‘Initially Greece [and Portugal and Ireland] all got gross bailouts,’ he says. ‘They were given the money to pay their creditors in full and on time. If Greece had been restructured in spring 2010 with a haircut, you might have destabilised some fragile northern European financial institutions, forcing a very embarrassing need to recapitalise them directly.’

Plans were made for flying in money to embassies to distribute to holiday islands, and even for the evacuation of tourists from the Greek islands. German tourists pulled their holiday bookings. In London, the Eurozone Contingency Committee sat at the Treasury, featuring Mervyn King, Adair Turner and cabinet ministers William Hague and Vince Cable, chaired by Chancellor George Osborne. ‘Throughout 2011–12 we were very worried about the Eurozone precipitating a UK financial banking crisis again: we created an emergency committee on Eurozone contingency planning, which for a while was meeting every other week, even every week.’ Strikingly, German politicians and leading members of the ECB popped up in the days after the inconclusive May election to say that a Grexit would be ‘manageable’, as it would ‘do more harm to Greeks than the Eurozone’. But the more Greece’s hard-left parties were attacked from abroad – and by the discredited mainstream parties in Athens – the more popular they became.


pages: 497 words: 150,205

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

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

My agent Jonny Geller and his assistant Kirsten Forster have been very helpful. A big thank you to everyone else at Curtis Brown who has assisted in some way. It has been good working with the dynamic team at Amazon’s createspace who publish books much faster and more flexibly than traditional publishers tend to. I am extremely grateful to George Soros, whose analysis of the political economy of the eurozone crisis has been masterful, for very kindly providing an endorsement for European Spring. Thank you to Heather Grabbe and Kim Forepaugh for their help with that and much else. Over the course of my career, some people have been particularly good to me. I owe Nick Barr, my tutor at the London School of Economics, a huge debt of gratitude. Edward Lucas gave me my first break in journalism, aged seventeen, followed closely by Anthony Robinson at the Financial Times.

At the European Council, I have always been stimulated by Shahin Vallée, who has a fine mind and a good heart. Peter Praet is a force for good at the European Central Bank. I also built good relations with many other policymakers and diplomats; you know who you are. After Dominique Strauss-Kahn resigned and Christine Lagarde replaced him, the International Monetary Fund became more of a voice of reason in the eurozone crisis. Thank you to David Lipton, Min Zhu, Nemat Shafik, Olivier Blanchard, José Viñals, Mahmood Pradhan, Stijn Claessens and many others for our stimulating exchanges. I also worked closely with the World Bank’s Europe and Central Asia team, notably Philippe Le Houérou, Indermit Gill and Dirk Reinermann, together with Kaushik Basu and his predecessor as chief economist, Justin Lin. Dilip Ratha, the Bank’s migration guru, has been particularly supportive.

European Spring is structured as follows. The first half of the book looks at the ongoing repercussions of the banking and debt crisis. Chapter 1 explains the common causes of the crisis in Britain and the eurozone, how they have made similar mistakes and how they face common longer-term challenges. Chapters 2 to 4 detail why the crisis took a particularly virulent turn in the eurozone. Chapter 5 explains why the crisis is not over and what needs to be done to resolve it, while Chapter 6 sets out how to make the euro succeed longer term. Since the chapters are largely self-standing, British readers who are not overly interested in the eurozone can skip Chapters 4 to 6 (or even Chapters 2 to 6) if they like. Chapter 7 looks at how economies outside the eurozone have fared, points out how poorly Britain has done and explains why its long-delayed recovery is dysfunctional.


pages: 700 words: 201,953

The Social Life of Money by Nigel Dodd

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

Besides the recent repeat performance of California (Harvey 2012: 32), there is an even stronger resonance in the Eurozone crisis, where citizens in several nation-states—Greece, Ireland, Italy, Portugal, and Spain—have been caught up in a situation that bears close comparison with what Marazzi described as the condition of forced austerity that earlier confronted the residents of New York. What Marazzi described as a crisis of financial circulation in which the city of New York was reduced to a form of “pension fund socialism,” has in Europe taken the form of a crisis in which pensioners—alongside welfare claimants and public sector workers—have been brutally exposed to a broader struggle between creditors and debtors that incorporates states (within and outside the Eurozone) and private financial institutions. The Eurozone crisis needs to be set in the context of the global banking crisis that immediately preceded it, which, in turn, has its own prehistory of global payment imbalances that fueled the supply of cheap credit in the United States.

The immediate political ramifications of this problem are potentially far-reaching. Take, for example, the relationship between “surplus” and “deficit” nations within the Eurozone. Since the crisis began, this relationship has been framed overwhelmingly in terms of the failure of the latter nations to “live within their means.” Not only have these nations borrowed excessively, but also their continuing membership in the Eurozone presents a danger for surplus nations of cross-subsidy: a “transfer union” in which money flows from strong to weak states, lending moral validity to the deficit nations’ prolonged financial profligacy, their lack of fiscal self-control, and their poor work ethic. “Transfer union” became part of the Eurozone’s lexicon only in the teeth of its crisis.37 Jörg Krämer, chief economist at Commerzbank, claimed that the Eurozone “has moved away from a monetary union and towards a transfer union” (New York Times, May 11, 2010), and Columbia University economics professor Jagdish Bhagwati remarked in an interview that monetary union will turn into a transfer union “if the weak countries have problems.”38 The notion of a transfer union is generally used in such instances to describe redistributive functions that (so critics argue) were never intended for the euro.39 This is the language of restricted economy.

Aglietta has recently extended his theory of money as a pacifier in his analysis of the crisis within the Eurozone. The single currency, he argues, is akin to the gold standard: an external currency, beyond the reach of national governments. The euro is therefore incomplete because it has no overarching sovereign that can act as a guarantor (Aglietta 2012: 23)—or pacifier. Fractionnement has overruled centralization since the Eurozone crisis began, amid violent upheavals that pitch citizen against state, and citizen against citizen, within countries that are deemed to be on the “periphery” of a union of states. The single currency continues to bind its member societies together, but mainly through common problems, such as excessive public and private debt, failing banks, and economic stagnation, that are a driving force behind intensifying geopolitical divisions that make its eventual balkanization seem inevitable.


pages: 597 words: 172,130

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

"Robert Solow", Ayatollah Khomeini, bank run, banking crisis, 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 innovation, Flash crash, George Akerlof, German hyperinflation, Google Earth, hiring and firing, inflation targeting, Isaac Newton, Julian Assange, low cost airline, market bubble, market design, money market fund, moral hazard, mortgage debt, new economy, Northern Rock, Paul Samuelson, price stability, quantitative easing, rent control, reserve currency, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, savings glut, Socratic dialogue, sovereign wealth fund, The Great Moderation, too big to fail, union organizing, WikiLeaks, yield curve, Yom Kippur War

But by 2010, the economic fallout from the 2008 crisis had left the finances of Greece, and soon other European nations, in such precarious straits as to risk an unraveling of the union. Now, Jean-Claude, it is your turn,” Bernanke (right) told Trichet (center) in a private meeting in Frankfurt as the eurozone crisis became more severe. The ECB’s governing council usually met at its headquarters in Frankfurt to set monetary policy for the seventeen-nation eurozone, but in May 2010, as the debt crisis that began in Greece was rapidly spreading to Ireland, Portugal, and Spain, they met instead in Lisbon, shown here. At a dinner later that night, they broached for the first time the possibility of using ECB resources to buy bonds of countries that were under attack from markets. Axel Weber (left), the president of the powerful German Bundesbank, was initially open to bond purchases in that late-night meeting, but by the next day he had changed his mind.

September 9—Jürgen Stark, a German member of the ECB executive board, resigns, joining Weber as the second German to leave in protest of bond buying by the central bank. September 21—Responding to another wave of weakness in the U.S. economy, the Fed announces its Maturity Extension Program, known as Operation Twist, aimed at replacing $400 billion in shorter-term bonds the Fed owned with a comparable amount of longer-term bonds, achieving some of the effects of new QE with less political blowback. October 6—Concerned about the ripple effects of the eurozone crisis on the British economy, the Bank of England policy committee unanimously agrees to an additional £75 billion of quantitative easing. October 19—At a farewell celebration for Trichet at the Frankfurt opera house, key players including Trichet, Draghi, Merkel, Sarkozy, and IMF chief Christine Lagarde meet to plot a path forward, amid worries that neither Papandreou nor Italian prime minister Silvio Berlusconi have the credibility to continue leading their nations.

King and most of his colleagues on the MPC viewed this as a one-time price jump, not the kind of ongoing inflation that might warrant raising interest rates. “In the medium term we expect inflation to come down below the target, given the extent of spare capacity in the economy,” King said in a May 12 press conference, while acknowledging “enormous uncertainties around this.” On top of the inflation scare, the eurozone crisis was sending British financial markets on a wild ride. About half of British trade was with nations in the eurozone, meaning their economic downfall could be catastrophic for UK companies. With the coalition not yet formed, Alistair Darling was in Brussels representing Britain that crucial Sunday of May 9 as European finance ministers raced to finalize a eurozone bailout before markets opened in Australia and Asia Monday morning.


pages: 515 words: 142,354

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

bank run, banking crisis, barriers to entry, battle of ideas, Berlin Wall, Bretton Woods, business cycle, buy and hold, capital controls, 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, 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, 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, Robert Shiller, Ronald Reagan, 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

Some, like Ireland, should commend themselves on doing better than others, such as Portugal and Greece. But, each, in their own way, except when graded against their other failing peers, are an abject failure. While GDP is the standard measure of economic performance,2 there are other indicators, and in virtually every one, the eurozone’s overall performance is dismal, and that of the crisis countries, disastrous: unemployment is very high; youth unemployment is very, very high; and output per capita is lower than before the crisis for the eurozone as a whole, much lower for some of the crisis countries. If the decline in GDP per capita or work in the crisis countries were equally shared across the population, that would be one thing. But it is not. Certain individuals can’t find a job as the unemployment rate soars, while others hold on to theirs. Not surprisingly, especially in the crisis countries, inequality has also increased.

The fact that the eurozone is doing so much more poorly than countries elsewhere, including countries seemingly similar, suggests that there is common cause for the eurozone’s travails: the euro. Much of the rest of the book attempts to link the eurozone’s poor performance to the euro and the structure of the eurozone itself. The concluding section of this chapter explains succinctly why the eurozone’s poor performance has to be blamed on the euro. THE EUROZONE AND THE CRISIS We begin our analysis by describing the economic conditions in the eurozone today, and what has happened since the onset of the crisis.3 We observed in chapter 1 the widely shared fear that the real test of the euro would occur when the eurozone faced a shock—with the shock affecting different countries differently. The rigidities of the euro and the eurozone’s rules, it was thought, would not enable the region to respond. Those fears proved warranted.

The euro has led to an increase in inequality. A main argument of this book is that the euro has deepened the divide—has resulted in the weaker countries becoming weaker and the stronger countries becoming stronger: for instance, German GDP going from 10.4 times that of Greece in 2007 to 15.0 times that of Greece in 2015. But the divide has also led to an increase in inequality within the countries of the eurozone, especially in those in crisis. And this is so even in those European countries that were making progress in reducing inequality before the start of the euro. This should not come as a surprise: high unemployment hurts those at the bottom, high unemployment puts downward pressure on wages, and the government cutbacks associated with austerity have particularly negative effects on middle- and lower-income individuals that depend on government programs.


pages: 554 words: 158,687

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

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

In practice peripheral countries were borrowing in a currency that would in the end behave as foreign money to them, even if it was legally domestic. Peripheral states were soon to realize their error, which was only matched by the error of core banks in assuming that lending to the periphery was equivalent to lending to core states of the eurozone. A fiscal, banking, and monetary crisis in Europe The global recession that followed the bankruptcy of Lehman Brothers in 2008 led to falling tax revenues for eurozone states and therefore to increased budget deficits, as is shown in figure 13. Fiscal imbalances in the periphery of the eurozone were the result and not the cause of the crisis, even in Greece. Escalating budget deficits as the recession unfolded led to rapid growth of sovereign debt in the periphery, shown in figure 14. FIG. 13 Eurozone government primary balances as percentage of GDP As peripheral sovereign debt began to escalate, bond markets came to realize that the debt of peripheral states was not of the same quality as the debt of core states.

Moreover, the crisis that broke out in 2007 represents a systemic failure of private banking in terms of liquidity, solvency, information gathering and risk management. Potentially the most serious twist in the crisis, however, has been the threat to the European Monetary Union once public finance had come under pressure. Financialization in Europe has entailed the introduction of the euro as a competitor to the dollar for the role of world money. The result has been the emergence of a division between core and periphery in the eurozone – the latter bearing the brunt of the crisis. If default and exit from the eurozone occurred for peripheral states, the monetary union would receive a body blow with severe implications for financialization across the world. Finally, Chapter 10 considers the regulation of finance and the role of state intervention in the course of financialization. Finance was systemically regulated in the 1950s, 1960s and much of the 1970s in terms of prices, quantities and functions of the financial institutions, but these regulations were lifted in the years that followed.

The ability of the US and the UK central banks to confront the worst of the crisis of 2007 has relied on the enormous expansion of bank reserves, as was briefly shown in Chapter 4 and will be discussed in more detail in chapters 8 and 9. Re-strengthened intervention, however, has compromised the so-called independence of central banks, since it has often been undertaken under direct pressure from elected governments, as is shown in connection with the eurozone crisis in Chapter 9. There is little doubt that central banks have been pivotal to state intervention under conditions of financialized capitalism. Last but not least, the importance of central banks in shaping the context of financialized accumulation has also been demonstrated with regard to the evolving form of money. When the rise of e-money proper but also of access e-money assumed significant proportions in the late 1990s, a question emerged among mainstream economists whether the position of the central bank would be threatened.


pages: 93 words: 30,572

How to Stop Brexit (And Make Britain Great Again) by Nick Clegg

Berlin Wall, Boris Johnson, collapse of Lehman Brothers, Dominic Cummings, Donald Trump, eurozone crisis, Fall of the Berlin Wall, Francis Fukuyama: the end of history, offshore financial centre, sceptred isle, Snapchat

Not that it changed anything – Britain was simply sidestepped, and the rest of the EU went ahead anyway with their own ‘intergovernmental’ deal – a treaty outside the formal structures of the EU. After that painful experience, France and Germany were adamant that there would be no new treaties, and that the eurozone crisis would be addressed using the treaty powers already available. The threat of the UK hijacking a formal process and turning it into a stage for the Conservative Party’s internal battles was too much. Yet without a new treaty, the EU has had to muddle through with piecemeal change that falls short of the fundamental reform that circumstances demand. The single-currency area is healing, but the eurozone crisis revealed deep economic tensions that must be resolved if the EU is to avoid similar problems in future. The eurozone will need to integrate much more closely, accepting a larger degree of centralised control to ensure greater fiscal discipline, leading in the longer term to a smoothing out of the major disparities in Gross Domestic Product (GDP) per capita and productivity.

Indeed, it has been reported that in a private conversation in the Prime Minister’s flat shortly before the referendum, the pro-Brexit editor of the Daily Mail, Paul Dacre, pointed to a TV screen and told David Cameron that the pictures of refugees on the daily news would be the reason voters would support Brexit.11 Second, until very recently the health of Europe’s economy has also been a cause for considerable public concern. In normal times, we might have expected people to acknowledge that even if the EU was failing to work properly in some areas, at least it provided self-evident benefits in terms of jobs, trade and prosperity. Yet since the economic crash of 2008, the EU’s eurozone has stumbled from one economic crisis to the next, centred especially on the chronic weakness of the Greek economy and the cruel explosion in joblessness across southern Europe. The overwhelming impression has been of a system teetering on the edge. Amongst Anglo-American commentators and analysts – who provide the bulk of the analysis in global financial markets – it became fashionable to predict the collapse of the euro, and the possible demise of the EU as a whole.

The thing we all realised at the time was that the EU countries that shared the single currency were obliged to move ahead at pace to overcome the economic crisis, leaving the non-eurozone members of the EU, and in particular Britain, behind. While this may all sound pretty uncontroversial and obvious – how else was the eurozone going to survive? – in truth it represented a final departure from the ideology of an ‘ever-closer union’, which had loosely governed the EC and then the EU ever since the 1950s; a belief that in the end all the member states were destined for the same distant horizon. The eurozone crisis led to a clear and overt recognition that the nations of Europe were not all embarked on the same journey, and that some of them circled each other in distinctly different orbits. Yet there was an immediate problem. The eurozone countries now formed their own natural club-within-a-club, and because of the voting rules in the European Council, this eurozone club would have an automatic majority in all the key votes.


pages: 354 words: 92,470

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

9 dash line, Admiral Zheng, air freight, 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, 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, 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, hydraulic fracturing, Hyman Minsky, imperial preference, income inequality, income per capita, incomplete markets, inflation targeting, information asymmetry, Internet of things, invisible hand, joint-stock company, Kickstarter, Long Term Capital Management, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, moral hazard, Nixon shock, offshore financial centre, oil shock, old age dependency ratio, paradox of thrift, Peace of Westphalia, plutocrats, Plutocrats, price stability, profit maximization, quantitative easing, race to the bottom, rent-seeking, reserve currency, reshoring, rising living standards, Ronald Reagan, 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

In this – imaginary – world there would be free movement of goods, services, capital and people, precisely the ‘Four Freedoms’ enshrined within the European Union. There would also be a single currency and a single central bank: with perfectly functioning markets, there would be no need for currency adjustment. Already, however, we know that the European Union is struggling politically with two of its ‘Four Freedoms’, namely the free movement of capital and of people. The Eurozone crisis, in abeyance at the time of writing, but still unresolved, partly stems from Europe’s inability to cope with the consequences of the free flow of capital across its internal borders. The Syrian conflict, meanwhile, has revealed severe challenges regarding the free movement of people, particularly given the weak points in the Schengen area’s common external border. Yet, relative to historical patterns of migration, the number of Syrian migrants entering the European Union has been tiny.

The Western model of free markets and democracy had been either poorly applied, badly misunderstood or found wanting. Whatever the answer, Latin America hadn’t delivered the goods. DEMOCRACY, IMPERIAL BUREAUCRACY AND RIGHT-WING POPULISM: THE EUROPEAN QUESTIONS In Europe, economic failure has placed extraordinary pressure on liberal democratic values, which, all too frequently, appear to have been undermined to ensure the euro’s future. With the onset of the Eurozone’s financial crisis in 2010, European policymakers had to make up the Eurozone’s rules on an almost daily basis in an attempt to prevent the collapse of the financial system and, perhaps, the euro’s ultimate fragmentation. Largely to protect German and French banks (and, by implication, the entire credit system) it was deemed essential that Southern European governments should not be allowed to default to their Northern European creditors: instead, Southern European citizens would have to accept painful austerity, in some cases on a multi-year basis.

For good measure, he added that ‘Realism maintains that universal moral principles cannot be applied to the actions of states.’19 This creates a seemingly paradoxical situation: a state has to look after the collective interests of its citizens, even if that means that those citizens, individually, might feel a grave injustice had been committed on their behalf.20 Yet the interests of the international statesman may not always align with the ‘national interest’, particularly if the statesman is now also a member of some international organization that provides him with a whole bunch of new incentives.21 At that point, the statesman’s role is in danger of becoming disturbingly ambiguous. Does the new international club provide a convenient scapegoat for the delivery of unpopular measures at home, as happened with the imposition of austerity measures in Southern European countries during the Eurozone crisis that began in 2010? Does the homogeneity of view associated with club membership – for example, adherence to the Washington Consensus or acceptance of inflation-targeting conventions – undermine otherwise legitimate protests at home? Does the new club limit the powers of domestic government through the growth of, for example, a supranational legal authority? And what happens if the views of the international statesman – and the new club he has now joined – are rejected by the nation he is supposed to represent?


pages: 269 words: 83,307

Young Money: Inside the Hidden World of Wall Street's Post-Crash Recruits by Kevin Roose

activist fund / activist shareholder / activist investor, Basel III, cognitive dissonance, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, discounted cash flows, Donald Trump, East Village, eurozone crisis, fixed income, forward guidance, glass ceiling, Goldman Sachs: Vampire Squid, hedonic treadmill, jitney, knowledge worker, new economy, Occupy movement, plutocrats, Plutocrats, Robert Shiller, Robert Shiller, selection bias, shareholder value, side project, Silicon Valley, Skype, Steve Jobs, The Predators' Ball, too big to fail, urban planning, We are the 99%, young professional

I can’t say for certain, but in my experience, the drug intake for many first- and second-year analysts is limited to heavy drinking, performance-enhancers at work (Adderall, Modafinil, and over-the-counter caffeine pills), and an occasional pot-smoking session on the weekends or at night after work. The financial sector’s cocaine use, which was notorious before the financial crisis, seems to be much less prevalent now, or at least is confined to older bankers and traders, who have more free time to go wild anyway. Chapter Seventeen “A European debt crisis had been raging”: For more on the Euro zone crisis, see “Timeline: The Unfolding Eurozone Crisis,” BBC News, June 13, 2012. “Banks were still taking on huge, leveraged positions in opaque and little-regulated markets”: Dominic Elliott, “Basel Leverage Rules to Put Pressure on Wall Street,” Reuters Breakingviews, June 26, 2013. “The junk bond market…was having its strongest year since the crisis”: Matt Wirz and Shira Ovide, “Welcome to the Biggest Junk Bond Sale Since the Financial Crisis,” Wall Street Journal (Deal Journal), July 26, 2011.


pages: 576 words: 105,655

Austerity: The History of a Dangerous Idea by Mark Blyth

"Robert Solow", accounting loophole / creative accounting, balance sheet recession, bank run, banking crisis, Black Swan, Bretton Woods, business cycle, buy and hold, capital controls, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, deindustrialization, disintermediation, diversification, en.wikipedia.org, ending welfare as we know it, Eugene Fama: efficient market hypothesis, eurozone crisis, financial repression, fixed income, floating exchange rates, Fractional reserve banking, full employment, German hyperinflation, Gini coefficient, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, interest rate swap, invisible hand, Irish property bubble, Joseph Schumpeter, Kenneth Rogoff, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, Long Term Capital Management, market bubble, market clearing, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, Occupy movement, offshore financial centre, paradox of thrift, Philip Mirowski, price stability, quantitative easing, rent-seeking, reserve currency, road to serfdom, savings glut, short selling, structural adjustment programs, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, unorthodox policies, value at risk, Washington Consensus, zero-sum game

Portuguese net debt to GDP increased from 62 percent in 2006 to 108 percent in 2012, while the interest that pays for Portugal’s ten-year bonds went from 4.5 percent in May 2009 to 14.7 percent in January 2012. Ireland’s net debt-to-GDP ratio of 24.8 percent in 2007 rose to 106.4 percent in 2012, while its ten-year bonds went from 4 percent in 2007 to a peak of 14 percent in 2011. The poster child of the Eurozone crisis and austerity policy, Greece saw its debt to GDP rise from 106 percent in 2007 to 170 percent in 2012 despite successive rounds of austerity cuts and bondholders taking a 75 percent loss on their holdings in 2011. Greece’s ten-year bond currently pays 13 percent, down from a high of 18.5 percent in November 2012.5 Austerity clearly is not working if “not working” means reducing the debt and promoting growth.

But it is also a dangerous idea because the way austerity is being represented by both politicians and the media—as the payback for something called the “sovereign debt crisis,” supposedly brought on by states that apparently “spent too much”—is a quite fundamental misrepresentation of the facts. These problems, including the crisis in the bond markets, started with the banks and will end with the banks. The current mess is not a sovereign debt crisis generated by excessive spending for anyone except the Greeks. For everyone else, the problem is the banks that sovereigns have to take responsibility for, especially in the Eurozone. That we call it a “sovereign debt crisis” suggests a very interesting politics of “bait and switch” at play. Before 2008 no one, save for a few fringe conservatives in the United States and elsewhere, were concerned with “excessive” national debts or deficits. Deficit hawks in the United States, for example, pretty much disappeared in embarrassment as, under the banner of fiscal conservativism, the Bush administration pushed both debts and deficits to new heights while inflation remained steady.8 Even in places where fiscal prudence was the mantra, in the United Kingdom under Gordon Brown, or in Spain and Ireland when they were held up as economic models for their dynamic economies—really—deficits and debt did not garner much attention.

Rather, we piece together how the debt increase was generated by the implosion of the US financial sector and how this impacted sovereigns from the United States to the Eurozone and beyond. To explain this I stress how the interaction of the repo (sale and repurchase) markets, complex instruments, tail risks, and faulty thinking combined to give us the problem of too big to fail. It takes us from the origins of the crisis in the run on the US repo market in September 2008 to the transmission of this US-based crisis to the Eurozone, noting along the way how a banking crisis was deftly, and most politically, turned into a public-sector crisis and how much it all cost.34 Chapter 3, “Europe: Too Big to Bail: The Politics of Permanent Austerity,” analyzes how the private debt generated by the US banking sector was rechristened as the “sovereign debt crisis” of profligate European states. If chapter 2 places the origins of the debt in the United States, chapter 3 describes the bait and switch in Europe.


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

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

., 179 Erie Canal, 90 Eshag, Eprime, 71 European Central Bank, 139, 188, 198, 217, 242–3, 253, 254, 361 institutional constraints on, 50, 234, 242, 249, 274–5 misreading of Eurozone crisis, 275 quantitative easing (QE) by, 273–4 on ‘stress testing’, 364 taxing of ‘excess’ reserves, 266 use of LTROs, 257 European Commission, 139, 3612, 365 European Exchange Rate Mechanism, 188 European Investment Bank, 354 European Union (EU, formerly EEC), 153, 318, 379, 383 Financial Stability Board (FSB), 363 ‘Four Freedoms’, 375 lack of state, 376 Single Resolution Board, 365 Eurozone current account imbalances, 333, 334, 335, 336–7, 341–2 Juncker investment programme, 274 proposed European Monetary Fund, 376, 382 structural flaw in, 341, 375–7 two original sins of, 274, 376–5 Eurozone debt crisis (2010–12), 50, 223, 377, 382 and double-dip recession, 241, 242–3, 274 ECB’s misreading of, 275 and financial crowding-out theory, 234 and Greece, 32, 224, 224–5, 226, 233, 235, 242–3, 243, 365 and ‘troika’, 32, 139, 243 469 i n de x exchange-rate policy, 127–8, 139 and Congdon’s ‘real balance effect’, 285 and domestic interest rates, 251 fixed rates under Bretton Woods, 16, 159, 161, 162, 168 floating rates from 1970s, 16–17, 184 and Friedman, 182 IMF ‘scarce currency’ clause, 380–81 Nixon’s dollar devaluation (1971), 153, 154, 165 and quantitative easing, 267, 267 sterling crisis (1951), 145 sterling devaluation (November 1967), 152 sterling-dollar peg (from 1949), 148, 150, 152 sterling/franc/deutschmark devaluations (1949), 152 ‘Triffin paradox’, 161, 165 ‘expansionary fiscal consolidation’, 192, 225, 231 Fabian socialism, 96 Fama, Eugene, 208, 311–12, 313 Fanny Mae, 217, 256, 309, 320 fascism, 13, 98, 131, 175 Federal Reserve, US and 2008 crash, 50, 217, 254, 256 AIG bail-out (2008), 325 Federal Open Market Committee (FOMC), 185–6 and Great Depression, 104–6 inflation targeting, 188 and monetarism, 185–6, 188 monetary policy in 1950s, 146 ‘Operation Twist’, 268 quantitative easing (QE) by, 256–7, 273–4 ‘Reserve Position Doctrine’ (1920s), 103–4 and under-consumption theory, 298 Ferguson, Niall, 73, 79, 80, 91 financial collapse (2007–8) acute phase, 218–20, 223 ‘Austrian’ explanation, 104, 303 banks as proximate cause, 343, 361, 365 Bear Stearns rescue, 217 British analogies with Greece, 235 British debate after, 225–8 causes of, 3–4, 343–4, 365, 366, 368 central bank responses, 3, 217, 219, 234–5, 253–4, 254, 256–8, 359 comparative recovery patterns, 241–4, 242, 273, 273–4 compared to 1929 crash, 218 Conservative narrative, 226–8, 229–31, 233, 234–5, 237–9 and crisis of conservative economics, 17 and embedded leverage, 318, 322, 325 five distinct stages of crisis, 216–19 ‘global imbalances’ explanation, 11, 331, 333, 336–43, 337 government responses, 3, 217–18, 219–20, 221–36, 237–47 Hayekian view of cause, 303 hysteresis after, 239–41, 240, 241, 370 inequality as deeper cause of, 299–306, 368 Lehman Brothers bankruptcy, 3, 50, 217, 365 leverage (debt to equity) ratios on eve of, 317–18 liquidity-solvency confusion, 317 outbreaks of populism following, 13, 371–3, 376, 383 post-crash deficit, 226–33, 229, 237–8 private debt as proximate cause, 3–4 470 i n de x stagnation of real earnings as deep cause, 4, 303, 367 standard account of origins of, 3–4 as test of two theories, 2–3, 76 theoretical and policy responses, 10, 129, 219–20, 223–36, 237–47 see also austerity policy and under-consumption theory, 303–6 US sub-prime mortgage market, 3, 216, 304–5, 309, 323, 328, 341 see also Great Recession (2008–9) Financial Services Authority, U K, 321–2, 330 financial system and causes of 2008 collapse, 3, 4–5, 253, 307–9, 361 and crisis of conservative economics, 17 deregulation, 307–9, 310–16, 318–22, 328, 332–3, 384 East Asian financial crisis (1997–8), 202, 339, 371, 382 ‘Efficient Market Hypothesis’ (EMH), 311–13, 321–2, 328, 388 ‘financialization’ of the economy, 5, 305, 307–9, 366–7 fraud and criminality, 3, 4, 5, 7, 328, 350, 365–6, 367 and free-market orthodoxy, 5, 308–16 loosening of moral restraints, 319 mark-to-market (M2M) framework, 314 offshore euro-dollar market, 308, 332 privatised gain and socialised loss, 319–20 released from national regulation (1980s/90s), 131, 318–22 structural power of finance, 6–7, 14, 309 systemic under-estimation of risk, 314–16, 316*, 320–22, 323, 329–30 Thatcher’s Big Bang (1980s), 319 tradable public debt instruments, 43, 80–81 Turner’s ‘financial intensity’ concept, 366 unrealism of assumptions, 310–16 value at risk (VaR) framework, 314–15, 315, 330 ‘Washington consensus’ deregulation, 198, 200 see also banks FinTech, 356 First World War, 86, 95, 106–7, 374, 375 ‘fiscal consolidation’, 10–11, 129, 225 Darling’s plan (2009), 225–6 ‘expansionary’, 192, 225, 231 and Osborne, 227–8, 229–30, 231, 233, 237–9, 243–4, 244, 245 fiscal policy and 2008 collapse, 10, 217–18, 219–20, 223–36, 265–6, 273–4, 286 ‘Barber boom’, 167, 168 during Blair-Brown years, 221–4, 223, 225–6, 227 British experience (1692–2012), 77 Congdon’s total rejection of, 280, 285–6 ‘crowding out’ argument, 83–4, 109–11, 226, 233–5 current and capital spending, 107–8, 114, 142, 155–6, 193, 221–3, 237–8, 355–7 directing flow of new spending, 286–7 fiscal multiplier, 110–11, 125–6, 133–6, 138, 230–31, 233, 235, 244–5 471 i n de x fiscal policy – (cont.) in inter-war Britain, 106–17 and Keynesian economics, 2–3, 109, 111, 114–17, 125–7, 129–31, 133–4, 137–8, 173, 278 Keynesian full employment phase (1945–60), 141–8 Krugman’s ‘confidence fairy’, 117 Lawson counterrevolution, 185, 192–3, 222, 358 legacy of monetarism, 190–93 May Committee (1931), 112 national income accounts, 138 New Classical view of, 200 in new macroeconomic constitution, 351–2, 355–7, 360–61 nineteenth-century theory of, 9, 29 post-Keynesian disablement of, 193, 221, 258, 304, 328 pre-crash orthodoxy, 221–2, 223–4, 230–31 Public Sector Borrowing Requirement (PSBR), 155–6 see also balanced budget theory; public investment; taxation Fisher, Irving, 9, 52, 61, 99, 280 ‘compensated dollar’ scheme, 66 equation of exchange, 62–4, 71–2, 258, 278–9, 283, 284, 287 QTM formulation, 62–7, 71–2 and quantitative easing, 258, 278–9 Santa Claus money, 62–4, 258, 278–9 Fitch (CR A), 329 France assignats in 1790s, 64–5 and gold standard, 50, 102, 104, 127 ‘indicative planning’ system, 150 ‘physiocrats’in, 81 protectionism in late nineteenthcentury, 59 state holding companies, 356 statism in, 140, 144 university campus revolts (1968), 164 Freddie Mac, 217, 256, 309, 320 free trade, xviii, 9, 58–9, 76, 79, 81–2 abandoned in Britain (1932), 113 general presumption in favour of, 377 and Hume’s ‘price-specie-flow’ mechanism, 37–8, 53, 54, 104, 332 and Irish potato famine, 15 List’s ‘infant industry’ argument, 88–9, 90, 378–7 and nationalist–globalist split, 371–3 and post-war liberalization, 16, 374 and presumption of peace, 379 repeal of Corn Laws (1846), 15, 85 Ricardo’s doctrine of comparative advantage, 88, 378, 379, 379 US conversion to (1940s), 90 Freiburg School, 140 Friedman, Milton adaptive expectations theory, 180–81, 183, 194, 206–11 and Cartesian distinction, 22 as Fisher’s heir, 278 The Great Contraction (with Schwartz; 1865), 105 idea of ‘helicopter money’, 63 and monetary base, 185, 280 and Mont Pelerin Society, 176–7 and ‘natural’ rate of unemployment, 163, 177, 181, 195, 206, 208 onslaught on Keynesianism, 170, 174, 177–83, 261 ‘permanent income hypothesis’ (1957), 178, 183 and Phillips Curve, 38, 180–81, 194, 206–8, 207 472 i n de x policy implications of work of, 182–3 political motives of, 177, 183–4 and quantity theory, 61, 70, 177–9, 182, 183, 194 ‘stable demand function for money’, 179 view of Great Depression, 104–6, 179, 183, 256, 276, 278 weaknesses in arguments of, 183 Frydman, Roman, 389 Fullarton, John, 49 Funding for Lending programme, 265–6 G20 Financial Stability Board, 363 summits (2009/10), 219–20, 223, 225 G7 finance ministers meeting (February 2010), 224–5 Galbraith, James, 303, 361 game theorists, 389 Gasperin, Simone, 357* Geddes, Sir Eric, 108 German Historical School, 88–9 Germany and 2008 crash, 217, 218, 243 current account surplus, 333, 334, 341, 342, 380, 381 employer–union bargains, 147, 167 and Eurozone crisis, 341, 365, 376, 377 and Great Depression, 97, 111, 129–30 growth Keynesianism (1960–70), 153–4 high growth rates in 1950/60s, 149, 156 Hitler’s reduction in unemployment, 111, 112, 129–30 hyperinflation of early 1920s, 275 as Keynesian in 1960s, 140 nineteenth-century expansion and unification, 89, 91 ‘ordo-liberalism’ in, 140 post-war modernization/catch-up, 156–7 protectionism in late nineteenthcentury, 59 return to gold standard (1924), 102 ‘Rhenish capitalism’ model, 154 Giffen, Robert, 51 Giles, Chris, 219, 302 Gini coefficient, 299, 300 Gladstone, William, 42–3, 86 Glass–Steagall Act (1933), 319, 361, 362 global imbalances basic theory of, 335–6 and capital account liberalization, 318–19 capital flight, 59, 334, 337, 341, 343 Eurozone see Eurozone: current account imbalances as explanation for 2007–8 crash, 11, 331, 333, 336–43, 337 and financial deregulation, 318–19, 332–3 and First World War, 95 increases in pre-crash years, 333, 333–4, 334, 335 problematic nature of, 333–4 reserve accumulation, 336, 337–41 ‘saving glut’ vs ‘money’ glut, 338–41, 342 structural causes still in place, 344 US dollar as main reserve currency, 338 global warming, 383 globalization, 17, 300, 334–5 absence of the state, 350, 373, 375–6 anti-globalist movements, 371–2, 373 first age of, 51, 55, 57, 59, 374, 375 473 i n de x globalization – (cont.) future of, 382–4 Geneva and Seattle protests (1998/99), 371 and inflation rate, 252–3 and lower wages in developed world, 252–3, 300, 379 nationalist-globalist split, 371–3 ‘neo-liberal’ agenda of IMF, 139, 181, 318–19 popular protest against, 351, 371–2 resurgence of after Cold War, 374 Rodrik’s ‘impossible trinity’, 375 gold, 23, 24, 25, 28, 35, 37 new gold production, 51, 52, 55, 62 gold standard, xviii, 1, 9, 27, 29, 338 and Britain, 9, 42, 43, 44, 45–50, 53, 57–9, 80, 101, 102, 113 collapse of US exchange standard (1971), 160, 165 commitment to convertibility, 55–6 and Cunliffe model, 54–5, 102 depressions in later nineteenthcentury, 51–2 dysfunctional after First World War, 95, 97 final suspension in Britain (1931), 113, 125 Fisher’s ‘compensated dollar’ scheme, 66 Hume’s ‘price-specie-flow’ mechanism, 37–8, 53, 54, 104, 285, 332 and international bond markets, 92 as international by 1880s, 50–52 Keynes on, 58, 101, 127 Kindleberger thesis, 58–9 move to ‘managed’ system, 71, 99–100 replaces silver standard (1690s), 42, 43 restored (1821), 48 return to in 1920s, 102, 104, 107 suspension during Napoleonic wars, 43, 45–7 suspension of convertibility (1919), 101–2 triumph of by mid-nineteenthcentury, 44, 50 working and design of, 52–9 as working in tandem with empire, 57, 58 Goldberg, Michael D., 389 Goldman Sachs, 315 Goodhart, Charles, 168, 187 Graeber, David, 28 Great Depression (1929–32), 9, 13, 96, 97–8, 110–13, 127 compared to 2008 crash, 218 Friedman-Schwartz view, 104–6, 179, 183, 256, 276, 278 impact on US policy-makers in 2008 period, 256, 275, 278 left-wing explanations of, 298 rise in inequality in lead-up to, 289 and second wave of collectivism, 15–16 Great Moderation (early 1990s–2007), 4, 53, 202, 278 economic problems during, 348 financial deregulation during, 318–22, 328 financial innovation during, 322–8 and independent central banks, 215 inflation during, 106, 215, 216, 252–3, 253, 348, 359, 360 international financial network, 309, 318–28 output growth during, 215, 253, 348 Great Recession (2008–9), xviii Congdon’s view of, 281–2, 287 co-ordinated global response, 219–20, 383 decline in productivity after, 305–6 474 i n de x initial signs of recovery (2009), 218–19, 225, 226 monetary interpretation of, 105, 106 ‘premature withdrawal’ of fiscal stimulus, 219–20, 223–36, 245, 352 reform agenda after, 361–8 rise in inequality in lead-up to, 289–90, 299–300 see also financial collapse (2007–8) Greece and Eurozone debt crisis, 32, 224, 224–5, 226, 233, 235, 242–3, 243, 337, 341, 365 in gold standard era, 59 Greenspan, Alan, 188, 313 Hamilton, Alexander, 88, 90, 92 Hammond, Philip, 236, 352 Hannover Re scandal, 329 Harrison, George, 105 Harrod, Roy, 123 Harvey, John, 333, 387 Hawtrey, Ralph, 109–10, 280 Hayek, Friedrich, 33, 46, 177, 195, 350, 367 founds Mont Pelerin Society, 176 ‘over-consumption’ theory, 296 The Road to Serfdom (1944), 16, 175–6 on Wall Street Crash, 104 Heath, Edward, 167–8 Heckscher, Eli, 37 Help to Buy programme, 265, 266 Henderson, Hubert, 109 Henderson, W.

The state became a huge net borrower for the first time since the Napoleonic wars, and the new voters came from the debtor, not creditor, class. Following the Second World War the debasement of money – inflation – was more or less continuous. But in the 1980s there came a reversal. Inflation was reined in, as the creditor class regained something of its old ascendancy. As unemployment rose and wages stagnated, loan sharks offering ‘pay day loans’ at usurious interest rates proliferated. In the Eurozone debt crisis of 2010–12, a ‘troika’ of creditors, in a return to nineteenth-century methods, demanded of Greece islands, gas extraction rights and museums – their ‘pound of flesh’ – as surety for loans they knew would never be repaid. The truth is that any monetary policy will always produce winners and losers, depending on the terms of access to credit. The modern answer – placing monetary policy in the hands of an ‘independent’ central bank – does not make money ‘neutral’, because monetary policy is bound to have distributional effects.

Rescuing the banks involved governments raising hundreds of billions in the bond markets, causing deficits to balloon: the rescue of the Royal Bank of Scotland alone cost £46 billion. Rescue operations included the co-ordinated $1 trillion stimulus measures agreed by the G20 in London in April 2009, with the British Prime Minister Gordon Brown taking the lead. 5 The acute phase of the world crisis was over by the third quarter of 2009; however, a secondary Eurozone crisis was superimposed on the original one in 2010–11. Given the pre-crash orthodoxy, and a widespread misunderstanding of the public financing problem, it is not surprising that the fiscal brakes were slammed on. The fact that ‘Keynesian measures’ had averted a politically life-threatening collapse of the world economy was considered much less important than 223 M ac roe c onom ic s i n t h e C r a s h a n d A f t e r , 2 0 0 7 – Figure 28.


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The Road to Somewhere: The Populist Revolt and the Future of Politics by David Goodhart

Affordable Care Act / Obamacare, agricultural Revolution, assortative mating, Big bang: deregulation of the City of London, borderless world, Boris Johnson, Branko Milanovic, Bretton Woods, British Empire, call centre, capital controls, carbon footprint, central bank independence, centre right, coherent worldview, corporate governance, credit crunch, deglobalization, deindustrialization, Donald Trump, Downton Abbey, Edward Glaeser, en.wikipedia.org, Etonian, European colonialism, eurozone crisis, falling living standards, first-past-the-post, gender pay gap, gig economy, glass ceiling, global supply chain, global village, illegal immigration, income inequality, informal economy, job satisfaction, knowledge economy, labour market flexibility, low skilled workers, market friction, mass immigration, mittelstand, Neil Kinnock, New Urbanism, non-tariff barriers, North Sea oil, obamacare, old-boy network, open borders, Peter Singer: altruism, post-industrial society, post-materialism, postnationalism / post nation state, race to the bottom, Richard Florida, Ronald Reagan, selection bias, shareholder value, Skype, Sloane Ranger, stem cell, Thomas L Friedman, transaction costs, trickle-down economics, ultimatum game, upwardly mobile, wages for housework, white flight, women in the workforce, working poor, working-age population, World Values Survey

He also thinks there was at times a triumphant atmosphere in Brussels at the end of the Cold War, a feeling that Europe could step up as an equal of the US. The strict rules that required countries to have budget deficits of no more than 3 per cent of GDP and debt to GDP ratios of no more than 60 per cent were allowed to slip soon after the Euro’s launch and then blown apart when the sovereign debt crisis struck in 2009. Unlike the 2007/8 credit crunch, the Eurozone crisis was one of the most widely predicted economic disasters of modern times. The apparently reduced risk of lending in hard Euros to weaker economies and governments like Greece and Spain created unsustainable government deficits in the case of Greece and an unsustainable property bubble in Spain (and Ireland). The no bail out rule was quickly abandoned after the economic crisis made several states insolvent, and the Eurozone economy has been living in a twilight zone ever since.

(The only politician of note who has consistently argued along these lines is David Owen.)20 Such a role would have suited Britain’s history and political temperament and might also have saved the EU from forcing countries into economic or cultural straitjackets that might suit Germany or France but do not suit Greece or Hungary. A two, or even three, tier EU could have sidestepped the clash between its inter-governmental soul and its supranational one, and thus avoided the nervous breakdown of the Eurozone crisis—the product of a compromise between these two incompatible approaches to integration. There was some movement in this direction with ‘opt-outs’ for Britain and others over the single currency, Schengen and so on. And it is possible that some multi-tier approach might yet emerge from the Brexit negotiation. The Scandinavian countries share some of Britain’s reservations about further integration, as do the Visegrad Four countries in the east with their conservative-populist politics.

The Coalition achieved short-term success, with Theresa May as Home Secretary reducing net non-EU immigration from 217,000 in December 2010 to 143,000 in December 2013 thanks to clamping down on abuse of student visas, raising the income threshold for people wanting to bring in spouses and effectively banning low-skilled immigration from outside the EU.21 This dealt with the fallacy that reducing immigration had become impossible in the modern world. But the pledge to reduce net inflows to ‘tens of thousands’—unwise in retrospect—was badly knocked off course by another surge from Europe starting in 2012, this time mainly young people from Spain, Portugal and Italy escaping the Eurozone crisis. Net immigration was soon back over 300,000 a year. This is the background to the Brexit vote—one government absentmindedly ushered in a mass immigration society without asking the voters, the next government promised to rein it in and failed to do so. And that Brexit vote has merely made more complex what was already one of the central tasks of British public policy: how to respond to the legitimate desire of a large majority to reduce immigration while minimising damage to an economy that has in some sectors become heavily dependent on migrants.


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Half In, Half Out: Prime Ministers on Europe by Andrew Adonis

banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, Bretton Woods, British Empire, centre right, colonial rule, congestion charging, Corn Laws, cuban missile crisis, Dominic Cummings, eurozone crisis, imperial preference, mass immigration, Neil Kinnock, oil shock

In Cameron’s view, the project to modernise his party and render it electable, after, unprecedentedly in Conservative Party history, three consecutive leaders had failed to make it to Downing Street, was to reconnect with what voters cared about and stop obsessing over issues most people regarded as tangential to their lives. Yet within eighteen months of Cameron’s taking office, this strategy had effectively been destroyed by the Eurozone crisis. One of the questions I was most frequently asked by EU colleagues, both as UK EU Sherpa, which I was from late 2011–2013, and as the UK’s Permanent Representative until 2017, was why the Eurozone turmoil after the financial crisis appeared to destabilise British politics and policy on the EU to a greater extent than in their own countries. Many EU colleagues commented privately that Britain was surely in a rather comfortable ‘have our cake and eat it’ position, living outside the machine infernale that the Eurozone appeared to have become for them.

The reason for our destabilisation is actually quite simple. As the Eurozone crisis intensified, it became necessary to make urgent institutional changes to shore up monetary union and prevent disaster. But no such institutional changes could occur unless all member states agreed and ratified them. In other words, the UK was obliged to legislate, at speed, to permit changes that members of the Eurozone deemed essential to save the Eurozone, despite the fact that being outside the monetary union meant Britain would not be present at any discussions. Simultaneously, of course, the worsening real-world impacts of the crisis, notably in southern Europe, propelled greater numbers of people to seek work in healthier and more open labour markets, including the UK. And the persistent failure, as Cameron saw it, of the Eurozone to grip the crisis rapidly enough, led to very anaemic growth – or worse – which weighed on the UK economy, and exacerbated the challenges he and Chancellor George Osborne faced in tackling the UK’s public finances.

Monetary union radically changed the dynamics of the EU, and the impact of the financial crisis was to bring latent governance tensions to a head. There could be no case for the UK, outside monetary union and dealing alone with its own extraordinary banking crisis – bearing huge costs of UK bank bailouts and resolutions – to participate at further taxpayer expense in the resolution of the Eurozone’s crisis. This could be – and often was – represented across the Channel as in some way indicating a lack of UK solidarity at a time of crisis. That criticism of the UK’s transactional approach carries real force on some issues. But on these issues it misunderstands the nature, and obligations, of a monetary union. For Cameron, it again crystallised the need to make even clearer that there were not two speeds of membership that involved everyone heading for the same destination, some via the express and others trundling by the slow train.


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

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

As Macaulay suggested, the growth of debt can only ever really be judged in comparison to the growth of the economy as a whole. Keep either growth or inflation high enough and perhaps a Government can run a deficit for perpetuity, while still seeing its debt shrink. Or can it? If it is really is impossible for countries to go bust, then it is strange that so many countries have failed to pay back their loans. From Edward III defaulting on his loans to Florence financiers in 134039 through to today’s Eurozone crisis, sovereign defaults have been a constant feature throughout history. In their definitive text, This Time is Different, economists Carmen M. Reinhart and Kenneth S. Rogoff list hundreds of examples of default through the last 800 years. Default is not just not unknown, it is endemic. Only a small number of countries – such as Australia, New Zealand, Canada, Denmark, Thailand and the United States40 – have never defaulted.

The latest estimates suggest that 32 Britannia Unchained the UK economy is at least 13 per cent smaller than the authorities believed as recently as 2008.82 Debt is projected to pass 70 per cent of GDP by 2015. In order to return back to any sort of budget balance, the UK faces seven hard years of spending cuts. There were two very different kinds of response to the financial crisis. Some countries like Britain, or the US, or the Eurozone, found their old irresponsibility catching up with them. The financial crisis revealed huge holes in their future spending plans. The lifestyle of both private and public sectors in these countries was simply unsustainable. Then there were others, such as Sweden, Chile, Switzerland – or Canada – who had taken the opportunity of the good years to pay down their debts and reform their economies. Their budgets look set to return to surplus soon, growth has recovered, and the confidence of the markets remains strong.

We recognise that in modern Western societies it is impossible to replicate the conditions which have spurred China’s growth. We are conscious, however, that some lessons can be learnt 113 114 Britannia Unchained and that, indeed, many of those lessons were familiar to us at an earlier stage of our economic development. Yet, in the aftermath of the financial crisis, and particularly in the wake of the Eurozone crisis, it is only in Western Europe, and partially in the United States, that the voices of pessimism are most loudly heard. Britannia Unchained has attempted to confront this phenomenon of increased pessimism. It has been a consistent assumption of the book that many lessons can be learnt from these rising economies. Britain’s recent past has seen different cycles of optimism and pessimism. The immediate postwar years, know as a period of austerity, gave way in the 1950s to an era of rising prosperity.


pages: 408 words: 108,985

Rewriting the Rules of the European Economy: An Agenda for Growth and Shared Prosperity by Joseph E. Stiglitz

Airbnb, balance sheet recession, bank run, banking crisis, barriers to entry, Basel III, basic income, Berlin Wall, bilateral investment treaty, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, corporate social responsibility, creative destruction, credit crunch, deindustrialization, discovery of DNA, diversified portfolio, Donald Trump, eurozone crisis, Fall of the Berlin Wall, financial intermediation, Francis Fukuyama: the end of history, full employment, gender pay gap, George Akerlof, gig economy, Gini coefficient, hiring and firing, housing crisis, Hyman Minsky, income inequality, inflation targeting, informal economy, information asymmetry, intangible asset, investor state dispute settlement, invisible hand, Isaac Newton, labor-force participation, liberal capitalism, low skilled workers, market fundamentalism, mini-job, moral hazard, non-tariff barriers, offshore financial centre, open economy, patent troll, pension reform, price mechanism, price stability, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, Robert Shiller, Robert Shiller, Ronald Reagan, selection bias, shareholder value, Silicon Valley, sovereign wealth fund, TaskRabbit, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, tulip mania, universal basic income, unorthodox policies, zero-sum game

The sad truth is that Europe is not performing well in this century. The three charts in Figure I.1 show GDP growth from 1980 to 2015 for the Eurozone, the United States, and the European Union. There was no increase in growth rates in the Eurozone after the creation of the euro. In fact, even before the onset of the financial crisis, growth was lower than in prior decades. Moreover, Eurozone countries responded to the crisis less effectively than the non-Eurozone countries. The smooth gray line shows what growth after 2000 would have looked like if it had continued on the same trajectory that it had followed for the previous two decades; the black line shows the actual outcomes. Especially in the Eurozone, the gap between precrisis GDP predictions and actual performance is large, and years after the crisis was still increasing, even though the economies of the Eurozone showed traditional signs of a recovery (such as reductions in unemployment rates).

In short, German practices enabled the buildup of the debt in Greece, Spain, and elsewhere that German policymakers would later forcefully deplore. For every debtor there is a creditor who deserves as much or more blame for a bad loan, since the creditor is typically expert in risk management. But Europe chose to single out the debtors for blame, and to force them to bear the costs of adjustment. The problems with the Eurozone were thus at play long before the crisis revealed what could no longer be ignored. The Macroeconomic Framework Created a Cycle of Limited Demand and Greater Inequality Even before the financial crisis, Europe’s economies faced some major challenges. There was steady pressure on middle-income Europeans that stemmed from global market forces, such as globalization creating downward pressure on wages from trade with low-wage developing countries, and from technological change, which seemed to be skills-biased, thus increasing demand for high-skilled workers but lowering it for those with less marketable skills.

It was another instance of blaming the victim. If only one country had had a problem, that interpretation might have had some plausibility. However, with enough crises in the recent past and the prospect of still more, we must seriously consider that the euro itself, including its underlying rules and governance, may be part of the problem. We must acknowledge that the structure of the Eurozone weakened crisis countries by facilitating capital flight. We must admit that the policy of austerity, and the refusal to consider sufficiently large debt restructuring, and the so-called structural reforms imposed on the crisis countries that were neither well-timed nor well-chosen, combined to deepen the downturns. While this chapter focuses on monetary policy, a brief discussion of structural policies will help set the scene.


The Despot's Accomplice: How the West Is Aiding and Abetting the Decline of Democracy by Brian Klaas

Asian financial crisis, Ayatollah Khomeini, Berlin Wall, Boris Johnson, citizen journalism, clean water, crowdsourcing, cuban missile crisis, Deng Xiaoping, Dissolution of the Soviet Union, Donald Trump, eurozone crisis, failed state, financial independence, Francis Fukuyama: the end of history, friendly fire, global pandemic, moral hazard, Ronald Reagan, selection bias, Skype, Steve Jobs, trade route, Transnistria, unemployed young men, Washington Consensus, zero-sum game

., 138 Development Assistance Committee (DAC), 58 Devlin, Larry, 43 Diamond, Larry, 171 Dictator’s Learning Curve, The (Dobson), 210 digital communications, 49, 125, 161–75, 207, 208, 221, 223 Dirección de Inteligencia Nacional (DINA), 48 direct democracy, 28–9 disabled rights, 141, 144 disinformation, 207–8 Dobson, Will, 210 “Don’t Forget Me” (GooGoosha), 140 Dubai, 82 Duékoué, Côte d’Ivoire, 105 Dulles, Alan, 41 Durack, Western Australia, 29–30 Duvalier, Jean-Claude “Baby Doc”, 114 Ebola, 184 echo chamber effect, 165 Egypt, 6, 9–10, 13–16, 27, 88, 155, 163–4, 225 1987 US aid payments begin, 14 2001 EU Association Agreement, 155 2008 Afifi exiled to US, 163 2009 Clinton describes Mubaraks as ‘friends of my family’, 6; Obama’s Cairo speech, 9–10, 218 2011 Tahrir Square protests begin, 10, 13, 163–4; Mubarak ousted, 13, 164 2012 Morsi elected president, 14; anti-Morsi demonstrations begin, 164, 247 2013 coup d’état; el-Sisi comes to power, 14–16, 88, 164; Saudi Arabia announces aid package, 15 Eid al-Kabir, 124 Eisenhower, Dwight David, 38, 43 elections campaign finance, 185–8, 238 foreign aid/intervention, 97–110, 143 “free and fair”, 8, 14, 88–90, 102, 159, 193 gerrymandering, 180–5, 188, 251 grade inflation, 88–9, 158, 159 inclusivity, 24, 129–31, 221 observation/monitoring, 8, 65, 81, 83–4, 88–90, 102, 158–9, 173–4, 178, 211, 223 polling, 174–6 respect for, 5, 37–48 rigging of, 22–3, 34, 61, 63–4, 70–1, 83–5, 87, 112, 158–9, 166, 210–11 short-term thinking, 26, 54, 56 turnout, 180, 184 Electoral Integrity Project, 189, 238 Elizabethville, Congo, 43 “emerging democracy”, 88 Emory University, 136 261 INDEX “End of History”, 163, 214 English Civil War (1642–51), 31 Ennahda party, 126–8 Equatorial Guinea, 6, 11, 121, 173, 220 Erdoggan, Recep Tayyip, 20, 161–3, 176 Eritrea, 11, 24 Estonia, 17, 149, 151 Ethiopia, 27 Eton College, Berkshire, 202 European Commission, 150 European Parliament, 84, 180 European Partnership for Democracy (EPD), 58 European Union (EU), 2, 3, 56, 61–3, 65–7, 84, 90, 100, 143, 145, 148–56, 160, 180, 195, 214, 223, 225, 247 1999 European Parliament elections, 180 2004 Eastern Bloc countries accede to Union, 148–9 2005 intervention in Palestinian election campaign, 100 2006 asset ban on Lukashenko government, 63 2008 aid given for Ghanaian election, 143 2009 Eurozone crisis begins, 180, 190 2013 endorsement of Azerbaijani election, 84; endorsement of Malagasy election, 90 2014 Riga designated European Capital of Culture, 148, 225 2015 Riga summit; Juncker slaps Orbán, 150 2016 Belarus sanctions suspended, 65, 67, 195; Zimbabwe sanctions suspended, 247; UK € 262 holds membership referendum, 1 Eurozone crisis, 180, 190 Facebook, 125, 161–3, 165, 168, 172, 223 Falls Church, Virginia, 163 famine, 24 Fatah, 99–102 Fats Domino, 207 Ferjani, Said, 125–33, 142, 156, 221, 224 Fidesz Party, 150–2 financial crisis (2008–9), 185, 206 FixMyStreet, 171 Florida, United States, 117 Forces Nouvelles, 106 Ford, Gerald, 45 Foreign Affairs, 53 foreign aid, 14–15, 47, 49, 52, 57, 89, 90, 92, 93, 95, 100–1 Fourteen Points (1918), 35 France, 2, 33, 44, 55–6, 58, 72, 89, 106, 108–10, 115, 129, 214, 225 “free and fair”, 8, 14, 88–90, 102, 159, 193 free speech, 94, 103, 161–3, 165, 188 free trade zones, 152–60 Freedom House, 139, 140, 189 Friedrich Ebert Foundation, 189 Front Populaire Ivorien, 105 FSB (Federal’naya sluzhba bezopasnosti), 61 Fukuyama, Francis, 74, 163, 214 fungibilty, 95 Gaddafi, Muammar, 24, 76–9, 102, 113, 129 Gambia, The, 121 Gandhi, Jennifer, 136 INDEX Gaza, Palestine, 100–1, 240–1 Gbabgbo, Laurent, 105–10, 111, 119 General Motors, 48 Geneva Convention, 177 Geneva, Switzerland, 140 George III, King of the United Kingdom, 31 Georgia, 143 Geraldton, Western Australia, 30 Germany, 17, 23, 35, 44, 56, 58, 74–5, 103–4, 147–8, 165, 189, 201, 204, 208, 213, 223 Gerry, Elbridge, 181–2 gerrymandering, 180–5, 188, 251 Ghana, 17, 143, 144, 171 Ghani, Rula, 137 globalization, 153 Globe & Mail, 94 golden handcuffs, 111, 119–21, 154 golden parachutes, 19, 116–21 Gollum, 20, 161–3, 165, 176 Google, 164 GooGoosha (Gulnara Karimova), 140, 145 Government Organized NonGovernmental Organizations (GONGOs), 209–10, 212 grade inflation, 88, 99, 158, 159 Great Leap Forward (1958–61), 24 Greece, 20, 21, 22, 27–30, 31, 156, 230 Green Revolution (2009), 135–6, 166–8 gridlock, 184–5, 187 Guardian, 166 gun regulation, 186–7 gunboat diplomacy, 116, 118, 120 Gutiérrez, Luis, 182 Guyana, 171, 220 Guys and Dolls, 40 Hague, William, 77 Haiti, 114–21 Hamas, 99–104, 241 Harmodius, 28 Harvard University, 45 health care, 184–5 Henry IV “the Impotent”, King of Castile and Léon, 30, 231 Herodotus, 29 Higiro, Robert, 94 Hipparchus, 28 Hitler, Adolf, 23, 103–4, 165 HIV (human immunodeficiency virus), 116, 207 Hobart, Tasmania, 153 homosexuality, 12, 20 Hong Kong, 168–70, 176, 221 House of Representatives, 33, 181 human rights, 10, 11, 52, 54, 57, 64, 113, 118, 139, 209, 213 Humphrey, Hubert, 21 Hungary, 150–2, 160, 171 Hussein, Saddam, 63, 72, 73, 79, 124, 156–7 I Paid a Bribe, 170–1 Ibragimbekov, Rustam, 82 Iceland, 88 Iglesias, Julio, 140 “illiberal democracy”, 227 Illinois, United States, 182–3 Iloniaina, Alain, 222–3 imihigo program, 93 Immunization of the Revolution, 127 inclusion, 24, 129–31 India, 56, 98, 152, 156, 170–1, 172, 220 Indonesia, 27, 156, 218 Indyk, Martin, 102 insidious model effect, 46, 48 Inter-Commission Working Group 263 INDEX on International Cooperation, 211 Inter-Services Intelligence (ISI), 52, 53 International Criminal Court (ICC), 106, 109, 118, 119 International Monetary Fund (IMF), 105 International Republican Institute (IRI), 58, 142 Internet, 49, 125, 161–75, 207, 208, 221, 223 iPad, 151 iPhones, 20, 83, 135–6, 145 Iran, 26, 30, 36, 38, 47, 48, 69, 98, 117, 135–6, 145, 208, 232 1951 nationalization of AngloIranian Oil Company, 38 1953 Operation Ajax; Mossadegh ousted, 38–42, 98, 208 1979 Islamic Revolution, 42, 117, 216 2009 intervention in Lebanese election, 98; presidential election; Green Revolution protests, 135–6, 166–8 2010 VOA announces “citizen journalism” iPhone app, 135–6, 145 2015 nuclear deal, 26 Iraq, 2, 5, 20, 49, 63, 67, 72–5, 77, 78, 79, 98, 124, 128, 129, 133, 156–7, 198, 213 1979 Saddam comes to power, 72, 129 1990 invasion of Kuwait, 156 2003 US-led invasion, 63, 72–3, 77, 84, 98, 156, 201, 234; de-Ba’athification campaign, 72, 77, 124, 128 2006 formation of al-Maliki government, 73 264 2015 IS execute election officials, 74 Ireland, 90, 217 Islam, 11, 12, 16, 99, 105, 123–6, 129, 131, 177, 218 Islamic State (IS), 74, 78, 131 Islamism, 99, 123–6, 129, 131, 177 Israel, 14, 99–104 Italy, 98, 192 Jackson, Peter, 162 Jammeh,Yahya, 121 Japan, 17, 24, 35, 56, 58, 74–5, 89, 112, 154, 156, 164, 204, 206, 217, 218, 220 al-Jazeera, 76 Jeddah, Saudi Arabia, 172 Joan of Portugal, Queen consort of Castile, 231 Jobs, Steve, 151 Johnson, Boris, 202 Jordan, 18, 60, 155 Juncker, Jean-Claude, 150 Kabila, Joseph, 121 Kabul, Afghanistan, 70 Kagame, Paul, 6, 91–6 Kagan, Robert, 217–18 Kakul Military Academy, 53 Kallel, Abdallah, 124 Kant, Immanuel, 118 Karbala, Iraq, 201 Karegeya, Patrick, 94 Karimov, Islam, 139–40, 142, 154 Karimova, Gulnara, 139–40, 145 Karnataka, India, 170 Karoui, Nébil, 131 Karzai, Hamid, 70 Katanga, Congo, 43–4 Keane, John, 30 INDEX Kennedy, John Fitzgerald, 11, 35–6, 55, 190, 192 Kenya, 220 KGB (Komitet Gosudarstvennoy Bezopasnosti), 3, 61–2, 147–8, 194, 225 Khan, Rana Sanaullah, 52 Khomeini, Ruhollah, 167 Kim Jong-un, 136, 181 Kingdom of Ebla, 28 Kipling, Rudyard, 69 Kissinger, Henry, 44–7, 214 knee-jerk reactions, 26, 55 Koch Brothers, 185–6 Konrad Adenauer Foundation, 58, 189 Kounalakis, Eleni, 151 kratos, 27 Kununurra, Western Australia, 30 Kuwait, 156, 229 Kyrgyzstan, 185 2011 NATO-led intervention, 76–7; death of Gaddafi, 76–7, 113 2013 Political Isolation Law, 77, 128 LINE, 164–5 Literary Digest, 174 lobbying, 186–7 local-level democracy, 3, 18, 169–73 locusts, 6–7 London, England, 132–3 long-term thinking, 4, 46, 48, 51–67, 138, 141, 234 Lord of the Rings (Tolkien), 20, 161–3, 165, 176 “Luck Be a Lady Tonight”, 40 Lukashenko, Alexander, 61–7, 154, 193–5, 206, 222 Lumumba, Patrice, 42–4 Lumumbashi, Congo, 43 Lake, Anthony, 117 Landon, Alf, 174 Langouste (Ramakavélo), 87 Laos, 200 Latin Earmuffs, 182 Latvia, 147–50, 151–2, 154, 160, 225 League of Democracies, 152–60, 212 Lebanon, 98 Léon, 30–1, 231 Léopoldville, Congo, 43 Levy, Phil, 157 Libya, 2, 5, 20, 24, 49, 67, 69, 76–9, 102, 113, 128, 129, 133, 156, 213 1969 coup d’état; Gaddafi comes to power, 78, 113, 129 2008 Rice makes visit, 76 MacCann, William, 34 Madagascar, 3, 6–9, 17, 20, 59, 85–91, 96, 200, 220, 222–3, 234–5 1991 Panorama Convention, 87 1992 presidential election, 87 1993 population census, 89 2006 presidential election, 85–6 2009 coup d’état; Rajoelina comes to power, 6, 90 2012 Rajoelina announces capture of bandits’ sorcerer, 7 2013 general election, 8, 89–90, 211, 222–3 Madagascar Effect, 6–8, 17, 81, 96, 159, 204, 234–5 Madison, James, 31–2 Malaysia, 153, 218 al-Maliki, Nouri, 73–4 Mao Zedong, 23, 24 265 INDEX marketplace of ideas, 24, 219 Mauritius, 220 May, Theresa, 26 McCain, John, 77 McMahon, Michael, 83 McSpedon, Joe, 49 Megara, 156 Mejora Tu Escuela, 171 El Mercurio, 47 Merkel, Angela, 208 Mesopotamia, 28 Mexico, 27, 149, 155, 156, 171, 172, 178 MI6, 43 Miami, Florida, 117 Miloševicc, Slobodan, 98, 120 Minnesota, United States, 21, 186–7 Minsk, Belarus, 19, 61–2, 66, 192, 193 Mo Ibrahim Foundation, 119 Mobutu, Joseph-Desiré, 43–4 Mogadishu, Somalia, 116 Moghaddam, Ismail Ahmadi, 167 Mohammad Reza Pahlavi, Shah of Iran, 39–42, 117 Moldova, 195–6 Mondale, Walter, 21 Mong Kok riots (2016), 169 Mongolia, 17, 30, 189 Morjane, Kamel, 130 Morocco, 155, 171 Morsi, Mohammed, 14, 15, 164, 247 Moscow, Russia, 210 Mossadegh, Mohammed, 38–42, 43, 232 Mosul, Iraq, 72, 73 al-Moubadara, 130 Mubarak, Hosni, 6, 13, 164 Mugabe, Robert, 112–13, 157–8 Mugenzi, Rene Claudel, 94–5, 189 € 266 Muhirwa, Alice, 93 Muñiz de Urquiza, María, 90 Munyuza, Dan, 94 Musharraf, Pervez, 51–7 Myanmar, 218, 225 Nasiri, Nematollah, 40 Nation, The, 198 National Council for Peace and Order (NCPO), 197 National Democratic Institute (NDI), 58, 92, 142 National Endowment for Democracy (NED), 58, 60, 144, 247 National Rifle Association (NRA), 186–7 Native Americans, 32, 33 Nawabshah, Pakistan, 51 Nazi Germany (1933–45), 23, 44, 74–5, 103–4, 147–8, 165 Nepal, 98 Netherlands, 58, 89, 143 Netherlands Institute for Multiparty Democracy, 58 New Stanford Hospital, Palo Alto, 26 NewYork Times, 71, 93, 185–6 New Zealand, 112, 156, 209 Nicaragua, 24, 98 Nidaa Tounes, 131 Niger, 185 Nigeria, 171, 172 Nixon, Richard, 44–7 Niyazov, Saparmurat, 25 Nobel Prize, 18, 24, 131, 156, 163 non-alignment, 43 non-governmental organizations (NGOs), 58–60, 141–2, 144, 158, 209–10, 212, 238 North Atlantic Treaty Organization (NATO), 45, 55, 77 INDEX North Carolina, United States, 183 North Korea, 4, 11, 136, 138, 144, 173, 176, 181 Norway, 24, 77, 205, 219 nuclear power/weapons, 26, 192 Nunavut, Canada, 153, 230–1 Nunn, Sam, 116 Nuristan, Afghanistan, 70 Nyaklyayew, Uladzimir, 61–2, 65 Nyamwasa, Faustin Kayumba, 94 Obama, Barack, 6, 9–10, 14, 49, 54, 55, 57–8, 76, 96, 111, 183, 204, 205, 218 Obiang, Teodoro, 6, 121 Odysseus, 22, 153 oil, 4, 11, 16, 24, 84, 192, 229 olive oil, 125 Operation Ajax (1953), 38–42, 98, 208 Operation Desert Storm (1991), 156 Operation Enduring Freedom (2001–14), 70 Operation Uphold Democracy (1994–5), 116 Orbán, Viktor, 150–2 Organization for Security and Co-operation in Europe (OSCE), 64 Ortega, Daniel, 98 Orwell, George, 15, 101, 199 Oswald, Lee Harvey, 192 Ouattara, Alassane, 105–10, 119 Oxford University, 198, 202 OxfordGirl, 166 Pakistan, 18, 50–7, 70, 220, 233 Palestine, 99–104, 108, 240–1 Palestine Liberation Organization (PLO), 99 Panama, 117 Panorama Convention (1991), 87 Papua New Guinea, 188 parliaments, 31 partisan engagement, 99–104 Peloponnesian War (431–404 BC), 156 People’s Alliance for Democracy (PAD), 197, 202 Pericles, 29 Persia, 28 Peru, 153 Philadelphia, Pennsylvania, 33 Philippines, 218 Pinochet, Augusto, 47–8, 225 Piromya, Kasit, 204–5 Plateau Dokui, Abidjan, 107 Plato, 29 Poland, 201 Political Isolation Law (2013), 77, 128 polling, 174–6 Pomerantsev, Peter, 210 Pongsudhirak, Thitinan, 165 Port-au-Prince, Haiti, 117 Portugal, 218, 231 Pouraghayi, Saeedah, 167 Powell, Colin, 116, 120 Préval, René, 117 Price, Melissa, 30 Princeton University, 186 prisoner’s dilemma, 200 process engagement, 99–100 propaganda-industry tax, 209 protectionism, 177 proto-democracy, 28 Public Diplomacy of the Public Chamber of Russia Elections, 211 Pul-i-Charki, Kabul, 71 Putin, Vladimir, 63, 64–5, 194–5, 204, 207, 214 267 INDEX al-Qaeda, 18, 50, 52–3, 55, 78, 177, 234 Qatar, 155, 229 Qatif, Saudi Arabia, 11, 16 Queen, 121 racism, 176, 218, 250 Rajoelina, Andry, 6 Ramadan, 126 Ramakavélo, Desiré-Philippe, 86–7 Rao, Bhaskar, 170 Rassemblement des Républicains, 105 Ratchaburi, Thailand, 199 Ravalomanana, Marc, 6 Reagan, Ronald, 35–6, 55 realpolitik, 4, 45, 48, 98, 104 refugees, 208 representative democracy, 30–3 Republican Party, 39, 58, 79, 124, 142, 181, 182–8 Rever, Judi, 94 Riahi, Taghi, 39–40 Rice, Condoleeza, 76, 102 Riga, Latvia, 147–8, 150, 160, 225 rock lobster, 87 Rojanaphruk, Pravit, 198–9, 221, 223–4 Romania, 149, 209 Rome, Ancient (753 BC–476 AD), 21, 30 Romney, Mitt, 112 Roosevelt, Franklin Delano, 39, 174 Roosevelt, Kermit, 38–40, 208 Roosevelt, Theodore “Teddy”, 39 de Rosas, Juan Manuel, 34–5 Roskam, Peter 183 rule of law, 10, 27, 73, 77, 136, 159, 209, 218 Rumsfeld, Donald, 145 Russia Today (RT), 207–9 268 Russian Federation, 24, 27, 60–1, 63–5, 82, 106, 140, 149, 190, 191–6, 204, 205–12, 214, 221, 229 1996 Commonwealth with Belarus established, 194 2002 proposal for re-integration of Belarus, 194 2005 support for Moldovan opposition on Transnistria, 195–6; Russia Today established, 207 2010 Putin sings Fats Domino’s Blueberry Hill, 207 2013 endorsement of Azerbaijani election, 211 2014 annexation of Crimea; intervention in Ukraine, 64, 65; RT reports “genocide” in Ukraine, 207; RT reports CIA behind Ebola outbreak, 207 2015 NED banned, 60; pressure on Belarus to host military base, 65, 195 2016 RT report on rape of “Lisa” in Germany, 208; Putin praised by Trump, 214 Rwanda, 6, 20, 91–6, 120, 185, 189, 215, 216 Rwandan Patriotic Front (RPF), 91 San Diego State University, 209 sanctions, 52, 62–5, 67, 103, 106, 135–6, 145, 156–8, 160, 195, 247, 253 Sandinista National Liberation Front, 98 Sandy Hook massacre (2012), 186 dos Santos, José Eduardo, 112–13 Sarkozy, Nicolas, 108 INDEX SARS (severe acute respiratory syndrome), 25–6 Saudi Arabia, 5–6, 9–12, 15–16, 19–20, 85, 98, 138, 144, 200, 216, 229 1962 slavery abolished, 11 2009 intervention in Lebanese election, 98; children sentenced to prison and lashes for stealing exam papers, 11, 16; Jeddah floods, 172 2010 Indonesian maid mutilated by employer, 11, 12; arms deal with US, 10–12 2011 Qatif protests, 16 2013 aid package to Egypt announced, 15; purchase of US naval craft announced, 16; Badawi sentenced to prison and lashes, 16 Saudi Arabia Effect, 5, 9, 16, 85, 138, 200 Schneider, René, 45 School of the Americas, 115 Seattle, Washington, 77 Secret Intelligence Service (SIS), 43 Sen, Amartya, 24 Senate, US, 32–3, 187 Senegal, 42, 121 September 11 attacks (2001), 18, 52–3, 55, 70 Serbia, 98, 120 Shanghai Cooperation Organization, 211 Sharif, Nawaz, 51–2, 233 Shinawatra, Thaksin, 196, 199, 201, 202, 205 Shinawatra,Yingluck, 198 short-term thinking, 3–4, 26, 46, 48, 51–67, 120, 138, 141, 234 Shushkevich, Stanislav, 192–3 Siberia, 147, 148 Sidick, Koné Abou Bakary, 107–9 Sierra Leone, 88, 171, 209 Singapore, 23, 24, 27, 93, 155, 215, 216, 217, 229 Siripaiboon, Thanakorn, 165 el-Sisi, Abdel Fattah, 15 Skujenieks, Knuts, 148 Skype, 62 slavery, 11, 29, 32 social media, 49–50, 125, 161–70, 173, 176, 199, 207, 208, 223 Socrates, 29 Solon, 28 Somalia, 42, 116 Sophocles, 29 Sopko, John, 137 Sousse attacks (2015), 131 South Africa, 27, 94, 157, 189 South Korea, 17, 27, 112, 152, 156, 218 Soviet Union (1922–91), 1, 22–3, 35–6, 37–50, 61, 64, 82, 121, 147–8, 150, 160, 192–4, 201, 204, 206–7 Spain, 218 Sparta, 28, 29 St John’s College, Oxford, 202 Stalin, Joseph, 23 Stanford University, 171 State Department, 11, 15, 54, 202 state power, 27 Statkevich, Mikalai, 61–2, 65, 222 Stewart, Jon, 53 Sting (Gordon Sumner), 140 Stockholm Syndrome, 199 Sudan, 206 Sukondhapatipak, Werachon 198 Sundaravej, Samak, 197 Super PACs, 185 Supreme Court, US, 185, 188 Sweden, 92, 220 269 INDEX Switzerland, 118, 140, 205 Syria, 78, 120, 131, 198, 208, 217, 224, 225 Szájer, József, 151 Tahrir Square, Cairo, 10, 13, 163–4 Taiwan, 27, 218 Taliban, 18, 52, 56, 71, 138 tame democracy promotion, 59 Taming of Democracy Assistance, The (Bush), 59 Tarakhel Mohammadi, 70–1 Tasmania, Australia, 153 Tasting and Grumbling, 197 Tea Party, 185 terrorism, 11, 16, 18, 19, 20, 26, 52–3, 55, 63, 70, 78, 97, 100, 101, 131, 156, 201, 234 Tetra Tech, 138 Thailand, 3, 19, 27, 154, 164–5, 196–206, 212, 221, 223–4, 253 1973 pro-democracy uprising, 199 1976 student protests, 199 1982 launch of Cobra Gold exercises with US, 201 2003 troops dispatched to Iraq, 201 2006 coup d’état, 196, 197 2008 judicial coup, 196, 197, 202, 253 2010 protests and crackdown, 202 2014 NCPO coup d’état, 164, 196–206, 221; junta gives out free haircuts, 154; rail deal with China, 203; junta releases LINE “values stickers”, 164–5 2015 man arrested for insulting Tongdaeng, 165 270 2016 constitutional referendum, 197, 223 Thirty Tyrants, 29 Thucydides, 28, 29 time horizon, 55 Tobruk, Libya, 77 Togo, 170, 177–8 Tolkien, John Ronald Reuel, 20, 161–3, 165, 176 Tongdaeng, 165 torture, 11, 28, 43, 48, 52, 124–7, 132, 139, 141, 222, 224 Trans-Pacific Partnership, 153 Transnistria, 196 transparency, 26, 82, 170, 174, 212, 218 Tripoli, Libya, 77 Trojan War, 22 Trump, Donald, 1, 20, 25, 79, 178, 180, 187, 188, 204, 205 Tudeh Party, 41, 232 Tunisia, 12–13, 17, 18, 19, 27, 65, 77, 123–33, 142, 143, 144, 155, 156, 209, 218, 221, 224–5 1987 coup d’état; Ben Ali comes to power, 124, 126, 129 1991 Barraket Essahel affair, 123, 126, 224 1995 EU Association Agreement, 155 2010 self-immolation of Bouazizi; protests begin, 12, 126, 224 2011 ousting of Ben Ali, 13, 124–6, 130 2014 assembly rejects bill on political exclusion, 128; law on rehabilitation and recognition of torture victims, 224; presidential election, 130 2015 Bardo Museum and Sousse attacks, 131, 156; National INDEX Dialogue Quartet awarded Nobel Peace Prize, 18, 131 Tunisia’s Call, 131 Turkey, 20, 27, 39, 149, 161–3, 165, 176 Turkmenistan, 11, 25, 26, 138, 144, 154 Twitter, 49, 162, 163, 166, 168, 176, 199, 208 U2, 92 Udon Thani, Thailand, 201 Uganda, 166, 176 Ukraine, 2, 27, 64, 65, 171, 198, 207, 213 Umbrella Movement (2014), 168, 176, 221 United Arab Emirates (UAE), 229 United Kingdom (UK), 1–3, 31, 33, 38, 43–4, 56, 58, 71–2, 92, 94–5, 126, 129, 132–3, 156, 166, 171–2, 180, 189, 202, 214 1707 Acts of Union, 31 1947 Churchill’s statement on democracy, 22, 190, 215 1951 Mossadegh nationalizes Anglo-Iranian Oil Company, 38 1987 Ferjani arrives in exile, 126 1999 European Parliament election, 180 2003 invasion of Iraq, 72–3 2009 OxfordGirl tweets on Iranian Green Revolution, 166; Blair meets with Kagame, 6, 92 2011 intervention in Libya, 77; Kagame appears on BBC radio; threat against Mugenzi, 94–5, 189 2012 launch of FixMyStreet, 171 2016 EU membership referendum, 1 United Nations (UN), 104, 105, 106, 108–10, 118, 130, 132, 140, 152 United States (US) 1787 Constitutional Convention, 31 1812 redrawing of Massachusetts senate election districts, 181–2 1869 Wyoming grants women vote, 33 1870 non-white men receive vote, 33 1913 Seventeenth Amendment enacted, 32 1917 Wilson’s “safe for democracy” speech, 35 1918 Wilson’s Fourteen Points, 35 1920 women receive vote, 33 1924 protections to ensure Native American voting rights, 33 1936 presidential election, 174 1948 CIA intervention in Italian election, 98 1953 Operation Ajax; Mossadegh ousted in Iran, 38–42, 98, 208 1960 plot to assassinate Lumumba with poisoned toothpaste, 43 1961 Foreign Assistance Act, 14–15 1962 Saudi Arabia pressured into abolishing slavery, 11; Cuban Missile Crisis, 50 1963 Kennedy’s Berlin speech, 35; assassination of Kennedy, 192 271 INDEX 1965 protections to ensure minority voting rights, 33 1973 ousting of Allende in Chile, 47 1982 launch of Cobra Gold exercises with Thailand, 201 1987 Reagan’s Berlin speech, 35; aid payments to Egypt begin, 14 1988 Reagan’s “city on a hill” speech, 10, 35, 179, 188, 189 1990 intervention in Nicaraguan election, 98 1991 launch of Operation Desert Storm in Iraq, 156 1992 presidential and House of Representatives elections, 183–4 1993 Clinton assumes office, 115; Battle of Mogadishu, 116 1994 launch of Operation Uphold Democracy in Haiti, 116; Cessna crash at White House, 116; Cédras given “golden parachute”, 116–17 1997 USAID Cambodia claims to have “exceeded expectations”, 59 1999 Pakistan urged to return to democracy, 52, 53 2001 September 11 attacks, 18, 52–3, 55, 70; cooperation with Pakistan begins, 52–3, 55; invasion of Afghanistan, 70, 71, 84, 98 2002 Bush announces new approach for Israel/Palestine conflict, 99 2003 invasion of Iraq, 63, 72–3, 77, 84, 98, 156, 201, 234 272 2004 Belarus Democracy Act, 63, 194 2005 Senate vote on armorpiercing bullet ban, 187; intervention in Palestinian election campaign, 99–104 2006 Musharraf appears on The Daily Show, 53 2008 Afifi arrives in exile, 163, 247; Rice’s visit to Libya, 76 2009 Obama assumes office, 55, 57; Clinton describes Mubaraks as “friends of my family”, 6; Obama’s Cairo speech, 9–10, 218; military helicopter drops ballot boxes in Afghanistan, 70; Kagame receives Clinton Global Citizen award, 92 2010 VOA announces “citizen journalism” app for Iran, 135, 145; Citizens United v.

They are not the only ones, of course, but they are the longstanding rock that governments around the world have turned to as they formed their own democratic foundations. However, nearly two decades into the twenty-first century, the crisis of democracy is not just a global one; it’s also a Western one. Western democracies are struggling. Some of their practices are undemocratic and deeply flawed. This “hypocrisy” of promoting democracy abroad while simultaneously failing to address democratic challenges at home rings hollow. â•… In the European Union, the Eurozone crisis has prompted accusations of a serious “democracy deficit.”3 Technocrats have a disproportionate role that is insulated from democratic pressures. Turnout for European Parliament elections is notoriously low, and there is a “disconnect” between voters and their representatives that is more pronounced with European institutions than any similar phenomenon at the national level. Indeed, 12 million more Brits voted for Big Brother, a major reality television program in the UK, than voted in their country’s 1999 European Parliament elections.4 However, turnout for such elections is not markedly different from stubbornly low turnout in congressional midterm elections in the United States (just 36.4 per cent of eligible voters in 2014, the lowest level since 1942).5 This cannot absolve the European Parliament of its failure to hold elections that are sterling examples of democratic process.

This is particularly true because alterÂ� native—and undemocratic—models are emerging, challenging the ideological dominance of the notion that democracy is the most desirable form of government, or at least, as Churchill put it, the worst form except for all the others. The confluence of recent events has seen China and Russia rise and reassert themselves on the global stage at the same time as Western democracy is facing unprecedented challenges, from the surge in right-wing populism to the Eurozone crisis. As a result, this is a critically important time for Western governments to rise to the challenge. Otherwise, nations stalled between dictatorship and democracy will look east rather than west, casting the American eagle into the swamp and placing the Chinese dragon and the Russian bear atop a dark authoritarian hill instead. € 190 13 THE BEAR AND THE DRAGON The ten principles outlined above all show a way for the West to reinvent its flawed approach to advancing democracy across the globe.


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The Flat White Economy by Douglas McWilliams

"Robert Solow", access to a mobile phone, banking crisis, Big bang: deregulation of the City of London, bonus culture, Boris Johnson, Chuck Templeton: OpenTable:, cleantech, cloud computing, computer age, correlation coefficient, Edward Glaeser, en.wikipedia.org, Erik Brynjolfsson, eurozone crisis, George Gilder, hiring and firing, income inequality, informal economy, Kickstarter, knowledge economy, loadsamoney, low skilled workers, mass immigration, Metcalfe’s law, Network effects, new economy, offshore financial centre, Pareto efficiency, Peter Thiel, Productivity paradox, Robert Metcalfe, Silicon Valley, smart cities, special economic zone, Steve Jobs, working-age population, zero-sum game

Sometimes this emerges through proximity to centres of education, sometimes through proximity to cheap accommodation, preferably both. In the case of London, the availability of skills seems to have benefitted particularly from immigration into the UK (see Chapter 7) and especially from the weakness of the Eurozone economy and the very high levels of youth unemployment in Southern Europe that have resulted from the Eurozone crisis. Indeed, London’s Flat White Economy development has occurred despite relatively expensive accommodation (though rents have been driven up by the very scale of the immigration that has been associated with the Flat White Economy). Of course the analysis in this book shows that it is not purely economic factors that have stimulated the Flat White Economy. People come to London as much for the fun factor as for work and a liberal social environment (It is no coincidence that Bangalore, India’s software capital, also has more pubs per capita34 than any other city in India!).

CHAPTER 6 The UKs Unbalanced Economy One of the themes of this book is that the London economy is doing well – growing much faster than the equivalent cities in Asia (Hong Kong and Singapore) or North America (New York). However the UK economy is – although one of the stronger economies in the Western world – not doing that well and if London’s stellar performance is removed, the performance of the rest of the UK looks decidedly lacklustre, only appearing good in comparison with European economies held back by a range of problems including the Eurozone crisis. My concern in this chapter is about the unbalanced nature of UK economic growth. My argument is that although in an ideal world growth would be spread evenly – like Marmite – in the real world this just does not happen. I argue that the position of the rest of the UK outside London and to some extent the South East would be very much worse if London was not so successful because of the scale of the spillover effects from London’s growth.

There are two serious challenges which might mean that London could fail to compete and lose its position in the global Flat White Economy the first of which is concerns changes to immigration: the threat of a cutting off of the supply of labour. Central to the Flat White Economy has been the remarkable flow into London of high-quality labour through immigration from all around the world but particularly from the Eurozone as Europe has remained mired in economic crisis. The European economic crisis will almost certainly continue, creating a substantial potential supply of the types of young skilled labour that have been so vital for London’s growth. Youth unemployment in most parts of Continental Europe won’t go away and with Europe appearing to enter a triple dip recession the potential supplies could even increase. But will the potential migrants be allowed to come to London to boost the capital’s economy?


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The Populist Explosion: How the Great Recession Transformed American and European Politics by John B. Judis

affirmative action, Affordable Care Act / Obamacare, Albert Einstein, anti-communist, back-to-the-land, Bernie Sanders, Boris Johnson, Bretton Woods, capital controls, centre right, collapse of Lehman Brothers, deindustrialization, desegregation, Donald Trump, eurozone crisis, financial deregulation, first-past-the-post, fixed income, full employment, ghettoisation, glass ceiling, hiring and firing, illegal immigration, immigration reform, income inequality, invisible hand, laissez-faire capitalism, mass immigration, means of production, neoliberal agenda, obamacare, Occupy movement, open borders, plutocrats, Plutocrats, post-materialism, rolodex, Ronald Reagan, Silicon Valley, War on Poverty, We are the 99%, white flight, Winter of Discontent

I first became aware that the adoption of the Euro was leading Europe into a cul-de-sac thanks to Paul Krugman’s columns in The New York Times. I became convinced of the special role played by German export surpluses from the “Appendix” to Michael Pettis’s book, The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy (Princeton University Press, 2013). Pettis also has an interesting essay on Greece, Spain, and the Eurozone crisis, “Syriza and the French Indemnity of 1871–73,” on his blog (http://blog.mpettis.com/2015/02/syriza-and-the-french-indemnity-of-1871-73/). For other relevant books and articles, see my endnotes. In following European Union politics, I found two websites invaluable: Social Europe (socialeurope.eu) and Open Democracy (opendemocracy.net). Arthur Goldhammer keeps up with “French politics” (artgoldhammer.blogspot.com) and Michael Tangeman with Spain (progressivespain.com).

Hall, “Varieties of Capitalism and the Eurocrisis,” West European Politics, August 2014; Heiner Flassback and Kostas Lapavitsas, Against the Troika: Crisis and Austerity in the Eurozone, Verso, 2015; Engelbert Stockhammer, “The Euro Crisis and the Contradictions of Neoliberalism in Europe,” Post Keynesian Economics Study Group, Working Paper 1401; Mark Copelovtich, Jeffry Frieden, and Stefanie Walter, “The Political Economy of the Euro Crisis,” Comparative Political Studies, 2016; Servaas Storm and C. W. Naastepad, “Myths, Mixups, and Mishandlings: Understanding the Eurozone Crisis,” International Journal of Political Economy 45, 2016; and Pettis, op. cit., Appendix. For a narrative of the events, see Stathis Kouvelakis, “The Greek Cauldron,” New Left Review, November–December 2011. 112“treasonous”: Ibid. 113Greece will be massively limited: http://globalcomment.com/loansharking-greece-Syriza-the-troika-and-the-end-of-greek-sovereignty/. 114member of the European community: For this history of Syriza, see Yanis Varoufakis, “Can Greece’s Syriza Change Europe’s Economy,” Boston Review, December 3, 2013. 115rural voters: Yiannis Mavris, “Greece’s Austerity Election,” New Left Review, July–August 2012. 116“the Greece of Democracy”: Yannis Stavrakakis and Giorgos Katsambakis, “Leftwing Populism in the European Periphery: the case of Syriza,” Journal of Political Ideologies, 2014.


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How Will Capitalism End? by Wolfgang Streeck

accounting loophole / creative accounting, Airbnb, basic income, Ben Bernanke: helicopter money, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, Clayton Christensen, collective bargaining, conceptual framework, corporate governance, creative destruction, credit crunch, David Brooks, David Graeber, debt deflation, deglobalization, deindustrialization, disruptive innovation, en.wikipedia.org, eurozone crisis, failed state, financial deregulation, financial innovation, first-past-the-post, fixed income, full employment, Gini coefficient, global reserve currency, Google Glasses, haute cuisine, income inequality, information asymmetry, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, labour market flexibility, labour mobility, late capitalism, liberal capitalism, market bubble, means of production, moral hazard, North Sea oil, offshore financial centre, open borders, pension reform, plutocrats, Plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, post-industrial society, private sector deleveraging, profit maximization, profit motive, quantitative easing, reserve currency, rising living standards, Robert Gordon, savings glut, secular stagnation, shareholder value, sharing economy, sovereign wealth fund, The Future of Employment, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transaction costs, Uber for X, upwardly mobile, Vilfredo Pareto, winner-take-all economy, Wolfgang Streeck

Under the auspices of the emerging consolidation state, politicization is migrating to the right side of the political spectrum where anti-establishment parties are getting better and better at organizing discontented citizens dependent upon public services and insisting on political protection from international markets. CHAPTER FIVE Markets and Peoples: Democratic Capitalism and European Integration Hopes that the resolutions of European heads of state would stabilize the financial markets and solve the Eurozone debt crisis, once and for all, have risen with each new summit over the past two years, only to be dashed again once the fine print comes to light.1 Would investors really join in on the ‘voluntary haircut’? Was the bazooka, after all, not more of a water pistol? No one could say with any degree of certainty what should be done to repair the crashed global financial system. Some demand strict austerity, others growth; everybody knows that both are necessary, but cannot be had at the same time.

As integration advanced into core areas of the nation states and their social orders it became commensurately ‘politicized’ and ground to a halt. New steps towards integration became more difficult and could only be achieved, if at all, through the European Court of Justice. A spectre was haunting Brussels’ Europe: would the disempowerment of the nation states henceforth have to depend upon the ‘European consciousness’ of its peoples – or even upon the mobilization of a democratic European consciousness? The Eurozone crisis has resolved this question by once again sundering the integration process from the will of the people. Monetary union, initially conceived as a technocratic exercise – therefore excluding the fundamental questions of national sovereignty and democracy that political union would entail – is now rapidly transforming the EU into a federal entity, in which the sovereignty and thereby democracy of the nation states, above all in the Mediterranean, exists only on paper.

The Northern hope of escaping from the current predicament with a one-off payment – or even a one-off deflation to bring about structural reform in the South – will evaporate, as surely as Southern hopes for long-term support for social structures ill-suited to a hard-currency regime. Meanwhile, the notion that a pan-European democracy might spring up out of the European Parliament and somehow ride to the rescue will turn out to be an illusion – and the longer the wait, the greater the disillusionment.34 Less feasible still is the dream of achieving such a democracy by dint of letting the Eurozone crisis drag on until ‘the pain’ becomes too great – not so much the economic pain in the South as the moral and political anguish in the North, above all in Germany. More likely than a headlong rush into pan-European democracy is that the national polities will fall prey to aggressively nationalist parties. The only remaining supporters of euro-led integration, apart from politicians fearful of losing their seats, will be the middle classes of the South, who dream of achieving a social-democratic consumer paradise on the coat-tails of Northern capitalism, even as this implodes; and the Northern export industries, which want to preserve the credit-financed consumption of the Southerners as long as possible, together with the competitive advantages of an undervalued pan-European currency.


pages: 382 words: 92,138

The Entrepreneurial State: Debunking Public vs. Private Sector Myths by Mariana Mazzucato

"Robert Solow", Apple II, banking crisis, barriers to entry, Bretton Woods, business cycle, California gold rush, call centre, carbon footprint, Carmen Reinhart, cleantech, computer age, creative destruction, credit crunch, David Ricardo: comparative advantage, demand response, deskilling, endogenous growth, energy security, energy transition, eurozone crisis, everywhere but in the productivity statistics, Financial Instability Hypothesis, full employment, G4S, Growth in a Time of Debt, Hyman Minsky, incomplete markets, information retrieval, intangible asset, invisible hand, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, knowledge worker, natural language processing, new economy, offshore financial centre, Philip Mirowski, popular electronics, profit maximization, Ralph Nader, renewable energy credits, rent-seeking, ride hailing / ride sharing, risk tolerance, shareholder value, Silicon Valley, Silicon Valley ideology, smart grid, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, total factor productivity, trickle-down economics, Washington Consensus, William Shockley: the traitorous eight

Myth 5: Europe’s Problem is all about Commercialization It is often assumed that Europe’s main disadvantage in innovation as compared to the US is its lack of capability for ‘commercialization’ (see Figure 2) which stems from problems with the ‘transfer’ of knowledge. In fact, EU problems don’t come from poor flow of knowledge from research but from the EU firms’ smaller stock of knowledge. This is due to the great differences in public and private spending on R&D. While in the US R&D/GDP is 2.6 per cent, it is only 1.3 per cent in the UK. In Italy, Greece and Portugal – the countries experiencing the worst effects of the eurozone crisis – R&D/GDP spending is less than 0.5 per cent (Mazzucato 2012b). If the US is better at innovation, it isn’t because university–industry links are better (they aren’t), or because US universities produce more spinouts (they don’t). It simply reflects more research being done in more institutions, which generates better technical skills in the workforce (Salter et al. 2000). Furthermore, US funding is split between research in universities and early stage technology development in firms.

In July 2010 the South Korean government announced that it would double its spending on green research to the equivalent of $2.9 billion by 2013 (almost 2 per cent of its annual GDP), which means that between 2009 and 2013 it will have spent £59 billion on this type of research in total. Figure 14 shows that Europe, the US and China have dominated global new investment in renewable energy between 2004 and 2011. In Europe, investments are led by Germany. How the ensuing eurozone crisis will affect investments over the next five years is unknown, but the recent trend has been of increasing overall investments. Figure 15. Government energy R&D spend as % GDP in 13 countries, 2007 Source: UK Committee on Climate Change (2010, 22). Figure 15 further shows that, within Europe, government investments in energy R&D differ greatly, with the UK, Spain and Ireland spending less than the US and many other Asian and European countries.

And, as discussed above, this has created a self-fulfilling prophecy, where the smartest young graduates think that it will be more exciting and fun to work at Goldman Sachs or Google rather than a State investment bank or a ministry for innovation. The only way to rebalance this problem is to upgrade, not downgrade, the status of government – and the words and the images used to describe it. There are important implications for the eurozone crisis. The conditions being imposed on the weakest countries, via the ‘fiscal compact’, should be conditions not about reducing the public sector across the board, but conditions that increase the incentives for governments to spend on key areas like education and R&D, and also to transform the public sector from within so that it is more strategic, meritocratic and dynamic. While this might sound difficult, it is no less difficult than imposing the austerity that is undermining the weaker countries’ socioeconomic structure and future competitiveness.


pages: 393 words: 115,263

Planet Ponzi by Mitch Feierstein

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

Now obviously, in a benign economic climate you would expect loan losses to come down. There’s nothing in principle strange about seeing loss provisions rise and fall. But we are not in a benign economic climate. To pick just a few issues: (a) borrowers are currently experiencing bizarrely and unsustainably low interest rates; (b) the real economy is weak, joblessness high, and the outlook deteriorating; (c) the eurozone crisis is impairing countless European financial institutions, many of which do business with Bank of America; and (d) under any deficit reduction plan at all, the fiscal stimulus is about to be ripped away from the American economy and replaced with fiscal tightening of unprecedented severity, while (e) the scope for further economic support from the Fed is minimal. Under these circumstances, I personally would consider beefing up my loan loss provisions.

Indeed, one of Berlusconi’s most toxic legacies has been the way he chose to infantilise politics, the way he made it seem less important than the next bunga bunga party. All this matters because countries need leadership in times of danger, and the danger facing Italy is now acute. By mid November 2011, interest rates on Italian ten-year bonds were pushing towards 8%, nudged upwards by worries of an economic slowdown and insufficient government zeal in tackling the country’s excessive debt, and exacerbated by the uncertainties of the eurozone’s stumbling response to crisis.9 These are times of almost breathless risk for the world economy. To understand those risks, you need, once again, to see things through the eyes of the bond market. Italy has a decaying economy. Some of its best industries are located in segments, notably shoes and clothing, where production is shifting remorselessly to lower-wage economies. Italian firms will do fine. They’ll simply offshore their production to the degree required‌—‌indeed, typically alert and nimble, they are already doing so.

She knew what was right, did it, and was prepared to reap the consequences, good and bad. By contrast, the political leaders of today seem to lack almost any desire to lead. That’s been comically obvious in Italy and saddeningly so in Japan. But Chancellor Merkel, who is neither a buffoon nor an incompetent, presents another version of the same basic deficiency. Her timidly evasive approach to the eurozone crisis has done nothing but exacerbate the problems. She hasn’t even had the courage to kick the can down the road; she’s insisted on nudging it, a centimeter or two at a time‌—‌and you can imagine for yourself how much the financial markets love that approach. A bolder leader would, two years ago, have propelled Greece into formal default, ring-fenced Italy and Spain, and placed Portugal and Ireland on probation.


pages: 318 words: 77,223

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

activist fund / activist shareholder / activist investor, Airbnb, balance sheet recession, bank run, barriers to entry, break the buck, Bretton Woods, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, collapse of Lehman Brothers, corporate governance, currency peg, disruptive innovation, Erik Brynjolfsson, eurozone crisis, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, fixed income, Flash crash, forward guidance, friendly fire, full employment, future of work, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, income inequality, inflation targeting, Jeff Bezos, Kenneth Rogoff, Khan Academy, liquidity trap, Martin Wolf, megacity, Mexican peso crisis / tequila crisis, moral hazard, mortgage debt, Norman Mailer, oil shale / tar sands, price stability, principal–agent problem, quantitative easing, risk tolerance, risk-adjusted returns, risk/return, Second Machine Age, secular stagnation, sharing economy, 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. For those recognizing how close the region had gotten to severe financial fragmentation and economic implosion, this 1 percent zone did not seem that bad.

KENNEDY Issue 1: Repeatedly inadequate and unbalanced economic expansion, reflecting cyclical/secular/structural headwinds, highlights the extent to which many advanced economies still lack proper growth models. As shown in Figure 5, advanced economies have had enormous difficulties growing since the global financial crisis, and without growth, it has been hard for them to improve living standards, reduce poverty, and invest in the future. Gross domestic product (GDP) levels in the Eurozone and Japan have struggled mightily to regain their pre-2008-crisis growth levels. The United Kingdom and the United States have done better, growing more robustly as they have taken advantage of more favorable national and geopolitical circumstances—be it, for example, the entrepreneurial nature of America’s more flexible and optimistic system, the ability of Britain to attract disproportionately large investments from certain parts of the world, or lower exposure to the effects of geopolitical tensions over Ukraine and parts of the Middle East.

Caruana noted that especially when the situation is made more complex by macro-prudential and monetary policies pulling in opposite directions, as has been the case in recent years, “gauging the effectiveness of macroprudential policies is another big challenge, especially when more than one tool is deployed.”14 Then there is the IMF’s important reminder, which, interestingly enough, comes from a comprehensive staff guidance note that looks at design and implementation issues, including the balance of benefits and risks as well as how to take into account individual country circumstances: “For macroprudential policy to be effective it needs to look beyond banks.”15 Finally there is the issue of how, when the time comes to do so, central banks will be able to exit from experimental policies in an orderly and calm manner. The difficulties were illustrated well in January 2015 by the messy way in which the Swiss National Bank removed an exchange rate floor that it had implemented three years earlier to minimize the damage to Switzerland from the Eurozone crisis. The move came as a complete surprise to markets, triggering the sorts of immediate price moves (including 40 percent in the currency and 10 percent in stocks) that would be notable in developing economies let alone a mature economy like Switzerland known for its stability and predictability. While highlighting a range of things and leaving several questions unanswered, Switzerland’s bumpy exit is indicative of something that we will develop at greater length in the next two parts of this book and that should be of interest to us all—namely, that the destiny of central banks is increasingly slipping out of their own hands.


pages: 263 words: 80,594

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

"Robert Solow", activist fund / activist shareholder / activist investor, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, basic income, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, bitcoin, Bretton Woods, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, credit crunch, Credit Default Swap, cryptocurrency, currency peg, David Graeber, debt deflation, decarbonisation, Donald Trump, eurozone crisis, 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, housing crisis, Hyman Minsky, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), Kenneth Rogoff, Kickstarter, land value tax, light touch regulation, low skilled workers, market clearing, means of production, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, Northern Rock, offshore financial centre, paradox of thrift, payday loans, pensions crisis, Ponzi scheme, price mechanism, principal–agent problem, profit motive, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Right to Buy, rising living standards, risk-adjusted returns, road to serfdom, savings glut, secular stagnation, shareholder value, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, the built environment, The Great Moderation, too big to fail, transfer pricing, universal basic income, Winter of Discontent, working-age population, yield curve, zero-sum game

Since 2009, these four central banks have pumped more than $10trn of digitally-created money into the global financial system by purchasing government bonds, which has pushed up asset prices across the board.22 The Fed’s balance sheet peaked at around $4.5trn in 2015, or a quarter of US GDP — the value of the UK’s programme as a percentage of GDP peaked at a similar level.23 The BoJ’s apparently unending QE programme has seen its assets climb to over $5trn, larger than Japan’s entire economy.24 In many countries, it is hard to see how this expansion in central bank balance sheets will ever be reversed.25 For a time, it looked as though this coordinated action might bring a relatively swift end to the series of overlapping recessions then taking place in the economies of the global North. But then came the Eurozone crisis. Just as Chinese money had flooded into US debt before the crisis, German money, derived from its large current account surplus, flowed into debt booms in the UK and the Eurozone — notably in Ireland and Spain. In Europe’s periphery, states like tiny, overindebted Latvia faced similar problems. The tell-tale signs of finance-led growth — rising debt, housing booms, and rising current account deficits — started to afflict many EU economies.

Rather than accept that the debts needed to be written off, and the system transformed, the EU — helped along by the IMF — decided to impose austerity on the struggling economies, immiserating a large portion of Europe’s population. The nationalised banks received easier treatment than the indebted states that had bailed them out: this was socialism for the banks, and ruthless free-market capitalism for everyone else. In the wake of the Eurozone crisis, it didn’t take long for Keynes to fall out of favour again. The Greek crisis was exacerbated by its inability to print its own currency due to its membership of the Euro. But the idea that the financial crisis was sparking a new wave of sovereign debt crises, from which no economy would be safe, spread like wildfire. Rather than identifying the root cause of the crisis — the model of finance-led growth constructed in the 1980s — politicians, academics, and commentators around the world seized on the narrative that the recession stemmed from too much government borrowing.


pages: 322 words: 87,181

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

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

But he has promised to maintain pension benefits, and his preferred social model appears to be Nordic-style flexicurity—a combination of high levels of economic security with market-based incentives.11 None of these steps will do much—certainly not in the short run—to address the key challenge that will define Macron’s presidency: creating jobs. Employment was the French electorate’s top concern and will be the new administration’s top priority. Since the eurozone crisis, French unemployment has remained high, at 10 percent—and close to 25 percent for people under twenty-five years old. As we have seen, conventional structural reforms have weak and ambiguous effects on employment, especially during times of depressed demand. There is virtually no reliable evidence that liberalizing labor markets will increase employment, unless the French economy receives a significant boost in aggregate demand as well.

Angela Merkel’s initial reaction to the election’s outcome was not encouraging. She congratulated Macron, who “carries the hopes of millions of French people,” but she also stated that she would not consider changes in eurozone fiscal rules.12 Even if Merkel (or a future government under her Social Democratic challenger Martin Schulz) were more willing, there is the problem of the German electorate. Having portrayed the eurozone crisis not as a problem of interdependence but as a morality tale—thrifty, hard-working Germans pitted against profligate, duplicitous debtors—German politicians will not have an easy time bringing their voters along on any common fiscal project. Macron is well aware of the difficulties he faces with Germany. Anticipating the German reaction, he countered it thus: “You cannot say, ‘I am for a strong Europe and globalization, but over my dead body for a transfer union.’”


pages: 414 words: 101,285

The Butterfly Defect: How Globalization Creates Systemic Risks, and What to Do About It by Ian Goldin, Mike Mariathasan

"Robert Solow", air freight, Andrei Shleifer, Asian financial crisis, asset-backed security, bank run, barriers to entry, Basel III, Berlin Wall, Bretton Woods, BRICs, business cycle, butterfly effect, clean water, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, connected car, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, discovery of penicillin, diversification, diversified portfolio, Douglas Engelbart, Douglas Engelbart, Edward Lorenz: Chaos theory, energy security, eurozone crisis, failed state, Fellow of the Royal Society, financial deregulation, financial innovation, financial intermediation, fixed income, Gini coefficient, global pandemic, global supply chain, global value chain, global village, income inequality, information asymmetry, Jean Tirole, John Snow's cholera map, Kenneth Rogoff, light touch regulation, Long Term Capital Management, market bubble, mass immigration, megacity, moral hazard, Occupy movement, offshore financial centre, open economy, profit maximization, purchasing power parity, race to the bottom, RAND corporation, regulatory arbitrage, reshoring, Silicon Valley, six sigma, Stuxnet, supply-chain management, The Great Moderation, too big to fail, Toyota Production System, trade liberalization, transaction costs, uranium enrichment

Consistent with the traditional view in the literature on economic growth and development, it seems to be the case that overall inequality at the global level is decreasing as most developing countries are enjoying rapid income growth.9 Despite the still very wide absolute differences in incomes, there is convergence between the average incomes of most, but certainly not all, developing countries and the more advanced OECD economies. However, within virtually all countries, rich and poor alike, inequality is increasing.10 Globalization is part of the explanation. The ongoing crisis in the Eurozone and the aftermath of the global financial crisis have fueled this development further. We elaborate on these patterns below. Within-Country Inequality The OECD reports that income inequality was increasing in most OECD countries from the mid-1980s to the late 2000s; exceptions were Turkey and Greece, where inequality decreased, and France, Hungary, and Belgium, where the degree of inequality remained stable throughout the late 2000s (figure 7.1).

Because the dynamics are such that a buildup of systemic risk is slow and often remains “under the radar,” policy makers do not feel a sense of urgency to act before a crisis unravels. In this sense, one could argue that globalization, as well as the complexity it involves, facilitates the undermining of fundamental elements of democratic systems. It follows that the urgency with which questions of “social systemic risk” need to be addressed cannot be underestimated. The Eurozone crisis has also shown that frustration with complexity is not the only potential source of social risk. In addition, there is also the risk that the political elites (those who wish to protect the benefits they derive from globalization) will be tempted to put democratic values aside in order to enable a timely and decisive political response. Unelected prime ministers, for example, have been installed in Italy and Greece, “in large part as a result of pressure from outside creditors.”

See blackouts; financial crises; natural disasters; pandemics cross-border flows. See capital flows; migration cultural protectionism, 190 cyber risks: cyberaggression, 40, 114–16, 122, 193; cybercrime, 115, 116, 122, 193, 240n36. See also Internet Data Center Knowledge, 118 debt: bank leverage ratios, 45–46, 46f, 68; collateralized debt obligations, 41, 42, 42b, 44f; corporate, 41–42, 43f; default risk, 54, 67; Eurozone crisis, 9–10, 188, 189, 190, 192, 209; of financial sector, 52; growth of, 40–41. See also mortgages default risk, 54, 67 Dell, 91 democracy: inequality and, 195; tensions with globalization, 60, 188–90; transitions to, 11–12. See also extremist political parties Deng Xiaoping, 74 density risk, 29–30. See also geographic concentration deregulation, financial, 38, 48–49, 50, 52, 52–53b, 62. See also financial regulation derivatives: credit default swaps, 41, 42b, 53b; definition of, 42b; innovations, 41, 61; market growth, 41, 53b; risks transferred through, 61.


pages: 394 words: 85,734

The Global Minotaur by Yanis Varoufakis, Paul Mason

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

The answer lies in the preceding pages, but it is perhaps time to spell it out. If the euro crisis were to be resolved quickly and painlessly, Germany (and the other surplus eurozone countries) would forfeit the immense bargaining power that the simmering crisis hands the German government vis-à-vis France and the deficit countries. To put the same point differently, the surplus countries now have one foot inside the eurozone and one foot outside it. On the one hand, they have bound the rest of the eurozone to them by means of a common currency, thus securing large intra-eurozone surpluses. On the other hand, they know that the ongoing crisis affects the deficit countries disproportionately and, so long as the surplus countries retain the option of getting out of the eurozone, their bargaining power in Europe’s forums is immense.

Concise and accessible, the books bring a fresh, unorthodox approach to a variety of controversial subjects. Also available in the Economic Controversies series: Lorenzo Fioramonti, Gross Domestic Problem: The Politics behind the World’s Most Powerful Number Robert R. Locke and J.-C. Spender, Confronting Managerialism: How the Business Elite and Their Schools Threw Our Lives Out of Balance Heikki Patomäki, The Great Eurozone Disaster: From Crisis to Global New Deal ABOUT THE AUTHOR YANIS VAROUFAKIS is Professor of Economics at the University of Athens, Visiting Professor at the University of Texas, and Economist-in-Residence for Valve Corporation. Born in Athens, 1961, Varoufakis completed his secondary education in Greece before moving to England where he read mathematics and economics at the universities of Essex and Birmingham.

In a never-ending circle, the imposed austerity worsens the recession afflicting these deficit states, and thus inflames the bankers’ already grave doubts about whether they will ever be paid back by Greece, Ireland, etc. And so the crisis reproduces itself. Tumbling mountaineers and the euro crisis The domino effect, with one deficit-stricken country falling upon the next, until none is left standing, is the common metaphor used to describe the eurozone crisis. I think there is a better one: a group of disparate mountaineers, perched on a steep cliff face, tied to one another by a single rope. Some are more agile, others less fit, but all are bound together in a forced state of solidarity. Suddenly an earthquake hits (the Crash of 2008) and one of them (let’s call her Helen) is dislodged, her fall arrested only by the shared rope. Under the strain of the stricken member’s weight as she dangles in mid-air, and with loosened rocks falling from above, the next weakest (or ‘marginal’) mountaineer struggles to hang on; eventually, Paddy has to let go, too.


pages: 268 words: 81,811

Flash Crash: A Trading Savant, a Global Manhunt, and the Most Mysterious Market Crash in History by Liam Vaughan

algorithmic trading, backtesting, bank run, barriers to entry, Bernie Madoff, Black Swan, Bob Geldof, centre right, collapse of Lehman Brothers, Donald Trump, Elliott wave, eurozone crisis, family office, Flash crash, high net worth, High speed trading, information asymmetry, Jeff Bezos, Kickstarter, margin call, market design, market microstructure, Nick Leeson, offshore financial centre, pattern recognition, Ponzi scheme, Ralph Nelson Elliott, Ronald Reagan, sovereign wealth fund, spectrum auction, Stephen Hawking, the market place, Tobin tax, tulip mania, yield curve, zero-sum game

A few weeks later, the offshore specialist convinced him to set up another vehicle, this one in Mauritius, which would be used to invest cash that wasn’t tied up in trading. Its name: the “NAV Sarao Milking Markets Fund.” Nav paid $2.3 million in professional fees for the work before he’d seen any benefits, 20 percent of which was kicked back to MacKinnon, Dupont, and James for making the connection. While his advisers took care of his business affairs, Nav was free to focus on trading. The Eurozone crisis continued to roil markets around the world, and by 2011 Nav’s system, an amalgamation of a modified TT algo and his own rapid-fire scalping, was working better than ever. His best day, by some margin, came on August 4, when apocalyptic headlines from Italy and Spain collided with weak U.S. employment figures and speculation about a forthcoming downgrade of U.S. government debt, driving the S&P 500 down 4.8 percent, its biggest drop since the collapse of Lehman Brothers.

Their pick, Jon Corzine, was a bona fide Wall Street legend who had run Goldman Sachs in the nineties before cashing in his considerable chips and entering politics, first as a senator then as governor of New Jersey. “It was as if a manager of the New York Yankees was making a comeback in the minor leagues,” wrote the New York Times. Corzine, who was a spry sixty-four, had started his career as a bond trader, and he believed the solution to the firm’s problems, at least in the short term, lay on the trading floor. It was the middle of the Eurozone crisis, and bonds issued by the likes of Italy, Spain, and Portugal were trading at considerably below their face value, reflecting the heightened probability of default. Convinced the authorities would never let that happen, Corzine quietly bought up $7 billion of the distressed securities, using them as collateral for a complicated so-called “repo” trade that served the dual purpose of keeping the instruments off the firm’s balance sheet and allowing it to declare its expected profits straightaway.


pages: 411 words: 114,717

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

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

As soon as the crisis started gathering momentum in 2008, the Polish zloty and the Czech koruna were free to fall. Exports picked up immediately, dampening rather than magnifying the suddenness and severity of the downturn. Where Hayek Lives Not all of the neighbors were so well positioned. Among the nations of the Baltics, the Balkans, and the smaller economies of Central Europe, only Slovenia had joined the Eurozone by the time the crisis hit in 2008. But many of these countries had deep ties to the euro anyway: like Hungary they had borrowed heavily in euros or Swiss francs, or they had pegged the value of their currencies to the euro. Because of their foreign debts they did not have the option of borrowing even more to spend their way out of recession, which was the route John Maynard Keynes had recommended as the answer to the Great Depression, and the route virtually every rich country has followed in hard times since the 1930s.

The Rest of the West Just as it makes no sense to analyze emerging markets in terms of generic rubrics like BRICS, developed markets also need to be analyzed as individual stories, and compared to rivals in the same income class. This is particularly true today in Europe, where nations of vastly different sizes and circumstances are often lumped together as interchangeable pieces of the troubled Eurozone. One of the interesting differences between the Eurozone crisis and earlier regional debt crises is that money is fleeing within the region, not out of it, as investors seek safe haven in the two largest European economies, Germany and France. Germany’s economic performance is the positive opposite of the troubles in some smaller Eurozone countries, because capital inflows are driving down borrowing costs in Germany, feeding a boomlet in the housing market, while the gradual decline of the euro is helping to push exports.

In retrospect, 1998 offered investors a rare opportunity to buy into those markets. In all of the regional financial crises going back to the Mexican Tequila Crisis of 1994, the country where the crisis started saw its stock market drop 85 percent on average (for example, Thailand in 1997–1998), while all of the markets in the region fell by an average of 65 percent. Europe is at a similar point today. The Eurozone crisis started in Greece, where the market is up slightly from a maximum decline of 90 percent, and the rest of peripheral Europe—Portugal, Italy, Ireland, and Spain—hit maximum declines that averaged 70 percent. Europe’s crisis echoes Asia’s circumstances circa 1997 in other crucial ways. In both regions, the smaller economies went into crisis embracing what they thought was a tool of stability, the fixed exchange rate.


Globalists: The End of Empire and the Birth of Neoliberalism by Quinn Slobodian

Asian financial crisis, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, business cycle, capital controls, central bank independence, collective bargaining, David Ricardo: comparative advantage, Deng Xiaoping, desegregation, Dissolution of the Soviet Union, Doha Development Round, eurozone crisis, Fall of the Berlin Wall, floating exchange rates, full employment, Gunnar Myrdal, Hernando de Soto, invisible hand, liberal capitalism, liberal world order, market fundamentalism, Martin Wolf, Mercator projection, Mont Pelerin Society, Norbert Wiener, offshore financial centre, oil shock, open economy, pattern recognition, Paul Samuelson, Pearl River Delta, Philip Mirowski, price mechanism, quantitative easing, random walk, rent control, rent-seeking, road to serfdom, Ronald Reagan, special economic zone, statistical model, The Chicago School, the market place, The Wealth of Nations by Adam Smith, theory of mind, Thomas L Friedman, trade liberalization, urban renewal, Washington Consensus, Wolfgang Streeck, zero-sum game

Anyone who believes it is pos­si­ble to acquire comprehensive knowledge enabling him 270 GLOBALISTS to control events has no knowledge, but only a pretense of knowledge.”36 Contrary to the notion of our present-­day knowledge society, scholars have noted, it is professions of ignorance and unknowability that are most helpful in exonerating ­those putatively responsible for global systemic risk, as, for example, in the world of finance.37 Not knowing the totality while knowing the rules needed to maintain it is the essence of the Geneva School variety of neoliberalism described in this book. As the example of Schäuble’s subsequent conduct in the Eurozone crisis showed, conceding the unknowability of the economy does not mean a willingness to exercise pragmatic open-­ mindedness or arrive at new management strategies through negotiation and compromise among diverse constituencies. Instead it meant an even more rigid tendency to default to the princi­ple and the rule. Accepting the economy as an internal limit to government means inflexible adherence to the laws seen as necessary to encase the unknowable economy itself.

Ibid., 110. 18. Ludwig Mises, Omnipotent Government: The Rise of the Total State and Total War (New Haven, CT: Yale University Press, 1944). 19. See Volker Berghahn and Brigitte Young, “Reflections on Werner Bonefeld’s ‘Freedom and the Strong State: On German Ordoliberalism’ and the Continuing Importance of the Ideas of Ordoliberalism to Understand Germany’s (Contested) Role in Resolving the Eurozone Crisis,” New Po­liti­cal Economy 18, no. 5 (2013): 768– 778; Werner Bonefeld, “Freedom and the Strong State: On German Ordoliberalism,” New Po­liti­cal Economy 17, no. 5 (2012): 633–656; Pierre Dardot and Christian Laval, The New Way of the World: On Neoliberal Society (New York: Verso, 2014), chap. 5; Ben Jackson, “At the Origins of Neo-­Liberalism: The ­Free Economy and the Strong State, 1930–1947,” Historical Journal 53, no. 1 (2010): 129–151. 20.

See also Chambers of commerce Equality, 100, 260, 269; before the law, 36, 45, 137, 173, 219; economic, 17, 101, 161, 225; formal, 224, 286; ­legal, 176, 270; po­liti­cal, 97, 153, 169, 199, 329n145; redistributive, 16, 103, 264; substantive, 223 369 Erhard, Ludwig, 162, 166, 170, 185, 203; as economics minister, 190, 197; on Eu­ro­ pean integration, 156, 186, 188–189, 194, 196, 209; on international investment law, 125, 138–140, 142–143 Eucken, Walter, 7, 17, 114–115, 117, 124, 189; critique of mass democracy, 251; on the economic constitution, 204–205, 211; on law and economics, 208; on thinking in ­orders, 209, 226, 248; Walter Eucken Institute, 3 Eurafrica, 183, 195, 200–201, 214–216, 219; as deviation from rules-­based order, 245 Eu­rope: Central, 9, 261; Common Agricultural Policy (CAP), 191, 197; Common Market, 191–193, 203, 216; Directorate General for Competition, 209, 274; East Central, 17, 110, 265; Eastern, 261; Eu­ro­pean Central Bank, 4; Eu­ro­pean Coal and Steel Community, 185, 188, 190; Eu­ro­pean Commission, 186, 197, 208–209, 276; Eu­ro­pean Court of Justice, 12, 207, 210, 214, 257, 274; Eu­ro­pean Development Fund, 194; Eu­ro­pean Economic Community, 22, 156, 158, 200–201, 217, 266; Eu­ro­pean ­Free Trade Area, 156, 188; Eu­ro­pean integration, 154, 168; Eu­ro­pe­ anization, 180, 195; Eu­ro­pean Union, 4, 5, 15, 105; Euroskepticism, 185, 188, 197, 203; Eurozone crisis, 270; Rome Treaty, 22, 81, 191–193, 195, 202, 214, 245; Schuman Plan, 190; Western, 13, 101, 107, 125, 137, 148, 156–158, 161–162, 183, 186, 192–193, 202. See also Constitutions; Eurafrica; Law; Marshall Plan Evolution: of races, 169; of rules, 14, 226, 238; of systems, 227, 230, 239 Exit options, 267, 275 Expropriation, 4, 29, 65, 123–124, 137–141, 148, 220; regulatory, 141 Extraterritoriality, 148 Fabian Society, 124 Failures: government, 251–252; market, 251 Fascism, 14, 16, 116, 277 Federal Union, 102, 122, 124 370 Index Federation, international, 22, 92 Federation, neoliberal, 18, 75, 90, 95, 98–104, 122, 133, 155–156, 181, 202; competitive federalism, 267; Eu­rope as realization of, 214; neoliberal federalism, 267, 278.


pages: 322 words: 84,580

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

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

If fiscal stimulus in a recession improves public finances, then deficit expansion creates the fiscal space it needs. The constraint used to excuse fiscal inaction—or worse—after the Great Recession turns out to have largely existed only in policy makers’ own minds. There is one exception. Where governments find themselves unable to borrow the money for deficit spending in their budgets, the limits of “fiscal space” are real. This happened to Greece and other countries hit by the eurozone debt crisis of 2010–12. Meanwhile, on the monetary side, the claim has been that once interest rates come close to zero—often dubbed the “zero lower bound”—central banks run out of ammunition to boost demand. In both cases, the excuse for letting economy-wide spending collapse is nevertheless weaker than it may seem. The reasons for this, however, belong to a much broader theme, which is how the West’s financial system has worked against the economy of belonging, and what policies are required to change this.

To sum up: rather than running out of strategies, central banks have engaged in a sort of learned helplessness. Rebuilding an economy of belonging requires them to unlearn it. On the fiscal side, too, the financial market reforms set out in the previous pages help remove one perceived obstacle to a high-pressure macroeconomic policy, the lack of “fiscal space.” When Greece and the other countries on the eurozone’s periphery were hit by the sovereign debt crisis of 2010–12 and needed to fund large budget deficits, they were simply unable to borrow money in the private market to pay for them. As members of the euro, they could not direct their own central banks to finance their budgets either. Instead they agreed to be helped with official loans from their eurozone partner countries. As is now incontrovertible, the conditions attached to these loans made the downturn worse than it needed to be.26 But in Greece and elsewhere, an alternative existed: radically writing down the existing debts of governments and banks, so that taxpayers would not be on the hook for those past mistakes.

But part of the vicious cycle bedevilling left-behind places is that credit creation is self-reinforcing.24 Economic decline makes lending less attractive to banks, and their withdrawal of credit aggravates the decline. In the United States, the financial crisis deepened a credit drought that was hitting smaller places particularly hard. Small community banks, which were a mainstay of local business lending, had already been disappearing, while many larger banks stopped issuing small business loans after the crisis.25 In Europe, the eurozone crisis saw a dramatic flight of finance from the hardest-hit crisis countries, which meant even solid businesses struggled to expand. (As discussed in chapter 9, even when easily available, bank lending is a dangerous form of finance. In places where debt and credit rise particularly fast, a turn in economic fortunes can destroy creditworthiness while trapping people in debt that prevents them from moving for work or starting new businesses.)


pages: 100 words: 31,338

After Europe by Ivan Krastev

affirmative action, bank run, Berlin Wall, central bank independence, clean water, conceptual framework, creative destruction, deindustrialization, Donald Trump, eurozone crisis, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, illegal immigration, job automation, mass immigration, moral panic, open borders, post-work, postnationalism / post nation state, Silicon Valley, Slavoj Žižek, too big to fail, Wolfgang Streeck, World Values Survey, Y Combinator

And the extent of overestimation is more pronounced for those who take a dim view of German unification. What this may intimate is that the unification of Europe has always been far more a dream than a reality. And it is the return of the East-West divide, more than any other political development, that fuels fears of a wholesale or even partial disintegration of the EU. In reality, all the crises that Europe faces today divide the union one way or another. The eurozone crisis divides the union over a north-south axis. Brexit highlights the division between the core and the periphery. The Ukraine crisis divides Europe into hawks and doves with respect to dealing with Russia. But it is the east-west divide that reemerged after the refugee crisis that threatens the future survival of the union itself. Eastern Europe’s Compassion Deficit “I find it difficult to comprehend,” German president Joachim Gauck once confessed, “how nations whose citizens were once politically oppressed and who experienced solidarity can withdraw their solidarity for the oppressed from other places.”26 Why is it that central Europeans have become so estranged from the fundamental values that underpin the European Union and show so little solidarity with the sufferings of others?


pages: 312 words: 93,836

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

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

During the height of the crisis, the ECB sent out one of its regular questionnaires to traders at around a hundred different banks across Europe.4 One of the questions was phrased as follows: ‘Has the market liquidity in the unsecured [money] market changed with respect to last year?’ Of the respondents, 93 per cent said that it ‘had worsened’. Another question to take the pulse of the market was whether traders thought that the money market was efficient. In 2005, over 80 per cent had answered either ‘significantly efficient’ or ‘extremely efficient’. Three years into the Eurozone crisis, in 2013, this figure had dropped below 1 per cent. The situation had been similar for all major currencies. The unsecured interbank money market, where banks lent to each other without requiring any collateral to protect them against a collapse of the other bank, died in August 2007. Banks no longer lent to each other the way they used to. And if they didn’t lend to each other, why would they lend to companies and households?

., 45 buy and sell orders, 208 ‘call-outs’, 24; symptom assessing, 25 ‘Can do More’, 144 Canada: dollar, 33; Foreign Exchange Committee, 179 Canary Wharf, London, 6 Cantor Fitzgerald, London office, 264 capital controls, abolishment, 133 Carr Futures, World Trade Centre office, 264 cash markets, importance loss, 139 cash squeezes, year-end, 44 cash-settled derivatives; benchmark need, 122–3; made market, 133 cassettes, history of, 110–11 CDOs (collateralised debt obligations), 11 central bank, 151; -banks unique relationship, 173; foreign exchange interventions, 233; inflation rate target, 70; LIBOR key variable, 53, 151; LIBOR use, 152; money pumping, 50; power, 174; power overestimated, 49, 54; price stability goal, 51; repos, 175; tips, 176; transparency, 40, 166–7; unexpected interest rate moves, 41; weakening of, 114 Channel 4 News, 11 Chase Manhattan, 131 Chemical Bank (JPMorgan Chase), 30 CIBOR (Copenhagen Interbank Offered Rate), 28, 78–9 Citibank, 29, 30, 58, 101, 153, 155, 182, 188, 193, 220, 223; benchmark manipulation fine, 160; ‘Scandi’ desk, 33; Tokyo dealing room, 196 CME (Chicago Mercantile Exchange), 123, 1288; Eurodollar futures, 126 collateral types, central banks lowering, 50 competition law, UK and EU, 222 complex structured products, valuation inability, 50 compliance departments banks, 253; post-scandals increase, 283 Cooke, Mr Justice, 282 copycat behaviour, market making, 202–3 Cosmopolis, 250 counterparties, confirmations, 18 Countrywide, 49 CPI, Inflation index, 149 credit: default swap market, 99; officers, 95; rating agencies, 96; risk, 137; risk measure for, 55 Crédit Agricole Indosuez, 37, 44, 58–9, 134, 155 Crédit Suisse, 153, 193, 221, 223; First Boston, 127 creditworthiness: ‘image problem’, 51; judgments on, 225; signals, 98, 99 cross-currency basis swap, LIBOR-indexed, 62 CRSs, 129 Darin, Roger, 115 dealing relationships, informal reciprocal, 227 dealing rooms, internal monitoring increase, 283 deceptive behaviour, LIBOR banks, 105; quotes post-crisis pressure, 106 Del Missier, Jerry, 77 Den Danske bank, 178 derivatives, ‘abstract’, 123–4; benchmark use, 150; borrowing and lending idea, 138; concrete type, 121; growing market, 79; interest rates, 30; LIBOR-indexed, 28, 71, 80, 104, 129; new instruments, 18; textbook explanation, 119–20; trade tickets, 141’usefulness’ of, 131 derivatives market: benchmark need, 119; LIBOR importance, 37; Scandanavia, 27 Deutsche Bank, 153, 193, 223; LIBOR controls deceptions, 183; LIBOR fine, 83 Diamond, Bob, 77 Dillon Read, 49 ‘discount windows’ lowering, 50 ‘dishonesty’, 249 Donohue, Craig, 128 dot-com bubble, 104 downgrades, credit rating agencies, 96 Dresdner Bank, 17, 155, 197 Duffy, Terry, 128 Easton Ellis, Bret, American Psycho, 236 economic data releases, examples of, 38 efficient market hypothesis, 195, 200–1; unrealistic assumption, 196 ‘emerging markets’, trading desks, 37 ERM (European Exchange Rate Mechanism) crisis, 31–2 Ermotti, Sergio, 213 EURIBOR (Euro Interbank Offered Rate), 14, 76–8, 126, 130; derivatives, 145; new unpredictability, 62; pre-Euro, 148 euro, the: Eurozone crisis, 109; launch of, 36 eurocurrency market, 113; central bank weakening, 111; deregulated, 114; Eurodollars, see below; fast growth of, 112; LIBOR derivatives replaced, 134 Eurodollar market, 113, 133, 152; advantages, 112; banks made, 117, 125; contracts standard maturity dates, 126; financial deregulation prompt, 116; futures, see below; gradual reduction of, 136; history of, 111; LIBOR rate making, 117, 129; rapid growth of, 115 Eurodollar futures, 125, 128, 265; bets on, 146; rationale for, 129; success of, 127 Euromoney, 135 European Banking Federation, 180 European Central Bank (ECB), 50, 109, 145 European Commission, 221 Euroyen LIBOR futures contract, 127 ‘Events’ central bank meetings, 40 excessive lending, inflationary fears, 114 exclusivity, self-perception, 269 expectations, games of, 103; overpriced stock, 104 ‘expert judgments’, banks LIBOR quotes, 278 Fama, Eugene, 195 ‘fat fingers’ errors, 253 FBI, USA, 192–3 FCA (Financial Conduct Authority), 183–4, 188, 219, 282; Fair and Effective Markets Review, 222; prohibited individuals list, 285 fear, rumours of, 266 Federal Reserve, see USA FIBOR (Frankfurt Interbank Offered Rate), 19, 127 financial crisis, Asia 1997, 36 financial crisis 2007–8; decent culture erosion explanation, 279; familiar analysis of, 114; financial market illuminating, 275; -LIBOR implications, 52, 111; money markets freeze, 109 financial markets: cartels, 222; deregulation 115–16; instruments liquidity, 43; misconceptions, 236; self-regulated, 113, 171; see also, money markets Finers Stephens Innocent, 3 Finland: USSR collapse impact, 20; USSR Winter War, 65 ‘firm policy’, interbank spread choosing, 229 fixed exchange rates, sustainability, 32 flat switch, 92–5 flow traders, 143 Forex, 1995 exam, 223; reciprocity endorsed, 227 FRAs (forward rate agreements), 28, 75, 91, 129–30; growth of, 148 Friday dress policy, 135 FSA (Financial Services Authority), UK, 1–2, 67, 77, 98, 105, 124, 163, 180, 243; prohibition orders, 4; suspension, 5 ‘Full Amount’ call, weakness indicator, 143 funding costs:, averages, 104; LIBOR signalling, 97; -market liquidity relation, 44 futures contracts: agricultural, 120; cash-settled, 125; transparent exchanges, 63 FX (foreign exchange) market, 172, 196, 245; bank price influence, 212; big banks domination/market concentration, 193, 195, 210, 212, 223, 234; ‘clear the decks’, 210; ‘community’, 190; ethical problem, 213; global banks 2014 fines, 188; interbank spread survey, 228; interest rate markets joining, 31; Japanese banks borrowing, 33; London ‘banging the close’; 209; non-public information grey zone, 224; order books, 7; reciprocity, 224; scale of significance, 126, 192, 232; spot market desk, 214, 217; standardised norms, 194; swap market, see below; ‘The Cartel’, 220; traders, see below; turnover scale, 212 FX swap market, 134, 137, 145, 146; interest rate speculation, 133; Japanese traders, 34; lower credit risk, 137, 144; 9/11 trading, 265; spot-prices, 31, 227 FX traders, 191; club mentality, 269; desks, 30; respect among, 269; secret code us, 219; ‘techniques’, 204; varied backgrounds, 216 Gelboim, Ellen, 153 gentlemen’s agreements, 141 ‘getting married to your position’, trading attitude, 257–8 global merchandise exports, growth, 112 Goldman Sachs, 49, 140, 193, 223, 272 Goodhart, Charles, 173 Greece, 2015 ATM queues, 109 Greenspan, Alan, 15, 51, 173–4 Greenwald, Bruce, 225 guilt, feelings of, 78, 169, 243, 259 Häyhä, Simo (‘White Death’), 65 ‘Hambros’, 194 Harley, Dean, 231 Hayes, Tom, 8, 13, 72, 92–3, 115, 238; prison sentence, 12 HBOS, 183 headhunters, 160 HELIBOR (Helsinki Interbank Offered Rate), 28 Hester, Stephen, 284 Hintz, Brad, 10 HSBC, bank, 27, 153, 155, 188, 193, 208, 213, 223; FCA fine, 219; FX trading, 116, 187; Group Management Training College, 187; Stockholm, 31 Hull, John, 150 Hunger Games series, 255 Hyogo Bank default, 33 ICAP, 86, 101, 175; LIBOR fine, 85 ICMA (International Capital Market Association), 174 IKB bank, 50; rollover problems, 49 illiquidity, temporary, 43 Indonesia, financial crisis, 36 Industrial Bank of Japan, 34 ‘industry’, financial, 154–5 information: LIBOR delays problem, 49, 54; big banks superior, 210 instincts, 226 interbank money market, 38; central bank influence, 39; efficiency estimate change, 109; lending fall, 111; LIBOR, see below interest rate(s): benchmarks, 14; central banks forecasts, 166; changes impact of, 38; derivatives, 17, 174; hedging, 128; movement, 42; short-term, 28, 133; swaps sizes, 142 International Code of Conduct and Practice for the, 216 International Monetary Market (IMM), 72; contracts conventions, 126; LIBOR fixings, 73–4 investment banks, risk takers, 272 Ireland, Financial Regulator, 4, 168, 281 IRS, interest rate swap, 129–30; short-term, 140 ISDA (International Swaps and Derivatives Association), 174; fix, 14 Japan: bank sector/system: crisis, 47, 81; dollars difficulty period, 34; fear premium, 36; Financial Services Agency, 101; FX market concentration, 193; FX ‘premium’, 35–6; safe perception change, 33; unique derivatives market, 36; yen market, 8, 45 JP Morgan/JP Morgan Chase, 92, 105, 153, 178, 188, 192–3, 220–3 Kahneman, Daniel, 255 Kerviel, Jérôme, 250 Keynes, J.M., General Theory of Employment, 102 Kipling, Rudyard, 127 KLIBOR (Kuala Lumpur), 37 Knight, Angela, 107 Lapavitsas, Costas, 6–7 layering, 204 Leeson, Nick, 250 ‘legacy issues’, 236 Lehman Brothers, 2, 10, 48–9, 59, 105, 162, 272; bankruptcy filing, 160; collapse of aftermath, 96 Lewis, Ken, 164 LIBOR, 19, 28, 76–7, 104, 127, 130, 147, 209, 234, 265; anti-competitive process, 186; banking lobby regulated, 180–1; ‘barometer of fear’, 96; benchmark significance, 192, 225; central banks perfection assumption, 49; controls deception, 184; crisis-induced ‘stickiness’, 106; crucial price, 13; daily individual quotes, 97; derivatives, see below; ‘Eurodollar futures’ origin, 126; FCA regulated, 282; ‘fear’ index, 15; fixing panels, see below; future direction of, 38; inaccuracy possibilities, 74; interbank money market gauge, 39; jurisdiction issue, 115; manipulation, 7, 12, 14, 78; manipulation impossibility assumption, 81; market-determined perception, 88, 149; mechanism, 104; minute change importance, 73; new unpredictability, 62; 1980s invention, 111; objective process ‘evidence’, 148; perception of, 119; players as referees, 80; post 2007 interest, 53; pre-2013 unregulated, 118; predicting difficulty, 70; regulatory oversight lack, 179; retail credit impact, 277; sanctioned secrecy, 181–2; savings and borrowings dominance, 107; scandal breaking, 81; state measure use, 151; three-months, 71; ‘too big to fail’, 279; use of limited post-scandal, 278 LIBOR derivatives market, 8, 45, 137–8, 232; autonomous development of, 111; banks made, 125; ‘community’, 190; -FX connected, 189; imaginary money market, 148; increased abstraction of, 144–6 LIBOR panel banks, 74–5, 79, 98, 118, 172, 282; -LIBOR implications, 52 big banks dominated, 173, 179–80; fixing process, 75; membership criteria, 184–5; punishment idea, 108; post-scandal membership, 186 LIBOR scandal, 77, 152, 167, 245; correctness attempts, 277; post- definition unchanged, 278; breaking of, 81; Wall Street Journal on, 238 LIBOR-OIS spread(s), 51, 54–5, 99, 151 LIFFE, 126–7 liquidity: and credit crunch 2008, 2; credit issues, 45; informal norms need, 284; provision ‘duty’ 229; risk, 42–3, 55, 70 Lloyds Bank, 153, 183; LIBOR fine, 83 long/short positions, 26 Lukes, Steven, 186 makers, price, 24 Malaysia, financial crisis, 36 Mankell, Henning, 235 ‘marked to market’ trading books, 62 market, the financial: ‘colour’ 202; ‘conventions’, 228–33; ‘courtroom’, 171; interbank spread choosing ‘image’, 229; liquidity risk, 42–3; making, see below; perfections of, 15; relationships dependent, 225–6; risks limits management failure, 281 market makers/making, 24, 72, 117, 201, 206, 217, 226–7, 257; ‘ability’, 185; cash-settled derivatives, 133; failure to manage, 281; NIBOR IRS, 132; profession of, 200; two-way price quoting, 228; visibility of, 202 Martin Brokers, 85 Mathew, Jonathan, 139 McAdams, Richard, 231 McDermott, Tracey, 282 Meitan Tradition, 100, 175 Merita Bank, 56 Merrill Lynch, 2–3, 8–9, 12, 46, 49, 59–60, 62, 64, 69, 92–3, 96, 140, 153, 155, 160–1, 164, 188, 272, 285; Bank of America takeover, 67; bonuses, 10, 162–3; financial centre, 48; International Bank Limited Dublin, 4; mismarking, 68; risk taking encouraged, 281; silence rule, 242 Midland Montagu (Midland Bank Stockholm Branch), 20, 22–3, 27, 29; Stockholm, 22, 29 ‘Millenium bug’ fears, LIBOR impact, 44 mismarking, 9 mistakes, fear of, 26 Mollenkamp, Carrick, 98 ‘monetary transmission mechanism’, 39 money market(s): decentralised, 224; freeze, 110; international basis, 112; ‘risk premium’, 42; stable illusion-making, 106; -state link, 224 Moody’s, 96 morals, 66; morality, 69 Morgan Stanley, 49, 193, 223, 272 mortgage bonds, 21 NASDAQ stock exchange, transparency, 220 New York 2001 attacks, 263 New York Times, 4, 9, 11, 163, 241, 243 NIBOR (Norwegian Interbank Offered Rate), 28, 72, 130–1; fixing dates, 76; inaccurate fixing, 74; IRS market, 132; new unpredictability, 62; one month IRS market, 136 nicknames, use of, 25–6 Nordbanken, nationalised, 27 Nordic bank branches, 30 Norges Bank, NIBOR use, 152 Norinchukin Bank, 153 Northern Rock, Newcastle queues, 109 Norway, banking system, 131 ‘objective’ fact, LIBOR, 149 ‘off-balance-sheet’, trading, 137–8 official interest rate, predicting, 38 OIS (overnight index swap), 51; see also LIBOR-OIS one month IRS market, 136 OPEC (Organization of the Petroleum Exporting Countries), US dollar surpluses, 113 options desk, FX, 214 ‘over-the-counter’ trades, 63 derivatives, 129, 134; interest rate options, 130; markets, 227 Philippines, financial crisis, 37 Philips, cassette launch, 111 PIBOR (Paris Interbank Offered Rate), 19, 127 post scandals, reforms, 282 price(s), as interactions, 200; brokers indications role, 87; ‘resolution hypothesis’, 218 primary dealers, 175, 178 privacy, individual rights to, 167 Rabobank, LIBOR fine, 83, 153, 282 RBC, bank, 223 RBS, bank, 92, 153, 185, 188, 192, 220–1, 223, 284; LIBOR scandal fine, 83 reciprocity: -and trust, 226, 284; informal agreements, 228 regret, fear of, 258 regulatory arbitrage: Eurodollar market prompting, 118; platform for, 114 ‘reputation’, 185 respect, among traders, 267 Reuters, 19, 79, 151; Dealing, 41, 195, 260; Dealing 2000–2, 29, 34, 194; indicative prices, 62; screen price, 53 risk, 135; buzz of, 261–2; limits breaking, 274; ‘loss aversion’, 255; managers, 253; organizational limits, 250; pressures for, 63 risk taking: addictive, 262; enjoyment of, 260; fear control, 263; increase, 73; individualistic, 262; reward anticipation, 254; reward interpretation, 259; supervision need, 253 risk takers, 270; respect among, 268–9 Robert, Alain, 260 ‘rogue traders’, 1, 237; ‘bad apples’ narrative, 237, 240, 246, 279; fame, 252; fascination with, 246; losses, 259; ranking list, 250; risk list, 251; scandals, 258; stigma, 247 rogue trading, 274; definitions, 249; labelling, 248; risk link, 250 Royal Bank of Canada, 153 RP Martins, 153 rules of the game, loyalty to, 25 ‘run-throughs’, 87–9, 226–7 Russia, financial crisis, 36 Ryan, Ian, 3, 9, 68 Sanford C.


pages: 270 words: 73,485

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

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

In a globalized world, even the nation-state is not an autonomous borrower which can dictate its terms. The holders of the debt may be spread worldwide. Even if the debt is held by nationals, they do have the freedom to invest their money elsewhere. Since some of the rentiers may be pension funds, there is an intertemporal aspect to the necessity for the borrower to maintain a good credit rating. The Crisis in the Eurozone This has been shown in the eurozone crisis, which began in 2010 – the second leg of the crisis that had started with the collapse of Lehman Brothers. The European search for stability in exchange rates had climaxed in the decision to have a single currency, the euro, to which the first countries signed up in 1999.10 The European Central Bank (ECB) was set up in the image of the German Bundesbank. It has a mandate to keep inflation low, using an explicitly monetarist strategy.

Despite a deep recession, it found the control of inflation difficult. It joined the ERM in 1989, but exited in 1992 as the pressure to maintain parity within the ERM became too costly in terms of high interest rates. The rest of the members of the ERM moved on to set up the eurozone after 2001, when the EEC had expanded and had become the EU. Nineteen countries as of now are members of the eurozone. Their woes are part of the story of the crisis as it entered its second phase. In the first few years, the euro seemed to work fine, although the rules of fiscal discipline were not strictly adhered to, even by Germany and France. But there was a boom and countries managed to grow. They were also able to borrow on the commercial market and interest rates on sovereign debt converged to the low favorable rate Germany was paying.

(i) Elizabeth II (i) emerging economies (i) benefits of capital flows (i) capital inflows (i) saving and investment (i) empires, end of (i) empirical analysis of asset prices (i) employment and fiscal policy (i) role of government spending (i) energy-intensive technology (i) Engels, Friedrich (i) The Communist Manifesto (with Karl Marx) (i) The Condition of the Working Class in England (i) entrepreneurs (i) equation of exchange (i) equilibrium (i) assuming (i) flow (i) Keynesian (i) market economy (i) as naturally determined (i), (ii) possible states of (i) rabbits and foxes game (i) theory of (i), (ii), (iii) Walras’ view of (i) see also flow equilibrium; general equilibrium theory; partial equilibrium theory; disequilibrium, stock equilibrium tradition (i) equities (i) equity bundles (i) Essay on Population (Malthus) (i) Europe, political upheaval (i) European Central Bank (ECB) (i), (ii) European Economic Community (EEC) (i) European Monetary System (i) Eurozone (i), (ii) crisis (i) excess credit (i) Exchange Rate Mechanism (ERM) (i) exchange rate policy, role of (i) exchange rates Bretton Woods system (i) fixed (i) flexibility (i), (ii) setting level of (i) expectation of distribution (i) expectations adaptive (i), (ii) rational (i), (ii), (iii) role of (i) statistical definition (i) exploration, effects of (i) externality (i) fallacy of aggregation (i) Fama, Eugene (i), (ii), (iii) Fannie Mae (i) Federal Reserve, reaction to Great Depression (i) feudalism (i) financial crisis, definition (i) financial innovations (i) financial instruments (i), (ii), (iii) financial markets (i), (ii), (iii), (iv) financial revolution (i) financial service providers, insolvency and illiquidity (i) Financial Services Authority, UK, regulatory approach (i) financial services, availability (i) First Socialist International (i) fiscal crisis (i) fiscal policy (i), (ii) Fisher, Irving (i) fixed costs (i) flexible exchange rates (i) food prices (i) foreign aid (i) foreign exchange Asian countries (i) dealing (i), (ii) levels of transactions (i) theory of rates (i) foreign investment, liquidation (i) forward trading (i) France Keynesian experiment (i) occupation of Germany (i) FRB-MIT-PENN model (i) Freddie Mac (i) free movement, capital and labor (i) free trade (i), (ii) French Revolution (i) Friedman, Milton (i), (ii), (iii), (iv) A Monetary History of the United States (with Anna Schwartz) (i) A Theory of the Consumption Function (i) Frisch, Ragnar (i), (ii) full employment (i), (ii), (iii) future developments, optimism/pessimism (i) Gaitskell, Hugh (i) Galbraith, John Kenneth (i) The Affluent Society (i) Garicano, Luis (i) Gates, Bill (i) Geddes Axe (i) Geithner, Timothy (i), (ii), (iii) general equilibrium theory (i), (ii) Germany, post-World War I (i), (ii) Glass-Steagall Act (i) global economy, growth poles (i) global imbalances (i) global interdependence (i) globalization (i) acceleration (i) effect on interest rates (i) effects of (i) events (i) inapplicability of Keynesian models (i) market economy (i) nineteenth-century (i) glut, possibility of (i) Glyn, Andrew (i), (ii) God, as clockmaker (i) Godwin, William (i) An Enquiry Concerning Political Justice and Its Influence on General Virtue and Happiness (i) gold flows (i) Gold Standard (i), (ii), (iii), (iv), (v) Bretton Woods system (i) leadership of (i) return to (i), (ii), (iii) suspension (i), (ii), (iii) UK exit (i), (ii) Goldberger, Arthur (i) goodness of fit (i) goods, production and supply (i) Goodwin, Richard (i) Goodwin cycle (i) rabbits and foxes game (i) government debt, grading (i) government spending attitudes to (i) benefit (i) post-World War I (i) governments influence over behavior (i) interference and corruption (i) role of (i) Grapes of Wrath, The (John Steinbeck) (i) Great Depression (i), (ii), (iii) monetary policy (i) reactions of economists (i) role of Keynesian model in recovery (i) Great Moderation (i), (ii), (iii), (iv), (v) Great Recession banks (i) as economic crisis or crisis of economics (i) effects of (i) events of (i) failure to anticipate (i) overview (i) prospect of recovery (i) responses to (i), (ii) Great War see World War I Greece, Great Recession (i) Greenspan, Alan (i), (ii), (iii), (iv) The Age of Turbulence (i) gross domestic product (GDP) (i) growth poles, proliferation (i) Hamilton, Alexander (i) Hansen, Alvin (i), (ii) Hansen, Lars Peter (i) Harris, Seymour (i) Harrod, Roy (i) Harvey, William (i) Hatry, Clarence (i) Hayek, Friedrich (i), (ii), (iii) development from Wicksell (i) return to favor (i) heterodoxies (i) heterogeneity, of total output (i) Hicks, John (i) high yields (i) home ownership (i) house prices (i), (ii) household debt, rise in (i) houses as appreciating assets (i) depreciation (i) Hume, David (i), (ii) A Treatise on Human Nature (i) hydraulic analogue model (i) hyperinflation, Germany (i) ideological capture (i) ideological pressure (i) immigrants, scapegoating of (i) imperfect competition (i) theory of (i) imperialism (i) income (i) growth: Harrod’s theory (i); long boom (i) inequality (i) levels (i); influence of money supply (i); new classical model (i); per capita (i) incomes policies (i) indentured labor (i) India (i) individual volition, within overall pattern (i) Industrial Revolution (i), (ii) industrial unrest (i) industrialization effects of (i) less-developed countries (i) industry, working conditions (i) inequality income and wealth (i) long-run trends (i) inflation determining factors (i) eighteenth century (i) house prices (i) Hume’s theory (i) Keynesian models (i) Locke’s theory (i) and manufacturing supply (i) as permanent (i) post-World War I (i) and price rises (i) as priority (i) Smith’s theory (i) as target of public policy (i) and unemployment (i) inflation rates, developed countries (i) information, as public (i) infrastructure development (i) initiative, opportunities for (i) injecting liquidity (i), (ii), (iii) see also quantitative easing innovations clusters (i), (ii), (iii) need for (i) role in boom and bust (i) Institute for Konjunktur (i) interconnectedness (i), (ii) interdependence (i), (ii), (iii) interest attitudes to (i) long-/short-run rates (i) market rate vs. natural rate (i) vs. profit (i) regulation (i) interest rates effect on recovery (i) global effects (i) Keynes’ view (i) rise in (i) setting (i) US (i) interference and corruption (i) interlinking, developed and emerging economies (i) international economics, interdependence (i) International Gold Standard (i) International Monetary Fund (IMF) purpose (i) warnings of crisis (i) international trade (i), (ii), (iii) invention, and globalization (i) investment and aggregate effective demand (i) and bank credit (i) in business (i) expectations (i) as future-oriented (i) high yields (i) theory of (Keynes) (i) invisible hand (i), (ii), (iii), (iv) involuntary unemployment (i) iron law of wages (Ricardo) (i), (ii) irrational exuberance (i), (ii) IS-LM model (i), (ii), (iii) Is the Business Cycle Obsolete?


pages: 357 words: 99,684

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, centre right, citizen journalism, collapse of Lehman Brothers, collective bargaining, creative destruction, credit crunch, Credit Default Swap, currency manipulation / currency intervention, currency peg, do-ocracy, eurozone crisis, Fall of the Berlin Wall, floating exchange rates, Francis Fukuyama: the end of history, full employment, ghettoisation, illegal immigration, informal economy, land tenure, 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

‘Real wages in Germany: numerous years of decline’, DIW Weekly Report, 23 October 2009. 8.Gordon Brown, Mansion House speech, 20 June 2007. 9.K.-M. Yi, ‘The Collapse of Global Trade: The Role of Vertical Specialisation’, in Richard Baldwin and Simon Evenett (eds), The Collapse of Global Trade, Murky Protectionism, and the Crisis: Recommendations for the G20, London 2009; and Barry Eichengreen and Kevin O’Rourke, voxeu.org. 10.Costas Lapavitsas et al., ‘Eurozone crisis: beggar thyself and thy neighbour’, Research on Money and Finance Report, March 2010. 11.Ewald Engelen et al., ‘After the Great Complacence’, Oxford 2011, p. 209. 12.Andrew Haldane, speech, November 2010, op cit. 13.Child and Working Tax Credit Statistics, HMRC, hmrc.gov.uk/stats, April 2010. 14.BBC News, ‘Labour attacks Nick Clegg over social mobility plan’, 5 April 2011. 15.Stephanie Flanders, ‘Have British jobs gone to British workers?’

P. 127 cellphones 75–76, 133–34 Central Security (Egypt) 9, 11, 17 Challenge of Slums, The (UN) 198–99 Charles, Prince 51–52 Chávez, Hugo 33 China 38, 78, 108, 112, 121, 125; consumption 109; foreign currency reserves 107; monetary policy 123 Chomsky, N. 28–29 Chris (student demonstrator) 48 Cinco, Mena 196–98, 206, 206–9 Citigroup 67 civil disobedience 56 class struggles 131 Clegg, Nick 44 Climate Camp movement 1, 55 Clinton, Hillary 26 collaborative production 139–41 Coming Insurrection, The 189–91 commodity price inflation 120–22, 195 communes 189, 190 Communiqué from an Absent Future 38–39 Communist Manifesto, The (Marx and Engels) 174, 188–89 communists 80 computer gamers 136 Conservative/Liberal Democrat coalition 44 consumption, and self-esteem 80–81 control 148 co-operatives 84 corruption, threat of 177–78, 205 creative destruction 106 credit crisis 106, 109 credit default swaps 99, 107 Critical Legal Thinking website 54 cross-border links 69–70 Cruz, Gloria 204 cultural stereotypes 27 culture: mass 29–30; popular 65, 176; transnational 69; working-class 72; youth 70 culture wars 178–84 currency manipulation 121–22 currency war 122–24 cyber-repression 78 Czechoslovakia 173 Darkness at Noon (Koestler) 128–29 Davies, Nick 148 Davos 17, 111 Dawkins, Richard 75, 150 Day X, 24 November 2010, London 41–42, 46–48 Debord, Guy 42, 46–17, 51 debt, toxic 110–11 default theory 111 deflationary slump 123 Deleuze, Gilles 46, 85 Delius, Frederick 127, 132, 152, 176 democratic counter-revolution 177, 188 demographics of revolt 66, 66–73; Athens, December 2008 uprising 73; students 66–71; the urban poor 70–72 Deptford 57 Detrick, Terry 154, 155–56, 156 devaluation 91, 122–23 @digitalmaverick 1–2 discontent, three tribes 68–69 disillusionment 68–69 disinformation, counteracting 146 disposable income 67 Dodd–Frank Act (USA) 167 @dougald 1 Dubstep Rebellion 48–52; blog 52; the Book Bloc 50–51; casualties 51; Fleet Street photographers 51; graffiti 51; marchers 49; police–student confrontation 50–51 durable authoritarianism 27, 30, 191 Durkheim, Emile 103–4 Dworkin, Ronald 46 eBay 74 e-commerce 81 economic crisis 3; revolutions, 1848 173 economic stagnation 191–92 economic theory 111 Economist, the 25 egoism 132 Egypt: bread prices 11; democratic counter-revolution 177; economic growth 119; economic indicators 119–20; elections, November 2011 177; Gini Index 119; inflation 120–21; opposition movement 10; organized workforce 72; police corruption 11; privatizations 17–18; unemployment 119–120; urban poor 71; working class 19–20 Egyptian revolution, the: the Army and 178; balance sheet 5; bread prices 11; casualties 17; chants 191, 211; counter-revolution 18; Day of Rage, 28 May 15–17; and Facebook 6, 10, 11, 12, 14; freedom 5; immolations 11, 71; Internet switched off 14; medical professions 20–22; military coup 17–19; numbers involved 13; outbreak, 25 January 10–14, 83; police violence 15; questions facing 23–24; Twitter blocked 14; Twitter feeds 13, 14; ultras 16–17; working class 20; on YouTube 11, 14, 15–16; zabbaleen riots 6–10 email 10 emancipated life 143–44 Engels, Friedrich 174, 188–89, 190 @eponymousthing 184 equity withdrawal 114 Estero de San Miguel, Manila 196–99, 205–6, 206–9 Eternal Sunshine of the Spotless Mind, The (film) 29 Eurobonds 113 Eurocrisis, the 111–13 European Central Bank 92, 98, 104, 112 European Financial Stability Facility 92, 104 European Financial Stabilization Facility 113 European monetary union 112, 113 European Union: response to Greek debt crisis 91–92, 96, 98–99, 104; sovereign debt crisis 104 Europe, revolutions, 1848 172 Eurozone 104; debt crisis 91–92, 99, 111–13 Execution of Maximilian (Manet) 53 exploitation 85 Facebook 74; Arab world growth of 135; and the Egyptian revolution 6, 10, 11, 12, 14; establishing connections with 75; ‘We are all Khaled Said’ page 11; and the Iranian revolution 34; and London trade-union demonstration, March 2011 57–58; Middle East usage 135; reciprocity 77; user numbers 135 Farewell to the Working Class (Gorz) 79–80 fatalism 30, 31 feedback loops 187 Feldstein–Horioka paradox 107 Feldstein, Martin 107 Fennimore and Gerda (Delius) 127, 132 First World War 128 Fisher, Mark 30 Flaubert, Gustave 171, 192 Flickr 10, 75 Food Price Index 121 Fordist era 28 Foucault, Michel 46, 84–85 fragmentation 80–81, 82 fragmented power 17 ‘Fragment on Machines’ (Marx) 143–44 France 173; Languedoc, 1848 174, 187; socialism 188; see also Paris freedom 27, 124; of expression 127; individual 127–30; Marx on 141–42; suppression of 131–33 Freeman, Richard 108 free-market economics 92, 188 Friedman, Milton 111 Fukuyama, Francis 30 G20 Summit, 2009 48, 122 Gaddafi, Muammar 25, 31 Gapan City, Philippines 193–96 Gates, Bill 23, 110 gay rights 132 Gaza 37; Israeli invasion of 33 Gaza City 31 Gaza Flotilla, May 2010 55 general intellect, the 144, 145–47 General Motors 39 Germany 113, 191; revolution of 1848 172; wages 108, 112 @Ghonim 13 Giddens, Anthony 31 Gide, André 127 Giffords, Gabrielle 182 Gini Index 119 Gladwell, Malcolm 81–82, 83 global capital flows 107–8 global financial crisis 31, 39, 66–67, 85, 110–11, 115, 191 globalization 69,72, 105, 108, 109, 122, 124, 149, 191 Golkar, Saeid 78 Googlebombs 78 Gorz, André 79–80, 143 graduate with no future, the 66–73, 96–97; disposable income 67; as international sub-class 69; life-arc 67; numbers 70; revolutionary role 72–73; and the urban poor 70–71 Grapes of Wrath, The (Steinbeck) 153, 155, 159, 163, 164 Great Britain: anti-road movement 56; benefit system 113–14; changing forms of protest 54–57; collapse of Labour 113–15; devaluation 123; Education Maintenance Allowance 47; end of winter of discontent 61–62; equity withdrawal 114; European elections, 2009 115; general election, 2010 43; the graduate with no future 96–97; Millbank riot 42–44; non-UK born workers 115; police failures 61; public spending cuts 54–55; radical tactics 54–57; spontaneous horizontalists 44–46; Strategic Security and Defence Review 124; student population 70; UK Uncut actions 54–55; university fees 44, 47, 50, 54; youth 41–42, 44, 53–54; youth unemployment 66 Great Depression, lessons of 123–25 Great Doubling 108 Great Unrest, 1914 175–76 Greece 37, 188; anomic breakdown 103–4; austerity programme 92–93, 102; bailouts 92, 96, 98, 113; cabinet reshuffle 96, 97–98; debt crisis 90, 91–92, 98–99, 112; GDP 91; general election, 2009 91; general strike 99; the left 100; media ownership 87; Medium Term Fiscal Strategy 91; model of capitalism 102; MP resignations 89; Papandreou government falls 96; political legitimacy lost 104; the salariat 101; tax evasion 97; tax revenues 92; tax system 91; see also Athens Greek Communist Party (KKE) 88, 90 Grigoropoulos, Alexandras 32 grime (music) 52 Grossman, Vasily 129 @GSquare86 69 Guindi, Ezzat 9 hackers 35 el-Hamalawy, Hossam, @3arabawy 10, 22, 71 Hardy, Simon 69 Hayek, Friedrich 111, 209 Henderson, Maurice 161–62 Hennawy, Abd El Rahman, @Hennawy89 12–13 Here Comes Everybody (Shirky) 138 Herman, Edward S. 28–29 hidemyass.com 14 hierarchy: erosion of 80–81; informal 83; predictability of 77 higher education market 67 Hill, Joe 176 historical materialism 131 Hogge, Becky 140 homelessness 159–63 Hoon, Geoff 114 Horioka, Charles 107 horizontalism 45, 55, 56, 62, 100 Huffington Post blog 184 human rights 143 Hungary 172 Ian’s Pizza, Madison, Wisconsin 184 Ibrahim, Gigi, @GSquare86 69 ideology 29, 149 immolations 11, 32, 71 impotence, zeitgeist of 29–30 impoverishment 209 Inception (film) 29 India 120–21 Indiana 116–17, 125 indignados, the 88, 100–1, 104 individual: freedom of 127–30; power of the 65, 79; rise of the 127–30 Indorama group 22 industrialization 192 Indymedia 74 inequality 209 inflation 109, 120–21 info-capitalism 148, 211 info-hierarchies 147–52 info-revolution, the 146, 149–50 informal hierarchies 83 information capitalism 145 information management 147 information networks 77 information tools 75 Inkster, Nigel 65 institutional loyalty 68 interest rates 67 International Labour Organization 19–20, 120 International Monetary Fund 92 Internet consciousness 136–38 Internet, the: access in slums 207; Arab world growth 135; and behaviour changes 131; and the Iranian revolution 35; out of reach for some 152; power of 29; shutdowns 14, 78; and the spread of ideas 150–51 investment, and savings 107 Invisible Committee, the 189–91 Iran 25; causes of failure of revolution 36–37; election, 2009 33–34; and the Internet 35; and the Middle East balance of power 178; rooftop poems 36; Twitter Revolution 33–37, 78, 178; on YouTube 34, 35 Iraq 25, 55 Ireland 92, 111, 112, 188 Islam 30, 37 Israel 26, 33, 179–80 Italy 104 Jakarta 33 James, C.


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The End of Growth by Jeff Rubin

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

Its expulsion from the monetary union would trigger a domino effect among its fellow PIIGS. Economists call this contagion—just like a virus spreading from one person to another. Contagion is the real reason the EU is so worried about Greece. It’s also the reason Draghi has pledged to do whatever it takes to keep Greece in the monetary union and preserve the euro. The ECB has managed to staunch the worst of the bleeding for now, but the eurozone debt crisis remains far from resolved. Much like Greece, Portugal depends heavily on tourism to make its economy go. And also like its Hellenic neighbor, Portugal is getting billions of euros from bailout packages funded by its EU partners. But if Greece dumps the euro and brings back the drachma, Portugal’s tourism industry will be at a huge disadvantage. If the price of a holiday in Santorini is cut in half due to a devalued drachma, can the beaches of the Algarve compete when tourists are still being charged prices in expensive euros?

For Americans, it means oil gets more expensive. If you live in a country with a currency that goes up against the greenback, then oil becomes cheaper. If the greenback were to plunge against the yuan, the decline would effectively transfer millions of barrels of oil consumption from the United States to China. So what is the likelihood that the US dollar falls against other major currencies? With the eurozone debt crisis still in the middle innings, it’s understandably hard to envision how the greenback might suffer a significant drop as well. After all, currency markets are also a zero-sum game. If one major currency is going down, another major currency must be going up. If Europe’s currency union eventually breaks apart, though, a realigned euro would rally against the US dollar. A currency backed by the strong northern European economies of Germany and France would quickly attract global capital flows.

In the United States, the twin stimulus of zero interest rates and trillion-dollar budget deficits is allowing the country’s GDP to eke out a 2 percent gain. The future toll of this muted growth, meanwhile, remains to be tallied. In the eurozone, a pledge by ECB president Mario Draghi to backstop the short-term debt of the shakiest countries helped calm the financial crisis and hold together the European Monetary Union. The eurozone debt crisis, though, remains far from over. What’s still missing from the equation is economic growth. Without it, the eurozone’s debt load is no more sustainable now than it was at the height of the crisis. China’s economic growth, meanwhile, is advancing at its slowest pace in more than a decade. Even Beijing admits its days of double-digit growth are over. China’s GDP is still growing faster than that of OECD economies, but revisions to forecasts keep grinding expectations lower.


pages: 182 words: 53,802

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

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

As this goes to press, almost nine years have passed since the ‘credit crunch’ of August 2007. Yet the global economy struggled to recover from that crisis and the easy (unregulated) credit-fuelled bubbles that were violently burst by rising real rates of interest. Instead of recovery, the crisis simply rolled around the global economy. It was at its most intense at the core – the US and the UK – but subsequently moved across to Europe and in particular the Eurozone. Then the crisis moved to emerging markets, and China in particular. Western economies experienced the longest period of economic failure in peacetime history. Only during periods of war was economic failure so prolonged. And yet, far from trying to correct imbalances by re-regulating the financial system, governments stood idly by as the global credit bubble – never fully deflated after 2008 – was reinflated by central bank operations such as quantitative easing.

verbatim report in the Washington Times, 24 October 2008, washingtontimes.com, accessed 6 June 2016. 8Gillian Tett, ‘Silos and Silences – Why So Few People Spotted the Problems in Complex Credit and What This Implies for the Future’, Financial Stability Review, No. 14, Paris: Banque de France, July 2010, banque-france.fr, accessed 3 October 2013. 9Karl Polanyi, The Great Transformation: The Political and Economic Origins of Our Time, Boston: Beacon Press, 1957, p. 217. 2. The Creation of Money 1Polanyi, The Great Transformation, p. 132. 2Joseph Schumpeter, A History of Economic Analysis, Oxford: Oxford University Press, 1954, pp. 114–15. 3John Law, Money and Trade Considered with a Proposal for Supplying the Nation with Money, 1705, avalon.law.yale.edu, accessed 6 June 2016. 4Andrea Terzi, ‘The Eurozone Crisis: A Debt Shortage as the Final Cause’, INET Annual Conference, New Economic Thinking: Liberté, Égalité, Fragilité, Paris, 8–11 April 2015. Emphases mine. 5John Maynard Keynes, ‘National Self-Sufficiency’, The Yale Review, Vol. 22(4), June 1933, pp. 755–69, mtholyoke.edu, accessed 6 June 2016. 6Michael McLeay, Amar Radia and Ryland Thomas, ‘Money in the Modern Economy: An Introduction and Money Creation in the Modern Economy’, Bank of England Quarterly Bulletin, Vol. 54(1), 2014, bankofengland.co.uk, accessed 6 June 2016. 7John Maynard Keynes, The Collected Writings, A Treatise on Money: The Pure Theory of Money, Vol. 5, Cambridge: Cambridge University Press, 2012 (1930). 8Andy Haldane speech, ‘The $100 Billion Question’, Bank of England, March 2010, bankofengland.co.uk, 7 June 2016. 9Laura E.


pages: 370 words: 102,823

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

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

Implications for the euro zone: the re-integration of money and fiscal policy The region of the world which has experienced perhaps the most damaging outcomes from the application of the orthodox theory of money to macroeconomic policy-making is the euro zone. In many ways the design of the European single currency was based on the orthodox theory, and it has severely limited the ability of euro-zone countries to deal with the aftermath of the financial crisis. It is crucial to recognise here that the emergence of sovereign debt problems within the euro zone after the crisis broke in 2008 cannot be simply put down to ‘profligate spending’ by irresponsible governments. Notwithstanding legitimate concerns about Greek accounting practices and tax collection, most economies on Europe’s periphery (Greece, Italy, Spain, Portugal and Ireland) only experienced debt problems once their economies had entered into recession after the crash. But from that point on, they were severely hampered in their attempts to respond.

Strategies that try to circumvent this central problem, seeking to revive demand largely by increasing consumer debt, as observed in the UK, or to increase profit margins by indiscriminately cutting labour costs, are not going to work in the medium run. It is not only the size, but also the timing, of a major boost in investment which is key. The acute phase of the financial part of the euro zone sovereign debt crisis is hopefully over, though the Greek situation remains precarious and may reignite uncertainty in the future. This gives renewed urgency for a less austere and more expansionary fiscal policy, particularly to increase public investment levels and to facilitate private investment. One of the justifications for fiscal austerity has been the orthodox economic view that public investment does not ultimately boost demand because it merely ‘crowds out’ private investment, as government borrowing leads to higher interest rates and taxation.

Table 2: Projected average GDP growth (%) Scenario Actual Projected 2000–2008 2009–2014 2015–2020 European Union Business as usual Investment-led 2.3 0.1 1.5 3.0 North euro zone Business as usual Investment-led 1.8 0.6 1.5 2.9 South euro zone Business as usual Investment-led 2.3 –1.3 1.2 3.3 Table 3: Unemployed workers (millions of people) Scenario Actual Projected 2000 2008 2014 2015 2020 European Union Business as usual Investment-led 21.7 17.9 27.3 26.7 26.3 24.3 22.1 North euro zone Business as usual Investment-led 3.9 4.0 3.4 3.5 3.4 3.8 3.4 South euro zone Business as usual Investment-led 5.9 5.3 12.0 11.6 11.4 9.5 8.5 Despite these important reductions, the level of unemployment in the European Union and in the euro zone does not decline to pre-crisis levels. To further reduce the level of unemployment in Europe, an investment-led strategy would have to be complemented by other policies, such as better educational programmes, training and research. The investment-led scenario also leads to more favourable results in terms of debt-to-GDP ratios compared to the business-as-usual scenario. While debt levels for both scenarios are projected to remain above the 60 per cent level prescribed by the Stability and Growth Pact, the important gains achieved in terms of GDP growth in the investment-led scenario lead to lower debt-to-GDP ratios.


pages: 823 words: 206,070

The Making of Global Capitalism by Leo Panitch, Sam Gindin

accounting loophole / creative accounting, active measures, airline deregulation, anti-communist, Asian financial crisis, asset-backed security, bank run, banking crisis, barriers to entry, Basel III, Big bang: deregulation of the City of London, bilateral investment treaty, Branko Milanovic, Bretton Woods, BRICs, British Empire, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collective bargaining, continuous integration, corporate governance, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, dark matter, Deng Xiaoping, disintermediation, ending welfare as we know it, eurozone crisis, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, full employment, Gini coefficient, global value chain, guest worker program, Hyman Minsky, imperial preference, income inequality, inflation targeting, interchangeable parts, interest rate swap, Kenneth Rogoff, Kickstarter, land reform, late capitalism, liberal capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, manufacturing employment, market bubble, market fundamentalism, Martin Wolf, means of production, 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, non-tariff barriers, Northern Rock, oil shock, precariat, price stability, quantitative easing, Ralph Nader, RAND corporation, regulatory arbitrage, reserve currency, risk tolerance, Ronald Reagan, seigniorage, shareholder value, short selling, Silicon Valley, sovereign wealth fund, special drawing rights, special economic zone, structural adjustment programs, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, very high income, Washington Consensus, Works Progress Administration, zero-coupon bond, zero-sum game

The new crisis has confirmed more generally the continuing significance of states in global capitalism. Although the institutions of the European Union have more constitutional authority than other international organizations, their inability to intervene so as to resolve the debt crisis of their smaller member-states is largely due to the internal political dynamics within other member-states, above all Germany. The eurozone crisis also confirms a basic fact about the nature of both globalization and informal empire: state sovereignty is not effaced within it. This can be seen in the difficulties the American state has continually had to confront in getting the German state—from the time of the Herstaat banking crisis in the 1970s to the Mexican crisis in the 1990s to the crisis of the euro today—to overcome its obsession with inflation and “moral hazard,” and to take its share of responsibility for containing crises.

Also confirmed was the US Treasury and Fed’s central role in global crisis-management—from currency swaps to provide other states with much needed dollars, to overseeing policy cooperation among the G20 as well as G7 central banks and finance ministries. It was the formerly highly touted supranational system of European governance—exposed in the crisis for its lack of central authority over taxation, bond issuance, and budget approval—which now appeared most dysfunctional for the management of global capitalism. The eurozone crisis was not something that cheered the American state. The Fed’s provision of liquidity to US financial institutions was undertaken with one eye to their passing that liquidity to Europe through the interbank market. The Treasury was intimately involved in policy discussions, directly as well as through the IMF, with Geithner discretely “pressing Europe to take more decisive action” at the regular conference calls of the G7 finance ministers now taking place almost weekly.

An already marked democratic deficit in Europe was further expanded, as the crisis in Greece and Italy ushered in “national unity” governments headed by central bank technocrats, whose mettle was supposed to be tested by whether they could calm German anxieties about “moral hazard”—which would itself largely depend on whether they could “get tough enough with the unions.”18 The real danger the eurozone crisis poses to global capitalism is that states that had sworn off capital controls forever may be forced by domestic class struggles into adopting them, not least as a way of coping with electoral outcomes that effectively narrow the democratic deficit while expanding economic contradictions. Against this, similar external pressures to those that led most developing states to abjure capital controls for pragmatic rather than ideological reasons in the wake of the Asian crisis (see Chapter 11) are being felt by states in Europe today.


How to Be a Liberal by Ian Dunt

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

Under the EU’s Dublin Convention, asylum seekers had to apply for refugee status at the first safe country they reached. But this didn’t reflect the geographical reality of the situation. The boats were not evenly spread across Europe. Most were landing in Italy and Greece, who struggled to handle the pressure of such a large influx of people. This was an issue that went to the heart of the European project. It was the first test since the eurozone crisis of the EU’s values of countries acting in solidarity and working together for mutual benefit. The numbers arriving were large, but in a continent of half a billion people, they were manageable. All that was required was that the burden be shared. But the nationalists refused. The Visegrád Group flatly rejected any quota system that would see its nations take refugees. In public, Europe’s leaders condemned Orbán.

You can find further discussion of some of the issues in this section in A Companion to the History of Economic Thought, edited by Warren J Samuels, Jeff E Biddle, and John B Davis. Chapters 26 and 27 are particularly good, but the book is also recommended for its discussion of Adam Smith and John Maynard Keynes. For a different, and more critical look at Friedman’s legacy, including his reputation on inflation, read Macroeconomics and the Phillips Curve Myth, by James Forder. The best work on the 2008 financial crash and the eurozone crisis, by some distance, is Crashed: How a Decade of Financial Crises Changed the World, by Adam Tooze. People tend to stay away from official reports, but the Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States, by the Financial Crisis Inquiry Commission, is a truly majestic work – as readable as any popular economics book and freely available online at https://www.govinfo.gov/content/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf.

See European Union (EU) EU referendum campaign and result 1 government response and May 1 Johnson as prime minister 1 Trump and nationalism 1 euro 1 European Central Bank (ECB) 1, 2, 3, 4 European Coal and Steel Community 1 European Convention on Human Rights (ECHR) 1, 2 European Court of Justice 1, 2, 3 European Economic Community 1 European Parliament 1 European Union (EU) Charter of Fundamental Rights of the European Union 1 EU citizens 1 EU referendum 1 Greece financial crisis 1 Hungary and Orbán 1, 2 institutions 1 migrants and refugees 1 origins 1 post-war cooperation 1, 2 Russia and Ukraine 1 Troika programmes 1, 2 UK leaves 1 eurozone 1, 2, 3 Evergreen State College 1 Exclusion Crisis 1, 2, 3, 4 executive power 1, 2, 3, 4 Exhibit B show 1 experts 1, 2, 3 Facebook 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 Fairfax, Thomas 1, 2, 3, 4, 5, 6, 7 A Remonstrance from his Excellency Sir Thomas Fairfax 1 fake news 1 family separation policy 1 Fannie Mae (Federal National Mortgage Association) 1 Farage, Nigel 1, 2, 3, 4 far right 1, 2, 3, 4, 5 fascism Carlyle 1 emergence of 1 Germany 1, 2 identity and belonging 1 Orwell on 1, 2, 3, 4, 5 post-war economics 1, 2, 3 Fawcett, Millicent 1 Federal Housing Administration 1 Federal Reserve 1, 2, 3 female genital mutilation 1 female priests 1 female suffrage 1 feminism 1, 2, 3, 4, 5 Ferdinand, Archduke Franz 1 feudalism 1, 2 Fidesz 1, 2, 3, 4 Figes, Orlando 1 financial crisis 1, 2, 3, 4 Financial Services Authority (FSA) 1 financial services deregulation 1 first generation rights 1, 2 First World War 1, 2, 3, 4, 5 fiscal policy 1 Five Star Movement 1 Five Year Plan 1 Flower, Eliza 1 forced marriage 1 Forster, EM 1 Maurice 1 4chan 1 Fox, Liam 1 Fox News 1, 2 France American independence 1, 2 anti-semitism 1 Austria war 1 Dreyfus Affair 1 Estates General 1 Greece financial crisis 1 Napoleon rule 1 National Convention 1 origins of revolution 1 post-war cooperation 1 revolution aftermath 1, 2 Seven Years’ War 1 the Terror 1 Franco, General Francisco 1 freedom American independence 1 Berlin on 1, 2 England history 1 French Revolution aftermath 1, 2 Levellers Agreement 1 liberalism struggle 1 Locke on 1, 2, 3, 4 Mill and Taylor on 1, 2, 3, 4, 5 Puritans 1, 2 Rousseau on 1, 2 freedom of conscience 1, 2 freedom to publish 1, 2 free market 1, 2, 3 free movement 1, 2, 3 free press 1, 2, 3 free speech 1, 2, 3, 4, 5, 6, 7, 8 free trade 1, 2, 3 French Revolution aftermath 1, 2 anti-semitism 1 Carlyle history 1 development of liberal values 1 events of 1 Rights of Man 1, 2, 3, 4, 5, 6 Rousseau and general will 1, 2 Frenkel, Naftaly Aronovich 1 Friedman, Milton 1, 2 FSA (Financial Services Authority) 1 Fukuyama, Francis 1 full employment 1, 2 G20 1, 2 Gaddafi, Colonel Muammar 1 Galbraith, John 1, 2 Galileo 1, 2, 3, 4 gas chambers 1, 2 gatekeepers 1 GATT (General Agreement on Tariffs and Trade) 1, 2, 3 gay identity 1, 2, 3, 4, 5, 6, 7 Geithner, Timothy 1, 2 gender, and sex 1 General Agreement on Tariffs and Trade (GATT) 1, 2, 3 general will 1, 2, 3, 4, 5 Generation Identity 1 generation snowflake 1 German Workers’ Party 1 Germany Austria-Hungary alliance 1 First World War 1 Greece financial crisis 1 interwar economy 1 migrants and refugees 1 Nazi rule 1, 2 post-war cooperation 1 Second World War 1 welfare state 1 Gestapo 1, 2 Gingrich, Newt 1, 2 Ginnie Mae (Government National Mortgage Association) 1 Girondins 1, 2, 3 Glass-Steagall Act 1, 2, 3 gleichschaltung 1 Glorious Revolution 1, 2, 3, 4 Google 1, 2, 3 Gove, Michael 1, 2, 3 government American independence 1 debt and austerity 1 financial crisis measures 1 and institutions 1 legitimate government 1 Locke on 1, 2, 3, 4 post-war Keynesianism 1, 2, 3 Smith on 1, 2 Government Sponsored Enterprises (GSEs) 1 Gramm–Leach–Bliley Act 1 Great Depression 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 Greater London Council 1, 2, 3 Great Terror, Russia 1 Greece 1, 2, 3, 4, 5 Greenspan, Alan 1, 2 group identity 1, 2, 3, 4, 5, 6, 7, 8 Guatemala 1 Guérin, Jules 1 guillotine 1, 2, 3, 4 gulags 1, 2, 3, 4 Gyurcsány, Ferenc 1 haircuts (finance) 1, 2 Haiti earthquake 1 half-truth 1, 2 Hall, Stuart 1 Hamilton, Gene 1 Handsworth riots 1 Hannity, Sean 1, 2 Hardenberg, Charlotte von 1 Hardy, Henry 1 harm principle 1, 2, 3, 4 Hayek, Friedrich Capital Consumption 1 on communism end 1 Constitution of Liberty 1 death of 1 economic thought 1 and Keynes 1 on Mill and Taylor 1, 2 Nobel Prize 1 post-war economics 1, 2, 3 The Road to Serfdom 1 state intervention 1, 2, 3 Hayek, Laurence 1 Heads of Proposals 1, 2, 3 health care 1, 2, 3, 4 health tourism 1 Heart of Texas 1 Hébert, Jacques 1, 2, 3 Hébertists 1, 2 Henry, Major Hubert-Joseph 1, 2 Herder, Johann Gottfried von 1 heresy 1, 2, 3, 4, 5 higher and lower pleasures 1, 2 higher self 1 Himmler, Heinrich 1, 2 Hitler, Adolf 1, 2, 3, 4, 5, 6, 7, 8, 9 Hobbes, Thomas 1 Leviathan 1 Holdheim, William 1 Hollander, Jacob Harry 1 Holocaust 1, 2 Holodomor 1 home ownership 1 homophobia 1, 2 homosexuality 1, 2 Hostile Environment 1, 2, 3, 4, 5 House of Commons 1, 2, 3, 4, 5, 6 House of Lords 1, 2, 3 House of Representatives 1 housing 1, 2, 3 Howard, Michael 1 Huber, Ernst Rudolf 1 human rights 1, 2, 3 Hume, David 1 Hungary 1, 2 hyperinflation 1, 2, 3 hypertext 1 hypotheses 1 identity cultural appropriation 1 cultural identity 1, 2 cultural relativism 1 group identity 1, 2 identity and belonging 1 national identity 1, 2, 3, 4, 5, 6 nationalism 1, 2 Orwell on patriotism 1, 2 identity cards 1 identity politics cultural appropriation 1 culture war 1 difference 1 disagreement 1 group identity 1, 2 intersectionality 1, 2 marginalised groups 1, 2 origins 1 right-wing identity politics 1 social media 1 identity war 1, 2 Ignatieff, Michael 1 IMF (International Monetary Fund) 1, 2 immigration EU referendum 1, 2 France anti-semitism 1 Hungary and Orbán 1 liberalism of the future 1 nationalism 1, 2, 3 right-wing identity politics 1, 2, 3 UK policy 1 US policy 1, 2 imperialism 1, 2, 3 incommensurable goods 1, 2 Independents (English Civil War) 1, 2 individual Berlin on 1, 2 communism and fascism 1, 2, 3, 4 Constant 1, 2, 3, 4, 5 Descartes 1, 2, 3, 4 identity 1, 2, 3 invention of teenager 1 Keynesianism 1 Levellers 1 liberalism 1, 2, 3 Locke 1, 2, 3 Marxism 1, 2 Mill 1, 2, 3, 4, 5 nationalism 1 Orwell 1, 2 Overton 1 Puritans 1 and reason 1 Smith 1 individualism 1, 2, 3, 4, 5 individual rights 1, 2, 3, 4, 5, 6, 7, 8, 9 industrial revolution 1, 2 inflation 1, 2, 3, 4, 5, 6 information flow 1, 2, 3 Instagram 1, 2, 3 institutions 1 Intellectual Dark Web 1 intellectual property 1 interest rates 1, 2, 3 internal emigration 1 International Brigades 1 international law 1 International Monetary Fund (IMF) 1, 2 international relations 1 internet 1, 2, 3 intersectionality 1 investment banks 1, 2, 3, 4, 5 invisible hand 1, 2, 3, 4 Iraq 1, 2, 3 Ireland 1, 2 Ireton, Henry 1, 2, 3, 4 Islam 1 Italy 1, 2, 3, 4, 5, 6, 7 Jacobins 1, 2, 3, 4, 5, 6, 7 James II 1, 2, 3, 4, 5, 6, 7 Japan 1 Javid, Sajid 1, 2 Jehovah’s Witnesses 1 Jews anti-semitism 1, 2, 3 Berlin’s identity 1, 2 Dreyfus Affair 1, 2 Germany 1, 2, 3 group identity 1 Levellers 1 right-wing identity politics 1 Second World War and Holocaust 1 St Louis ship 1 Johannot, Marie-Charlotte 1 Johnson, Boris 1, 2, 3, 4 Johnson, Lyndon 1 journalism 1, 2, 3, 4 Joyce, George 1 JP Morgan 1, 2 judiciary 1, 2 Juncker, Jean-Claude 1 justice 1, 2 Kant, Immanuel 1 Kennedy, John F 1 Keynes, John Maynard The General Theory of Employment, Interest and Money 1 and Hayek 1, 2, 3 post-war economics 1, 2, 3, 4, 5 state intervention 1 Time Man of the Year 1 death of 1 Keynesianism 1, 2, 3, 4 Khader, Naser 1 knowledge 1, 2 Kogon, Eugen 1 Komsomol 1 Kosinski, Michal 1 Krugman, Paul 1 Kruks, Sonia 1 Kukathas, Chandran 1 kulaks 1, 2 Kurdi, Alan 1, 2 Kymlicka, Will 1 labour 1, 2, 3 Lagarde, Christine 1, 2 laissez-faire austerity measures 1 communism 1 Constant 1, 2 financial crisis 1 Hayek 1, 2 inflation policy 1 liberalism 1, 2, 3, 4, 5 Mill 1, 2, 3, 4, 5 post-war economics 1, 2, 3 right-wing identity politics 1 Soviet Union collapse 1 land 1, 2, 3 language 1, 2, 3 Laski, Harold 1 Latvia 1 Laud, William 1, 2, 3, 4, 5 Law for the Restoration of the Professional Civil Service 1 law of nature 1, 2, 3 Law of Suspects 1 League Party 1 Leave.EU 1, 2.


pages: 348 words: 82,499

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

asset allocation, bank run, buy and hold, collapse of Lehman Brothers, credit crunch, diversification, diversified portfolio, estate planning, eurozone crisis, fixed income, high net worth, hiring and firing, Isaac Newton, Kickstarter, lateral thinking, money market fund, Northern Rock, passive investing, place-making, quantitative easing, selection bias, short selling, South Sea Bubble, technology bubble, transaction costs, Vanguard fund

Top websites www.advfn.com www.fool.co.uk www.investorschronicle.co.uk www.londonstockexchange.com www.moneyam.com www.sharesmagazine.co.uk chapter 13 * * * Corporate bonds and gilts Less risky than equities but usually returning more than a bank or building society, bonds aim to give a steady income through good times and bad. Understanding bonds is all about understanding risk, and, as with investments across the board, the more of it you are prepared to take, the greater the returns you can hope to get. Before the credit crunch and the Eurozone crisis that followed it many people hadn’t a clue what a corporate or government bond was. Today we are all too familiar with the idea that nations and other organisations see their borrowing costs go up if the bond markets don’t trust in their ability to pay their debts. Bonds are issued by governments and companies to raise capital to pay for high-cost projects, from wars to railways to housing projects, and, in the case of many debt-ridden nations these days, to pay the interest on existing liabilities.


pages: 283 words: 87,166

Reaching for Utopia: Making Sense of an Age of Upheaval by Jason Cowley

anti-communist, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, Boris Johnson, centre right, Charles Lindbergh, coherent worldview, Corn Laws, corporate governance, crony capitalism, David Brooks, deindustrialization, deskilling, Donald Trump, Etonian, eurozone crisis, Fall of the Berlin Wall, illegal immigration, liberal world order, Neil Kinnock, Occupy movement, offshore financial centre, old-boy network, open borders, plutocrats, Plutocrats, Right to Buy, Robert Mercer, Ronald Reagan, University of East Anglia

At the same time, globalisation has lifted hundreds of millions of people out of poverty in India and China; remarkable growth has reduced global extreme poverty from sixty per cent in the 1970s to less than ten per cent. But these same forces have created new economic insecurities in the West. The decline of stable, well-paid work means that, for the first time, most of those living in poverty are employed. Meanwhile, since the financial crash, Europe has been further destabilised by the eurozone crisis, the Greece crisis and the refugee crisis. The latest and most demanding disturbance to the balance of power is, of course, Brexit. No country has ever left the EU: but that is the epic task Britain has set itself. Our European partners are dismayed. Of the present leaders, perhaps only Macron has a vision for European reform. * * * In Britain, we have lived through two distinct political and economic eras since the end of the Second World War.


pages: 736 words: 233,366

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

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

Change here, in the country that did more than any other to destroy the continent during the first half of the twentieth century, has been especially profound. Despite its destruction as a nation state at the end of the Second World War, Germany has remained at the heart of Europe’s development – central to post-war economic recovery, central to the Cold War, central to the ending of the Cold War, central to widening European integration, central to the creation of the Euro, central to the crisis of the Eurozone, central to the migration crisis, and central to the still-embryonic steps to reform the European Union after its recent serious travails. In the meantime Germany has become a vital pillar of stable liberal democracy, it presides over Europe’s strongest economy, has overcome forty years of division to attain national unity, and has reluctantly acquired the mantle of European leadership. Germany’s own transformation has played a key role in Europe’s post-war story – and is far from the least successful part.

Other countries, too – Italy (with a government debt of 132.3 per cent of gross domestic product, and no indication of prospective decline), Portugal (129 per cent), Cyprus (107.5 per cent), Belgium (105.8 per cent), Spain (99.8 per cent), and even France (96.2 per cent, and not declining) – still gave cause for concern. The sovereign debt crisis was by this time far less acute than it had been – though only slowly improving. The Eurozone had survived an existential crisis intact. But was it fundamentally healthy? Could the Eurozone survive another major economic shock that might lead to potential financial crisis in one of its bigger economies, such as Italy’s? Was the Eurozone, in fact, from the start a flawed project in its lack of a central fiscal authority? And was its rescue medicine likely to make the patient more ill rather than better? On these issues opinions among economists varied.

Among them he included replacing the economics of austerity by expansionist policies directed at growth, the mutualization of debt, converging economies by removing surpluses to the benefit of deficit countries, and using expanded credit facilities by the European Central Bank to invest in productive enterprise to stimulate the economy. So far, the political will to introduce such change has been lacking. The Eurozone crisis had, in fact, led in the opposite direction to that advocated by Stiglitz. Vast amounts of money were certainly poured into the economy, though most of it went to save the banks, not directly to stimulate recovery. Further immense sums were spent by the Bank of England (£375 billion between 2009 and 2012) and later the European Central Bank (1.1 trillion Euros in 2015–16) in creating new electronic money to buy government bonds in order to increase the money supply – the method known as ‘quantitative easing’.


pages: 363 words: 101,082

Earth Wars: The Battle for Global Resources by Geoff Hiscock

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

“This climb is a permanent, irreversible change,” he wrote in 2011.15 All of this amounts to what the Australian analyst Michael Wesley calls a global environment of “rivalrous interdependence,” where the name of the game is endless manoeuvring and competitive cooperation.16 Events such as the eurozone’s financial crisis, or the chaos that attends the remaking of Arab nations across North Africa and the Middle East attest to how quickly the international situation can change. London-based Jan du Plessis, chairman of Rio Tinto, the mining group that has the most globally dispersed set of assets, found his view of Europe “almost unreservedly negative” as the eurozone crisis unfolded near the end of 2011. But he was more positive about the United States, calling it “a pragmatic nation that doesn’t give up easily, and has the determination and the optimism to keep trying new things until it solves a problem.”


pages: 336 words: 95,773

The Theft of a Decade: How the Baby Boomers Stole the Millennials' Economic Future by Joseph C. Sternberg

Affordable Care Act / Obamacare, Airbnb, American Legislative Exchange Council, Asian financial crisis, banking crisis, Basel III, Bernie Sanders, blue-collar work, centre right, corporate raider, Detroit bankruptcy, Donald Trump, Edward Glaeser, employer provided health coverage, Erik Brynjolfsson, eurozone crisis, future of work, gig economy, Gordon Gekko, hiring and firing, Home mortgage interest deduction, housing crisis, job satisfaction, job-hopping, labor-force participation, low skilled workers, Lyft, Marc Andreessen, Mark Zuckerberg, minimum wage unemployment, mortgage debt, mortgage tax deduction, Nate Silver, new economy, obamacare, oil shock, payday loans, pension reform, quantitative easing, Richard Florida, Ronald Reagan, Saturday Night Live, Second Machine Age, sharing economy, Silicon Valley, sovereign wealth fund, TaskRabbit, total factor productivity, Tyler Cowen: Great Stagnation, uber lyft, unpaid internship, women in the workforce

Germans will bristle at that characterization, because their budget balance has become legendary in recent years. Germany provides an advanced, Western European–style welfare state that by most measures is far more generous than America’s. Yet its budget is in surplus and it’s paying down its debt, which is set to fall soon to below 60 percent of GDP from a high well above 80 percent of GDP during the eurozone crisis after 2010. That budget balance—they call it the schwarze Null, or “black zero”—is a point of pride for German politicians of both major political parties. American politicians have paid lip service to deficit-cutting and budget-balancing for decades. The Germans actually do it. They do it in a way that some Americans are inclined to view as a model. The key fact is that although social spending is high, taxes also are high.

., 86 Boomer parents and, 88 credit ratings and, 94 degree inequalities and, 85, 91–93 description/overview, 17, 22–23, 83–103 for-profit colleges and, 98 grad school and, 89 grants and, 97, 99, 100 home ownership and, 94–95 household income and, 92–93 importance of college education and, 87–89, 95–96, 106–107 income-based pay plan and, 100–101 number of people going to college and, 87 parental/Boomer debt and, 84 private loans and, 99–100 racial inequality and, 96 reality of, 86 statistics, 22–23, 84–86, 87–89, 90–92, 93n, 94, 96–97, 99 subsidized loans and, 97, 98 taxes and, 97–98, 101, 101n Trump and, 230 tuition increases and, 87–88 warnings and, 102–103 emergency-lending facility use, 78 entitlements for elderly assumptions on growth/revenue and, 153 benefit cuts and, 175–176 demographics and, 156–157 expansion, 146 problems/Millennials and, 146, 159–160, 161, 233 taxes and, 157, 160, 174 Trump and, 231 “trust funds” and, 160 See also Medicare; Social Security euro currency, 180 Europe (Continental) generational problems borrowing and, 180 euro currency, 180 European Union/mobility and, 186 eurozone, 180 financial crisis and, 179–181 Europe (Continental) generational problems/unemployment economic growth and, 181–182 education and, 181 Millennials as shock absorbers, 182 minimum wages and, 183–184 NEET and, 181 older worker protection, 184–185 small-/medium-sized companies and, 182–183 taxes/tax wedge and, 183 temporary work, 184–185 youth unemployment/reasons and, 180–186 Fair Labor Standards Act (1938), 67–68 Family and Medical Leave Act, 55 Fannie Mae creation, 120 first-time buying and, 135 importance of, 11 less secure mortgages and, 122–123, 124–125 receivership, 125n, 129 role, 120, 122 Federal Deposit Insurance Corporation, 11 Federal Housing Agency (FHA), 120, 131, 135 Federal Insurance Contribution Act, 155 Federal Open Markets Committee, 133 Federal Register, 229 Federal Reserve financial crisis/Great Recession and, 60–61, 63–64 interest rates and, 18, 19, 124 investment and, 61–62 mortgage lending and, 61–62 “quantitative easing” and, 18–19, 60 Trump and, 19, 231–232 under Greenspan, 55, 124 FHA (Federal Housing Agency), 120, 131, 135 FICO, 94 Fidelity Brokerage Services savings survey, 77, 81 financial crisis/Great Recession bailouts and, 59 bank failures, 10–11 bankruptcies, 11 Boomers and, 60, 110–111 comparison to other economic crises, 59 description overview, 59–60 Federal Reserve and, 60–61, 63–64 home equity disappearance and, 110–111 job losses distribution, 32–37 “jobless recovery,” 35, 69 Millennials (overview) and, 9–14, 238 official end, 11 “redistribution recession,” 165 “shovel-ready” projects, 163, 163n social programs/benefits and, 163–166 stock market, 10 tax-cuts and, 163 See also housing/financial crisis Financial Crisis Inquiry Commission (FCIC), 122n fixed investment, 49, 51, 53, 56, 57, 60, 127 Florida, Richard, 41 401(k) plans, 80 France bailouts and, 180 minimum wage, 184 Freddie Mac first-time buying and, 135 importance of, 11 less secure mortgages and, 122–123, 124–125 receivership, 125n, 129 role, 122 free market politicians and, 18 See also specific components; specific individuals Friedman, Milton, 133 Friedman, Thomas, 41 Gates, Bill, 91 GDP (gross domestic product) financial crisis/recovery and, 11–12, 13 Millennials and, 220–221 Geithner, Tim, 129 General Motors, 130n “Generation X” description, 6n, 8 heirs and, 104 housing/financial crisis and, 10, 111, 131, 134, 135 retirement finances and, 80, 81 “Generation Y,” 6 generational accounting, 171–172 generational problems/other countries background, 177–179 lessons from, 177, 186–187, 200–201 union legal power and, 186 See also specific countries generational unfairness overview, 170–176 See also specific components generations birth cohort vs., 7 diversity, 7 See also specific generations Generations: The History of America’s Future, 1584-2069 (Strauss and Howe), 6–7 Germany bailouts and, 180 financial crisis, 180 migrants, 199 military spending and, 198n taxes and, 196–198 traits of people, 198 Germany/Millennials apprenticeship system, 181, 233 “balanced budgets” and, 195–196, 198–201 falling birthrates effects, 199 minimum wage and, 184 pension systems/retirement age and, 199, 200 welfare state/entitlements, 195, 196, 198–200 GI Bill, 120 gig economy Boomers and, 71 description, 69–72, 70n middleman and, 70, 140 Millennials and, 71, 234 technology and, 69–70 Ginnie Mae, 133 Gokhale, Jagadeesh, 171–172 Gore, Al “lockbox” and, 153–154, 161n Saturday Night Live and, 153–154 Great Depression, 10, 14, 49, 83, 119, 148, 163n, 238 Great Recession.


pages: 281 words: 69,107

Belt and Road: A Chinese World Order by Bruno Maçães

active measures, Admiral Zheng, autonomous vehicles, Branko Milanovic, BRICs, cloud computing, deindustrialization, demographic dividend, Deng Xiaoping, different worldview, Donald Trump, energy security, European colonialism, eurozone crisis, Francis Fukuyama: the end of history, global supply chain, global value chain, industrial cluster, industrial robot, Internet of things, Kenneth Rogoff, land reform, liberal world order, Malacca Straits, one-China policy, Pearl River Delta, smart cities, South China Sea, sovereign wealth fund, special economic zone, trade liberalization, trade route, zero-sum game

In the first two years of the Belt and Road there was simply no reaction from Europe and the initiative remained for the most part unknown. That started to change in 2015. The EU-China summit in June that year highlighted the mutual interest in China’s bold infrastructure projects. The European Union was at that time busy implementing its own infrastructure investment strategy, the Juncker plan, and hoped China could support it with a significant contribution. During the years of the eurozone crisis, China had played a stabilizing role in many of the countries most in need of inward investment flows. Unsurprisingly, there was much goodwill left. A Connectivity Platform was created to ensure that investment projects approved by both sides could benefit from the highest synergies and interoperability. Many of the arguments heard in Brussels at the time underlined that China seemed to have converted to the European Union model.


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

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

.” ■ ■ ■ By the summer of 2012, Libor was front-page news. In June, Barclays became the first bank to reach a settlement with authorities around the world, admitting to rigging the rate and agreeing to pay a then-record £290 million ($355 million) in fines. The British lender avoided criminal charges thanks to its extensive cooperation with the investigation, but the fallout was devastating. The scandal coincided with the eurozone debt crisis and a renewed period of seething disdain for the banking sector. News bulletins cut from riots in Athens and Occupy Wall Street protests in New York to transcripts of traders calling each other “big boy” and agreeing to defraud the public for a “bottle of Bollinger”. Within a week, Barclays’s charismatic chief executive officer, Bob Diamond, had been forced to resign, and the reputation of the Bank of England, which was accused of being directly involved in the U.K. lender’s behavior, was in shreds.

(Bob) xi, 90–1, 92, 94, 96–9, 134, 136, 137, 139–46, 170 Diamond, Robert Edward, Sr. 90, 93, 94 Dimon, Jamie 137 DKB Financial Products 17 Dole, Bob 127 Ducrot, Yvan 81, 82, 85, 86, 126 Dudley, William 51 Dynegy 41 easyJet 144 Engel, Marcy 17 Enrich, David 151 Enron 42, 70, 101, 116, 154 ESL Investments 72 Euribor 135–6 euro 54 eurodollar futures 17 European Banking Federation 135 European Central Bank (ECB) 99, 118 European Commission 118 eurozone debt crisis xi Ewan, John 50, 51–2, 161–2, 163 exchange-rate mechanism (EU) 54 Fannie Mae 103 Farallon Capital Management 72 197 Farmanfarmaian, Khodadad 13, 15, 18 Farr, Terry 30–2, 33, 37, 63, 64, 65, 68, 79, 85, 117, 148, 168, 169 Federal Bureau of Investigation (FBI) 125, 129 Federal Energy Regulatory Commission 41 Federal Reserve 45, 55, 167 Term Auction Facility (TAF) 55 Federal Reserve Bank 51 Financial Conduct Authority (FCA) 129, 168, 173 Financial Services Authority (FSA) 54, 56–60, 75, 105–8, 133, 137, 140–3, 148, 152, 159, 163 Financial Times 73, 141, 146 Finma 109, 110 fixed income,currencies and commodities (FICC) 91 floating-rate note 15 Flowers, Chris 72 Foreign Exchange and Money Markets Committee (FXMMC) 50–1, 56, 115, 163 forward rate agreements 10 Fraser, Simon 144 Freshfield Bruckhaus Deringer 107 FTSE 171 Fulcrum Chambers 148, 155 Galbraith, Evan 15 Garstangs Burrows Bussin 155 Geithner, Tim 54–5, 69, 70 Gensler, Francesca 70, 135 Gensler, Gary 69–75, 89, 91, 135, 136, 169 Great Mutual Fund Trap, The 72 Gensler, Robert 71–2 Ghosh, Dr.


pages: 286 words: 79,305

99%: Mass Impoverishment and How We Can End It by Mark Thomas

"Robert Solow", 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, additive manufacturing, Albert Einstein, anti-communist, autonomous vehicles, bank run, banks create money, bitcoin, business cycle, call centre, central bank independence, complexity theory, conceptual framework, creative destruction, credit crunch, declining real wages, distributed ledger, Donald Trump, Erik Brynjolfsson, eurozone crisis, fiat currency, Filter Bubble, full employment, future of work, Gini coefficient, gravity well, income inequality, inflation targeting, Internet of things, invisible hand, Jeff Bezos, jimmy wales, job automation, Kickstarter, labour market flexibility, laissez-faire capitalism, light touch regulation, Mark Zuckerberg, market clearing, market fundamentalism, Martin Wolf, money: store of value / unit of account / medium of exchange, Nelson Mandela, North Sea oil, Occupy movement, offshore financial centre, Own Your Own Home, Peter Thiel, Piper Alpha, plutocrats, Plutocrats, profit maximization, quantitative easing, rent-seeking, Ronald Reagan, Second Machine Age, self-driving car, Silicon Valley, smart cities, Steve Jobs, The Great Moderation, The Wealth of Nations by Adam Smith, wealth creators, working-age population

If, on the other hand, some of these things are half-truths or even outright wrong, then we may be staring solutions in the face without seeing them, or at least without giving them serious consideration. It is not an exaggeration to say that the future – or at least the shape – of Western civilization is at stake, so it is worth digging into each of these points in a little more detail. FALSEHOOD #1: PROFLIGATE GOVERNMENTS WERE THE CAUSE OF THE EUROZONE CRISIS One of the reasons we think we know that the crisis was caused by profligate governments is that we have been told so many times by those who ought to be in a position to know. Indeed, it is expansionary policies and weak fiscal positions that created the current problems of high debt and low competitiveness in the crisis countries in the first place. Ludger Schuknecht3 The sentence above comes from a letter from Ludger Schuknecht of the German Finance Ministry to Martin Wolf of the Financial Times.


pages: 478 words: 126,416

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

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

All experienced spiralling debt service costs. With each mini-crisis, the scale and scope of European Central Bank intervention increased. In 2012 the new Governor of the European Central Bank, Mario Draghi, promised to do ‘whatever it takes’ to preserve the Eurozone.26 Given the potential resource available to an institution empowered to print Europe’s money, that commitment stabilised the Eurozone crisis. For the time being. The proximate causes of these successive crises are very different – emerging market debt problems, the new economy bubble, defaults on asset-backed securities, the political strains within the Eurozone – yet the basic mechanism of all these crises is the same. They originate in some genuine change in the economic environment: the success of emerging economies, the development of the internet, innovation in financial instruments, the adoption of a common currency across Europe.

Yet the crisis was not over. New ‘rogue traders’ were escorted from their desks by security guards. Various rate-fixing scandals demonstrated that the origins of the crisis in fact lay deep within the culture of the finance industry. Monetary policies boosted asset prices, rewarding those who enjoyed accumulated wealth at the expense of those who derived their income from employment. The Eurozone muddle muddled on. When the global financial crisis hit in 2008, politicians of all parties and officials were essentially at sea. ‘Never allow a crisis to go to waste,’ said President Obama’s chief of staff, Rahm Emanuel, but the crisis did go to waste.3 Emanuel’s cynical remark exemplifies the pragmatic realism characteristic of modern political life; but, as in this case, ‘realism’ often has no outcome because pragmatism devoid of analysis or intellectual content permits no more than ineffectual tinkering.

Gerald 242 Countrywide Financial 150, 152, 293 Craig, James 26 credit cards companies 27, 210 debt 54 origin of 185–6 profitability 113 credit default swaps 41, 60, 61, 64, 73, 100, 101, 119, 120, 121, 139, 152, 153, 223 credit expansion 54, 98 Crédit Lyonnais 33 credit ratings 21, 101, 248 credit risk 42, 75, 177, 192 Crédit Suisse First Boston 167, 292 credit-scoring 84, 87, 290, 291 Crosby, James 125 crowd-funding 81 D Dad’s Army (television series) 12 Dahinden, Vincent 124 Daschle, Tom 230 debit cards 186 debt reduction 241 debt securities 101, 107 debt-to-value ratio 149 democracy 4, 52, 308 deposit channel 25–6, 147–8, 173–94 activities of 188–94, 189, 192 directed by retail banks 291 household wealth 173–80, 175, 179 the payment system 181–8 ring-fencing 194, 287 simplification needed 213 deposit insurance 25, 121 deposit protection schemes 135 Derbyshire Building Society 90 deregulation 13, 28, 31, 149–50, 151, 246–7, 292 derivative contracts 191, 192, 323n11 derivatives market 2, 19, 35, 38, 110 portfolios 98 regulation 57, 234 securities 2, 15, 17, 41, 71, 131 Detroit, Michigan 254 Deutsche Bank 33, 104, 136–8, 166, 169, 191–2, 192, 193, 200, 219, 222, 266, 282, 286, 303, 323n11 Diamond, Bob 34, 35, 261, 267, 295, 300 Dickens, Charles: Martin Chuzzlewit 201 Dimon, Jamie 14–15, 35, 231 Dirks, Ray 228 Disney, Walt 70, 71 diversification 21, 27, 28, 29, 32, 33, 45, 95–9, 153 ‘alternative assets’ 98 building societies 151 buying all available stocks 99 coin-tossing game 96 correlation 96, 97–8 Exchange Traded Funds 99 hedge funds 98–9 passive funds 99 diversification divorce 74 DLJ 313n15 Dodd-Frank regulatory regime 236–7, 271 Doerr, John 167 dollar devaluation (1971) 14, 36 Donoghue, Mrs 283 dot.com boom 40 Draghi, Mario 42, 139 Dreamworks 21 Drexel Burnham Lambert 46 drug use 22 ‘Dutch book’ 68, 116 E eBay 187 economic policy 240–69 the British dilemma 262–9 consumer protection 259–62 financial markets and economic policy 248–52 Maestro 240–48 pensions and inter-generational equity 252–9 Economist, The 115 ‘Edge, the’ 114–18, 288 Edinburgh Britain’s second financial centre 11, 263 investment trusts in 26 Edison, Thomas 196 education 253, 259 efficient market hypothesis (EMH) 69–70, 99 Einstein, Albert 129 El Paso oil business 117–18, 232 electricity 245–6, 278 eligible counterparty 282–3 Elizabeth II, Queen 161 Emanuel, Rahm 301 embezzlement 127 emerging markets 39, 42 Emerson, Ralph Waldo: The Conduct of Life 181 emperor’s guard’s new clothes, the 309–10 empire, decline of 13 Enron 123, 124, 126, 127, 158, 176–7, 197, 246, 317n5 Equitas 107 Equity Funding 228 equity markets 23, 85, 168–9, 249, 288 Ericsson 108 Espirito Santo 271 Eurodollar market 13, 20, 120, 121 European Central Bank 42, 98, 138, 139, 183, 243, 244 European Commission 184, 289 European Monetary System 184 European Parliament 184, 328n6 European Union (EU) 194, 220, 226, 228, 273, 287 Eurostat 250 Eurozone 158, 183, 243, 250 creation of 129 crisis 41–2, 139, 301 indebtedness in 184 exchange rates fixed 18 flexible 18 forward 73 Exchange Traded Funds (ETFs) 99 synthetic 99 exchange-traded funds 280 Exchequer Partnerships 158, 159 extended family 78 Exxon Mobil 96, 101, 120, 134, 161, 163, 164, 189, 196 F Facebook 81, 162–3, 166, 167, 185, 196 ‘fair value’ 125–6, 191 fallacy of composition 89 Fama, Eugene 69 family support 79 Fannie Mae 75, 91, 135, 152, 230, 317–18n5 Farkas, Lee 152, 293 FBI 131 febezzle (‘functionally equivalent bezzle’) 127, 128, 132, 136, 176, 177, 190 Federal Deposit Insurance Corporation (FDIC) 25, 135, 247 Federal Reserve Bank of Kansas City symposium (Jackson Hole, Wyoming, 2005) 56–7, 58, 73, 79, 102, 181, 236, 256, 280 Federal Reserve Bank of New York 57, 183, 232, 242, 243 Federal Reserve Board 5, 41, 56, 57, 58, 134, 183, 231, 240, 243, 245, 247 Federal Reserve System 13, 40, 90, 98, 150, 183, 245 Federated Department Stores 204 fee structures 204 Ferguson, Charles 236 Feynman, Richard P. 276, 327n3 Fidelity 109, 199, 200, 213 finance sector a bias to action 203–8 control of risk 6, 7 economic significance 6 excess in the industry 6 export contribution 265 greedy individualism 24 growth of 1–2, 33 heavy criticism of 233 as just another business 5 labour force 263 lack of sanction application 7 lobbying 230, 302, 306 major role in politics 4 management of household financial affairs 6 matching of borrowers and lenders 6, 7 past and current attitudes in 23–4 payments system 6, 7, 25, 281 profitability 132–40, 134 qualitative assessment 265 recurrent crises 35, 307 regarded as having unique status 4–5 remuneration 54, 112 role of 143 search 144 sense of personal entitlement 24, 300 share in GDP 264–5 skills 15 stewardship 144 structural reform 7 taxation 266–7 work incentives 7 workers in finance 6–7, 125 finance theory 5 Finance Watch 328n6 financial advisers 197, 199, 291 Financial Conduct Authority 230, 237, 261 Financial Products Group 293 financial sector, regulation of see regulation Financial Services Authority 243, 247, 303 Financial Services Compensation Scheme 260 Financial Times 68, 115 financialisation 4–7, 36, 45, 72, 163, 165, 172, 259 and complexity 276, 278 conflation of roles of agent and trader 198 and the conglomeration 133 direct impact of 176 effect on corporate behaviour 78 and emergence of large asset management companies 200 emphasis on monetary policy 241 in Germany 169 and hedge funds 289 and housing 149 national and international 39 and risk 55 and secondary markets 170 and social security 255 Summers supports 57 transition from agency to trading 84 two main componenents of 16 Fink, Larry 200 First Boston 200 First Data Corporation 186 First World War 221 fiscal arbitrage 122, 123, 223 FISIM (financial services indirectly measured) 264 Fitch rating agency 313n6 Fitzgerald, Scott: The Great Gatsby 17, 297 FitzPatrick, Sean 156, 293–4 Five Star Movement 306 fixed commissions 29 fixed interest, currency and commodities (FICC) 22, 107, 110, 111, 118, 125, 160, 191, 194, 288 fixed-interest securities 190, 193 Flaubert, Gustave: Sentimental Education 80 Florida land boom (1920s) 201 Forbes magazine 204, 231 Ford, Henry 45, 70, 71 foreign exchange transactions speculators in 18–19 value of 2 Fortune magazine 23 ‘four horsemen’ 167, 168 Fox, Justin 70 fractional reserve banking 88 France corporatism 303–4 defeat of Sarkozy 248, 249 downgraded bonds 248, 249, 250 housing 149, 174 ‘trente glorieuses’ 36 Frankfurt financial centre 26 Freddie Mac 75, 135 free market 18, 59, 238, 247, 302 Frick, Henry Clay 44 Friedman, Milton 60, 63 Free to Choose 56 front running 28 FrontNational 306 Frost, Robert: ‘Provide, Provide’ 252 FT Alphaville 16 Fuld, Dick 24, 32, 72–3, 75, 231, 293 full employment 241 fund managers 66, 86, 108, 115, 206, 209, 212 future of finance 297–308 futures 19 G G8 and G20 economic summits 220 Galbraith, J.K. 127, 201 Galton, Francis xi gambling 130–31, 289 close regulation of 71, 72 Lloyd’s coffee house 71–2 lottery 65, 66, 68, 72 Gates, Bill 174, 268 Gaussian copula 22 GEC 48, 51 GEICO 107 Geithner, Timothy 57–8, 73, 75–6, 92, 104, 183, 230, 232, 239, 276, 306, 307 Geithner doctrine 271 Gemeinschaft 17, 61, 255 General Electric 46, 196 General Motors 45, 49 general share price indexes 98 Generali 27 Generally Accepted Accounting Principles (GAAP) 193 Gensler, Gary 288 Germany corporatism 303, 304 ‘economic miracle’ 36 housing 149, 174 indebtedness to 183–4 Landesbanken 169 Mittelstand 52, 168, 169, 170, 171, 172 role of Bundesbank 243 social market economy 219 state pensions 253 Gesellschaft 17, 61, 255 Gingrich, Newt 230 Glass-Steagall Act (1933) 25, 28, 33 Glaxo 96 global financial crisis (2007–9) and bank assets 91 bankers’ cognitive dissonance 102 begins in the USA 41 causes of 194, 220, 271 collapse of asset-backed securities market 21 collapse of sub-prime mortgages 109 costs of 285 and derivative contracts 192 and diversification 32 emergency measures 285–6 Gaussian copula 22 and liquidity 188, 278, 286 misallocation of housing finance 148 most culpable figures 293 unprecedented public intervention 41 the worst financial crisis since the Great Depression 15 globalisation 13 of capital flows 176, 180 of financial markets 17 and income inequality 53–4 pressure on regulatory structures 14 ‘gnomes of Zurich’ 18 gold standard 13, 18, 36, 181, 241 Golden Dawn 306 Goldman Sachs 1, 14, 31, 55, 57, 59, 63, 104–5, 114, 115, 117, 118, 120, 135, 143, 158, 160, 164, 232, 233, 250, 258, 266, 282, 283, 284, 288, 294, 300, 306 Code of Business and Ethics 118 Goldsmith, Oliver: The Deserted Village 49 goodwill 31, 258–9 Goodwin, Fred 14, 34, 149, 156, 169, 231, 293 Google 80, 83, 162, 167, 196 Gould, Jay 44 government assets and liabilities 000 government bonds 17, 42, 86, 155, 178, 208, 222, 290 government debt 128, 178, 190, 203, 245, 250, 251 government spending 253 Graham, Ben 176 Grasso, Dick 49 Great Depression 12, 15, 25, 36, 57, 218, 221, 225, 258, 308 ‘Great Moderation, the’ 40, 57, 104 Greece accounting manipulation 158, 250 adoption of a common currency 41 government debt 42, 128 refinancing of Greek credit 42 Greenspan, Alan 57, 63, 104, 119, 181, 245, 276 and Ayn Rand 79, 240 and ‘Black Monday’ 242 chairman of the Federal Reserve Board 56, 58, 181, 240–41, 242 and Fed priorities 247–8 and the Markowitz model 68–9 and mortgage defaults 97 and risk 73 testimony to Congress 67–8, 240 ‘Greenspan doctrine’ 56, 60, 67, 68, 71, 87, 101, 249 ‘Greenspan put, the’ 242, 249 Grillo, Bepep 306 Grimaldis of Monaco 123 gross domestic product (GDP) 251, 256, 264–5, 265, 266 gross national income (GNI) 265–6 gross value added (GVA) 265 group insurance 76–7 Grubman, Jack 293 H Haldane, Andrew 139, 264 Halifax Building Society 31, 32, 140, 164, 258–9 becomes a public company 124 competition for the ‘talent’ 193–4 ‘the Edge’ established in wholesale financial markets 114 and fixed-interest securities 190, 193 Group Treasury 106, 107, 111, 129 origins 106 rescued by the British government 124 response to changing times (1990s) 129 takes over the Bank of Scotland 124, 125 the world’s largest mortgage lender 106 worthless windfall shares 127–8 Hamamatsu Photonics 168 Hambrecht & Quist 167 Hambros Bank 158 Hanson 45, 46–7 ‘hard’ commodities 17 Harding, David 111–12, 124 Hartlepool nuclear power station, northeast England 158 Harvard University 5, 14–15 Harvey-Jones, Sir John 51 Hawkins, Sir Henry 61, 64, 116 Hayek, Friedrich 225 HBoS 32, 91, 124, 125, 135 healthcare 77, 78, 79, 253, 257–8 hedge fund managers 23, 99, 109, 282 Hedge Fund Research 323n9 hedge funds 27, 98–9, 110, 191, 194, 284, 289, 323n9 hedge fund centre, Mayfair, London 263 Helyar, John 46, 164 Henderson, David 58 ‘hidden champions’ 168 high-frequency trading 2, 111, 280, 305 Hill, Lord 322n14 Hope, Bob 160 Hornby, Andy 14 horse-racing 72, 116 House of Commons library 115 House of Lords 283 House of Morgan 25, 35 Household International 34–5 housing 148–54, 290 causes of crisis in housing finance 153 collapse of thrifts 150 equity release 54 house prices (US) 41, 43, 174, 259 houses as physical assets 146–7 low-cost 79 mortgage defaults 97 owner-occupied housing stock 53, 149, 151 specialist lenders 150 HSBC 1, 24, 34–5, 286, 328n22 Hubler, ‘Howie’ 130 Hurricane Katrina (2005) 79, 256 I Ibsen, Henrik: An Enemy of the People 285 Iceland: bank and compensation scheme collapse 260 ICI 45, 46–8, 51, 78 Iksil, Bruno 35, 130 ‘I’ll be gone, you’ll be gone’ culture 125, 128, 129, 131, 133, 152, 156, 204, 273 imperialism 13, 218 income distribution 52–4, 53 Independent Commission on Banking 139, 287 India, economic growth in 53 inflation 36, 54, 178, 241–2, 258 information asymmetry 60, 74, 76, 251, 317n2 information technology 18, 19–20, 31, 168, 185 infrastructure, property and 154–60 initial public offering (IPO) 113 Inside Job (film) 236 insurance companies 16, 27, 29, 120, 197, 199, 208, 213, 264 Intel 29, 167 interest rates and inflation 241, 242 long-term 251 intergenerational accounting 258 intermediation 80–105 bad intermediaries 81–2 competition 271 direct/indirect 82, 83 and diversification 96 facilitating 7 and the internet 81 leverage 100–105 managed 83, 201, 212–13 the role of the middleman 80–99 total costs of 207 transparent 83, 84, 201–2, 203 International Financial Reporting Standards (IFRS) 193 International Labour Organization (ILO) 263 International Monetary Fund (IMF) 13–14, 38, 39, 56, 58, 139, 220, 302 international reply coupons 131 International Swaps and Derivatives Association (ISDA) 61, 119, 193 internet 182, 183, 185 connectedness 81, 83 and intermediation 81 Interstate Commerce Commission 233, 237 investment banking FICC trading 107 global expansion of American banks 33 investment trusts 26, 27 relationships 16 within commercial banks 22 investment banks boutique 205 ‘dark pools’ 29 economists in 248–9 legal partnerships 30 modern objectives 197 and rating agencies 249 and search 197 investment channel 26, 148, 174, 175, 195–213 a bias to action 203–8 fails to meet the needs of businesses and households 213 investable assets 202–3, 203 the role of the asset manager 208–13 simplification needed 213 and sovereign wealth funds 253 stewardship 195–203, 203 investment companies 26, 27, 96, 177, 197, 199, 200, 201, 202 investment funds closed-end (managed) 212 open-ended (transparent) 212 Investor B 108 investors allocation of risk 57, 60, 73 and credit ratings 21 foreign 39 institutional 23, 28, 46 large 98 and leverage 101 long-term 94 losses of 43 private 28 property 99 retail 66 small 30, 99 sophisticated 23 Ireland bank workers’ strike (1970) 182 collapse of banking system (2008) 42, 138, 182 Isaacson, Walter 71 Ishmael, Stacy-Marie 16 Israel defence forces 171 high-technology start-up sector 117 It’s a Wonderful Life (film) 12–13 ITT 45 J Japan credit expansion 98 economic growth 36, 39 imagined competitive threat from 221 and quantitative easing 245 speculative bubble (late 1980s) 38–9, 280 jobbers 25, 28, 29–30 Jobs, Steve 70, 71, 162, 196 Johnson, Simon 302 Jordan Marsh department store 46, 90 J.P.


pages: 290 words: 84,375

China's Great Wall of Debt: Shadow Banks, Ghost Cities, Massive Loans, and the End of the Chinese Miracle by Dinny McMahon

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, American Society of Civil Engineers: Report Card, Andrei Shleifer, Asian financial crisis, bank run, business cycle, California gold rush, capital controls, crony capitalism, dark matter, Deng Xiaoping, Donald Trump, Edward Glaeser, eurozone crisis, financial innovation, fixed income, Gini coefficient, if you build it, they will come, income inequality, industrial robot, invisible hand, megacity, money market fund, mortgage debt, new economy, peer-to-peer lending, Ponzi scheme, Ronald Reagan, short selling, Silicon Valley, too big to fail, trickle-down economics, urban planning, working-age population, zero-sum game

All of this has had a major effect on the economy. It’s no coincidence that the economy has been slowing since 2012. Real estate—which includes shopping malls and office towers as well as apartments, both of which are suffering their own gluts—is the bedrock of the Chinese economy, accounting for about 20% of GDP in 2013, a level similar to that of both Spain and Ireland when they were hit by the Eurozone crisis, and triple the level of the United States prior to the subprime-mortgage crisis. But real estate’s contribution to the economy is actually far greater than these levels suggest. Housing construction is essential to buoying dozens of industries that are already mired in overcapacity, like steel, cement, and glass. Moreover, construction provides employment for 16% of the urban population. And with banks making about 30% of their loans to the property sector, the health of the financial system requires buoyant property prices.


pages: 332 words: 81,289

Smarter Investing by Tim Hale

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

Yet by the time the second edition was published, readers and investors had suffered the trauma of the credit crisis and the demise of Lehman Brothers and a range of other near collapses, such as RBS and Lloyds, which were saved only by the largesse of the UK taxpayer. The UK market fell during the period November 2007 to February 2009 by over 40%, and the economy was deeply in recession. By the time of this third edition, we have suffered through the Eurozone crisis (which may well raise its ugly head again), double dip recession, quantitative easing (printing money), record low interest rates and the signs of a few shoots of recovery. Equity markets in 2013 have roared ahead, pricing in better future earnings. What does all this tell us? Not a lot really, other than we have virtually no idea what lies ahead of us in the next few years, and no one else does either.


pages: 310 words: 85,995

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

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

., 120–21 business zones, 150 ‘Butskellism’, 49* Cadbury, 77 Cameron, David, 205 Canada, 22 capitalism competition, 21, 25, 56, 85, 86 ‘creative destruction’ concept, 21 current failings of, 4–5, 17, 25, 42, 45–6, 48, 201, 212–13 and decline of social trust, 5, 45–6, 48, 55, 59, 69 as essential for prosperity, 4–5, 18, 20, 25, 201 and families, 37 first mover advantage, 148 and greed, 10, 19, 25–7, 28, 31, 42, 58, 69, 70†, 81, 95 and Marx’s alienation, 17–18 and oppositional identities, 56, 74 vested interests, 85, 86, 135–6, 207 see also firms Catalan secession movement, 58 causality, narrative of, 33, 34 CDC Group, 122, 149* Chaucer, Geoffrey, The Canterbury Tales, 129 Chicago, University of, 166 childhood adoption, 110–11 children in ‘care’, 104, 105, 110, 111, 157 children ‘reared by wolves’, 31–2 cognitive development, 105–6, 170, 175–6 fostering, 104, 105, 111 identity acquisition, 32 impact of parental unemployment, 160–61 learning of norms, 33, 35, 107–8 non-cognitive development, 105, 163, 169–70, 171–3, 174, 175–6 ‘rights of the child’ concept, 103–4 in single-parent families, 101, 102, 104–5, 155, 160 trusted mentors, 169–70 see also family China, 118–19, 149, 203 Chira, Susan, 52–3 Chirac, Jacques, 14, 120–21 Christian Democratic parties, 5, 14 Citigroup, 186 Clark, Gregory, The Son Also Rises, 106–8 Clarke, Ken, 206 class divide assortative mating among new elite, 99–100, 154, 188–9 author’s proposed policies, 19–20, 21, 183–4, 187–8, 190, 207–8 and breadth of social networks, 169 and Brexit vote, 5, 196 and cognitive development, 105–6 divergence dynamic, 7, 18, 48, 98–108, 154–61, 170–71, 172–80, 181–90 ‘elite’ attitudes to less-well educated, 4, 5, 12, 16, 53, 59, 60–61, 63 and family life, 20, 98, 99–106, 157–62 and fracture to skill-based identities, 3–5, 51–6, 78 and home ownership, 68, 181, 182–3 need for socially mixed schools, 164–5 and non-cognitive development, 105, 163, 169–70, 171–3, 174, 175–6 and parental hothousing, 100, 101, 105–6 post-school skills development, 170–76 pre-emptive support for stressed families, 20, 155, 157–60, 161–3, 208 and reading in pre-teens, 167–9 and recent populist insurgencies, 5 retirement insecurities, 179–80 and two-parent families, 155–6, 157 unravelling of shared identity, 15, 50, 51–6, 57*, 58–61, 63, 215 see also white working class climate change, 44, 67, 119 Clinton, Hillary, 5, 9, 203–4 coalition government, UK (2010–15), 206 cognitive behavioral therapy, 160 Cold War, 113, 114, 116 end of, 5–6, 115, 203 Colombia, 120 communism, 32, 36–7, 85–6 communitarian values care, 9, 11, 12, 16, 29, 31, 42, 116 fairness, 11, 12, 14, 16, 29, 31, 34, 43, 116, 132–3 hierarchy, 11, 12, 16, 38–9, 43, 99–100 left’s abandonment of, 16, 214* liberty, 11, 12, 16, 42 loyalty, 11, 12, 16, 29, 31, 34, 42–3, 116 new vanguard’s abandonment of, 9, 11–13, 14–15, 16, 17, 49–50, 113, 116–18, 121, 214 post-war settlement, 8–9, 49, 113–16, 122 and reciprocal obligations, 8–9, 11–12, 13, 14, 19, 33, 34, 40–41, 48–9, 201, 212–15 roots in nineteenth-century co-operatives, 8, 13, 14, 201 sanctity, 11, 16, 42–3 Smith and Hume, 21–2† values and reason, 29–30, 43–4 see also belonging, narrative of; obligation, narrative of; reciprocity; social democracy Companies Act, UK, 82 comparative advantage, 20, 120, 192, 194 Confederation of British Industry (CBI), 79 conservatism, 30, 36 Conservative Party, 14, 49, 205, 206 contraception, 98–9, 102 co-operative movement, 8, 13, 14, 201 Corbyn, Jeremy, 202, 204–5 Crosland, Anthony, The Future of Socialism, 17, 18, 19 Cuban Missile Crisis (1962), 114 debutante balls, 188 Denmark, 63, 178, 214* Descartes, Rene, 31 Detroit, 128, 129, 144 Deutsche Bank, 78, 185 development banks, 149–50 Development Corporations Act (1981), 150 Dickens, Charles, Bleak House, 108 digital networks detachment of narratives from place, 38, 61–2 economies of scale, 86–7 global e-utilities, 37, 38, 86–7, 89–90, 91 social media, 27, 61, 87, 173, 207, 215 value-based echo-chambers, 38, 61–2, 64–5, 212, 215 Draghi, Mario, 153 Dundee Project, 161–2 Dutch Antilles, 193 East Asia, 147, 192 eBay, 87 economic man, 10, 19, 25, 26–7, 31, 34–5, 196, 209, 210, 215 economic rent theory, 19, 91, 133–9, 140–44, 186–8, 192, 195, 207 education and collapse of social democracy, 50, 52, 53, 54, 55, 59, 63 and empathy, 12 and European identity, 57* expansion of universities, 99–100, 127 and growth of the middle class, 100 inequality in spending per pupil, 167 mis-ranking of cognitive and non-cognitive training, 174–6 need for socially mixed schools, 164–5 post-school skills development, 170–76 pre-school, 105–6, 163–4 quality of teaching, 165–6 reading in pre-teens, 167–9 and shocks to norms of ethical family, 98, 99–105 symbols of cognitive privilege, 175 teaching methods, 166–7 vocational education, 171–6 zero-sum aspects of success, 189 electoral systems, 206 Emerging Market economies, 129, 130–31 empires, age of, 113 The Enigma of Reason (Mercier and Sperber), 29 enlightened self-interest, 33, 40*, 97–8, 101, 109, 112, 113, 114, 117, 184, 213 Enron, 80 ethnicity, 3, 20, 56, 62, 64, 65, 211 Europe Christian Democrats in, 5, 14 class divides, 3, 4, 5, 125 decline in social trust, 45 and knowledge industries, 192 metropolitan-provincial divides, 3, 4, 125 and migration, 121, 197 and shared identity, 57–8, 64, 66, 125 social democracy in, 8–9, 49, 50 European Central Bank, 153 European Commission, 57 European Investment Bank, 149 European Union (EU, formerly EEC), 66, 67, 114, 115, 116, 117 Brexit vote (June 2016), 5, 125, 131, 196, 215 Eurozone crisis, 153 public policy as predominantly national, 212 universities in, 170 evolutionary theory, 31, 33†, 35–6, 66 externalities, 145–6 Facebook, 87 Fairbairn, Carolyn, 79 fake news, 33–4 family, 19 African norms, 110–11 benefits for single parents, 160 Clark’s ‘family culture’, 107–8 entitled individual vs family obligation, 99–103, 104–6, 108–9, 210 equality within, 39, 154 erosion of mutual obligations, 101–2, 210 identity acquisition, 32 ideologies hostile to, 36–7 impact of unemployment/poverty, 4, 7, 160–61 importance of, 36, 37 and increased longevity, 110, 161 in-kind support for parenting, 161 nuclear dynastic family, 102, 110, 154 one-parent families, 101, 102, 104–5, 155, 160 parental hothousing, 100, 101, 105–6 post-1945 ethical family, 97–8, 99–105, 108, 210 pressures on young parents, 159–60, 161–3 and public policy, 21, 154–5, 157–70, 171–3, 177, 209 and reciprocity, 97–8, 101, 102 shocks to post-1945 norms, 98–105 shrinking of extended family, 101–2, 109–10, 161 social maternalism concept, 154–5, 157–8, 190 two-parent families as preferable, 155–6, 157 see also childhood; marriage Farage, Nigel, 202 fascism, 6, 13*, 47, 113 Federalist papers, 82 feminism, 13, 99 Fillon, François, 204 financial crisis, global (2008–9), 4, 34, 71, 160 no bankers sent to gaol for, 95–6 financial sector, 77–9, 80–81, 83–5 asymmetric information, 88, 185 co-ordination role, 145–6 economies of scale, 87 localized past of, 84, 146 toxic rivalries in, 189 trading in financial assets, 78–9, 84, 184–5, 186, 187 Finland, 63 firms, 19, 21, 69 CEO pay, 77–8, 79, 80–81 competition, 21, 25, 56, 85, 86 control/accountability of, 75–81, 82–5 cultures of good corporate behaviour, 94–5 demutualization in UK, 83, 84 deteriorating behaviour of, 18, 69, 78, 80–81 economies of scale, 17–18, 37, 86–7, 88–91, 126–7, 144–5, 146–7 ethical, 70–71, 172, 209–10 and ethical citizens, 93–4, 95, 96 failure/bankruptcy of, 70, 71, 72, 74, 75–6 flattening of hierarchies in, 39 Friedman’s profit nostrum, 69–70, 71, 76, 78–9, 210 global e-utilities, 37, 38, 86–7, 89–90, 91 ideologies hostile to, 37, 81 low productivity-low cost business model, 173–4 ‘maximising of shareholder value’, 69–70, 76, 79, 82–3 ‘mutuals’, 83 need for bankslaughter crime, 95–6 new network features, 86–7 policing the public interest, 93–4 public dislike of, 69, 95–6 public interest representation on boards, 92–3 regulation of, 87–90, 174 reward linked to short-term performance, 77, 78–81 sense of purpose, 39–40, 41, 70–75, 80–81, 93–4, 96 shareholder control of, 76–7, 79, 80, 82–3 societal role of, 81–2, 92–3, 96, 209–10 utility services, 86, 89, 90 worker interests on boards, 83, 84–5 Fisher, Stephen, 196* Five Star, 125 Ford, 70, 71 France, 7, 63, 67, 114 écoles maternelles in, 164 labour market in, 176, 189 pensions policy, 180 presidential election (2017), 5, 9, 204 universities in, 170 working week reduced in, 189 Frederiksen, Mette, 214* Friedman, Milton, 15, 69–70, 71, 76 The Full Monty (film), 7, 129 G20 group, 118 G7 group, 118 G8 group, 194 Ganesh, Janan, 125 Geldof, Bob, 169 General Agreement on Tariffs and Trade (GATT), 114, 115, 116–17 General Motors (GM), 72, 73–4, 75, 86, 172 geographic divide, 3, 16, 18, 19, 215 author’s proposed policies, 19, 207 and Brexit vote, 125, 196 broken cities, 4, 7, 19, 48, 125, 129–30, 147–9 business zones, 150 co-ordination problem over new clusters, 145–50, 207 decline of provincial cities, 4, 7, 19, 48, 125, 129–30, 131, 144–5 economic forces driving, 126–30 and education spending, 167 first mover disadvantage, 148–9 ideological responses, 130–32 investment promotion agencies, 150–51 and local universities, 151–2 and metropolitan disdain, 125 need for political commitment, 153 as recent and reversible, 152–3 regenerating provincial cities, 19, 142, 144–50 and spending per school pupil, 167 widening of since 1980, 125 George, Henry, 133–6, 141 Germany 2017 election, 5, 205 local banks in, 146 Nazi era, 57 and oppositional identities, 56–7 oversight of firms in, 76 post-war industrial relations policy, 94–5 and post-war settlement, 114 re-emergence of far right, 5 rights of refugees in, 14 ‘social market economy’, 49 TVET in, 171–2, 174, 175 vereine (civil society groups), 181 worker interests on boards, 84–5 global divide, 7–8, 20, 59–60, 191–8, 208 globalization, 4, 18, 20, 126–7, 128, 129, 130–31, 191–8 Goldman Sachs, 70†, 83–4, 94 Google, 87 Great Depression (1930s), 114 Green, Sir Philip, 80 Grillo, Beppe, 202 ‘Grimm and Co’, Rotherham, 168–9 Gunning, Jan Willem, 165 Haidt, Jonathan, 11–12, 14, 16, 28, 29, 132–3 Haiti, 208 Halifax Building Society, 8, 84 Hamon, Benoît, 9, 204 Harvard-MIT, 7, 152 Hershey, 77 HIV sufferers in poor countries, 120–21 Hofer, Norbert, 202 Hollande, Francois, 9, 204 Hoover, 148 housing market, 181–4 buy-to-let, 182, 183, 184 and lawyers, 187 mortgages, 84, 176, 182, 183–4 proposed stock transfer from landlords to tenants, 184 Hume, David, 14, 21, 21–2†, 29 Huxley, Aldous, Brave New World (1932), 5 Iceland, 63 Identity Economics, 50–56, 65–7 ideologies based on hatred of ‘other’ part of society, 43, 56, 213, 214 ‘end of history’ triumphalism, 6, 43–4 hostile to families, 36–7 hostile to firms, 37, 81 hostile to the state, 37–8 and housing policy, 183 and migration, 198 New Right, 14–15, 26, 81, 129 norms of care and equality, 116, 132–3 polarization of politics, 38, 63, 202–5 pragmatic eschewal of, 17, 18, 21, 22, 29–30 and principle of reason, 9, 13, 14, 15, 21, 43 Rawlsian vanguard, 13–14, 30, 49–50, 53, 67, 112, 113, 201, 202, 203, 214 return of left-right confrontation, 5, 6, 81, 202–5 and rights, 12–14, 44, 112 seduction of, 6 and twentieth century’s catastrophes, 5–6, 22 views on an ethical world, 112 see also Marxism; rights ideology; Utilitarianism IFC (International Finance Corporation), 122 Imperial Chemical Industries (ICI), 69–70, 75 India, 118–19 individualism entitled individual vs family obligation, 99–103, 104–6, 108–9, 210 fulfilment through personal achievement, 28, 99, 100–101, 102, 103, 108–9, 213 New Right embrace of, 14–15, 53, 81, 214–15 as rampant in recent decades, 19, 214–15 reciprocity contrasted with, 44–5 and withering of spatial community, 61–2 industrial revolution, 8, 126 inequality and assortative mating among new elite, 99–100, 154, 188–9 and divergence dynamic, 7, 18, 48, 98–108, 154–61, 170–71, 172–80, 181–90 and financial sector, 185 and geographic divide, 3, 7–8, 20, 125 global divide, 7–8, 20, 59–60, 191–8, 208 persistence of, 106–8 Rawls’ disadvantaged groups, 3–4, 13–14, 16, 50, 53, 121, 203–4, 214 and revolt against social democracy, 15–16 rising levels of, 3–5, 106, 125, 181, 190 and Utilitarian calculus, 132 innovation, 185–6, 208 International Monetary Fund (IMF), 114, 117 international relations achievement of post-WW2 leaders, 113–16, 122 building of shared identity, 114–16 core concepts of ethical world, 112, 113–14 erosion of ethical world, 116–18 expansion of post-war ‘clubs’, 116–18, 210 new, multipurpose club needed, 118–19, 122 and patriotism narrative, 67 situation in 1945, 112–13, 122 investment promotion agencies, 150–51 Irish Investment Authority, 151 Islamist terrorism, 42, 212, 213 Italy, 4, 58, 160 James, William, 29* Janesville (US study), 178 Japan, 72–3, 94, 101, 149, 192 John Lewis Partnership, 83, 172 Johnson, Robert Wood, 39–40, 72 Johnson & Johnson, 39–40, 41, 72, 74*, 79 Jolie, Angelina, 112 JP Morgan, 71* Juppé, Alain, 204 Kagame, Paul, 22 Kay, John, 82*, 84, 211 Keynes, John Maynard, 115 General Theory (1936), 47 kindergartens, 163 Knausgård, Karl Ove, 173 knowledge revolution, 126, 127–8 Kranton, Rachel, 35, 50–51 Krueger, Anne, 141 Krugman, Paul, 47 labour market flexicurity concept, 178 function of, 176–7 and globalization, 192, 194–6 and immigration, 194, 195, 196 investment in skills, 176–7 job security, 176, 177 and low productivity-low cost business model, 173–4 minimum wage strategies, 147, 174, 176, 180 need for reductions in working hours, 189 need for renewed purpose in work, 190 regulation of, 174, 189 and robotics revolution, 178–9 role of state, 177–8, 189 see also unemployment Labour Party, 49, 206 Marxist take-over of, 9, 204–5 language, 31, 32, 33, 39–40, 54, 57 Larkin, Philip, 99, 156 lawyers, 13–14, 45 Buiter’s three types, 186 and shell companies, 193, 194 surfeit of, 186–7 taxation of private litigation proposal, 187–8 Le Pen, Marine, 5, 63, 125, 202, 204 leadership and belief systems, 41–2, 43, 95 building of shared identity, 39–42, 49, 68, 114–16 changing role of, 39 and flattening of hierarchies, 39 and ISIS, 42 political achievements in post-war period, 113–16, 122 and pragmatist philosophy, 22 and shared purpose in firms, 39–40, 41, 71–5 strategic use of morality, 39–40, 41 transformation of power into authority, 39, 41–2, 57 League of Nations, 116 Lee Kwan Yew, 22, 147 Lehman Brothers, 71*, 76 liberalism, 30 libertarianism, 12–13, 15 New Right failures, 16, 21 Silicon Valley, 37–8 lobbying, 85, 141 local government, 182, 183 London, 3, 125, 127–8, 165–6, 193 impact of Brexit on, 131, 196 migration to, 195–6 Macron, Emmanuel, 67, 204 Manchester terror attack (2017), 212, 213 market economy, 19, 20, 21, 25, 48 and collapse of clusters, 129–30, 144–5 failure over pensions, 180 failure over skill-formation, 173–4 mutual benefit from exchange, 28 market fundamentalists, 147, 150 marriage assortative mating, 35, 99–100, 154, 188–9 cohabitation prior to, 99, 100 as ‘commitment technology’, 109, 155–6 divorce rates, 98, 99, 100–101, 102, 103 and female oppression, 156 religious associations, 109, 156 and rent-seeking, 141 ‘shotgun weddings’, 103 and unemployment, 103 Marxism, 13*, 26, 30, 43, 47, 113, 203, 214 alienation concept, 17–18 and the family, 36–7 late capitalism concept, 6 takeover of Labour Party, 9, 204–5 and ‘useful idiots’, 205* view of the state, 37 Maxwell, Robert, 80 May, Theresa, 205 Mayer, Colin, 18, 70 media celebrities, 6, 112, 204 Mélenchon, Jean-Luc, 5, 202, 204 mental health, 157, 158–9, 162 Mercier, Hugo, 29 meritocratic elites, 3–4, 5, 12–17, 20 Rawlsian vanguard, 13–14, 30, 49–50, 53, 67, 112, 113, 201, 202, 203, 214 Utilitarian vanguard, 9–10, 11–13, 15–16, 18, 52, 53, 59, 66–7, 209 see also Utilitarianism WEIRD (Western, Educated, Industrial, Rich and Developed), 3–4, 12, 14, 16, 17, 20, 116, 121, 133, 214* and white working class, 5, 16 Merkel, Angela, 14, 205 metropolitan areas, 3, 4, 7, 16, 19, 48, 125 co-ordination problem over new clusters, 145–50, 207 economies of agglomeration, 18, 19, 129, 131, 133–44, 195, 196, 207 gains from public goods, 134–5, 138–9 migration to, 195–6 political responses to dominance of, 131–2 scale and specialization in, 126–8, 130, 144–5 and taxation, 131, 132–43, 187, 207 Middle East, 192 Middleton, Kate, 188–9 migration, 121, 194–8, 203 as driven by absolute advantage, 20, 194–5, 208–9 and housing market, 182, 183 Mill, John Stuart, 9–10 minimum wage strategies, 147, 174, 176, 180 Mitchell, Andrew, 188 Mitchell, Edson, 78 modernist architecture, 12 Monarch Airlines, 75 monopolies, natural, 86–7, 88 and asymmetric information, 88, 90 auctioning of rights, 88–9 taxation of, 91–2 utility services, 86, 89, 90 ‘moral hazard’, 179 morality and ethics deriving from values not reason, 27, 28–9, 42–3 and economic man, 10, 19, 25, 26–7, 31, 34–5 and empathy, 12, 27 evolution of ethical norms, 35–6 Haidt’s fundamental values, 11–12, 14, 16, 29, 42–3, 132–3 and market economy, 21, 25, 28, 48 and modern capitalism, 25–6 and new elites, 3–4, 20–21 Adam Smith’s theories, 26–8 use for strategic purposes, 39–40, 41 and Utilitarianism, 9–10, 11, 14, 16, 55, 66–7, 209, 214 motivated reasoning, 28–9, 36, 86, 144, 150, 167 Museveni, President, 121 narratives and childhood mentors, 169–70 and consistency, 41, 67, 81, 96 conveyed by language, 31, 33, 57 detachment from place by e-networks, 38, 61–2 and heyday of social democracy, 49 and identity formation, 32 mis-ranking of cognitive and non-cognitive training, 174–6 moral norms generated from, 33, 97–8 and purposive action, 33–4, 40–41, 42, 68 and schools, 165 of shared identity, 53–6, 81 use of by leaders, 39–42, 43, 49, 80–81 see also belonging, narrative of; obligation, narrative of; purposive action National Health Service (NHS), 49, 159 national identity and citizens-of-the-world agenda, 59–61, 63, 65 contempt of the educated for, 53, 59, 60–61, 63 and distinctive common culture, 37†, 63 established in childhood, 32 esteem from, 51–3 fracture to skill-based identities, 3–5, 51–6, 78 legacy of Second World War, 15, 16 methods of rebuilding, 64, 65–8, 211–15 and new nationalists, 62–3, 67, 203, 204, 205 patriotism narrative, 21, 63, 67, 215 place-based identity, 51–6, 65–8, 211–14, 215 and polarization of society, 54–5 and secession movements, 58 unravelling of shared identity, 15, 50, 51–6, 57*, 58–61, 63, 215 and value identity, 64–5 National Review, 16 nationalism, 34 based on ethnicity or religion, 62–3 capture of national identity notion by, 62, 67, 215 and narratives of hatred, 56, 57, 58–9 and oppositional identities, 56–7, 58–9, 62–3, 68, 215 traditional form of, 62 natural rights concept, 12, 13 Nestlé, 70, 71 Netherlands, 206 networked groups as arena for exchanging obligations, 28 and ‘common knowledge’, 32–3, 34, 54, 55, 66, 212 decline of civil society networks/ groups, 180–81 and early man, 31 evolution of ethical norms, 35–6 exclusion of disruptive narratives, 34 families as, 97–8 leadership’s use of narratives, 39–42, 49 narratives detached from place, 38, 61–2 value-based echo-chambers, 38, 61–2, 64–5, 212, 215 see also family; firms Neustadt, Richard, 39* New York City, 5, 125, 128, 143–4, 193 NGOs, 71, 118, 157–8 ‘niche construction’, 35*, 36* Nigeria, 58 Noble, Diana, 149* Norman, Jesse, 21–2† North Atlantic Treaty Organization (NATO), 114, 115, 116, 117 North Korea, 85 Northern League, Italy, 58 Norway, 63, 206, 208–9 Nozick, Robert, 14–15 obligation, narrative of, 11, 12–13, 16, 19, 29, 33 and collapse of social democracy, 53–6, 210 entitled individual vs family obligation, 99–103, 104–6, 108–9, 210 in ethical world, 112, 113–22 and expansion of post-war ‘clubs’, 117–18, 210 fairness and loyalty instilled by, 34 heyday of the ethical state, 48–9, 68, 196–7 and immigration, 196–7 and leadership, 39, 40–41, 49 ‘oughts’ and ‘wants’, 27, 28, 33, 43 and secession movements, 58 and Adam Smith, 27, 28 see also reciprocity; rescue, duty of oil industry, 192 Organization for Economic Co-operation and Development (OECD), 114–15, 125 Orwell, George, Nineteen Eighty-Four (1949), 5 Oxford university, 7, 70, 100 Paris, 5, 7, 125, 128, 174, 179 patriotism, 21, 63, 67, 215 Pause (NGO), 157–8 pension funds, 76–7, 79–81, 179–80, 185 Pew Research Center, 169 Pinker, Steven, 12* Plato, The Republic, 9, 11, 12, 15, 43 Playboy magazine, 99 political power and holders of economic rent, 135–6, 144 leadership selection systems in UK, 204–5, 206 minimum age for voting, 203 need to restore the centre, 205–7 polarization within polities, 38, 63, 202–5 polities as spatial, 38, 61–2, 65, 68, 211–13 and shared identity, 8, 57–61, 65, 114–16, 211–15 transformation into authority, 41–2, 57–8 trust in government, 4, 5, 48, 59, 210, 211–12 populism, political, 6, 22, 43, 58–9, 202 and geographic divide, 130–31 headless-heart, 30, 60, 112, 119, 121, 122 media celebrities, 6, 112, 204 pragmatism as opposed to, 30 and US presidential election (2016), 5, 203–4 pragmatist philosophy, 6, 9, 19, 21, 21–2†, 46, 201 author’s proposed policies, 19–20, 21, 207–15 limitations of, 30 and Macron in France, 204 and migration, 198 and post-war settlement, 113, 116, 122 and social democracy, 18, 201–2 successful leaders, 22 and taxation, 132, 207 and teaching methods, 166–7 values and reason, 29–30, 43–4 proportional representation, 206 protectionism, 113, 114, 130–31 psychology, social, 16, 54 co-ordination problems, 32–3 esteem’s trumping of money, 174 Haidt’s fundamental values, 11–12, 14, 16, 29, 42–3, 132–3 narratives, 31, 32, 33–4, 38, 39–42, 49, 53–6 norms, 33, 35–6, 39, 42–3, 44, 97–8, 107–8 ‘oughts’ and ‘wants’, 27, 28, 33, 43 personal achievement vs family obligation, 99–103, 104–6, 108–9, 210 ‘theory of mind’, 27, 55 Public Choice Theory, 15–16 public goods, 134–5, 138–9, 186, 202, 213 public ownership, 90 Puigdemont, Carles, 202 purposive action, 18, 21, 25, 26, 34, 40*, 53–4, 68, 112, 211–13 autonomy and responsibility, 38–9 and belonging narrative, 68, 98, 114, 211, 212, 213 in Bhutan, 37† decline in ethical purpose across society, 48 and heyday of social democracy, 47, 49, 114 and narratives, 33–4, 40–41, 42, 68 in workplace, 190 Putnam, Robert, 45–6, 106 Bowling Alone, 181 ‘quality circles’, 72–3 Rajan, Raghuram, 178 Rand, Ayn, 32 rational social woman, 31, 50–51, 196 Rawls, John, 13–14 Reagan, Ronald, 15, 26 Reback, Gary, 90 reciprocity, 9, 19, 31, 212–15 and belonging, 25, 40–41, 49, 53–6, 67, 68, 98, 181, 182, 210–11, 212–13 and collapse of social democracy, 11, 14, 53–6, 58–61, 201, 210 and corporate behaviour, 95 in ethical world, 112, 113–15, 116 and expansion of post-war ‘clubs’, 117–18, 210 fairness and loyalty as supporting, 29, 31, 34 and the family, 97–8, 101, 102 and geographic divide, 125 heyday of the ethical state, 48–9, 68, 96, 196–7, 201 and ISIS, 42 Macron’s patriotism narrative, 67 nineteenth-century co-operatives, 8 rights matched to obligations, 44–5 and three types of narrative, 33, 34, 40–41 transformation of power into authority, 39, 41–2, 57–8 Refuge (Betts and Collier), 27 refugees, 14, 27, 115, 119–20, 213 regulation, 87–90 and globalization, 193–4 of labour market, 174 religion, 56–7, 62–3, 109, 156 religious fundamentalism, 6, 30, 36–7, 212, 213, 215 rent-seeking concept, 140–41, 150, 186, 187–8, 195 rescue, duty of, 40, 54, 119–21, 210, 213 as instrument for ethical imperialism, 117–18, 210 as not matched by rights, 44, 45, 117 and post-war settlement, 113, 115–16 restoring and augmenting autonomy, 121–2 and stressed young families, 163 term defined, 27, 112 value of care as underpinning, 29 retirement pensions, 179–80 rights ideology and corresponding obligations, 44–5 emergence in 1970s, 12–14 human rights lobby, 112, 118, 118* individualism as rampant in recent decades, 19, 214–15 and lawyers, 13–14, 45 Libertarian use of, 12–13, 14–15 natural rights concept, 12, 13 and New Right, 12–13, 14–15, 53 Rawls’ disadvantaged groups, 3–4, 13–14, 16, 50, 53, 112, 121, 203–4, 214 ‘rights of the child’ concept, 103–4 and Utilitarian atate, 12–14 see also individualism Romania, communist, 32, 36 Rotherham, ‘Grimm and Co’, 168–9 rule of law, 138–9, 186 Rwanda, 22 Salmond, Alex, 202 Sandel, Michael, 105 Sanders, Bernie, 9, 64, 202, 203 Sarkozy, Nicolas, 204 Schultz, Martin, 14 Schumpeter, Joseph, 21* Scotland, 58 Seligman, Martin, 108–9 sexual behaviour birth-control pill, 98–9, 102 and class divide, 99, 102, 155–6 concept of sin, 156 and HIV, 121 and stigma, 156–8 sexual orientation, 3, 45 Sheffield, 7, 8, 126, 128–9, 131, 151, 168, 192 shell companies, 193, 194 Shiller, Robert, 34 Sidgwick, Henry, 55 Signalling, Theory of, 41, 43, 53, 63, 95 Silicon Valley, 37–8, 62, 145, 152, 164 Singapore, 22, 147 Slovenia, 58 Smith, Adam, 14, 21, 21–2†, 174 and mutual benefit from exchange, 28 and pursuit of self- interest, 26–7, 40 on reason, 29 The Theory of Moral Sentiments (1759), 27, 28, 174 Wealth of Nations (1776), 26, 28, 174 Smith, Vernon, 28 social democracy ‘Butskellism’, 49* collapse of, 9, 11, 50, 51–6, 116–18, 201–2, 210 communitarian roots, 8–9, 11, 13, 14, 17, 48–9, 201 and group identities, 3–4, 13–14, 51–6 heyday of, 8–9, 15, 17, 47, 48–9, 68, 96, 196–7, 201, 210 and housing, 181–2 influence of Utilitarianism, 9, 10, 14, 16, 18, 49–50, 201, 203, 214 Libertarian challenge, 12–13, 14–15 New Right abandonment of, 14–15, 16, 26, 53 and Public Choice Theory, 15–16 replaced by social paternalism, 11–13, 49–50, 209–10 and rights ideology, 12–14 and secession movements, 58 shared identity harnessed by, 15, 196–7 unravelling of shared identity, 15, 50, 51–6, 57*, 58–61, 63, 215 and Utilitarianism, 214 social maternalism concept, 21, 154–5, 190 free pre-school education, 163–4 mentoring for children, 169–70, 208 support for stressed families, 20, 155, 157–60, 161–3, 208 social media, 27, 61, 87, 173, 207, 215 social paternalism backlash against, 11–13, 15–16 as cavalier about globalization, 20 and child-rearing/family, 105, 110, 154–5, 157, 158, 159, 160, 190, 209 replaces social democracy, 11–13, 49–50, 209–10 ‘rights of the child’ concept, 103–4 and Utilitarian vanguard, 9–10, 11–13, 15–16, 18, 66–7, 209 social services, 159 scrutiny role, 162 Solow, Robert, 141 Soros, George, 15* South Africa, 85 South Asia, 192 South Korea, 129, 130–31 South Sudan, 192 Soviet Union, 114, 115, 116, 203 Spain, 58, 160 specialization, 17–18, 36, 126–8, 130, 144–5, 192 Spence, Michael, 41, 53, 95 Sperber, Dan, 29 St Andrews University, 189 Stanford University, 145, 152 Starbucks, 193 the state, 19 ethical capacities of, 11, 20–21, 48–9 failures in 1930s, 47, 48 ideologies hostile to, 37–8 and pre-school education, 163–4 and prosperity, 37 public policy and job shocks, 177–8 public policy on the family, 21, 154–5, 157–70, 171–3, 177, 209 public-sector and co-ordination problem, 147–8 social maternalism policies, 21, 157, 190 Utilitarian takeover of public policy, 10–12, 13–14, 15–17, 18, 49–50, 113, 201 Stiglitz, Joseph, 56 Stoke-on-Trent, 129 Stonehenge, 64 Sudan, 8 Summers, Larry, 187 Sure Start programme, 164 Sutton, John, 151* Sweden, 178 Switzerland, 175, 206 Tanzania, 193 taxation and corporate globalization, 193, 194 of economic rents, 91–2, 187–8 ethics and efficiency, 132–43 on financial transactions, 187 generational differences in attitudes, 59 Henry George’s Theorem, 133–6, 141 heyday of the ethical state, 49 issues of desert, 132–3, 134–9 and the metropolis, 131, 132–43, 187, 207 and migration, 197 of natural monopolies, 91–2 ‘optimal’, 10 of private litigation in courts, 187–8 and reciprocity, 54, 55, 59 redesign of needed, 19 redistributive, 10, 11, 14, 49, 54, 55, 60, 197 of rents of agglomeration, 19, 132–44, 207 social maternalism policies, 21, 157 substantial decline in top rates, 55 tax havens, 62 Venables-Collier theory, 136–9 Teach First programme, 165–6 technical vocational education and training (TVET), 171–6 technological change, 4 robotics revolution, 178–9 and withering of spatial community, 61–2 see also digital networks telomeres, 155–6 Tepperman, Jonathan, The Fix, 22 Thatcher, Margaret, 15, 26 Thirty Years War, 56–7 Tirole, Jean, 177, 178 Toyota, 72–3, 74, 94, 172 trade unions, 173, 174, 176 Troubled Families Programme (TFP), 162 Trudeau, Pierre, 22 Trump, Donald, 5, 9, 63, 64, 86, 125, 136, 202, 204, 206, 215 Uber, 87 unemployment in 1930s, 47 and collapse of industry, 7, 103, 129, 192 impact on children, 160–61 older workers, 4, 103, 213 retraining schemes, 178 in USA, 160 young people, 4 Unilever, 70, 71 United Kingdom collapse of heavy industry, 7, 103, 129, 192 extreme politics in, 5 and falling life expectancy, 4 financial sector, 80, 83, 84–5 IMF bail-out (1976), 115 local banks in past, 146 northern England, 3, 7, 8, 84, 126, 128–9, 131, 151, 168, 192 shareholder control of firms, 76–7, 79, 80, 82–3 statistics on firms in, 37 universities in, 170, 172, 175* vocational education in, 172, 175† widening of geographic divide, 125 United Nations, 65, 112 ‘Club of 77’, 116 Security Council, 116 UNHCR, 115 United States breakdown of ethical family, 104–5 broken cities in, 129, 130 extreme politics in, 5, 63 and falling life expectancy, 4 financial sector, 83–4, 186 and global e-utilities, 89–90 growth in inequality since 1980, 125 heyday of the ethical state, 49 and knowledge industries, 192 labour market in, 176, 178 local banks in past, 146 oversight of firms in, 76 pessimism in, 5, 45–6 presidential election (2016), 5, 9, 203–4 Public Interest Companies, 93 public policy as predominantly national, 212 ‘rights of the child’ concept in, 103–4 Roosevelt’s New Deal, 47 statistics on firms in, 37 taxation in, 143–4, 144* unemployment in, 160 universities in, 170, 172, 173 weakening of NATO commitment, 117 universities in broken cities, 151–2 in EU countries, 170 expansion of, 99–100, 127 knowledge clusters at, 127, 151–2 low quality vocational courses, 172–3 in UK, 170, 172, 175* in US, 170, 172, 173 urban planning, post-war, 11–12 Utilitarianism, 19, 30, 49–50, 55, 108, 112, 121, 210–11 backlash against, 11–13, 201, 202 belonging as absent from discourse, 16, 59, 66–7, 210–11 care as key value, 12 and consumption, 10, 11, 16, 19–20, 209 equality as key value, 12, 13, 14, 15, 116, 132–3, 214 incorporated into economics, 10–11, 13–14, 16 influence on social democrats, 9, 10, 14, 16, 18, 49–50, 201, 203, 214 origins of, 9–10 paternalistic guardians, 9–10, 11–13, 66–7, 210 takeover of public policy, 10–12, 13–14, 15–17, 18, 49–50, 113, 201 and taxation, 10, 132*, 133 vanguard’s switch of identity salience, 52, 53, 59 Valls, Manuel, 204 Venables, Tony, 18, 136, 191* Venezuela, 120, 214 vested interests, 85–6, 135–6, 165, 166, 207 Volkswagen, 74–5 Walmart, 87 Warsi, Baroness Sayeeda, 65 Wedgwood, Josiah, 129 welfare state, 9, 48–9 unlinked from contributions, 14 well-being and happiness belonging and esteem, 16, 25, 27, 29, 31–3, 34, 42, 51–6, 97–8, 174 entitled individual vs family obligation, 108–9 and financial success, 26, 94 ‘ladder of life’, 25* poverty in Africa, 37 reciprocity as decisive for, 31 Westminster, Duke of, 136 white working class ‘elite’ attitudes to, 4, 5, 16 falling life expectancy, 4, 16 pessimism of, 5 William, Prince, 188–9 Williams, Bernard, 55* Wittgenstein, 62, 63 Wolf, Alison, 52–3, 155 World Bank, 115, 117, 118, 118*, 122 World Food Programme, 115 World Health Organization, 115 World Trade Organization (WTO), 116–17 Yugoslavia, 58 Zingales, Luigi, 178 Zuma, Jacob, 85 Copyright THE FUTURE OF CAPITALISM.


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The Marshall Plan: Dawn of the Cold War by Benn Steil

Albert Einstein, Alistair Cooke, anti-communist, Berlin Wall, Bretton Woods, British Empire, business cycle, Carmen Reinhart, centre right, currency manipulation / currency intervention, deindustrialization, disintermediation, Dissolution of the Soviet Union, Donald Trump, eurozone crisis, facts on the ground, Fall of the Berlin Wall, full employment, imperial preference, invisible hand, Kenneth Rogoff, kremlinology, land reform, Mikhail Gorbachev, Monroe Doctrine, new economy, open economy, Potemkin village, RAND corporation, Ronald Reagan, structural adjustment programs, the market place, trade liberalization, Transnistria, Winter of Discontent, Works Progress Administration, éminence grise

Inside the Kremlin’s Cold War: From Stalin to Khruschev. Cambridge: Harvard University Press, 1996. Zwass, Adam. Monetary Cooperation between East and West. White Plains, NY: International Arts and Sciences Press, 1975. ARTICLES Adams, Frank S. “Stassen Plea Wins Legion Convention to Marshall Plan.” New York Times. September 1, 1947. Agnew, John. “The Eurozone Crisis and the Marshall Plan Metaphor.” openDemocracy. August 6, 2012. https://www.opendemocracy.net/john-agnew/eurozone-crisis-and-marshall-plan-metaphor. Albright, Madeleine. “Why Bigger Is Better.” The Economist. February 15, 1997. Albright, Robert C. “House Bill Would Okay Greek-Turk Loan, Grant.” Washington Post. March 19, 1947. ———. “Junkets Might Alter Next Session’s Votes.” Washington Post. September 7, 1947. Alsop, Joseph, and Stewart Alsop. “Hoover a Godsend to ERP Foes.”


pages: 287 words: 95,152

The Dawn of Eurasia: On the Trail of the New World Order by Bruno Macaes

active measures, Berlin Wall, British Empire, computer vision, Deng Xiaoping, different worldview, digital map, Donald Trump, energy security, European colonialism, eurozone crisis, failed state, Francis Fukuyama: the end of history, global value chain, illegal immigration, intermodal, iterative process, land reform, liberal world order, Malacca Straits, mass immigration, megacity, open borders, Parag Khanna, savings glut, scientific worldview, Silicon Valley, South China Sea, speech recognition, trade liberalization, trade route, Transnistria, young professional, zero-sum game, éminence grise

When Russia and China developed their new, mammoth integration projects, they had one underlying goal: to show Europeans that their decades-old integration project was one among many, benefitting from no special aspirations to universality. But if this underlying goal succeeded beyond the most optimistic expectations, that was because the European Union was already, and very much on its own initiative, retreating within its borders. The eurozone crisis is probably a good signpost for this retreat. Not only did it force Europeans to look inwards and focus almost all their attention on reforming eurozone rules and institutions, it greatly diminished Europe’s prestige and soft power, based as it was on an image of economic prosperity and efficient co-ordination and policymaking. Both Russia and China are thus ready for the next stage in their plans.


pages: 385 words: 111,807

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

Affordable Care Act / Obamacare, Albert Einstein, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collateralized debt obligation, colonial rule, Corn Laws, corporate governance, corporate raider, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, discovery of the americas, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Akerlof, Gini coefficient, global value chain, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Gunnar Myrdal, Haber-Bosch Process, happiness index / gross national happiness, high net worth, income inequality, income per capita, information asymmetry, intangible asset, interchangeable parts, interest rate swap, inventory management, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, laissez-faire capitalism, land reform, liberation theology, manufacturing employment, Mark Zuckerberg, market clearing, market fundamentalism, Martin Wolf, means of production, Mexican peso crisis / tequila crisis, Nelson Mandela, Northern Rock, obamacare, offshore financial centre, oil shock, open borders, Pareto efficiency, Paul Samuelson, post-industrial society, precariat, principal–agent problem, profit maximization, profit motive, purchasing power parity, quantitative easing, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, Scramble for Africa, shareholder value, Silicon Valley, Simon Kuznets, sovereign wealth fund, spinning jenny, structural adjustment programs, The Great Moderation, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Vilfredo Pareto, Washington Consensus, working-age population, World Values Survey

Mexicans, seen as the archetypal ‘lazy Latinos’ in the US, actually work longer than the ‘worker ant’ Koreans. Recall that the Latin American countries are very strongly represented in the above-mentioned list of countries with longest working weeks (five out of twelve). It is simply not true that the Latin Americans are laid-back people who do not work hard, as the stereotype goes. In the ongoing Eurozone crisis, the Greeks have been vilified as lazy ‘spongers’ living off hard-working Northerners. But they have longer working hours than every country in the rich world apart from South Korea. The Greeks actually work 1.4 and 1.5 times longer than the supposedly workaholic Germans and Dutch. Italians also defy the myth of ‘lazy Mediterranean types’ by working as long as the Americans and 1.25 times longer than their German neighbours.

In the US, the UK and Sweden it rose quite substantially: from around 6 per cent to around 9–10 per cent. Five years after the crisis, their unemployment rates are still around 7–8 per cent. Some people claim that the ‘real’ rate of unemployment in the US could easily be 15 per cent, if we include the discouraged workers and those in time-related under-employment. In the ‘periphery’ countries of the Eurozone, which were particularly hard hit by the 2008 crisis, the unemployment situation ranges from catastrophic to grim. In Greece and Spain the unemployment rate has risen from around 8 per cent before the crisis to 28 per cent and 26 per cent respectively, with youth (aged fifteen to twenty-four)unemployment rates over 55 per cent. The unemployment problem is also serious in Portugal (18 per cent) and Ireland (14 per cent).


pages: 566 words: 163,322

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

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

When a boom period reaches a manic stage, a high concentration of wealth at the top can encourage the rich to take a portion of their bulging fortunes and indulge in risky forms of financial speculation, in the kinds of conspicuous consumption that whip up social resentment, and then to ship a large share of the national wealth offshore when the inevitable crisis arrives. Once a crisis starts, politicians must decide who will suffer the brunt of the losses, and the festering anger can make it much harder for creditors and debtors to reach agreement. As the Eurozone nations struggled to resolve the debt crisis in Greece, one of the basic hurdles was that neither Greece’s creditors nor its own citizens were eager to help bail out the government of a deeply unequal society in which the rich have barely paid taxes in decades. By 2015, the backlash was palpable, and fear bloomed in the Greek economy. Leaving a hotel in the island of Santorini that summer, the general manager and his staff repeatedly warned me to carry my bill and credit card slip; customs officials were now randomly checking travelers for proof that hotels were not accepting cash, the preferred payment method of tax dodgers.

Many of these companies are still run by the founders, who tell similar stories of setting up shop after the collapse of Communism in the late 1980s, then fighting their way through hard times before reaching a critical mass—many of them have annual sales of nearly one billion dollars—where they feel comfortable enough to break out of Poland and start moving into Germany, next door. These companies range from manufacturers in fast fashion and shoes to providers of novel services like debt collection, a profession still undeveloped in western Europe. In late 2014 a Wroclaw entrepreneur said that with bad loans rising across the Eurozone in the wake of the region’s debt crisis, the continent’s secretive banks had started looking for a discreet partner to help retire the problem quietly. That’s why he set up a Polish agency to collect debts in Germany. The Polish CEO said his agency takes a “soft approach” to this abrasive profession, which he expects will ease his move across the border. The firm has been opening offices in Germany and hiring German-speaking Poles to collect debts by phone.

The scale of the Asian currency collapse was hardly unusual. Examining again the major currency crises in the emerging world going back to 1990, I found that stock prices in the country at the epicenter of the crisis—such as in Mexico in ’94 or in Thailand in ’97—typically saw a currency-fueled drop of 85 percent in dollar terms, while the average decline in stock prices across the affected region was 65 percent. The way the Eurozone crisis played out in the region’s peripheral economies also exhibited this basic pattern: The stock market fell by up to 90 percent in Greece—the country where the crisis started—and spread across peripheral Europe, including Portugal, Ireland, Italy, and Spain, where the average drop was 70 percent. When the crisis reached its nadir in 2012, the total value of the stock markets of these five European countries was less than the market cap of Apple.


pages: 305 words: 98,072

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

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

YOU CAN ALSO MAKE MONEY WHEN THINGS GO DOWN Another thing to be aware of is that (as counter-intuitive as it might seem) if you think something will fall in value, you are often able to make money out of that too. This is called “shorting”. Essentially, shorting is a bet that something will go down instead of up. For example, if you believe that the German stock market will suffer due to a eurozone crisis, you can “short” it. To do this, you buy a product that will make you money if the German stock market falls. Shorting is another great thing to be aware of. Many people have never heard of it and most have no idea that anyone can do it. You just need to know how. It should be noted that shorting is quite a risky and specialist activity and not be entered into lightly but it is well worth knowing that it is possible at the very least.


pages: 831 words: 98,409

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

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

Technologization, financialization, and globalization have created an intricate web of interconnections within the financial world itself and between the financial world and other sectors such as the economy and politics. While new linkages are formed at an unprecedented speed, our capacity to fully grasp the resulting complexity has not quite caught up with the new system we have created—as was evident in the miscalculation of the impact of Lehman Brothers’ failure or the challenges of dealing with the eurozone crisis. Introduction: Meet the “Superhubs” Davos epitomizes the principles of network science as they apply to human beings. These meetings tangibly demonstrate that similar people attract each other—and that those who already have the most connections attract even more. The Davos success formula? The resort is hard to reach, isolated, and difficult to navigate. Deprived of their usual environments, infrastructure, and privileges, leaders are crammed into a vacuum with nowhere else to go.


Corbyn by Richard Seymour

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

What all sides are missing, crucially, is that the shape of any divorce settlement depends on what the EU is prepared to offer, not mainly on what British politicians would like, and the EU’s red lines are already restrictive. The ‘global-trader’ idea of the Brexit Right, wherein an emancipated Britannia will be able to strike lucrative deals in a global market, is a fantasy. It’s true that the EU has been in relative global decline for some years, despite stabilising the eurozone crisis (at the significant expense of its poorer countries). It’s also true that this has resulted in losses in the City, where, for example, the euro currency is traded. The EU may turn out to be unsustainable in the long term, at least in its present format. However, British capitalism, and the City in particular, still gain enormous benefits from EU membership. The ability of financial firms located in the UK to sell their services throughout the EU, likely to be at the very least curtailed after withdrawal from the EU, is one of the sources of the City’s current global power.


pages: 367 words: 108,689

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

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

Thomas, 48 Chamberlain, Joseph, 304 Chamberlain, Neville, 91 Champy, James, 174, 255 Channel Tunnel, 202 Charter Consolidated, 146 Chase Manhattan, 149 Chatfield, Admiral Lord, 233 Cheltenham & Gloucester Building Society, 109–10, 118 Chevalier, Albert, 172 childcare, 13, 15, 18–19, 76, 81 see also nurseries Cisco, 114 Citibank, 96, 100 Citigroup (Citicorp), 146 secret reports, 24–6, 152, 159 Citizens’ Charter, 222–3, 258 City of London, 129–31 deregulation, 134–40, 147–51, 285 hostility to industry, 152 and occupational pensions, 190 pay and bonuses, 142–4, 149–50, 160–1 Clarke, Kenneth, 177 Cobbett, William, 282–3, 290–2 Cobden, Richard, 106 Coles, Adrian, 109–13, 117–19 collateralized debt obligations (CDOs), 154, 156 Columbus, Christopher, 277–8 Community Development Finance Institutions, 96 comparative advantage, 298 Comprehensive Performance Assessments, 265 Conrad, Joseph, 286 Conservative Party, 58–9, 63, 137, 188, 222, 227 and pension reforms, 176–85, 194 conveyancing, 101 Cooke, Sue, 252 Co-operative Bank, 118 co-operatives, 299 corporate re-engineering, 174, 255–6, 261 ‘Corset’, the, 57, 60–1, 65–8, 70, 72, 97, 99, 285 Cotton, Kathleen, 328 council houses, sale of, 63, 67, 100 County NatWest, 145, 148 courts, closure of, 252 Crabtree, Tim, 292–6 credit cards, 18, 80–1, 168, 300 credit default swaps, 156 Credit Suisse First Boston, 114, 151 credit unions, 96 Cresswell-Turner, Sebastian, 65 Crunchies, 44, 49, 83 Crystal Palace station, 52–4 D Dad’s Army, 93–4 Daily Express, 183, 185 Daily Mail, 9–10, 38, 189, 271 Daily Mirror, 190–1 Daily News, 38 Daily Telegraph, 15, 83, 130, 139, 181, 288 Darling, Alistair, 118 Dartford Grammar School, 216–17 Davies, Brian, 113 Davis, Brooklyn, 16 Dearing, Ron, 227 debt advice, 17 ‘deliverology’, 262, 266–7 democracy, 26 ‘property-owning’, 63 shareholder, 107 Demos, 257 Denmark, 77, 286 Department of Education, 218, 224, 227 Department of Health and Social Security (DHSS), 177, 184 Department of Trade and Industry, 188 Department of Work and Pensions, 17 derivatives, 141–2, 155–6, 158–9 Direct Edge, 155 Disney, 142–3 divorce, 79–80 Dluglash, Alan, 20 Dorset, 18, 292–6 dot.com boom, 114–15, 132–3, 140–1, 154, 169 downshifting, 12, 44, 52, 73, 83, 292 Drexel Burnham Lambert, 148 Dulwich, 287 Dulwich Preparatory School, 204–6 Dunkley Marshall, 138 Dunn, Robert, 225 dyslexia, 230 E Edinburgh, 18 education, 19–20, 207–41 and character, 233–4 and choice, 207–11, 213, 216, 221–3, 238 comprehensive, 220, 234, 237 and globalization, 212, 239 national curriculum, 220, 227 ‘open admission’ policy, 220–1 private, 5, 10–13, 19–20, 36, 143, 169, 211–12, 236, 238–9, 242 SATs, 226–7 ‘Three Wise Men’ report, 226 see also Black Papers on Education; schools Efficient Market Hypothesis, 128–9, 131, 133, 140, 157 Eisner, Michael, 142 Eleven-Plus, 217–18 Eliot, T. S., 231 Elliott, J. H., 280 Elliott, Richard, 258–9 Ellison, Robin, 188–95 endowment policies, 199 energy prices, rising, 298 Enron, 117 Enterprise Finance Guarantee (EFG), 121–2 entrepreneurs, 167–71, 292–7 Epicurean Dealmaker, 144 Essex, 235, 267 eurobond market, 136 eurozone crisis, 273 Evans, John, 239 exchange controls, abolition of, 58–9, 62–8 executive pay, 142–3, 157 F Fair Trading Act, 135 Falklands War, 137 Fama, Eugene, 128 Family Lives, 232 FBI, 122–3 Fell, Michelle, 117 financial services sector, 15, 24–6, 39, 69, 82, 116, 127–62, 287 corrosion of middle-class values, 154–6, 158–62 corrosion of real economy, 156–7, 159 deregulation, 3, 30, 35, 66, 134–40, 147–51, 285 dysfunctional behaviour, 140–1, 144, 153 and ‘financialization’, 152–3 immunity, 30, 34 lobbying power, 152 and madness of crowds, 132 mathematicians and physicists in, 127, 129 pay and bonuses, 142–4, 149–50, 155, 160 value of securities traded, 158–9 Financial Times, 70, 141 First World War, 275 FitzGerald, Niall, 194 food allergies, 4, 44 Foot, Michael, 67 Ford, Henry, 254–5 foreign languages, 163 Fortune, John, 111, 117, 120 Fowler, Norman, 176–85, 187–90, 196, 201 France, 16, 64, 97, 276 Frankfurt, 137 fraud, 30, 262 free school meals, 295 Friedman, Milton, 58 friendly societies, 97, 299 Friends of the Earth, 44 FRS17, 192 FTSE 100, launch of, 149 fuel bills, 18, 203 Fukuyama, Francis, 22–3, 272–3, 288 Future Foundation, 40 futures trading, 142 G Galbraith, John Kenneth, 264 gambling, 123–4 Garson, Greer, 275 General Motors, 248 ‘Generation Rent’, 21 Germany, 22, 70, 97, 116, 152, 176 Girobank, 106, 122 Glasgow, 252 Global Educational Reform Movement, 237 globalization, 23, 25, 76, 212, 248–9, 272 GMO, 128–9, 132, 134 Godber, Steve, 182 gold, 278–9 Gold Standard, 95 Goldman Sachs, 152 Good Life, The, 73–4 Goode, Sir Roy, 191–2 Goodhart’s Law, 260, 267 Goodison, Nicholas, 134, 136–8, 147, 150 Goodwin, Fred, 193 Google, 300 Gore, Al, 261 Gorst, John, 37 GPs, 258, 303 Graham, Benjamin, 200 Gramsci, Antonio, 254 Granita restaurant, 263, 265 Grant, Hugh, 161 Grantham, Jeremy, 128–9 Gravesend Grammar School, 217 Great Barrington, Massachusetts, 92 Great Depression, 95 Greater London Assembly, 20 Greener Dreyfus & Co., 145 Greenham, Tony, 106–7, 110, 114–16, 132, 151 Greenwell’s, 146 Greenwich, 220–1 Grossman-Stiglitz Paradox, 131 Guardian, 16, 138, 214 Gump, Paul, 236 H Hacker, Jacob, 286 Hadleigh, 250–1 Halifax Building Society, 72, 102, 108, 110, 112, 118–19, 122 Hammer, Michael, 174, 255 Hardern, Michael, 112 Harvard Business Review, 256 Hattersley, Roy, 135 HBOS, 72, 118–19 Head, Simon, 261 Healey, Denis, 62, 66–7 Heath, Christopher, 158 Heath, Edward, 58, 63, 177–8 hedge funds, 159, 162 Henderson Crosthwaite, 158 Hertford College, Oxford, 224 Heseltine, Michael, 64 holidays, 12, 16–18, 38–9, 69, 88, 163, 268, 271 home ownership expansion of, 63, 67 levels in eastern Europe, 3, 68 levels in London, 68 and retirement, 14, 19, 21, 85, 200–1, 203 shared ownership schemes, 61–2 Homebuy schemes, 61–2 Hoover, J.


pages: 401 words: 109,892

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

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

In the twenty years following my arrival in the US in 1999, most domestic US markets lost their competitive edge. I did not notice any of these changes as they were happening. I was not aware of the trends until I stumbled upon the facts in my own research. Why? Because the changes were very gradual, and because a lot of things are always happening at the same time: the internet bubble, 9 / 11, the war in Iraq, the housing bubble, the financial crisis of 2008–2009, the eurozone crisis of 2010–2012, oil price volatility, the rise of populism, the risk of trade wars, and so on. Throughout this tumultuous history, oligopolistic concentration and markups have increased slowly but steadily. And it’s only now, looking back, that a clear picture emerges. Notice that I am talking about US markets, not US firms. US firms do very well in global markets. In that sense, they are competitive.


pages: 385 words: 121,550

Three Years in Hell: The Brexit Chronicles by Fintan O'Toole

airport security, banking crisis, Berlin Wall, blockchain, Bob Geldof, Boris Johnson, British Empire, centre right, cognitive dissonance, congestion charging, deindustrialization, deliberate practice, Dominic Cummings, Donald Trump, Double Irish / Dutch Sandwich, Downton Abbey, Etonian, eurozone crisis, facts on the ground, Fall of the Berlin Wall, first-past-the-post, full employment, income inequality, l'esprit de l'escalier, labour mobility, late capitalism, open borders, Slavoj Žižek, South China Sea, technoutopianism, zero-sum game

It has created, especially with the adoption of the euro, a huge technocratic infrastructure (most obviously in the European Central Bank) without creating the mechanisms of democratic accountability to keep it in line. It has acquired many of the characteristics of a state without having the deep sense of identity and allegiance a state requires. It has created expectations that it should be able to solve problems collectively, but when faced with crises like the vast influx of refugees it lacks the power (and apparently the will) to do so. It has created (as the eurozone crisis showed) the need to build federal institutions with formidable economic powers, but it has not created an appetite among most of its citizens for those powers to be ceded to the European centre. It can neither move forward to a federalised future nor retreat to the more minimal status of a trading bloc. At the core of these problems is an ideological crisis. The EU has to root itself in ideas and values because it can’t root itself in anything else.

One of the reasons most small EU countries are especially unhappy about Brexit is that having the British at the European table has helped to disperse power among a larger number of big players. It is easier for smaller countries to use their diplomatic skills to create coalitions on questions of vital interest to themselves when they can play on rivalries and disagreements between the major states, including the UK. We can see this most clearly from a negative example: without the UK in the eurozone, Ireland was much more vulnerable in the banking crisis to bullying by the ECB. If and when Britain leaves, Germany will, merely by default, become much more dominant. The balance of power that Castlereagh did so much to create at the Congress of Vienna will have tilted towards Berlin. But there is another irony, too: the Germans don’t really want this dominance. Scarred by the experience of defeat, they don’t trust themselves with it.


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

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

Index of worldwide industrial production during two recessions Source: Barry Eichengreen and Kevin O’Rourke, ‘A Tale of Two Depressions’, VoxEU (8 March 2010), <http://www.voxeu.org/article/tale-two-depressions-what-do-new-data-tell-us-february2010-update> downward spiral, avoiding a second Great Depression. Perhaps surprisingly, it can therefore be argued that the authorities (central banks and governments) rescued the free market system by their responses after . Compared with the other industrialized countries, the eurozone recovered less effectively after the financial crisis of , as can be seen in Figure ., which compares the development of GDP in the eurozone with that of the UK and the US. It is remarkable that the Great Recession of – had approximately the same intensity in these three economies, whereas the progression was different after . While the UK and US saw a recovery (albeit a slow one), the eurozone slid back into recession in –.

. – government bonds , , f, b debt , f, , – debt/GDP increase f deficit  investment , , f,  and public goods – spending ,  see also governments, role of; internal limits of government governments, role of – external limits of government externalities – public goods, supply of – redistribution – regulation  Great Britain see United Kingdom Great Depression (s) , –, –, f Greece eurozone government bond spreads, ten-year f global financial crisis ()  government bonds  labour costs, gross hourly f Greenspan, A. – gross domestic product (GDP)  in constant prices , f cumulative growth and budgetary austerity f in developed countries and developing countries , f per capita in Soviet Union and United States  real per capita, North Korea and South Korea , f fairness, sense of , ,  financial markets (external limit) – Finland eurozone government bond spreads, ten-year f labour costs, gross hourly f social security spending as percentage of government spending f France eurozone government bond spreads, ten-year f gross domestic product (GDP) per capita f labour costs, gross hourly f personal income tax rates f, f public and private capital f social security f,  taxation policies capping top incomes  free market system , , –,  competition and cooperation ,  external limits ,  internal limits –, , ,  free-rider problem –, , ,  Freud, S.

.  Gini coefficients b global capitalism b global financial crisis ()  immigration – imperialism  import protection  income, share of total going to top % f,   INDEX income distribution –b, , , –,  income equality and economic growth trade-off , f,  income inequality , f, , , ,  reformist scenario  United Kingdom and United States  income per capita , f income redistribution policies  income tax f, ,  on highest incomes , , –, , , – productivity, labour costs and public sector  in selected countries f India five-year plans  gross domestic product (GDP) per capita f individual rationality and collective rationality –, –, ,  environment (external limit)  external limits of governments  industrial production, worldwide  inequality –,  assets – reduction  and social and political instability , f wealth ,  world –b see also income inequality inflation and lender of last resort –b insolvency/bankruptcy , ,  interbank market  interest rates , –, – on Spanish and British ten-year government bonds f internal contradictions of capitalism –,  internal limits of capitalism – internal limits of free market system –, , ,  internal limits of government – winner-takes-all phenomenon – International Monetary Fund (IMF) ,  investment boom  in eurozone  projects (efficiency)  public  as share of GDP  ‘invisible hand’ ,  Ireland eurozone government bond spreads, ten-year f global financial crisis ()  labour costs, gross hourly f Italy eurozone government bond spreads, ten-year f gross domestic product (GDP) per capita f labour costs, gross hourly f social security spending as percentage of government spending f Jacobson Schwartz, A. n Japan gross domestic product (GDP) per capita f liberalization and material prosperity  Kahneman, D.  Keynes, J.


pages: 466 words: 127,728

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

Affordable Care Act / Obamacare, Asian financial crisis, asset allocation, Ayatollah Khomeini, bank run, banking crisis, Ben Bernanke: helicopter money, bitcoin, Black Swan, Bretton Woods, BRICs, business climate, 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, Edward Snowden, eurozone crisis, fiat currency, financial innovation, financial intermediation, financial repression, fixed income, Flash crash, floating exchange rates, forward guidance, G4S, George Akerlof, global reserve currency, global supply chain, Growth in a Time of Debt, income inequality, inflation targeting, information asymmetry, invisible hand, jitney, John Meriwether, Kenneth Rogoff, labor-force participation, Lao Tzu, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, market clearing, market design, money market fund, money: store of value / unit of account / medium of exchange, mutually assured destruction, obamacare, offshore financial centre, oil shale / tar sands, open economy, plutocrats, Plutocrats, Ponzi scheme, price stability, quantitative easing, RAND corporation, reserve currency, risk-adjusted returns, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Satoshi Nakamoto, Silicon Valley, Silicon Valley startup, Skype, sovereign wealth fund, special drawing rights, Stuxnet, The Market for Lemons, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, too big to fail, trade route, undersea cable, uranium enrichment, Washington Consensus, working-age population, yield curve

pagewanted=all; Angeline Benoit, Manuel Baigorri, and Emma Ross-Thomas, “Rajoy Drives Spanish Revolution with Low-Cost Manufacture,” Bloomberg, December 19, 2012, http://www.bloomberg.com/news/2012-12-19/rajoy-drives-spanish-revolution-with-low-cost-manufacture.html. adverse demographics as a major hurdle . . . : Buttonwood, “The Euro Zone Crisis: Growth Problem,” Economist, December 17, 2012, http://www.economist.com/blogs/buttonwood/2012/12/euro-zone-crisis. a €60 billion bailout fund . . . : Matina Stevis, “Euro Zone Closes In on Bank Plans,” Wall Street Journal, June 13, 2013, http://online.wsj.com/article/SB10001424127887323734304578542941134353614.html. Chapter 6: BELLs, BRICS, and Beyond The original term BRIC was created . . . : Jim O’Neill, “Building Better Global Economic BRICs,” Goldman Sachs, Global Economics Paper no. 66, November 30, 2001, http://www.goldmansachs.com/our-thinking/archive/archive-pdfs/build-better-brics.pdf.

New York Times, December 14, 2001, http://www.nytimes.com/2001/12/14/world/nation-challenged-video-bin-laden-tape-boasts-trade-center-attacks-us-says-it.html. Buttonwood. “The Real Deal—Low Real Interest Rates Are Usually Bad New for Equity Markets.” Economist, October 20, 2012, http://www.economist.com/news/finance-and-economics/21564845-low-real-interest-rates-are-usually-bad-news-equity-markets. ———. “The Euro Zone Crisis: Growth Problem.” Economist, December 17, 2012, http://www.economist.com/blogs/buttonwood/2012/12/euro-zone-crisis. “Cargo Plane with 1.5 Tons of Gold Held in Istanbul.” Hurriyet Daily News, January 5, 2013, http://www.hurriyetdailynews.com/cargo-plane-with-15-tons-of-gold-held-in-istanbul-.aspx?pageID=238&nid=38427. Cendrowicz, Leo. “Switzerland Celebrates World’s Longest Rail Tunnel.” Time, October 20, 2010, http://www.time.com/time/business/article/0,8599,2026369,00.html.


pages: 401 words: 112,784

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

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

While ‘important-looking foreigners’ chased investors’ debts, a traditionally poor population that never quite believed in boom-time riches laboured under impossible retrenchment ‘with scarcely a peep of protest’.16 Irish resignation may be less frightening than Greek rage, but it is hardly healthy either. Our aim in this book is to identify the distinctive social maladies that flow from economic stagnation away from the peculiarities of the eurozone crisis, in Britain and the United States. Before the storm hit, the thing that marked out these two societies was the steady opening-up of a vast economic gap. Indeed, the world's leading authorities on the distribution of income have published a book that draws on decades of evidence, with the subtitle: A contrast between continental European and English-speaking countries.17 All rich societies levelled out over most of the twentieth century; the great contrast emerged after the 1970s.


pages: 385 words: 119,859

This Is London: Life and Death in the World City by Ben Judah

British Empire, deindustrialization, eurozone crisis, high net worth, illegal immigration, mass immigration, multicultural london english, out of africa, period drama, plutocrats, Plutocrats, Skype, white flight, young professional

These are the evenings when I sit under the flickering naked bulb in the kitchen and talk with the Professor. The shoulders of this older man are pinched up, and fingering his cigarette packet he narrates the evening news with what he remembers from the programme last night. The Professor corners anyone in the kitchen with his views, and begins, whether they wanted it or not, to tell them about the Eurozone crisis or the frontlines in Ukraine. His brown hair is streaked with silver and his face screws upwards with anxiety: gullied and canyoned with black lines. He is not a Professor, of course, they only call him that in the halfway house. He is in reality a welder who has run away from his wife in Romania at the last possible moment before infirmity and is now cracking up as he traipses up and down Barking looking for work.


pages: 356 words: 112,271

Brexit and Ireland: The Dangers, the Opportunities, and the Inside Story of the Irish Response by Tony Connelly

air freight, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, call centre, centre right, Double Irish / Dutch Sandwich, eurozone crisis, Fall of the Berlin Wall, knowledge economy, LNG terminal, low skilled workers, non-tariff barriers, open borders, personalized medicine, race to the bottom, regulatory arbitrage, éminence grise

On 23 January 2013 he delivered a speech at the Bloomberg offices in London. It was actually quite pro-EU: he announced five principles to guide a deep-rooted reform of the Union to make it, in his view, fit for purpose in the twenty-first century. But it was his promise (or threat) to hold an in–out referendum on EU membership that grabbed the headlines. Cameron presented the vote in the following terms. The eurozone crisis would mean the EU being transformed beyond all recognition. It desperately needed to become more flexible and economically dynamic. There was a clamour for powers to flow back to member states and national parliaments. A treaty change that dealt with all these issues would provide Britain with a once-and-for-all opportunity. ‘It is time for the British people to have their say,’ he told the audience.


pages: 215 words: 64,460

Shadows of Empire: The Anglosphere in British Politics by Michael Kenny, Nick Pearce

battle of ideas, Berlin Wall, Boris Johnson, Bretton Woods, British Empire, colonial rule, corporate governance, Dominic Cummings, Donald Trump, eurozone crisis, Fall of the Berlin Wall, floating exchange rates, Francis Fukuyama: the end of history, full employment, global reserve currency, imperial preference, informal economy, invention of the telegraph, Khartoum Gordon, labour mobility, liberal capitalism, Mahatma Gandhi, mass immigration, Monroe Doctrine, Nixon shock, quantitative easing, reserve currency, Ronald Reagan, trade route, Washington Consensus

Under pressure from the growing ranks of Eurosceptics within his own party, and the rise in support for UKIP outside it, Cameron argued that he wanted to negotiate a new settlement for Britain in Europe and then put it to the British people in a referendum. He got the electoral mandate to pursue this course when he secured a majority for his party at the 2015 general election and promptly opened negotiations with the rest of the EU. The negotiations achieved little of substance, however. European leaders were not ready for treaty change and were preoccupied with the ongoing problems of the eurozone and the refugee crisis precipitated by the Syrian civil war. Cameron could secure only minor amendments to the social security entitlements of EU nationals migrating to the UK and several other, largely cosmetic reforms. This package of changes had very little impact upon the referendum debate that opened up early in 2016. With the long-anticipated referendum on the UK's membership of the EU now imminent, proponents of the Anglosphere moved into a more overtly political mode of operation, drawing on their ideological reworking of Britain's global history to advance a new account of the country's role in the world outside the EU and establishing the key positions that would form the core of their referendum platform.


pages: 412 words: 128,042

Extreme Economies: Survival, Failure, Future – Lessons From the World’s Limits by Richard Davies

agricultural Revolution, air freight, Anton Chekhov, artificial general intelligence, autonomous vehicles, barriers to entry, big-box store, cashless society, clean water, complexity theory, deindustrialization, eurozone crisis, failed state, financial innovation, illegal immigration, income inequality, informal economy, James Hargreaves, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, large denomination, Livingstone, I presume, Malacca Straits, mandatory minimum, manufacturing employment, means of production, megacity, meta analysis, meta-analysis, new economy, off grid, oil shale / tar sands, pension reform, profit motive, randomized controlled trial, school choice, school vouchers, Scramble for Africa, side project, Silicon Valley, Simon Kuznets, Skype, spinning jenny, The Chicago School, the payments system, trade route, Travis Kalanick, uranium enrichment, urban planning, wealth creators, white picket fence, working-age population, Y Combinator, young professional

Life in Estonia offers a second warning too, one linked to my travels in the first two parts of the book: the potential for new divisions and damage to the social fabric of a city. Tallin has many districts that are tech hubs, places where the city gleams and locals see no end of opportunity. As one entrepreneur put it to me, ‘If you work in technology and are even half decent it is impossible to be unemployed here.’ But other parts of the capital are depressed, still reeling from the eurozone crisis a decade ago. And it is not just the odd shopkeeper complaining about the bias towards IT companies and the government’s bet on technology: young and highly educated people have concerns too. ‘At first it is easy to assimilate here,’ explains one Tallinn resident, a recent émigré from Russia. ‘But after you have been here for a while you realize that inside one country there are two separate worlds.’


The Data Journalism Handbook by Jonathan Gray, Lucy Chambers, Liliana Bounegru

Amazon Web Services, barriers to entry, bioinformatics, business intelligence, carbon footprint, citizen journalism, correlation does not imply causation, crowdsourcing, David Heinemeier Hansson, eurozone crisis, Firefox, Florence Nightingale: pie chart, game design, Google Earth, Hans Rosling, information asymmetry, Internet Archive, John Snow's cholera map, Julian Assange, linked data, moral hazard, MVC pattern, New Journalism, openstreetmap, Ronald Reagan, Ruby on Rails, Silicon Valley, social graph, SPARQL, text mining, web application, WikiLeaks

A line drawn in red (underperforming) or blue (overperforming) connects the two values, providing a handy sense of which team owners are regretting their expensive players gone bust. Moreover, scrubbing across a timeline provides a lively animation of that season’s “pennant race” to the finish. Figure 6-7. Salary vs. performance (Ben Fry) Designing With Data Similar in a way to graphing connections, flow diagrams also encode information into the connecting lines, usually by thickness and/or color. For example, with the Eurozone in crisis and several members incapable of meeting their debts, The New York Times sought to untangle the web of borrowing that tied EU members to their trading partners across the Atlantic and in Asia. In one “state” of the visualization, the width of the line reflects the amount of credit passing from one country to another, where a yellow to orange color ramp indicates how “worrisome” it is—i.e., unlikely to be paid back!


pages: 517 words: 139,477

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

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

Bear Stearns and Citibank tried to insulate themselves by issuing funds and special investment vehicles that were off-balance-sheet items. As defaults mounted, investors complained that they were not fully apprised of the risks of these securities, and the firms’ legal counsel recommended that they take back many of these mortgages onto their own balance sheets. 26. When federal government debt is not explicitly backed by the central bank, it is no longer assumed “riskless,” as was illustrated in the Eurozone crisis of 2011-2012. 27. The new facility was called the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility. 28. Non-interest-bearing accounts (demand deposits) were used by business to process wage and other payments. Their security was deemed of paramount importance by the Fed in order to keep the payments systems functioning. 29. In 1996 the ratio of the FDIC’s trust fund to deposits, called the designated deposit ratio, was set at 1.25 percent, but by September 2008 it fell below 1.0 percent. 30.


pages: 238 words: 73,121

Does Capitalism Have a Future? by Immanuel Wallerstein, Randall Collins, Michael Mann, Georgi Derluguian, Craig Calhoun, Stephen Hoye, Audible Studios

affirmative action, blood diamonds, Bretton Woods, BRICs, British Empire, business cycle, butterfly effect, creative destruction, deindustrialization, demographic transition, Deng Xiaoping, discovery of the americas, distributed generation, eurozone crisis, fiat currency, full employment, Gini coefficient, global village, hydraulic fracturing, income inequality, Isaac Newton, job automation, joint-stock company, Joseph Schumpeter, land tenure, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, loose coupling, low skilled workers, market bubble, market fundamentalism, mass immigration, means of production, mega-rich, Mikhail Gorbachev, mutually assured destruction, offshore financial centre, oil shale / tar sands, Ponzi scheme, postindustrial economy, reserve currency, Ronald Reagan, shareholder value, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, too big to fail, transaction costs, Washington Consensus, WikiLeaks

These economies all had different weaknesses which might not have been “found out” without the American-driven financial crisis. But when recession struck and was worsened by austerity policies, lesser economic activity meant lesser revenues, and so government debt now rocketed everywhere. The crisis in Europe then worsened when the recession “found out” a quite extraneous weakness of the Eurozone which turned the recession into a major sovereign debt crisis, caused in the first place by the zone’s own internal imbalances. There had been a big outflow of capital from the richer EU countries to the poorer ones, with the Greek government contributing its distinctive dose of fiscal dishonesty. But this crisis had only intensified because of the enthusiasm of the elites of the seventeen eurozone countries—not their peoples and not the elites of the remaining ten EU countries—for “deepening” the Union through a common currency without ensuring adequate backing of the euro by a central bank with treasury and fiscal functions.

Almost the whole of South and Southeast Asia plus Oceania, a very large macro-region, was little affected for these reasons and also because this region traded heavily with China (important for the Australian recovery). As in the Great Depression the right policies could minimize the damage, the wrong policies could worsen it. The politics and ideologies which flourish within different macro-regions matter for the outcome. Thus the sovereign debt crisis of the eurozone came as the diffusion of the American crisis interacted with different causal chains—the distinctive political rhythms and institutions of the European Union, and the ideological preference for austerity and avoidance of inflation of German (and British) elites. The internal logic of capitalism in many developing countries would intrinsically lead to further growth. If there is a threat to this it comes from outside, from the self-induced weaknesses of America and Europe.


pages: 169 words: 52,744

Big Capital: Who Is London For? by Anna Minton

Airbnb, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, Capital in the Twenty-First Century by Thomas Piketty, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, Donald Trump, eurozone crisis, Fall of the Berlin Wall, Frank Gehry, high net worth, housing crisis, illegal immigration, Kickstarter, land value tax, market design, new economy, New Urbanism, offshore financial centre, payday loans, quantitative easing, rent control, Right to Buy, sovereign wealth fund, the built environment, The Wealth of Nations by Adam Smith, urban renewal, working poor

According to a report which researched fourteen new landmark developments, 40 per cent of those homes have been sold to investors from high-corruption risk countries or those hiding behind anonymous companies.7 As to the relationship between foreign wars and London property, there is more than a tacit admission in the industry that one feeds the other, with one property executive commenting with brute honesty that ‘every mortar bomb in Libya adds £1/sq foot to investments here’.8 As the Evening Standard put it: If someone wanted to map the world’s economic and political hotspots without watching the news, they could do a lot worse than track London’s property market. First the richest tycoons of Europe’s sick economies plunged their cash into pads in Mayfair, Knightsbridge and Kensington to escape the eurozone debt crisis. Then the Arab Spring saw an influx of money from Middle Eastern tycoons. Next came the Russians and Ukrainians looking for a safe haven, and now the French and American super-rich are rushing into the capital to escape Hollande’s and Obama’s tax hikes.9 Following the election of Donald Trump as president of the United States, property investment company London Central Portfolio cheerily sent out an email to subscribers reflecting on the ‘unprecedented turn of events’, and pointing out that while the London property market will clearly not be top of your agenda today … it is London Central Portfolio’s view that there will be a net positive impact on the market … as uncertainty on the political and economic state is heightened once again … Whilst all of this plays out, Prime Central London property, a traditional safe haven, is expected to benefit.10 ‘EXCHANGE VALUE’ I know a lot of people that have second homes in London and I’m so glad they do.


pages: 665 words: 146,542

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

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

They show how insufficient the law of reflux is in ensuring this system’s stability. Contagion leads to three categories of banking crises. The original crises are panics produced by the conversion of deposits into cash. These should normally be averted by way of deposit insurance. However, in numerous recent cases we have seen that this did not happen, from the run on deposits at Northern Rock in September 2008 to the much more recent eurozone banking crises in Cyprus and Greece. A second type of crisis results from settlement failures in interbank payments. In principle, these should also be avoided, if all systems operated through gross settlement in the money of a central bank that also plays the role of clearing house. But it is far from the case that all settlement systems obey such a schema, especially when it comes to settlements on financial securities and derivatives products.

The French republican tradition stands diametrically opposed to this worldview. Transferring this doctrine to the ECB and applying it to very disparate societies could only cause misunderstandings and mutual incomprehension as to how it was to be applied. The ambiguity persisted through the episodes of political deadlock that cropped up over time. This was the reason why, when the eurozone was faced with the devastating shock of the financial crisis, it had neither the common means of action nor, most importantly, the foresight among its political leaders (or still less, the democratic legitimacy) to assert the long-term interests of the European project. One suggestion that emerged from political debates was that of the need for a social contract for Europe. This would mean recognising the existence of a common good to be preserved and nurtured.

See Eichengreen, Exorbitant Privilege. 9 Its main founders were Joseph Nye, Robert Keohane and Stephen Krasner. This current of thought was introduced to France by Gérard Kébadjian. See Gérard Kébadjian, Théories de l’économie politique internationale, Paris: Seuil, 1999. 10 These so-called ‘non-conventional’ measures are described in chapters 1 and 2 of Michel Aglietta, Europe: sortir de la crise et inventer l’avenir, Paris: Michalon, 2014. 11 TARGET’s crucial role in the eurozone financial crisis is described in detail by Philippine Cour-Thimann, ‘Target balances and the crisis in the euro area’, CESifo Forum, vol. 14, 2013. 12 Benoît Coeuré, ‘Il faut un ministère des Finances de la zone euro’, Le Monde, 28 July 2015. 13 ‘Process trade’ refers to a specific type of insertion into the division of labour. Profiting from its young, large and disciplined working class, China created special economic zones to which it attracted large quantities of foreign direct investment.


Frommer's Paris 2013 by Kate van Der Boogert

Airbnb, airport security, British Empire, Chuck Templeton: OpenTable:, clean water, eurozone crisis, haute couture, Honoré de Balzac, housing crisis, music of the spheres, place-making, starchitect, sustainable-tourism, urban renewal

In December 2011, former president Jacques Chirac was given a 2-year suspended sentence for embezzling funds while he was Mayor of Paris from 1977 to 1995. In the 2012 French Presidential Election, the Parti Socialiste (Socialist Party) candidate François Hollande defeated the incumbent president Nicolas Sarkozy. At a time of severe economic crisis, unemployment, austerity, and national identity were all key issues during the campaign. Nicknamed “Mr. Normal,” Hollande has promised to challenge the German-led austerity measures against the Eurozone crisis, create 60,000 new teaching jobs across France, reduce the deficit by taxing the wealthy, and pull French troops out of Afghanistan by the end of the year. With France's high public debt, record levels of unemployment, and poor growth, new President Hollande certainly has his work cut out for him. As Sarkozy put it in his presidency concession speech, “a new era of France has started.” The new Parisians Paris is often described as a melting pot, and the city is home to large numbers of immigrant communities.


pages: 692 words: 189,065

The Human Swarm: How Our Societies Arise, Thrive, and Fall by Mark W. Moffett

affirmative action, barriers to entry, Berlin Wall, California gold rush, delayed gratification, demographic transition, eurozone crisis, George Santayana, glass ceiling, Howard Rheingold, invention of agriculture, invention of writing, Kevin Kelly, labour mobility, land tenure, long peace, Milgram experiment, out of africa, phenotype, Ralph Waldo Emerson, Ronald Reagan, shared worldview, Silicon Valley, social intelligence, Steve Jobs, Steven Pinker, World Values Survey

Ratnieks FLW, T Wenseleers. 2005. Policing insect societies. Science 307:54–56. Rayor LS. 1988. Social organization and space-use in Gunnison’s prairie dog. Behav Ecol Sociobiol 22:69–78. Read DW. 2011. How Culture Makes Us Human. Walnut Creek, CA: Left Coast Press. Redmond EM. 1994. Tribal and Chiefly Warfare in South America. Ann Arbor: University of Michigan Press. Reese G, O Lauenstein. 2014. The eurozone crisis: Psychological mechanisms undermining and supporting European solidarity. Soc Sci 3:160–171. Reese HE, et al. 2010. Attention training for reducing spider fear in spider-fearful individuals. J Anxiety Disord 24:657–662. Reicher SD. 2001. The psychology of crowd dynamics. In MA Hogg, RS Tindale, eds. Blackwell Handbook of Social Psychology: Group Processes. Oxford, England: Blackwell. pp. 182–207.


pages: 280 words: 79,029

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

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

One HSBC veteran happily recounted stories of the financial crisis that gripped Asia in the late 1990s, when tellers were instructed to bring piles of cash into view to reassure people that banks were overflowing with money. Tales of improvisation from Asia were not supposed to be relevant to the West’s ultrasophisticated financial system. But far worse was to come. A chain of events was under way that would lead in time to the collapse of Lehman Brothers, a huge US investment bank, state takeovers of swaths of the rich world’s banking systems, a deep global recession, and the Eurozone debt crisis. I observed these later phases of the crisis from the position of the Economist’s finance editor, a post that I held from July 2009 until October 2013. The crisis would lead to a complete reversal in public attitudes toward the financial industry. The decade leading up to the crisis was one in which finance was lionized. Policy makers applauded the march of new techniques, such as securitization, that appeared to send risk away from the banks and spread it more evenly throughout the financial system.


pages: 743 words: 201,651

Free Speech: Ten Principles for a Connected World by Timothy Garton Ash

A Declaration of the Independence of Cyberspace, activist lawyer, Affordable Care Act / Obamacare, Andrew Keen, Apple II, Ayatollah Khomeini, battle of ideas, Berlin Wall, bitcoin, British Empire, Cass Sunstein, Chelsea Manning, citizen journalism, Clapham omnibus, colonial rule, crowdsourcing, David Attenborough, don't be evil, Donald Davies, Douglas Engelbart, Edward Snowden, Etonian, European colonialism, eurozone crisis, failed state, Fall of the Berlin Wall, Ferguson, Missouri, Filter Bubble, financial independence, Firefox, Galaxy Zoo, George Santayana, global village, index card, Internet Archive, invention of movable type, invention of writing, Jaron Lanier, jimmy wales, John Markoff, Julian Assange, Mark Zuckerberg, Marshall McLuhan, mass immigration, megacity, mutually assured destruction, national security letter, Nelson Mandela, Netflix Prize, Nicholas Carr, obamacare, Peace of Westphalia, Peter Thiel, pre–internet, profit motive, RAND corporation, Ray Kurzweil, Ronald Reagan, semantic web, Silicon Valley, Simon Singh, Snapchat, social graph, Stephen Hawking, Steve Jobs, Steve Wozniak, The Death and Life of Great American Cities, The Wisdom of Crowds, Turing test, We are Anonymous. We are Legion, WikiLeaks, World Values Survey, Yom Kippur War

This should not be achieved by giving jobs to people not competent to do them, nor should the two kinds of representation be confused. Precisely because the suspicion will be that ‘she’s only there because she’s black/Muslim/female/whatever . . .’, we should not ask Muslim journalists only to report on Muslims, any more than we expect Christians only to report on Christian matters, or women only on women. At the height of the Eurozone crisis, I got my daily update from the economics correspondent of Britain’s Channel 4 News. His name was Faisal Islam, but I was not turning to him for news about Islam. As for the representation of diversity by the media, this is a vital component of media pluralism. Part of the state’s expressive function can be to support public service media in minority languages, or covering minority communities.


pages: 497 words: 144,283

Connectography: Mapping the Future of Global Civilization by Parag Khanna

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

(Harcourt, Brace and Howe, 1920), Chapter II.4. 2. Peter Nolan, Is China Buying the World? (Polity, 2013). 3. “Flow Dynamics,” The Economist, Sept. 19, 2015. 4. Financial flows (such as global banking, foreign investment, and portfolio capital) surged from $470 billion (4 percent of GDP) in 1980 to $12 trillion (21 percent of a much larger GDP) in 2007. After the financial crisis, the eurozone banking crisis and higher reserve requirements pushed capital flows back below 10 percent of GDP. 5. Turkey’s Ayka Tekstil and Sweden’s H&M are other major apparel manufacturers and brands that have expanded operations in Ethiopia. 6. See DHL’s Global Connectedness Index 2014, http://www.​dhl.​com/​en/. 7. Tiny Belgium’s banks serve as custodial financial institutions holding $400 billion in U.S. Treasuries (almost 70 percent of its GDP) for major foreign purchasers such as China. 8.


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Fall Out: A Year of Political Mayhem by Tim Shipman

banking crisis, Beeching cuts, Bernie Sanders, Boris Johnson, centre right, Clapham omnibus, Corn Laws, corporate governance, Dominic Cummings, Donald Trump, drone strike, Etonian, eurozone crisis, Gordon Gekko, greed is good, iterative process, John Bercow, Kickstarter, kremlinology, land value tax, mutually assured destruction, Neil Kinnock, new economy, non-tariff barriers, offshore financial centre, open borders, quantitative easing, Ronald Reagan, Snapchat, working poor

We will change our model and we will come back, and we will be competitively engaged.’ Jeremy Corbyn dismissed this vision of the UK as Singapore-on-Sea as a ‘bargain basement tax haven’. But Hammond had been concerned that May’s speech would cause the pound to fall and he wanted them to see the government had a plan. His colleagues were grateful. Davis felt the threat would stop the Commission thinking it could push Britain around as it had Greece during the eurozone crisis. A fellow cabinet minister said, ‘That was Phil being a team player even though he was not entirely comfortable with the strategy.’ Hammond would back away from his comments when he talked to Le Monde in July but his intervention in January helped ensure that when May spoke, the pound actually rose. Privately, Hammond was less supportive of his prime minister. That week the Economist had run a cover story on May under the headline ‘Theresa Maybe’.


pages: 484 words: 136,735

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

"Robert Solow", bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Black Swan, bonus culture, Bretton Woods, BRICs, business cycle, buy and hold, Carmen Reinhart, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, Edward Glaeser, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, F. W. de Klerk, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, global rebalancing, Hyman Minsky, income inequality, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, Long Term Capital Management, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, money market fund, moral hazard, mortgage debt, Nelson Mandela, new economy, Northern Rock, offshore financial centre, oil shock, paradox of thrift, Pareto efficiency, Paul Samuelson, peak oil, pets.com, Ponzi scheme, post-industrial society, price stability, profit maximization, profit motive, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Vilfredo Pareto, Washington Consensus, zero-sum game

After the euro was formally created in January 1999, the European Central Bank acquired the same freedom of action in monetary policy that the Fed enjoyed. Initially, the ECB clung firmly to the monetarist traditions of the German Bundesbank. But over time, its policies became increasingly pragmatic, with France, Italy, and Spain gradually gaining influence over the euro project, while German banks and export industries became increasingly exposed to financial conditions in the rest of the euro zone. By the outbreak of the subprime crisis, the ECB had become even more generous than the Fed or the Bank of England in supporting economic activity and lending without limit to crippled financial institutions. In the period after the Annus Mirabilis of 1989, therefore, the governments and central banks in every major economy gradually shifted from the exclusive focus on inflation demanded by the monetarist counterrevolution.

Convergence between the United States and Europe Even if liberal democracy remains the most plausible and attractive model for long-term political and economic development, surely the collapse of financially oriented capitalism has surely discredited the Anglo-Saxon model in comparison with the more consensual European approach? This view was certainly widespread in the immediate aftermath of the crisis, but the opposite is true. Assuming that the United States recovers from the recession much faster than continental Europe and that Britain also emerges from the recession with less permanent damage than many of the countries in the eurozone—both of which are likely events—the crisis will reaffirm the relative resilience of Anglo-Saxon financial capitalism, provided Anglo-Saxon capitalism is not confused with the exaggerated market fundamentalism of Capitalism 3.3. Many vestiges of Capitalism 2’s bureaucratic state-led system survived in continental Europe (as well as in Japan) well after they were swept away in Britain and America by the Thatcher-Reagan revolutions.

Yet a diminution in the international role of the dollar, or a return to the fixed currencies of the postwar period, are extremely unlikely in the decades ahead. One thing the crisis beyond doubt proved was the value of floating currencies. Exchange rate flexibility gave governments around the world the freedom to cut interest rates and to support their economies with fiscal stimulus that could never have been imagined in the days of Bretton Woods. Conversely, the financial turmoil that engulfed the eurozone after the worst of the banking crisis was over in other countries reminded the world of the dangers of long-term commitments to fixed exchange rates and of the immense costs of defending currencies in a system disturbingly reminiscent of the gold standard of the 1930s. Any reversion to fixed exchange rates, still less to a gold-based system such as Bretton Woods, therefore seems out of the question. Since 1971, the world has lived without any monetary standard for the first time in history, and this is not about to change.


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

affirmative action, Asian financial crisis, bank run, banking crisis, bilateral investment treaty, borderless world, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, central bank independence, collective bargaining, colonial rule, Corn Laws, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, Doha Development Round, en.wikipedia.org, endogenous growth, eurozone crisis, financial deregulation, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, George Akerlof, guest worker program, Hernando de Soto, immigration reform, income inequality, income per capita, industrial cluster, information asymmetry, joint-stock company, Kenneth Rogoff, land reform, liberal capitalism, light touch regulation, Long Term Capital Management, low skilled workers, margin call, market bubble, market fundamentalism, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, microcredit, Monroe Doctrine, moral hazard, night-watchman state, non-tariff barriers, offshore financial centre, oil shock, open borders, open economy, Paul Samuelson, price stability, profit maximization, race to the bottom, regulatory arbitrage, savings glut, Silicon Valley, special drawing rights, special economic zone, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tobin tax, too big to fail, trade liberalization, trade route, transaction costs, tulip mania, Washington Consensus, World Values Survey

The Greek government had handy accomplices in carrying out this statistical legerdemain. In return for hundreds of millions of dollars in fees, Wall Street firms such as Goldman Sachs engineered the financial derivatives that helped hide the scale of Greece’s budget woes.16 When the full scale of the government’s bankruptcy came to light in early 2010, it threw not only Greece but the entire Eurozone into crisis. Germany and France were confronted by a cruel choice: either bail out Greece, thereby rewarding misbehavior and flouting EU rules, or let Greece (and possibly other weaker nations as well) drop out of the euro, dealing a potentially fatal flow to the currency union. External finance is a fair-weather friend: there when it is least needed, and absent when it could do some good. This is not news.


pages: 361 words: 97,787

The Curse of Cash by Kenneth S Rogoff

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

Bernanke and Greenspan are right that the hikes did not spare the United Kingdom the financial crisis, but it is hard to know whether they helped mitigate the costs. Cross-country comparisons are inherently difficult. The financial sector accounts for a larger share of output in the United Kingdom than in the United States (in 2008, it was 10% and 8%, respectively).6 The United Kingdom was also far more exposed to the Eurozone debt crisis than the United States was through its links in banking and trade. In contrast, the housing bubble never burst in the United Kingdom the way it did in the United States, given land use restrictions, especially around London, that create a chronic housing shortage. Thus one cannot be sure that the modest pre-crisis interest rate hikes didn’t help; it is difficult to disentangle cause and effect.


pages: 417 words: 97,577

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

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

Industries.” 28. http://equitablegrowth.org/report/u-s-merger-policy-amid-the-new-merger-wave/. 29. http://fortune.com/2015/10/22/mba-ethics-volkswagen/. 30. http://www.nbcnews.com/id/18472476/ns/business-us_business/t/duke-cheating-scandal-shows-need-law/. 31. https://www.marketwatch.com/story/wal-mart-ceo-consumers-feeling-greater-pressure-2011-04-27. 32. http://www.saturdayeveningpost.com/2014/01/03/history/post-perspective/ford-doubles-minimum-wage.html. 33. https://www.ucg.org/world-news-and-prophecy/the-eurozone-debt-crisis-calamity-still-looms. 34. http://www.economist.com/node/9832838. 35. https://ecology.iww.org/texts/JohnBellamyFoster/CapitalismandtheCurseofEnergyEfficiency. 36. http://www.newyorker.com/magazine/2010/12/20/the-efficiency-dilemma. 37. https://www.wired.com/2011/09/att-conquered-20th-century/. 38. Tim Wu, The Master Switch (Alfred Knopf, 2010). Chapter 2: Dividing Up the Turf 1.


pages: 358 words: 104,664

Capital Without Borders by Brooke Harrington

banking crisis, Big bang: deregulation of the City of London, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, complexity theory, corporate governance, corporate social responsibility, diversified portfolio, estate planning, eurozone crisis, family office, financial innovation, ghettoisation, haute couture, high net worth, income inequality, information asymmetry, Joan Didion, job satisfaction, joint-stock company, Joseph Schumpeter, liberal capitalism, mega-rich, mobile money, offshore financial centre, race to the bottom, regulatory arbitrage, Robert Shiller, Robert Shiller, South Sea Bubble, the market place, Thorstein Veblen, transaction costs, upwardly mobile, wealth creators, web of trust, Westphalian system, Wolfgang Streeck, zero-sum game

Governments were used to pulling the strings, but now they’re bankrupt and they are dependent upon the wealth creators. That really is the crux of the matter. And you’ve got people in Brussels desperate that there is tax leakage all over the place—that they can’t control people’s mobility in an era of increasingly easy jet travel, lack of border controls, et cetera.” This conflict has been particularly heated in the aftermath of the 2008 financial crisis and the subsequent euro zone banking crisis, both of which have left governments scrambling for tax revenue and eager to crack down on tax avoidance. The fiscal shortfall is so pressing that crisis-stricken countries such as Spain and Cyprus have ramped up efforts to persuade high-net-worth individuals—primarily from Russia, China, and the Middle East—to change their citizenship.19 In return for making investments and paying tax in their new homelands, these wealthy individuals automatically get EU passports, avoiding the lengthy and uncertain bureaucratic process to which the nonwealthy are subject.20 While legal, such cash-for-passports programs have been attacked by the European Commission as undermining the legitimacy of state authority.21 Other countries have taken even more extreme measures to shore up their treasuries in the face of rampant tax avoidance.

See also 1 percent EMEA (Europe, Middle East, and Africa), 243 Engels, Friedrich, 16, 204 Enlightenment, 18, 203, 204, 218, 277 entail, 4, 208, 218, 276, 306n17 equal opportunity, 204 Erika (Swiss wealth manager), 61, 69, 82, 98–99, 137–38, 245–46, 248, 298 estate planning: in civil-law countries, 57–58. See also trust and estate planning ethnography, 27–30; immersion, 25, 274 European Union: cash-for-passports programs, 239–40; Cook Islands blacklisted by, 158; Savings Tax Directive, 299 euro zone banking crisis, 239 exchange funds, 206 Executive Commission (European Union), 158 express trusts, 155 family: banks, 251, 269; children kept secret from the legally recognized, 125; client relations as quasi-familial, 85–88, 92, 120–21; contemporary social scientific theories of, 278; contributions to theory and research of this study, 276–78; disputes over wealth of, 16–17; dynastic, 96, 193–94; institutions opened to the public, 250; as not high-trust environment, 84; suspicion in wealthy, 81; tear themselves apart over money, 88; transformation in, 165–67; wealth lends special dynamic to, 84–85; wealth management influences, 16–17, 272; wealth managers help families, 68.


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Average Is Over: Powering America Beyond the Age of the Great Stagnation by Tyler Cowen

Amazon Mechanical Turk, Black Swan, brain emulation, Brownian motion, business cycle, Cass Sunstein, choice architecture, complexity theory, computer age, computer vision, computerized trading, cosmological constant, crowdsourcing, dark matter, David Brooks, David Ricardo: comparative advantage, deliberate practice, Drosophila, en.wikipedia.org, endowment effect, epigenetics, Erik Brynjolfsson, eurozone crisis, experimental economics, Flynn Effect, Freestyle chess, full employment, future of work, game design, income inequality, industrial robot, informal economy, Isaac Newton, Johannes Kepler, John Markoff, Khan Academy, labor-force participation, Loebner Prize, low skilled workers, manufacturing employment, Mark Zuckerberg, meta analysis, meta-analysis, microcredit, Myron Scholes, Narrative Science, Netflix Prize, Nicholas Carr, P = NP, pattern recognition, Peter Thiel, randomized controlled trial, Ray Kurzweil, reshoring, Richard Florida, Richard Thaler, Ronald Reagan, Silicon Valley, Skype, statistical model, stem cell, Steve Jobs, Turing test, Tyler Cowen: Great Stagnation, upwardly mobile, Yogi Berra

There will be lots of “hollowing out” of various regions—at least in terms of well-educated high earners—and not everyone will be on the winning side of this process. More areas will specialize in being locations for tourists, retirees, and individuals living off family assistance or government assistance. This point suggests a broader perspective on the economic crisis in the Eurozone. Most current discussions of the crisis focus on debts, failing banks, capital-flight deflationary pressures, self-defeating austerity, and so on. That’s all relevant, but there is a deeper backdrop to these problems. Europe really is integrating economically, however imperfectly, and we are learning that there are big winners and big losers to this process. The debt problems and the high bond yields and the other signs of crisis can be read—in this account—as our financial markets heralding the future arrival of major changes in economic geography.


pages: 337 words: 101,440

Revolution Française: Emmanuel Macron and the Quest to Reinvent a Nation by Sophie Pedder

Airbnb, Berlin Wall, Bernie Sanders, bike sharing scheme, centre right, disruptive innovation, Donald Trump, Downton Abbey, Erik Brynjolfsson, eurozone crisis, failed state, Fall of the Berlin Wall, ghettoisation, haute couture, Jean Tirole, knowledge economy, liberal capitalism, mass immigration, mittelstand, new economy, post-industrial society, rent-seeking, ride hailing / ride sharing, Second Machine Age, sharing economy, Silicon Valley, Travis Kalanick, urban planning, éminence grise

British centrist politicians dreamed in vain of establishing a radical political middle that could forge a post-partisan consensus. Party politics in other Western European countries, including Italy, Spain and Greece, had long been far more turbulent. Italy had seen parties – Forza Italia, the Five Star Movement – emerge from nowhere, sometimes to seize power and then fade away again. Greece, under military rule between 1967 and 1974, was taken to the brink of ejection from the eurozone over the sovereign-debt crisis, which saw the virtual annihilation of its Socialist Party and the ascent of the radical-left party, Syriza. Belgium was regularly without a government at all. In June 2016 it was Britain’s turn to perplex fellow Europeans with its vote for Brexit, followed by uninterrupted political melodrama. The following year, Spain was thrown into turmoil over the illegal Catalonian independence referendum.


pages: 185 words: 43,609

Zero to One: Notes on Startups, or How to Build the Future by Peter Thiel, Blake Masters

Airbnb, Albert Einstein, Andrew Wiles, Andy Kessler, Berlin Wall, cleantech, cloud computing, crony capitalism, discounted cash flows, diversified portfolio, don't be evil, Elon Musk, eurozone crisis, income inequality, Jeff Bezos, Lean Startup, life extension, lone genius, Long Term Capital Management, Lyft, Marc Andreessen, Mark Zuckerberg, minimum viable product, Nate Silver, Network effects, new economy, paypal mafia, Peter Thiel, pets.com, profit motive, Ralph Waldo Emerson, Ray Kurzweil, self-driving car, shareholder value, Silicon Valley, Silicon Valley startup, Singularitarianism, software is eating the world, Steve Jobs, strong AI, Ted Kaczynski, Tesla Model S, uber lyft, Vilfredo Pareto, working poor

Combining these possibilities yields four views: Indefinite Pessimism Every culture has a myth of decline from some golden age, and almost all peoples throughout history have been pessimists. Even today pessimism still dominates huge parts of the world. An indefinite pessimist looks out onto a bleak future, but he has no idea what to do about it. This describes Europe since the early 1970s, when the continent succumbed to undirected bureaucratic drift. Today the whole Eurozone is in slow-motion crisis, and nobody is in charge. The European Central Bank doesn’t stand for anything but improvisation: the U.S. Treasury prints “In God We Trust” on the dollar; the ECB might as well print “Kick the Can Down the Road” on the euro. Europeans just react to events as they happen and hope things don’t get worse. The indefinite pessimist can’t know whether the inevitable decline will be fast or slow, catastrophic or gradual.


pages: 354 words: 99,690

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

bank run, Boris Johnson, British Empire, cognitive dissonance, collapse of Lehman Brothers, credit crunch, don't be evil, double helix, Downton Abbey, Etonian, eurozone crisis, haute cuisine, Julian Assange, lateral thinking, Northern Rock, offshore financial centre, payday loans, plutocrats, Plutocrats, profit motive, sensible shoes, Skype, The Wisdom of Crowds, WikiLeaks

I don’t know if the country can afford to pay hard-working and well-motivated primary-school headteachers, who also work in the community to help other schools, £180,000 a year (which is roughly what he got after backpay for the previous year and employers’ pension contributions are taken away). But I hope so, and I’m pleased that Mark Elms has been well paid for doing a good job. The fact that so many felt otherwise is a sign of how hysterical with envy some people, and a lot of news reporting, have become. * Occasionally, just for a moment, I think it might be a good thing if money ceased to exist, if the eurozone sovereign debt crisis spiralled so hopelessly out of control that there was an international bank run of catastrophic proportions, and so all of the numbers – and, in millions of cases, negative numbers – next to our names on screens became academic because the screen-owning institutions had run out of the pieces of paper that the numbers were supposed to represent – and indeed weren’t even sure for how much longer they’d receive the electricity to run the computers that stored these now notional numbers.


pages: 388 words: 125,472

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

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

As the then BBC journalist Paul Mason put it at the time, ‘By enshrining in national and international law the need for balanced budgets and near-zero structural deficits, the Eurozone has outlawed expansionary fiscal policies.’ Eurozone budgets had to be submitted to the Commission for approval. It effectively abolished Keynesian, interventionist economics, forbidding a fiscal stimulus during periods of economic disaster. Meanwhile, the European Central Bank was an engine of Continent-wide austerity, but it was so unaccountable it did not even publish its minutes. The Eurozone economy had been plunged into crisis by the financial collapse, fuelled by the recklessness of often German banks lending to countries like Greece. The policies imposed in European countries such as Spain, Portugal and particularly Greece left vast swathes of young people out of work – in some cases, over 50 per cent; public services imploding; and poverty soaring. No wonder the EU promotes such a conflict within the Establishment.


pages: 772 words: 203,182

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

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

André Sapir at the Brussels-based consultancy Bruegel explained: “Everything we feared about the Mediterranean model has proven right—only it was worse. In Holland, Germany, and the Nordic countries there was more of a longer-term view of the challenges that societies were facing.”5 Reporters Ralph Atkins and Matt Steinglass of the Financial Times elaborated in August 2011: “Germany, the Netherlands, and a few other northern European counties tell another story, however. Their success is the flip side of the Eurozone debt crisis. While the economic models of some in the 12-year-old monetary union have been blown apart—in Greece unemployment has hit 15 percent—others have turned out to be surprisingly efficient.”6 Productivity Growth in Northern Europe Outpaced America It was just another in the long line of reports about auto firms establishing new assembly plants abroad to supply the American market, and always in places like Mexico.


pages: 380 words: 116,919

Britain's Europe: A Thousand Years of Conflict and Cooperation by Brendan Simms

anti-communist, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, Bretton Woods, BRICs, British Empire, business cycle, capital controls, Corn Laws, credit crunch, eurozone crisis, Fall of the Berlin Wall, first-past-the-post, imperial preference, land reform, Monroe Doctrine, moral panic, oil shock, open economy, plutocrats, Plutocrats, race to the bottom, Ronald Reagan, sceptred isle, South Sea Bubble, trade route, éminence grise

A large proportion of the new Conservative MPs at the 2005 election were Eurosceptics. So, in many ways, was Gordon Brown, who succeeded as prime minister in 2007 and who continued his long-standing opposition to joining the euro. These reservations were shared by the new coalition government under David Cameron after 2010, not least because of the manifest failure of the eurozone to deal with the escalating sovereign debt crisis and the suffering this imposed on peripheral countries such as Greece. This seemed to vindicate Eurosceptic claims about the euro and the lack of democracy in the European Union, or at least the impossibility of establishing an economic and currency union without the political integration to match it. Over recent years, this dim view of the European Union was further confirmed by its failure to get to grips with any of the challenges facing the continent, from the revival of Russian power in the east and the migration crisis to Islamist terror and state breakdown in the Middle East and, of course, the escalating euro sovereign debt crisis.

Above all, the resilience of British society is considerable, and the country’s capacity to wage conflicts of varying intensity for longer periods, once fully mobilized, is second only to that of the United States. What is beyond question, though, is that a shambolic and uncoordinated ‘Brexit’ would have a catastrophic effect on the rest of the continent. A legislative Dunkirk, in which Britain repatriated her sovereignty as the eurozone slipped further and further into crisis, would have a shattering psychological impact on her European partners. It might well accentuate the break-up of the currency union, as the Germans and other states likewise wished to regain their national freedom of action. If Germany stayed, it would dominate the rump even more than it already does, without wishing to.17 The result would most likely be a fragmented, fearful and vulnerable Europe, less likely to be sure to caucus against Britain but also much less capable of delivering the economic and political stability of the continent on which not only Britain’s prosperity but also her security has always depended.


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

affirmative action, Albert Einstein, algorithmic trading, Andy Kessler, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Basel III, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, business cycle, capital asset pricing model, Carmen Reinhart, carried interest, Celtic Tiger, clean water, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, debt deflation, Deng Xiaoping, deskilling, discrete time, diversification, diversified portfolio, Doomsday Clock, Edward Thorp, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, eurozone crisis, Everybody Ought to Be Rich, Fall of the Berlin Wall, financial independence, financial innovation, financial thriller, fixed income, full employment, global reserve currency, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, happiness index / gross national happiness, haute cuisine, high net worth, Hyman Minsky, index fund, information asymmetry, interest rate swap, invention of the wheel, invisible hand, Isaac Newton, job automation, Johann Wolfgang von Goethe, John Meriwether, joint-stock company, Jones Act, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kevin Kelly, laissez-faire capitalism, load shedding, locking in a profit, Long Term Capital Management, Louis Bachelier, margin call, market bubble, market fundamentalism, Marshall McLuhan, Martin Wolf, mega-rich, merger arbitrage, Mikhail Gorbachev, Milgram experiment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, Naomi Klein, negative equity, NetJets, Network effects, new economy, Nick Leeson, Nixon shock, Northern Rock, nuclear winter, oil shock, Own Your Own Home, Paul Samuelson, pets.com, Philip Mirowski, plutocrats, Plutocrats, Ponzi scheme, price anchoring, price stability, profit maximization, quantitative easing, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Ray Kurzweil, regulatory arbitrage, rent control, rent-seeking, reserve currency, Richard Feynman, Richard Thaler, Right to Buy, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Robert Shiller, Rod Stewart played at Stephen Schwarzman birthday party, rolodex, Ronald Reagan, Ronald Reagan: Tear down this wall, Satyajit Das, savings glut, shareholder value, Sharpe ratio, short selling, Silicon Valley, six sigma, Slavoj Žižek, South Sea Bubble, special economic zone, statistical model, Stephen Hawking, Steve Jobs, survivorship bias, The Chicago School, The Great Moderation, the market place, the medium is the message, The Myth of the Rational Market, The Nature of the Firm, the new new thing, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, trickle-down economics, Turing test, Upton Sinclair, value at risk, Yogi Berra, zero-coupon bond, zero-sum game

Continued market skepticism forced the EU to go nuclear—a €750-billion stabilization fund to support eurozone countries. Journalists spoke of financial ‘shock and awe’. ‘Panic’ better summed up the actions. Initially, stock markets rose sharply, especially shares of banks exposed to Greece who would benefit from the rescue. The interest rates on Greek, Irish, Italian, Portuguese, and Spanish bonds fell sharply. President Nicolas Sarkozy turned the eurozone’s sovereign-debt crisis into a personal triumph, letting it be known that the rescue was 95 percent French. Le Figaro reported Sarkozy’s comment that ‘in Greece they call me ‘the savior’.” Karl Dunninger, a trader, captured the madness: The most amusing part of this is that nations seriously in debt and without a pot to piss in will be ‘contributing’ some of the money to fund the debt. Spain, for instance, has pledged to do so.


pages: 322 words: 99,066

The End of Secrecy: The Rise and Fall of WikiLeaks by The "Guardian", David Leigh, Luke Harding

4chan, banking crisis, centre right, Chelsea Manning, citizen journalism, Climategate, cloud computing, credit crunch, crowdsourcing, Downton Abbey, drone strike, eurozone crisis, friendly fire,