liquidity trap

62 results back to index

End This Depression Now! by Paul Krugman

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

I wrote the original version of my book The Return of Depression Economics, back in 1999, mainly to warn Americans that Japan had already found itself in a position where printing money couldn’t revive its depressed economy, and that the same thing could happen to us. Back then a number of other economists shared my worries. Among them was none other than Ben Bernanke, now the Fed chairman. So what did happen to us? We found ourselves in the unhappy condition known as a “liquidity trap.” The Liquidity Trap In the middle years of the last decade, the U.S. economy was powered by two big things: lots of housing construction and strong consumer spending. Both of these things were, in turn, driven by high and rising housing prices, which led both to a building boom and to spending by consumers who felt rich.

…

But even then it makes no sense to argue that deficit spending actually works against monetary policy, which is what Ferguson seemed to claim. And it’s very much the wrong question to ask when the economy is depressed even though the Fed has cut the interest rates it can control all the way to zero—that is, when we’re in a liquidity trap, which we were in when Ferguson delivered those remarks (at a conference sponsored by PEN and the New York Review of Books) and which we are still in today. Recall from chapter 2 that a liquidity trap happens when even at a zero interest rate the world’s residents are collectively unwilling to buy as much stuff as they are willing to produce. Equivalently, the amount people want to save—that is, the income they don’t want to spend on current consumption—is more than the amount businesses are willing to invest.

…

With the Fed printing lots of money—for that, roughly speaking, is how it pays for all those bonds and mortgages it buys—and the federal government running trillion-dollar-plus deficits, why aren’t we seeing a sharp rise in inflation? The answer lies in depression economics, specifically in what I hope has become the familiar concept of the liquidity trap, in which even zero interest rates aren’t low enough to induce sufficient spending to restore full employment. When you’re not in a liquidity trap, printing lots of money is indeed inflationary. But when you are in one, it isn’t; in fact, the amount of money the Fed prints is very nearly irrelevant. Let’s talk basic concepts for a moment, then look at what has actually happened.

The Curse of Cash by Kenneth S Rogoff

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

The problem back then, as in many countries today, is that with short-term policy interest rates already at zero, monetary policy was stuck in a “liquidity trap,” with nothing more to do. Inspired by the maverick German thinker Silvio Gesell, Fisher penned a short 1933 book Stamp Scrip, exploring the idea of requiring people to periodically put new stamps on the back of their paper currency notes to keep them valid. This, of course, was a very primitive way of paying a negative interest rate on cash. Keynes praised the idea in his 1936 General Theory but rightly came to the conclusion that it was utterly impractical.7 Rejecting Gesell’s solution to the liquidity trap helped lead to Keynes’s famous conclusion that government spending was the key to propelling economies out of the Great Depression.

…

Certainly a part of the problem is that inflation-targeting evangelism—and there is really no other word for it—created institutions that were simply too inflexible to deal with the dramatic changes the world has experienced over the past 20 years. Inflation can be too low, and inflexible inflation-targetting regimes are not too good at dealing with it, especially as interest rates drift toward the zero lower bound, also known as the “liquidity trap.” The zero bound has become a stubbornly persistent problem for essentially three reasons. First and foremost, inflation has collapsed and inflation expectations along with it. Starting with New Zealand in 1989, most advanced-country central banks have gradually coalesced around an inflation target of about 2%, which in itself implies dramatically lower interest rates than when inflation averages 10%.

…

For example, some have argued that by running a larger deficit, a government can generate so much growth that a country’s ratio of debt to GDP actually comes down.6 Another line of thought is that certain kinds of structural reform are potentially counterproductive at the zero bound, lowering growth in the short run.7 In particular, if higher future productivity translates into expectations of lower future prices, the result is lower inflation expectations and therefore a higher real interest rate, assuming the monetary authority is paralyzed by the liquidity trap and unable to respond. In theory at least, this real interest rate channel can be so intense that it drives down today’s demand and output, even though in the long run higher future productivity growth is beneficial, and even though under ordinary circumstances consumers might feel richer immediately, thereby pushing demand up.

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

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

Robert Barro uses this example in chapter 2 of his textbook Macroeconomics, 5th ed. (Cambridge, MA: MIT Press, 1997). 4. In addition to our own work, four studies have influenced our thinking on these issues a great deal: Gauti Eggertsson and Paul Krugman, “Debt, Deleveraging, and the Liquidity Trap,” Quarterly Journal of Economics 127, no. 3 (2012): 1469–513; Veronica Guerrieri and Guido Lorenzoni, “Credit Crises, Precautionary Savings, and the Liquidity Trap” (working paper, University of Chicago Booth School of Business, July 2011); Robert E. Hall, “The Long Slump,” American Economic Review 101 (2011): 431–69; and Virgiliu Midrigan and Thomas Philippon, “Household Leverage and the Recession” (working paper, NYU Stern School of Business, April 2011). 5.

…

The Frictions The most well-known friction is called the zero lower bound on nominal interest rates.6 The zero lower bound means that interest rates cannot get low enough to actually induce savers in the economy to start buying. If interest rates cannot decrease enough, the gap in spending left by levered households cutting back remains unfilled. This is also referred to as the “liquidity trap,” because when an interest rate is kept at zero when it needs to be negative, people save their money in liquid instruments such as cash and U.S. government treasury bills. Instead of spending, savers hoard money in risk-free assets. The zero lower bound on interest rates exists because the government issues paper money—cash—which cannot have a negative return.7 We normally value cash for its transaction purposes: paying the babysitter or the parking valet at a restaurant.

…

But the zero lower bound on interest rates prevents interest rates from becoming negative. In the example above, if a bank tried to charge you $10 for putting money in a deposit account, you would take the money and put it in your safe at home, which would guarantee you a 0 percent return—hence, the zero lower bound. As a result, the economy is stuck in a liquidity trap. Borrowers cannot spend as they rebuild their balance sheets and face severe borrowing constraints. Savers refuse to spend because interest rates are not sufficiently negative to induce them to consume.8 Economic activity then becomes demand-driven. Anything that can induce households in the economy to spend will increase total output.

The Global Minotaur by Yanis Varoufakis, Paul Mason

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

The Fed responds with a new interest rate of between 0.25 per cent and 0 per cent (depending on the particulars of the lender). Desperate times obviously call for desperate measures. Nonetheless, it is a sobering moment when America becomes officially enmeshed in a state that economists had convinced themselves would never be seen again: a typical liquidity trap, not seen since 1929.1 Only this time it is worse. For unlike in 1929, our generation’s liquidity trap is global. Interest rates have reached rock bottom not only in the United States but throughout the West. As further evidence that the disease (which began with the CDO market and consumed the world’s financial sector) has spread to the real economy, where people actually produce things (as opposed to pushing paper around for ridiculous amounts of cash), President Bush declares that about $17.4 billion of the $700 billion facility will be diverted to America’s stricken car makers.

…

Instead, the government and the Bank of Japan injected as much liquidity as was required into the banks. Lamentably, most of these injections were absorbed by the black holes within the banks (the non-performing loans) without generating substantial new investment. For the first time since the mid-1930s, an advanced capitalist economy had been caught in a recessionary liquidity trap. Despite the monetary authorities’ best efforts to boost investment by pushing interest rates down to almost zero and pumping liquidity into the banks, Japan’s zombie banks could not deliver the hoped-for investments. The government tried one fiscal stimulus after the other. Roads were built, bridges were erected, railway projects criss-crossed the nation’s islands.

…

Paradoxically, the ‘never again’ spirit that emerged from the wreck of the Latin American and South East Asian crises proved that the peripheral financial crises that criss-crossed the globe in a chain between 1994 and 2002 were part of an elaborate dress rehearsal for the Crash of 2008. After 2008, and the Global Minotaur’s forced abdication, the United States and Europe discovered to their horror that the Japanese liquidity trap had spread to them. At that point, all the chastisement that the Japanese authorities had received from American and European commentators for not having taken tough action against their zombie banks was quietly forgotten. Indeed, Europe and the United States followed the same recipes that delivered Japan’s lost decades.

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

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

Unfortunately, like almost everything else with financial crises, engineering a reflation—or to put it more baldly, creating inflation—is not as simple as it seems. Once a deflationary spiral has gained momentum, conventional monetary policy tends not to work. Nor does it work against other ills that accompany financial crises. Other weapons must be developed and thrown into battle. The Liquidity Trap When economists talk about the futility of ordinary monetary policy, they refer to a “liquidity trap.” Policy makers dread this state of affairs, and to understand why, we must examine how central banks exercise control over the money supply, interest rates, and inflation. In the United States, the Federal Reserve primarily controls the money supply through “open market operations”: that is, it can wade into the secondary market and buy or sell short-term government debt.

…

In the pages that follow, we’ll move between past and present, revealing how the foregoing questions were asked and answered in the wake of previous crises. Along the way we’ll explain several intimidating and often misunderstood concepts in economics: moral hazard, leverage, bank run, regulatory arbitrage, current account deficit, securitization, deflation, credit derivative, credit crunch, and liquidity trap, to name a few. We hope our explanations will prove useful not only to financial professionals on Wall Street and Main Street but also to corporate executives at home and abroad; to undergraduate and graduate students in business, economics, and finance; to policy makers and policy wonks in many countries; and most numerous of all, to ordinary investors around the world who now know that they ignore the intricacies of the international financial order at their peril.

…

Now those banks can use it to make loans worth several times that amount. Money is suddenly more available, and as a consequence, credit is easier to obtain. More to the point, it’s cheaper: the net effect of adding money to the economy is that the Federal funds rate will fall, as will interest rates generally. This is what takes place during normal times. A liquidity trap, by contrast, is not normal. It’s what happens when the Fed has exhausted the power of open market operations. That dreaded moment arrives when the Federal Reserve has driven the Federal funds rate down to zero. In normal times setting that rate would pump plenty of easy money and liquidity into the economy and spur wild growth.

Built on a Lie: The Rise and Fall of Neil Woodford and the Fate of Middle England’s Money by Owen Walker

activist fund / activist shareholder / activist investor, bank run, banking crisis, barriers to entry, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Brexit referendum, British Empire, buy and hold, call centre, carbon footprint, clean water, coronavirus, corporate governance, COVID-19, fixed income, G4S, Kickstarter, knowledge economy, liquidity trap, lockdown, mass affluent, popular capitalism, profit motive, regulatory arbitrage, shareholder value, short selling, Silicon Valley, sovereign wealth fund, stem cell, Steve Jobs, Winter of Discontent

Owen Walker * * * BUILT ON A LIE The Rise and Fall of Neil Woodford and the Fate of Middle England’s Money Contents 1 Made in Maidstone 2 Follow the Money 3 Big Bang 4 Taking a Punt on Henley 5 Making Middle England Rich 6 The Fucking Americans 7 Breakaway 8 Oracle of Oxford 9 Liquidity Trap 10 Self-Combustion 11 Built on a Lie 12 Aftermath Acknowledgements Index About the Author Owen Walker is an award-winning business journalist, covering European banks for the Financial Times. He was previously asset-management correspondent at the newspaper and his reporting on Neil Woodford’s downfall led to the FT winning business and finance team of the year at the 2019 Society of Editors’ Press Awards.

…

The mark-up meant that Stratified Medical, a business with just twenty-three staff and turnover of £1.2 million, made a bigger contribution to the outperformance of Equity Income in its first year than a host of global corporations, including AstraZeneca, GlaxoSmithKline and BT. Either Woodford had a sixth sense for picking companies of the future, or the hundreds of thousands of armchair investors who had entrusted him with their life savings were in for a very rude awakening. 9 Liquidity Trap In autumn 2016 more than two dozen founders and chief executives of small British businesses received a curious invitation with an intriguing sign-off: ‘We very much hope you can attend but please be aware that this event is highly confidential and by invitation only.’ The email came from Neil Woodford, the rock-star fund manager with whom the recipients were very well acquainted.

…

The fund’s top ten holdings – once a roll call of the UK’s most dependable large companies – now comprised a jumble of struggling businesses and obscure science start-ups that were yet to turn profitable. Selling such companies was near impossible without accepting bargain-basement prices. Woodford had set himself a classic liquidity trap, with no escape in sight. On 18 December 2018, Woodford travelled to Exeter University to receive an honorary degree from his alma mater. Days later, it was the Woodford IM staff Christmas party. The two dozen full-time workers gathered at a countryside retreat. It was a sombre affair – a world away from the heady night at the Crazy Bear four years earlier.

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

The post-financial crisis world is a deeply worrying place not so much because interest rates came down to such low levels initially but, instead, because the circumstances in which they might eventually go up again seem increasingly difficult to imagine. Central bankers know all this, which is why they have resorted to the use of increasingly unconventional monetary policies. They certainly don't want to admit to be caught in the so-called liquidity trap. Originally defined by Keynes as a situation where increases in the money supply would make no difference to the prevailing level of interest rates, the liquidity trap has been reinterpreted since Japan's experience of zero interest rates and deflation in the 1990s to imply that monetary policy becomes impotent once interest rates drop to zero. Central bankers have no desire to admit to their impotence in these circumstances so they've had to think of something else.

…

While the economic logic is sound enough, the commitment not to raise interest rates – in other words, the commitment to allow inflation to rise – needs to be completely credible. Instead, it sounds counterintuitive. All over the world, central banks have committed themselves to meeting inflation targets.15 If inflation rises, the public have been told – time and time again – that central banks will respond by raising interest rates. To escape from a liquidity trap, however, this is precisely what central banks must not do: and, moreover, the public have to be completely convinced that central banks will not do it.16 Many people, however, will presumably think that, with the first whiff of inflation, central banks would immediately shift interest rates back up again.

…

New Zealand kicked the process off at the end of the 1980s. In 2012, both the Federal Reserve and the Bank of Japan finally got around to adopting formal inflation targets, ironically after inflation targeting had failed to prevent the financial crisis. 16. See, for example, P. Krugman, ‘It's Baaack! Japan's Slump and the Return of the Liquidity Trap’, Brookings Papers on Economic Activity, Washington, DC, 1998, or G. Eggertsson and M. Woodford, ‘The Zero Bound on Interest Rate and Optimal Monetary Policy’, Brookings Papers on Economic Activity, Washington, DC, 2003. 17. See G. Eggertsson, ‘The Deflation Bias and Committing to being Irresponsible’, Journal of Money, Credit and Banking, 38 (2006). 18.

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

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

Because if the interest rate fell below zero, people would just hold cash instead of bonds. At the margin, then, money is just being held as a store of value, and changes in the money supply have no effect. This is, of course, the liquidity trap. And IS-LM makes some predictions about what happens in the liquidity trap. Budget deficits shift IS to the right; in the liquidity trap that has no effect on the interest rate. Increases in the money supply do nothing at all. That’s why in early 2009, when The Wall Street Journal, the Austrians, and the other usual suspects were screaming about soaring rates and runaway inflation, those who understood IS-LM were predicting that interest rates would stay low and that even a tripling of the monetary base would not be inflationary.

…

ABOUT THIS BOOK I began writing for the Times in 2000. For several years prior I had written monthly columns for Fortune and Slate, but I was still mainly a research economist. In fact, I wrote what I personally consider possibly my best academic paper, “It’s Baaack: Japan’s Slump and the Return of the Liquidity Trap,” in 1998. The Times expected me to write almost entirely about business and economics. But I found myself in a position neither they nor I expected. The administration of George W. Bush was dishonest to a degree never before seen in U.S. politics (though now surpassed by the Trumpists), and it was obviously, it seemed to me, taking us to war on false pretenses.

…

Japan, in particular, looked at a fundamental level a lot like us: a big, rich, educated, technologically advanced, politically stable nation with competent if not brilliant monetary and fiscal authorities. If Japan could find itself caught in a “lost decade” of stagnation and deflation, couldn’t the same thing happen here? I wrote about these concerns at the time, notably in a 1998 academic paper (“It’s Baaack: Japan’s Slump and the Return of the Liquidity Trap”) that has, I think, stood the test of time pretty well, and a 1999 book, The Return of Depression Economics. Others raised similar alarms, including a then-Princeton professor by the name of Ben Bernanke. But it wasn’t a message many wanted to hear. But the parallels between ourselves and Japan grew stronger over time.

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

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

They would take the form of purchases by the Bank of England of a range of financial assets in order to expand the amount of reserves held by commercial banks and to increase the availability of credit to companies. That should encourage the banking system to expand the supply of broad money by lending to the private sector and also help companies to raise finance from capital market. 23 The theoretical case for QE was built on the idea of a liquidity trap. 254 t h e n e w mon e t a r i s m Rate of interest Figure 41. Liquidity trap LM IS GDP The liquidity trap IS The situation which produces the ‘trap’ is one in which the expected rate of return on investment (Wicksell’s ‘natural rate of interest’) is lower than the lowest rate of interest banks are willing to charge for loans. The zero bound is the limit of what interest rate policy can achieve to lower commercial banks’ lending rate.

…

The zero bound is the limit of what interest rate policy can achieve to lower commercial banks’ lending rate. At the zero lower bound (ZLB) the demand for money to hold becomes perfectly interest elastic (expands without limit).* This is because the sense of * See Krugman (1998). While both Krugman and Keynes pointed to the existence of a liquidity trap, their ideas are subtly different. According to Paul Krugman a liquidity trap – and consequently the need for QE – occurs when ‘a zero short-term interest rate isn’t low enough to produce full employment’ (Krugman (2014)). In Figure 41, the expected profit rate has fallen so much that only a sizeable negative nominal interest rate could restore full employment.

…

Post-crash outcomes: Germany, Greece and Eurozone 243 37. UK austerity – counterfactual medicine, 2007–2013 244 38. The transmission mechanism of monetary policy 250 39. Output growth and inflation in the advanced economies during the Great Moderation 253 40. Cutting interest rates: central banks’ base rates, 2003–2016 254 41. Liquidity trap 255 42. Four key monetary debates 260 43. Good and bad outcomes of QE 264 44. Growth in UK bank (M4) lending, 2000–2016 266 45. UK exchange rate and current account, and QE, 2006–2016 267 46. Growth in UK money supply and money lending post-crash 268 xiv F ig u r e s 47. UK broad money (M4) growth, 2000–2016 269 48.

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

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

The Fed “could not monetize the debt if the debt were not being created by Congress in the first place.” But as long as Bernanke’s dream team of Yellen and Dudley had his back, the Fed would continue to have Congress’s back. No one wanted to exit. That would turn off the money machine. I preferred to think of QE2 as a “liquidity trap.” A liquidity trap, as defined years ago by Keynes, occurs when interest rates have been pushed so low that the expected rates of return on investments follow them down. When investment falls, the economy stagnates and cash holdings in banks rise. The cash is trapped, despite the central bank’s exertions.

…

On February 18, 2011, junk bond yields hit a low of 6.80 percent, dipping below the prior December 2004 record of 6.86 percent. Not only were corporations mired in a liquidity trap, so were households. Policymakers couldn’t grasp that the longer interest rates stayed at the zero bound, the more savings consumers would have to siphon from their available funds for spending. You can’t force all of Grandma’s money into the casino. Hence, the “trap” in the “liquidity trap” for households. Household formation, or the lack thereof, acted as a ball and chain on the economy. Census data showed that household formation had contracted in 2010 for the first time since World War II.

…

Chicago’s Evans, a dove, acknowledged that monetary policy was hitting its outer bounds. “Normally, monetary policy could reduce the incentives to save and stimulate spending by lowering short-term nominal interest rates,” Evans said. “But with the federal funds rate already essentially at zero, we are in a liquidity trap.” Evans suggested the way out was to increase inflation expectations such that “the opportunity costs of holding cash goes up, tripping incentives toward higher spending and lending.” But how? Nothing the Fed did worked. At the January 2011 FOMC meeting, everyone agreed that economic conditions remained tepid.

Big Three in Economics: Adam Smith, Karl Marx, and John Maynard Keynes by Mark Skousen

Albert Einstein, banking crisis, behavioural economics, Berlin Wall, Bretton Woods, business climate, business cycle, creative destruction, David Ricardo: comparative advantage, delayed gratification, experimental economics, financial independence, Financial Instability Hypothesis, foreign exchange controls, full employment, Hernando de Soto, housing crisis, Hyman Minsky, inflation targeting, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Arrow, laissez-faire capitalism, liberation theology, liquidity trap, low interest rates, means of production, Meghnad Desai, microcredit, minimum wage unemployment, money market fund, open economy, paradox of thrift, Pareto efficiency, Paul Samuelson, Phillips curve, Post-Keynesian economics, price stability, pushing on a string, rent control, Richard Thaler, rising living standards, road to serfdom, Robert Shiller, Robert Solow, rolodex, Ronald Coase, Ronald Reagan, school choice, secular stagnation, Simon Kuznets, The Chicago School, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, Tobin tax, Tragedy of the Commons, unorthodox policies, Vilfredo Pareto, zero-sum game

He had lost faith in monetary policy and the Federal Reserve in the 1930s, when interest rates were so low that reducing them wouldn't have made much difference (see Figure 5.2). Inducing the Federal Reserve to expand the money supply would not be very effective either, because banks refused to lend excess reserves anyway. Keynes called this a "liquidity trap." The new money would just pile up unspent and uninvested because of "liquidity preference," the desire to hold cash during a severe depression (1973 a [1936], 207). How the Multiplier Generates Full Employment Public works would serve several benefits. First, public works are positive spending, putting people to work and money into business's pockets.

…

Robert Solow, Samuelson's colleague at MIT and a Nobel laureate, summarized the new orthodoxy when he proclaimed with considerable pride that "short-term macroeconomic theory is pretty well in hand.... All that is left is the trivial job of filling in the empty boxes" (1965, 146). The Pigou Effect: The First Assault But over time critics have chipped away at the Keynesian structure. The first objection was the "liquidity trap" doctrine, Keynes's fear that the economy could be trapped indefinitely in a deep depression where interest rates are so low and "liquidity preference" so high that reducing interest rates further would have no effect (Keynes 1973a 2. A popular work coinciding with Samuelson's support of deficit spending was A Primer on Governmen t Spending, by Robert L.

…

A popular work coinciding with Samuelson's support of deficit spending was A Primer on Governmen t Spending, by Robert L. Heilbroner and Peter L. Bernstein. It stated, "Recent experience indicates that the economy grows faster when the government runs a deficit and slower when revenues exceed outlays" (1963, 119). [1936], 207). The man who first countered the liquidity-trap doctrine was Arthur C. Pigou, ironically the straw man Keynes vilified in The General Theory. In a series of articles in the 1940s, Pigou said that Keynes overlooked a beneficial side effect of a deflation in prices and wages: deflation increases the real value of cash, Treasury securities, cash-value insurance policies, and other liquid assets of individuals and business firms.

The Upside of Inequality by Edward Conard

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

Valerie Ramey, “Identifying Government Spending Shocks: It’s All in the Timing,” Quarterly Journal of Economic Affairs, 2011, http://qje.oxfordjournals.org/content/early/2011/03/21/qje.qjq008.full. 39. Paul Krugman, “The Conscience of a Liberal: Nobody Understand the Liquidity Trap (Wonkish),” New York Times, July 14, 2010, http://krugman.blogs.nytimes.com/2010/07/14/nobody-understands-the-liquidity-trap-wonkish. 40. Paul Krugman, “Failure to Rise,” New York Times, February 12, 2009, http://www.nytimes.com/2009/02/13/opinion/13krugman.html?ref=paulkrugman. 41. Lawrence Summers, “Why Public Investment Really Is a Free Lunch,” Financial Times, October 6, 2014, http://www.ft.com/intl/cms/s/2/9b591f98-4997-11e4-8d68-00144feab7de.html#axzz3mNLQzKa6. 42.

…

Angus Deaton, “Measuring and Understanding Behavior, Welfare and Poverty,” Nobel Prize Lecture, December 8, 2015, http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2015/deaton-lecture.html. 53. Paul Krugman, “The Conscience of a Liberal: Monetary Policy in a Liquidity Trap,” New York Times, April 11, 2013, http://krugman.blogs.nytimes.com/2013/04/11/monetary-policy-in-a-liquidity-trap. 54. Martin Wolf, “Lunch with the FT: Ben Bernanke,” Financial Times, October 23, 2015, http://www.ft.com/intl/cms/s/0/0c07ba88-7822-11e5-a95a-27d368e1ddf7.html. 55. “Pushing on a String,” Wikipedia, accessed December 18, 2015, https://en.wikipedia.org/wiki/Pushing_on_a_string. 56.

…

See also talent empirical studies on trade, immigration, and, 54–59 low-skilled immigration and slowing wage growth, 47–52, 57–58 trade deficits and slowing wage growth, 52–53 labor unions, 97, 109, 112–13, 146, 211, 217, 227–28 Lawrence, Robert, 55, 163–64 Leadership on the Line (Heifetz and Linsky), 93–94 Lee, Chul-In, 178 Leibniz, Gottfried, 68 life expectancy, 158–59 liquidity trap, 149n lone geniuses, 67–70 Lorentz, Hendrik, 68 lotteries, 32–33, 124 low-skilled immigration, 4, 39, 60–61, 157–58, 215–16, 246–48 empirical studies on slowing wage growth and, 54–59 straining constrained resources and slowing growth, 47–52 low-wage economies, 4, 13–14, 38 slowing middle-class wage growth and trade, 40–47 Lucas, Robert, 143–44 Luddites, 45, 156 Mankiw, Greg, 233–34 manufacturing, 12, 13, 18–19, 37, 42, 44, 57, 126 value of technology companies vs., 128, 128–29 marginal tax rates, 72–73 Mariel boatlift, 54–55, 56 market efficiency, 110 marriage effect on income mobility, 181, 181–82 growing success of women and value of, 156, 166–69 Massachusetts test scores, 221–23 Mead, Lawrence, 208 median household income, 11–12, 159–63, 174 all full-time workers, 25 to 64 years old, 161, 161 full-time African American workers, 25 to 64 years old, 159, 160 full-time white workers, 25 to 64 years old, 159–62, 160 growth in incomes by level of income, 10, 10–11, 40 income growth by income quintile over time, 162–63, 163 Massachusetts vs.

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

In deflation, the real value of cash increases, so individuals and businesses hoard cash instead of spending it or investing in new land, plant, and equipment. This entire process of asset sales, hoarding, and price declines is called a liquidity trap, famously described by Irving Fisher in his 1933 work The Debt-Deflation Theory of Great Depressions and by John Maynard Keynes in his most influential work, The General Theory of Employment, Interest and Money. In a liquidity trap, the response to money printing is generally weak, and from a Keynesian perspective, fiscal policy is the preferred medicine. While the response to money printing may be weak, it is not nil.

…

Subbotin, Alexander. “A Multi-Horizon Scale for Volatility.” Centre d’Economie de la Sorbonne, working paper, March 3, 2008. Swensson, Lars E. O. “The Zero Bound in an Open Economy: A Foolproof Way of Escaping from a Liquidity Trap.” National Bureau of Economic Research, Working Paper no. 7957, October 2000, http://www.nber.org/papers/w7957. ———. “Escaping from a Liquidity Trap and Deflation: The Foolproof Way and Others.” National Bureau of Economic Research, Working Paper no. 10195, December 2003, http://www.nber.org/papers/w10195. Taylor, Jason E., and Richard K. Vedder. “Stimulus by Spending Cuts: Lessons from 1946.”

…

The idea is that wages will rise during periods of inflation but will not decline easily during periods of deflation; they will tend to stick at the old nominal wage levels. As a result, wages fail to adjust downward, employers fire workers, unemployment rises, and aggregate demand is weakened. A liquidity trap then develops, and deflation becomes worse as the cycle feeds on itself, resulting in impossibly high debt, bankruptcies, and depression. Inflation is considered advisable policy because it allows employers to give workers a nominal raise, even if there is no raise in real terms due to higher prices.

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

Keynes argued that when short-term and long-term interest rates had reached their respective lower bounds, further increases in the money supply would just be absorbed by the hoarding of money and would not lead to lower interest rates and higher spending. Once caught in this liquidity trap, the economy could persist in a depressed state indefinitely. Since economies were likely to find themselves in such conditions only infrequently, Hicks described Keynes’s theory as special rather than general, and relevant only to depression conditions. And this has remained the textbook interpretation of Keynes ever since. Its main implication is that in a liquidity trap monetary policy is impotent, whereas fiscal policy is powerful because additional government expenditure is quickly translated into higher output.

…

Keynes’s reply was that in a slump the demand for liquidity – emergency money – was so high that further injections of money would simply be absorbed in idle cash balances as a claim on generalised future purchasing power without any impact on current spending. The economy would be stuck in a ‘liquidity trap’. The argument was set out in Chapters 13 and 14 of The General Theory. They are among the more difficult and obscure parts of the book. It was left to Britain’s first Nobel Laureate in Economic Science, Sir John Hicks, to explain them in a famous article published in 1937 entitled ‘Mr Keynes and the Classics’.

…

Its main implication is that in a liquidity trap monetary policy is impotent, whereas fiscal policy is powerful because additional government expenditure is quickly translated into higher output. This ‘modern’ view of Keynes does not, however, do full justice to the fundamental nature of the coordination problems in a capitalist economy. Even when the economy is not in a liquidity trap, the inability to coordinate spending plans may inhibit the response of total demand to monetary and fiscal stimulus. It all depends on expectations. And they will reflect the particular historical circumstances in which the stimulus is applied. It is, I think, surprising that the Keynesian argument that a cut in wages might not reduce unemployment has not been extended to the corresponding proposition for interest rates.

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

For its actual value is largely governed by the prevailing view as to what its value is expected to be.”2 The monetary authorities might try to pump more money into the system but people would prefer to leave the money idle, earning zero interest, than exchange it for bonds. There was a liquidity trap where the rate of interest reached a floor, and no further fall could be engineered by the monetary authorities. Recent policies of quantitative easing have seen Central Banks buying bonds and other assets on the open market to lower the rate of interest, both short term and long run. The short rate has reached a floor of below 0.5 percent and that is what a liquidity trap looks like. The novelty of terms such as consumption function and the marginal propensity to consume attracted the younger generation of economists.

…

The Policy Legacy of Keynes Yet, at the outset, there was much less disagreement about the effectiveness of Keynes’s policy nostrums, or rather nostrums derived from his message by civil servants and Treasuries. This was more so in Anglo-Saxon economies than in continental European ones. In the UK especially, the Treasury, the bête noire of Keynes during much of his professional life, was won over completely. The notion of monetary policy being ineffective due to the liquidity trap became an accepted part of British policy. Fiscal policy – manipulation of public spending and budget deficits and surpluses – was taken to be central to all macro policy-making. Keynes’s ideas led to legislation that set up “built-in stabilizers.” Unemployment benefits, for example, ensured that even if unemployment rose the incomes of the unemployed did not fall precipitously, because benefits kicked in.

…

(i), (ii) Keynes, John Maynard (i), (ii), (iii), (iv), (v), (vi), (vii) approach and argument (i) at Bretton woods (i) challenge to Ricardo’s theory (i) circus (i) The Economic Consequences of the Peace (i) economic vocabulary (i), (ii), (iii) The General Theory of Employment, Interest and Money (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) intentions (i) on interest rates (i) liquidity preference (i) The Means to Prosperity (i) monetary theory (i) personality (i) theory of investment (i) A Tract on Monetary Reform (i) The Treatise on Money (i) on trade cycles (i) wheat (i) Keynesian models (i) argument (i) Cross diagram (i) challenges to (i) and cyclical behavior (i) development of (i) in different national contexts (i) equilibrium (i) evaluation of (i) Friedman’s challenge (i), (ii) full employment (i) highpoint (i) inapplicability (i) inflation (i) loss of faith in (i) loss of ground (i) policy legacy (i) in practice (i) public debt (i) recession (i) reduction of (i) rejectionist responses (i) renewed attack on (i) scope of influence (i) stagflation (i) stock disequilibrium (i) Keynesianism effect of policies (i) responses to Great recession (i) Keynesian Revolution, development of theory (i) King, Gregory (i) King, Mervyn, Lord (i), (ii) kings, borrowing (i) Kitchin, Joseph (i) Klein, Lawrence (i), (ii), (iii), (iv), (v) Economic Fluctuations in the United States, 1921–1941, (i) Klein-type models see econometric modeling knowledge demands (i) Kohl, Helmut (i) Kondratieff cycles (i), (ii), (iii), (iv), (v) Kondratieff, Nikolai Dimitrievich (i) labor, free movement (i) labor theory of value (i) laissez-faire (i), (ii) land values (i) Law of Population (Malthus) (i) laws of motion (i) Lehman Brothers (i), (ii) lender of last resort (i) lending (i), (ii), (iii) Lenin, Vladimir (i) less-developed countries, crises (i) Lesseps, Ferdinand de (i) Lévy, Dominique (i) Liberal Party, social reform (i) liberalization (i), (ii), (iii) limited liability (i) LINK project (i) liquidity injecting (i), (ii), (iii) see also quantitative easing liquidity preference (i), (ii) liquidity trap (i) living standards (i) loans, interest (i) local knowledge (i) Locke, John (i) London, stock market crash (i) long boom (i), (ii), (iii), (iv) long cycles (i) Long Depression (i), (ii) long perspective (i) long-run equilibrium (i) long-run rate of interest (i) long swings (i) Long-Term Capital Management (i), (ii) Louis XVI, execution (i) Lucas, Robert (i), (ii), (iii), (iv) Luddites (i) machinery, effects on relative value (i) MacMillan, Harold (i) macro-modeling (i), (ii) macroeconomic models (i) macroeconomics (i) teaching of (i) mal-investments (i) Malthus, Thomas (i) Essay on Population (i) Law of Population (i) use of statistics (i) Mandel, Ernest (i), (ii) manufacturing, relocation (i), (ii), (iii), (iv) marginal costs (i) marginal disutility of work (i) marginal efficiency of capital (MEC) (i), (ii), (iii) marginal propensity to consume (MPC) (i), (ii), (iii) market economy equilibrium (i) globalization (i) market rate of interest (i) market regulation (i) markets perfect (i) and profit (i) single (i) theory of (Ricardo) (i) Marshall Aid (i) Marshall, Alfred (i), (ii) The Economics of Industry (with Mary Marshall) (i) Marshall, Mary (i) Marshallian Cross (i), (ii) Marshall’s theory of competition (i) Marx, Karl (i), (ii), (iii), (iv) The Communist Menifesto (with Friedrich Engels) (i) Das Kapital (i) Marxian view collapse of capitalism (i) extension of (i) revival of (i) mathematical representation, of economic theory (i) mathematical techniques, misleading (i) mathematics, usefulness (i) McCarthy, Sen.

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

., inflation is too low, then borrowing goes down and it becomes difficult for the central bank to stimulate the economy with low interest rates (see the note below on liquidity trap*). The only option in this situation would be that central banks would begin to apply negative interest rates. But if consumers can convert their bank funds into cash, such a measure would turn out to be ineffective. This is known as the zero lower bound for interest rates and can cause a liquidity trap. Hence a consensus merged that inflation needs to be low, but positive – at around 2% which would be accompanied with a nominal GDP growth rate of 4-5% (Turner, 2015).

…

In fact, one of the crucial conclusions of the author’s model was that by using separate policy control instruments, especially in terms of controlling money supply, the quantity of bank lending and the interest rate at which the government lends money to banks, the central bank has a better grip on controlling inflation and interest rates and would be able to address the zero limit bound problem and eliminate the liquidity trap. In their words, “…a zero bound does not apply to this rate, which makes it feasible to keep steady state inflation at zero without worrying about the fact that nominal policy rates are, in that case, more likely to reach zero or negative values.” ----------------------------------------------------------------------------------------- *(The liquidity trap is a situation in which cash injections from the central bank to the private sector fail to decrease interest rates.

…

The reason why negative interest rates have been in the news over the past year is mainly because of the persistently ultra-low inflation and near-zero interest rates (in most developed countries) over the past few years. When inflation becomes too low, it becomes harder for governments to deal with it, especially as interest rates drift toward the zero lower bound (also known as the “liquidity trap”). Second, since the crisis, world markets have seen a greater amount of economic volatility. The greater the volatility, the more likely it is that economies will be face severe downturns requiring central bank interest rate cuts (Rogoff, 2016), and therefore the more likely that we will need to indulge in negative interest rates.

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

Since household saving depends on the household’s income, a reduction in output (and therefore incomes and employment) also lowers saving and brings it closer to equality with investment. Moreover, in situations of economic depression, where unemployment has shot up, people may want to hoard money so much that the interest rate becomes essentially insensitive to changes in economic circumstances. This is the Keynesian “liquidity trap.” In this scenario the adjustment can arrive only through a sufficiently large drop in output and employment. The high level of saving among individual households proves, collectively, self-defeating. Recession follows. In this model of autonomous changes in aggregate demand, business cycle fluctuations are the result.

…

., 13n Hunting Causes and Using Them: Approaches in Philosophy and Economics (Cartwright), 22n import quotas, 149 incentives, 7, 170, 172, 188–92 income: functional distribution of, 121 military service and, 108 personal distribution of, 121 income inequality, 117, 124–25, 138–44, 147–49 deregulation in, 143 factor endowments theory in, 139–40 Gini coefficient and, 138 globalization in, 139–41, 143 in manufacturing, 141 offshoring in, 141 skill premium in, 138–40, 142 skill upgrading in, 140, 141, 142 technological change in, 141–43 trade in, 139–40 India, 107, 154 Indonesia, 166 industrial organization, 201 industrial revolution, 115 industry: developing economies and policies on, 75–76, 87, 88 government intervention and, 34–35 inflation, 185 in business cycles, 126–27, 130–31, 133, 135, 137 public spending and, 114 infrastructure, 87, 91, 111, 163 Institute for Advanced Study (IAS), xii–xiii, xiv School of Social Science at, xii Institute for International Economics, 159 institutions: development economics and, 98, 161, 202, 205–7 labor productivity and, 123 insurance, banking and, 155 interest rates, 39, 64, 110, 129–30, 156, 161 internal validity, 23–24 International Bank for Reconstruction and Development, 2 see also World Bank international economics, 201–2 International Monetary Fund (IMF), 1n, 2 Washington Consensus and, 160, 165 Internet, big data and, 38 “Interview with Eugene Fama” (Cassidy), 157n investment: business cycles and, 129–30, 136 foreign markets and, 87, 89, 90, 92, 165–67 income inequality and, 141 savings and, 129–30, 165–67 Invisible Hand Theorem, 48–50, 51n, 182, 186 Israel, 103, 188 day care study in, 71, 190–91 Japan: city growth models and, 108 income inequality and, 139 Jenkins, Holman W., Jr., 135n Jevons, William Stanley, 119 Kahneman, Daniel, 203 Kenya, 106–7 Keynes, John Maynard, 1–2, 31, 46, 165 on business cycles, 127–37 on liquidity traps, 130 see also models, Keynesian types of Klemperer, Paul, 36n Klinger, Bailey, 111n Korea, South, 163, 164, 166 Kremer, Michael, 106–7 Krugman, Paul, 136, 148 Kuhn, Thomas, 64n Kupers, Roland, 85 Kydland, Finn E., 101n labor markets, 41, 52, 56, 57, 92, 102, 108, 111, 119, 163 labor productivity, 123–24, 141 labor theory of value, 117–19 Lancaster, Kelvin, 59 Latin America, Washington Consensus and, 159–63, 166 Leamer, Edward, 139 learning, rule-based vs. case-based forms of, 72 Leijonhufvud, Axel, 9–10 Lepenies, Philipp H., 211n leverage, 154 Levitt, Steven, 7 Levy, Santiago, 3–4, 105–6 Lewis, W.

…

., 101n labor markets, 41, 52, 56, 57, 92, 102, 108, 111, 119, 163 labor productivity, 123–24, 141 labor theory of value, 117–19 Lancaster, Kelvin, 59 Latin America, Washington Consensus and, 159–63, 166 Leamer, Edward, 139 learning, rule-based vs. case-based forms of, 72 Leijonhufvud, Axel, 9–10 Lepenies, Philipp H., 211n leverage, 154 Levitt, Steven, 7 Levy, Santiago, 3–4, 105–6 Lewis, W. Arthur, 32–33 “Life among the Econ” (Leijonhufvud), 9–10 Lincoln, Abraham, 52 Lipsey, Richard, 59 liquidity, 134–35, 155, 185 liquidity traps, 130 locational advantages, 108 London, England, congestion pricing and, 3 Lucas, Robert, 130, 131–32, 134–36 “Machiavelli’s Mistake: Why Good Laws Are No Substitute for Good Citizens” (Bowles), 71n macroeconomics, 39–40, 87, 102, 107, 143, 157n, 181 business cycles and, 125–37 capital flow and, 165–66 classical questions of, 101 demand-side view of, 128–30, 136–37 globalization and, 165–66 Madison, James, 187 Mäki, Uskali, 22n malaria, randomized testing and, 106, 204 Malthus, Thomas, 118 Manchester University, 197 Mankiw, Greg, 149, 150, 171n, 197 manufacturing: economic growth and, 163–64 exchange rate and, 100, 163 income inequality and, 141 marginal costs, 121, 122 marginalist economics, 119–22 marginal productivity, 120–21, 122–25 marginal utility, 121, 122 Mariel boatlift (1980), 57 market design models, 5 “Market for ‘Lemons’, The” (Akerlof), 69n market fundamentalism, 160, 178 markets: asymmetric information in, 68–69, 70, 71 behavioral economics and, 69–71, 104–7, 202–4 economic models and, see models economics courses and, 198 economists’ bias toward, 169–71, 182–83 efficiency in, xiii, 14, 21, 34, 48, 50, 51, 67, 98, 125, 147, 148, 150, 156–58, 161, 165, 170, 192–95, 196 general-equilibrium interactions in, 41, 56–58, 69n, 91, 120 in Great Recession, 156–59 imperfectly competitive types of, 67–69, 70, 136, 150, 162 incentives in, 7, 170, 172, 188–92 institutions and, 98, 161, 202 likely outcomes in, 17–18 multiple equilibria in, 16–17 perfectly competitive types of, 21, 27, 28, 47, 69n, 71, 122, 180 prisoners’ dilemma in, 14–15, 20, 21, 61–62, 187, 200 self-interest in, 21, 104, 158, 186–88, 190 social cooperation in, 195–96 supply and demand in, 13–14, 20, 99, 119, 122, 128–30, 136–37, 170 values in, 186–96 Washington Consensus and, 159–67, 169 Marshall, Alfred, 13n, 32, 119 “Marshallian Cross Diagrams and Their Uses before Alfred Marshall: The Origins of Supply and Demand Geometry” (Humphrey), 13n Marx, Groucho, 26 Marx, Karl, xi, 31, 116, 118 Massachusetts, University of (Amherst), 77 Massachusetts Institute of Technology (MIT), 107, 108, 165, 206 mathematical economics, 35 mathematical optimization, 30, 101, 202–3 mathematics: economic models and, 29–37, 47 social sciences and, 33–34 Maxwell’s equations, 66n Meade, James, 58 methodological individualism, 181 Mexico: antipoverty programs in, 3–4, 105–6 globalization and, 141, 166 microeconomics, 125–26, 131 microfounded models, 101 Miguel, Ted, 106–7 Milan, Italy, congestion pricing and, 3 Milgrom, Paul, 36n minimum wages, employment and, 17–18, 28n, 114, 115, 124, 143, 150, 151 Minnesota, University of, 131 Mishel, Lawrence, 124n models: authority and criticism of, 76–80 big data and, 38–39, 40 causal factors and, 40–41, 85–86, 99–100, 114–15, 179, 184, 200, 201, 204 coherent argument and clarity in, 80–81 common sense in, 11 comparative advantage principle and, 52–55, 58n, 59–60, 139, 170 compensation for risk and, 110 computers and, 38, 41 contextual truth in, 20, 174 contingency and, 25, 145, 173–74, 185 coordination and, 16–17, 42, 200 critical assumptions in, 18, 26–29, 94–98, 150–51, 180, 183–84, 202 criticisms of, 10–11, 178, 179–85 decision trees and, 89–90, 90 diagnostic analysis and, 86–93, 90, 97, 110–11 direct implications and, 100–109 dual economy forms of, 88 efficient-markets hypothesis and, 156–58 empirical method and, xii, 7, 46, 65, 72–76, 77–78, 137, 173–74, 183, 199–206 endogenous growth types of, 88 experiments compared with, 21–25 fables compared with, 18–21 field experiments and, 23–24, 105–8, 173, 202–5 general-equilibrium interactions and, 41, 56–58, 69n, 91, 120 goods and services and, 12 Great Recession and, 155–59 horizontal vs. vertical development and, 64n, 67, 71 hypotheses and, 46, 47–56 imperfectly competitive markets and, 67–69, 70, 136, 150, 162 incidental implications and, 109–11 institutions and, 12, 98, 202 intuition and, 46, 56–63 Keynesian types of, 40, 88, 101, 102, 127–30, 131, 133–34, 136–37 knowledge and, 46, 47, 63–72 main elements of, 31 mathematics and, 29–37, 47 neoclassical types of, 40, 88, 90–91, 121, 122 new classical approach to, 130–34, 136–37 parables and, 20 partial-equilibrium analysis and, 56, 58, 91 perfectly competitive markets and, 21, 27, 28, 47, 69n, 71, 122, 180 predictability and, 26–28, 38, 40–41, 85, 104, 105, 108, 115, 132, 133, 139–40, 184–85, 202 principle-agent types of, 155 questions and, 114–16 rationality postulate and, 202–3 real world application of, 171–72 rules of formulation in, 199–202 scale economy vs. local advantage in, 108 scientific advances by progressive formulations of, 63–72 scientific character of, 45–81 second-best theory and, 58–61, 163–64, 166 selection of, 83–112, 136–37, 178, 183–84, 208 simplicity and specificity of, 11, 179–80, 210 simplicity vs. complexity of, 37–44 social reality of, 65–67, 179 static vs. dynamic types of, 68 strategic interactions and, 61–62, 63 of supply and demand, 3, 13–14, 20, 99, 119, 122, 128–30, 136–37 theories and, 113–45 time-inconsistent preferences in, 62–63 tipping points arising from, 42 in trade agreements, 41 unrealistic assumptions in, 25–29, 180–81 validity of, 23–24, 66–67, 112 variety of, 11, 12–18, 26, 68, 72, 73, 114, 130, 198, 202, 208, 210 verbal vs. mathematical types of, 34 verification in selection of, 93–112 see also economics; macroeconomics; markets “Models Are Experiments, Experiments are Models” (Mäki), 22n monetary policies, 87 monopolies, 161 in imperfectly competitive markets, 67–68 in perfectly competitive markets, 122 price controls and, 28, 94–97, 150 Montesquieu, Charles-Louis de Secondat, Baron de La Brède et de, 196 mortality rates, 206 mortgage-backed securities, 155 mortgage finance, 39, 155 mosquito nets, randomized testing of, 106, 204 “Mr.

Stuff Matters: Exploring the Marvelous Materials That Shape Our Man-Made World by Mark Miodownik

3D printing, active measures, British Empire, Buckminster Fuller, California gold rush, invention of the printing press, Isaac Newton, liquidity trap, New Urbanism, stem cell, trade route

Aerogels were not of alien origin, I found out, but they nevertheless had a very strange back-story: they were invented in the 1930s by a man called Samuel Kistler, an American farmer turned chemist, who conjured them into existence solely to satisfy his curiosity about jelly. Jelly? What was jelly? he asked. He knew that it wasn’t a liquid, but it wasn’t really a solid either. It was, he decided, a liquid trapped in a solid prison, but one in which the prison bars were like an invisibly thin mesh. In the case of edible jelly, the mesh is made from long molecules of gelatin, which is derived from the protein, collagen, that makes up most connective tissues, such as tendons, skin, and cartilage. When added to water, these gelatin molecules unravel and connect with one another to form a mesh that traps the liquid within it and prevents it from flowing.

…

The surface tension forces inside the mesh are strong enough for the water to be unable to escape the jelly, but weak enough for it to slosh around—which is why jelly wobbles. It’s also why jelly feels so amazing when you eat it: it’s almost 100 percent water, and with a melting point of 35°C the internal gelatin network promptly melts, freeing the water to burst in your mouth. The simple explanation—a liquid trapped by a solid internal mesh—was not enough for Samuel Kistler. He wanted to know whether the invisible gelatin mesh within a jelly was all of a piece. In other words, was it a coherent, independent internal skeleton, such that if you could find a way to remove all of the liquid from it, the mesh could stand on its own?

…

., [>] Hephaistos, [>] high-carbon steel, [>], [>] hip joints formation of in womb, [>] replacements for, [>]–[>] Hirst, Damien (For the Love of God), [>] historical records, and importance of paper, [>] Honduras cocoa farms, [>] Hoover Dam, [>] hot chocolate, [>] human body aging, impact on joints, [>] aging process, [>] ball-and-socket joints, [>] blood supply development, [>] cartilage, function of, [>]–[>] cartilage, rebuilding, [>]–[>] diverse structures in, limited atomic underpinnings, [>] hip joints, [>]–[>] integration of different scales into, [>] knee joints, [>] ligaments, function, [>] macrostructures in, [>] self-healing capacity, [>]–[>] self-repair capacity, [>] tolerance for titanium, [>] transplants for, impact of shortages, [>] human scale, [>], [>]–[>] Hyatt, John Wesley celluloid film, [>]–[>] creation of first usable synthetic plastic, [>], [>] effort to craft celluloid dentures, [>]–[>] experiments using nitrocellulose in alcohol, [>] patent challenge by Daniel Spill, [>]–[>] plastic-coated billiard balls, [>]–[>] ice, melting, [>]–[>] identification cards/photos, [>] immunosuppressant drugs, [>] implants dental, [>] and romanticizing of bionic devices, [>]–[>] human windpipe, [>]–[>], [>] and improved quality of life, [>] synthetic, limitations of, [>]–[>] using scaffolding and adult stem cells, [>]–[>] Inchtuthil, Scotland, Roman nails at, [>]–[>] India, diamonds from, [>] industrial design, cultural meanings, [>]–[>] Industrial Revolution dependence on steel, [>] and early use of cast iron, [>] and production of pool tables, [>] and rediscovery and refinement of concrete, [>] ink Janus particles in electronic reading devices, [>]–[>], and penetration of paper fibers, [>] in thermal paper, [>] Institute of Making (University College London), materials library, [>] insulation, double-glazed glass, [>] International Association of Athletics Federations, [>] interstellar dust collection, [>] inventors, home-based, during 19th century, [>] invisibility shields, [>] iron alloying with carbon to create steel, [>]–[>] in cement, [>] crystals of, as microscale molecules, [>] use of by Romans, [>] Iron Age, [>], [>]–[>] iron oxide, rust in concrete, [>]–[>] inhibition by chromium, [>] ivory in billiard balls, material properties, [>]–[>] for hip joint replacements, [>] Janus particles, [>]–[>], [>] Japan, samurai steel blade, [>]–[>] jawbone, artificial, [>], [>] jelly continuity of liquids in, [>] Kistler’s explorations of, [>]–[>] as liquid trapped in solid mesh, [>] and surface tension, [>] See also gels jet jewelry, [>], [>] jewelers’ rouge (steel sharpener), [>] JFK Airport construction, concrete used in, [>] joints chondroblast scaffolds, [>] hips and knees, [>]–[>] impact of aging on, [>]–[>] inability to self-heal, [>] kaolin in English bone china, [>] in paper sizing, [>] in porcelain, [>] Kapoor, Anish (Cloud Gate sculpture), [>] Kevlar, [>], [>] King’s College London, Material Research group, [>] Kistler, Samuel creation of silica aerogel, [>] experiments using gels, [>]–[>], [>] interest in jelly, [>]–[>] invention of aerogel, [>]–[>] Nature article about aerogels and jellies, [>]–[>], [>] patenting of silica aerogel, [>] replacement of gel liquid with gas, [>] kitchen sinks, stainless steel for, [>]–[>] knee joints anterior cruciate ligament, [>] complex motion of, [>] Kodak camera, [>]–[>] Kroto, Harry, [>] Lajic, Radivoke, [>]–[>], [>] laminate in safety glass, [>] Laughlin, Zoe, [>] lava, [>]–[>] Lavoisier, Antoine, [>] lead, melting point, [>] Learned, Charles, [>] Lee, Wen Ho, [>] Lefferts, Marshall, [>], [>] lenses, and refraction by glass, [>] Lewis, David, [>]–[>] Libyan Desert, fulgurites in, [>]–[>], [>] ligaments function, [>] lack of blood supply, and inability to self-heal, [>] torn, repair using titanium screws, [>]–[>] viscoelasticity, [>] light absorption by electrons, [>] colors in, Newton’s explanation, [>]–[>] light-controlling meta-materials, [>]–[>] passage through glass, refractive index, [>] Raleigh scattering, [>]–[>] lightning bolts, glass produced by, [>] lignin, [>], [>]–[>] lignite, [>] lime, [>] limestone, [>] linen, [>] lonsdaleite, [>] Louis XV, staples made for, [>] love, romantic, association of diamonds with, [>] love letters and enduring nature of words on, [>] example, [>] as intimate communication, [>] and sensual nature of paper, [>] For the Love of God (Hirst), [>] Lumière brothers, and projection of movies, [>] Lycra, [>] macrostructures, [>], [>]–[>], [>] Maillard reaction, [>] malachite, [>] Manchester University, Physics Department, [>] Mars Pathfinder mission, silica aerogels on, [>] materials, materials science breaking materials apart, fundamentals, [>]–[>] as field of scientific research, [>] hierarchical architecture, and specialized properties, [>] historical, cultural, and personal significance, [>], [>]–[>], [>]–[>], [>]–[>] importance of atoms, atomic structures, [>]–[>] incorporation of smaller scales into larger ones, implications, [>]–[>] and interplay of scales, [>], [>] limits of chemical approach to understanding, [>] origins of author’s interest in/ obsession with, [>]–[>] psychophysical aspects, [>] understanding expansion and contraction, [>] understanding inner structures of, [>] understanding similarities, connections, [>] understanding internal structure, [>] See also specific materials Materials Library, King’s College, [>]–[>], [>] Mayan chocolatl, [>], [>] McBain, J.

Platform Capitalism by Nick Srnicek

"World Economic Forum" Davos, 3D printing, additive manufacturing, Airbnb, Amazon Mechanical Turk, Amazon Web Services, Big Tech, Californian Ideology, Capital in the Twenty-First Century by Thomas Piketty, cloud computing, collaborative economy, collective bargaining, data science, deindustrialization, deskilling, Didi Chuxing, digital capitalism, digital divide, disintermediation, driverless car, Ford Model T, future of work, gig economy, independent contractor, Infrastructure as a Service, Internet of things, Jean Tirole, Jeff Bezos, knowledge economy, knowledge worker, liquidity trap, low interest rates, low skilled workers, Lyft, Mark Zuckerberg, means of production, mittelstand, multi-sided market, natural language processing, Network effects, new economy, Oculus Rift, offshore financial centre, pattern recognition, platform as a service, quantitative easing, RFID, ride hailing / ride sharing, Robert Gordon, Salesforce, self-driving car, sharing economy, Shoshana Zuboff, Silicon Valley, Silicon Valley startup, software as a service, surveillance capitalism, TaskRabbit, the built environment, total factor productivity, two-sided market, Uber and Lyft, Uber for X, uber lyft, unconventional monetary instruments, unorthodox policies, vertical integration, warehouse robotics, Zipcar

Perez, 2009. 16. Federal Reserve Bank of St Louis, 2016b. 17. Comments of Verizon and Verizon Wireless, 2010: 8n12. 18. Schiller, 2014: 80. 19. Dyer-Witheford, 2015: 82–4. 20. Greenspan, 1996. 21. Brenner, 2009: 23. 22. Rachel and Smith, 2015. 23. Khan, 2016. 24. The zero lower bound, or liquidity trap, argues that nominal interest rates cannot go below zero (otherwise savers would take their money out and put it under the proverbial mattress). The result is that policymakers cannot push nominal interest rates below zero. For more, see Krugman, 1998. Recently some countries have begun imposing negative rates on reserves held at the central bank, though the effects of this action appear so far to be minimal and possibly contrary to what is intended (e.g. decreasing lending, rather than increasing lending). 25.

…

The Guardian, 27 April. http://www.theguardian.com/technology/2016/apr/27/how-uber-conquered-london (accessed 22 May 2016). Kosoff, Maya. 2015. ‘Uber’s Nightmare Scenario’. Business Insider. 19 July. http://uk.businessinsider.com/what-it-would-take-for-uber-to-reclassify-all-its-drivers-2015-7 (accessed 22 May 2016). Krugman, Paul. 1998. ‘It’s Baaack: Japan’s Slump and the Return of the Liquidity Trap’. Brookings Papers on Economic Activity, 29 (2): 137–206. Kuang, Cliff. 2016. ‘How Facebook’s Big Bet on Chatbots Might Remake the UX of the Web’. Co.Desi.gn. 12 April. http://www.fastcodesign.com/3058818/how-facebooks-big-bet-on-chatbots-might-remake-the-ux-of-the-web (accessed 22 May 2016).

Debunking Economics - Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned? by Steve Keen

accounting loophole / creative accounting, Alan Greenspan, banking crisis, banks create money, barriers to entry, behavioural economics, Benoit Mandelbrot, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, book value, business cycle, butterfly effect, capital asset pricing model, cellular automata, central bank independence, citizen journalism, clockwork universe, collective bargaining, complexity theory, correlation coefficient, creative destruction, credit crunch, David Ricardo: comparative advantage, debt deflation, diversification, double entry bookkeeping, en.wikipedia.org, equity risk premium, Eugene Fama: efficient market hypothesis, experimental subject, Financial Instability Hypothesis, fixed income, Fractional reserve banking, full employment, Glass-Steagall Act, Greenspan put, Henri Poincaré, housing crisis, Hyman Minsky, income inequality, information asymmetry, invisible hand, iterative process, John von Neumann, Kickstarter, laissez-faire capitalism, liquidity trap, Long Term Capital Management, low interest rates, mandelbrot fractal, margin call, market bubble, market clearing, market microstructure, means of production, minimum wage unemployment, Money creation, money market fund, open economy, Pareto efficiency, Paul Samuelson, Phillips curve, place-making, Ponzi scheme, Post-Keynesian economics, power law, profit maximization, quantitative easing, RAND corporation, random walk, risk free rate, risk tolerance, risk/return, Robert Shiller, Robert Solow, Ronald Coase, Savings and loan crisis, Schrödinger's Cat, scientific mainstream, seigniorage, six sigma, South Sea Bubble, stochastic process, The Great Moderation, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, total factor productivity, tulip mania, wage slave, zero-sum game

Keynes does not stress this) there is (2) a maximum to the level of income which can possibly be financed with a given amount of money. If we like we can think of the curve as approaching these limits asymptotically. (Ibid.) This ‘liquidity trap’ enabled Hicks to provide an explanation for the Great Depression, and simultaneously reconcile Keynes with ‘the Classics.’ Keynes was consigned to one end of the LM curve, where the liquidity trap applied, and ‘the Classics’ to the other, where full employment was the rule (see Figure 3.1). In the ‘classical’ range of the LM curve, conventional economics reigned supreme: there was a maximal, full employment level of income, where any attempts to increase output would simply cause a rising interest rate (or inflation, in extensions of the IS-LM model).

…

.; and uncertainty; critique of marginal efficiency of capital; critique of Say’s Law; General Theory of Employment, Interest and Money; models of convention formation; on expectations; view of stock market Keynesian economics; American; new; overthrow of see also post-Keynesianism Keynesianism Kindleberger, Charles Kirman, Alan Koo, Richard, The Holy Grail of Macroeconomics Kornai, Janos Krugman, Paul; ‘Debt, deleveraging, and the liquidity trap’ Kumar, Dharma Kydland, Finn labor: as only source of profit; surplus labor; value of labor embodied/labor commanded labor market; theory of labor theory of value Lakatos, I. land: as factor of production; as source of value Law of Demand; applicability of; non-applicability of Leeson, Robert Leijonhufvud, Axel leisure time, and income lemmings, fluctuation of populations of Leontief input–output matrix leverage, responsible levels of Levy Institute liability structures of financial institutions liquidity; of firms liquidity preference liquidity trap Ljungqvist, L.

…

The falling price level also has the perverse effect that the real rate of interest rises even though nominal rates have fallen, and this drastically reduces investment. Fisher’s theory was thus an alternative explanation of the Great Depression to both Keynes’s rejection of Say’s Law and Hicks’s ‘liquidity trap’ (discussed in Chapter 9). But though the chain reaction argument is plausible, Fisher provided no formal proof for it – in contrast to his previous emphasis upon formal mathematical reasoning. Partly for this reason, his thesis was received poorly by the economics profession, and his insights were swamped by the rapid adoption of Hicks’s IS-LM analysis after the publication of Keynes’s General Theory.9 After the Great Depression, economists continued to cite his pre-Crash work on finance, while his debt-deflation theory was largely ignored.10 As a result, the antipathy he saw between the formal concept of equilibrium and the actual performance of asset markets was also ignored.

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

Project Syndicate, April 1, 2011. Subbotin, Alexander. “A Multi-Horizon Scale for Volatility.” Working paper prepared for Centre d’Économie de la Sorbonne, March 3, 2008. Svensson, Lars E. O. “Escaping a Liquidity Trap and Deflation: The Foolproof Way and Others.” Working Paper No. 10195, National Bureau of Economic Research, December 2003. ———. “The Zero Bound in an Open Economy: A Foolproof Way of Escaping from a Liquidity Trap.” Working Paper No. 7957, National Bureau of Economic Research, October 2000. “Systematic Risk and the Redesign of Financial Regulation.” A Global Financial Stability Report, prepared for the International Monetary Fund, April 2010.

…

The Financial Crisis Inquiry Report: Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States, New York: Public Affairs, 2011, xvii. 175 In 2009, Janet Yellen, then president of the Federal Reserve Bank of San Francisco . . . “Fed Seeks Power to Issue Own Debt When Crisis Ebbs, Yellen Says,” Bloomberg, March 26, 2009. 181 Svensson’s paper is the Rosetta stone of the currency wars . . . Lars E. O. Svensson, “Escaping a Liquidity Trap and Deflation: The Foolproof Way and Others,” Working Paper No. 10195, National Bureau of Economic Research, December 2003. 182 “Even if the . . . interest rate is zero . . .” Svensson, op. cit. 182 “If the central bank could manipulate private-sector beliefs . . .” Svensson, op. cit. 185 In a famous study written just before the start of President Obama’s administration . . .

Understanding Asset Allocation: An Intuitive Approach to Maximizing Your Portfolio by Victor A. Canto

accounting loophole / creative accounting, airline deregulation, Alan Greenspan, Andrei Shleifer, asset allocation, Bretton Woods, business cycle, buy and hold, buy low sell high, California energy crisis, capital asset pricing model, commodity trading advisor, corporate governance, discounted cash flows, diversification, diversified portfolio, equity risk premium, financial engineering, fixed income, frictionless, global macro, high net worth, index fund, inflation targeting, invisible hand, John Meriwether, junk bonds, law of one price, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low cost airline, low interest rates, market bubble, merger arbitrage, money market fund, new economy, passive investing, Paul Samuelson, Performance of Mutual Funds in the Period, Phillips curve, price mechanism, purchasing power parity, risk free rate, risk tolerance, risk-adjusted returns, risk/return, rolling blackouts, Ronald Reagan, Savings and loan crisis, selection bias, seminal paper, shareholder value, Sharpe ratio, short selling, statistical arbitrage, stocks for the long run, survivorship bias, systematic bias, Tax Reform Act of 1986, the market place, transaction costs, Y2K, yield curve, zero-sum game

The decline in asset prices also reduced the net capital and capital adequacy of the banks, forcing them to further curtail their loan operations. These conditions created what some called a liquidity trap. As the Japan central bank printed money to stimulate the economy, the commercial banks did not lend the extra money. Instead, the money was held as excess reserves. The abundance of bank reserves reduced short-term interest rates, while stagnation lowered long-term rates. Worse, the yield curve flattened to near zero levels, hence the liquidity trap. The Japanese economy remained stagnant for several years following this turn of events. Eventually, most of the bad loans were worked out and the banks began lending again, once their capital had increased.

…

., 89 Kerry, John, 84 large-cap stocks active management tested against passive management, 166-168 annual returns, 19 elasticity, 184, 187-189 Index 311 location effect, 190-193, 202-204, 273-274 optimal mix with small-cap stocks, 23-24, 31-32, 123 performance of, 16-18, 41-43 regulatory fixed costs, 184-185 risk measurement, 20 size cycles, 54-55 active versus passive management during, 170-172, 175, 271-272 equal-weighted versus cap-weighted indexes, 175-180 and market breadth, 168-170, 237-238 in value-timing strategy, 243-250 LBOs (leveraged buyouts), 74 legislation. See tax-rate changes leverage in pure-alpha strategy, 256-257, 261 leveraged buyouts (LBOs), 74 LIBOR (London Interbank Offered Rate), 257 lifecycle allocations for benchmark portfolio, 115-116 lifecycle funds case study, 152-157 liquidity trap, 221 LJE quantitative model, probabilities in, 134-136 local companies, 190 location cycles, 57-58 location effect, 186. See also elasticity elasticity and, 187-189 large-cap stocks and, 190-193, 202-204, 273-274 regional stock indices and, 198-202 small-cap stocks and, 193-198, 202-204, 213, 273-274 location portfolios, Sharpe ratio, 61-63 location-based asset allocation cyclical asset allocation and, 34-37, 125-126 optimal mixes, 24-25 London Interbank Offered Rate (LIBOR), 257 long-run asset allocation.

The New Depression: The Breakdown of the Paper Money Economy by Richard Duncan

Alan Greenspan, asset-backed security, bank run, banking crisis, banks create money, Bear Stearns, Ben Bernanke: helicopter money, Bretton Woods, business cycle, currency manipulation / currency intervention, debt deflation, deindustrialization, diversification, diversified portfolio, fiat currency, financial innovation, Flash crash, Fractional reserve banking, Glass-Steagall Act, income inequality, inflation targeting, It's morning again in America, Joseph Schumpeter, laissez-faire capitalism, liquidity trap, low interest rates, market bubble, market fundamentalism, mass immigration, megaproject, Mexican peso crisis / tequila crisis, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, Nixon triggered the end of the Bretton Woods system, private sector deleveraging, quantitative easing, reserve currency, risk free rate, Ronald Reagan, savings glut, special drawing rights, The Great Moderation, too big to fail, trade liberalization

Mismanaged intervention could have the opposite effect, however, and produce very high and destabilizing rates of inflation. Extreme inflation is like fire in that it consumes the savings of the public in a conflagration of rising prices. Extreme deflation is ice-like. It leaves the economy frozen in a liquidity trap with high unemployment and no growth. Both would end in disaster for the economy and, therefore, for society. However, the two would impact asset prices very differently. This chapter looks at how very high rates of inflation and extreme deflation would affect the various asset classes. It is not inconceivable that, as this economic calamity plays out over the next decade, the economy could be hit by both.

…

Decrease in Construction Reduction in Output Reduction in Trade Unemployment More Pessimism IX. Hoarding X. Runs on Banks Banks Curtailing Loans for Self-Protection Banks Selling Investments Bank Failures Distrust Grows More Hoarding More Liquidation He then went on to explain how, in such circumstance, the economy can become frozen in a liquidity trap: If the over-indebtedness with which we started was great enough, the liquidation of debts cannot keep up with the fall of prices which it causes. In that case, the liquidation defeats itself. While it diminishes the number of dollars owed, it may not do so as fast as it increased the value of each dollar owed.

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

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

Credit growth, asset price inflation and large-scale capital inflows – in other words, the financial conditions then prevailing in the United States – were more reliable harbingers of a crisis. White also questioned the policy, championed by Bernanke, of dealing with the aftermath of a bubble rather than forestalling it. An over-indebted economy might enter a liquidity trap, rendering it impervious to monetary stimulus. If capital was misallocated during the boom, then low interest rates after the bust might contribute to economic sclerosis, as Japan had experienced over the previous decade. Reducing interest rates after a bubble’s collapse might discourage saving, thereby reducing the economy’s growth prospects: ‘If low rates are maintained for an extended period,’ White suggested, ‘they may or may not have the desired effect on aggregate demand, but they clearly have negative long-term effects with respect to aggregate supply.’

…

Olson, Mancur, The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities (New Haven, Conn., 1982). Origo, Iris, The Merchant of Prato (New York, 2020). Orlik, Thomas, China: The Bubble That Never Pops (New York, 2020). Orphanides, Athanasios, ‘Monetary Policy in Deflation: The Liquidity Trap in History and Practice’, Finance and Economics Discussion Series, Federal Reserve Board, December 2003. Osnos, Evan, Age of Ambition: Chasing Fortune, Truth, and Faith in the New China (New York, 2014). ‘Overcapacity in China: Causes, Impacts, and Recommendations’, European Chamber of Commerce, November 2009.

…

According to this view, the BOJ was late to ease monetary policy after the economy slowed, possibly out of fear of re-inflating the bubble. The Bank of Japan is also accused of lacking boldness and imagination in addressing deflation. It could, for instance, have done more to bring down long-term interest rates. See Ahearne et al., ‘Preventing Deflation’; also, Athanasios Orphanides, ‘Monetary Policy in Deflation: The Liquidity Trap in History and Practice’, Federal Reserve Board, December 2003. It is not clear, however, that the Bank of Japan didn’t respond aggressively enough as its policy rate came down quickly and mild deflation only surfaced towards the end of the 1990s. 14. Anna Schwartz in her essay ‘Why Financial Stability Depends on Price Stability’ fails to mention the case of Japan’s bubble economy.

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

First, suppose people are utterly indifferent to whether they hold bonds or money, so that bonds to get the $100 can be sold without having to offer a higher return to the buyer than such bonds were yielding before. (Of course, $100 is so small an amount that it would in practice have a negligible effect on the required rate of return, but the issue is one of principle whose practical effect can be seen by letting the $100 stand for $100 million or $100 ten-million.) In Keynesian jargon, there is a “liquidity trap” so people buy the bonds with “idle money.” If this is not the case, and clearly it cannot be indefinitely, then the government can sell the bonds only by offering a higher rate of return on it. A higher rate will then have to be paid also by other borrowers. This higher rate will in general discourage private spending on the part of would-be borrowers.

…

., 125 liberalism, 5, 10, 22–23, 32, 115, 137, 195; on dispersal of power, 2, 3, 6, 15, 39; on freedom of the individual, 12–13, 25–26, 33, 39, 195; On government, 23, 24–27, 34, 147, 195 (see also government, proper functions of); on governmental paternalism, 1–2, 33–34, 178–79, 188; on inappropriate governmental roles, 34–36; and international monetary policy, 56–57, 67–69; perversion of the term, 5–6; on role of voluntary co-operation, 22; on social security, 182–4; on taxation, 176 licensure, 9, 35–36, 137–60; and anticommunist agenda, 141; as governmental intervention, 126–27, 130–31, 191; granting arrangements for, 140–41; of medical profession, 138, 147–48, 149–59; paternalistic arguments justifying, 148, 149; as restriction on economic freedom, 111, 137–38, 146, 147; as special interest monopoly, 143–44, 148–49 limited government. See government, proper functions of liquidity crisis, 46–50 liquidity trap, 82 majority rule, 24–25, 52, 113–14, 187, 194 market. See free market Marx, Karl, 197 Marxism, 167–68 McCarthyism, 20–21 medical care, governmental, 177 medical profession, licensure of, 138, 147–48, 149–59 (see also American Medical Association); alternative to, 158–59; and experimentation, 157, 158, 160; and low standards of practice, 156–58; and restricted medical school admission, 151–53, 155, 156, 158; social costs of, 155–58 Meiselman, David, 84 n.

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

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

During presentations to the annual meetings of the IMF and World Bank in Washington, D.C., she referred to the new-normal phenomenon as the “new mediocre.”10 However one labels it, various explanations have been put forward for this unusual and worrisome phenomenon—from the difficulties of escaping a liquidity trap and the challenging aspects of balance sheet recessions to a change in productivity trends, lack of infrastructure investment, the effects of debt overhangs, demography, and “the race against the machines.” These are all factors that, first, hold actual growth below the potential of the economy, and second, act to pull down future potential growth.

…

The more people expect prices to fall in the future, the greater the possibility that they will delay their spending, thus also undermining companies’ appetite for expanding productive capacity and investing in new ones. Economists are also trying to figure out where “neutral” interest rates (that is, the steady-state policy rates consistent with stable inflation) are likely to settle once advanced economies finally overcome the liquidity trap and migrate up to a higher-equilibrium growth rate. There is general agreement that the new-equilibrium interest rate structure is likely to be below historical averages. But there is still quite a bit of disagreement on how far below. This frantic catch-up process is not limited to economists.

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

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

THE GHOST OF LORD KEYNES Keynes was never what the press or politicians would call a Keynesian. He was pragmatic for an intellectual and made a small fortune speculating in stocks. His famous book, which nobody reads, The General Theory, was largely concerned with solving the problem posed by deflation. This is called the ‘‘paradox of thrift’’ or the ‘‘liquidity trap.’’ If you stop spending money because your job is uncertain and things are getting cheaper all the time, you are doing the right thing for you. But if everyone does this, spending and work dry up and you have a deflationary spiral leading to a prolonged depression like that of the 1930s. Keynes’ solution to deflation was based on the idea that the economy was driven by total demand for goods and services.

…

(LBJ), 140; and the Great Inflation, 154 Joint Stock Companies, history and role, 81–82, 89, 138; East India Company, 81–82 Keynes, John Maynard, 113–115, 129, 153, 155, 163, 165 Kindleberger, Charles, Manias, Panics and Crashes, 136 ‘‘legal tender,’’ xv, xvii, 10, 105, 148 Lender of Last Resort, 150 lending, xix, 15–18, 27, 34, 36–39, 56, 60–63, 66, 68, 70, 72, 83–84, 90, 92, 98, 102–103, 107, 109–110, 126, 131–132, 142, 148, 150–152, 156–158, 164, 166–167, 170, 185–189. See also Balance sheet lending Leverage, 4–5, 27–28, 66, 152, 160 liberalism, 125, 180, 182 Liberty and markets, 125, 179–182 LIBOR (London Interbank Offered Rate), 146, 150 ‘‘Lifeboat’’ method of bank rescue, 121 Liquidity, 30, 110, 113 Liquidity Trap, 113 Lombard Rate, 34 Lombard Street, book by Walter Bagehot, 102 Lombard Street, London, 34, 135 ‘‘long tail’’ risks, 69. See also ‘‘black swans’’ Long Term Credit Bank (LTCB), Japan, 170 195 196 Index Mackay, Charles, Great Popular Delusions and the Madness of Crowds, 136 Madoff, Bernard, 23, 175 Main Street, 1, 91, 104, 144, 176, 187 Manias, xviii–xx, 27, 109, 136–138 Manufacturers Hanover Trust Company, 148, 158 margin lending, 110 market capitalization, 47, 51, 70, 126, 159, 183 markets 19–22, 24–28, 40–41, 60, 72, 107, 111, 117–119, 124, 126–127, 150, 165–169, 175–176; 179–189; defined, xi–xx; functions, 18–28; history of, 75, 79–89, 135–145; how to play, 50–56; irrational, 52–53, 156–57; real estate market downturn and ‘‘Billy Bob’’ banking crisis, 131–32; secondary, 44 MBS (Mortgage Backed Securities), 57 Medici, 79 Meyer, Martin, Bankers, The, 143 MMA (Money Market Account), 130 models, uses in finance, 21, 25, 27, 63–65, 69–70, 99–100, 138, 152, 166, 171, 177, 182; faith in, 4, 58, 66, 68, 71–72, 74 MOF (Ministry of Finance, Japan), 167 money, creation of, 13; defined, x, xi, 117; history of, xv–xvi, 33–34, 77–80; function of, xii–xv; money supply, types of xv, xvii–xviii, 4, 8–9, 83, 92, 148, 155; value of, 4.

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

After the collapse of a financial bubble, as occurred in the United States in the 1930s and Japan in the 1990s, the more immediate threat is the opposite 71 72 Chapter 3 | The Economic Consequences of Financial Regulation of inflation. It is deflation, the relentless drop in the price of assets as society responds by trying to pay down debt and save. It was this “liquidity trap” Keynes was trying to cure with his advice to offset private thrift with government spending. However, vast increases in government spending and debt have proven ineffective in halting Japanese deflation. And while the United States has avoided actual deflation, the effects of massive increases in government spending, debt, and the money supply have been remarkably feeble.

…

eBook <www.wowebook.com> 170 Index Global whirlwinds (continued) economic primacy, 113 European banking crisis ECB, 102–103 federal funds market, 102 Federal Reserve, 103 global money market, 102 interbank market, 101 interbank-lending market, 102 interest rate and currency risks, 101 investment-banking industry, 101 recession, 103 short-and medium-term credit, 101 short-term funding and liquidity, 101 sovereign risk, 102 steroids, 103 globalization, 113 global money pump, 103–105 global trade, zero-sum game ants and grasshoppers, 96 cheap TV deal, 94–95 Chinese Central Bank, 94 currency manipulation, 95–96 multilateral trade, 94 political demagoguery, 94 hegemon, 113–116 sustainable development, 112 technology vs. friction, 105–106 US global economic leadership, 112 US losing clout, 111–112 war, settlement risk, 108–109 Western decline acceleration, 113 Government-sponsored enterprises (GSEs), 17 Graham-Leach-Bliley Act, 36 Great Depression, 5, 44, 61 Great Moderation, 16–18, 21, 61 “Green” economy, 85 Growth-killing austerity, 111 H Home equity lines of credit (HELOCs), 16 I Industrial Revolution, 77 Infinite customization, 68 J Joint-stock banking, 63, 76 L Laissez-faire economy, 84–86 Liberal arts, 132 Life after finance, 75 credit-driven economy, 76–77 death knell, consumer credit American optimism, 90 big data, 90 entrepreneurs starvation, 91–92 loan factories, 90 per-account/per-transaction, 90 securitization, 90 unbanking, 91 financial repression Bretton Woods system, 79 capital exports and foreignexchange transactions, 79 captive domestic audience, 79 debt restructuring, 78 GDP, 79 government banks ownership, 79 industrial policy, 86 monopolies, 86 negative real interest rates, 78, 79 prudential regulation, 79 rules, 80 subsidized green energy, 86 tax raising and lowering, 81–82 World War II, 79 Government expenditure, 75–76 low interest rates, 77–78 political direction, credit and investment formal taxation, 82 government-run utility, 83 Japanese banks, 83 laissez-faire economy myth, 84–86 Index market-driven banking system, 83 winners and losers, 83–84 risky business amalgamation, 88 coincidence, 88 competition, 89–90 joint-stock banks, 87 often-contradictory rules and requirements, 88 private partnerships, 87 separation of functions, 87 shareholder-owned banks, 87 small-town banks, 87 Life-line banking, 70 R Liquidity trap, 72 Ring fencing, 88 London Interbank Offered Rate (LIBOR), 102 Rules-based regulation, 59, 61 M S “Market-centric” financial system, 110 Real Time Gross Settlement (RTGS), 108 Regulation process “Anglo-Saxon” world, 36 balance sheets and trading desks, 35 definition, 36 finance deregulation, 35–36 Graham-Leach-Bliley Act, 36 Triple A–rated bonds, 37 “ultra-safe” money market mutual fund, 37 Regulatory arbitrage, 61 Resolution Trust Corporation (RTC), 31 Savings-and-loan (S&L) industry, 28, 30 Mass-market retail banking, 66 Securities and Exchange Commission (SEC) rules, 33 McKinsey Global Institute (MGI), 110 S&L industry.See Savings-and-loan industry Micro-regulation, 92 Ministry of International Trade and Industry (MITI), 83 Society for Worldwide Interbank Financial Telecommunications (SWIFT), 107 Moral hazard, 18 Straight-through procession, 107 N National Bank Act, 49 National Bureau of Economic Research (NBER), 78 O Outsourcing, 13 P Personal Consumption Expenditure (PCE), 90 Price discovery, 104 Principles-based regulation, 59 Printing money, 78 Professional/proprietary trading, 12 Subprime mortgage market, 66 T The Dodd-Frank Act, 49 Trillion-pound banking groups, 60 Troubled Asset Relief Program (TARP), 39 U US Federal Reserve, 6 V Volcker rule, 88 W Working capital, 11 171 Broken Markets A User’s Guide to the Post-Finance Economy Kevin Mellyn Broken Markets: A User’s Guide to the Post-Finance Economy Copyright © 2012 by Kevin Mellyn All rights reserved.

The Long Good Buy: Analysing Cycles in Markets by Peter Oppenheimer

Alan Greenspan, asset allocation, banking crisis, banks create money, barriers to entry, behavioural economics, benefit corporation, Berlin Wall, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, book value, Bretton Woods, business cycle, buy and hold, Cass Sunstein, central bank independence, collective bargaining, computer age, credit crunch, data science, debt deflation, decarbonisation, diversification, dividend-yielding stocks, equity premium, equity risk premium, Fall of the Berlin Wall, financial engineering, financial innovation, fixed income, Flash crash, foreign exchange controls, forward guidance, Francis Fukuyama: the end of history, general purpose technology, gentrification, geopolitical risk, George Akerlof, Glass-Steagall Act, household responsibility system, housing crisis, index fund, invention of the printing press, inverted yield curve, Isaac Newton, James Watt: steam engine, Japanese asset price bubble, joint-stock company, Joseph Schumpeter, Kickstarter, Kondratiev cycle, liberal capitalism, light touch regulation, liquidity trap, Live Aid, low interest rates, market bubble, Mikhail Gorbachev, mortgage debt, negative equity, Network effects, new economy, Nikolai Kondratiev, Nixon shock, Nixon triggered the end of the Bretton Woods system, oil shock, open economy, Phillips curve, price stability, private sector deleveraging, Productivity paradox, quantitative easing, railway mania, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, savings glut, secular stagnation, Shenzhen special economic zone , Simon Kuznets, South Sea Bubble, special economic zone, stocks for the long run, tail risk, Tax Reform Act of 1986, technology bubble, The Great Moderation, too big to fail, total factor productivity, trade route, tulip mania, yield curve

Available at https://www.japantimes.co.jp/news/2009/01/06/reference/lessons-from-when-the-bubble-burst/ 9 Okina, K., Shirakawa, M., and Shiratsuka, S. (2001). The asset price bubble and monetary policy: Experience of Japan's economy in the late 1980s and its lessons. Monetary and Economic Studies, 19(S1), 395–450. 10 Turner, G. (2003). Solutions to a liquidity trap. London, UK: GFC Economics. 11 Norris, F. (2000). The year in the markets; 1999: Extraordinary winners and more losers. New York Times [online]. Available at https://www.nytimes.com/2000/01/03/business/the-year-in-the-markets-1999-extraordinary-winners-and-more-losers.html 12 See Sorescu, A., Sorescu, S.

…

Public Choice, 130(1–2), 99–114. Tooze, A. (2018). Crashed: How a decade of financial crises changed the world. London, UK: Allen Lane. Turner, A. (2017). The path to a low-carbon economy. Climate 2020 [online]. Available at https://www.climate2020.org.uk/path-low-carbon-economy Turner, G. (2003). Solutions to a liquidity trap. London, UK: GFC Economics. US Department of Justice. (2015). U.S. v. Microsoft: Proposed findings of fact. Available at https://www.justice.gov/atr/us-v-microsoft-proposed-findings-fact-0 Vogel, E. (2001). Japan as number one lessons for America. Lincoln, NE: iUniverse.com. Why weather forecasts are so often wrong. (2016).

The Great Stagnation by Tyler Cowen

Asian financial crisis, Bernie Madoff, Black Monday: stock market crash in 1987, confounding variable, en.wikipedia.org, endogenous growth, financial innovation, Flynn Effect, income inequality, indoor plumbing, life extension, liquidity trap, Long Term Capital Management, Mark Zuckerberg, meta-analysis, Peter Thiel, RAND corporation, Savings and loan crisis, school choice, scientific management, Tyler Cowen, Tyler Cowen: Great Stagnation, urban renewal

As a former BusinessWeek columnist, he did the most of anyone to raise questions about the quality of our recent innovations and to ask whether our measured productivity improvements are real. Paul Krugman, Nouriel Roubini, and Jeffrey Sachs are all more famous, prizewinning commentators on the questions of macroeconomics and development, and from them you will hear a lot of talk about liquidity traps, currency crises, and the future of Africa. But this group misses many of the critical angles of science and technology and the broader historical picture of how a technological plateau is possible. Peter Thiel, a cofounder of PayPal and an early investor in Facebook (he shows up as a character in the movie Social Network, albeit poorly portrayed), also deserves credit for promoting the idea of an innovation and productivity slowdown.

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

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

Since physical money effectively pays a zero interest rate (cash keeps the same nominal value forever), taking rates negative might simply make savers convert all their deposits into cash. That would mean further monetary stimulus would have no effect, as all new central bank money would be immediately swapped for cash and rates would stay at zero. This theoretical situation is called a “liquidity trap.” But it turned out that central banks were not “trapped” at zero at all. This became clear when the Riksbank—Sweden’s central bank—was the first to introduce a negative interest rate in 2009. Switzerland, Japan, and eventually the European Central Bank itself followed suit. No matter the theory, it turns out that cutting interest rates below zero in practice looks very similar to cutting them when they are positive.

…

See employment job training programmes, 108–9, 204, 205 Johnson, Boris, 238 Kentucky, 126, 205 Kerr, Sari Pekkala, 250n20 Kerr, William, 250n20 Kessler, Martin, 79–80 Keynes, John Maynard, 131, 133, 140, 142, 147 knowledge economy, 27–29, 70, 207 Korea, 79 Kuper, Simon, 194 laissez-faire economics, 236 Lakner, Christoph, 19 Law and Justice party (Poland), 45 League party (Italy), 192 left behind, the: carbon tax and, 184–86, 187; dependence of, 9, 111–12, 116; economic grievances of, 8, 18, 35–36, 48; education of, 27–29; employment solutions for, 105–6; gender roles as issue for, 33–34; in Germany, 60; harms inflicted on, by financial sector instability, 151; harms inflicted on, by poor policy decisions, 56, 61–62, 68, 70, 134–35, 137–38, 141, 143; health of, 36, 48–49, 112; loss of economic and psychological security felt by, 9, 35–36, 44, 48, 61–62, 111–12, 116; macroeconomic policy choices harmful to, 134–35, 137–38; macroeconomic policy’s effect on, 131–47; in the Nordic countries, 105–6; overlooking of situation of, 232; place-based identification of, 31–33, 45–47, 49; place of residence of, 29–33; populism’s attraction for, 36, 72; recessions’ effects on, 135, 137–38, 141; regional instances of, 192–208; socioeconomic conditions resulting in, 9–10, 17–36; tax policy for benefit of, 168–87; Trump support from, 45; unemployment of, 135, 136; vulnerability of, 58, 111–13, 135 Le Pen, Marine, 15, 72 Le Pen family, 41, 192 Lewis, Sinclair, It Can’t Happen Here, 11 liberalism and liberal democracy: cultural values associated with, 14–15; divergent interests in, 232–33; economic health as essential bulwark of, 7–8, 10, 12–16; failures of centrist politicians in, 229–33; globalisation associated with, 211–12; globalisation criticised from standpoint of, 9, 13; principles of, 5; rejection of, 7, 10, 15–16, 18; restoration of, 229. See also elites; illiberalism libertarianism, 236 Linke party (Germany), 192 liquidity trap, 163–64 living standards, 19–20, 67 Louis, Edouard, 35; Who Killed My Father? 36 macroeconomic policy, 131–47; economics of belonging dependent on, 132–33, 141–42, 147; failures to use, 56, 90–92, 141, 144, 146–47, 161, 165, 181; financial policy in support of, 163–65; fiscal austerity as, 144–46; harms inflicted on the vulnerable by, 56, 61–62, 68, 70, 134–35, 137–38, 141, 143; high-pressure, 106, 132–33, 138–44, 146–47, 151, 216–17; for job creation, 132; overall economic productivity affected by, 138–40; social contract undermined by mistakes in, 133; symmetric vs. asymmetric, 142 Macron, Emmanuel, 61, 193, 238 macroprudential regulations, 161–62, 260n21, 270n7 “Make America Great Again,” 8, 33 “make work pay” schemes, 43, 47, 61 manufacturing.

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

Look at his Monetary Reform.... [It is] straight quantity theory.... So if you ask in what way was Keynes’s liquidity preference theory [changes in monetary velocity] different from the quantity theory . . . , it was different only in the idea of having a liquidity trap [a decline in monetary velocity]. This was the only essential different idea. In my reformulation I don’t have a liquidity trap.9 Friedman was a hardworking student and took copious notes in class and of works that he read. He took, for example, eighty-seven pages of notes on Keynes’s Treatise on Money. The member of the faculty at Chicago with whom Friedman had the most contact as a student, but of whom he had a very low opinion at the time, was Henry Schultz.

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

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

Under conditions of uncertainty, hanging on to the universal form of wealth, money, rather than commodities makes sense, except under conditions of rapid inflation when it may prove more advantageous to hold on to cans of tuna and barrels of cooking oil rather than money. The more general case is one in which a loss of faith and of confidence in the economy leads people to hoard money and not to spend it. This can occur when profit prospects dim. But this in turn leads into what Keynes called the ‘liquidity trap’ – the more people or institutions (including banks and corporations) hoard money rather than spend it, the more likely that effective demand will collapse and the less profitable reinvestment in production will become. The result is a downward spiral (of the sort that occurred in the 1930s and which we are currently witnessing) that is difficult to reverse.

…

Morgan 142, 173, 219 ‘just-in-time’ principle 68 K Kay, Kenneth 53 Kerala, India, and remittances 38 Keynes, John Maynard 32, 53, 55, 87, 111, 160, 226, 237, 238 General Theory 114 Keynesian, Keynesians 168, 238, 255, 261 Kohl, Helmut 64 ‘Kondratieff cycles’ 96 Krieger, Andy 24–5 Krugman, Paul 235–6 kulaks 250 L labour and capital 56, 88, 169–70 casual 242 competition 61 costs 15, 16, 88 disempowered 16 divisions of 196, 213 exploitation of 94 feminisation of the global labour force 258 ‘floating’ army of laid-off workers 60 geographical mobility of 59–60, 213 guild 160 import of 14 integration of peasant populations into 58 laws 59, 103 living standards 88–9 massive reserves 64 and new technologies 60 organisations 61 and politics of populist outrage 55–6 power of 12, 14, 15, 40–41, 103, 172 quality requirements 93 regulation of conditions of 59 rights 251 scarcity of 12, 59, 60 social divisions of 67 supply 47, 121 supply and demand for 60 surplus 5, 15, 215 ultimate power of the workforce 63, 101–2 unionised 108 unrest 66 labour markets geographically segmented 59 local 63 regulating dynamics of 60 labour power demand of 115 released as a commodity into the market place 58 and standard of living 62–3 supply of 63, 65, 115 value of 64 labour process 105 collective 104 resistance or inefficiencies in 47 labour unions 256 laissez faire 128 land capital embedded in the 191 enclosures 48 fertility 82 Israeli dispossession of Palestinian land 247 land use degradation 77 reform 249 rights 88 speculation 187–8 values 181, 182, 183, 234 landlords 40 laptops 131 Las Vegas, foreclosure crisis in 2 Latin America anti-neoliberal struggles 226 bilateral trade with China 173 and the Catholic Church 254 land bought up in 220 population growth 146 Latin American Southern Cone group (MERCOSUR) 200 Latvian government 37 Lazard’s 11 lead-based paints 74 ‘learned societies’ 91 Lebanon economic stimulus 140 rebuilding of 202 Leeson, Nicholas 37, 100, 190 Lefebvre, Henri 128 legitimation crises 217 Lehman Brothers 2, 5, 12, 21, 37, 132, 211 Leipzig, Germany 142 Lenin, Vladimir 46, 136, 227 Leningrad 243 Leninism 134 lesbians, and colonisation of urban neighbourhoods 247 leveraged buy-outs 50 leveraging 30, 31 Leverhulme foundation 44 life expectancy 137, 152, 250 limited companies 49 liquidity crisis in 206 liquidity injections vii, 261 liquidity trap 111 surplus 5, 28, 30 living standards 10, 46, 62–3, 72, 88–9, 96, 120 Locke, John 90, 233 London, territorial organisation of 196 London School of Economics vii, 235 Long Term Capital Management crash and bail-out (1998) 8, 100, 261 ‘long waves’ 96 Luddite movement 60, 96 Luxemburg, Rosa 108, 116–17 luxury goods 70, 110 M McCarthyism 169 machinery 66, 113, 114, 127 Mackinder, Sir Halford 209–10 macroeconomics 237 McVeigh, Timothy 248 Maddison, Angus 26 Mahan, A.T.: The Influence of Sea Power upon History 209 maintenance failures 86 Malaysia: resorts to capital controls 198 Malthus, Thomas 72, 94 Manchester 27 Mao Zedong 59 Cultural Revolution 137 dialectical sense of how contradictions worked 136 Great Leap Forward 137, 138, 250 health care 137 recognised that a revolution had to be permanent or nothing at all 136–7 Maoism 133 Maoists 253 Marcos, Imelda 43 Marcuse, Herbert 169 market laws 198 market share 43 markets credit 2, 5, 37 export 141, 218 free 10, 90, 100, 128, 131 internal 109 market connections 162–3 niches 131, 175 see also derivatives markets; futures markets; labour markets; options markets Marshall, Arthur 162 ‘Marshallian’ industrial production districts 162 Marx, Karl 46–7, 98, 110, 160, 232–3 and Bakunin 225 on barriers 84, 88 the capitalist creed 103 capitalist development 117 changing the world 119–20 on the cotton industry 67 and falling profitability 94 goal of 238 on an ‘industrial reserve army’58 and Keynes 111 and limitless money 47 and Luddite movement 96 on Malthus and Ricardo 72 on the power of the labourer 101–2 on ‘primitive accumulation’58, 249 and rent 81 and reproduction schemas 70 on the rise of capitalism 135, 250 systematic critique of capitalism and its crisis tendencies 237 understanding and transparency 99, 100 on the world of high finance 54–5 Capital 53–4, 70, 89, 119, 126, 237 Grundrisse der Kritik des Politischen Ökonomie 47, 155 Marx, Karl and Engels, Friedrich: The Communist Manifesto 89, 115, 127, 157, 237, 259 Marxian theory 56, 183 Marxists 253 Meadows, Donella h.: Limits to Growth 72 meat-based diets 73, 74 Medicare 28–9, 224 Mellon, Andrew 11, 98 mercantilism 206 merchant capitalists 40 mergers 49, 50 forced 261 Merrill Lynch 12 Merton, Robert 100 methane gas 73 Mexico debt crisis (1982) 10, 19 northern Miexico’s proximity to the US market 36 peso rescue 261 privatisation of telecommunications 29 and remittances 38 standard of living 10 Mexico City 243 microcredit schemes 145–6 microeconomics 237 microenterprises 145–6 microfinance schemes 145–6 Middle East, and oil issue 77, 170, 210 militarisation 170 ‘military-industrial complex’ 91 minorities: colonisation of urban neighbourhoods 247, 248 Mitterrand, François 198 modelling of markets 262 modernism 171 monarchy 249 monetarism 237 monetisation 244 money centralised money power 49–50, 52 a form of social power 43, 44 limitlessness of 43, 47 loss of confidence in the symbols/quality of money 114 universality of 106 monoculture 186 Monopolies Commission 52 monopolisation 43, 68, 95, 113, 116, 221 Monsanto 186 Montreal Protocol (1989) 76, 187 Morgan Stanley 19 Morishima, Michio 70 Morris, William 160 mortgages annual rate of change in US mortgage debt 7 mortgage finance for housing 170 mortgage-backed bonds futures 262 mortgage-backed securities 4, 262 secondary mortgage market 173, 174 securitisation of local 42 securitisation of mortgage debt 85 subprime 49, 174 Moses, Robert 169, 171, 177 MST (Brazil) 257 multiculturalism 131, 176, 231, 238, 258 Mumbai, India anti-Muslim riots (early 1990s) 247 redevelopment 178–9 municipal budgets 5 Museum of Modern Art, New York 21 Myrdal, Gunnar 196 N Nandigram, West Bengal 180 Napoleon III, Emperor 167, 168 national debt 48 National Economic Council (US) 11, 236 national-origin quotas 14 nationalisation 2, 4, 8, 224 nationalism 55–6, 143, 194, 204 NATO 203 natural gas 188 ‘natural limits’ 47 natural resources 30, 71 natural scarcity 72, 73, 78, 80, 83, 84, 121 nature and capital 88 ‘first nature’ 184 relation to 121, 122 ‘the revenge of nature’ 185 ‘second nature’ 184, 185, 187 as a social product 188 neocolonialism 208, 212 neoliberal counter-revolution 113 neoliberalism 10, 11, 19, 66, 131, 132, 141, 172, 175, 197, 208, 218, 224, 225, 233, 237, 243, 255 Nepal: communist rule in 226 Nevada, foreclosure wave in 1 New Deal 71 ‘new economy’ (1990s) 97 New Labour 45, 255 ‘new urbanism’ movement 175 New York City 11 September 2001 attacks 41 fiscal crisis (1975) 10, 172, 261 investment banks 19, 28 New York metropolitan region 169, 196 Nicaragua 189 Niger delta 251 non-governmental organisations (NGOs) 35, 253–4 non-interventionism 10 North Africa, French import of labour from 14 North America, settlement in 145 North American Free Trade Association (NAFTA) 200 Northern Ireland emergency 247 Northern Rock 2 Norway: Nordic cris (1992) 8 nuclear power 188 O Obama, Barack 11, 27, 34, 210 Obama administration 78, 121 O’Connor, Jim 77, 78 offshoring 131 Ogoni people 251 oil cheap 76–7 differential rent on oil wells 83 futures 83, 84 a non-renewable resource 82 ‘peak oil’ 38, 73, 78, 79, 80 prices 77–8, 80, 82–3, 261 and raw materials prices 6 rents 83 United States and 76–7, 79, 121, 170, 210, 261 OPEC (Organisation of Oil-Producing Countries) 83, 84 options markets currency 262 equity values 262 unregulated 99, 100 Orange County, California bankruptcy 100, 261 Organisation for Economic Cooperation and Development (OECD) 51 organisational change 98, 101 organisational forms 47, 101, 121, 127, 134, 238 Ottoman Empire 194 ‘over the counter’ trading 24, 25 overaccumulation crises 45 ozone hole 74 ozone layer 187 P Pakistan: US involvement 210 Palley, Thomas 236 Paris ‘the city of light’ 168 epicentre of 1968 confrontations 177, 243 Haussmann’s rebuilding of 49, 167–8, 169, 171, 176 municipal budget crashes (1868) 54 Paris Commune (1871) 168, 171, 176, 225, 243, 244 Partnoy, Frank: Ubfectious Greed 25 patents 221 patent laws 95 patriarchy 104 pensions pension funds 4, 5, 245 reneging on obligations 49 Péreire brothers 49, 54, 98, 174 pesticides 185, 186, 187 petty bourgeois 56 pharmaceutical sector 129, 245 philanthropy 44 Philippines: excessive urban development 8 Phillips, Kevin 206 Pinochet, General Augusto 15, 64 plant 58 Poland, lending to 19 political parties, radical 255–6 politics capitalist 76 class 62 co-revolutionary 241 commodified 219 depoliticised 219 energy 77 identity 131 labour organizing 255 left 255 transformative 207 pollution air 77 oceanic 74 rights 21 ‘Ponts et Chaussées’ organisation 92 Ponzi schemes 21, 114, 245, 246 pop music 245–6 Pope, Alexander 156 population growth 59, 72, 74, 121, 167 and capital accumulation 144–7 populism 55–6 portfolio insurance 262 poverty and capitalism 72 criminalisation and incarceration of the poor 15 feminisation of 15, 258 ‘Great Society’ anti-poverty programmes 32 Prague 243 prices commodity 37, 73 energy 78 food grain 79–80 land 8, 9, 182–3 oil 8, 28, 37–8, 77–8, 80, 82–3, 261 property 4, 182–3 raw material 37 reserve price 81–2 rising 73 share 7 primitive accumulation 58, 63–4, 108, 249 private consortia 50 private equity groups 50 private property and radical egalitarianism 233, 234 see also property markets; property rights; property values privatisation 10, 28, 29, 49, 251, 256, 257 pro-natal policies 59 production expansion of 112, 113 inadequate means of 47 investment in 114 liberating the concept 87 low-profit 29 offshore 16 production of urbanisation 87 reorganisation and relocation of 33 revolutionising of 89 surplus 45 technologies 101 productivity agreements 14, 60, 96 agricultural 119 cotton industry 67 gains 88, 89 Japan and West Germany 33 rising 96, 186 products development 95 innovation 95 new lines 94, 95 niches 94 profit squeeze 65, 66, 116 profitability constrains 30 falling 94, 131 of the financial sector 51 and wages 60 profits easy 15 excess 81, 90 falling 29, 72, 94, 116, 117 privatising 10 rates 70, 94, 101 realisation of 108 proletarianisation 60, 62 property markets crash in US and UK (1973–75) 8, 171–2, 261 overextension in 85 property market-led Nordic and Japanese bank crises 261 property-led crises (2007–10) 10, 261 real estate bubble 261 recession in UK (after 1987) 261 property rights 69, 81–2, 90, 122, 179, 198, 233, 244, 245 Property Share Price Index (UK) 7 property values 171, 181, 197, 248 prostitution 15 protectionism 31, 33, 43, 211 punctuated equilibrium theory of natural evolution 130 Putin, Vladimir 29, 80 Q Q’ing dynasty 194 quotas 16 R R&D (research and development) 92, 95–6 race issues 104 racism 61, 258 radical egalitarianism 230–34 railroads 42, 49, 191 Railwan, rise of (1970s) 35 rare earth metals 188 raw materials 6, 16, 37, 58, 77, 101, 113, 140, 144, 234 RBS 20 Reagan, Ronald 15, 64, 131, 141 Reagan-Thatcher counter revolution (early 1980s) 71 Reagan administration 1, 19 Reagan recession (1980–82) 60, 261 Real Estate Investment Trusts (US) 7 recession 1970s 171–2 language of 27 Reagan (1980–82) 60, 261 Red Brigade 254 reforestation 184 refrigeration 74 reinvestment 43, 45, 66–7, 110–12, 116 religious fundamentalism 203 religious issues 104 remittances 38, 140, 147 rentiers 40 rents differential rent 81, 82, 83 on intellectual property rights 221 land 182 monetisation of 48, 109 monopoly 51, 81–2, 83 oil 83 on patents 221 rising 181 reproduction schemas 70 Republican Party (US) 11, 141 reserve price 81 resource values 234 Ricardo, David 72, 94 risks, socialising 10 robbery 44 Robinson, Joan 238 robotisation 14, 136 Rockefeller, John D. 98 Rockefeller brothers 131 Rockefeller foundation 44, 186 Roman Empire 194 Roosevelt, Franklin D. 71 Rothschild family 98, 163 Royal Society 91, 156 royalties 40 Rubin, Robert 98 ‘rule of experts’ 99, 100–101 Russia bankruptcy (1998) 246, 261 capital flight crisis 261 defaults on its debt (1998) 6 oil and natural gas flow to Ukraine 68 oil production 6 oligarchs 29 see also Soviet Union S Saddam Hussein 210 Saint-Simon, Claude Henri de Rouvroy, Comte de 49 Saint-Simonians 87, 168 Salomon Brothers 24 Samuelson, Robert 235, 239 Sandino, Augusto 189 Sanford, Charles 98 satellites 156 savings 140 Scholes, Myron 100 Schumer, Charles 11 Schumpeter, Joseph 46 Seattle battle of (1999) 38, 227 general strike (1918) 243 software development in 195 Second World War 32, 168–70, 214 sectarianism 252 securitisation 17, 36, 42 Sejong, South Korea 124–6 service industries 41 sexism 61 sexual preferences issues 104, 131, 176 Shanghai Commune (1967) 243 shark hunting 73, 76 Shell Oil 79, 251 Shenzhen, China 36 shop floor organisers (shop stewards) 103 Silicon Valley 162, 195, 216 Singapore follows Japanese model 92 industrialisation 68 rise of (1970s) 35 slavery 144 domestic 15 slums 16, 151–2, 176, 178–9 small operators, dispossession of 50 Smith, Adam 90, 164 The Wealth of Nations 35 social democracy 255 ‘social democratic’ consensus (1960s) 64 social inequality 224 social relations 101, 102, 104, 105, 119, 121, 122, 123, 126, 127, 135–9, 152, 240 loss of 246 social security 224 social services 256 social struggles 193 social welfarism 255 socialism 136, 223, 228, 242, 249 compared with communism 224 solidarity economy 151, 254 Soros, George 44, 98, 221 Soros foundation 44 South Korea Asian Currency Crisis 261 excessive urban development 8 falling exports 6 follows Japanese model 92 rise of (1970s) 35 south-east Asia: crash of 1997–8 6, 8, 49, 246 Soviet Union in alliance with US against fascism 169 break-up of 208, 217, 227 collapse of communism 16 collectivisation of agriculture 250 ‘space race’ (1960s and 1970s) 156 see also Russia space domination of 156–8, 207 fixed spaces 190 ‘space race’ (1960s and 1970s) 156 Spain property-led crisis (2007–10) 5–6, 261 unemployment 6 spatial monopoly 164–5 special drawing rights 32, 34 special economic zones 36 special investment vehicles 36, 262 special purpose entities 262 speculation 52–3 speculative binges 52 speed-up 41, 42 stagflation 113 stagnation 116 Stalin, Joseph 136, 250 Standard Oil 98 state formation 196, 197, 202 state-corporate nexus 204 ‘space race’ (1960s and 1970s) 156 state-finance nexus 204, 205, 237, 256 blind belief in its corrective powers 55 ‘central nervous system’ for capital accumulation 54 characteristics of a feudal institution 55 and the current crisis 118 defined 48 failure of 56–7 forms of 55 fusion of state and financial powers 115 innovation in 85 international version of 51 overwhelmed by centralised credit power 52 pressure on 54 radical reconstruction of 131 role of 51 and state-corporate research nexus 97 suburbanisation 171 tilts to favour particular interests 56 statistical arbitrage strategies 262 steam engine, invention of 78, 89 Stiglitz, Joseph 45 stimulus packages 261 stock markets crash (1929) 211, 217 crashes (2001–02) 261 massive liquidity injections (1987) 236, 261 Stockton, California 2 ’structural adjustment’ programmes vii, 19, 261 subcontracting 131 subprime loans 1 subprime mortgage crisis 2 substance abuse 151 suburbanisation 73, 74, 76–7, 106–7, 169, 170, 171, 181 Summers, Larry 11, 44–5, 236 supermarket chains 50 supply-side theory 237 surveillance 92, 204 swaps credit 21 Credit Default 24, 262 currency 262 equity index 262 interest rate 24, 262 Sweden banking system crash (1992) 8, 45 Nordic crisis 8 Yugoslav immigrants 14 Sweezey, Paul 52, 113 ‘switching crises’ 93 systematic ‘moral hazard’ 10 systemic risks vii T Taipei: computer chips and household technologies in 195 Taiwan falling exports 6 follows Japanese model 92 takeovers 49 Taliban 226 tariffs 16 taxation 244 favouring the rich 45 inheritance 44 progressive 44 and the state 48, 145 strong tax base 149 tax rebates 107 tax revenues 40 weak tax base 150 ‘Teamsters for Turtles’ logo 55 technological dynamism 134 technologies change/innovation/new 33, 34, 63, 67, 70, 96–7, 98, 101, 103, 121, 127, 134, 188, 193, 221, 249 electronic 131–2 ‘green’ 188, 221 inappropriate 47 labour fights new technologies 60 labour-saving 14–15, 60, 116 ‘rule of experts’ 99, 100–101 technological comparative edge 95 transport 62 tectonic movements 75 territorial associations 193–4, 195, 196 territorial logic 204–5 Thailand Asian Currency Crisis 261 excessive urban development 8 Thatcher, Margaret, Baroness 15, 38, 64, 131, 197, 255 Thatcherites 224 ‘Third Italy’, Bologna 162, 195 time-space compression 158 time-space configurations 190 Toys ‘R’ Us 17 trade barriers to 16 collapses in foreign trade (2007–10) 261 fall in global international trade 6 increase in volume of trading 262 trade wars 211 trade unions 63 productivity agreements 60 and US auto industry 56 trafficking human 44 illegal 43 training 59 transport costs 164 innovations 42, 93 systems 16, 67 technology 62 Treasury Bill futures 262 Treasury bond futures 262 Treasury instruments 262 TRIPS agreement 245 Tronti, Mario 102 Trotskyists 253, 255 Tucuman uprising (1969) 243 Turin: communal ‘houses of the people’ 243 Turin Workers Councils 243 U UBS 20 Ukraine, Russian oil and natural gas flow to 68 ultraviolet radiation 187 UN Declaration of Human Rights 234 UN development report (1996) 110 Un-American Activities Committee hearings 169 underconsumptionist traditions 116 unemployment 131, 150 benefits 60 creation of 15 in the European Union 140 job losses 93 lay-offs 60 mass 6, 66, 261 rising 15, 37, 113 and technological change 14, 60, 93 in US 5, 6, 60, 168, 215, 261 unionisation 103, 107 United Fruit Company 189 United Kingdom economy in serious difficulty 5 forced to nationalise Northern Rock 2 property market crash 261 real average earnings 13 train network 28 United Nations 31, 208 United States agricultural subsidies 79 in alliance with Soviet Union against fascism 169 anti-trust legislation 52 auto industry 56 blockbusting neighbourhoods 248 booming but debt-filled consumer markets 141 and capital surplus absorption 31–2 competition in labour markets 61 constraints to excessive concentration of money power 44–5 consumerism 109 conumer debt service ratio 18 cross-border leasing with Germany 142–3 debt 158, 206 debt bubble 18 fiscal crises of federal, state and local governments 261 health care 28–9 heavy losses in derivatives 261 home ownership 3 housing foreclosure crises 1–2, 4, 38, 166 industries dependent on trade seriously hit 141 interventionism in Iraq and Afghanistan 210 investment bankers rescued 261 investment failures in real estate 261 lack of belief in theory of evolution 129 land speculation scheme 187–8 oil issue 76–7, 79, 80, 121, 170, 210, 261 population growth 146 proletarianisation 60 property-led crisis (2007–10) 261 pursuit of science and technology 129 radical anti-authoritarianism 199 Reagan Recession 261 rescue of financial institutions 261 research universities 95 the reversing origins of US corporate profits (1950–2004) 22 the right to the city movement 257 ‘right to work’ states 65 savings and loan crisis (1984–92) 8 secondary mortgage market 173 ‘space race’ (1960s and 1970s) 156 suburbs 106–7, 149–50, 170 train network 28 unemployment 5, 6, 60, 168, 215, 261 unrestricted capitalist development 113 value of US stocks and homes, as a percentage of GDP 22 and Vietnam War 171 wages 13, 62 welfare provision 141 ‘urban crisis’ (1960s) 170 urban ‘heat islands’ 77 urban imagineering 193 urban social movements 180 urbanisation 74, 85, 87, 119, 131, 137, 166, 167, 172–3, 174, 240, 243 US Congress 5, 169, 187–8 US Declaration of Independence 199 US National Intelligence Council 34–5 US Senate 79 US Supreme Court 179 US Treasury and Goldman Sachs 11 rescue of Continental Illinois Bank 261 V Vanderbilt family 98 Vatican 44 Veblen, Thorstein 181–2 Venezuela 256 oil production 6 Vietnam War 32, 171 Volcker, Paul 2, 236 Volcker interest rate shock 261 W wage goods 70, 107, 112, 162 wages and living standards 89 a living wage 63 national minimum wage 63 rates 13, 14, 59–64, 66, 109 real 107 repression 12, 16, 21, 107, 110, 118, 131, 172 stagnation 15 wage bargaining 63 Wal-Mart 17, 29, 64, 89 Wall Street, New York 35, 162, 200, 219, 220 banking institutions 11 bonuses 2 ‘Party of Wall Street’ 11, 20, 200 ‘War on Terror’ 34, 92 warfare 202, 204 Wasserstein, Bruce 98 waste disposal 143 Watt, James 89 wealth accumulation by capitalist class interests 12 centralisation of 10 declining 131 flow of 35 wealth transfer 109–10 weather systems 153–4 Weather Underground 254 Weill, Sandy 98 Welch, Jack 98 Westphalia, Treaty of (1648) 91 Whitehead, Alfred North 75 Wilson, Harold 56 wind turbines 188 women domestic slavery 15 mobilisation of 59, 60 prostitution 15 rights 176, 251, 258 wages 62 workers’ collectives 234 working hours 59 World Bank 36, 51, 69, 192, 200, 251 ‘Fifty Years is Enough’ campaign 55 predicts negative growth in the global economy 6 World Bank Development Report (2009) 26 World Trade Organisation (WTO) 200, 227 agreements 69 street protests against (Seattle, 1999) 55 TRIPS agreement 245 and US agricultural subsidies 79 WorldCom 8, 100, 261 worldwide web 42 Wriston, Walter 19 X X-rays 99 Y Yugoslavia dissolution of 208 ethnic cleansings 247 Z Zapatista revolutionary movement 207, 226, 252 Zola, Émile 53 The Belly of Paris 168 The Ladies’ Paradise 168

Magic Internet Money: A Book About Bitcoin by Jesse Berger

Alan Greenspan, barriers to entry, bitcoin, blockchain, Bretton Woods, Cambridge Analytica, capital controls, carbon footprint, correlation does not imply causation, cryptocurrency, diversification, diversified portfolio, Ethereum, ethereum blockchain, fiat currency, Firefox, forward guidance, Fractional reserve banking, George Gilder, inflation targeting, invisible hand, Johann Wolfgang von Goethe, liquidity trap, litecoin, low interest rates, Marshall McLuhan, Metcalfe’s law, Money creation, money: store of value / unit of account / medium of exchange, moral hazard, Network effects, Nixon shock, Nixon triggered the end of the Bretton Woods system, oil shale / tar sands, planned obsolescence, price mechanism, Ralph Waldo Emerson, rent-seeking, reserve currency, ride hailing / ride sharing, risk tolerance, Robert Metcalfe, Satoshi Nakamoto, the medium is the message, Vitalik Buterin

Additionally, competition ensures that prices are both quick to adjust and evident in the economy at large, leading to the efficient allocation of resources. The resulting reduction in waste begets lower prices, which stimulates economic growth by increasing the purchasing power of money – growing Bitcoin’s value. 4.4.1 Calculated Risk: Liquidity Trap “The habit of saving is itself an education; it fosters every virtue, teaches self-denial, cultivates a sense of order, trains to forethought, and so broadens the mind.” T. T. Munger, Research Scientist As a basis for trade (medium of exchange), pricing scale (unit of account), and savings mechanism (store of value), Bitcoin is a honeypot for value, both in the intellectual and monetary senses of the term.

Rise of the Robots: Technology and the Threat of a Jobless Future by Martin Ford

3D printing, additive manufacturing, Affordable Care Act / Obamacare, AI winter, algorithmic management, algorithmic trading, Amazon Mechanical Turk, artificial general intelligence, assortative mating, autonomous vehicles, banking crisis, basic income, Baxter: Rethink Robotics, Bernie Madoff, Bill Joy: nanobots, bond market vigilante , business cycle, call centre, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Charles Babbage, Chris Urmson, Clayton Christensen, clean water, cloud computing, collateralized debt obligation, commoditize, computer age, creative destruction, data science, debt deflation, deep learning, deskilling, digital divide, disruptive innovation, diversified portfolio, driverless car, Erik Brynjolfsson, factory automation, financial innovation, Flash crash, Ford Model T, Fractional reserve banking, Freestyle chess, full employment, general purpose technology, Geoffrey Hinton, Goldman Sachs: Vampire Squid, Gunnar Myrdal, High speed trading, income inequality, indoor plumbing, industrial robot, informal economy, iterative process, Jaron Lanier, job automation, John Markoff, John Maynard Keynes: technological unemployment, John von Neumann, Kenneth Arrow, Khan Academy, Kiva Systems, knowledge worker, labor-force participation, large language model, liquidity trap, low interest rates, low skilled workers, low-wage service sector, Lyft, machine readable, machine translation, manufacturing employment, Marc Andreessen, McJob, moral hazard, Narrative Science, Network effects, new economy, Nicholas Carr, Norbert Wiener, obamacare, optical character recognition, passive income, Paul Samuelson, performance metric, Peter Thiel, plutocrats, post scarcity, precision agriculture, price mechanism, public intellectual, Ray Kurzweil, rent control, rent-seeking, reshoring, RFID, Richard Feynman, Robert Solow, Rodney Brooks, Salesforce, Sam Peltzman, secular stagnation, self-driving car, Silicon Valley, Silicon Valley billionaire, Silicon Valley startup, single-payer health, software is eating the world, sovereign wealth fund, speech recognition, Spread Networks laid a new fibre optics cable between New York and Chicago, stealth mode startup, stem cell, Stephen Hawking, Steve Jobs, Steven Levy, Steven Pinker, strong AI, Stuxnet, technological singularity, telepresence, telepresence robot, The Bell Curve by Richard Herrnstein and Charles Murray, The Coming Technological Singularity, The Future of Employment, the long tail, Thomas L Friedman, too big to fail, Tragedy of the Commons, Tyler Cowen, Tyler Cowen: Great Stagnation, uber lyft, union organizing, Vernor Vinge, very high income, warehouse automation, warehouse robotics, Watson beat the top human players on Jeopardy!, women in the workforce

It will just slosh around in the banking system. This is more or less what occurred during the 2008 financial crisis—not because of job automation, but because the banks could not find creditworthy borrowers, and/or no one wanted to borrow anyway. Everyone just wanted to hold onto their cash. Economists call this situation a “liquidity trap.” * In Elysium, the rabble eventually infiltrates the elite orbital fortress by hacking into its systems. That’s at least one hopeful note regarding this scenario: the elite would have to be very careful about whom they trusted to design and manage their technology. Hacking and cyber attack would likely be the greatest dangers to their continued rule

…

., 29–30, 250 kiosks, intelligent, 17–19 Kiva Systems, 16 K’NEX, 5–6 knowledge-based jobs automation of, 85–86 big data and, 93–96 collaboration with machines and, 121–128 See also white-collar jobs Koller, Daphne, 133 Koza, John, 110 Kroger Company, 17 Krueger, Alan, 119 Krugman, Paul, 60, 203–204, 204n, 205 Kuka AG, 10 Kura sushi restaurant chain, 14–15 Kurzweil, Ray, 78, 233, 234–235, 237 labor organized, 57–58 role in economy, 279 share of national income, 38–39, 41, 56, 58 See also workers/workforce Lanier, Jaron, 77 Law, Legislation and Liberty (Hayek), 257–258 law school bubble, 173n LeCun, Yann, 231 legal discovery, trends in, 124–125 Lehman, Betsy, 149 leisure time, basic income guarantee and, 263 Leno, Jay, 177 Levy, Steven, 85 liability autonomous cars and, 183–184, 186, 190 health care, 150, 150n Lickel, Charles, 96 The Lights in the Tunnel (Ford), xiii, 60, 264 Lipson, Hod, 108, 109, 110, 180 liquidity trap, 218n London Symphony Orchestra, 111 London taxi drivers, 209n long-tail distribution, in Internet sector, 76–78 long-term unemployment, ix, xvi, 45–46, 211, 280 Los Angeles Angels, 83 low-wage jobs, automation and, 26–27 Luddites, 31, 33, 256 machine essay grading, 129–131 machine intelligence, 72, 75, 80.

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

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

The problem Krugman hoped to address was to convince the reader that in the throes of a deleveraging crisis, when financial failures induced everyone to try to shed debt, there was room for the government to improve the situation by taking on substantial volumes of new debt. In his books, this supposed “Keynesian” solution had to map into the old-fashioned IS-LM model of a “liquidity trap,” something he had long trumpeted as the paradigm for “depression economics,” which he interpreted to mean that the supply and demand for loanable funds could be equilibrated only at a negative interest rate. Eggertsson and he sought to render these ideas more acceptable to the orthodoxy through resort to a standard New Keynesian model with the wrinkle that there were posited two different agents, and the “impatient agent borrows from the patient agent, but is subject to a debt limit.

…

“Influential Economists,” The Economist, February 10, 2011. Economist. “What Went Wrong with Economics?” The Economist, July 18, 2009. Eecke, Wilfred ver. “Ethics in Economics: From Classical Economics to Neoliberalism,” Philosophy and Social Criticism 9 (1982): 145–68. Eggertsson, Gauti, and Paul Krugman. “Debt, Deleveraging, and the Liquidity Trap: A Fisher-Minsky-Koo Approach” (2010), at www.frbsf.org/economics/conferences/1102/eggertsson.pdf. Ehrenreich, Barbara. Bait and Switch (New York: Henry Holt, 2005). Ehrenreich, Barbara. “Turning Poverty into an American Crime,” The Nation, August 9, 2011. Eichengreen, Barry. “The Crisis in Financial Innovation,” address to International Schumpeter Society, 2010, available at http://emlab.berkeley.edu/~eichengr/crisis_finan_innov.pdf.

…

I owe a debt to Steve Keen (“Like a Dog Walking on Its Hind Legs”) for this, and some other ideas covered in this section. 112 See Krugman, “The Return of Depression Economics.” This talk has disappeared from its original site, and was never published; it can be found at www.youtube.com/watch?v=5N35mq4_gIw. 113 Eggertsson and Krugman, “Debt, Deleveraging, and the Liquidity Trap,” p. 3. 114 Nocera, “The Big Lie.” 115 Paul Krugman blog, December 24, 2011, at http://krugman.blogs.nytimes.com/2011/12/24/joe-nocera-gets-mad/#postComment. 116 For the original claim, see Mooney, The Republican War on Science. The misguided tendency of blaming “Republicans” for the transformation of academic science in the United States is covered in Mirowski, ScienceMart, pp. 35 et seq.) 117 Interview with Josh Rosner, PBS NewsHour, August 1, 2011; “Fannie was shrewd enough to understand that in order to push their agenda on Capitol Hill they needed to be supported by economists as well and so they started a series of papers where they would hire notable Conservative economists like Glenn Hubbard or progressive economists like Joe Stiglitz and Peter Orszag to justify various aspects of Fannie and Freddie’s mission, or dispel concerns about their safety and soundness, and really used those as lobbying points on Capitol Hill,” said Rosner.

The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance by Eswar S. Prasad

access to a mobile phone, Adam Neumann (WeWork), Airbnb, algorithmic trading, altcoin, bank run, barriers to entry, Bear Stearns, Ben Bernanke: helicopter money, Bernie Madoff, Big Tech, bitcoin, Bitcoin Ponzi scheme, Bletchley Park, blockchain, Bretton Woods, business intelligence, buy and hold, capital controls, carbon footprint, cashless society, central bank independence, cloud computing, coronavirus, COVID-19, Credit Default Swap, cross-border payments, cryptocurrency, deglobalization, democratizing finance, disintermediation, distributed ledger, diversified portfolio, Dogecoin, Donald Trump, Elon Musk, Ethereum, ethereum blockchain, eurozone crisis, fault tolerance, fiat currency, financial engineering, financial independence, financial innovation, financial intermediation, Flash crash, floating exchange rates, full employment, gamification, gig economy, Glass-Steagall Act, global reserve currency, index fund, inflation targeting, informal economy, information asymmetry, initial coin offering, Internet Archive, Jeff Bezos, Kenneth Rogoff, Kickstarter, light touch regulation, liquidity trap, litecoin, lockdown, loose coupling, low interest rates, Lyft, M-Pesa, machine readable, Mark Zuckerberg, Masayoshi Son, mobile money, Money creation, money market fund, money: store of value / unit of account / medium of exchange, Network effects, new economy, offshore financial centre, open economy, opioid epidemic / opioid crisis, PalmPilot, passive investing, payday loans, peer-to-peer, peer-to-peer lending, Peter Thiel, Ponzi scheme, price anchoring, profit motive, QR code, quantitative easing, quantum cryptography, RAND corporation, random walk, Real Time Gross Settlement, regulatory arbitrage, rent-seeking, reserve currency, ride hailing / ride sharing, risk tolerance, risk/return, Robinhood: mobile stock trading app, robo advisor, Ross Ulbricht, Salesforce, Satoshi Nakamoto, seigniorage, Sheryl Sandberg, Silicon Valley, Silicon Valley startup, smart contracts, SoftBank, special drawing rights, the payments system, too big to fail, transaction costs, uber lyft, unbanked and underbanked, underbanked, Vision Fund, Vitalik Buterin, Wayback Machine, WeWork, wikimedia commons, Y Combinator, zero-sum game

Channels for injecting outside money into an economy quickly and efficiently become important in the face of weak economic activity or looming crises, when banks might slow down or even terminate the creation of inside money (credit). The central bank could substantially reduce deflationary risks by resorting to such measures to escape the liquidity trap that results when it runs out of room to use traditional monetary policy tools in a cash-based economy. A liquidity trap occurs when households and firms are reluctant to take advantage of cheap credit; this can result from rising unease about an economy’s prospects. As a result, simply printing more money by itself does little to boost debt-financed household consumption or business investment, especially if the financial system is not providing enough credit.

…

Such channels for injecting outside money into an economy quickly and efficiently become important when economic activity is weak or when crises loom, which might cause banks to slow down or even terminate credit creation. Thus, a central bank could substantially reduce deflationary risks by resorting to such measures to escape the liquidity trap that results when it runs out of room to use traditional monetary policy tools. CBDC accounts would have been useful when the US Congress introduced a massive stimulus bill in March 2020 as the COVID-19 pandemic sent the country into lockdown and the economy nosedived. The legislation, which carried a price tag of about $2 trillion, included Economic Impact Payments of up to $1,200 per individual, subject to certain income thresholds.

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

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

If not, it will show itself an outmoded system which must be scrapped.” February 2010 * Doug Henwood’s calculation, applying a statistical measure developed by the economist Robert Shimer. * The Polish economist Michal Kalecki (1899–1970) developed a “Keynesian” theory of business cycles, liquidity traps, and countercyclical spending independently of Keynes. In economics departments outside the US, he is usually given credit for this. But Kalecki’s politics were Marxist. * Keynes: “The whole management of the domestic economy depends upon being free to have the appropriate rate of interest without reference to the rates prevailing elsewhere in the world.

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

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

This rise in the “propensity to hoard” short-circuits the free market recovery mechanism, which involves a fall in interest rates and a rise in business and residential investment. Even if the central bank prints more money, the typical response to a downturn, people and businesses will simply hold on to the extra cash rather than spending it. The economy will get stuck in a “liquidity trap,” with further increases in the money supply having little or no impact on interest rates or spending. Keynes conceded that liquidity traps were rare, but he claimed that one had occurred in the United States during the financial crisis of 1932, when a large number of banks failed and “scarcely anyone could be induced to part with holdings of money on any reasonable terms.”

Sacred Economics: Money, Gift, and Society in the Age of Transition by Charles Eisenstein

Albert Einstein, back-to-the-land, bank run, Bernie Madoff, big-box store, bread and circuses, Bretton Woods, capital controls, carbon credits, carbon tax, clean water, collateralized debt obligation, commoditize, corporate raider, credit crunch, David Ricardo: comparative advantage, debt deflation, degrowth, deindustrialization, delayed gratification, disintermediation, diversification, do well by doing good, fiat currency, financial independence, financial intermediation, fixed income, floating exchange rates, Fractional reserve banking, full employment, global supply chain, God and Mammon, happiness index / gross national happiness, hydraulic fracturing, informal economy, intentional community, invisible hand, Jane Jacobs, land tenure, land value tax, Lao Tzu, Lewis Mumford, liquidity trap, low interest rates, McMansion, means of production, megaproject, Money creation, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, multilevel marketing, new economy, off grid, oil shale / tar sands, Own Your Own Home, Paul Samuelson, peak oil, phenotype, planned obsolescence, Ponzi scheme, profit motive, quantitative easing, race to the bottom, Scramble for Africa, special drawing rights, spinning jenny, technoutopianism, the built environment, Thomas Malthus, too big to fail, Tragedy of the Commons

Certainly, this is an ability that deserves reward, and herein lies an essential missing piece of Marxist theories of value that ignore the entrepreneurial dimension to the allocation of capital. While the bold yet still mainstream economists I’ve mentioned see negative interest as a temporary measure to promote lending and escape a deflationary liquidity trap, its true significance runs much deeper. A liquidity trap is not a temporary aberration caused by a bubble collapse; it is an ever-present default state originating in the declining marginal efficiency of capital,30 itself a result of technological improvement and competition. As Keynes pointed out, As the stock of the assets, which begin by having a marginal efficiency at least equal to the rate of interest, is increased, their marginal efficiency (for reasons, sufficiently obvious, already given) tends to fall.

The End of Indexing: Six Structural Mega-Trends That Threaten Passive Investing by Niels Jensen

Alan Greenspan, Basel III, Bear Stearns, declining real wages, deglobalization, disruptive innovation, diversification, Donald Trump, driverless car, eurozone crisis, falling living standards, fixed income, full employment, Greenspan put, income per capita, index fund, industrial robot, inflation targeting, job automation, John Nash: game theory, liquidity trap, low interest rates, moral hazard, offshore financial centre, oil shale / tar sands, old age dependency ratio, passive investing, Phillips curve, purchasing power parity, pushing on a string, quantitative easing, regulatory arbitrage, rising living standards, risk free rate, risk tolerance, Robert Solow, secular stagnation, South China Sea, total factor productivity, working-age population, zero-sum game

Having said that, there are obviously limits as to how much spending can be financed by debt and money. When that point is reached, you are at the end of the debt super-cycle. John Maynard Keynes called it Push on a String, when he first described the phenomenon in 1935. Nowadays, it is often called the Liquidity Trap. When debt rises fast – and fast in this context means faster than GDP growth – capital that could otherwise be used productively to enhance GDP growth is instead used to service existing debt, i.e. it is used unproductively. Debt rising faster than GDP is a vicious circle. As GDP growth slows, more debt is needed to service existing debt, which will cause GDP growth to slow even further.

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

His style is far more thorough and granular, but essentially his mission has been to substantiate these early findings and build upon them with a wider focus. The Great Depression is highly relevant to the credit implosion that began in 2008, although a majority of observers today pointedly deny the applicability of the parallel. Of even greater importance is that the academic blueprint Bernanke might follow to escape the clutches of a liquidity trap may be fatally flawed, and in fact much of our present difficulties can be traced to Depression era institutions and practices. By carefully probing the flaws of this body of economic research, a deeper understanding of our present dilemma is inescapable. Bernanke and his academic peers, who together have ossified around an academic consensus, lay the blame for the depth and duration of the Depression upon the gold standard.Yet via the convenient machination of assumption they neglect to discover the primary cause of that sharp downturn, which not only instigated the collapse, but doomed it to be deeper and longer than prior recessions.

…

The obstinance of those who did not feel the tremors of the tectonic shift away from gold is merely par for the course at such an important inflection point in the world’s cultural and monetary history, for there is a human tendency to think linearly and extrapolate. 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?

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

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

: Blinder, “The GOP Myth of ‘Job-Killing’ Spending,” Wall Street Journal. $49 billion dribbling out over fiscal years 2013–2019: Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2012 to 2022. Chapter 9: The Attack on the Spreads Rogoff (and Krugman again) for the United States: Krugman, “It’s Baaack: Japan’s Slump and the Return of the Liquidity Trap,” Brookings Papers on Economic Activity; Rogoff, “The Bullets Yet to Be Fired to Stop the Crisis,” Financial Times. “almost treasonous”: Daly, “Rick Perry Jabs Bernanke, Says ‘Printing More Money . . . Is Almost Treasonous,’” CBS News Political Hotsheet. “magically fix economic problems”: Palin’s letter to the editor appeared on November 18.

…

“The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy.” Brookings Papers on Economic Activity 42/2 (Fall 2011): 215–87. Krugman, Paul R. “Cash for Trash.” New York Times, September 21, 2008. ———. “Gordon Does Good.” New York Times, October 12, 2008. ———. “It’s Baaack: Japan’s Slump and the Return of the Liquidity Trap.” Brookings Papers on Economic Activity 29/2 (Fall 1998): 137–205. Lagarde, Christine. “Global Risks Are Rising, but There Is a Path to Recovery,” in Achieving Maximum Long-Run Growth: A Symposium Sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyo., August 25–27, 2011: 421–26.

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

Figure 6.7 The future short rate as an option on the expected natural rate ‘Non-Conventional’ Policies for Circumventing the Zero-Rate Barrier When the option’s intrinsic value is positive, the observed nominal rate is too high in relation to the natural rate that the central bank should fix in order to bring the economy back towards optimal production (an output gap of zero). The economy is stuck in a liquidity trap. The result is that the curve of the short-term interest rate heads to close to zero, on account of the attractive power of the zero floor. The central bank thus finds its action constrained, if it is indeed committed to influencing the economy on the basis of the short-term rate. It loses its ability to transmit its impulses to the economy.

…

Financial vulnerabilities result from the accumulation of foreign debts, bubbles in the price of assets financed on credit, and financial techniques that produce intersections of commitments among international financial counterparties that bear a hidden systemic risk. Balance of payments surpluses are disequilibria, if they create externalities stemming from asymmetrical adjustments. They reduce demand and economic activity in other countries when, for various reasons, adjustment via interest and exchange rates does not work for different reasons: liquidity traps, inflexible currency exchange, or deflationary pressures. What, then, are the principles of international organisation revealed to us by history? Which principles allow us, if not to prevent financial disorder, then at least to contain it for a certain number of years – allowing us to take advantage of the improvements in monetary regulation at the national level that we studied in Chapter 6?

The People's Republic of Walmart: How the World's Biggest Corporations Are Laying the Foundation for Socialism by Leigh Phillips, Michal Rozworski

Alan Greenspan, Anthropocene, Berlin Wall, Bernie Sanders, biodiversity loss, call centre, capitalist realism, carbon footprint, carbon tax, central bank independence, Colonization of Mars, combinatorial explosion, company town, complexity theory, computer age, corporate raider, crewed spaceflight, data science, decarbonisation, digital rights, discovery of penicillin, Elon Musk, financial engineering, fulfillment center, G4S, Garrett Hardin, Georg Cantor, germ theory of disease, Gordon Gekko, Great Leap Forward, greed is good, hiring and firing, independent contractor, index fund, Intergovernmental Panel on Climate Change (IPCC), Internet of things, inventory management, invisible hand, Jeff Bezos, Jeremy Corbyn, Joseph Schumpeter, Kanban, Kiva Systems, linear programming, liquidity trap, mass immigration, Mont Pelerin Society, Neal Stephenson, new economy, Norbert Wiener, oil shock, passive investing, Paul Samuelson, post scarcity, profit maximization, profit motive, purchasing power parity, recommendation engine, Ronald Coase, Ronald Reagan, sharing economy, Silicon Valley, Skype, sovereign wealth fund, strikebreaker, supply-chain management, surveillance capitalism, technoutopianism, TED Talk, The Nature of the Firm, The Wealth of Nations by Adam Smith, theory of mind, Tragedy of the Commons, transaction costs, Turing machine, union organizing, warehouse automation, warehouse robotics, We are all Keynesians now

Having completed his tour of American business and witnessed its inner workings, upon his return to Britain, he compiled his thoughts in a 1932 lecture to University of Dundee students little younger than himself, although it would be another five years before he published his results. The resulting text, “The Nature of the Firm”, features a quote from economist Dennis Robertson—a close collaborator of famed British macroeconomist John Maynard Keynes, and the originator of the concept of the “liquidity trap”—in which Robertson talks of the curiosity of the very existence of companies, unflatteringly describing them as “islands of conscious power in this ocean of unconscious cooperation, like lumps of butter coagulating in a pail of buttermilk.” But where Robertson had merely remarked upon the mystery, Coase explained it: “Those who object to economic planning on the grounds that the problem is solved by price movements can be answered by pointing out that there is planning within our economic system [that] is akin to what is normally called economic planning.”

Phil Thornton by The Great Economists Ten Economists whose thinking changed the way we live-FT Publishing International (2014)

Alan Greenspan, availability heuristic, behavioural economics, Berlin Wall, bitcoin, Bretton Woods, British Empire, business cycle, business process, call centre, capital controls, Cass Sunstein, choice architecture, cognitive bias, collapse of Lehman Brothers, Corn Laws, creative destruction, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, double helix, endogenous growth, endowment effect, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, fiat currency, financial deregulation, fixed income, Ford Model T, full employment, hindsight bias, income inequality, inflation targeting, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Kenneth Arrow, Kenneth Rogoff, Kickstarter, liquidity trap, loss aversion, mass immigration, means of production, mental accounting, Myron Scholes, paradox of thrift, Pareto efficiency, Paul Samuelson, Post-Keynesian economics, price mechanism, pushing on a string, quantitative easing, Richard Thaler, road to serfdom, Ronald Coase, Ronald Reagan, school vouchers, Simon Kuznets, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, Toyota Production System, trade route, transaction costs, unorthodox policies, Vilfredo Pareto, women in the workforce

It says that the amount of money in the economy multiplied by the velocity (speed) at which it circulates equals prices multiplied by the number of sales (or transactions) of goods. It is expressed as MV = PT. Keynes believed that the velocity of money was highly unstable and when it slowed very sharply it would lead to a liquidity trap (see Chapter 5). Friedman insisted that the velocity of money was relatively stable and therefore the factor that was likely to change the prices side of the equation was the stock of money in the economy. If governments increase the supply of money, that will lead to inflation. This is why he believed that would have 152 The Great Economists been the right action in the Great Depression but also why he believed central banks should keep a tight rein on the money supply in normal times to prevent an inflationary spike.

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

A number of economists objected to these measures because they would lead to an increase in unemployment, especially among the poor, while the financial problems had been set in motion by comfortable officials and well-to-do bankers. Some support for orthodoxy, however, came from the Japanese experience in the 1990s when the combination of an expansive monetary policy and the depreciation of the yen produced a ‘liquidity trap’. Both Japanese interest rates and bank loans decreased after the declines in stock prices and real estate prices, and the inference was that there was a ‘credit crunch’. Banks were reluctant to lend because their loan losses had eroded their capital and firms were reluctant to borrow because of the sluggish growth in the demand for their products.

…

The ‘carry-trade’ transactions led to an increase in the flow of funds from Tokyo to New York and to a decline in the value for the yen that in turn led to an increase in the Japanese trade surplus and increases in Japanese output and employment. The increase in the Japanese trade surplus was a useful response to the liquidity trap and an effective supplement to expansive Japanese fiscal and monetary policies. The carry-trade transactions would remain profitable for the US hedge funds as long as any appreciation of the yen was smaller than the excess of the interest rates on US dollar securities over the interest rates they were paying on their yen loans.

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

Airbnb, Alan Greenspan, Apollo 13, bank run, Bear Stearns, Bernie Madoff, bitcoin, Bretton Woods, business logic, buy and hold, Carl Icahn, Carmen Reinhart, corporate raider, correlation does not imply causation, cotton gin, creative destruction, Credit Default Swap, crony capitalism, crowdsourcing, Donald Trump, Downton Abbey, Fairchild Semiconductor, fiat currency, financial innovation, Fractional reserve banking, full employment, George Gilder, Glass-Steagall Act, Home mortgage interest deduction, Jeff Bezos, job automation, Joseph Schumpeter, junk bonds, Kenneth Rogoff, Kickstarter, Larry Ellison, liquidity trap, low interest rates, Mark Zuckerberg, market bubble, Michael Milken, Money creation, money market fund, moral hazard, mortgage tax deduction, NetJets, offshore financial centre, oil shock, peak oil, Peter Thiel, Phillips curve, price stability, profit motive, quantitative easing, race to the bottom, Ronald Reagan, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Solyndra, Steve Jobs, The Wealth of Nations by Adam Smith, too big to fail, Travis Kalanick, Uber for X, War on Poverty, yield curve

Economists who suggest that an interest rate set by the Fed led to the housing boom are ignoring history. In the 1970s, the Fed was eagerly jacking up rates, but housing soared. For those same economists to suggest that a low fed funds rate rendered credit “easy” is to first promote Keynesian mythology about “liquidity traps.” They ask us to believe that absent the Fed, credit created in the real economy would have sat idle. The latter is not a serious presumption, nor is it serious to believe the Fed can decree credit easy. What they describe as “artificially low rates” is, at best, an admission of credit tightness, not ease.

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

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

In a depressed housing market, the problem with your house could easily be not so much its value as the fact that you can’t sell it because nobody is buying property at the moment. Or rather, you can sell it, but you have to do so for an artificially depressed, crazy-cheap price: a “fire sale” price. When the market returns to normal, you will be able to sell your house for its true value, so you aren’t really insolvent, you’re just caught in a “liquidity trap.” In practice, all you would do in the above example—as long as you weren’t really You Inc., in which case you might well be under a legal obligation to go into receivership—would be to simply ignore the question and keep going. You’d hope to be able to pay your bills as they fell due and hang on for grim life until your house price recovered.

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

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

Carney is the outgoing chief of the BoE, one of the biggest central banks. A nice Canadian guy. They say he’s a Toronto Maple Leafs fan and a pretty good goalie. Goalies can be odd-balls, very superstitious, but they tell the truth. At his swan-song press conference, he said we were heading toward a liquidity trap. I gotta respect the BoE. It has an incredibly straight-forward article about QE on its website. It’s illustrated with pictures of inflated balloons like a big bubble about to pop. At least Carney gives it to us in plain English, and with a sense of humor. The Rabbi and I meet at The Arts Club for breakfast.

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

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

TABLE N.1 Effects of Quantitative Easing on Interest Rates in the United States Thus, there are some limitations to the Fed’s normal way of influencing the economy. First, if longer-term interest rates do not respond to changes in the Fed Funds rate, then the Fed has very little effect on the economy. Second, if the Fed Funds rate is zero or close to zero, than there is no room for further Fed tightening. This is known by economists as the liquidity trap. In this situation, the Fed cannot really stimulate the economy anymore. In 2008, this is what happened. Banks also did not want to lend, since they were fearful of their own survival and wanted to shore up capital. With the financial system still in turmoil, the Fed had to find innovative ways to help the financial system.

…

Level III: Unobservable inputs that are not corroborated by market data. liquid trade A trade that can be executed easily with little impact on market prices and where market prices before trading are quite reliable. liquidity premium Refers to the extra return an investor receives when taking investments that aren't as easily converted into cash. liquidity trap A situation where monetary policy is unable to stimulate an economy by lowering interest rates or increasing the money supply. For example, if short-term interest rates are already at zero percent, the Fed must resort to other policies since they cannot reduce the interest rate any further. May also occur in other situations, such as when investment does not respond to interest rates.

New York 2140 by Kim Stanley Robinson

Anthropocene, availability heuristic, back-to-the-land, Black-Scholes formula, Burning Man, central bank independence, creative destruction, credit crunch, crowdsourcing, decarbonisation, East Village, full employment, gentrification, happiness index / gross national happiness, hive mind, income inequality, invisible hand, Jane Jacobs, Ken Thompson, Kim Stanley Robinson, liquidity trap, Mason jar, mass immigration, megastructure, microbiome, music of the spheres, New Urbanism, offshore financial centre, Planet Labs, plutocrats, Ponzi scheme, precariat, quantitative easing, Reflections on Trusting Trust, rent-seeking, Social Justice Warrior, the built environment, too big to fail

The Tyranny of Sunk Costs a) Mutt and Jeff b) Inspector Gen c) Franklin d) Vlade e) a citizen f) Amelia g) Charlotte h) Stefan and Roberto Part Two. Expert Overconfidence a) Franklin b) Mutt and Jeff c) that citizen d) Inspector Gen e) Vlade f) Amelia g) Stefan and Roberto h) Franklin Part Three. Liquidity Trap a) the citizen b) Mutt and Jeff c) Charlotte d) Amelia e) Inspector Gen f) Mutt and Jeff g) Stefan and Roberto h) Vlade i) that citizen Part Four. Expensive or Priceless? a) Franklin b) Charlotte c) Vlade d) Amelia e) a citizen f) Inspector Gen g) Franklin h) Mutt and Jeff Part Five.

…

“I’ll be up in a bit,” Charlotte said. “I want to see how things look up there.” So the evening was screwed. And in fact it had been going badly most of the night, judging by Jojo’s face, and that was worrying me quite badly. Adjustments were going to have to be made, but which ones? And why? PART THREE LIQUIDITY TRAP Drowned, hosed, visiting Davy Jones, six fathoms under, wet, all wet, moldy, mildewed, tidal, marshy, splashing, surfing, body-surfing, diving, drinking, in the drink, drunk, damp, scubaed, plunged, high diving, sloshed, drunk, dowsed, watered, waterfalled, snorkeled, running the rapids, backstroking, waterboarded, gagged, holding your breath, in the tube, bathyscaping, taking a bath, showered, swimming, swimming with the fishes, visiting the sharks, conversing with the clams, lounging with the lobsters, jawing with Jonah, in the belly of the whale, pilot fishing, leviathanating, getting finny, shnockered, dipped, clammed, clamming, salting, brined, belly-flopping, trawling, bottom-feeding, breathing water, eating water, down the toilet, washing-machined, submarining, going down, going down on Mother Ocean, sucking it, sucking water, breathing water, H2O-ing, liquidated, liquefied, aplastadoed, drenched, poured, squirted, pissed on, peed out, golden showered, plutosucking, estuaried, immersed, emulsified, shelled, oystered, squeegeed, melted, melting, infinityedged, depthcharged, torpedoed, inundated, laved, deluged, fluvialized, fluviated, flooded, Noahed, Noah’s-neighbored, U-boating, universally solventized, ad aqua infinitum a) the citizen The First Pulse was not ignored by an entire generation of ounce brains, that is a myth.

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

The Keynesian approach was developed in reaction to the Great Depression which began in 1929, under which unemployment rose to 15 per cent in Britain. Essentially the Keynesian approach was, to quote a phrase much beloved of Denis Healey, ‘When you are in a hole, stop digging.’ Originally the emphasis was on boosting public spending when the private sector was depressed and monetary policy was caught in what was known as a liquidity trap, so that lower interest rates were ineffectual in boosting demand. In the post-war years, rescue operations evolved into what became known as ‘demand management’, involving tax cuts as well as increases in public spending. During the relatively successful economic policies of the immediate post-war decades, Keynesian policymakers probably became overconfident.

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

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

Economists and people who speak money argue all the time about things like inflation, not just in terms of what to do about it and its practical consequences but actually in terms of the very essence of what it is and how it works and how best to define it. Here is the range of views, as summarized by Wikipedia: Some economists maintain that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply, while others take the view that under the conditions of a liquidity trap, large injections are “pushing on a string” and cannot cause significantly higher inflation. Views on which factors determine low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or to changes in available supplies such as during scarcities, as well as to changes in the velocity of money supply measures—in particular the MZM (money zero maturity) supply velocity.

Capitalism Without Capital: The Rise of the Intangible Economy by Jonathan Haskel, Stian Westlake

23andMe, activist fund / activist shareholder / activist investor, Airbnb, Alan Greenspan, Albert Einstein, Alvin Toffler, Andrei Shleifer, bank run, banking crisis, Bernie Sanders, Big Tech, book value, Brexit referendum, business climate, business process, buy and hold, Capital in the Twenty-First Century by Thomas Piketty, carbon credits, cloud computing, cognitive bias, computer age, congestion pricing, corporate governance, corporate raider, correlation does not imply causation, creative destruction, dark matter, Diane Coyle, Donald Trump, Douglas Engelbart, Douglas Engelbart, driverless car, Edward Glaeser, Elon Musk, endogenous growth, Erik Brynjolfsson, everywhere but in the productivity statistics, Fellow of the Royal Society, financial engineering, financial innovation, full employment, fundamental attribution error, future of work, gentrification, gigafactory, Gini coefficient, Hernando de Soto, hiring and firing, income inequality, index card, indoor plumbing, intangible asset, Internet of things, Jane Jacobs, Jaron Lanier, Jeremy Corbyn, job automation, Kanban, Kenneth Arrow, Kickstarter, knowledge economy, knowledge worker, laissez-faire capitalism, liquidity trap, low interest rates, low skilled workers, Marc Andreessen, Mother of all demos, Network effects, new economy, Ocado, open economy, patent troll, paypal mafia, Peter Thiel, pets.com, place-making, post-industrial society, private spaceflight, Productivity paradox, quantitative hedge fund, rent-seeking, revision control, Richard Florida, ride hailing / ride sharing, Robert Gordon, Robert Solow, Ronald Coase, Sand Hill Road, Second Machine Age, secular stagnation, self-driving car, shareholder value, sharing economy, Silicon Valley, six sigma, Skype, software patent, sovereign wealth fund, spinning jenny, Steve Jobs, sunk-cost fallacy, survivorship bias, tacit knowledge, tech billionaire, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Tim Cook: Apple, total factor productivity, TSMC, Tyler Cowen, Tyler Cowen: Great Stagnation, urban planning, Vanguard fund, walkable city, X Prize, zero-sum game

Chapter 5: Intangibles, Investment, Productivity, and Secular Stagnation 1. Published as Summers 2015. Summers developed his views further in a Keynote Address at the National Association for Business Economics Policy Conference, February 24, 2014, published as Summers 2014. Paul Krugman has also popularized the term “liquidity trap,” which refers to a position whereby interest rates can be lowered no further and so monetary policy, which works by adjusting interest rates and so changing investment and consumption, loses its power to affect activity. 2. There are a number of different measures of profits. One such measure is published by statistical agencies.

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

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

In November 2012, IMF chief economist Olivier Blanchard admitted that the impact of the unconventional monetary measures was both limited and uncertain. He acknowledged the minimal effect of the policies on business and consumer confidence, consumption, employment, and growth in incomes or credit.12 It was Keynes's liquidity trap, where policy is largely ineffective, analogous to pushing on a string. But central banks continued with the failed policies. In January 2015, the European Central Bank announced its own version of QE after over two years of prevarication. No one was convinced that it would create growth or inflation.

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

Yet Schumpeter’s insights into capital formation through entrepreneurship, and its disruptive impact on prevalent business models—creative destruction—seem in sync with the age of Amazon and Netflix. This revival comes at a time when Austrian money theories are stymied by velocity’s volatility, and neo-Keynesian models prove unprepared for a new liquidity trap. It is past time to take Schumpeter off the shelf and give historical method its due. Consideration of Schumpeter today comes mostly from those interested in microeconomics—the theory of the firm, and the individual. A Schumpeterian renascence needs to consider his macroeconomic perspective, including his illumination of global growth dynamics.

Clan Corporate by Stross, Charles

Dr. Strangelove, glass ceiling, imposter syndrome, indoor plumbing, liquidity trap, RFID

Suddenly she had a strange vision, a billion coal-fired cooking stoves staining the sky with as bad a smog as a billion SUVs. Convergence . . . “So times are bad and the Constabulary are getting heavy-handed. The Evil Empire is rattling its sabers and threatening to invade, just to add to the fun. And the economy is stuck in a liquidity trap that’s been getting worse for months, with deflation setting in … ?” She shook her head again. “And I thought things were bad back home.” “So where have you been?” Erasmus asked, cocking his head to one side. There was something birdlike about his movements, but now Miriam could see that it was a side effect of the disease eating him from the inside out, leaving him gaunt and huge-eyed.

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

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

Brookings Papers on Economic Activity (Spring). Krueger, A. B., and O. Ashenfelter (2018). Theory and evidence on employer collusion in the franchise sector. NBER Working Paper No. 24831, National Bureau of Economic Research, Cambridge, MA, July. Krugman, P. (1998). It’s baaack: Japan’s slump and the return of the liquidity trap. Brookings Papers on Economic Activity 2, 137–187. Kumar, S. (2016). Relaunching innovation: Lessons from Silicon Valley. Banking Perspectives 4(1), 19–23. Kwoka, J. (2015). Mergers, Merger Control, and Remedies. Cambridge, MA: MIT Press. Kwoka, J. (2017a). A response to the FTC critique. Working paper, April 6. https://papers.ssrn.com/sol3/papers.cfm?

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

See Jason Furman, “Options to Close the Long-Run Fiscal Gap,” testimony before the US Senate Committee on Budget, January 31, 2007, www.brookings.edu/wp-content/uploads/2016/06/furman20070131S-1.pdf. 5. Keynesian economists will often argue that there is a special circumstance under which crowding out doesn’t happen. It’s a situation—often described as a liquidity trap—where rising deficits don’t push interest rates higher because rates are stuck at zero. In that situation, the government can safely add to the deficit without worrying that rising interest rates will crowd out private investment (since rates are stuck at zero). That gives the government a window of opportunity to boost spending without any kind of trade-off.

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

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

With great ingenuity, the American Paul Samuelson (1915-2009) - one of the most influential economists of the second half of the twentieth century, a professor at the Massachusetts Institute of Technology and the first American to win the Nobel Prize in Economics - attempted to prove that neoclassical theory could explain how the economy behaved in normal times, except when recessionary periods made monetary policy have little effect: i.e. when increasing the money supply does not lower interest rates and only adds to idle balances rather than spurring growth (what is known as the ‘liquidity trap'). In essence, Samuelson argued that in normal economic times there was little need for governments to try to manage the economy along Keynesian lines and that government intervention (e.g. aimed at increasing employment) in these cases would only lead to higher inflation. In the 1970s, inflation began to increase, opening the way for the monetarists, led by Milton Friedman.

Samuelson Friedman: The Battle Over the Free Market by Nicholas Wapshott

2021 United States Capitol attack, Alan Greenspan, bank run, basic income, battle of ideas, Bear Stearns, Berlin Wall, Bretton Woods, business cycle, California gold rush, collective bargaining, coronavirus, corporate governance, COVID-19, creative destruction, David Ricardo: comparative advantage, Donald Trump, double helix, en.wikipedia.org, fiat currency, financial engineering, fixed income, floating exchange rates, full employment, God and Mammon, greed is good, Gunnar Myrdal, income inequality, indoor plumbing, invisible hand, John von Neumann, Joseph Schumpeter, Kenneth Arrow, laissez-faire capitalism, light touch regulation, liquidity trap, lockdown, low interest rates, Machinery of Freedom by David Friedman, market bubble, market clearing, mass immigration, military-industrial complex, Money creation, money market fund, Mont Pelerin Society, moral hazard, new economy, Nixon shock, Nixon triggered the end of the Bretton Woods system, paradox of thrift, Paul Samuelson, Philip Mirowski, Phillips curve, price mechanism, price stability, public intellectual, pushing on a string, quantitative easing, rent control, road to serfdom, Robert Bork, Robert Solow, Ronald Coase, Ronald Reagan, school vouchers, seminal paper, Simon Kuznets, social distancing, Tax Reform Act of 1986, The Chicago School, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, too big to fail, trickle-down economics, universal basic income, upwardly mobile, urban renewal, War on Poverty, We are all Keynesians now, Works Progress Administration, zero-sum game

(Edward) Austin (Gossage) Robinson (November 20, 1897–June 1, 1993), British economist and prominent member of Keynes’s Cambridge Circus. 53.Kaldor helped Hayek write his assaults upon Keynes’s ideas in Economica in 1931, and became a prominent Keynesian and advised Harold Wilson’s Labour government 1964–1970. 54.Harry Gordon Johnson (May 26, 1923–May 8, 1977), Canadian economist. 55.Sir Dennis Holme Robertson (May 23, 1890–April 21, 1963), British economist. Like members of Keynes’s Cambridge Circus, Robertson was intimately involved in critiquing Keynes’s early drafts of The General Theory. He invented the term “liquidity trap.” 56.Friedman and Friedman, Two Lucky People, p. 242. 57.The Bretton Woods Conference, formally the United Nations Monetary and Financial Conference, gathered 730 delegates from all forty-four Allied nations at the Mount Washington Hotel, Bretton Woods, New Hampshire, to regulate the international monetary and financial order after the conclusion of World War II.

Hacking Politics: How Geeks, Progressives, the Tea Party, Gamers, Anarchists and Suits Teamed Up to Defeat SOPA and Save the Internet by David Moon, Patrick Ruffini, David Segal, Aaron Swartz, Lawrence Lessig, Cory Doctorow, Zoe Lofgren, Jamie Laurie, Ron Paul, Mike Masnick, Kim Dotcom, Tiffiniy Cheng, Alexis Ohanian, Nicole Powers, Josh Levy

4chan, Aaron Swartz, Adam Curtis, Affordable Care Act / Obamacare, Airbnb, Bernie Sanders, Big Tech, Burning Man, call centre, Cass Sunstein, Chelsea Manning, collective bargaining, creative destruction, crony capitalism, crowdsourcing, digital rights, disinformation, don't be evil, dual-use technology, facts on the ground, Firefox, Free Software Foundation, Hacker News, hive mind, hockey-stick growth, immigration reform, informal economy, jimmy wales, John Perry Barlow, Julian Assange, Kickstarter, liquidity trap, lolcat, machine readable, Mark Zuckerberg, obamacare, Occupy movement, offshore financial centre, Overton Window, peer-to-peer, plutocrats, power law, prisoner's dilemma, radical decentralization, rent-seeking, Silicon Valley, Skype, Streisand effect, technoutopianism, The future is already here, WikiLeaks, Y Combinator, Yochai Benkler

It’s a tragic (for the criminals) function of the inability to engage in collective action, as in a world in which the duo could communicate with and trust one another they’d both keep their lips sealed and neither would go to prison at all. Lack of confidence that investments in a struggling economy will pay off is a partial explanation for ongoing hoarding and liquidity traps. Nobody wants to stick their neck out on their own, without an understanding that other lenders are likely to start lending, and that consumers are likely to consume. Just as the prisoners would optimize their respective outcomes were they able to confer and act in a binding unison by which they agreed to stay mum, so too would our economy be best off if all of the economic actors agreed that they’d spend together, and kick-start a real recovery.

Money Free and Unfree by George A. Selgin

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

Second, highly leveraged banks, including dealers, upon realizing that adverse asset shocks have increased their own debt rollover risk, may “hoard” liquidity by refraining from lending—and especially from term lending—even to counterparties that they know to be solvent (Acharya and Skeie 2011). Consequently, instead of serving as efficient conduits for the transmission of reserves, dealers become so many liquidity traps, contributing to the drying-up of wholesale lending markets. The drying-up of liquidity, in turn, contributes to the perceived riskiness of nondealer counterparties and, hence, to more liquidity hoarding, possibly leading to a general credit freeze. Such a freeze appears to have hampered monetary policy during the subprime crisis when, as various Federal Reserve officials have themselves acknowledged, instead of assisting the Fed in keeping financial markets liquid, the primary dealer system “blocked, or seriously undermined, the mechanisms through which monetary policy influences the economy” (Fisher and Rosenblum 2009; cf.

The Power of Gold: The History of an Obsession by Peter L. Bernstein

Alan Greenspan, Albert Einstein, Atahualpa, bread and circuses, Bretton Woods, British Empire, business cycle, California gold rush, central bank independence, double entry bookkeeping, Edward Glaeser, Everybody Ought to Be Rich, falling living standards, financial innovation, floating exchange rates, Francisco Pizarro, German hyperinflation, Hernando de Soto, Isaac Newton, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, large denomination, liquidity trap, long peace, low interest rates, Money creation, money: store of value / unit of account / medium of exchange, old-boy network, Paul Samuelson, price stability, profit motive, proprietary trading, random walk, rising living standards, Ronald Reagan, seigniorage, the market place, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, trade route

The banks whose reserves were swelled by the golden imports felt the same way: nothing in those days was as beautiful to behold as a nice, fat pile of cash. In short, money continued to heap up in America far beyond its proper level just to sit quietly until the storms had blown over. The process came to be known as a "liquidity trap." The accumulations of cash would be put to use only later when the pressures of wartime spending demanded it. And so the great Victorian gold standard died an ugly, painful, and protracted death, a process that reached all the way back to the prohibitions on convertibility that were put in place after the outbreak of World War I.

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

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

Lincoln is remembered for overcoming enormous political and military challenges. Often overlooked, however, is the economic and financial chaos he confronted upon taking office. In the weeks prior to Lincoln’s inauguration, the nation was swept by fear, the hoarding of gold, and a panic perhaps more dangerous than other classic Keynesian liquidity traps in March 1933 and September 2008, since there was no central bank in 1861 with the authority to issue currency and inject liquidity into the financial system to try to break a downward spiral by restraining the psychology of hoarding.3 Americans chose to keep hard money in the form of gold and silver coins and shunned paper money issued by the state-chartered banks around the country.

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

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

By 2011 inflation averaged 4.5 per cent, so real interest rates were minus 4 per cent. One might have expected such exceptionally generous borrowing terms to have sparked a recovery. But they didn’t, because when banks, households and companies all want to hoard money not part with it, monetary policy becomes largely ineffective. In a liquidity trap, it is like pushing on a string. Normally, when the Bank of England cuts its bank lending rate, the rate at which banks can borrow more generally also falls.428 Banks then tend to lend to people and companies more cheaply, which generally encourages both to borrow more and in time to spend or invest more.

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

Reliance on the fiscal buffer (the ability to let the fiscal deficit rise in response to a private-sector led recession) was essential this time, because even a strongly expansionary monetary policy was insufficient to prevent the shifts of the household and corporate sectors into surplus. We know it was insufficient because the monetary authorities initiated such a policy. This is a situation in which Keynesian fiscal policy becomes relevant. This is no more than to say that the economy was in a ‘liquidity trap’: at the lowest interest rate the central bank could create, the private and foreign sectors would have had a large excess of income over desired spending at full employment (the spending that would have occurred had the economy been at full employment, which, of course, it was not). This could be dealt with in only one of two ways: either by a collapse in income greater than the associated collapse in spending – that is, an outright depression – or by a large fiscal deficit.

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 problem was uncertainty about the future prospects for the economy, and thus the profitability of investment. This uncertainty is all the greater when the economy is struggling. Businesses will be reluctant to invest, whatever the level of interest rates. They may prefer to pay down debts, or hold cash. Keynes described this as a “liquidity trap”. Instead, Keynes said that the government should step in and boost demand. In the short run, governments face no practical limits on their borrowing capabilities since investors tend to regard government bonds as a safe asset. The government could then employ people in, say, construction projects.

The Ministry for the Future: A Novel by Kim Stanley Robinson

"World Economic Forum" Davos, agricultural Revolution, airport security, Anthropocene, availability heuristic, basic income, bitcoin, blockchain, Bretton Woods, cakes and ale, carbon tax, centre right, clean tech, clean water, cryptocurrency, dark matter, decarbonisation, degrowth, distributed ledger, drone strike, European colonialism, failed state, fiat currency, Food sovereignty, full employment, Gini coefficient, global village, green new deal, happiness index / gross national happiness, High speed trading, high-speed rail, income per capita, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invisible hand, Jevons paradox, Kim Stanley Robinson, land reform, liberation theology, liquidity trap, Mahbub ul Haq, megacity, megastructure, Modern Monetary Theory, mutually assured destruction, nuclear winter, ocean acidification, off grid, off-the-grid, offshore financial centre, place-making, plutocrats, Ponzi scheme, post-oil, precariat, price stability, public intellectual, quantitative easing, rewilding, RFID, Robert Solow, seigniorage, Shenzhen special economic zone , Silicon Valley, special economic zone, structural adjustment programs, synthetic biology, time value of money, Tragedy of the Commons, universal basic income, wage slave, Washington Consensus

The carbon coin designed in that way would eventually probably replace the US dollar as the world’s benchmark currency, which would strengthen it even more. It’s like compound interest again, Dick remarked to Mary. Said, Yes, but this time guaranteed by being delinked from current interest rates, which often hit zero, or even go negative. With this coin, you’re good to go no matter what happens. Dick said, That could make for a liquidity trap, because investors would stash money there for safety rather than put it to use. Shook head at that. Set the rate low enough that it’s seen as more of a back-up. Dick said, If the central banks announced they were upping the amount of carbon needed to earn a coin, they could then balance it with other safe asset classes like treasury bonds and infrastructure bonds.

An Economic History of the Twentieth Century by J. Bradford Delong

affirmative action, Alan Greenspan, Andrei Shleifer, ASML, asset-backed security, Ayatollah Khomeini, banking crisis, Bear Stearns, Bretton Woods, British Empire, business cycle, buy and hold, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, centre right, collapse of Lehman Brothers, collective bargaining, colonial rule, coronavirus, cotton gin, COVID-19, creative destruction, crowdsourcing, cryptocurrency, cuban missile crisis, deindustrialization, demographic transition, Deng Xiaoping, Donald Trump, en.wikipedia.org, ending welfare as we know it, endogenous growth, Fairchild Semiconductor, fake news, financial deregulation, financial engineering, financial repression, flying shuttle, Ford Model T, Ford paid five dollars a day, Francis Fukuyama: the end of history, full employment, general purpose technology, George Gilder, German hyperinflation, global value chain, Great Leap Forward, Gunnar Myrdal, Haber-Bosch Process, Hans Rosling, hedonic treadmill, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, housing crisis, Hyman Minsky, income inequality, income per capita, industrial research laboratory, interchangeable parts, Internet Archive, invention of agriculture, invention of the steam engine, It's morning again in America, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, land reform, late capitalism, Les Trente Glorieuses, liberal capitalism, liquidity trap, Long Term Capital Management, low interest rates, manufacturing employment, market bubble, means of production, megacity, Menlo Park, Mikhail Gorbachev, mortgage debt, mutually assured destruction, Neal Stephenson, occupational segregation, oil shock, open borders, open economy, Paul Samuelson, Pearl River Delta, Phillips curve, plutocrats, price stability, Productivity paradox, profit maximization, public intellectual, quantitative easing, Ralph Waldo Emerson, restrictive zoning, rising living standards, road to serfdom, Robert Gordon, Robert Solow, rolodex, Ronald Coase, Ronald Reagan, savings glut, secular stagnation, Silicon Valley, Simon Kuznets, social intelligence, Stanislav Petrov, strikebreaker, structural adjustment programs, Suez canal 1869, surveillance capitalism, The Bell Curve by Richard Herrnstein and Charles Murray, The Chicago School, The Great Moderation, The Nature of the Firm, The Rise and Fall of American Growth, too big to fail, transaction costs, transatlantic slave trade, transcontinental railway, TSMC, union organizing, vertical integration, W. E. B. Du Bois, Wayback Machine, Yom Kippur War

Raghuram Rajan, “Has Financial Development Made the World Riskier?,” in The Greenspan Era: Lesson for the Future, Kansas City: Federal Reserve Bank of Kansas City, 2005, 313–369, www.kansascityfed.org/documents/3326/PDF-Rajan2005.pdf. The most prominent other Cassandra was Paul Krugman. See his essay “It’s Baaack: Japan’s Slump and the Return of the Liquidity Trap,” Brookings Papers on Economic Activity 199, no. 2 (1998): 137–187; and his book The Return of Depression Economics, New York: Norton, 1999. 10. “What Should Economists and Policymakers Learn from the Financial Crisis?,” London School of Economics, March 25, 2013, www.lse.ac.uk/lse-player?id=1856. 11.

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

By manipulating the spread between its “interest on reserves” (IOR) rate in relation to market rates, the Fed now had greater capacity to influence the aggregate quantity of reserves, and to direct liquidity to specific sections of the banking system, with the goal in particular of reducing systemic risk in the interbank market. The centerpiece of this new system was what came to be known as the practice of “quantitative easing.”88 At a time when interest rates were already near zero, this essentially involved flooding the financial markets with so many dollars as to prevent what economists called a “liquidity trap.” The US had not objected when this had been undertaken by Japan at the beginning of the decade, and this was no doubt a factor in ensuring it did not produce a run on the yen; its application in the US was seriously explored as a matter of Treasury policy as early as 2005.89 Previously, anyone suggesting such direct and massive pump-priming would have been judged economically illiterate.

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

“Joseph Schumpeter: A Frustrated ‘Creditist.’ ” New Perspectives in Monetary Macroeconomics, G. Dymski and R. Pollin Eds. Ann Arbor, University of Michigan Press: 337–51. Economou, M., M. Madianos, et al. (2011). “Increased Suicidality amid Economic Crisis in Greece.” Lancet 378: 1459. Eggertsson, G. B. and P. Krugman (2012). “Debt, Deleveraging and the Liquidity Trap: A Fisher-Minsky-Koo Approach.” The Quarterly Journal of Economics 127 (3): 1469–513. Eichengreen, B. (2007). “The Breakup of the Euro Area.” NBER Working Paper No. 13393, Cambridge, MA, National Bureau of Economic Research, http://www.nber.org/papers/w13393. Eichengreen, B. (2008). Globalizing Capital: A History of the International Monetary System, Princeton, NJ, Princeton University Press.

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

Wall Street Journal Online, March 15. Krugman, Paul. 1995. “Dutch Tulips and Emerging Markets.” Foreign Affairs 74, no. 4: 28-​44. Krugman, Paul. 1988. “Financing vs Forgiving a Debt Overhang.” Journal of Development Economics 29: 253–​268. Krugman, Paul. 1998. “It’s Baaack: Japan’s Slump and the Return of the Liquidity Trap.” Brookings Papers on Economic Activity 2: 137–​205. 582   r e f e r e n c e s Krugman, Paul. 2011. “An Impeccable Disaster.” New York Times, September 11. Krugman, Paul. 2012. End This Depression Now! New York: W. W. Norton. Krugman, Paul. 2014a. “Timid Analysis.” Conscience of a Liberal, New York Times Blogs, March 21. http://​krugman.blogs.nytimes.com/​2014/​03/​21/​timid-​ analysis-​wonkish/​?