floating exchange rates

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Capitalism and Freedom by Milton Friedman

"Friedman doctrine" OR "shareholder theory", affirmative action, Berlin Wall, central bank independence, Corn Laws, Deng Xiaoping, floating exchange rates, Fractional reserve banking, full employment, invisible hand, Joseph Schumpeter, liquidity trap, market friction, minimum wage unemployment, price discrimination, rent control, road to serfdom, Ronald Reagan, secular stagnation, Simon Kuznets, the market place, The Wealth of Nations by Adam Smith, union organizing

No amount of exchange control or direct restrictions on trade enabled them to peg an exchange rate that was far out of line with economic realities. In consequence, it is unquestionably true that floating exchange rates have frequently been associated with financial and economic instability—as, for example, in hyperinflations, or severe but not hyperinflations such as have occurred in many South American countries. It is easy to conclude, as many have, that floating exchange rates produce such instability. Being in favor of floating exchange rates does not mean being in favor of unstable exchange rates. When we support a free price system at home, this does not imply that we favor a system in which prices fluctuate wildly up and down.

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Perhaps worse than either tariffs or quotas are extra-legal arrangements, such as the “voluntary” agreement by Japan to restrict textile exports. FLOATING EXCHANGE RATES AS THE FREE MARKET SOLUTION There are only two mechanisms that are consistent with a free market and free trade. One is a fully automatic international gold standard. This, as we saw in, the preceding chapter, is neither feasible nor desirable. In any event, we cannot adopt it by ourselves. The other is a system of freely floating exchange rates determined in the market by private transactions without governmental intervention. This is the proper free-market counterpart to the monetary rule advocated in the preceding chapter.

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A system of floating exchange rates would therefore enable us to proceed effectively and directly toward complete free trade in goods and services—barring only such deliberate interference as may be justified on strictly political and military grounds; for example, banning the sale of strategic goods to communist countries. So long as we are firmly committed to the strait jacket of fixed exchange rates, we cannot move definitively to free trade. The possibility of tariffs or direct controls must be retained as an escape valve in case of necessity. A system of floating exchange rates has the side advantage that it makes almost transparently obvious the fallacy in the most popular argument against free trade, the argument that “low” wages elsewhere make tariffs somehow necessary to protect “high” wages here.

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

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

One distortion embraced by elites is floating exchange rates, a flawed idea foisted on the world by Milton Friedman in the 1970s. If a builder hired you to construct a house using a one-foot ruler, then told you on day two that a foot was thirteen inches, and on day three that a foot was ten inches, and so on, the resulting house would be unsound and in danger of collapse. That’s how comparative advantage works under floating exchange rates. Currency hedges are generally unavailable more than one year forward; too short a time for capital commitments that have five- to ten-year horizons. Floating exchange rates enrich currency traders and speculators, but add costs to commerce and impede capital flows.

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A central bank can impose capital controls and refuse to allow the dollar investor to reconvert local currency and remit the proceeds. Capital controls were common in the 1960s even in developed economies. Later, these controls largely disappeared from developed economies, and were greatly reduced in emerging markets. The relaxation has been partly at IMF urging, and partly because floating exchange rates make local economies less vulnerable to a run on the bank. Yet, in an extraordinary speech on May 24, 2016, David Lipton, first deputy managing director of the IMF, laid the foundation for an international ice-nine solution: The time has come to re-examine our global architecture. … What elements of the architecture are worth revisiting?

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The Money Riots The period from 1971 to 1980 in international finance is best described as chaotic, not only in a colloquial sense, but in a scientific sense. Equilibrium was perturbed. Values wobbled violently. IMF members tried, and failed, to reestablish fixed exchange rates at new parities along with a new dollar parity to gold. Monetarists such as Milton Friedman urged the world to abandon gold as a monetary standard. Floating exchange rates became the new normal. Countries could make their goods cheaper by letting their currencies devalue instead of making structural adjustments to improve productivity. Keynesians embraced the new system because inflation caused by devaluation lowered unit labor costs in real terms. Workers would no longer have to suffer pay cuts.

Money Mischief: Episodes in Monetary History by Milton Friedman

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

I concluded then that true economic unification in Europe, defined as a single relatively free market, was possible only in conjunction with a system of freely floating exchange rates. (I ruled out a unified currency on political grounds, if memory serves.) Experience since then has only strengthened my confidence in that conclusion, while also making me far more skeptical that a system of freely floating exchange rates is politically feasible. Central banks will meddle—always, of course, with the best of intentions. Nonetheless›, even dirty floating exchange rates seem to me preferable to pegged rates, though not necessarily to a unified currency. CHAPTER 10 Monetary Policy in a Fiat World We saw in chapter 2 that a world monetary system has emerged that has no historical precedent: a system in which every major currency in the world is, directly or indirectly, on an irredeemable paper money standard—directly, if the exchange rate of the currency is flexible though possibly manipulated; indirectly, if the currency is unified with another fiat-based currency (for example, since 1983, the Hong Kong dollar).

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A free market arose in which the "greenback price of gold" rose above the official legal price—indeed, at the extreme, to more than double the official price. The government required customs duties and certain other obligations to be paid in gold; banks provided separate gold and greenback deposits for their clients. In short, gold and greenbacks circulated side by side at a floating exchange rate determined in the market, although greenbacks were clearly the dominant currency for most purposes and in most areas. Finally, we come to 1873. A movement was afoot to end the greenback episode and resume a specie standard. It was time for Congress to start tidying up the coinage legislation.

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Thè countries it traded with were on a gold standard, and prices in those countries fell drastically after 1929, including the price of silver. With China on a silver standard, the fall in the price of silver was equivalent to a depreciation of the exchange rate of its currency with respect to gold-standard currencies; it gave China the equivalent of a floating exchange rate. For example, in 1929 the Chinese dollar was valued on the foreign exchange market at 36 U.S. cents; in the next two years the price of silver in terms of gold fell more than 40 percent, making the Chinese dollar worth only 21 cents. Since U.S. wholesale prices fell by only 26 percent, China could command higher prices in terms of its own currency for its exports, despite their lower price in terms of gold.

Paper Promises by Philip Coggan

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, Alan Greenspan, balance sheet recession, bank run, banking crisis, barriers to entry, Bear Stearns, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, bond market vigilante , Bretton Woods, British Empire, business cycle, call centre, capital controls, Carmen Reinhart, carried interest, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, currency risk, debt deflation, delayed gratification, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, falling living standards, fear of failure, financial innovation, financial repression, fixed income, floating exchange rates, full employment, German hyperinflation, global reserve currency, Goodhart's law, Greenspan put, hiring and firing, Hyman Minsky, income inequality, inflation targeting, Isaac Newton, John Meriwether, joint-stock company, junk bonds, Kenneth Rogoff, Kickstarter, labour market flexibility, Les Trente Glorieuses, light touch regulation, Long Term Capital Management, low interest rates, manufacturing employment, market bubble, market clearing, Martin Wolf, Minsky moment, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Myron Scholes, negative equity, Nick Leeson, Northern Rock, oil shale / tar sands, paradox of thrift, peak oil, pension reform, plutocrats, Ponzi scheme, price stability, principal–agent problem, purchasing power parity, quantitative easing, QWERTY keyboard, railway mania, regulatory arbitrage, reserve currency, Robert Gordon, Robert Shiller, Ronald Reagan, savings glut, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, Suez crisis 1956, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, time value of money, too big to fail, trade route, tulip mania, value at risk, Washington Consensus, women in the workforce, zero-sum game

If the country runs a trade deficit, it must borrow the money from abroad. If foreign creditors demand too high an interest rate, as has happened in Greece, Portugal and Ireland, then the country faces a severe crisis; cutbacks, if not rationing, will be required. There would be no need to choose between fixed and floating exchange rates if there were a global currency that was accepted everywhere. Trade and tourism would be much easier. But the idea, akin to the spread of global languages like Esperanto, while attractive in theory, is unlikely to be adopted in practice. Governments would lose a lot of independence in monetary policy, as Europeans have discovered; capital flows would be much harder to control if a single currency was accepted worldwide, something that would upset the Chinese, for example.

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Once again, it was the Americans, still at that stage a creditor nation, who led the way to a new system in which central banks acted to bring down inflation and thereby protect the interest of creditors. But the debate has evolved over the years. Go back a century and the banking establishment would have been firmly in favour of fixed exchange rates and sound money. In practice, however, the banking sector has benefited hugely from floating exchange rates, which have created a highly liquid trading market and a desire for financial products that insure against exchange-rate risk. And the abandonment of fixed exchange rates has led to a huge expansion of cross-border capital flows, from which the finance sector has taken a very large bite. The seeds of the financial crisis of 2007 – 08 were sown in the exchange-rate revolution of the early 1970s.

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In other words, countries wanted to have their cake (a fixed exchange rate) and eat it (independent monetary policy). They did not want the markets to have the ability to point out when monetary policy was incompatible with the exchange-rate target. Establishing the Bretton Woods system evoked many of the arguments that still rage today. Graham favoured floating exchange rates, but that turned out to be a policy whose time had not yet come. His arguments (and those of laissez-faire economists like Friedrich Hayek and Ludwig von Mises) were to be taken up in the 1960s and 1970s by the Chicago economists Milton Friedman and Robert Lucas. The creation of the euro owes much to the feeling – prevalent at Bretton Woods – that exchange rates should be stable and speculation curbed.

Why Government Is the Problem by Milton Friedman

affirmative action, Bretton Woods, floating exchange rates, invisible hand, rent control, Savings and loan crisis, urban renewal

It is interesting to note that every economic plank of the 1928 Socialist party platform has by now been either wholly or partly enacted. So ideas are important, but they take a long time and are not important in and of themselves. Something else has to come along that provides a fertile ground for those ideas. I mentioned the adoption of floating exchange rates in 1971; it was the same thing. Many economists during the previous twenty years had been talking about how much more desirable floating exchange rates would be, but they never got anywhere until gold started leaving the United States and Nixon closed the gold window because there was nothing else he could do. All of a sudden you had a crisis. What happened then was determined by the ideas that had already been explored and developed.

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A clear example in the international sphere is the International Monetary Fund (IMF), which was established to administer a system of fixed exchange rates. Whether that is a good system or a bad system is beside the point. In 1971, after President Nixon closed the gold window, the fixed exchange rate system collapsed and was replaced by a system of floating exchange rates. The IMF's function disappeared, yet, instead of being disbanded, it changed its function and expanded. It became a relief agency for backward countries and proceeded to dig deeper into the pockets of its sponsors to finance its new activities. At Bretton Woods, two agencies were established: one to administer a fixed exchange rate system and the other, the World Bank, to perform the function of promoting development.

The Money Machine: How the City Works by Philip Coggan

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

So companies looked for ways to protect themselves from these risks. Secondly, floating exchange rates created the potential for continuous speculation. The 1970s saw the creation of the financial futures market in Chicago, which allowed traders to bet on the likely movement of exchange rates. Both developments were opportunities for financial companies. They could make money speculating on the markets and they could make money helping companies protect themselves from foreign-exchange risk. Both opportunities were taken. Floating exchange rates also had significant implications for governments. Think of three key elements of monetary policy: exchange rates, interest rates and capital controls.

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The easiest way of doing so was to raise interest rates; this had the effect of cutting consumer demand for foreign goods. But the result was a stop– go kind of economy, in which periods of rapid expansion were suddenly cut short as governments raised interest rates to protect sterling. In a world of floating exchange rates, there is no requirement for governments to ratchet up interest rates every time the currency falls. Voters naturally don’t like high interest rates. The problem was exacerbated by governments’ desire to keep unemployment low; at the slightest sign of economic weakness, they acted to boost the economy.

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In the late 1990s, however, LIFFE abandoned trading in the face of competition from the German futures market. Trading moved to a screen-based system, which was designed to be cheaper for investors. However, Chicago, the world’s biggest futures market, retains the pits and coloured jackets. With the advent of floating exchange rates (see Chapter 14), it occurred to Chicago traders that there may well be a market for trading in currency futures, since exchange rates seemed to be exhibiting the same volatility as commodity prices. Currency futures quickly became a success; some experts now estimate that 10 per cent of all US foreign-exchange transactions take place on the Chicago futures floor.

Unfinished Business by Tamim Bayoumi

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

The crisis only happens once a sufficient number of investors switch to expecting a devaluation—the exact timing of a crisis depends on the mood of investors.7 If fixed exchange rate regimes create risks of a currency crisis, then why not simply adopt a floating exchange rate regime where the value of the currency is left to market forces? While a floating exchange rate solves the problem of investors rushing in on the assumption they will be able to leave before the inevitable devaluation of a fixed exchange rate, it has its own potential problems. Like other asset prices, exchange rates can experience excessive swings as a result of herding behavior by investors.

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The future Delors Report was to take a much more decentralized approach to sovereignty, in large part because it was driven by French dissatisfaction with the growing dominance of the Deutsche mark in European monetary policy, a dynamic to which we now turn. The Hard D-Mark In the period from the early 1970s to the mid-1980s plans for monetary union were overshadowed by monetary instability coming from the collapse of the Bretton Woods system of fixed exchange rates. Globally, the main challenges were managing the switch from fixed to floating exchange rates and taming inflation, which rose in the wake of the 1973 oil price shock. On curbing inflation, Germany and Japan were notably more successful than other major economies including the United States and other members of the European Economic Community such as France, Italy, and the United Kingdom.

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The Outskirts Cannot Hold: The European Exchange Rate Mechanism Crisis After the collapse of the Bretton Woods fixed exchange rate system, the European Economic Community (EEC, later the European Union) tried to maintain fixed exchange rates across its membership even as the United States and Japan switched to floating exchange rates. There were good reasons for Europe to choose a different approach. The United States and Japan were large economies that were relatively closed to international trade. As a consequence, while the value of the exchange rate mattered, it was not regarded as a central policy issue. By contrast, the members of the Community had deliberately fostered much closer trade ties through a customs union that made exchange rate fluctuations between them more important.

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

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

Friedman favored markets of all kinds, and he thought a futures market was a necessary complement to a system of floating exchange rates. It would provide a vehicle for investors to signal their views of the direction of currency prices. And just as farmers benefited from protection against fluctuations in crop prices, businesses would benefit from protection against fluctuations in exchange rates. When Melamed announced the creation of the International Money Market on December 20, 1971, the press release had Friedman’s name all over it. Melamed called the five-thousand-dollar endorsement deal “the best investment the Merc ever made.”63 Friedman had predicted that floating exchange rates would change slowly over time, because the relative strength of national economies also changed slowly over time.

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They agreed the primary goal of economic policy was to increase the dollar value of the nation’s economic output. They had little patience for efforts to address inequality. A 1979 survey of the members of the American Economic Association found 98 percent opposed rent controls, 97 percent opposed tariffs, 95 percent favored floating exchange rates, and 90 percent opposed minimum wage laws.37 Their differences were matters of degree, and while those differences are consequential — and are described in these pages — the degree of consensus was consequential, too. Critiques of capitalism that remained a staple of mainstream debate in Europe were seldom heard in the United States.

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Melamed called the five-thousand-dollar endorsement deal “the best investment the Merc ever made.”63 Friedman had predicted that floating exchange rates would change slowly over time, because the relative strength of national economies also changed slowly over time. Moreover, he said that speculators would contribute to stability, because they would make money by driving prices back toward the levels justified by those fundamentals. But instead of floating, exchange rates soared and sank. Economists offered a variety of tortured theories for the volatility, avoiding the actual and obvious explanation: there was gambling going on.64 By 1985, daily currency trading topped $150 billion; by 1995, $1.2 trillion; by 2007, $3.3 trillion.65 An industry popped into existence: currency managers for industrial firms, bankers to take their instructions, speculators to take advantage.* The losers did not take long to start washing up onshore.

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

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

The result is a rise in the correlation of asset yields across several countries. The macroeconomic effect of exchange crises in countries with debts in dollars and incomes in national currencies plays out on the balance sheets of both banks and non-banking actors. The debt liabilities to asset values ratio is a function of the exchange rate. If the country is on a floating exchange rate, the anticipated depreciation of the currency’s exchange rate will be self-fulfilling. The rise in the foreign exchange rate swells indebtedness and weakens the balance-sheet structure. This increases risk premiums and thus increases the short-term cost of renewing the debt. The result is a fall in capital’s profitability, weakened investment and a sharp brake on growth, or even a recession if the balance sheets worsen significantly.

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The major differences between the two plans concerned the nature of the initial quotas (whether these would be drawing rights on a bank, or subscription to a Fund’s capital); the role of the exchange market and the extent of capital controls; and, finally, the symmetry or asymmetry of compulsory adjustments. In Keynes’s view, capital controls had to be permanent, since floating exchange rates were not capable of leading to an economically satisfying equilibrium in the balances of payments. The Clearing Union would much more effectively take over this role, just as the banking principle had unified currencies within nations by eliminating the dualist system of the Middle Ages, as well as the confusion among different units of account that resulted from it.

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The Failure of the Reform Attempt (1972–74) and the Jamaica Accords (1976) The SDR were at the heart of the negotiations seeking to rebuild the international monetary system between 1972 and 1974. These negotiations took place within the Committee of Twenty (C20) and subsequently the IMF Interim Committee.18 The SDR stood at the crossroads between two crucial questions: the demonetisation of gold and the future of the dollar. Firstly, with the establishment of floating exchange rates, in June 1974 the SDRs’ value passed from being attached to gold to being attached to a basket of currencies. This matched with the US’s desire to approve floating exchanges rather than return to a system of parities centred on SDR. But, this being the case, there was an inherent contradiction in purporting to make SDR the main reserve asset.

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

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

The issue of replacing the gold standard with something else was as difficult and fraught as the issue of replacing the dollar globally today. Even a thinker as radical and creative as Keynes never made a total break with it. The extreme of purely floating exchange rates, such as the world has known since 1971, was considered by few economists in the ’30s (Lionel Robbins being a notable exception) to be a “system” as such, helping to restore equilibrium. Today associated with laissez-faire economics, floating exchange rates were then frowned upon by economists of the right as well as the left as both symptom and cause of disorder in monetary affairs; disorder that triggered others to initiate mutually destructive competitive responses.

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“I hold that in modern conditions,” he wrote in a letter to The Times of London on August 1, “wages in this country are, for various reasons, so rigid over short periods, that it is impracticable to adjust them to the ebb and flow of international gold-credit, and I would deliberately utilise fluctuations in the exchange as the shock-absorber.” Though this might appear a defense of floating exchange rates, he would far more often than not in his career defend the desirability of “stable” rates. This continuous finessing of so fundamental an issue in monetary management would flummox his supporters and enervate his detractors. Simultaneous with his Times letter Keynes published The Economic Consequences of Mr.

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The United States now had the most to gain from adoption of the proposals, not because it would need assistance from the fund or the bank but because it would “get assurance that other countries will be enabled to pursue monetary credit and trade policies that we regard as essential for a high level of world trade.” Floating exchange rates during White’s time at the Treasury were anathema to powerful U.S. commercial interests—large exporters and domestic producers—owing to upward pressure on the dollar. Foreign currencies falling against the dollar tended to depress U.S. exports and fuel imports competitive with American-made goods.

Endless Money: The Moral Hazards of Socialism by William Baker, Addison Wiggin

Alan Greenspan, Andy Kessler, asset allocation, backtesting, bank run, banking crisis, Bear Stearns, Berlin Wall, Bernie Madoff, Black Swan, bond market vigilante , book value, Branko Milanovic, bread and circuses, break the buck, Bretton Woods, BRICs, business climate, business cycle, capital asset pricing model, carbon tax, commoditize, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crony capitalism, cuban missile crisis, currency manipulation / currency intervention, debt deflation, Elliott wave, en.wikipedia.org, Fall of the Berlin Wall, feminist movement, fiat currency, fixed income, floating exchange rates, foreign exchange controls, Fractional reserve banking, full employment, German hyperinflation, Great Leap Forward, housing crisis, income inequality, index fund, inflation targeting, Joseph Schumpeter, Kickstarter, laissez-faire capitalism, land bank, land reform, liquidity trap, Long Term Capital Management, lost cosmonauts, low interest rates, McMansion, mega-rich, military-industrial complex, Money creation, money market fund, moral hazard, mortgage tax deduction, naked short selling, negative equity, offshore financial centre, Ponzi scheme, price stability, proprietary trading, pushing on a string, quantitative easing, RAND corporation, rent control, rent stabilization, reserve currency, risk free rate, riskless arbitrage, Ronald Reagan, Savings and loan crisis, school vouchers, seigniorage, short selling, Silicon Valley, six sigma, statistical arbitrage, statistical model, Steve Jobs, stocks for the long run, Tax Reform Act of 1986, The Great Moderation, the scientific method, time value of money, too big to fail, Two Sigma, upwardly mobile, War on Poverty, Yogi Berra, young professional

One is the tendency of credit to grow excessively under a regulated centralized bank that targets inflation through interest rate setting. Another is why modern day floating exchange rates were unable to prevent the buildup of destabilizing trade and capital imbalances. Economists have gained notoriety in recent decades for linking gold to the Depression’s downturn and then crediting the revival of the late 1930s with the lessening of its use as a currency reserve, not necessarily by outright accusation but through its ability to transmit deflation globally. This being the case, the inability of today’s floating exchange rates to block the transmission of credit contraction and the deflation of asset prices (and prospectively wages and consumer prices) is a glaring counterpoint to singling out adherence to gold as a cause of poor economic performance of certain nations during that era.

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Bordo is a monetarist who is of the view that a gold exchange standard is flawed because there is a “tendency for such a system to amplify and propagate the effects of unstable policies in the reservecurrency countries.”40 Schwartz partnered with Milton Friedman on his groundbreaking monetary explanation of the Depression. Although they seem to vigorously support freely floating exchange rates, they conclude in a 1988 paper looking at the economic volatility from the end of Bretton Woods (1971) that “floating rates may not provide the degree of insulation once believed,” debunking the thesis that “transmission that occurred under fixed exchange rates …was mostly prevented when exchange rates floated.”41 Their disparagement of the work of other economists studying the field of fixed and floating exchange rates and their degree of stability to the world economic system is illuminating, for it highlights the inadequacy of econometric capability: “The exercises in model building that have occupied specialists in international economics seem designed to impress readers with the ingenuity of the effort rather than the value of the analytical contribution.

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But Fisher then became a leading indicator of the intellectual mood of the 1930s. He quickly grasped reflation as a way out of the liquidity trap and, out of self-interest, his personal dilemma. Fisher helped construct a new orthodoxy that likewise has calcified academia around support for floating exchange rates, elastic currency, and the uselessness of commodity-backed currency. If the world, as Einstein proved, is circular and contains an unseen dimension, then why might not also the riddles of finance be? As we shall see in the following chapter, “Spitting into the Wind,” the Federal Reserve governors have clung to the prevailing attitudes of the Fisherian and Friedmanist school of thought.

The Future of Money by Bernard Lietaer

agricultural Revolution, Alan Greenspan, Alvin Toffler, banks create money, barriers to entry, billion-dollar mistake, Bretton Woods, business cycle, clean water, complexity theory, corporate raider, currency risk, dematerialisation, discounted cash flows, diversification, fiat currency, financial deregulation, financial innovation, floating exchange rates, full employment, geopolitical risk, George Gilder, German hyperinflation, global reserve currency, Golden Gate Park, Howard Rheingold, informal economy, invention of the telephone, invention of writing, John Perry Barlow, Lao Tzu, Lewis Mumford, low interest rates, Mahatma Gandhi, means of production, microcredit, Money creation, money: store of value / unit of account / medium of exchange, Norbert Wiener, North Sea oil, offshore financial centre, pattern recognition, post-industrial society, price stability, Recombinant DNA, reserve currency, risk free rate, Ronald Reagan, San Francisco homelessness, seigniorage, Silicon Valley, South Sea Bubble, The Future of Employment, the market place, the payments system, Thomas Davenport, trade route, transaction costs, trickle-down economics, two and twenty, working poor, world market for maybe five computers

Compare this with the situation as recently as 1983 (see Figure P.7), when the reserves still provided a pretty safe cushion. Even people who profit from explosive speculative activity are becoming seriously worried. For instance George Sores, widely considered one of the biggest players in this game, states: 'Freely floating exchange rates are inherently unstable; moreover, the instability is cumulative so that the eventual breakdown of a freely floating exchange rate system is virtually assured. Joel Kurtzman, business editor of The New York Times, is even more damning. He titles his latest book The Death of Money: How the Electronic Economy has destabilised the World’s Markets. A master of understatement like Paul Volcker, ex-governor of the Federal Reserve, goes on record to express his concern about the growth of 'a constituency in favour of instability', i.e. financial interests whose profits depend on increased volatility.

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Fired Ercbnnge Rnte: Rate fixed by an authority at which one currency can be exchanged against another. This was the rule in the Bretton Woods Agreement from 1945 to 1971, and the IMF was the authority, which had to approve any, changes in exchange rates. The rule of fixed exchange rates was replaced by floating exchange rates after 1972 for most national currencies. Floating Exchange Rate: Rate at which one currency can be exchanged for another as determined by the free bidding and asking in the foreign exchange market. Has been the regime for most national currencies since 1972. Fractional Reserves: When a currency is issued with only a fraction backed by whatever supports it.

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They have therefore created the Time Dollars necessary for their transaction by agreeing on the transaction itself. The main advantage of mutual credit systems is that they self-regulate to have always currency available in sufficiency. Negotiated exchange rate: In contrast with ‘fixed exchange rates', when the exchange rate is negotiated as part of the transaction itself. Currently under floating exchange rates, all national currencies have negotiated exchange rates among each other. Similarly with ROCS the value of one hourly service is negotiated at the moment of a transaction: a dentist may charge five ROCS for each hour of work for example. OECD: The Organisation of Economic Co-operation and Development, based in Paris, and grouping the 'developed' countries in the world.

The Accidental Theorist: And Other Dispatches From the Dismal Science by Paul Krugman

"World Economic Forum" Davos, Alan Greenspan, Bonfire of the Vanities, Bretton Woods, business cycle, carbon tax, clean water, collective bargaining, computerized trading, corporate raider, declining real wages, floating exchange rates, full employment, George Akerlof, George Gilder, Home mortgage interest deduction, income inequality, indoor plumbing, informal economy, invisible hand, It's morning again in America, Kenneth Arrow, knowledge economy, life extension, new economy, Nick Leeson, paradox of thrift, Paul Samuelson, plutocrats, price stability, rent control, Robert Solow, Ronald Reagan, Silicon Valley, trade route, very high income, working poor, zero-sum game

Moreover, how can you discuss globalization without noticing that the U.S. has a floating exchange rate? If the Fed were to pursue a radically more expansionary monetary policy, one sure consequence would be a lower value of the dollar. If you really think that U.S. prices are basically limited by foreign competition, then you have to believe that a fall in the dollar will translate almost directly into higher inflation. In fact, traditional analyses of inflation in trading economies conclude that expansionary monetary policy has more, not less, effect on inflation in a country with a large import share and a floating exchange rate than it does in a relatively self-sufficient economy.

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The answers one might give to these questions define four boxes, all of which have their adherents. Here is the matrix: Is exchange rate flexibility useful? No Yes Can the forex market be trusted? Yes Relaxed guy Serene floater No Determined fixer Nervous wreck Suppose that you believe that the policy freedom a country gains from a floating exchange rate is actually worth very little, but you also trust the foreign exchange market not to do anything silly. Then you will be a very relaxed guy: You will not much care what regime is chosen for the exchange rate. You may have a small preference for a fixed rate or better yet a common currency, on the grounds that stable exchange rates reduce the costs of doing business; but you will not lose sleep over the choice.

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

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

If one country’s inflation is too high or it consumes too much and produces too little, its currency will decline to bring its costs back in line or force it to import less and save more. As chaotic as floating exchange rates (currencies that fluctuate against one another) are, they thus serve a vital economic purpose: they allow separate economic cultures to coexist. Milton Friedman compared floating exchange rates to daylight saving time: Isn’t it absurd to change the clock in summer when exactly the same result could be achieved by having each individual change his habits? All that is required is that everyone decide to come to his office an hour earlier, have lunch an hour earlier, etc.

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In the early 1990s Mexico, as it had in the 1970s and 1980s, borrowed heavily from foreigners, this time in the form of short-term Treasury bills whose value was linked to the dollar rather than via bank loans. When the peso collapsed in 1994, the cost of servicing that debt soared, and the United States and International Monetary Fund bailed Mexico out. Mexico learned its lesson, and thereafter kept a floating exchange rate and stuck to borrowing in its own currency. When the rich world sank into crisis in 2008, Mexico’s central banker observed, with relief, “This time it wasn’t us.” Individual firms learned lessons, as well. While almost forgotten now, the collapse in 1990 of Drexel Burnham Lambert, home of the junk bond king Michael Milken, was the largest closure of an investment bank in the United States.

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A similar problem afflicts the entire global economy. The crisis that befell America was in its own way the product of too much saving in other parts of the world. Indeed, this could be traced to the roots of a previous crisis, in East Asia, which was itself the result of a failed effort to eliminate the uncertainty of floating exchange rates. Thailand entered the 1980s suffering from double-digit inflation, excessive private borrowing, and a gaping budget deficit. It put in place several strict policies to restore health, among them fixing the exchange rate of its currency, the baht. That stable exchange rate made foreign investors less worried about lending to Thai companies in local currency, believing that when the Thai borrower repaid the money, it would not have lost value because of a devaluation.

EuroTragedy: A Drama in Nine Acts by Ashoka Mody

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

The term “flexible Wechselkurs” was used for German books, and “taux de change flexible” was used for French books. The English variation “floating exchange rate,” the German variation “schwankender Wechselkurs,” and the French variation “taux de change flottant” yielded similar trends. three leaps in the dark 41 Robert Hetzel, economist at the Federal Reserve Bank of Richmond, would later explain: “Germany’s commitment to a free market economy pushed it to reject fixed exchange rates and adopt floating exchange rates.”82 Thus, in proposing a monetary union, Pompidou was defying not only the global experience that was causing fixed-​exchange-​rate systems to break down, but he was also ignoring the clash between the French dirigiste temperament and the German market-​oriented economic ideology.

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A consensus toward more flexibility, even floating, of exchange rates was emerging. The values of currencies would change continuously as national and global conditions changed. introduction 5 German officials opposed a monetary union. Germans, traditionally more pro-​market, were inclined toward floating exchange rates. But the French initiative to create a single European currency was pulling them in the opposite direction. From the start, the political worry for Germans was that they would be sucked into paying for countries that had fallen into prolonged recessions and financial crises. Yet at The Hague, German Chancellor Willy Brandt did not disengage from the discussion.

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Two days before the summit, on Saturday, November 29, the New York Times reported that Pompidou would “press for closer monetary links within the European Economic Community” at the summit.84 Pompidou’s finance minister, Valéry Giscard d’Estaing, added that the summit would chart a path toward a common European monetary policy. The Germans could have said no and walked away. Germany was an economically powerful nation. It preferred floating exchange rates. The idea of a European monetary union would have been shelved in the archives. The Shadow of the War Continues to Fall on Germany Germany’s politics and leadership were also changing. The Christian Democratic Union (CDU) had finally lost its postwar grip on power, and Willy Brandt of the Social Democratic Party (SPD) had just become chancellor.

The Social Life of Money by Nigel Dodd

"hyperreality Baudrillard"~20 OR "Baudrillard hyperreality", accounting loophole / creative accounting, bank run, banking crisis, banks create money, behavioural economics, Bernie Madoff, bitcoin, Bitcoin Ponzi scheme, blockchain, borderless world, Bretton Woods, BRICs, business cycle, capital controls, capitalist realism, cashless society, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computer age, conceptual framework, credit crunch, cross-subsidies, currency risk, David Graeber, debt deflation, dematerialisation, disintermediation, Dogecoin, emotional labour, eurozone crisis, fiat currency, financial engineering, financial exclusion, financial innovation, Financial Instability Hypothesis, financial repression, floating exchange rates, Fractional reserve banking, gentrification, German hyperinflation, Goldman Sachs: Vampire Squid, Herbert Marcuse, 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, Minsky moment, mobile money, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, National Debt Clock, Neal Stephenson, negative equity, new economy, Nixon shock, Nixon triggered the end of the Bretton Woods system, Occupy movement, offshore financial centre, paradox of thrift, payday loans, Peace of Westphalia, peer-to-peer, peer-to-peer lending, Ponzi scheme, post scarcity, post-Fordism, Post-Keynesian economics, postnationalism / post nation state, predatory finance, price mechanism, price stability, quantitative easing, quantitative trading / quantitative finance, remote working, rent-seeking, reserve currency, Richard Thaler, risk free rate, Robert Shiller, Satoshi Nakamoto, scientific management, 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

Even here, a narrative is attached to the rating, which is unraveled whenever the rating shifts, or when various ratings agencies offer different grades for a particular financial product. 42 Bretton Woods refers to the international monetary system that was established in 1944, wherein countries agreed to adopt monetary policies aimed to ensure that their currencies maintained fixed rates of exchange against the U.S. dollar, which was in turn “pegged” to gold. After a series of difficulties during the 1960s, the system finally broke down in 1973, when a system of “floating” exchange rates was adopted. President Nixon’s decision to suspend the dollar’s convertibility into gold in 1971—known as the “Nixon shock”—was a major step toward this breakdown. 43 It was Bourdieu who accused Hans Tietmeyer, then President of the Bundesbank, of perpetuating a “monetarist religion” (see Tognato 2012: 135). 44 Issing was a key figure in the euro’s design and a founding member of the executive board of the European Central Bank. 2 CAPITAL This boundless drive for enrichment, this passionate chase after value, is common to the capitalist and the miser; but while the miser is merely a capitalist gone mad, the capitalist is a rational miser.

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In other words, the burden of devaluation shifts from private capital onto money, as private problems (money’s particularism) are transposed into public ones (money’s universalism) (Harvey 2006: 310). It is at the top of the hierarchy of monetary institutions that the fundamental question of money’s value must always be defended. It is on this level, moreover, that capitalist crises take on an international dimension through money. After the collapse of Bretton Woods, states with floating exchange rates were competing to determine which of them bear the brunt of devaluation. Alternatively, in the aftermath of the 2007–8 banking crisis, periodic “currency wars” have ensued as states seek to boost export-led growth by devaluing their currencies. For Harvey, the increasing involvement of the state in the economy since Marx’s time is not a refutation of his basic law of value.

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Harvey cites Roosevelt’s New Deal as one major example of these forces at work. Two more recent instances that I want to discuss here are the aftermath of the collapse of the Bretton Woods regime, which saw major struggles between capital and labor being waged against the background of a new international regime of floating exchange rates, and the ongoing crisis within the Eurozone, whose devastating effect across classes and generations is still being played out. One of the classic analyses of the Bretton Woods crisis from the perspective of Marx’s theory of money and credit was advanced by Christian Marazzi in his 1976 paper, “Money in the World Crisis” (Marazzi 1995).

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

active measures, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, Bonfire of the Vanities, break the buck, Bretton Woods, British Empire, business cycle, buy and hold, Carmen Reinhart, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, Corn Laws, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cross-border payments, currency peg, currency risk, death of newspapers, debt deflation, Deng Xiaoping, disintermediation, diversification, diversified portfolio, edge city, financial deregulation, financial innovation, Financial Instability Hypothesis, financial repression, fixed income, floating exchange rates, George Akerlof, German hyperinflation, Glass-Steagall Act, Herman Kahn, Honoré de Balzac, Hyman Minsky, index fund, inflation targeting, information asymmetry, invisible hand, Isaac Newton, Japanese asset price bubble, joint-stock company, junk bonds, large denomination, law of one price, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market bubble, Mary Meeker, Michael Milken, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, new economy, Nick Leeson, Northern Rock, offshore financial centre, Ponzi scheme, price stability, railway mania, Richard Thaler, riskless arbitrage, Robert Shiller, short selling, Silicon Valley, South Sea Bubble, special drawing rights, Suez canal 1869, telemarketer, The Chicago School, the market place, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, very high income, Washington Consensus, Y2K, Yogi Berra, Yom Kippur War

In fact, he considered clinging to rigid beliefs in the face of disconcerting evidence to be one of the more dangerous forms of irrationality, especially when it is practiced by those in charge. The international economy would be a safer place if CPK’s tolerant skepticism were more common among the powers that be. I am thinking, in particular, about current discussions of the so-called ‘Washington consensus’, and the pros and cons of both freely floating exchange rates and unfettered capital markets. Any reader of this book will come away with the distinct notion that large quantities of liquid capital sloshing around the world should raise the possibility that they will overflow the container. One issue omitted in the book – because it is well outside its scope – is the other side of the ledger: What are the social benefits of free capital flow in its various forms, the analogue of gains from trade?

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The range of movement in the values of national currencies since the early 1970s has been much larger than ever before. In 1971 the United States abandoned the US gold parity of $35 an ounce that had been established in 1934. The effort to retain a modified version of the Bretton Woods system of pegged currencies that was formalized in the Smithsonian Agreement of 1972 failed and a floating exchange rate arrangement was adopted by default early in 1973. At the beginning of the 1970s, the dominant market view was that the German mark and the Japanese yen might appreciate by 10 to 12 percent because their inflation rates had been below the US rate in the previous few years. The German mark and the Japanese yen appreciated more rapidly than anticipated through most of the 1970s, and then both currencies depreciated significantly in the first half of the 1980s, although not to the levels of the early 1970s.

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The United States made no effort to defend the new parity for the US dollar that had been set in the Smithsonian Agreement. By February 1973 speculation that the mark would be revalued led to increasingly large money flow to Frankfurt; the Bundesbank stopped buying the US dollar, and the mark immediately appreciated. Most economists had thought that the adoption of floating exchange rates would severely dampen the movement of interest-sensitive money and that once currencies were floating central banks would be able to follow independent monetary policies without any untoward external effects. Economists differed about whether speculative money movements would be stabilizing or, occasionally, destabilizing in a serious way; the general view was that fear of currency losses would deter cross-border money flows.

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

Alan Greenspan, Andrei Shleifer, Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, behavioural economics, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, classic study, collapse of Lehman Brothers, creative destruction, Credit Default Swap, crowdsourcing, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Doha Development Round, Edmond Halley, Fall of the Berlin Wall, falling living standards, fiat currency, financial engineering, financial innovation, financial intermediation, floating exchange rates, foreign exchange controls, forward guidance, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, German hyperinflation, Glass-Steagall Act, Great Leap Forward, Hyman Minsky, inflation targeting, invisible hand, Japanese asset price bubble, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, labour market flexibility, large denomination, lateral thinking, liquidity trap, Long Term Capital Management, low interest rates, manufacturing employment, market clearing, Martin Wolf, Mexican peso crisis / tequila crisis, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, Nick Leeson, no-fly zone, North Sea oil, Northern Rock, oil shale / tar sands, oil shock, open economy, paradox of thrift, Paul Samuelson, Ponzi scheme, price mechanism, price stability, proprietary trading, purchasing power parity, quantitative easing, rent-seeking, reserve currency, Richard Thaler, rising living standards, Robert Shiller, Robert Solow, Satoshi Nakamoto, savings glut, secular stagnation, seigniorage, stem cell, Steve Jobs, The Great Moderation, the payments system, The Rise and Fall of American Growth, Thomas Malthus, too big to fail, transaction costs, Tyler Cowen: Great Stagnation, yield curve, Yom Kippur War, zero-sum game

But in the late 1960s differences in inflation across countries, especially between the United States and Germany, appeared to be more than temporary, and led to the breakdown of the Bretton Woods system in 1970–1. By the early 1970s, the major economies had moved to a system of ‘floating’ exchange rates, in which currency values are determined by private sector supply and demand in the markets for foreign exchange. Inevitably, the early days of floating exchange rates reduced the discipline on countries to pursue low inflation. When the two oil shocks of the 1970s – in 1973, when an embargo by Arab countries led to a quadrupling of prices, and 1979, when prices doubled after disruption to supply following the Iranian Revolution – hit the western world, the result was the Great Inflation, with annual inflation reaching 13 per cent in the United States and 27 per cent in the United Kingdom.7 Economic experiments From the late 1970s onwards, the western world then embarked on what we can now see were three bold experiments to manage money, exchange rates and the banking system better.

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So the euro area must pursue one, or some combination of, the following four ways forward: Continue with high unemployment in the periphery countries until wages and prices have fallen enough to restore the loss in competitiveness. Since the full-employment trade deficits of these countries are still significant, further reductions will be painful to achieve. Unemployment is already at very high levels in these countries. In small countries, for which a floating exchange rate may seem too risky, such a route may be the only option. Create a period of high inflation in Germany and other countries in surplus, while restraining wages and prices in the periphery, to eliminate the differences in competitiveness between north and south. That would require a marked fall in the euro for a long period, which would be unpopular in both Germany, whose savers would earn an even lower return on their assets than at present, and the rest of the world, which would interpret the fall as a hostile move.

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The aim should be fourfold: to reinvigorate the IMF and reinforce its legitimacy by reforms to its voting system, including an end to a veto by any one country; to put in place a permanent system of swap agreements among central banks, under which they can quickly lend to each other in whichever currencies are needed to meet short-term shortages of liquidity; to accept floating exchange rates; and to agree on a timetable for rebalancing of major economies, and a return to normal real interest rates, with the IMF as the custodian of the process. The leadership of the IMF must raise its game. The two main threats to the world economy today are the continuing disequilibrium between spending and saving, both within and between major economies, and a return to a multipolar world with similarities to the unstable position before the First World War.

Keeping at It: The Quest for Sound Money and Good Government by Paul Volcker, Christine Harper

Alan Greenspan, anti-communist, Ayatollah Khomeini, banking crisis, Bear Stearns, behavioural economics, Black Monday: stock market crash in 1987, Bretton Woods, business cycle, central bank independence, corporate governance, Credit Default Swap, Donald Trump, fiat currency, financial engineering, financial innovation, fixed income, floating exchange rates, forensic accounting, full employment, Glass-Steagall Act, global reserve currency, income per capita, inflation targeting, liquidationism / Banker’s doctrine / the Treasury view, low interest rates, margin call, money market fund, Nixon shock, oil-for-food scandal, Paul Samuelson, price stability, proprietary trading, quantitative easing, reserve currency, Right to Buy, risk-adjusted returns, Ronald Reagan, Rosa Parks, Savings and loan crisis, secular stagnation, Sharpe ratio, Silicon Valley, special drawing rights, too big to fail, traveling salesman, urban planning

Milton Friedman, openly and loudly, had been advocating much more radical action: a system of freely floating exchange rates which, in his view, would let the markets rapidly and efficiently correct international payment imbalances and better reconcile differences in national monetary policies. In effect, he was proposing to discard a major part of the Bretton Woods agreement and leave currencies to the whim of the (in his view, perfectly rational) market, without any concern for other countries’ wishes. His principal intellectual opponent was Bob Roosa, who argued that the 1930s experience amply demonstrated the instability that floating exchange rates could create, the very antithesis of the order embodied in the Bretton Woods agreement.

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The major European nations invited the United States to an emergency meeting in Paris on Friday, March 9. It turned out to be momentous. The morning session was spent largely by ministers expressing their individual frustrations about the lack of practical options. Finally, temporary floating seemed the only reasonable avenue. Shultz, ideologically in favor of floating exchange rates and free markets in general, had been among the Nixon advisors who wanted to adopt that approach when the gold window was closed in 1971. At that point, he had been overruled by Connally and Burns and eventually the president. I wasn’t sure how he would react once he had the full responsibilities of Treasury secretary.

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See also specific events Financial Reporting Council (Britain’s Accounting Standards Board), 194 Financial Services Modernization Act/1999 (Gramm-Leach-Bliley law/1999), xv, 205 Financial Stability Oversight Council (FSOC), 214 Financial Times, 201 First Chicago, 98, 124 First Pennsylvania rescue/as model, xii, 125, 127, 146 Fiscal Policy Seminar, 24 fixed exchange rates Bretton Woods system and, ix, 24, 67 Federal Reserve and, 49, 49n foreign currency swaps, 49 freely floating exchange rates/problems and, 63–64 gold committee and, 51–52 gold reserves levels and, 51, 61–62, 64, 70 Kennedy and, 45 “market” vs. “official” price, 61–62 Operation Twist, 49 problems/possible solutions, 61–69, 70–71 Roosa/“Roosa bonds” and, 48–49 “Triffin dilemma,” 48, 54, 64, 65, 87 US/other countries and, 62, 64, 65, 66, 67, 68, 70–71, 72, 73–74 fixed exchange rates/end Camp David meeting (1971), 71–74 currency crises continuing and, 101 Nixon meetings/actions following, x–xi, 76, 78, 79 Nixon’s August 15 speech and, x, 75 problems/solutions and, xi, 76–86 reactions US/abroad, 75–79 Smithsonian agreement and, xi, 79–80, 82, 87 Volcker travels/meetings and, 75–82 Folsom, Suzanne Rich, 189 Ford, Gerald, xi, 173 “four nos” economic policy (Connally), 70 Fowler, Joe Federal Reserve discount rate and, 54 Goldman Sachs and, 93, 93n special drawing rights (SDRs) and, 57, 65–66 Treasury and, x, 53–54, 57, 61 Volcker and, 93, 149, 150 France, x–xi, 48, 62, 64, 76, 84.

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

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

Liberalisation of the exchange rate over the years has proceeded in fits and starts, culminating in the adoption in 2014 of trading bands that were 2 percentage points either side of a daily central rate, the admission in 2015 of the Renminbi to the IMF’s Special Drawing Rights and, in the same year, the announcement that the Renminbi would be managed not only against the US dollar, but also against a new basket of currencies. China’s long-standing intention to have a fully convertible currency, and to have a flexible currency, however, does not necessarily mean that the authorities are getting any closer to having a floating exchange rate. Indeed, if anything, the activities of the People’s Bank suggest that a free float is not on the agenda anytime soon. Liberalisation of the capital account has a mixed scorecard. Inward and outward flows are controlled by the Qualified Foreign Institutional Investors, and Renminbi Qualified Institutional Investors quotas, and the Qualified Domestic Institutional Investors ceiling, respectively.

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If China wants to manage its exchange rate within certain limits, there has to be a stable relationship between the growth of domestic Renminbi assets due to credit creation and the level of foreign exchange reserves needed to ‘back’ the asset base of the financial system and keep the currency stable. Countries with floating exchange rates don’t have this problem, because the currency can fall without there being any reserves constraint. Consider China’s situation in the light of the experience of many countries during the Asian crisis just over two decades ago. In the run-up to that crisis, many Asian economies pegged their exchange rates to the US dollar, wanted to run their own monetary policy, and opened their capital accounts to large inflows of financial and physical capital.

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Larger trade deficits became common from the 1980s onwards, and the trend was underpinned as emerging markets also took up their positions as export-led economies from the 1990s. The US function in the global system necessarily changed. In the immediate post-war years, it mainly supplied US dollar liquidity via capital outflows. Since the advent of floating exchange rates, it has done so mainly via trade deficits, the counterpart of which are net inflows of capital from other countries, including China. The bottom line, however, is that US imports played a key role in greasing the world’s demand for US dollars and sustaining global economic growth.12 There is no question that the US dollar has survived as the premier global currency – contrary to repeated warnings – with its reputation for stability, safety and liquidity largely intact, but not wholly.

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

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

This episode led Sir Thomas to derive his eponymous maxim: ‘bad money drives out good’ (although it should be noted that he was far from the first person to understand the principle). It might be more accurately rendered as ‘bad money drives out good money at fixed exchange rates’, since at floating exchange rates the market will simply adjust: thus, one Zimbabwean dollar used to be worth considerably less then one World of Warcraft gold piece. If an economically illiterate dictator (in Zimbabwe, for example) had set the exchange rate between Zimbabwean dollars and gold pieces at one-to-one, then sane citizens would offload all their dollars for worthless trinkets as soon as possible while hanging on to their gold pieces.

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This market continued to grow long after the end of convertibility, incidentally, and by 1994 the ‘eurodollar contract’ that gave the purchaser the obligation to borrow $1 million in London in three months’ time was the most heavily traded financial instrument in the world (Mayer 1998b). The drain on the American reserves simply could not continue. In 1971, when Richard Nixon made the famous decision to end the convertibility of the US dollar into gold, we entered the world of fiat currency, floating exchange rates, computers, global telecommunications and global trading. In March 1973 the European countries that were still tied to the US dollar announced that they would sever the link, bringing the Bretton Woods system to an end. In 1973, then, one economic era ended and another began (Conway 2014b).

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He goes on to say: Monetary nationalism is simply incompatible with globalization. It has always been, even if this has only become apparent since the 1970s, when all the world’s governments rendered their currencies intrinsically worthless. I strongly agree with Steil’s view that the era of floating exchange rates between nation-state-based fiat currencies is a historical ‘blip’ that won’t be part of the future of money (Steil 2007a). I think a reactionary reset to digital gold is unlikely, though, because of the wider spectrum of alternatives that will be enabled through new technology. I hope to persuade you of this in Part III

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

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

Although exchange-rate regime harmonization among its member countries is not practiced in the CAN, and monetary integration is still not on their agenda, the fact is that Ecuador’s new monetary system adds to the already large variety of exchange-regimes in the Andean region. At present (mid-2002) we have floating exchange-rate regimes in Peru, Colombia, and República Bolivariana de Venezuela, a crawling peg system in Bolivia, and a foreign-currency regime in Ecuador. The fact that two trade partners (and neighboring countries) of Ecuador—Peru and Colombia—are in a floating exchange-rate regime while Ecuador is dollarized creates the potential for Ecuador to lose regional competitiveness, should these countries depreciate their currencies, an option unavailable to Ecuador.

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Under León Febres Cordero’s liberalizing government, which took office in August 1984, real GDP rebounded, growing 4.2 and 4.3 percent in 1984 and 1985, respectively, while inflation moderated to around 20 percent. In 1986, however, at the same time it began liberalizing commercial-bank interest rates, the government began a floating exchange rate for privatesector imports. Oil-export prices fell by more than half that year, how- LONGER-TERM ORIGINS OF ECUADOR’S “PREDOLLARIZATION” CRISIS 29 Table 2.1 Ecuador: Governments, 1979–2001 Period President Aug 79–May 81 May 81–Aug 84 Jaime Roldós Osvaldo Hurtado Aug 84–Aug 88 Aug 88–Aug 92 Aug 92–Aug 96 Aug 96–Feb 97 León Febres Cordero Rodrigo Borja Sixto Durán Ballén Abdalá Bucaram Feb 97–Aug 98 Fabián Alarcón Aug 98–Jan 00 Jan 00– Jamil Mahuad Gustavo Noboa Acceded to office through Election Vice President, assumed office Election Election Election Designation by Congress Election Vice President, assumed office Departure from office Accidental death Term concluded Term concluded Term concluded Term concluded Removed by Congress Term concluded Resigned ever, and in January 1987 the government suspended debt service to commercial banks.

Meltdown: How Greed and Corruption Shattered Our Financial System and How We Can Recover by Katrina Vanden Heuvel, William Greider

Alan Greenspan, Asian financial crisis, banking crisis, Bear Stearns, Bretton Woods, business cycle, buy and hold, capital controls, carried interest, central bank independence, centre right, collateralized debt obligation, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, declining real wages, deindustrialization, Exxon Valdez, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, fixed income, floating exchange rates, full employment, Glass-Steagall Act, green new deal, guns versus butter model, housing crisis, Howard Zinn, Hyman Minsky, income inequality, information asymmetry, It's morning again in America, John Meriwether, junk bonds, kremlinology, Long Term Capital Management, low interest rates, margin call, market bubble, market fundamentalism, McMansion, Michael Milken, Minsky moment, money market fund, mortgage debt, Naomi Klein, new economy, Nixon triggered the end of the Bretton Woods system, offshore financial centre, payday loans, pets.com, plutocrats, Ponzi scheme, price stability, pushing on a string, race to the bottom, Ralph Nader, rent control, Robert Shiller, Ronald Reagan, Savings and loan crisis, savings glut, sovereign wealth fund, structural adjustment programs, subprime mortgage crisis, The Great Moderation, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, wage slave, Washington Consensus, women in the workforce, working poor, Y2K

Addressing these issues should be an integral part of a new economic model, including requirements for more transparent reporting (including on hedge funds and other private investment vehicles), greater shareholder power and more restrictions on how executives are compensated. The system also favors debt. Closer oversight of credit standards is required. Similarly, the international flow of hot capital has upended theories about the system of floating exchange rates. The fact that America’s dollar stays high despite a huge trade deficit is not self-correcting. As Robert Wade of the London School of Economics argues, some intelligent combination of semi-pegged currencies and capital-flow restraint would go miles toward rebalancing the international economy.

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When in 1971 the Nixon administration was faced with the choice of increasing taxes to finance the Vietnam War or abandoning the Bretton Woods fixed-exchange-rate system that delivered pre-dictability and less risk in international financial relationships, it had no hesitation. The markets would do the job instead—and if other governments did not like the new risks, tough. For a long time, it looked as though private markets could step into the breach—recycling first petrodollars in the 1970s and then Asian dollars back into the global system. Floating exchange rates were volatile, but instruments like markets in future exchange rates emerged to manage new risks. There might be serious ruptures, like the 1980s Latin American debt crisis or the 1990s Asian financial crisis when private markets took fright, but basically governments could step away from global economic management.

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It was not just Lyndon B. Johnson who opened the way to the Republicans’ “Southern Strategy” and nearly 40 years of conservative dominance: It was also Nixon’s abandonment of government-led economic disciplines through his suspension of Bretton Woods fixed exchange rates. Obama should propose the end of floating exchange rates and argue for a system of managed rates between the euro, dollar and yen to bring back more pre-dictability into the system. The American, EU and Japanese governments would undertake, as in Bretton Woods I, whatever economic action is needed to maintain stability between their exchange rates.

The Marginal Revolutionaries: How Austrian Economists Fought the War of Ideas by Janek Wasserman

"World Economic Forum" Davos, Abraham Wald, Albert Einstein, American Legislative Exchange Council, anti-communist, battle of ideas, Berlin Wall, Bretton Woods, business cycle, collective bargaining, Corn Laws, correlation does not imply causation, creative destruction, David Ricardo: comparative advantage, different worldview, Donald Trump, experimental economics, Fall of the Berlin Wall, floating exchange rates, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, Gunnar Myrdal, housing crisis, Internet Archive, invisible hand, John von Neumann, Joseph Schumpeter, laissez-faire capitalism, liberal capitalism, low interest rates, market fundamentalism, mass immigration, means of production, Menlo Park, military-industrial complex, Mont Pelerin Society, New Journalism, New Urbanism, old-boy network, Paul Samuelson, Philip Mirowski, price mechanism, price stability, public intellectual, RAND corporation, random walk, rent control, road to serfdom, Robert Bork, rolodex, Ronald Coase, Ronald Reagan, Silicon Valley, Simon Kuznets, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, trade liberalization, union organizing, urban planning, Vilfredo Pareto, Washington Consensus, zero-sum game, éminence grise

Moving beyond the idea of limiting an already-existing state, neoliberals like the Austrians imagined how to create a state that protected economic freedom from government planners, international governing institutions, and democratic polities alike.20 The Austrians thus helped build postwar neoliberalism, which, in the name of freedom, prioritized the creation of a market-based society sustained by a strong state, the rule of law, and limited democratic involvement. They also contributed to the formation of a number of transnational epistemic communities that advocated trade liberalization, floating exchange rates, state deregulation, and privatization. Austrians played instrumental roles in these communities by persuading institutional actors, state and nonstate, to follow their prescriptions in times of uncertainty and crisis. Through GATT, the Bellagio Group, the RAND Corporation, and others, Haberler, Machlup, and Morgenstern proved adept at behind-the-scenes policy interventions that shaped economic liberalization and Cold War reasoning in the 1960s and 1970s.

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I can assure you I miss the presence of you [at the Group of Thirty, or G-30].”71 The G-30, a powerful consulting group formed in 1978 to address problems in the global economy, evolved out of a series of conferences on the international monetary system that “the Quartet” had orchestrated in the early 1960s. Over twenty-seven meetings, Machlup and his colleagues reshaped the Bretton Woods landscape, providing the intellectual foundation for the shift from the postwar gold exchange standard to floating exchange rates and financial liberalization. In coordinating elite networks of academics, government officials, and financial leaders, the Machlup Group proved as significant to the neoliberal order as Hayek and the MPS or Haberler and GATT.72 By the time Machlup convened the first conference of scholars at the RF-owned Villa Serbelloni on Lake Como in Bellagio, Italy, in 1963, the Bretton Woods monetary system faced mounting problems.

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Machlup served on the Group of Thirty as its intellectual lodestar until his retirement.76 Economic experts acknowledged the significance of the Bellagio Group at the time, yet they disagreed about its aims and underestimated its lasting effects. In 1965, Machlup’s friend Herbert Furth criticized it for its lack of clear prescriptions. Milton Friedman, an early advocate of floating exchange rates, also disapproved of the lack of policy direction. However, the Bellagio Group was the main site of international monetary discussions in the 1960s and 1970s, and its members transformed the terms of debate. They helped bring about the end of the Bretton Woods system by proposing viable alternative monetary regimes, including a floating currency system, which replaced the gold exchange standard after the United States went off gold in 1971.

Milton Friedman: A Biography by Lanny Ebenstein

Abraham Wald, affirmative action, Alan Greenspan, banking crisis, Berlin Wall, Bretton Woods, business cycle, classic study, Deng Xiaoping, Fall of the Berlin Wall, fiat currency, floating exchange rates, Francis Fukuyama: the end of history, full employment, Hernando de Soto, hiring and firing, inflation targeting, invisible hand, Joseph Schumpeter, Kenneth Arrow, Lao Tzu, liquidity trap, means of production, Modern Monetary Theory, Mont Pelerin Society, Myron Scholes, Pareto efficiency, Paul Samuelson, Phillips curve, Ponzi scheme, price stability, public intellectual, rent control, road to serfdom, Robert Bork, Robert Solow, Ronald Coase, Ronald Reagan, Sam Peltzman, school choice, school vouchers, secular stagnation, Simon Kuznets, stem cell, The Chicago School, 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, Thorstein Veblen, zero-sum game

Yet few industries rely so heavily on special government favors.6 Changes in monetary growth affect the economy only slowly—it may be six or twelve or eighteen months or even more before their effects are manifest.7 Inflation is always and everywhere a monetary phenomenon.8 From the 1940s to 2006, Friedman put forward a bevy of public policy proposals, many of which have at least to some extent been implemented or considered—this can be said of very few individuals. Daniel Patrick Moynihan remarked in 1971: “If you were to ask me to name the most creative social-political thinker of our age I would not hesitate to say Milton Friedman.”9 Starting in the 1940s, Friedman put forward the idea of floating exchange rates, which were implemented in the United States in the early 1970s. In the 1950s, he developed his idea of a fixed expansion of the money supply each year. Although this policy proposal had only mixed success, his general emphasis that the way to limit inflation is to limit increases in the supply of money became the accepted opinion in the late 1970s to early 1980s.

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After the 1968 election but before Nixon was inaugurated, Friedman met with him in New York, giving the president-elect a memorandum recommending flexible exchange rates, which Friedman had long advocated. He wrote in Newsweek the year before: “We should set the dollar free and let its price in terms of other currencies be determined by private dealings. Such a system of floating exchange rates would eliminate the balance of payments problem... and informal exchange controls, and [would allow the ability] to move unilaterally toward freer trade.”2 A negative balance of payments, or trade deficit, was much more of a problem in a system of fixed exchange rates than in one of market-determined exchange rates, because under the latter system, there is no loss of national government financial reserves when there is a trade deficit in order to maintain a currency’s value.

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That would be much higher because Italy has been accumulating so much debt. In the past, Italy has inflated away its debt. The virtue of the euro is that Italy can’t do it alone. A tight ECB policy wouldn’t permit that to happen again. In this sense, the euro is good for Europe. But only if there is flexibility all around. The problem is that, in a world of floating exchange rates, as Italy was before the euro, if one country is subjected to a shock which requires it to cut wages, it cannot do so with a modern kind of control and regulation system. It is much easier to do it by letting the exchange rate change. Only one price has to change, instead of many. But now, in the euro, that option is taken away.

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

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

Finally, in 1973, the IMF declared the Bretton Woods system dead, officially ended the role of gold in international finance and left currency values to fluctuate against one another at whatever level governments or the markets desired. One currency era had ended and another had now begun, but the currency war was far from over. The age of floating exchange rates, beginning in 1973, combined with the demise of the dollar link to gold put a temporary end to the devaluation dramas that had occupied international monetary affairs since the 1920s. No longer would central bankers and finance ministries anguish over breaking a parity or abandoning gold.

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In the 1950s and 1960s, it had provided bridge loans to countries suffering temporary balance of payments difficulties to allow them to maintain their currency peg to the dollar. In the 1980s and 1990s it had assisted developing economies suffering foreign exchange crises by providing finance conditioned upon austerity measures designed to protect foreign bankers and bondholders. Yet with the elimination of gold, the rise of floating exchange rates and the piling up of huge surpluses by developing countries, the IMF entered the twenty-first century with no discernable mission. Suddenly the G20 breathed new life into the IMF by positioning it as a kind of Bank of the G20 or proto–world central bank. Its ambitious leader at the time, Dominique Strauss-Kahn, could not have been more pleased, and he eagerly set about as the global referee for whatever guidelines the G20 might set.

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bank regulation Board of Governors on classical gold standard in creating a new gold-backed system creation of current assets of Dodd-Frank reform legislation of 2010 and and dollar price stability gold and money supply during 1930s gold and money supply in 2011 handling of its own balance sheet and IMF IOUs to the Treasury as lender of last resort and management of unemployment mandates of mercantilism compared to and monetarism quantitative easing program Financial Crisis Inquiry Commission financial economics financial war game financial warfare strategy First National Bank of New York First National City Bank of New York fixed exchange rates floating exchange rates, 1970s Fort Knox, Kentucky Foundations of Economic Analysis (Samuelson) fractal dimension framing, in economics France currency collapse in 1920s and European sovereign debt crisis of 2010 gold reserves and gold standard invasion of Germany’s Ruhr Valley Paris Peace Conference of 1919 Treaty of Versailles and Tripartite Agreement of 1936 withdrawal from London Gold Pool free-floating currency free trade barriers Friedman, Milton Gallarotti, Giulio M.

Triumph of the Optimists: 101 Years of Global Investment Returns by Elroy Dimson, Paul Marsh, Mike Staunton

asset allocation, banking crisis, Berlin Wall, Black Monday: stock market crash in 1987, book value, Bretton Woods, British Empire, buy and hold, capital asset pricing model, capital controls, central bank independence, classic study, colonial rule, corporate governance, correlation coefficient, cuban missile crisis, currency risk, discounted cash flows, diversification, diversified portfolio, dividend-yielding stocks, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, European colonialism, fixed income, floating exchange rates, German hyperinflation, index fund, information asymmetry, joint-stock company, junk bonds, negative equity, new economy, oil shock, passive investing, purchasing power parity, random walk, risk free rate, risk tolerance, risk/return, selection bias, shareholder value, Sharpe ratio, stocks for the long run, survivorship bias, Tax Reform Act of 1986, technology bubble, transaction costs, yield curve

After some last-ditch attempts to set new fixed rates, the world turned in 1973 to the floating exchange rate system that persists to the present day. There were thus four exchange rate regimes over the twentieth century. During 1900–14 the gold standard was in effect. After that, apart from a brief return to the Gold Exchange Standard, the period 1914–45 contained the two world wars. The Bretton Woods fixed-rate system then operated from 1946–71. Finally, the period since has been one of floating exchange rates. Currencies went through an adjustment to the Bretton Woods system until 1949. It is therefore helpful to start by dividing our period into two: 1900–49 and 1950–2000.

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Given the potential measurement error in inflation indexes, and the fact that real exchange rates involve a ratio of two different price index series, it is all the more striking that, with the exception of South Africa, all real exchange rates appreciate or depreciate annually by no more than a fraction of one percentage point. 7.5 Volatility of exchange rates At the time floating exchange rates were adopted in 1973, it was asserted that exchange rates would become free to adjust to international differences in inflation. Countries with price levels that were rising fast would see their currencies depreciate, and countries with relatively low price inflation would see their currencies appreciate.

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., 70, 141, 142, 143, 146, 147, 155, 158, 159, 160, 162, 192, 218 Fat tails, 56, 204 Financial distress, 87, 218, 219 Financial management, 211–9 Financial reporting, 218–9 Financial Times (FT), 23, 24, 36, 37, 223, 299 335 Financial Times-Stock Exchange (FTSE), xi, 28, 38, 115, 133, 134, 143, 299 Finland, 12, 20, 28, 29, 121 Finn, F.J., 229 Firer, C., xii, 42, 279 First World War, 37, 44, 47, 69, 75, 76, 93, 94, 116, 122, 123, 153 Fisher, I., 38, 69, 70 Fisher, L., 38 Fisher effect, 69–70 Floating exchange rates, 94, 98 Foreign bonds, 16–7 Foidl, N., 254 France, 249–53 see also cross-country comparisons Frankfurt, 19 Fraser, P., 188 Free float, 13, 39 French, K.R., xi, xii, 140, 141, 142, 143, 146, 155, 158, 159, 160, 162, 192, 218 Frennberg, P., xii, 289 FT Index, 36, 37 Fujino, S., 269 Function of bond markets, 18–9 Function of stock markets, 18–9 Fund managment, 9, 144, 205–9 Gallais-Hamonno, G., xii, 249 GDP, see gross domestic product Gemis, M., 234 General Electric Corp, 18, 23, 28, 32 Geometric mean, 38, 51, 59–61, 71, 82, 89, 92, 110, 152, 154, 163–75, 181–94, 197, 198, 202, 203, 214, 219, 223 Germany, 254–8 see also cross-country comparisons Giammarino, R., 239 Gielen, G., 254 Glassman, J.

The Making of Global Capitalism by Leo Panitch, Sam Gindin

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

What was essentially happening was a transition from the fixed exchange rates designed to foster capitalist reconstruction under the Marshall Plan and the European Payments Union, to the establishment of the legal, institutional and market infrastructure that would sustain capitalist globalization amid floating exchange rates anchored by a US dollar– Treasury bill standard. As President Ford’s Treasury secretary, William Simon, put it when the IMF finally ratified the new monetary order (five years after the fact): This is of major interest to the United States, not only because gold is an inherently unstable basis for the monetary system but because it is inevitably linked to a fixed exchange rate system.

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As Paul Volcker noted, “traders and investors were reminded that the United States, after all, was still a relative bastion of strength and stability and a safe haven in troubled times.”46 The lead taken by the Treasury and Fed in preventing bank failures during this period from turning into an international financial conflagration also goes very far to explaining why, despite all the initial fears that the move to floating exchange rates would undermine the financing of world trade, an internal Treasury memorandum was able to note in 1976 that “businessmen have found that the difficulties of operating under floating rates were not as great as many of them had anticipated.”47 The pragmatic, tentative, and uncertain steps the US had taken in approaching the decision to go off gold were replicated in successive rounds of G10 and IMF meetings to attempt to revive a fixed exchange rate system.

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When Volcker proposed during the IMF’s Interim Committee negotiations in 1972 that an “indicator system” be adopted, “whereby a country’s deviation from an established norm of international reserves would trigger application of ‘graduated pressures’ on the offending country to impel it to take the necessary steps towards adjustment, European participants objected to the automaticity implied in the plan . . . [They] were unwilling to accept automatic interference in their own policies.”48 Thus, when in early 1973 the US prevailed on the Japanese and European states to embrace a system of floating exchange rates, this decision, as Volcker put it, “was not taken out of any general conviction that it was a preferred system. It was simply a last resort when, by general assent, the effort to maintain par values or central rates seemed too difficult in the face of speculative movements of capital across the world’s exchanges.”49 Just as Volcker also explains the US imposition of an import surcharge in August 1971 as a bargaining counter to secure currency revaluation and agricultural tariff reductions from the Europeans (a tactic that would again and again be deployed as part and parcel of the US push for “free trade”),50 so were the Europeans’ calls for capital controls mainly tactical.

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

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

There can be no rational ground for determining the outcome of these negotiations in international organizations, as each country's government attempts to pursue its own special groups' interest and will do whatever it takes to do just that. After 1971, the world predominantly moved to having an independent monetary policy and free capital flows, but floating exchange rates between currencies. This arrangement has the advantage of allowing Keynesian economists to play with their favorite tools for “managing” economies while also keeping international financial institutions and large capital owners happy. It is also a huge boon for large financial institutions which have generated a foreign exchange market worth trillions of dollars a day, where currencies and their futures are trading.

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Firms that have spent decades working on a competitive advantage could see it wiped out in 15 minutes of unpredictable foreign exchange volatility. This usually gets blamed on free trade, and economists and politicians likewise will use it as an excuse for implementing popular but destructive protectionist trade policies. With free capital flows and free trade built on a shaky foundation of floating exchange rate quicksand, a much higher percentage of the country's businesses and professionals need to concern themselves with the movements of the currency. Every business needs to dedicate resources and manpower toward studying an issue of extreme importance over which they have no control. More and more people work in speculating on the actions of central banks, national governments, and currency movement.

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Unfortunately, however, the people in charge of the current monetary system have a vested interest in it continuing, and have thus preferred to try to find ways to manage it, and to find ever‐more‐creative ways of vilifying and dismissing the gold standard. This is entirely understandable given their jobs depend on a government having access to a printing press to reward them. The combination of floating exchange rates and Keynesian ideology has given our world the entirely modern phenomenon of currency wars: because Keynesian analysis says that increasing exports leads to an increase in GDP, and GDP is the holy grail of economic well‐being, it thus follows, in the mind of Keynesians, that anything that boosts exports is good.

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

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

Just as the Greek government was incapable of preventing a spike in borrowing costs, countries that fix their exchange rates sacrifice control of their interest rates. From an MMT perspective, “this explains the very high interest rates paid by governments with perceived default risk in fixed exchange rate regimes, in contrast to the ease a nation such as Japan has in keeping rates at 0 in a floating exchange rate regime, despite deficits that would undermine a fixed exchange rate regime.”36 The lesson is simple. Currency regimes matter. The simple crowding-out story was built for a world that no longer exists. Yet conventional economic theory treats the sequence of falling dominoes as an inevitable consequence of deficit spending.

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It is best to imagine monetary sovereignty as a continuum with some nations having a very high degree of sovereignty and others having less, little, or practically none. Countries with the highest degree of maximum sovereignty are those that spend, tax, and borrow in their own nonconvertible (floating exchange rate) currencies. Nonconvertible means that the state does not promise to convert the domestic currency into gold or foreign currency at a fixed price. Under this definition, the US, the UK, Japan, Australia, Canada, and even China are monetary sovereigns. In contrast, countries like Ecuador and Panama lack monetary sovereignty because their monetary systems are designed exclusively around the US dollar, a currency their governments cannot issue.

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Randall Wray, “Deficits, Inflation, and Monetary Policy,” Journal of Post Keynesian Economics 19, no. 4 (Summer 1997), 543. 31. The yield curve is a curve (or graph) that shows the interest rates on different debt instruments across a range of maturities. 32. Recall from the Introduction that we have defined monetary sovereignty to include countries that tax, borrow, and spend in a nontethered, that is, floating exchange rate currency that can only be issued by the government or its fiscal agents. 33. Today, it is standard operating procedure to coordinate deficit spending with bond sales. It doesn’t have to be that way. Congress could always rewrite its operating procedures to change this practice, especially now that the Federal Reserve no longer needs access to government bonds to hit its short-term interest rate target.

An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy by Marc Levinson

affirmative action, airline deregulation, Alan Greenspan, banking crisis, Big bang: deregulation of the City of London, Boycotts of Israel, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, car-free, Carmen Reinhart, central bank independence, centre right, clean water, deindustrialization, endogenous growth, falling living standards, financial deregulation, flag carrier, floating exchange rates, full employment, George Gilder, Gini coefficient, global supply chain, Great Leap Forward, guns versus butter model, high-speed rail, income inequality, income per capita, indoor plumbing, informal economy, intermodal, inverted yield curve, invisible hand, It's morning again in America, Kenneth Rogoff, knowledge economy, late capitalism, Les Trente Glorieuses, linear programming, low interest rates, manufacturing employment, Multi Fibre Arrangement, new economy, Nixon shock, Nixon triggered the end of the Bretton Woods system, North Sea oil, oil shock, Paul Samuelson, pension reform, Phillips curve, price stability, purchasing power parity, refrigerator car, Right to Buy, rising living standards, Robert Gordon, rolodex, Ronald Coase, Ronald Reagan, Simon Kuznets, statistical model, strikebreaker, structural adjustment programs, The Rise and Fall of American Growth, Thomas Malthus, total factor productivity, unorthodox policies, upwardly mobile, War on Poverty, Washington Consensus, Winter of Discontent, Wolfgang Streeck, women in the workforce, working-age population, yield curve, Yom Kippur War, zero-sum game

Yoshimitsu Imuta, “Transition to a Floating Exchange Rate,” in Mikiyo Sumiya, ed., A History of Japanese Trade and Industry Policy (Oxford: Oxford University Press, 2000), 528; Sueo Sekiguchi, “Japan: A Plethora of Programs,” in Hugh Patrick, ed., Pacific Basin Industries in Distress (New York: Columbia University Press, 1990), 437. 15. William Diebold Jr., Industrial Policy as an International Issue (New York: McGraw-Hill, 1980), 162; Japan Automobile Manufacturers Association, Motor Vehicle Statistics of Japan 2014, 16, 32. 16. Imuta, “Transition to a Floating Exchange Rate,” 527. Data on Japanese R&D spending are from Steven Englander and Axel Mittelstädt, “Total Factor Productivity: Macroeconomic and Structural Aspects of the Slowdown,” OECD Economic Survey 10 (1988): 36. 17.

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If exchange rates moved the wrong way, the loan repayments could be worth less than the banks’ dollar obligations to their depositors. And should an oil sheikhdom suddenly demand its dollars back, a bank that had used them to make five-year loans in British pounds or Dutch guilders could find itself desperate for cash. This was a frightening prospect, for in the new world of global finance and floating exchange rates, banks were more intimately connected than ever before. They not only lent one another money and joined forces to make loans, but also traded currencies to meet their customers’ needs. In many cases, those trades involved betting on an exchange rate at some future date. For example, a Spanish textile company expecting to receive one million West German deutsche marks in six months could lock in the value of that sum in Spanish pesetas, with its bank assuming the risk if the exchange rate on that date turned out to be different from what it anticipated.

How We Got Here: A Slightly Irreverent History of Technology and Markets by Andy Kessler

Albert Einstein, Andy Kessler, animal electricity, automated trading system, bank run, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Bletchley Park, Bob Noyce, Bretton Woods, British Empire, buttonwood tree, Charles Babbage, Claude Shannon: information theory, Corn Laws, cotton gin, Dennis Ritchie, Douglas Engelbart, Edward Lloyd's coffeehouse, Fairchild Semiconductor, fiat currency, fixed income, floating exchange rates, flying shuttle, Fractional reserve banking, full employment, GPS: selective availability, Grace Hopper, invention of the steam engine, invention of the telephone, invisible hand, Isaac Newton, Jacquard loom, James Hargreaves, James Watt: steam engine, John von Neumann, joint-stock company, joint-stock limited liability company, Joseph-Marie Jacquard, Ken Thompson, Kickstarter, Leonard Kleinrock, Marc Andreessen, Mary Meeker, Maui Hawaii, Menlo Park, Metcalfe's law, Metcalfe’s law, military-industrial complex, Mitch Kapor, Multics, packet switching, pneumatic tube, price mechanism, probability theory / Blaise Pascal / Pierre de Fermat, profit motive, proprietary trading, railway mania, RAND corporation, Robert Metcalfe, Silicon Valley, Small Order Execution System, South Sea Bubble, spice trade, spinning jenny, Steve Jobs, Suez canal 1869, supply-chain management, supply-chain management software, systems thinking, three-martini lunch, trade route, transatlantic slave trade, tulip mania, Turing machine, Turing test, undersea cable, UUNET, Wayback Machine, William Shockley: the traitorous eight

If wages had been held relatively constant and the exchange rate of money into gold allowed to float (like today), then workers would not have been as disaffected. In an uncompetitive country, instead of wages going down, the value of the currency would drop, import prices rise, and the blame laid on the foreigners for increasing prices. The flip side would have worked well for England. With a rising currency from a floating exchange rate, products like textiles would have gotten cheaper in both England and foreign markets, but not quite as cheap. So what? The market would still grow. National wealth would be created from a rising currency and money supply could grow at its natural Real Bills rate, rather than be affected by too much gold.

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A guy named Churchill put England back on the gold in 1925, at the pre-War exchange rate. Heck, it was still Isaac Newton’s rate. Big mistake. It overpriced the pound, which got dumped, and gold quickly flowed out of the country. Banks had 166 HOW WE GOT HERE restricted money supply and England went into a nasty recession, a loud advertisement for floating exchange rates. By 1928, the rest of the world went back on the gold standard, but not for long. Following the 1929 stock market crash, 1930 saw the introduction of the protectionist Corn Law-esque “Smoot-Hawley” tariffs (some say the market predicted the tariffs, which were debated in 1929.) Trade dried up as most other countries put up protective trade tariffs and increased taxes to make up for lost duties.

Naked Economics: Undressing the Dismal Science (Fully Revised and Updated) by Charles Wheelan

affirmative action, Alan Greenspan, Albert Einstein, Andrei Shleifer, barriers to entry, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, Boeing 747, Bretton Woods, business cycle, buy and hold, capital controls, carbon tax, Cass Sunstein, central bank independence, classic study, clean water, collapse of Lehman Brothers, congestion charging, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency risk, Daniel Kahneman / Amos Tversky, David Brooks, demographic transition, diversified portfolio, Doha Development Round, Exxon Valdez, financial innovation, fixed income, floating exchange rates, George Akerlof, Gini coefficient, Gordon Gekko, Great Leap Forward, greed is good, happiness index / gross national happiness, Hernando de Soto, income inequality, index fund, interest rate swap, invisible hand, job automation, John Markoff, Joseph Schumpeter, junk bonds, Kenneth Rogoff, libertarian paternalism, low interest rates, low skilled workers, Malacca Straits, managed futures, market bubble, microcredit, money market fund, money: store of value / unit of account / medium of exchange, Network effects, new economy, open economy, presumed consent, price discrimination, price stability, principal–agent problem, profit maximization, profit motive, purchasing power parity, race to the bottom, RAND corporation, random walk, rent control, Richard Thaler, rising living standards, Robert Gordon, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Sam Peltzman, school vouchers, seminal paper, Silicon Valley, Silicon Valley startup, South China Sea, Steve Jobs, tech worker, The Market for Lemons, the rule of 72, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, transaction costs, transcontinental railway, trickle-down economics, urban sprawl, Washington Consensus, Yogi Berra, young professional, zero-sum game

Foreign governments could redeem gold for dollars on Friday—but not on Monday. Since then, the United States (and all other industrialized nations) have operated with “fiat money,” which is a fancy way of saying that those dollars are just paper. Floating exchange rates. The gold standard fixes currencies against one another; floating rates allow them to fluctuate as economic conditions dictate, even minute by minute. Most developed economies have floating exchange rates; currencies are traded on foreign exchange markets, just like a stock exchange or eBay. At any given time, the exchange rate between the dollar and yen reflects the price at which parties are willing to voluntarily trade one for the other—just like the market price of anything else.

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At any given time, the exchange rate between the dollar and yen reflects the price at which parties are willing to voluntarily trade one for the other—just like the market price of anything else. When Toyota makes loads of dollars selling cars in the United States, they trade them for yen with some party that is looking to do the opposite. (Or Toyota can use the dollars to pay American workers, make investments inside the United States, or buy American inputs.) With floating exchange rates, governments have no obligation to maintain a certain value of their currency, as they do under the gold standard. The primary drawback of this system is that currency fluctuations create an added layer of uncertainty for firms doing international business. Ford may make huge profits in Europe only to lose money in the foreign exchange markets when it tries to bring the euros back home.

Global Governance and Financial Crises by Meghnad Desai, Yahia Said

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

The fierce competition between banks, in search of high volumes of international credit to make up for lost domestic credit with the growth slowdown in OECD countries, had made the supply of funds highly elastic to demand changes. Subsequently the recurrent problem of the scarcity of reserves, which had motivated the creation of the SDR, was no longer relevant. Moreover, as far as adjustment was concerned, floating exchange rates had resolved in principle the conflict between internal and external balance and jettisoned the need of policy cooperation. The monetarist counterrevolution was at high tide at the time. It offered an ideological background to the rebound of monetary nationalism according to which “each country should put its own house in order.”

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International capital markets fed the world with a fast-increasing amount of reserves, but they proved unable to regulate the distribution of borrowed reserves among countries. Sovereign indebtedness was not properly assessed, entailing abrupt disruptions between excessive tolerance to borrowing and acute credit crunches. Besides, equilibrium exchange rates were elusive. Huge gyrations of floating exchange rates and foreign exchange crises, which devastated pegged regimes, convinced most governments that exchange rates were too important to be left to the markets. But individual governments were powerless against speculative attacks while reduced to their own means. The malfunctioning of the market-led system in both exchange rate adjustment and solvency control gave content to the Fund’s missions restated in Jamaica.

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

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

The Bretton Woods deal included a gold window, where dollar claims could be converted, but the United States lacked the gold. So, over a weekend, with no consultations, the United States blew up the Bretton Woods system, closing the gold window. This kicked off the Great Inflation, and it ushered in an era of floating exchange rates that we are still living with today. OPEC, an attempt by oil producers to use cartel tactics to raise the price of their commodity (priced in dollars) in nominal terms to make up for the fall in the real value of the dollar, was a key side effect. The OPEC price hikes stuck, despite the fact that many countries could not afford them.

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Once interest rates were deregulated, how banks funded themselves in the market and, especially, what degree of mismatch between loans and funding they were willing to risk, became an important way of making higher profits. Treasury became a “profit center,” not a utility function, in the largest banks. Trading income was also scarce before the collapse of Bretton Woods created a world of floating exchange rates. The value of any currency vs. any other currency became a second-to-second market determination. Interbank trading of foreign exchange became one of the largest markets in the world, and remains such, with trillions turning over every day. Again, a new profit center for the largest banks was born.

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

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

The IMF’s mission has repeatedly morphed over the decades since Bretton Woods. In the 1950s and 1960s, it was the caretaker of the fixed-exchange-rate gold standard and a swing lender to countries experiencing balance-of-payments difficulties. In the 1970s, it was a forum for the transition from the gold standard to floating exchange rates, engaging in massive sales of gold at U.S. insistence to help suppress the price. In the 1980s and 1990s, the IMF was like a doctor who made house calls, dispensing bad medicine in the form of incompetent advice to emerging economies. This role ended abruptly with blood in the streets of Jakarta and Seoul and scores killed as a result of the IMF’s mishandling of the 1997–98 global financial crisis.

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The dollar was devalued again on February 12, 1973, by an additional 10 percent so that gold’s new official price was $42.22 per ounce; this is still gold’s official price today for certain central banks, for the U.S. Treasury, and for IMF accounting purposes, although it bears no relationship to the much higher market price. During this period, 1971–73, the international monetary system moved haltingly toward a floating-exchange-rate regime, which still prevails today. In 1972 the IMF convened the Committee of Twenty, C-20, consisting of the twenty member countries represented on its executive board, to consider the reform of the international monetary system. The C-20 issued a report in June 1974, the “Outline of Reform, that provided guidelines for the new floating-rate system and recommended that the SDR be converted from a gold-backed reserve asset to one referencing a basket of paper currencies.

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Treasury’s view of, 60–62 virtual targets, 46 Wall Street’s cybercapabilities, 54 war games, 58–59 fine art, as investment, 299 fiscal dominance, 287–88 Fiscal Stability Treaty (EU), 135–36 Fisher, Irving, 168, 246–47 Fisker, 123 Fitzgerald, F. Scott, 252 flash crash, 63, 270, 296–97 floating-exchange-rate regime, 235 Fonda, Jane, 1 food price inflation, 3 food stamps, 246 Ford, Gerald, 271–72 forward guidance, 83, 86, 185–88 forwards, gold, 275, 285–86 France, 235, 236 Franco-Prussian War, 115 Frank, Barney, 204, 205 Frankenreich, 112, 113–14 Freakonomics (Levitt and Dubner), 32–33 Freddie Mac, 248 Friedman, Milton, 84, 168, 263 Friedman, Tom, 256 Froman, Michael, 195, 196, 202–3 futures, gold, 275, 284–86 G7, 139, 140, 147 G9, 139–40 G20, 140, 147, 202, 203 Galloni, Alessandra, 131–32 Gang of Ten, 138, 139 Geithner, Timothy, 195, 196, 203, 244 General Electric, 255 General Theory of Employment, Interest and Money, The (Keynes), 246–47 Genoa Conference, 1922, 221–22 Gensler, Gary, 195, 196 geopolitics, 12–13 Germany, 125, 127, 136–37, 281 gold repatriation by, 231–32 GIIPS (Greece, Ireland, Italy, Portugal, Spain), 140, 142–46 Glass-Steagall, repeal of, 196, 253, 296 gold, 215–42 BIS transactions, 276–78 central bank acquisition of, since 2010, 225–30 central bank manipulation of, 271–81 Charlemagne’s switch from gold to silver standard, 114 Chávez’s repatriation of, 40, 231 China’s accumulation of, 12, 61, 226–30, 282–84, 296 classical gold standard, 1870–1914, 176, 234–35 constructing new gold standard, 237–42 contract money system, role in, 169–71 contracts based on, risks associated with, 217–18 disorderly price movements, implications of, 295–96 dollar convertibility abandoned, in 1971, 1, 2, 5, 209, 220, 235, 285 dollar standard, 234–35 drop from 1980 highs, 2 forwards, 275, 285–86 futures, 275, 284–86 Germany’s repatriation of, 231–32 gold exchange standard, 221–22, 224, 234–35 gold-to-GDP ratios, 157, 279–82 Great Depression caused by gold myth, 221–24 IMF sales of, 235–36, 277 as investment portfolio recommendation, 298–99 Iranian trading of, in financial war with U.S., 55–56 lease arrangements, 275, 284 market panics caused by gold myth, 224 monetary policy, and classical gold standard, 176 monetary system, role in, 217, 220–25 as M-Subzero, 280, 283–84 nature of, 218–20 as numeraire, 219–20 price rise of, 1977 to 1980, 1 price rise of, 2006 to 2011, 3 private market demand for, 230 quantity insufficient to support world trade and finance myth, 220 repatriation of, 40, 231–34 reserves, rebalancing of, 279–84 return-to-gold-standard scenario, 293–94 as risk-free asset, 219 Russia’s accumulation of, 12, 229–30 shadow gold standard, 236 storage of, at Federal Reserve and Bank of England vaults, 230–31 swaps, 275 Switzerland’s repatriation of, 232–33 U.S. attitude to, shift in, 235, 236 Gold and Foreign Exchange Committee, 272–73 Goldberg, Jonah, 294 Gold Bloc devaluations, 222 Goldman Sachs, 32–33, 128, 139, 140, 205, 206, 262 gold-to-GDP ratios, 157, 279–82 Goodhardt, Charles, 71, 72, 87, 188 Goodhardt’s Law, 71, 87 Gotthard Base Tunnel, 123 government debt repayment, impact of deflation on, 9, 258 government program dependency, in U.S., 246 Graeber, David, 255 Grant, James, 177 Great Depression, 84, 85, 125–26, 155, 221–22, 223–24, 234, 244, 245 Greece, 128, 133–34, 142, 153, 200, 290 greed, 25 Greenspan, Alan, 76, 77, 122 gross domestic product (GDP) of China, 93, 96 components of, 84, 96 debt-to-GDP ratio, 9, 159–60, 173, 258–59, 261 of U.S., 96, 244 Gulf Cooperation Council (GCC), 12, 150, 152–57 monetary integration process and, 153–57 as quasi-currency union, 153 Hague Congress, 116 Hall, Robert, 86–87 Hamilton, Alexander, 120–21 Han Dynasty, 90 Hanke, Steve, 80 Haydn, Michael, 37 Hayek, Friedrich, 70–71, 72, 87 hedge fund covert operations, 47–51 Hemingway, Ernest, 256 Herzegovina, 136 Himes, James, 284 Holocaust, 115 Holy Roman Empire, 114, 115 Hong Ziuquan, 91 Hoover, Herbert, 85 housing market bubbles in, 75, 76–77, 248 collapse of, 2007, 248, 296 rise in, since 2009, 291 wealth effect and, 72, 73 HSBC, 227 Hu Jintao, 151–52, 202 Hunt, Lacy H., 74, 79 Hunt brothers, 217 Hyundai, 82 ImClone Systems, 25 income inequality, in China, 106 India, 12, 139, 151.

The Vanishing Middle Class: Prejudice and Power in a Dual Economy by Peter Temin

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, affirmative action, Affordable Care Act / Obamacare, air traffic controllers' union, American Legislative Exchange Council, American Society of Civil Engineers: Report Card, anti-communist, Bernie Sanders, Branko Milanovic, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carried interest, clean water, corporate raider, Corrections Corporation of America, crack epidemic, deindustrialization, desegregation, Donald Trump, driverless car, Edward Glaeser, Ferguson, Missouri, financial innovation, financial intermediation, floating exchange rates, full employment, income inequality, independent contractor, intangible asset, invisible hand, longitudinal study, low skilled workers, low-wage service sector, mandatory minimum, manufacturing employment, Mark Zuckerberg, mass immigration, mass incarceration, means of production, mortgage debt, Network effects, New Urbanism, Nixon shock, Nixon triggered the end of the Bretton Woods system, obamacare, offshore financial centre, oil shock, plutocrats, Powell Memorandum, price stability, race to the bottom, road to serfdom, Robert Solow, Ronald Reagan, Savings and loan crisis, secular stagnation, Silicon Valley, Simon Kuznets, the scientific method, War on Poverty, Washington Consensus, white flight, working poor

He won election to the presidency through a Southern Strategy that appealed to Southern racism and opposition to the Civil Rights Movement. He abandoned Johnson’s War on Poverty and declared a War on Drugs in 1971. He also abandoned the fixed exchange rate of the Bretton Woods system to deal with the strain on the dollar exerted by the expanding war in Vietnam.2 Nixon switched the United States to a floating exchange rate, transferring responsibility for the domestic economy from the federal government, which controls fiscal policy, to the Federal Reserve System, which controls monetary policy. The Fed had been securing the exchange rate for the previous quarter century, and it had to learn how to fulfill its new role.

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Bradley, 116–117, 129, 142 Mincer, Jacob, 165 Minimum wage, 62, 72, 79 Minow, Martha, 111, 134 Mobility, 7, 32, 46, 133, 154, 159 Mortality, 33, 39–40, 58, 126, 154 Mortgages bubbles and, 154–155 discrimination and, 117 Fannie Mae and, 138 FIRE sector and, 80 forgiving, 156 Freddy Mac and, 138 Great Migration and, 34 HAMP and, 139–140 hedge funds and, 179n5 housing and, 34, 44–45, 69, 80, 117, 137–140, 154, 156, 179n5 Investment Theory of Politics and, 69 low-wage sector and, 34 race and, 117 reform for, 156 restricted access to, 117 security and, 138 transition and, 44–45 Mundell-Fleming model, 169n3 Murray, Charles, 132 Mutual funds, 31 NAACP, 116–117 National defense, 17–18, 93 National Federation of Independent Business, 97 National Review magazine, 51 National Rifle Association, 97 Native Americans, xi, 84 Neoliberalism, 17, 21–22 New Deal, 21, 52, 65, 80–81, 101, 141 New Federalism, 21–22, 35, 44, 83, 103, 110 New Jim Crow, 27, 49, 104, 154 New Jim Crow, The (Alexander), xvi Newman, Oscar, 131–132 New Yorker magazine, 83, 135 New York Times newspaper, 125 Nineteenth Amendment, 56, 58, 67 Nixon, Richard M. depletion allowance and, 81 floating exchange rate and, 15 Ford and, 168n2 Johnson and, 15, 27, 168n2 Kennedy and, 81 mass incarceration and, 104, 109 military draft and, 16 New Federalism and, 21–22, 35, 44, 83, 103, 110 Powell and, 17, 27, 117 Project Independence and, 16, 71, 143 public education and, 117 Rehnquist and, 95, 142 Roberts and, 142 segregation and, 27 Southern Strategy and, 15, 27, 35, 81, 117, 142 War on Drugs and, xv–xvi, 15, 37–38, 53, 55, 104, 106, 110, 132 Nixon Shock, 169n3 Nobel Prize, 7, 49, 124, 162, 164 North cities and, 132–134 concepts of government and, 88, 94 FTE (finance, technology, and electronics) sector and, 20 Great Migration and, 20, 27–28 (see also Great Migration) Investment Theory of Politics and, 62–66 low-wage sector and, 27–29, 32, 34 manufacturing jobs in, 20 mass incarceration and, 104 public education and, 119, 125 race and, 51–53, 55, 59 unions and, 20 North American Free Trade Agreement (NAFTA), 55 Northeast Corridor, 134 Norway, 149 Obama, Barack, 25, 38, 81–84, 91, 96, 127, 175n12 Occupational Safety and Health Administration (OSHA), 90 Offshoring, 28, 32 Oil, 80–81, 180n13 depletion allowance of, 81 Koch brothers and, 17–19, 83–85, 92, 97, 110–111, 158–159, 169n12, 175n17 OPEC and, 16, 143 Project Independence and, 16, 71, 143 shock of, 16 Oligarchy, 65, 72, 87–89, 93–97, 115, 159 One-percenters CEO salaries and, 24 Reagan and, 22–23 tax cuts for, 22–23 very rich and, 3, 9–12, 22–24, 77–85, 92, 96, 155, 170n28 Organization of Petroleum Exporting Countries (OPEC), 16, 143 Oxymorons, 15, 101, 110-111, 156.

A Little History of Economics by Niall Kishtainy

Alvin Roth, behavioural economics, British Empire, Capital in the Twenty-First Century by Thomas Piketty, car-free, carbon tax, central bank independence, clean water, Corn Laws, Cornelius Vanderbilt, creative destruction, credit crunch, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, Dr. Strangelove, Eugene Fama: efficient market hypothesis, first-price auction, floating exchange rates, follow your passion, full employment, George Akerlof, Great Leap Forward, greed is good, Hyman Minsky, inflation targeting, invisible hand, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Arrow, loss aversion, low interest rates, market clearing, market design, means of production, Minsky moment, moral hazard, Nash equilibrium, new economy, Occupy movement, Pareto efficiency, Paul Samuelson, Phillips curve, prisoner's dilemma, RAND corporation, rent-seeking, Richard Thaler, rising living standards, road to serfdom, Robert Shiller, Robert Solow, Ronald Reagan, sealed-bid auction, second-price auction, The Chicago School, The Great Moderation, The Market for Lemons, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade route, Vickrey auction, Vilfredo Pareto, washing machines reduced drudgery, wealth creators, Winter of Discontent

When the value of pesos in dollars moves around a lot it’s hard for a Mexican shopkeeper to know what price to agree for an order of American jeans over the next six months because an affordable dollar price today could be unaffordable in six months if the peso loses value. Some countries live with this: they let their exchange rates move up and down, what’s called a ‘floating’ exchange rate. Others try to stop it moving and ‘peg’ their exchange rates – in other words, fix them at a certain value of a leading currency like the dollar. The hope is that this will bring more certainty to consumers and businesspeople. They know how much they’ll be able to get for their goods abroad and how much foreign goods will cost.

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absolute poverty (i) acid rain (i) adaptive expectations (i) adverse selection (i) advertising (i) agriculture (i), (ii), (iii) aid (i) Akerlof, George (i) alienation (i) Ambrose, St (i) animal spirits (i), (ii), (iii) antitrust policies (i) Apple (i) Aquinas, St Thomas (i), (ii) Aristotle (i) Arrow, Kenneth (i) ascending auction (i) Asian Tigers (i), (ii) Atkinson, Anthony (i), (ii) auction theory (i) auctions (i) Augustine of Hippo, St (i) austerity (i) balance of trade (i) banks and entrepreneurs (i) and interest rates (i) and loans (i) and monopoly capitalism (i), (ii) and speculation (i) see also Britain, Bank of England; central banks; independent central banks; World Bank battle of the methods (i) Becker, Gary (i) behavioural economics (i) benevolent patriarch (i) Beveridge, William (i) big push (i) Black Wednesday (i) bonds (i) bourgeoisie (i), (ii), (iii) brand image (i) Britain Bank of England (i) inflation (i) pegged currency (i) Second World War (i) war with China (i) war with South Africa (i) bubbles (i), (ii) Buchanan, James (i) budget deficit (i) Burke, Edmund (i) capabilities (i) capital (i) and growth (i) Marx on (i) Capital (Marx) (i) Capital in the Twenty-First Century (Piketty) (i) capitalism (i), (ii), (iii) and entrepreneurs (i) and governments (i) and the Great Depression (i) and the Great Recession (i) historical law of (i) Marx on (i) world (i) see also communism Capitalism and Freedom (Friedman) (i) Capitalism, Socialism and Democracy (Schumpeter) (i) capitalists (i), (ii), (iii), (iv) and imperialism (i), (ii), (iii) Marx on (i), (ii), (iii), (iv), (v) carbon tax (i) carbon trading permits (i) Carlyle, Thomas (i), (ii) Castro, Fidel (i), (ii) central banks (i), (ii), (iii), (iv), (v) central planning (i), (ii) chaebols (i) chain of being (i), (ii) Chamberlin, Edward (i) Chaplin, Charlie (i) Chicago Boys (i) Chicago school (i), (ii), (iii), (iv) China, war with Britain (i) Christianity, views on money (i) Churchill, Winston (i) classical dichotomy (i) classical economics (i), (ii), (iii), (iv), (v) coins (i), (ii) Colbert, Jean-Baptiste (i) colonies/colonialism (i), (ii), (iii), (iv) American (i) Ghana (i), (ii) commerce (i), (ii), (iii), (iv) communism (i) and the Soviet Union (i) Communist Manifesto, The (Engels and Marx) (i), (ii) comparative advantage (i), (ii) competition (i), (ii), (iii), (iv) Condorcet, Marquis de (i) Confessions of an Economic Heretic (Hobson) (i) conspicuous consumption (i) constitution (rules) (i) consumers (i), (ii), (iii), (iv) contagion, economic (i) core (i) Corn Laws (i), (ii) Cortés, Hernan (i) cost (i) creative destruction (i) Credit Crunch (i) crime, economic theory of (i) Cuba (i) currency (i), (ii) see also coins currency markets (i), (ii) currency reserves (i) Debreu, Gérard (i) demand law of (i) see also supply and demand demand curve (i) democracy (i), (ii) Democratic Republic of the Congo (i) dependency theory (i) Depression (Great) (i), (ii), (iii), (iv), (v), (vi), (vii) and economic growth (i) and the US central bank (i) descending auction (i) developing/underdeveloped countries (i), (ii) development economics (i) Development of Underdevelopment, The (Frank) (i) diminishing marginal utility (i), (ii) diminishing return to capital (i) discretion (i) discrimination coefficient (i) distribution of income (i), (ii) diversification (i), (ii) dividends (i) division of labour (i) doomsday machines (i) Drake, Sir Francis (i) Drew, Daniel (i) dual economy (i) economic value (i), (ii), (iii), (iv) economics defined (i) normative (i) Economics of Imperfect Competition (Robinson) (i) economies of scale (i) economists (i), (ii), (iii) efficient markets hypothesis (i), (ii), (iii), (iv) efficient/inefficient economic outcome (i) see also pareto efficiency; pareto improvement Elizabeth I (i) Elizabeth II (i) employment, full (i) Engels, Friedrich (i) England’s Treasure by Forraign Trade (Mun) (i) entitlement (i), (ii) entrepreneurs (i), (ii) equilibrium (i), (ii), (iii), (iv), (v) exchange of goods (i), (ii) exchange rates (i) expectations, adaptive/rational (i), (ii), (iii), (iv) exploitation (i), (ii), (iii), (iv), (v) exports (i) and poor countries (i), (ii), (iii) externalities (i), (ii), (iii), (iv) Extraordinary Popular Delusions and the Madness of Crowds (MacKay) (i) failure, market (i), (ii), (iii), (iv) Fama, Eugene (i) famine (i), (ii), (iii), (iv) feminist economics (i) feudalism (i), (ii), (iii), (iv) financial systems (i), (ii) Finer, Herman (i) first price auction (i), (ii) First Welfare Theorem (i), (ii) First World War (i) fiscal policy (i), (ii) floating exchange rate (i) Florence (i) Folbre, Nancy (i) Fourier, Charles (i) framing (i), (ii) France agriculture (i) economic models (i), (ii) revolution (i), (ii), (iii), (iv) and taxation (i) Frank, Andre Gunder (i) free choice (i), (ii) free-market economics (i), (ii), (iii), (iv) free trade (i), (ii), (iii) Friedman, Milton (i), (ii), (iii) full employment (i) game theory (i), (ii), (iii) general equilibrium (i), (ii), (iii), (iv) General Theory of Employment, Interest and Money, The (Keynes) (i) Germany, infant industries (i) Ghana (i), (ii) Gilded Age (i) Global Financial Crisis (i), (ii) global warming (i) Goethe, Johann Wolfgang (i) gold (i), (ii) Golden Age (i) goods and services (i) government, and economies (i), (ii), (iii), (iv), (v), (vi), (vii) Great Moderation (i), (ii) Great Recession (i) Greece (i), (ii), (iii) gross domestic product (i) growth (i) and dependency theory (i) of government (i) and the Great Moderation (i) and Pakistan (i) and population (i) theory (i) Guevara, Ernesto ‘Che’ (i), (ii) guilds (i) Hamilton, Alexander (i) Hansen, Alvin (i) harmony, system of (i) Hayek, Friedrich (i), (ii) hedge funds (i) herds (i) Hicks, John (i) historical law of capitalism (i) HIV/AIDS (i) Hobson, John (i) Homobonus, St (i) human capital (i) human development (i), (ii) Human Development Index (i) imperfect competition (i), (ii) imperialism (i) Imperialism: The Highest Stage of Capitalism (Lenin) (i) imports (i), (ii), (iii) income (i), (ii) and bank loans (i) and capitalism (i) and communism (i) distribution of (i), (ii) and growth (i), (ii) national (i), (ii), (iii), (iv), (v) income per person (i), (ii) independent central banks (i) Industrial Revolution (i), (ii), (iii), (iv), (v) inequality (i), (ii) infant industries (i) inflation (i), (ii), (iii), (iv), (v) information economics (i), (ii), (iii) injection of spending (i) innovations (i), (ii) insurance (i), (ii) interest rates (i) British (i) and monetary policy (i) and recession (i) and usury (i) International Monetary Fund (i) investment (i) and the big push (i) and recession (i), (ii) invisible hand (i), (ii), (iii), (iv), (v) iron law of wages (i) Irrational Exuberance (Shiller) (i) Jefferson, Thomas (i) Jevons, William (i) just price (i) Kahneman, Daniel (i), (ii) Kennedy, John F.

Birth of the Euro by Otmar Issing

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

Initial empirical studies do indeed confirm that the ECB need not fear comparison with other, established central banks.30 Not a bad outcome for such a young institution, one which moreover has to formulate monetary policy under inordinately more difficult conditions. Monetary policy and the exchange rate Fundamental significance of the exchange rate regime One of the most important economic policy decisions at the macro level concerns the choice of exchange rate regime. This can best be illustrated by looking at the two extremes of a fixed and a floating exchange rate respectively. If a country fixes, or pegs, the exchange rate of its currency to that of another country, this has serious consequences for monetary policy in particular. Given full convertibility, such a fixed exchange rate system can only mean that the institution responsible, generally the central bank, must intervene in the foreign exchange market whenever the market rate threatens to diverge from the fixed rate, or parity.31 Essentially, this obligation to intervene implies that monetary policy must be geared to stabilising the exchange rate.

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The same considerations apply if the currency is linked to a metal (such as under the gold standard) or the price of a basket of commodities (commodity-reserve currency). 170 • The ECB – monetary policy for a stable euro If, in contrast, the market is left to determine the exchange rate, and the central bank therefore has no obligation to intervene, it can in principle direct its policy measures towards fulfilling a domestic mandate. Only with a flexible (floating) exchange rate is the central bank able to achieve a domestic objective (generally speaking, the objective of price stability).32 The choice of exchange rate regime is of central importance for monetary policy and also for the place of the central bank in the macroeconomic policy framework. If a fixed exchange rate system is chosen, this ultimately means no less than that, even if it may continue to exist de jure, the independence of the central bank exists de facto only on paper, in that its obligation to intervene in the foreign exchange market fundamentally robs the central bank of its sovereignty over monetary policy-making.33 The same considerations as for an individual country also apply to the currency and the central bank of a monetary union.

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

accounting loophole / creative accounting, Alan Greenspan, anti-communist, Asian financial crisis, asset-backed security, Atahualpa, balance sheet recession, bank run, banking crisis, Bear Stearns, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, California gold rush, capital controls, Carmen Reinhart, central bank independence, centre right, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, currency manipulation / currency intervention, Deng Xiaoping, discovery of the americas, Etonian, eurozone crisis, fiat currency, financial engineering, financial innovation, fixed income, floating exchange rates, foreign exchange controls, Francisco Pizarro, full employment, German hyperinflation, Glass-Steagall Act, guns versus butter model, hiring and firing, income inequality, invisible hand, Isaac Newton, it's over 9,000, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, land bank, liberal capitalism, low interest rates, market bubble, money: store of value / unit of account / medium of exchange, moral hazard, new economy, Nixon triggered the end of the Bretton Woods system, oil shock, plutocrats, Ponzi scheme, price mechanism, quantitative easing, rolodex, Ronald Reagan, South Sea Bubble, subprime mortgage crisis, Suez canal 1869, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the market place, The Wealth of Nations by Adam Smith, too big to fail, War on Poverty, Yom Kippur War

By contrast, he had noticed that the ‘atmosphere in the House of Lords yesterday [when he made his speech in support of the Bretton Woods proposals] was quite free’ from the rather antagonistic mood of the House of Commons.19 To modern analysts, however, Bretton Woods was a lot more similar to the pre-1914 gold standard than it would be to the world of freely floating exchange rates of the late twentieth century. Like the gold standard, the Bretton Woods system proposed a regime of fixed exchange rates, though it did allow for some devaluation, if ‘fundamental disequilibrium’ occurred. In many ways, Bretton Woods was even more rigid than the old gold standard, as it required capital controls, whereas the old system had not.

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As Paul Volcker remembered, Jimmy Carter’s appointments to the ‘main economic posts in the Treasury, the Council of Economic Advisers, and the State Department were of a quite different breed from the monetarists predominant during the later Nixon–Ford years’. Carter’s people all had ‘professional training in economics and had seen substantial governmental service in the 1960s’. These advisers and officials supported ‘floating exchange rates’ and shared, by ‘instinct and experience’, the ‘Keynesian faith in the ability of governments to maximize the performance of the economy and indeed of the market itself’.41 The persistence of inflation in the second half of the 1970s well into the Carter presidency created yet more uncertainty and despondency.

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The result of this pressure was that ‘the dollar today [2010] has fallen 75 percent against the yen, and we still have a trading deficit’. China’s successful export policy, its continuing trade surpluses with the United States, had more to do with the ‘trade policies and structure’ of the United States than with the exchange rate. Once again, Chinese officials emphasized the benefits of stability as opposed to the free-floating exchange rates which had been a feature of global currency markets since the collapse of Bretton Woods: ‘A stable yuan is of vital significance to the global economic development and the stability of the international monetary system.’43 The consequence of China’s exporting success was the accumulation of trillions of dollars of reserves.

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

"World Economic Forum" Davos, Alan Greenspan, Asian financial crisis, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, business cycle, capital controls, central bank independence, classic study, 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, Garrett Hardin, Greenspan put, Gunnar Myrdal, Hernando de Soto, invisible hand, liberal capitalism, liberal world order, Mahbub ul Haq, 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, power law, price mechanism, public intellectual, quantitative easing, random walk, rent control, rent-seeking, road to serfdom, Ronald Reagan, special economic zone, statistical model, Suez crisis 1956, systems thinking, tacit knowledge, 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

Colloque Walter Lipp­mann, Compte-­Rendu des séances du Colloque Walter Lipp­ mann (August 26–30, 1938), vol. 1 of Travaux du centre international d’études pour la renovation du libéralisme (Paris: Libraire de Médicis, 1938). 35. Heilperin himself was an advocate of the return of the gold standard. See Anthony M. Endres, ­Great Architects of International Finance: The Bretton Woods Era (London: Routledge, 2005), 162–173. On the role of the Bellagio Group in advocating the shift to floating exchange rates, see Carol Connell, Reforming the World Monetary System: Fritz Machlup and the Bellagio Group (London: Pickering and Chatto, 2013); Matthias Schmelzer, Freiheit für Wechselkurse und Kapital: Die Ursprünge neoliberaler Währungspolitik und die Mont Pèlerin Society (Marburg: Metropolis, 2010). 36.

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Craig VanGrasstek, The History and ­Future of the World Trade Organ­ization (Geneva: World Trade Organ­ization, 2013), 539. 123. Olivier Long, “International Trade ­under Threat: A Constructive Response,” The World Economy 1, no. 3 (1978): 257. 124. On the campaigns of Haberler, Fritz Machlup, Milton Friedman, and other economists for floating exchange rates, see Carol Connell, Reforming the World Monetary System: Fritz Machlup and the Bellagio Group (London: Pickering and Chatto, 2013); Robert Leeson, The Eclipse of Keynesianism: The Po­liti­cal Economy of the Chicago Counter-­Revolution (New York: Palgrave, 2000); Matthias Schmelzer, Freiheit für Wechselkurse und Kapital: Die Ursprünge neoliberaler Währungspolitik und die Mont Pèlerin Society (Marburg: Metropolis, 2010). 125.

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See also Federation; League of Nations; Multilevel governance; United Nations Gradu­ate Institute of International Studies: as center of neoliberal research, 74, 77, 78, 85, 88, 92, 94, 99, 109, 113, 127–128, 130, 187, 216; faculty at, 244, 245, 278; founding of, 75 Gray, John, 105, 235 ­Great Depression, 58, 64, 69, 71, 87, 107, 154; ­causes of, 46, 55, 57, 69; graphic depiction of, 59; reflection on, 6, 17, 54, 58, 187, 208, 215 371 ­Great Society, 57, 81 Greece, 97 Greenspan, Alan, 1 Gregory, Theodore, 172 Grünberg, Carl, 75 Guardians: of the cybernetic system, 251, 274; of the economic constitution, 214, 251, 275; of the world economy, 22, 194, 275 Guatemala, 139, 193 Gueye, Djeme Momar, 197 Haberler, Gottfried, 8, 99, 147, 164, 190, 207; and business cycle research, 17, 21, 31, 49, 71; on Eu­ro­pean integration, 183, 194, 216; on floating exchange rates, 241; Haberler Method, 72–73, 75, 77, 127; Haberler Report, 183, 191, 198, 200–202, 215, 222, 285; interwar international collaboration, 30, 57, 71–77, 78, 124, 128; and Mises Circle, 48–49; on the NIEO, 221, 253; on trade theory, 41–42, 49–50 Habsburg Empire, 13, 31, 32, 68, 111; dissolu­ tion of, 21, 27, 56, 67, 69, 93, 109–110, 128; as model, 12, 94, 105–106, 112, 144, 264; successor states, 123, 147 Hague Acad­emy of International Law, 11 Hallstein, Walter, 197 Hamilton College, 129 Hanover, 74 Hansen, Alvin, 73 Haq, Mahbub ul, 219 Hardin, Garrett, 239 Harvard Committee for Economic Research, 61 Harvard Economic Ser­v ice, 62–64, 67 Harvard University, 64, 75, 164, 199, 221 Haussmann, Baron George-­Eugène, 32, 47 Havana, 126, 130; ITO Charter, 128–130, 132–134, 318n64 Hayek, F.

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

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

But that is not a sufficient explanation. Note that many ageing societies do not run large current-account surpluses (consider Italy, for example) and that Germany ran sizeable current-account surpluses before ageing had really set in (prior to German unification). In the case of Japan, a floating exchange rate makes this policy more difficult to sustain than for Germany (as we will see later in this chapter), at least since the latter became part of the Eurozone. That is why Japan has periodically felt obliged to keep the yen down by accumulating foreign-currency reserves.27 The aggressive monetary policies of Abenomics, introduced under Prime Minister Shinzo Abe, may also be an attempt to restore lost growth by improving external competitiveness: between November 2012 (that is, just before he became prime minister for the second time) and July 2013, the JP Morgan broad trade-weighted real exchange rate of the yen fell by 17 per cent.

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Other economists have argued for such a policy in the event of crises, among them Keynes with his celebrated suggestion that people be paid to dig up bottles full of pound notes, and Ben Bernanke, when considering policy options confronting Japan in the early 2000s.52 This seems a solution to any long-term problem of structural-demand deficiency. Instead of relying on private-sector credit booms to generate a temporary return to full employment or accept a semi-permanent depression, let the government use its capacity to create money, already accepted when countries moved to floating exchange rates. This is not only what many in the Chicago School would have accepted. It is also the recommendation of those who believe in Modern Monetary Theory (see Chapter Six above). Meanwhile, control over the quantity of money to be printed would be left with the central bank, which would create the amount of money it deemed non-inflationary.

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If one wants to understand the problems of such arrangements, in modern circumstances, one need merely look at what happened in the 1920s and 1930s and more recently in the Eurozone. Fixed exchange rates are a recipe for instability. For small open economies with flexible labour markets, such as Hong Kong or the Baltic states, this may be better than the instability generated by floating exchange rates. For larger economies the idea that the exchange rate should dictate monetary policy is less sensible. It is also inconceivable that the US would follow such a rule: it did not do so after creation of the Federal Reserve in 1913, even though the dollar was notionally tied to gold until 1971.

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

accounting loophole / creative accounting, Ada Lovelace, agricultural Revolution, Airbnb, airline deregulation, Alan Greenspan, Andrei Shleifer, anti-communist, Apollo 11, assortative mating, autonomous vehicles, bank run, banking crisis, banks create money, basic income, Bear Stearns, Berlin Wall, Black Monday: stock market crash in 1987, Bletchley Park, Bob Noyce, Boeing 747, bond market vigilante , Branko Milanovic, Bretton Woods, Brexit referendum, British Empire, business cycle, call centre, capital controls, carbon footprint, carbon tax, Carl Icahn, Carmen Reinhart, Celtic Tiger, central bank independence, Charles Babbage, Charles Lindbergh, clean water, collective bargaining, Columbian Exchange, Columbine, Corn Laws, cotton gin, credit crunch, Credit Default Swap, crony capitalism, cross-border payments, currency peg, currency risk, debt deflation, DeepMind, Deng Xiaoping, discovery of the americas, Donald Trump, driverless car, Easter island, Erik Brynjolfsson, European colonialism, eurozone crisis, Fairchild Semiconductor, falling living standards, financial engineering, financial innovation, financial intermediation, floating exchange rates, flying shuttle, Ford Model T, Fractional reserve banking, Frederick Winslow Taylor, full employment, general purpose technology, germ theory of disease, German hyperinflation, gig economy, Gini coefficient, Glass-Steagall Act, global supply chain, global value chain, Gordon Gekko, Great Leap Forward, greed is good, Greenspan put, guns versus butter model, Haber-Bosch Process, Hans Rosling, Hernando de Soto, hydraulic fracturing, hydroponic farming, Ignaz Semmelweis: hand washing, income inequality, income per capita, independent contractor, indoor plumbing, industrial robot, inflation targeting, Isaac Newton, James Watt: steam engine, job automation, John Snow's cholera map, joint-stock company, joint-stock limited liability company, Jon Ronson, Kenneth Arrow, Kula ring, labour market flexibility, land reform, land tenure, Lao Tzu, large denomination, Les Trente Glorieuses, liquidity trap, Long Term Capital Management, Louis Blériot, low cost airline, low interest rates, low skilled workers, lump of labour, M-Pesa, Malcom McLean invented shipping containers, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Martin Wolf, McJob, means of production, Mikhail Gorbachev, mittelstand, Modern Monetary Theory, moral hazard, Murano, Venice glass, Myron Scholes, Nelson Mandela, Network effects, Northern Rock, oil shale / tar sands, oil shock, Paul Samuelson, Paul Volcker talking about ATMs, Phillips curve, popular capitalism, popular electronics, price stability, principal–agent problem, profit maximization, purchasing power parity, quantitative easing, railway mania, Ralph Nader, regulatory arbitrage, road to serfdom, Robert Gordon, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, savings glut, scientific management, Scramble for Africa, Second Machine Age, secular stagnation, Silicon Valley, Simon Kuznets, South China Sea, South Sea Bubble, special drawing rights, spice trade, spinning jenny, Steven Pinker, Suez canal 1869, TaskRabbit, techlash, Thales and the olive presses, Thales of Miletus, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Rise and Fall of American Growth, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade route, Tragedy of the Commons, transaction costs, transatlantic slave trade, transcontinental railway, Triangle Shirtwaist Factory, universal basic income, Unsafe at Any Speed, Upton Sinclair, V2 rocket, Veblen good, War on Poverty, Washington Consensus, Watson beat the top human players on Jeopardy!, women in the workforce, world market for maybe five computers, Yom Kippur War, you are the product, zero-sum game

The gold standard revived The war had brought a lot of economic and financial, as well as physical, destruction. So policymakers had a hankering to return to pre-war conditions. In particular, after the surge in wartime inflation, they wished to see a return to the gold standard. The rapid rise and fall of prices in the immediate aftermath of the war was unsettling, and suggested that floating exchange rates were a cause of instability. Furthermore, a fixed exchange rate was perceived to be a good form of discipline, stopping governments from cheating creditors by repaying them in depreciated currency. In Britain, many believed that the decision to return to the gold standard after the Napoleonic Wars had been the key to the country’s 19th-century success.

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After 1943, it became fairly clear that the Germans would be defeated and the Allies started to plan a post-war settlement. Among the first issues to be settled was the monetary system. A return to the full gold standard seemed out of the question, not least because the US economy was even more dominant than before. But politicians worried about adopting floating exchange rates, which seemed a recipe for chaos. A conference was duly organised at the Bretton Woods hotel in the mountains of New Hampshire. Harry Morgenthau, the US Treasury secretary, said at the opening ceremony that “We came here to work out methods which would do away with the economic evils – the competitive currency devaluations and destructive impediments to trade – which preceded the present war.”1 The British were represented by their top economist, John Maynard Keynes, and the Americans by Harry Dexter White, a Treasury official who was passing secrets to the Soviet Union, according to KGB archives.

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The underlying problem with the snake was that the West German economy was stronger than many of the others in the group and there was a natural tendency for the mark to rise. Despite two revaluations of the mark, the French withdrew from the system in 1974 and again in 1976.74 The first attempt to align European exchange rates thus proved a failure. Milton Friedman, the US economist, argued that floating exchange rates could be an improvement on a fixed rate system, provided that flexible rates were accompanied by a policy regime that could control inflation. First of all, he was a great believer in free markets, which would be more likely to establish the most appropriate exchange rate than central bankers or politicians.

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

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

THE IMF RIDES TO THE RESCUE With all this monetary chaos, it would be reasonable to think that the IMF would be in trouble, perhaps heading in monetary terms towards oblivion, in much the same way as the League of Nations had done in diplomatic terms four decades earlier. Yet, as the 1970s progressed, it became increasingly apparent that, with a move to floating exchange rates, the IMF’s role was, if anything, strengthening. First, the dollar’s heightened volatility meant that reserve managers elsewhere in the world craved an alternative monetary store of value that would be neither dollars nor gold. The IMF’s Special Drawing Rights (SDRs) – known colloquially as ‘paper gold’ – proved to be just the ticket.

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A country can commit to unrestrained cross-border capital flows and a stable exchange rate, but only if it relinquishes control of its inflation rate: if the currency is under upward pressure thanks to strong capital inflows, interest rates will have to come down to prevent the currency from rising. By cutting interest rates, however, inflation will in all likelihood end up higher. Finally, and for the sake of completeness, a country can choose its own inflation rate and welcome cross-border capital flows, but only if it is prepared to accept a floating exchange rate. In other words, a policymaker can commit to only two out of three key policy objectives, even if it might seem desirable to embrace them all. It is impossible to commit to free-flowing capital across borders and, at the same time, deliver both a stable exchange rate and a stable inflation rate.

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, behavioural economics, 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, carbon tax, 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, export processing zone, failed state, financial deregulation, financial innovation, financial intermediation, financial repression, floating exchange rates, full employment, future of work, general purpose technology, George Akerlof, global value chain, income inequality, inflation targeting, information asymmetry, investor state dispute settlement, invisible hand, Jean Tirole, Kenneth Rogoff, low interest rates, low skilled workers, manufacturing employment, market clearing, market fundamentalism, meta-analysis, moral hazard, Nelson Mandela, new economy, offshore financial centre, open borders, open economy, open immigration, Pareto efficiency, postindustrial economy, precautionary principle, price stability, public intellectual, pushing on a string, race to the bottom, randomized controlled trial, regulatory arbitrage, rent control, rent-seeking, Richard Thaler, Robert Gordon, Robert Shiller, Ronald Reagan, Sam Peltzman, Silicon Valley, Solyndra, special economic zone, spectrum auction, Steven Pinker, tacit knowledge, The Rise and Fall of American Growth, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, total factor productivity, trade liberalization, transaction costs, Tyler Cowen, unorthodox policies, Washington Consensus, World Values Survey, zero-sum game, éminence grise

Economists agree on many things that are often politically controversial. The Harvard economist Greg Mankiw listed some of them in 2009.2 The following propositions garnered support from at least 90 percent of economists: import tariffs and quotas reduce general economic welfare; rent controls reduce the supply of housing; floating exchange rates provide an effective international monetary system; the United States should not restrict employers from outsourcing work to foreign countries; and fiscal policy stimulates the economy when there is less than full employment. This consensus about so many important issues contrasts rather starkly with the general perception that economists rarely agree on anything.

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Moreover, it requires that economists make value judgments on distributional effects, which are better left to the electorate itself. Likewise, the proposition that rent controls reduce the supply of housing is violated under conditions of imperfect competition. And the proposition that floating exchange rates are an effective system relies on assumptions about the workings of the monetary and financial system that have proved problematic; I suspect a poll today would find significantly less support for it. Consider other issues of the day. The widely held presumption that minimum wages are damaging to employment carries considerably less weight today because of mounting evidence showing mixed results; there are models under which minimum wages either do not reduce employment or increase it.

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

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

Economists and policy makers alike have paid special attention to countries with debt issued in a foreign currency, and this was an issue that became a central component of the euro crisis. The fact that debt has to be serviced in a foreign currency puts a substantial constraint on monetary policy freedom, even in a world with floating exchange rates and freely flowing capital. Still, the trilemma is useful as a first-pass organizing device, and history provides us with numerous useful examples of how the underlying trade-offs were resolved in the past. Gold Standard The gold standard was the dominant international exchange rate system between the mid-nineteenth century and the early to mid-twentieth century, and many modern commentators make analogies between the gold standard and the European currency union, in that both suppressed the autonomy of monetary policy.

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Interestingly, these patterns very much resemble the buildup of imbalances within the euro area prior to the eruption of the euro-area crisis (with the role of Italy being taken by many periphery economies). In the end, the Bretton Woods system collapsed; it simply did not incorporate a sustainable and credible way of dealing with the adjustment problem. Afterward, the global exchange rate system started to move very close to the German ideal: free capital flows and floating exchange rates. Later (in the 1980s), this became part of the Washington Consensus (which, interestingly, was also pushed by various French politicians, for example, Jacques Delors), as we discuss in chapter 14. European Exchange Rate Mechanism In Europe, however, matters continued to look different. European governments felt that volatile intra-European exchange rates would be detrimental to the European project, and so, in 1978, they launched the European Exchange Rate Mechanism (ERM for short), an attempt to recreate the Bretton Woods system in a European context.

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The approach would also include a standardized administrative framework to ensure that similar standards are applied across European countries to the classifying of workers as unemployed. OPTIMAL CURRENCY AREA WITHOUT FISCAL UNION While Peter Kenen stressed the importance of a fiscal union, other academic contributors to the optimal currency area literature worked out conditions under which asymmetric shocks can be dealt with, even absent floating exchange rates and a fiscal redistribution scheme. Others questioned the usefulness of exchange rate movements altogether; for these economists, giving up exchange rate flexibility is no big sacrifice. What asymmetric shock absorbers are available—other than exchange rate flexibility and fiscal redistributions?

Austerity: The History of a Dangerous Idea by Mark Blyth

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

Austerity as Policy in the USA: 1921–1937 Rather than a slump after World War I, the United States experienced a boom as pent-up demand and massively expanded money supplies erupted from within war-shocked economies around the world. The boom was, however, short-lived, and in the continental European economies it was accompanied by significant inflation and, in some cases, a hard landing. No slump followed in the United States, however, for an unexpected reason—floating exchange rates in Europe (most countries were off gold) allowed countries to deflate externally instead of through domestic prices—and so recovery followed rapid disinflation.17 The Roaring Twenties began with a bump in Europe but not the United States, precisely because the Americans were not on gold. The early warning lights for the United States were blinking, however, in the form of falling agricultural prices and an increasingly volatile banking sector.

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The End of Banking The story of the crisis reconstructed in chapters 2 and 3 can, and perhaps should, be seen in a bigger context. At the end of the Bretton Woods era, when the United States finally went off gold in 1971, states around the world had to adjust to what Eric Helleiner has called “the reemergence of global finance.”3 Floating exchange rates, deregulation, disintermediation, and the rest, which made finance the most profitable sector of the American and British economies by the 2000s, was the new order of things. But what was it all really based upon? After all, finance is most properly thought of as a part of the information system of the economy: linking borrowers and lenders while sitting in the middle collecting a fee.

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

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

They are just the most dramatic and the most directly opposed to the efficient market hypothesis; so they do deserve special attention. But reflexivity can take many other forms. In currency markets, for instance, the upside and downside are symmetrical so that there is no sign of an asymmetry between boom and bust. But there is no sign of equilibrium either. Freely floating exchange rates tend to move in large, multi-year waves. The most important and most interesting reflexive interaction takes place between the financial authorities and financial markets. While bubbles only occur intermittently, the interplay between authorities and markets is an ongoing process. Misunderstandings by either side usually stay within reasonable bounds because market reactions provide useful feedback to the authorities, allowing them to correct their mistakes.

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Consistent with this, Ahern and Sosyura (2014) find that “fixed exchange ratio bidders dramatically increase the number of press releases disseminated to financial media during the private negotiation of a stock merger, compared to floating exchange ratio bidders, who do not have an incentive to manage their media during the merger negotiation. This effect is associated with short-lived increases in both media coverage and bidder valuation.” Furthermore, they find that floating-exchange rate bidders disseminate more news around the pricing period, perhaps trying to talk up their stock price when it matters the most. Merger Arbitrage Portfolio Portfolio construction is an important part of merger arbitrage. The merger arbitrage manager must decide which merger targets to buy and how to size the positions.

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

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

As long as the laissez-faire economics of Capitalism 3.3 was dominant, it was impossible for the G7, the IMF, the World Trade Organization, or any other international forum to engage in serious discussions about currencies and other issues of global management. Until the emergency meetings that followed the Lehman crisis, all that happened in such international gatherings was that the U.S., British, and German delegates felt obliged by their ideologies to preach the gospel of free-floating exchange rates and to repudiate all government intervention in currency markets at all times. By contrast, China and other emerging economies, quietly backed by Japan, France, and Italy, by contrast insisted that currencies and capital flows were government prerogatives too important to be left to turbulent and unpredictable markets.

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The theoretical benefits of free trade and comparative advantage will be counterbalanced explicitly by other economic objectives—initially the imperative of job creation after the recession and later the desirability of preserving a diversified industrial structure. Third, the pressure to coordinate macroeconomic and currency policies among the major trading economies—America, Europe, China, and Japan—will become irresistible. Such coordination will have major implications for the post-Bretton Woods system of floating exchange rates and for the governance of global political and economic institutions—two issues discussed at the end of this chapter. Limits to Growth and Physical Resources The market-knows-best philosophy of Capitalism 3.3 assumed that there could be no constraints on the growth of the world economy.

The Making of an Atlantic Ruling Class by Kees Van der Pijl

anti-communist, banking crisis, Berlin Wall, book value, Boycotts of Israel, Bretton Woods, British Empire, business cycle, capital controls, collective bargaining, colonial rule, cuban missile crisis, deindustrialization, deskilling, diversified portfolio, European colonialism, floating exchange rates, full employment, imperial preference, Joseph Schumpeter, liberal capitalism, mass immigration, means of production, military-industrial complex, North Sea oil, plutocrats, profit maximization, RAND corporation, scientific management, strikebreaker, Suez crisis 1956, trade liberalization, trade route, union organizing, uranium enrichment, urban renewal, War on Poverty

In May, Pompidou and Heath rejected the offer to meet with Nixon in the framework of a conference of Atlantic leaders as ‘premature’.43 The Nixon/Kissinger/Connally policy destroyed the Atlantic constraint and precipitated the crisis of the mode of accumulation which had developed under it. In the monetary field, the unilateral dollar policy provided the liquidity for a global restructuration of capital and at the same time put the United States at an advantage. As Parboni writes, ‘The system of floating exchange rates also eliminated any need for the United States to control its own balance of payments deficit, no matter what its source, because it was now possible to release unlimited quantities of non-convertible dollars into international circulation’.44 The October War in the Middle East provided the Americans with an opportunity to force compliance with the new American international concept on the part of all Western European countries except France.

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As Parboni has argued, American supremacy henceforward rested on the fact that it could resort to such devaluations without seeing them eroded again by inflation due to more expensive imports. On the other hand, as private international dollar liquidity grew explosively after 1971, involuntary credit from the rest of the world not only financed the American deficit, but all countries turned to the booming capital markets to finance their deficits now that the regime of floating exchange rates suspended the central banks’ function of intervening in foreign money markets.52 The financing rather than balancing of deficits opened enormous markets for bank capital, and eventually, for all other forms of money-capital as well. The liberation of banks from the Keynesian controls imposed on them in the 1930s on both sides of the Atlantic still was part of the unifying trend of the mid 1960s, spurred on by the Kennedy offensive.

The Deluge: The Great War, America and the Remaking of the Global Order, 1916-1931 by Adam Tooze

anti-communist, bank run, banking crisis, British Empire, centre right, collective bargaining, Corn Laws, credit crunch, failed state, fear of failure, first-past-the-post, floating exchange rates, Ford Model T, German hyperinflation, imperial preference, labour mobility, liberal world order, low interest rates, mass immigration, Mikhail Gorbachev, Monroe Doctrine, mutually assured destruction, negative equity, price stability, reserve currency, Right to Buy, Suez canal 1869, Suez crisis 1956, the payments system, trade route, transatlantic slave trade, union organizing, zero-sum game

The initial reaction to the suspension of the gold standard was one of shock. But, within a year as the pound stabilized at a new and far more competitive level, Britain’s National Government, still headed by MacDonald, would discover that for a country with some degree of international credibility, a free-floating exchange rate offered not disaster but the possibility of a creative reinvention of economic liberalism.38 With its banking system intact, low interest rates delivered an effective stimulus to the British recovery. When compared to either the US or continental Europe, the British experience of the 1930s was far from dismal.

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E. 380 League of Nations 4, 221–2, 231, 395, 470, 515–16 and the armistice 220, 222–3, 228 and the Berne conference 243 and Britain 258, 259–61, 262–3, 264–5, 266, 267, 268–70, 271, 455, 470 and China 261, 328, 330 and the Corfu crisis 447 Covenant drafting 255–6, 259–67, 271, 392 and Danzig 282 and democracy 243, 258 and disarmament 264–5 enforcement mechanisms 264–7 and fears of an Anglo-American condominium 257–8 and France 257–8, 261, 262, 263, 264–5, 266–8, 271, 277, 287, 325–6, 470, 492–3 and freedom of the seas 268–70 Geneva Protocols 470–71 and Germany 313, 315–16; disarmament talks withdrawal by Hitler 506 and the Hague Peace Arbitration Treaties 267 and human equality 324–5 and Japan 324–6, 329, 499 proposal as vehicle of international financial settlement 268 and racial non-discrimination 392 Saint-Germain Treaty and the League Covenant 330 and Silesia 286 and the US see United States of America: and the League of Nations Versailles and the League Covenant 255–6, 259–70, 271, 324–6, 335 and Wilson 16, 53, 54, 222–3, 243, 255–6, 259–63, 264, 266, 269–70, 277, 325, 326, 337, 516 League to Enforce Peace 45 Lebanon 193 Leffingwell, Russell C. 301, 345 Left Socialist Revolutionaries, Russia 86, 110–11, 118, 138, 157, 167 Ambassador Mirbach and the uprising of 164–5 Legien, Carl 313 Lenin, Vladimir Ilyich 10, 50, 71–2, 79–80, 83, 413, 418 at All-Russian congress (1918) 138, 141 April theses 71–2 and Asia 414–15 assassination attempt (August 1918) 168 balancing of imperialist powers strategy 151, 152, 153, 157, 234, 418 and the Bolshevik surrender 132, 136 Brest-Litovsk peace agreement see Brest-Litovsk Treaty and the ‘class struggle’ 128–9 class terror 242 and the Comintern 413, 414–15 as critic of revolutionary defensists 71–2, 110 death 233 Declaration of Rights 114 drive for one-party dictatorship 137–8 economic cooperation proposal with, and shift towards, Germany 151–2, 156–7, 159, 164, 166, 170, 200 economic cooperation proposal with the US (May 1918) 153 Entente relations after the armistice: conciliation concerns 236; and the Princes’ Islands conference proposal 236 at Fourth All-Russian congress 138, 164 ‘Imperialism, the Highest Stage of Capitalism’ 50 and Japan 146 and Keynes 295 ‘Land, Bread and Peace’ slogan 86 martial law declaration (May 1918) 157 and mass terror 165 misreading of logic of war 142 New Economic Policy 423, 424, 435, 483 October Revolution 83–6 peace demands 24, 132, 133 ‘People from Another World’ 128 post-armistice challenges 234–5 and Sinn Fein 79 and Soviet gold reserves 427 speech of 29 July 1918 to party’s Central Committee 165–6 SR mocking by 128 and the suppression of Constituent Assembly 128 views: of capitalism 141; of history 141–2; of imperialist war 142 and Wilson 10, 17, 21, 109, 146; 14 Points manifesto 123 Li Yuanhong 91–2, 98, 100–101 Liberal Party, Britain see Britain and the United Kingdom: Liberal Party liberalism and the 1920s 9 and the corrupt ‘old world’ 17 economic liberalism with free-floating exchange rate 501 embedded market-based 488 free trade 13, 14, 75, 501 as guard against resurgence of imperialism 488 imperial liberalism 15–16, 375, 383–93 interwar derailment of 17–21; and the 1918 summer politics of intervention 156–70; and the ‘Dark Continent’ model 17–18, 20, 26; and the destructive >force of imperialism 19–23; and the hegemonic crisis model 18–20, 26 and Japan 259 Keynesian ‘real liberalism’ 501 laissez-faire 300 New World support for European 312 and the Open Door 15–16, 44, 103, 205, 397, 405 and race 392–3 sentimental 272 and ‘Western values’ 10 Wilson on 232–3 and Wilsonian propaganda 17 and Wilson’s 14 Points manifesto 119–23, 198, 233 World War I and the coalition of liberal powers 511 see also democracy Liberty Bonds/Loans 206–7, 208, 215, 216, 342, 343, 344 Libya 233 Liebknecht, Karl 131, 238–9 Liga Patriotica 353 Lincheng 406 Lincoln, Abraham 41 Lindsay, Sir Ronald 507 Lithuania 114, 116, 139, 411 declaration as a republic 232 Livonia 167 Lloyd George, David, Ist Earl 3, 21, 42, 178–9, 432, 436 and 1917 joint conference of US and British War Cabinet 196–8 1918 election 245 American appeal, over Wilson’s head 203 as an exponent of liberal Empire 179 and Armenia 378 and Bohemia 281 and the Bolsheviks 235–6, 411 and Brest-Litovsk 109 on the British Empire 392 and British wages 246 Cannes Conference 429–30 charisma 173–4 Coalition government 40, 48–9, 245–9 and Danzig 282 and deflation 359 Democratic Programme of Reconstruction 248 end of premiership 438 Fontainebleau memorandum 285 and France 59; Franco-American clashes 298 Genoa Conference see Genoa Conference and German reparations 249–50, 293, 314 and Germany’s appeal for credit 427–8 and Hitler 306 and the ideological leadership of the war 197–8 and India 181, 387, 388, 389 and the Inter-Allied Conference (November 1917) 116, 197 and Ireland: conscription 192; Home Rule 191, 192; threat of massive repression 376 and the Middle East 195, 378, 381, 382 and the Monroe doctrine 269 and Mussolini 306 as pioneer of democracy 62 and Poincaré 431, 454 and the Poles 285 reflections on the war and its aftermath 5 and the risk of British dependence on the US 207 and the Romanovs 74 and the Russian famine 424 scheme to restore eastern European economies 428–9 and self-determination 120 and the Siberian intervention 159–60, 170 and the tax system 248 and trade unions 244 ‘trench vote’ encouragement 246 and Turkey 381, 382 and Versailles 249–50, 282, 307, 314, 328 war aims declaration 197, 244 war strategy 181 and Wilson 62, 158–9, 203, 224, 243, 244, 269–70, 335 and working class militancy 246–8, 359 and Zionism 195 Locarno Treaty 4, 23, 462 Lockhart, Bruce 145, 157, 160, 168 Lodge, Henry Cabot 231, 334, 335, 336 London 1916 economic conference 290 disorder, winter of 1918–1919 356 gold supplies 209 World Economic Conference 504, 506 London Conference (1924) 461 London Empire Conference 394–6 London Naval Conference (1930) 474, 486, 490–93, 499, 512 London Reparations Ultimatum 368, 371–2 London Treaty 116, 176, 177, 178, 306–7, 308, 310, 438 Lossow, Otto von 148 Louis XIV 273 Lowther, James 183, 185 Lucknow agreement 181, 188, 384, 391–2 Ludendorff, Erich 22, 24, 43, 47–8, 57, 82, 111, 129, 135, 140, 148, 153, 155, 219 aims for a dependent Russian state 161 attack on British front line 140 and the Bad Homburg conference 133 and Brest-Litovsk 118, 131 and the British in Murmansk 166 defence of Kaiser 225 desire to crush Soviet regime 161, 170 and Finland 150–51 and the Jews 135 and Petrograd 167 and Poland 135 and the SA 451 and the Supplementary Treaty 167 Lusitania 34, 43 Luther, Hans 460 Lüttwitz, Walther von 318–19 Luxemburg, Rosa 166, 167, 237, 238–9 Lwow, siege of 417 McAdoo, William Gibbs 52, 105, 207, 208, 291, 347 Macaulay, Thomas Babington, 1st Baron 391 MacDonald, Ramsay 26, 241, 244, 245, 455–6, 457, 470, 489 and Britain’s leaving the gold standard 500–501 and Brüning 495 on cessation of US debt payments 507 and French non-cooperation with Hoover proposals 496 and Hoover 474, 504 and the London Naval Conference 491–2 machine guns 156, 202, 204 McKenna, Reginald 48, 465 MacMurray, John V.

…

N. 414, 415, 416 Islamic army 416, 418 Royal Air Force 446 Royal Navy 1931 battleship construction 490 battle of Jutland 35 British Admiralty 34, 194, 365, 394 and China 481–2 cut in spending (1919) 364–5 and the defence of France 491 ‘navalism’ challenge to US 45 post-war dominance 374, 398 and the proposition of an imperial navy 394–5 and Soviet vessels in eastern Mediterranean 438 and US claim to naval dominance 269 and the Washington Conference 398, 401 Ruhr 1919 uprising 319 1923 crisis 24 French 1922 invasion and occupation 440–46, 447–9, 452–7, 459, 473 and Hitler 450, 452 Red Army 319, 337 starvation 443, 447 Russia 1917 Revolution 68–72, 73, 79–80; October Revolution 83–6; spring democratic revolution 189 abandonment of War 133 Bolshevism see Bolshevism/Bolsheviks Brest-Litovsk see Brest-Litovsk Treaty and Britain see Britain and the United Kingdom: and Russia/USSR Brusilov offensive 46–7, 70 Central Powers’ victory over 11 and China see China: and Russia/USSR civil war 142, 165, 173, 422 coal 108 Constituent Assembly 69, 83–5, 85, 86, 125; Bolshevik violent suppression of 127–8 currency 422 death penalty 69, 83 Declaration of the Rights of the People of Russia 114 democracy: 1917 spring democratic revolution 189; Allied intervention in Siberia on behalf of 156–70; Constituent Assembly elections (1917) 84–5, 85; democratic renewal (1917) 68–70; and the Entente as a democratic coalition 69–73; war grave of 76–87; and Wilson 145 Duma revival 42 Entente relations and membership see Entente: and Russia/ USSR famine 12, 423, 424, 425 and France see France/the French: and Russia/USSR and Germany see Germany: and Russia/USSR gold reserves 51 hyperinflation 212 and independence movements throughout the old Tsarist Empire 234–5 and Japan see Japan: and Russia/USSR Jews 69 Kronstadt rebellion 422–3 Left Socialist Revolutionaries see Left Socialist Revolutionaries, Russia Manchurian railway system rights 420 Menshevism see Menshevism/Mensheviks military spending 514 nationalism 150, 411 and the Ottoman Empire 193, 194 Petrograd formula for peace 71, 74, 76–8, 79, 115, 124, 138, 183 Provisional Government 68, 70, 71, 75–6, 79, 80, 81, 110, 125 Red Guards see Red Guards (Russia) repudiation of foreign debts 129, 425 requisitioning 422, 423 revolutionary defensism 71–2, 76, 82, 87, 110, 118, 122 Russian Army 69, 71, 81–3; Imperial 46; rebellion of peasant soldiers 82–3 self-determination 79, 108, 110, 114, 116, 125–6, 130–31 Siberia see Siberia Socialist Revolutionaries see Socialist Revolutionaries (SRs, Russia) and the Soviet regime see Soviet Union Soviets see Soviets (assemblies) strikes 247 Sykes-Picot agreement 193 treaty of the USSR (28 December 1922) 417–18 Tsarist autocracy 24, 59, 69, 73, 93–4, 276 Tsar’s abdication 68 and the Ukraine 124–6 and the US see United States of America: and Russia/USSR weakening between 1918 and 1920 21 Russian empire 5, 21 Ruthenia 132 Saar 277, 278, 279, 288, 289, 366, 447, 473 Saint-Germain Treaty 330 St Quentin, battle of 140 Saionji Kinmochi, Prince 144, 258–9, 321, 327, 478, 491 Salisbury, James Gascoyne-Cecil, 4th Marquess of 184 Salter, Arthur 205, 290 Salvemini, Gaetano 310 Saxony 232, 274, 418, 449–50 Scapa Flow 271, 317, 395 Schacht, Hjalmar 460, 506 Scheidemann, Philipp 114, 221, 312, 313, 315, 317, 426 Schurman, Jacob Gould 405, 406 seas, freedom of the 16, 45, 53, 75, 120, 226, 228, 257, 268–70 Seattle general strike (February 1919) 340 Second Moroccan Crisis, Agadir 59 Second Socialist International, Berne 240, 241–3, 409 Second World War see World War II Seeckt, Hans von 66, 147, 450 Seiyukai 96, 105, 144, 355, 363, 399, 467, 485, 491, 511 Selborne, William Palmer, 2nd Earl of 191 Semana Tragica 353 Senegal 227 Serbia/Serbs Entente demands for evacuation of 52 German complicity in Austria’s ultimatum to Serbia 313 and the League of Nations 261 threat of national extinction during war 5, 48 and Versailles 255 Serrati, Giacinto Menotti 414 Severing, Carl 432 Sèvres, Treaty of 381–2, 385 Shandong, Japanese occupation and claims 33, 89, 92–3, 99, 485 and Versailles 321, 323, 326–9, 336, 397 and the Washington Conference 403 Shanghai 321, 328, 478, 481–2 Shidehara Kijuro 23, 403, 478, 484 shipping 202–4, 205, 207, 292 Emergency Fleet Corporation 35, 203 see also Atlantic blockade Siberia 130, 235 Allied intervention 156–70 clashes between Red Guards and Czechs 158 and Japan 143, 146, 170, 321, 355, 363 White forces in 410 Sierra Leone 212, 374 Silesia 5, 281–3, 286, 314, 426 silver 209, 210–11, 355, 358 Singapore 394–5 Sinha, Satyendra Prassano 181 Sinn Fein 79, 180, 190, 192, 193, 227 Irish civil war 377 Easter uprising 79, 180, 376 Lenin, the Marxists and 79 Sisson, Edgar 119 Skoropadskyi, Pyotr 150, 154 slave trade 27 Slavs 158, 283–4, 307, 308 and the London Treaty 307 see also Yugoslavia Smith, Al 347 Smoot Hawley tariff 501, 504 Smuts, Jan 181, 197, 285–6, 375 Smyrna 381, 437 Snowden, Philip 456 Social Democratic International 409 Social Democratic Party of Germany (SPD) 24, 25, 34, 42, 73, 75, 112, 113, 162, 163, 319, 371, 448 and the armistice 219–21 and the Berne conference 241–2 and Brest-Litovsk 139 coalition with Centre Party and Liberals 163, 239, 243, 313, 320 Constituent Assembly election success 239 counter-revolutionary barbarity licensed by 238–9 and the DNVP 459 and the establishment of democracy 237–8 MSPD 73, 75, 130 and the Second Socialist International 240, 241–2 and the Soviet regime 237 USPD see USPD (Independent Social Democratic Party, Germany) and Versailles 317–18 Vorwaerts (newspaper) 162–3 socialism 1919 defeat of radical socialism 233 in Austria 243 in Britain: labour movement see Britain and the United Kingdom: labour movement; Labour Party see Britain and the United Kingdom: Labour Party European socialism and post-war reconstruction 240–44 in France see France/the French: Socialists in Germany see Germany: socialists in Italy 176, 177, 241, 311, 409 labour movement see labour movement in Russia 141, 151–2; SRs see Socialist Revolutionaries (SRs, Russia) see also Bolshevism/Bolsheviks; Russia Socialist International 416 Second 240, 241–3, 409 Socialist Revolutionaries (SRs, Russia) 84, 85, 85, 118, 128, 136, 138, 157 expulsion from Central Executive Committee of All-Russian Congress 157 Left SRs see Left Socialist Revolutionaries, Russia Sokolnikov, Grigori 136 Somme, battle of the 33, 37, 46, 47 Sonnino, Sidney 177, 178, 306, 307, 310, 311 South Africa Gandhi in 392 gold 209, 212; Rand gold miners 374–5 Hoover moratorium 498 Indian rights in 392–3 and Turkey and the British Empire 437 wartime wholesale price dislocation 213 White solidarity 392, 393 South-Eastern Front 147 sovereignty 5, 287, 289 German see Germany: self-determination/sovereignty and Versailles 272–6, 287, 289, 436, 448–9 Soviet Union and Afghanistan 416, 418 Asian thrust 414–16 Bolshevism see Bolshevism/Bolsheviks and Britain see Britain and the United Kingdom: and Russia/USSR and the Brussels Conference 425 and China see China: and Russia/USSR and Churchill 235, 236 collectivization 484, 511–12 Comintern see Comintern Communism see Communism Congress of Peoples of the East 415–16, 420 Congress of the Toilers of the Far East 420 and counter-revolutionary armies 234–5 creation of USSR by treaty (28 December 1922) 417–18 debt repudiation 129, 425 defensive struggle between Poland and China arenas 475 economy 408, 422, 423, 483; Five Year Plan 483–4, 511–12; GDP of total former USSR 13; gold reserves 427; New Economic Policy 423, 424, 435, 483 and the Entente 235–7, 434 famine 12, 423, 424, 425 and the Genoa Conference 433–5 Genoa Conference see Genoa Conference and Germany see Germany: and Russia/USSR and independence movements throughout the old Tsarist Empire 234–5 industrialization 483–4, 502, 511–12 and Iran 419 and the Kellogg-Briand Pact 472, 484 Kronstadt rebellion 422–3 Left Communists 137, 151 Polish-Soviet War 284, 411–13, 417; Treaty of Riga 417 Politburo 483 and the Princes’ Islands conference proposal 236 Red Army see Red Army revolutionary export failure between 1917 and 1923 408 revolutionary military council 168 Soviet bill for damage by Allies in civil war 434 and the strategic uncertainty of the late 1920s 475–84 terror: apparatus 165; Red Terror 168–9, 237 and Turkey see Turkey: and the Soviet Union and the US see United States of America: and Russia/USSR Whites 235, 236 Soviets (assemblies) 68–9 All-Russian congress see All-Russian congress of Soviets German Congress of Soviets 237 Petrograd Soviet see Petrograd Soviet Spa 161, 219, 228 Spain 282, 354 strikes 247 wartime wholesale price dislocation 213 Spanish-American War 15, 41, 44 SPD see Social Democratic Party of Germany SRs see Socialist Revolutionaries (SRs, Russia) Stalin, Joseph and Asia 415 and Brest-Litovsk 116 Declaration of Rights 114 Five Year Plan 483–4, 511–12 and the Red Army’s defeat at Zamosc 417 and the US 7 Stalinism 515 starvation 39–40, 156, 423, 443, 447 steel 125, 152 American steel strike 341 US Steel 341, 342 sterling 37, 51, 207–9, 210–11, 355, 358, 374, 457, 506 departure from gold standard 500–501, 504 devaluation 210–11, 501 free-floating exchange rate 501 Stimson, Henry 492, 496 Stinnes, Hugo 426, 427, 452 Stockholm peace conference 244 process 122 Stresemann, Gustav 24, 113, 155, 240, 320, 447–8, 450–51, 459–60, 461, 475, 495 and Briand 473, 492, 493 on debt 465 and Locarno 23, 462 Nobel Peace Prize 23, 462 Strong, Benjamin, Jr 344, 345, 373 Sturmabteilung (SA) 451 Suedekum, Albert 220–21 Suez canal 193, 377–9 suffrage see franchise suffragette militants 340 Sukhanov, Nikolai 71 Sun Yat-sen 90, 100, 101, 322, 330–31, 421, 478, 479 death 480 Sun-Joffe Declaration 478 Supplementary Treaty to Brest 167–9 Supreme War Council 205 Sweden strikes 247 wartime wholesale price dislocation 213 Sykes-Picot agreement 193, 438 Syria 193, 377, 380, 381 Taft, William Howard 230 Takahashi Korekijo 363, 399, 403, 502 Talleyrand-Périgord, Charles-Maurice de 273 Tanaka Giichi 95, 321, 485 tanks 200, 201, 202, 204 Tardieu, André 59–60, 277 taxation 250–51 British 248, 250 capital levy 250 French 251 US: inflation tax 216; tax on exports 46 Terauchi Masatake 95–6 terror 165 class terror 242 Red Terror 168–9, 237 White Terror, China 483 Thiers, Adolphe 274 Third International see Comintern Thoiry initiative 473 Thomas, Albert 76, 175 Thrace 381, 390 Thuringia 418 Tianjin 331 Tilak, Bal Gangadhar 180–81, 189, 382 Times, The 52, 56, 184, 195–6, 224 Tojo Hideki 329 Tory Party, Britain see Britain and the United Kingdom: Tory Party Trade Union Council (TUC) 466 trade unions American 46, 340, 341–2 British 42, 184, 244, 246, 247–8, 359, 466 and deflation 362 French 175 German 43, 237–8, 313, 503 and inflation 356 Japanese 356 Transcaucasian Republic 109, 147, 417–18 Trans-Siberian railway 80, 158, 331–2 Transylvania 47 Triple Entente see Entente Tripolitanian Republic 233 Trotsky, Leon on Bolshevik violence 126–7 and Brest-Litovsk 109, 116, 117, 118, 119, 126–7, 129, 130–31, 132–3, 137 calls for release of 83 and the Chinese Communists 480 class terror 242 and the Czechs 158 deportations 5 exile 483 as exponent of international relations 108 on German reparations and the Entente 489 as head of Red Army 136, 234, 422 as head of revolutionary military council 168 and Keynes 295 and the new order 8, 11–12, 18, 23, 26, 29–30 and the October Revolution 84 opposition to 1919 talks with Entente 236 and the peasantry 421 publishing text of London Treaty 116 rapprochement attempts with Western Powers 145 reflections on the war and its aftermath 4, 18 and the US 6, 8–9, 11, 12 and Wilson 109, 122 Truman, Harry S. 277, 291 Tsereteli, Irakli 71, 81, 83, 121, 127, 128 TUC (Trade Union Council) 466 Tukhachevski, Mikhail 412, 417, 422–3 Tumulty, Joseph 257 Turati, Filippo 176 Turin 74 Turkey 5, 113, 147, 193, 194 and Armenia 147, 148, 381 and Britain 436, 437–8 deployment of Imperial Forces, February 1920 375 and France 437–8 Grand National Assembly 382 and Greece 381, 382, 390, 437 and India 391 London Treaty’s effect on Turks 307 London’s aggression 381–2 nationalism 381–2, 437–8 and the Raj 384–5, 390 and the Soviet Union 419; and Britain 438; Soviet treaty 382 Treaty of Sèvres 381–2, 385 Turkish Army 437 Wilson and the British policy in 337 see also Ottoman Empire U-boats 24, 34, 43, 45, 48, 57–8, 64, 66, 74–5, 89 Uchida Yasuya, Viscount 326 UDC (Union of Democratic Control) 244, 455 Ugaki Kazushige 329, 330 Uhlans 417 Ukraine 114, 117, 124–5, 417 and Austria 132 and the Bolsheviks 124–6, 234 and Brest-Litovsk 109, 124–6, 130–32, 148–9 coal 125 Constituent Assembly elections 149 Donets industrial region 149 and Germany see Germany: and the Ukraine grain 111, 125, 132, 149–50 landgrab by peasants (1917) 149 National Assembly 150 National Bank 149–50 nationalism 122, 125 peace treaty with Central Powers 132 peasants 149, 150, 154, 164 Polish assault on 284 and the Polish-Soviet War 411–12, 417 Polish-Ukrainian army 412 Rada 125, 126, 130–31, 149, 154 Social Revolutionaries 149 USSR treaty (28 December 1922) 417–18 Ulster 180, 191 Unionist election triumph after Easter Uprising 376 see also Ireland: Unionists UMW (United Mine Workers) 341–2 unemployment Britain 359, 360, 370, 465, 500 dole 500 Germany 503 and the labour movement 362 US 345–6, 348 Union of Democratic Control (UDC) 244, 455 United Kingdom see Britain and the United Kingdom United Mine Workers (UMW) 341–2 United States of America and the 1916 balance of the war 34–40 1920 general election 338 abundance fable 201 African Americans 63, 339 agrarian movement 43 agriculture 346, 347; Farm Bloc 347, 373; Joint Congressional commission of agricultural inquiry 347 aircraft 202 American Army 35, 173, 201–2, 203, 204, 205, 218 American Federation of Labour 340 as arbiter of world affairs 16, 54–5, 67, 220–21, 222 armaments: production 202; share crash 52 and the armistice 220–31 autocracy resisted by 8, 67, 103, 190 banking system 38–9, 500, 504–5 beginning and development of American Republic 14–16 and Britain: Anglo-American ambitions in 1923 British politics 455; anti-war faction 56; balance of payments 12; and the bilateral dollar-sterling rate 207–9; British embassy in Washington 34; British Foreign Office 1928 memo on the US phenomenon 463–4, 474; and British ‘navalism’ 45; Churchill’s Atlantic unity appeal 206; collaboration with British Empire 259; and the Dawes Plan 454–5; and deflation 358–9; economic risk of British dependence on the US 40, 48–9, 78, 207–9; and emergent US power 6, 26; and European fears of an Anglo-American condominium 257–8; and freedom of the seas 226, 228, 257, 268–70; and French delegation at London Conference 491–2, 493; and French delegation at Washington Conference 400–401; French goal of trilateral transatlantic pact 268, 290; French trilateral security guarantee 277–80; and German reparations 293–5, 297–303, 454–5, 488–9; Hoover moratorium 498, 506, 507; and the Irish question 190–93, 377; and Japan 322, 395–6; joint conference November 1917 with British War Cabinet 196–8; and the Kellogg-Briand Pact 472–3; and Keynes 296–303; and the League of Nations 258, 259–61, 266, 268–70, 271, 455; Lloyd George’s appeal to American public 203; loans saving Britain from insolvency 78; and the London Naval Conference see London Naval Conference (1930); and the Middle East 193–6, 378, 379; and the Monroe doctrine 269; and the naval blockade 35, 56, 473; opposition to increasing US dependence 40, 48, 296; political scientists influenced by Westminster model 41; and shared naval supremacy 365; and US naval expansion 35–6, 56, 268–9; US private long-term investment (December 1930) 476; and war debts 302, 349, 366–7, 373, 439, 465, 468, 498, 506–7; and the Washington Conference see Washington Naval Conference; Wilson and British policy in Turkey 337; Wilson and Lloyd George 62, 158–9, 203, 224, 243, 244, 269–70; Wilson and the Labour Party 241; Wilson’s Buckingham Palace speech 240 see also British Empire: and the US capitalism see capitalism: American and the Caribbean 44 and China see China: and the US Churchill’s view of 6 Civil War 14, 29, 41, 44, 61, >63, 65 coal 341–2 Cold War see Cold War Congress and the Treaty Fight 335–8 conservatism 27–8, 29 Coolidge administration 467 cost of living rise 45–6, 216, 343 credit see credit: American declaration and entry of war 66–7, 68, 78, 87, 100, 106 democracy 62, 196; democratic capitalism 200–201; and the New Deal 505 Democratic Party 230–31, 340, 346, 347; 1916 Presidential campaign 46; Copperheads 65; and labour 340–42; Massachusetts 343; Southern Democrats 64; and the Treaty Fight 335 drive towards ‘world hegemony’ 8–9, 16 economy: ‘bombshell telegram’ of FDR 506; and British risk of dependence on the US 40, 48–9, 78, 207–9; capitalist 7, 8, 200–201; deflation 345–7, 346, 349, 354, 358–9, 367, 397, 504; destabilization through wartime mobilization 216; the dollar 207–9, 344, 355, 358, 370, 427, 436, 443, 456, 469, 505, 506; and the dollar-sterling rate 207–9; economics as medium of power 12, 200–201, 206–8; Federal government debt 349; and the Fed’s 50 per cent interest rate increase 345, 349; GDP 13, 216; global economic dominance 12–16, 36, 206–9, 211, 349–50, 362; GNP 217; and gold see United States of America: gold; and the Great Depression 345, 488–9, 495–7, 504–6 see also Great Depressiongrowth between 1865 and 1914 14; inflation tax 216; inflation–deflation succession (1919–1920) 342–7; low-growth war economy 215–16, 217; national wealth 12; recession (1919–1921) 345–7, 346; and the Reconstruction Finance Corporation 505; and war finance 36–40, 45–6, 48–9, 50, 51, 52–3, 78, 173, 206–8, 215–16, 217; wartime wholesale price dislocation 214; Wilsonian fiasco 342–7, 346, 349–50 Entente relations: appearing as new level of international cooperation 515; and the armistice 224–5, 226, 227–8, 229, 231; and the Atlantic blockade 34–5, 56, 473; dangers of clashes at Versailles 277–8, 307; Dawes Plan 453–61, 470, 497; and dependence on the US 38, 40, 48–9, 78, 207–9, 211; and the dollar exchange rate 207–9; and the end of Franco-Russian alliance 276; and Fiume 308, 337; and German reparations 293–5, 297–304, 441, 453–61, 488–9, 496–7; German U-boat campaign and the tipping of 58–9; hardening by US in December 1918 257; Harding strategy of distance from Europe 372; and the inter-Allied economic cooperation 205; and the Inter-Allied Supply Council 207; and naval power 35–6, 56, 268–9; political 40–46; and rejection of American global leadership 231; Roosevelt’s admiration for Entente efforts 43; and the Russian Revolution and democratization 69–73; and the US declaration/entry of war 66–7, 68, 78; US refusal of overt association 16, 44–5, 46, 52, 53–7, 60, 65; and US resource funnelling 201–5; and war finance and debts 36–40, 45–6, 48–9, 50, 51, 52–3, 78, 173, 206–8, 298–304, 302, 349, 366, 372–3, 439, 440, 466–70, 468, 473, 496–7, 498, 506–7; and the Washington Conference see Washington Naval Conference European exports tax 46 European power states’ overshadowing by 463–4 exceptionalism 27, 28–9, 54–5 export scheme, publicly funded 207 failures to aid global democratic campaigns 86–7, 102–6 Farm Bloc 347, 373 FBI 339–40 FDR administration 505–6 Federal government debt 349 Federal Reserve see Federal Reserve Fifteenth Amendment 63 Fordney-McCumber tariff 349 Fourteen Points see Wilson, Woodrow: 14 Points manifesto and France: American banker families leaving Paris 469; balance of payments 12; and Britain 268, 277–80, 290, 400–401; changing position between 1919 and 1945 291; and the end of Franco-Russian alliance 276; French appeal for solidarity 59–60; French goal of trilateral transatlantic pact with Britain 268, 290; and German reparations 441, 453–61, 488–9, 496–7; and Germany after the Ruhr crisis 453; Hoover moratorium 498, 506, 507; Kellogg-Briand Pact 472–3; and the League of Nations 257–8, 263; and the London Naval Conference 491–2, 493; Mellon-Berenger accord 469, 473, 497; and the occupation of the Ruhr 443–6, 448, 459; Thoiry initiative 473; trilateral security guarantee with Britain 277–80; US private long-term investment (December 1930) 476; and war compensations and reconstruction 251; and war debts 298, 299, 302, 304, 349, 366, 367, 440, 467–70, 468, 473, 496–7, 498, 506–7; and the Washington Conference 400–401; and the Washington Naval Conference 11; Wilson and the Socialists 240; Wilson on French freedom 276–7 German-Americans 43 and Germany: and American business interest 320; anti-American Mexican alliance proposal 65–6; and the armistice 220–31; breaking of diplomatic relations (February 1917) 89; Dawes Plan 453–61, 464, 497; derailment of Wilson’s ‘peace without victory’ 52, 56–8; and the French invasion of the Ruhr 443–6, 448, 459; German embassy in Washington 56; Germany’s Atlanticist internationalism 221–2; and the Great Depression 495–6; Hitler’s concerns over the US 6, 7; Hoover moratorium 498, 502–3, 507; and reparations 293–5, 297–304, 441, 453–61, 495–6, 498, 506; severing of diplomatic relations 59; stabilization of Weimar Republic after 1924 by US credit 461, 464–5; Stresemann’s policy of accommodation 448; Thoiry initiative 473; U-boat campaign 24, 45, 48, 57–8, 64, 66; US debts 498, 502–3, 506–7; US private long-term investment (December 1930) 476, 495–6; and Wilson’s 14 Points manifesto 122–3, 134, 143, 144, 145, 198, 224, 226, 227, 228, 230, 233, 327; Wilson’s demand for Kaiser’s abdication 224, 225; Wilson’s unilateral negotiations with Berlin 222–5, 229, 231 gold 344, 345, 349, 359, 505; standard 38, 345, 346, 355, 363, 505 growth in power through the war 6–7, 11 and the Hague Convention 267 Harding administration 348–9, 372, 432, 439, 441, 443; and the Washington Conference 396–7, 401 hegemonic crisis model 18–20, 26 Hoover administration 488 image 41 immigration law 348 and India 210 industry 41; industrial action (1919) 247, 341–2, 343, 409; Industrial Conference 341 interest rates 344–5, 349 invisible influence on post-war international order 3–4, 515–16 isolationism 348, 505, 517 and Italy see Italy: and the US and Japan see Japan: and the US Jewish-Americans 43 and the Ku Klux Klan 339, 347 labour movement 43, 340–42 and the League of Nations 267, 336–7; and the absent presence of US power 515–16; and Article X of Covenant 335, 336–7; and Britain 258, 259–61, 266, 268–70, 271, 455; and Geneva Protocols 470–71; and the need for the US to dissociate from former allies 303; Republican support 335; and Wilson 16, 53, 54, 222–3, 243, 255–6, 259–63, 264, 266, 269–70, 277, 325, 326, 337, 516 Liberty Bonds/Loans 206–7, 208, 215, 216, 342, 343, 344 and the London Naval Conference 491–2, 493 and the Middle East 193–6, 378 militarized great power destiny 517 military spending 514 and the Monroe doctrine 15, 310 National Equal Rights League 339 nationalism: and exceptionalism 27; and US role in international economy 349; Wilson presidency as triumphant nationalism 348 navy 15, 268–9, 362, 490; 1916 expansion 35–6, 56; and the Pacific 401 see also Washington Naval Conference New Deal 505, 517 New Freedom 340, 346, 461 Open Door policy 15–16, 44, 103, 205; and the Washington Conference 397, 405 and the Panama Canal 44 Pax Americana 7 ‘peace without victory’ goal 16, 50–67, 72, 75–8, 86–7, 211, 222, 257, 461 Penrose Bill 372–3 perception of Europe as the ‘Dark Continent’ 17–18, 26 Philippine conquest 41 Pittman Act 210 populist movement 43 post-war problems: economic 342–7, 346, 349–50; industrial 341–2, 343; racial 338–40; ‘Red movement’ 340, 342, 354, 409, 517; reluctance to face challenges 26–7 private long-term foreign investment 495–6; December 1930 476–7 privileged detachment of 67, 516 problematic entry into modernity 27–9 productivism 201 protectionism 15, 349, 492, 493, 501 and the quest for pacification and appeasement strategies 26 race riots (1919) 339–40 recognition of Provisional Government of Russia 68 Reconstruction 44, 63–4 Red movement/Red Scare 340, 342, 354, 409, 517 refusal to take sides in War 16, 44–5, 46, 52, 53–7, 60, 65 Republican Party 37, 231, 347, 348, 396; 1916 Presidential campaign 46; 1918 mid-term election campaign 340; abolitionists 63; Entente supporters 59; and the League of Nations 335; reaction to Wilson’s ‘peace without victory’ 55; and the Treaty Fight 335–6 resource funnelling into Europe 201–5 and Russia/USSR: aid (1917) 80; American anti-Bolshevik agitation 340; Bullitt’s mission to Russia 236; Cold War see Cold War; debts to US 302; economic cooperation proposal (May 1918) 152–3; famine relief 12, 425, 435; and the grave of Russian democracy 86–7; and House 86–7; and Japan 141, 144–5, 408; and the Kellogg-Briand Pact 472; Lansing’s view of Bolshevism 144; in October Revolution aftermath 86–7; and the Petrograd formula 76–8; Portsmouth Treaty arbitration 408; and refusal to attend Genoa Conference 430; and the reinvention of Communism 409; and the Siberian intervention 156, 158–9; and Soviet sponsorship of Northern Expedition 511; and the Trans-Siberian railway 80, 158; US recognition of Provisional Government 68; and the Washington Naval Conference 11; and Wilson’s 14 Points manifesto 121–3, 134, 143, 144, 145 Seattle general strike (February 1919) 340 shipping 202–4, 205; Emergency Fleet Corporation 35, 203 silver 210 Smoot Hawley tariff 501, 504 Spanish-American War 15, 41, 44 strikes: 1914–1921 247; 1919 341–2, 343; and the Communist vision 409; Seattle general strike (February 1919) 340 and the suppression of imperialism 15–16 trade policy reversal after Wilson 348–9 trade unions 46, 340, 341–2 Treasury 80, 216, 303, 304, 343–5; Certificates 345 Trotsky’s concerns and views 6, 8–9, 11, 12 and Turkey 194 unemployment 345–6, 348 and Versailles see Wilson, Woodrow: and Versailles wages 46, 216, 339, 343 War Industries Board 207 Washington Conference see Washington Naval Conference Wilson presidency see Wilson, Woodrow Wilsonianism see Wilsonianism working class militancy 246, 247 see also United States of America: strikes working hours 246 and the world economy 26, 476–7 US Steel 341, 342 USPD (Independent Social Democratic Party, Germany) 73, 75, 111, 130, 237, 238, 239, 242, 319, 320 ‘All Power to the Soviets’ slogan 409 and the Berne conference 242 and Brest-Litovsk 139 inquiry into German war guilt 313 and the Second Socialist International 240, 242 split with Comintern’s 21 Points 418 USSR see Soviet Union Varela, Hector 353 Vaterlandspartei (Homeland Party, Germany) 82, 111, 112, 130 Vatican peace initiative 87 Venezuala, US private long-term investment (December 1930) 477 Venice 82 Venizelos, Eleftherios 382, 438 Verdun, battle of 3, 11, 33, 37, 46, 47, 57, 176 Versailles/Paris peace conferences and Treaty 223, 226, 229, 251, 255–70 and the abolition of conscription 265, 277, 313 anticipated failure of 17 assigning of war guilt 9 and China 255, 282, 321–3; and Shandong 321, 323, 326–9, 336, 397 compliance in Asia 321–32 compliance in Europe 305–20 Council of Ten 291 criminalizing of the Kaiser 9 cruelty and kindness of 271–2, 280, 287 danger of clash between Europeans and Wilson 277–8, 307 and the Dawes Plan 458–9, 460–61, 470 and the DNVP 460–61 and Egypt 379 final phase (from May 1919) 312–18 and France 5, 255, 256, 257–8, 271–5, 277–80, 281, 286–7, 291; and the Middle East 378 see also Clemenceau, Georges: and Versailles German consideration of 312–18 and the German National Assembly 313, 317, 318–19 and German reparations 288, 292, 295, 297–8, 313–14, 489 and German revisionism 489, 490 and German sovereignty 272–6, 287, 289, 436, 448–9 and Italy 255, 308–11 and Japan 255, 256, 258–9, 321–8, 329, 363; and Shandong 321, 323, 326–9, 336, 397 and Keynes 271, 295–301 and the League of Nations Covenant 255–6, 259–70, 271, 324–6, 335 and Lloyd George 249–50, 282, 307, 314, 328 National Assembly vote 318 and a patchwork world order 255–70 and Prussia 283, 314, 316 Quai d’Orsay conference 235, 255 Saint-Germain Treaty 330 and self-determination/sovereignty 272–6, 287, 289, 436, 448–9 and Shandong 321, 323, 326–9, 336, 397 smaller conferences in Parisian suburbs 330 unfinished peace of 4 US assessment of budget positions ahead of 249 and Wilson see Wilson, Woodrow: and Versailles Victory Loan 343 Vienna 42, 109, 116, 117–18 Congress of 273, 274–5 Kreditanstalt 495 Viereck, George Sylvester 66 Volpi, Giuseppe 466 Vorwaerts 162–3 Vossische Zeitung 154 Wallace, Hugh Campbell 360–61 Wang, C.

Wealth and Poverty: A New Edition for the Twenty-First Century by George Gilder

accelerated depreciation, affirmative action, Albert Einstein, Bear Stearns, Bernie Madoff, book value, British Empire, business cycle, capital controls, clean tech, cloud computing, collateralized debt obligation, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, deindustrialization, diversified portfolio, Donald Trump, equal pay for equal work, floating exchange rates, full employment, gentrification, George Gilder, Gunnar Myrdal, Home mortgage interest deduction, Howard Zinn, income inequality, independent contractor, inverted yield curve, invisible hand, Jane Jacobs, Jeff Bezos, job automation, job-hopping, Joseph Schumpeter, junk bonds, knowledge economy, labor-force participation, longitudinal study, low interest rates, margin call, Mark Zuckerberg, means of production, medical malpractice, Michael Milken, minimum wage unemployment, Money creation, money market fund, money: store of value / unit of account / medium of exchange, Mont Pelerin Society, moral hazard, mortgage debt, non-fiction novel, North Sea oil, paradox of thrift, Paul Samuelson, plutocrats, Ponzi scheme, post-industrial society, power law, price stability, Ralph Nader, rent control, Robert Gordon, Robert Solow, Ronald Reagan, San Francisco homelessness, scientific management, Silicon Valley, Simon Kuznets, Skinner box, skunkworks, Solyndra, Steve Jobs, The Wealth of Nations by Adam Smith, Thomas L Friedman, upwardly mobile, urban renewal, volatility arbitrage, War on Poverty, women in the workforce, working poor, working-age population, yield curve, zero-sum game

Investment credits and rapid depreciation allowances—although better than no tax cuts at all—tend to favor the re-creation of current capital stock rather than the creation of new forms of capital and modes of production. Antitrust suits are directed chiefly against successful competitors (such as IBM) and ignore the government policies as the root of most American monopoly. The system of floating exchange rates deals with lapses in international trade by depreciating the dollar rather than by forcing a competitive response of greater productivity and new products. Our taxation and subsidy systems excessively cushion failure (of businesses, individuals, and local governments), reward the creativity and resourcefulness chiefly of corporate lawyers and accountants, and wait hungrily in ambush for all unexpected, and thus unsheltered, business success.

…

See Food and Drug Administration federal aid, economic growth and federal borrowing federal budget Federal Deposit Insurance Corporation (FDIC) federal disability benefits Federal Home Loan Bank federal programs, growth of Federal regulation. See Regulation Federal Reserve Feige, Edgar Feldstein, Martin Ferguson, Charles feudalism Filipinos Financial markets. See also Stock market Financing Failure: A Century of Bailouts first-job barrier First National Bank of Boston fiscal integrity floating exchange rates Food and Drug Administration (FDA) food stamps Forbes Ford, Gerald Ford, Henry Ford Foundation Ford Motor Company foreign money Forrester, Jay Fortune foundations France Frank, Barney Fraser, Malcolm Freddie Mac Friedman, Milton Friedman, Thomas fringe benefits G Galbraith, John Kenneth Galileo gambler’s ruin gambling impulse gambling stocks Gans, Herbert GAO.

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

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

Policy-makers and bankers themselves had always been more attached to competition than regulation – it was intellectually and philosophically more acceptable, and it afforded huge opportunities to make serious money. But now there was a paradigm shift in the argument. Markets, bankers argued, would do better than the state. Banks, they claimed, needed more freedom to manage their balance sheets and risk in an environment of floating exchange rates and free capital movements. Leading the charge were the banking communities in New York and London, using all their influence, especially with free-market-inclined Conservative and Republican politicians, to break down rules and promote competition. Who, after all, could be against more competition?

…

But for big finance there remained no doubt that it was on the right track. There was already a vast pool of money available to the banks and other companies, managed by professional treasury managers – the so-called interbank money market. This had been developing since the 1960s and was given a huge boost when the era of floating exchange rates began. Companies, banks and even countries dealing in cash denominated in one of the world’s reserve currencies could lend to each other in that currency or access the interbank market in another reserve currency – principally the dollar and the yen, but also the pound, the Swiss franc and German mark – and hedge against the risk of potentially adverse, loss-making movements.

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

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

Greg Mankiw, the Harvard professor and author of a leading economics textbook, provided a list in his blog a few years back.3 Here are some of the top ones (the numbers in parentheses indicate the percentage of economists who agree with the proposition). 1. A ceiling on rents reduces the quantity and quality of housing available. (93%) 2. Tariffs and import quotas usually reduce general economic welfare. (93%) 3. Flexible and floating exchange rates offer an effective international monetary arrangement. (90%) 4. Fiscal policy (for example, tax cuts and/or government expenditure increases) has a significant stimulative impact on a less than fully employed economy. (90%) 5. The United States should not restrict employers from outsourcing work to foreign countries. (90%) 6.

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

battle of ideas, Berlin Wall, Boris Johnson, Bretton Woods, Brexit referendum, 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, Les Trente Glorieuses, liberal capitalism, Mahatma Gandhi, mass immigration, Monroe Doctrine, Neal Stephenson, Nixon shock, public intellectual, quantitative easing, reserve currency, Ronald Reagan, Steve Bannon, Suez canal 1869, Suez crisis 1956, trade route, Washington Consensus

It was simultaneously embarking on major rises in military and social spending under conditions of full employment and, in so doing, putting enormous pressure on the dollar. The dollar was overvalued and the international monetary system that had supported its global role could no longer be patched up through the bilateral currency swaps and gold pool arrangements that had been used in the 1960s. Efforts to repair it failed. By 1973, floating exchange rates had become entrenched, and currency fluctuations became the shock absorbers of the global economy. The sterling area finally disappeared. The collapse of Bretton Woods inaugurated an era in which the governing frameworks of Anglo-American political economy changed profoundly. The managed international monetary system in which both the USA and the UK had a stake, as sovereigns of the world's two major currencies, was gradually replaced by a liberalised economic order under renewed American leadership.

The Next Factory of the World: How Chinese Investment Is Reshaping Africa by Irene Yuan Sun

"World Economic Forum" Davos, asset light, barriers to entry, Bretton Woods, business logic, capital controls, clean water, Computer Numeric Control, deindustrialization, demographic dividend, Deng Xiaoping, Donald Trump, European colonialism, floating exchange rates, full employment, global supply chain, Great Leap Forward, invisible hand, job automation, low skilled workers, M-Pesa, manufacturing employment, means of production, mobile money, Multi Fibre Arrangement, post-industrial society, profit motive, purchasing power parity, race to the bottom, RAND corporation, Ronald Reagan, Shenzhen special economic zone , Shenzhen was a fishing village, Silicon Valley, Skype, special economic zone, structural adjustment programs, tacit knowledge, Triangle Shirtwaist Factory, union organizing, Washington Consensus, working-age population

In 1986, with no other options left, Nigeria accepted the IMF’s Structural Adjustment Program, a package of emergency loans that gave it a much-needed fiscal lifeline in exchange for acceptance of Washington Consensus policies of privatization and liberalization of the economy. A main thrust was the adoption of a floating exchange rate program with no predefined rates of change. From an exchange rate of roughly 2 naira to US$1 at the beginning of the program, the naira depreciated to 4 in 1987, to 10 in 1991, and further to 22 in 1998.15 By the time I met Lawrence Tung, in 2013, the rate was 165 naira to the dollar. For textile mills, the continued drop in the currency’s value was devastating, because they could no longer afford to import needed spare parts and machinery, and decades of importing them meant that no domestic suppliers existed to fill those needs.

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

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

The pre-eminent example of the former category is the IMF’s special drawing right (SDR). The SDR (which, confusingly, has the ISO 4217 code ‘XDR’) was created as a supplementary international reserve asset in the context of the Bretton Woods fixed exchange rate system. After the collapse of that system in 1973, the shift of major currencies towards floating exchange rate regimes lessened our reliance on the SDR as a global reserve asset. It was initially defined as equivalent to 0.888671 grams of fine gold, which, at the time, was equivalent to one US dollar. In 1973, the SDR was redefined as a basket of currencies. This basket (last reviewed in 2015) is made up of five major world currencies, as shown in table 8.

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

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

But hints that a devaluation might be looming can cause massive speculation against the vulnerable currency, as we shall discuss in chapter 8. See also [248] for an eye-opening description of the conundrums of monetary policies. With the end of Bretton Woods in the early 1970s, the market for foreign currency grew rapidly in both size and instability. The liberalization of capital flows that followed the adoption of floating-exchange rates brought vastly larger flows of capital between nations. The first naive presumption is that the exchange rate between two currencies, say the U.S. dollar and the European euro (since January 1999), would be determined by the needs of trade: by North Americans trading with Europeans for euros in order to buy European goods, and conversely.

…

Since these investment demands are highly variable, including a fluctuating component of speculation, currency values prove volatile and prone to the same forces as described in chapters 4 and 5 for stocks and general financial markets. Such forces proved to be at the origin of the speculative bubble on the dollar in the first half of the 1980s [340]. The role of monetary policy allowed by the floating-exchange rate was particularly clear in the context of the large deficit of the U.S. federal budget in the early 1980s, which led to fears that inflation would go sky-high. According to supporters of monetary policy, the key to controlling inflation was that the Federal Reserve did not pump up the money supply too much.

The Rise of the Quants: Marschak, Sharpe, Black, Scholes and Merton by Colin Read

Abraham Wald, Albert Einstein, Bayesian statistics, Bear Stearns, Black-Scholes formula, Bretton Woods, Brownian motion, business cycle, capital asset pricing model, collateralized debt obligation, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, discovery of penicillin, discrete time, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, financial engineering, financial innovation, fixed income, floating exchange rates, full employment, Henri Poincaré, implied volatility, index fund, Isaac Newton, John Meriwether, John von Neumann, Joseph Schumpeter, Kenneth Arrow, Long Term Capital Management, Louis Bachelier, margin call, market clearing, martingale, means of production, moral hazard, Myron Scholes, Paul Samuelson, price stability, principal–agent problem, quantitative trading / quantitative finance, RAND corporation, random walk, risk free rate, risk tolerance, risk/return, Robert Solow, Ronald Reagan, shareholder value, Sharpe ratio, short selling, stochastic process, Thales and the olive presses, Thales of Miletus, The Chicago School, the scientific method, too big to fail, transaction costs, tulip mania, Works Progress Administration, yield curve

Long Term Capital Management’s strategy was very profitable so long as the market continued on a trajectory that had been maintained ever since the company’s inception. However, in July 1997, a financial contagion began in East Asia and spread around the world. It began when Thailand decided to end the fixed exchange rate regime that had pegged the value of its currency, the baht, to the US dollar. Once it moved to a floating exchange rate regime, the baht depreciated significantly, and its public debt, much of which was denominated in US dollars, ballooned dramatically. The Thai government was unable to meet its ongoing debt obligations and it was technically in default. As a consequence of the default, there was an immediate flight out of the baht and the currencies of other neighboring nations.

The Long Twentieth Century: Money, Power, and the Origins of Our Times by Giovanni Arrighi

anti-communist, Asian financial crisis, barriers to entry, Bretton Woods, British Empire, business climate, business logic, business process, classic study, colonial rule, commoditize, Corn Laws, creative destruction, cuban missile crisis, David Ricardo: comparative advantage, declining real wages, deindustrialization, double entry bookkeeping, European colonialism, Fairchild Semiconductor, financial independence, financial intermediation, floating exchange rates, gentrification, Glass-Steagall Act, Great Leap Forward, income inequality, informal economy, invisible hand, joint-stock company, Joseph Schumpeter, Kōnosuke Matsushita, late capitalism, London Interbank Offered Rate, means of production, Meghnad Desai, military-industrial complex, Money creation, money: store of value / unit of account / medium of exchange, new economy, offshore financial centre, oil shock, Peace of Westphalia, post-Fordism, profit maximization, Project for a New American Century, RAND corporation, reserve currency, scientific management, spice trade, Strategic Defense Initiative, Suez canal 1869, the market place, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, trade route, transaction costs, transatlantic slave trade, transcontinental railway, upwardly mobile, vertical integration, Yom Kippur War

It was during these years that deposits in the so-called Eurodollar or Eurocurrency market experienced a sudden upward jump followed by twenty years of explosive growth. And it was during these same six years that the system of fixed parties between the main national currencies and the US dollar and between the US dollar and gold, which had been in force throughout the phase of material expansion, was abandoned in favor of the system of flexible or floating exchange rates — a system which some (e.g. Aglietta 1979b: 831) regard not as a system at all, but as the form taken by the crisis of the pre-existing system. These were distinct but mutually reinforcing developments. On the one hand, the accumulation of a growing mass of world liquidity in deposits that no government controlled put increasing pressure on governments to manipulate the exchange rates of their currencies and interest rates in order to attract or repel liquidity held in offshore markets to counter shortages or surfeits in their domestic economies.

…

Instead of decreasing, the importance of the US dollar as world money increased, and what had previously existed informally was now established formally (Cohen 1977: 232-8). For about five years, from 1973 to 1978, this pure dollar standard seemed to endow the US government with an unprecedented freedom of action in the production of world money: The system of floating exchange rates . . . eliminated any need for the United States to control its own balance of payments deficit, no matter what its source, because it was now possible to release unlimited quantities of non-convertible dollars into international circulation. Therefore, while continuing to depreciate the dollar in an attempt to recover competitivity in the production of goods, the United States was no longer saddled with the problem of generating a current account surplus with which to finance its capital-account deficit. . . .

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

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

The decision of a group of developed sovereign countries to revive something akin to a Gold Standard in the twenty-first century requires a bit of explanation. We have to go back to the 1970s when the old Bretton Woods arrangement of fixed exchange rates broke down. Countries were on a de facto flexible or floating exchange rate system. This was a regime for which there were no road maps. Western European countries had previously come together in an arrangement that was called the Common Market (it was later renamed the European Economic Community, EEC). France, the Federal Republic of Germany, Italy, the Netherlands, Belgium and Luxemburg were the original members of what was in effect a customs union.

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

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

Hub Culture’s currency, Ven, is an attempt to bridge the divide between virtual currencies and real-world goods and services. People in the network transact in the “local” currency, which is priced from a basket of major sovereign currencies, commodities, and carbon futures. Your Ven can be exchanged for one of the major national currencies based on the same floating exchange rates that govern the value of world currencies against one another. Bitcoin has captured peoples’ imaginations because the money supply is determined by an algorithm, not bureaucrats or economists, and there is a cap to the number of Bitcoins that can be created: 21 million. Two related experiments are the Wuffie Bank and Serios.

Open: The Progressive Case for Free Trade, Immigration, and Global Capital by Kimberly Clausing

"World Economic Forum" Davos, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, active measures, Affordable Care Act / Obamacare, agricultural Revolution, battle of ideas, Bernie Sanders, business climate, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, carbon tax, climate change refugee, corporate social responsibility, creative destruction, currency manipulation / currency intervention, David Ricardo: comparative advantage, Donald Trump, fake news, floating exchange rates, full employment, gig economy, global supply chain, global value chain, guest worker program, illegal immigration, immigration reform, income inequality, index fund, investor state dispute settlement, knowledge worker, labor-force participation, low interest rates, low skilled workers, Lyft, manufacturing employment, Mark Zuckerberg, meta-analysis, offshore financial centre, open economy, Paul Samuelson, precautionary principle, profit motive, purchasing power parity, race to the bottom, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, Silicon Valley, Tax Reform Act of 1986, tech worker, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transfer pricing, uber lyft, winner-take-all economy, working-age population, zero-sum game

Some suggest that, if the United States wants to reduce its trade deficit, it should pay more attention to the value of the US dollar in international markets. However, most major economies—the Eurozone (as a whole), Japan, the United Kingdom, Australia, Canada, and the United States—have floating exchange rates. In other words, the sellers and buyers of currency determine the value of exchange rates in the foreign currency markets, leaving little room for the Federal Reserve and other central banks to affect exchange rates in these countries. This is likely for the best, since monetary policy (the actions of the central bank) can then be devoted to more useful ends, like working to counter recessions.

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

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

The key point to note is foreign exchange transactions do not affect the level of reserves in aggregate in the banking system; they merely transfer reserves between banks. 6.4.2. Different exchange rate regimes As discussed in Section 3.6, the UK has moved from having a gold-backed currency to a pegged exchange rate and finally to a free-floating exchange rate. In this section we briefly review these different models and their relation to monetary policy. When countries adhered to the gold standard, their exchange rate was determined by an agreement to exchange notes for a fixed quantity of gold. However, it is also possible to have a fixed exchange rate regime with a fiat currency, as was the case before in Europe just before the introduction of the euro.

A World in Disarray: American Foreign Policy and the Crisis of the Old Order by Richard Haass

access to a mobile phone, anti-communist, Berlin Wall, Bretton Woods, carbon footprint, carbon tax, central bank independence, colonial rule, cuban missile crisis, currency manipulation / currency intervention, deindustrialization, Doha Development Round, Donald Trump, Edward Snowden, energy security, European colonialism, failed state, Fall of the Berlin Wall, floating exchange rates, global pandemic, global reserve currency, guns versus butter model, hiring and firing, immigration reform, invisible hand, low interest rates, Mikhail Gorbachev, Monroe Doctrine, moral hazard, mutually assured destruction, no-fly zone, open economy, quantitative easing, RAND corporation, reserve currency, Ronald Reagan, South China Sea, special drawing rights, Steven Pinker, Suez crisis 1956, UNCLOS, UNCLOS, uranium enrichment, Yom Kippur War

What also occurred was a falling off of domestic political support for trade pacts in the United States and many other countries, casting uncertainty over future efforts to promote a more open world trading system. There was arguably less formal governance but still significant coordination on the monetary side. The principal characteristics of the era were floating exchange rates, central bank independence, and dollar dominance. The IMF assessed (“surveilled”) economies and gave them public report cards but had no power to insist on reforms other than when it was involved in extending loans to governments in financial difficulty. In the banking arena, the so-called Basel Committee established standards (for example, for the amount of capital required to be kept on hand) that banks were encouraged to follow.

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

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

But when the Bretton Woods system broke down in 1971–73 – with the Nixon administration no longer being prepared to support the rates of other currencies against the US dollar, which was itself devalued – the world embarked on not so much a system as a non-system of ‘floating rates’. Once the major nations embarked on a world of floating exchange rates, there could be wild gyrations in those rates. It was concern about these in the course of the 1970s that contributed to the decision on the part of Chancellor Schmidt, President Giscard and Roy Jenkins to press for ‘a zone of monetary stability’ in Europe, which led to the setting up of the European Monetary System.

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

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

The liberalisation of global capital markets and the sweeping away of domestic controls over credit enabled global finance a gradual return to the supremacy it had last enjoyed in the nineteenth century. In the post-war era, the international finance industry was a highly regulated system with largely fixed exchange rates and heavy restrictions on capital flows. By the mid-1980s, it was marked by lax regulations on lending, the free mobility of capital and for most countries, freely floating exchange rates. Moreover the other pillars of the market experiment adopted in the US and the UK—the weakening of unions, the axing of business regulations and the switch from maintaining employment to fighting inflation—also served to re-concentrate power in the hands of the leaders of the global finance industry.

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

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

Admittedly, the establishment of a eurozone ‘bad bank’ would leave eurozone taxpayers to pick up the bill. That, however, would be small price to pay if, as a result, nations within the single currency were then able to thrive: far better to have orderly losses than a catastrophic collapse. DEALING WITH DEBT: COUNTRIES WITH FLOATING EXCHANGE RATES The great advantage of an independent monetary policy is the ability to delay until tomorrow what might otherwise be necessary today. It's easy enough, for example, to see that the US, the UK and Japan – all of which have ropey fiscal positions, at least judged by post-war standards – have been under no real pressure to deliver austerity with the savage urgency required of nations in southern Europe.

Life After Google: The Fall of Big Data and the Rise of the Blockchain Economy by George Gilder

23andMe, Airbnb, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, Albert Einstein, AlphaGo, AltaVista, Amazon Web Services, AOL-Time Warner, Asilomar, augmented reality, Ben Horowitz, bitcoin, Bitcoin Ponzi scheme, Bletchley Park, blockchain, Bob Noyce, British Empire, Brownian motion, Burning Man, business process, butterfly effect, carbon footprint, cellular automata, Claude Shannon: information theory, Clayton Christensen, cloud computing, computer age, computer vision, crony capitalism, cross-subsidies, cryptocurrency, Danny Hillis, decentralized internet, deep learning, DeepMind, Demis Hassabis, disintermediation, distributed ledger, don't be evil, Donald Knuth, Donald Trump, double entry bookkeeping, driverless car, Elon Musk, Erik Brynjolfsson, Ethereum, ethereum blockchain, fake news, fault tolerance, fiat currency, Firefox, first square of the chessboard, first square of the chessboard / second half of the chessboard, floating exchange rates, Fractional reserve banking, game design, Geoffrey Hinton, George Gilder, Google Earth, Google Glasses, Google Hangouts, index fund, inflation targeting, informal economy, initial coin offering, Internet of things, Isaac Newton, iterative process, Jaron Lanier, Jeff Bezos, Jim Simons, Joan Didion, John Markoff, John von Neumann, Julian Assange, Kevin Kelly, Law of Accelerating Returns, machine translation, Marc Andreessen, Mark Zuckerberg, Mary Meeker, means of production, Menlo Park, Metcalfe’s law, Money creation, money: store of value / unit of account / medium of exchange, move fast and break things, Neal Stephenson, Network effects, new economy, Nick Bostrom, Norbert Wiener, Oculus Rift, OSI model, PageRank, pattern recognition, Paul Graham, peer-to-peer, Peter Thiel, Ponzi scheme, prediction markets, quantitative easing, random walk, ransomware, Ray Kurzweil, reality distortion field, Recombinant DNA, Renaissance Technologies, Robert Mercer, Robert Metcalfe, Ronald Coase, Ross Ulbricht, Ruby on Rails, Sand Hill Road, Satoshi Nakamoto, Search for Extraterrestrial Intelligence, self-driving car, sharing economy, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, Singularitarianism, Skype, smart contracts, Snapchat, Snow Crash, software is eating the world, sorting algorithm, South Sea Bubble, speech recognition, Stephen Hawking, Steve Jobs, Steven Levy, Stewart Brand, stochastic process, Susan Wojcicki, TED Talk, telepresence, Tesla Model S, The Soul of a New Machine, theory of mind, Tim Cook: Apple, transaction costs, tulip mania, Turing complete, Turing machine, Vernor Vinge, Vitalik Buterin, Von Neumann architecture, Watson beat the top human players on Jeopardy!, WikiLeaks, Y Combinator, zero-sum game

Millions of Chinese hackers take the lead, obsessively deploying petaflops—thousands of trillions of floating-point operations per second—to simulate the extraction process. Like gold standards through most of human history—look it up—T’Rain’s virtual gold standard is an engine of wealth. T’Rain prospers mightily. Even though its money is metafictional, it is in fact more stable than currencies in the real world of floating exchange rates and fiat money. Down here, for example, the U.S. government deploys its own computer power to fabricate dollars by the trillions out of thin air to pay its bills. Goldman Sachs deploys rackfuls of computer power linked by fiber-optic lines at the speed of light to extract lucrative margins out of prestidigitory trading in nanoseconds with nary a reference to real values.

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

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

At its heart, the system relied on the dollar holding its value against gold, but the US authorities proved unable to square that with their foreign and domestic policy priorities. The Bretton Woods framework collapsed in the early 1970s under the weight of US fiscal profligacy and inflationary incontinence. Since then, most countries have opted for a floating exchange rate with domestic (or, as in the euro area, regional) control of monetary policy. Technically, each jurisdiction is free under IMF treaty rules to adopt capital controls, but the strong norm has been that they do not do so. This was a world, most thought, in which the effects of one country’s monetary policy on others would be confined to shifts in exchange rates, leaving national economies to manage their own domestic monetary course in the interests of their own citizens.

…

Another demand-side force was the community of central bankers and monetary economists. Of course, CBI would increase their power and influence, but they did have arguments. Even under the Bretton Woods regime, under which most countries pegged their currency to the dollar, itself pegged to gold, Chicago economist Milton Friedman and others were making the case that floating exchange rates would permit smoother adjustment to international current account imbalances. But precisely because that would restore domestic monetary sovereignty, it posed the question of how politicians could be deterred from abusing the monetary power. After Bretton Woods collapsed, those issues could not be ducked, prompting a quarter-century-long debate about rules versus discretion (as told in the next chapter).

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

"World Economic Forum" Davos, affirmative action, Alan Greenspan, Asian financial crisis, bank run, banking crisis, Bear Stearns, bilateral investment treaty, borderless world, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, central bank independence, classic study, 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, export processing zone, 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 interest rates, low skilled workers, margin call, market bubble, market fundamentalism, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, microcredit, Monroe Doctrine, moral hazard, Multi Fibre Arrangement, night-watchman state, non-tariff barriers, offshore financial centre, oil shock, open borders, open economy, Paul Samuelson, precautionary principle, price stability, profit maximization, race to the bottom, regulatory arbitrage, Savings and loan crisis, savings glut, Silicon Valley, special drawing rights, special economic zone, subprime mortgage crisis, 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 missing ingredients would be brought into the picture much later as the problems of free finance became more apparent. The painful lessons of the interwar period would have to be relearned. Currency floating, in particular, worked very differently from what most economists expected at the time. By the 1980s, “excessive volatility” and “misalignment” had become bywords for floating exchange rates. As these pieces of economist’s jargon suggest, there were two problems: currency values fluctuated too much on a day-to-day basis; and there were prolonged periods of currency under-or overvaluation that created difficulties at home and for trade partners. Consider the travails of the British pound.

Rogue States by Noam Chomsky

"there is no alternative" (TINA), Alan Greenspan, anti-communist, Asian financial crisis, Berlin Wall, Branko Milanovic, Bretton Woods, business cycle, capital controls, classic study, collective bargaining, colonial rule, creative destruction, cuban missile crisis, declining real wages, deskilling, digital capitalism, Edward Snowden, experimental subject, Fall of the Berlin Wall, floating exchange rates, land reform, liberation theology, Mahbub ul Haq, Mikhail Gorbachev, Monroe Doctrine, new economy, Nixon triggered the end of the Bretton Woods system, no-fly zone, oil shock, precautionary principle, public intellectual, RAND corporation, Silicon Valley, strikebreaker, structural adjustment programs, Tobin tax, union organizing, Washington Consensus

That was a period, roughly up until about 1970, a period of historically unprecedented growth of the economy, of trade, of productivity, of capital investment, extension of welfare state measures, a golden age. That was reversed in the early ‘70s. The Bretton Woods system was dismantled, with liberalization of financial markets and floating exchange rates. The period since has often been described as a “leaden age.” There was a huge explosion of very short-term, speculative capital, completely overwhelming the productive economy. There was marked deterioration in just about every respect—considerably slower economic growth, slower growth of productivity, of capital investment, much higher interest rates (which slow down growth), greater market volatility, and financial crises.

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

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

It was Ben Bernanke’s book on the Great Depression that taught us the monetarist truism: ‘To an overwhelming degree the evidence shows that countries that left the Gold Standard recovered from the Depression more quickly than countries that remained on gold.’23 The lesson is this: he who devalues his currency first escapes the crisis first. In the 1930s, tight monetary policy, driven by adherence to gold, exacerbated the depression. This time there is no Gold Standard, but a system of free-floating exchange rates. Britain was first out of the blocks to devalue—the governor of the Bank of England, Mervyn King, told colleagues privately that he was proud of his contribution to the 20 per cent slide of sterling after 2008. America launched an effective devaluation strategy with QEII, despite simultaneously claiming to be for ‘a strong dollar’.

Data and the City by Rob Kitchin,Tracey P. Lauriault,Gavin McArdle

A Declaration of the Independence of Cyberspace, algorithmic management, bike sharing, bitcoin, blockchain, Bretton Woods, Chelsea Manning, citizen journalism, Claude Shannon: information theory, clean water, cloud computing, complexity theory, conceptual framework, corporate governance, correlation does not imply causation, create, read, update, delete, crowdsourcing, cryptocurrency, data science, dematerialisation, digital divide, digital map, digital rights, distributed ledger, Evgeny Morozov, fault tolerance, fiat currency, Filter Bubble, floating exchange rates, folksonomy, functional programming, global value chain, Google Earth, Hacker News, hive mind, information security, Internet of things, Kickstarter, knowledge economy, Lewis Mumford, lifelogging, linked data, loose coupling, machine readable, new economy, New Urbanism, Nicholas Carr, nowcasting, open economy, openstreetmap, OSI model, packet switching, pattern recognition, performance metric, place-making, power law, quantum entanglement, RAND corporation, RFID, Richard Florida, ride hailing / ride sharing, semantic web, sentiment analysis, sharing economy, Silicon Valley, Skype, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, smart contracts, smart grid, smart meter, social graph, software studies, statistical model, tacit knowledge, TaskRabbit, technological determinism, technological solutionism, text mining, The Chicago School, The Death and Life of Great American Cities, the long tail, the market place, the medium is the message, the scientific method, Toyota Production System, urban planning, urban sprawl, web application

As global trade required ‘modern’ organization through the early part of the twentieth century, the Bretton Woods agreement was signed in 1944 by committed countries in order to maintain exchange rates to a fixed value in terms of gold. On its failure in 1971 – due to the dollar’s inability to retain value in the light of a global recession – the detachment of monetary value from a mineral ore to a new system of floating exchange rates ‘de-materialized’ money (Harvey 1990). As the representation of value continues to become further abstracted from goods and services, for example, through electronic BACS transfers and online and mobile banking, we soon arrive at the role of money in society today. In the abstraction of value from a material representation to a promissory token, both time and identity become obfuscated.

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

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

From then on, the dollar would be a floating currency, with exchange rates for other countries’ currencies determined by the free market. Without a gold standard to restrict the money supply, the United States had new policy options. It could print money, cut interest rates to encourage lending, and let the dollar weaken over time. Moving from fixed to floating exchange rates caused dollars to lose value vis à vis other currencies. Surging imports got more expensive. Increased prices fed inflation. In this new climate, a group of stocks flourished. Investors poured their faith into so-called one-decision blue chip stocks with resilient earnings and P/E ratios.

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

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

The Response to the Dot-Com Bust After the crash in the NASDAQ index in 2000–2001 and the recession that followed, the Federal Reserve tried to offset the collapse in investment by cutting short-term interest rates steadily. From a level of 6½ percent in January 2001, interest rates were brought down to 1 percent by June 2003. Such a low level, unprecedented in the post-1971 era of floating exchange rates, sent a strong signal to the economy. House purchases picked up as more people found they could afford the lower mortgage payments. Increased housing demand encouraged more home construction, which was already being given a boost by the low interest rates at which developers could borrow.

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

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

Despite the huge government deficits run up during the war, the destruction of large swathes of Europe, and a highly repressed financial system, from 1945 to 1971 growth was uniformly high and unemployment very low. For these reasons this period is commonly referred to as the golden age of capitalism. Floating exchange rates Between 1945 and 1971 a new dynamic developed. By international agreement, oil had always been priced in US dollars and as a consequence the oil exporting nations of the Middle East had amassed a substantial surplus of dollars, invested mainly in US Government securities (bonds). By 1965, the French President, Charles de Gaulle, was decrying the world’s dependence on the US dollar and calling for a return to a national gold standard, and in 1971 Switzerland and France each demanded redemption in gold of its central bank’s holdings of dollars.

Greed and Glory on Wall Street: The Fall of the House of Lehman by Ken Auletta

Bear Stearns, book value, business climate, classic study, corporate governance, financial independence, fixed income, floating exchange rates, Herman Kahn, interest rate swap, junk bonds, New Journalism, profit motive, proprietary trading, Ronald Reagan, Saturday Night Live, scientific management, traveling salesman, zero-coupon bond

The State Department was not focused on international finance, and National Security Adviser Henry Kissinger was preoccupied with other matters, including a miserable war in Vietnam. Peterson supervised the principal staff work leading to the replacement of the international gold standard with a floating exchange rate. Working with Kissinger, he helped prepare for the Nixon-Brezhnev Summit of 1972, and chaired important trade negotiations with the Soviet Union, Poland and Japan. In the first volume of his memoirs, White House Years, Henry Kissinger says of Peterson’s appointment: I agreed enthusiastically when, at OMB Director George Shultz’s urging, the new post of Assistant to the President for International Economic Affairs was created at the White House—though it technically represented a diminution of my power.

The Blockchain Alternative: Rethinking Macroeconomic Policy and Economic Theory by Kariappa Bheemaiah

"World Economic Forum" Davos, accounting loophole / creative accounting, Ada Lovelace, Adam Curtis, Airbnb, Alan Greenspan, algorithmic trading, asset allocation, autonomous vehicles, balance sheet recession, bank run, banks create money, Basel III, basic income, behavioural economics, Ben Bernanke: helicopter money, bitcoin, Bletchley Park, blockchain, Bretton Woods, Brexit referendum, business cycle, business process, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, cashless society, cellular automata, central bank independence, Charles Babbage, Claude Shannon: information theory, cloud computing, cognitive dissonance, collateralized debt obligation, commoditize, complexity theory, constrained optimization, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-border payments, crowdsourcing, cryptocurrency, data science, David Graeber, deep learning, deskilling, Diane Coyle, discrete time, disruptive innovation, distributed ledger, diversification, double entry bookkeeping, Ethereum, ethereum blockchain, fiat currency, financial engineering, financial innovation, financial intermediation, Flash crash, floating exchange rates, Fractional reserve banking, full employment, George Akerlof, Glass-Steagall Act, Higgs boson, illegal immigration, income inequality, income per capita, inflation targeting, information asymmetry, interest rate derivative, inventory management, invisible hand, John Maynard Keynes: technological unemployment, John von Neumann, joint-stock company, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kenneth Rogoff, Kevin Kelly, knowledge economy, large denomination, Large Hadron Collider, Lewis Mumford, liquidity trap, London Whale, low interest rates, low skilled workers, M-Pesa, machine readable, Marc Andreessen, market bubble, market fundamentalism, Mexican peso crisis / tequila crisis, Michael Milken, MITM: man-in-the-middle, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, natural language processing, Network effects, new economy, Nikolai Kondratiev, offshore financial centre, packet switching, Pareto efficiency, pattern recognition, peer-to-peer lending, Ponzi scheme, power law, precariat, pre–internet, price mechanism, price stability, private sector deleveraging, profit maximization, QR code, quantitative easing, quantitative trading / quantitative finance, Ray Kurzweil, Real Time Gross Settlement, rent control, rent-seeking, robo advisor, Satoshi Nakamoto, Satyajit Das, Savings and loan crisis, savings glut, seigniorage, seminal paper, Silicon Valley, Skype, smart contracts, software as a service, software is eating the world, speech recognition, statistical model, Stephen Hawking, Stuart Kauffman, supply-chain management, technology bubble, The Chicago School, The Future of Employment, The Great Moderation, the market place, The Nature of the Firm, the payments system, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, trade liberalization, transaction costs, Turing machine, Turing test, universal basic income, Vitalik Buterin, Von Neumann architecture, Washington Consensus

As the century rolled on it was this form of money that evolved into fiat money, which is currently used by modern economies. Fiat currencies came into use in 1971 following the decision of President Nixon to discontinue the use of the gold standard. The end of the gold standard helped sever the ties between world currencies and real commodities and gave rise to the floating exchange rate. A distinguishing feature between commodity-backed currencies and fiat currencies, however, is the fact that it is based on trust and not a tangible value per se. Fiat currency is backed by a central or governmental authority and functions in purpose as a legal tender that it will be accepted by other people in exchange for goods and services.

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

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

FEEDBACK LOOP: A channel or pathway that is formed by an “effect” returning to its “cause”; it generates either more or less of the same effect. FIAT MONEY: Money that has value solely through governmental decree, not through any intrinsic value or ability to be redeemed for specie or commodity. FLOATING EXCHANGE RATE: When the value of a currency is allowed to fluctuate according to market forces and is not fixed by government entities. FOREIGN DIRECT INVESTMENT: Investment of foreign assets into domestic structures, equipment, and organization. Excludes foreign investment in domestic stock markets. FOREIGN EXCHANGE RESERVES: Liquid assets held by a central bank or government entity that are used to intervene in the foreign exchange market.

Planet Ponzi by Mitch Feierstein

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

Wall Street was still a minor player in the scheme of things, but a feisty one, a growing one. No other sector had grown at that rate. Even the computer industry, in the age of the PC and the mass-produced silicon chip, had not grown that fast. That turbocharged growth was fueled by two principal ingredients. First, the advent of floating exchange rates in 1971 had gradually led to the dismantling of international controls on the movement of capital. As capital started to become ever more mobile, Wall Street firms were ideally placed to skim a little froth from the river of money as it passed on through.2 Secondly, Wall Street had perfected the art of ‘disintermediation.’

Anatomy of the Bear: Lessons From Wall Street's Four Great Bottoms by Russell Napier

Alan Greenspan, Albert Einstein, asset allocation, banking crisis, Bear Stearns, behavioural economics, book value, Bretton Woods, business cycle, buy and hold, collective bargaining, Columbine, cuban missile crisis, desegregation, diversified portfolio, fake news, financial engineering, floating exchange rates, Fractional reserve banking, full employment, Glass-Steagall Act, global macro, hindsight bias, Kickstarter, Long Term Capital Management, low interest rates, market bubble, Michael Milken, military-industrial complex, Money creation, mortgage tax deduction, Myron Scholes, new economy, Nixon triggered the end of the Bretton Woods system, oil shock, price stability, reserve currency, risk free rate, Robert Gordon, Robert Shiller, Ronald Reagan, short selling, stocks for the long run, yield curve, Yogi Berra

Given the structural changes in the economy one might have expected proclivity to undervaluation to have diminished. Throughout the century, the elasticity of the US currency increased. There was the move from the gold standard to one of gold exchange standard, implementation of Bretton Woods, and then a free-floating exchange rate. The increasing ability of the Federal Reserve to provide a monetary response in periods of distress might suggest that the return of equities to fire-sale prices would become less prevalent. It is interesting that such a phenomenon is not evident in the data. The oscillation of the q ratio around the geometric mean does not appear to be any more volatile in the first half of the century than it was in the second.

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

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