pushing on a string

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The Dollar Meltdown: Surviving the Coming Currency Crisis With Gold, Oil, and Other Unconventional Investments by Charles Goyette

Alan Greenspan, bank run, banking crisis, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Bernie Madoff, Bretton Woods, British Empire, Buckminster Fuller, business cycle, buy and hold, California gold rush, currency manipulation / currency intervention, Deng Xiaoping, diversified portfolio, Elliott wave, fiat currency, fixed income, Fractional reserve banking, housing crisis, If something cannot go on forever, it will stop - Herbert Stein's Law, index fund, junk bonds, Lao Tzu, low interest rates, margin call, market bubble, McMansion, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, National Debt Clock, oil shock, peak oil, pushing on a string, reserve currency, rising living standards, road to serfdom, Ronald Reagan, Saturday Night Live, short selling, Silicon Valley, transaction costs

Consumers quit consuming when they discover that the dollar they don’t spend today buys more tomorrow. The situation is often likened to trying to “push on a string.” The Federal Reserve can monetize debt, purchase government bonds, and make reserves available to the banking system. But it can’t force businesses to borrow. If no one borrows, there is no stimulative effect in the economy. Deflation is a subject of special interest to many economists including Ben Bernanke, the current Federal Reserve chairman, who has written extensively about it. In a widely noted speech in 2002, Bernanke sought to answer the “pushing on a string” case for deflation, saying that the Fed and the government have sufficient means to ensure that any such interlude would be mild and brief.

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Already the Fed is buying short-term corporate debt in the commercial paper market. It can even buy mortgages. Bernanke discusses several other means of countering deflation and concludes that the monetary and fiscal authorities “would be far from helpless in the face of deflation. . . .” Still this does not quite answer the “pushing on a string” argument of deflationists. What can the Fed do to be sure of generating public spending with its monetary policies? The answer: whatever it takes. The Fed will use any tool at its disposal to stop a threat of deflation. It will create new tools and assume heretofore unseen authority if need be.

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See Gold coinage; Silver coinage Collectibles, precious metals as Command economy as anti-American bank nationalization currency controls features of financial behavior, reporting and poverty shortages and rationing wage and price controls Commodities as investment exchange-traded funds (ETFs) exchange-traded notes (ETNs) Rogers International Commodity Index (RICI) Consumer Price Index (CPI), core inflation rate as alternative Consumption, decline and deflation Core inflation rate Corzine, Jon Cost-push inflation Counterfeit, gold coins Countrywide Financial “Crack-up boom,” Credit, artificial and malinvestment Credit crisis Credit Suisse Currency controls, and monetary breakdown foreign. See Foreign currency as investment hard currencies DB Commodity Services LLC, Debt, federal. See Federal debt Debt securities exchange-traded notes (ETNs) U.S. government. See Treasury bonds Deflation bailout, effects on economic impact of myths about “pushing on a string” argument De Gaulle, Charles Deng Xiaoping Digital gold currencies GoldMoney Dollar as currency reserves deterioration, and oil-pricing alternatives devaluation and Fed overseas holdings Dollar standard benefits to U.S. global dumping of Economic collapse, signs of Economic crisis (2008- ) bailouts command economy threat credit crisis and dollar standard federal debt government actions.

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

“I’d always assumed that if deflation seemed imminent, we could start up the printing presses and create as many dollars as would be necessary to stop a deflationary spiral,” recalled Greenspan. “Now I was not sure.”19 Flooding the system with cheap money was one of the few instruments left to Greenspan, though the Fed chair knew the truth of Keynes’s economic adage, “You cannot push on a string”20—in other words, you can offer cheap money to banks and entrepreneurs, but, if investors see no opportunities and therefore do not wish to borrow, or banks are reluctant to lend, there is nothing a government can do to force them. Acutely aware that by cutting interest rates further he risked “a bubble, an inflationary boom of some sort,” which would have to be addressed at some time, in June 2003 Greenspan cut rates again, to 1 percent.

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“Once the nominal interest rate is at zero,” he explained, “no further downward adjustment in the rate can occur, since lenders generally will not accept a negative nominal interest rate when it is possible instead to hold cash.” When the short-term interest rate reached zero, it had been suggested that central banks would “run out of ammunition” and would be powerless to affect events through manipulating interest rates. However, Bernanke argued that, notwithstanding Keynes’s notion that “you cannot push on a string,” a central bank still retained “considerable power to expand aggregate demand3 and economic activity even when its accustomed policy rate is at zero.” This included the wholesale printing of money through credit swaps—the Fed buying back its own debt and relending at a lower rate—a policy that would become known as “quantitative easing.”

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And when this proved inadequate, in December 2008 the Fed reduced interest rates to zero and let it be known there was little prospect of raising them again for a very long time. The Federal Reserve became the lender of last resort to banks and financial institutions it deemed creditworthy, stepping in to guarantee short-term loans between banks that otherwise may have been considered too risky. It was not enough. The truth of Keynes’s adage “You cannot push on a string” soon became evident. It proved easier to make limitless amounts of cash cheaply available than it was to find good uses for it. As Bernanke explained, “Conventional monetary policy alone is not adequate to provide all the support that the economy needs.”15 In its dying days, the Bush administration prepared the Economic Stimulus Act of 2008 that would, when passed by Congress in the early weeks of Barack Obama’s presidency, provide nearly a trillion dollars to stimulate the economy directly through government spending on infrastructure, tax breaks, and other Keynesian antirecession devices.

Big Debt Crises by Ray Dalio

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

Ugly inflationary depressions arise in cases where policy makers allow faith in the currency to collapse and print too much money. 6) “Pushing on a String” Late in the long-term debt cycle, central bankers sometimes struggle to convert their stimulative policies into increased spending because the effects of lowering interest rates and central banks’ purchases of debt assets have diminished. At such times the economy enters a period of low growth and low returns on assets, and central bankers have to move to other forms of monetary stimulation in which money and credit go more directly to support spenders. When policy makers faced these conditions in the 1930s, they coined the phrase “pushing on a string.” One of the biggest risks at this stage is that if there is too much printing of money/monetization and too severe a currency devaluation relative to the amounts of the deflationary alternatives, an “ugly inflationary deleveraging” can occur.

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A Template for Understanding BIG DEBT CRISES Ray Dalio Table of Contents A Template for Understanding Big Debt Crises Acknowledgements Introduction PART 1: The Archetypal Big Debt Cycle How I Think about Credit and Debt The Template for the Archetypal Long-Term/Big Debt Cycle Our Examination of the Cycle The Phases of the Classic Deflationary Debt Cycle The Early Part of the Cycle The Bubble The Top The “Depression” The “Beautiful Deleveraging” “Pushing on a String” Normalization Inflationary Depressions and Currency Crises The Phases of the Classic Inflationary Debt Cycle The Early Part of the Cycle The Bubble The Top and Currency Defense The Depression (Often When the Currency Is Let Go) Normalization The Spiral from a More Transitory Inflationary Depression to Hyperinflation War Economies In Summary PART 2: Detailed Case Studies German Debt Crisis and Hyperinflation (1918-1924) US Debt Crisis and Adjustment (1928–1937) US Debt Crisis and Adjustment (2007–2011) PART 3: Compendium of 48 Case Studies Glossary of Key Economic Terms Primarily Domestic Currency Debt Crises Non-Domestic Currency Debt Crises Appendix: Macroprudential Policies Acknowledgements I cannot adequately thank the many people at Bridgewater who have shared, and continue to share, my mission to understand the markets and to test that understanding in the real world.

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PART 1: The Archetypal Big Debt Cycle How I Think about Credit and Debt The Template for the Archetypal Long-Term/Big Debt Cycle Our Examination of the Cycle The Phases of the Classic Deflationary Debt Cycle The Early Part of the Cycle • The Bubble • The Top • The “Depression” • The “Beautiful Deleveraging” • “Pushing on a String” • Normalization Inflationary Depressions and Currency Crises The Phases of the Classic Inflationary Debt Cycle The Early Part of the Cycle • The Bubble • The Top and Currency Defense • The Depression (Often When the Currency Is Let Go) • Normalization The Spiral from a More Transitory Inflationary Depression to Hyperinflation War Economies In Summary How I Think about Credit and Debt Since we are going to use the terms “credit” and “debt” a lot, I’d like to start with what they are and how they work.

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

“Too many dissents, I worried, could undermine our credibility.” But tradition be damned, Fisher refused to be a yes man. He always feared the consequences of “pushing on a string”—a phrase with a venerable history at the Fed. In 1935, Federal Reserve Chairman Marriner Eccles testified during hearings on the Banking Act that little could be done with monetary policy to stimulate growth. “You mean you cannot push on a string?” Congressman Alan Goldsborough said. “That is a very good way to put it, one cannot push on a string,” Eccles said. “We are in the depths of a depression and . . . beyond creating an easy money situation through reduction of discount rates . . . there is very little, if anything, that the [federal] reserve organization can do toward bringing about recovery.”

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“I find myself conciliating”: Bernanke, The Courage to Act, 238. Kohn responded to Bernanke’s e-mail by pointing out that “after a honeymoon period of three meetings without dissent in 1987, the Maestro had faced dissents in nineteen of his next twenty-one meetings.” The Fed’s tradition of: Ibid. “You mean you cannot push on a string?”: John H. Wood, A History of Central Banking in Great Britain and the United States (Cambridge: Cambridge University Press, 2005), 231. “It’s really a question”: Sudeep Reddy, “Fisher: Fix the Credit System First,” Wall Street Journal, April 22, 2008. In mid-April 2008: Maurna Desmond, “IMF: Subprime Losses Could Hit $1 Trillion,” Forbes.com, April 8, 2008, www.forbes.com/2008/03/31/subprime-costs-writedowns-markets-equity-cx_md-0331markets21.html.

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

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. Paul Krugman, “The Conscience of a Liberal: Rethinking Japan,” New York Times, October 20, 2015, http://krugman.blogs.nytimes.com/2015/10/20/rethinking-japan. 57. John Cochrane, “The Fed Needn’t Rush to ‘Normalize,’” Wall Street Journal, September 16, 2015, http://www.wsj.com/articles/the-fed-neednt-rush-to-normalize-1442441737.

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One explanation could be that the Fed can’t conduct monetary policy in a way that threatens price inflation, even if it wanted to. Borrowing and spending entail risk—by both lenders and borrowers. When the economy’s capacity and willingness to bear risk binds growth, savings and money sit unused. Increasing the monetary base just pushes on a string.55 Idle savings, the Fed’s inability to produce inflation, and the zero lower bound are all symptoms of the economy’s capacity and willingness to bear risk, binding growth. Krugman agrees that printing money, on its own, won’t create inflation. He insists that to produce inflation, the government must increase spending to tighten capacity utilization56 . . . assuming no corresponding private-sector dial-back, of course!

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

The nature of debt super-cycles In a debt super-cycle, as the cycle advances, economic growth is increasingly driven by a combination of growth in debt and money supply. 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.

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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. Debt therefore continues to grow, and GDP growth continues to slow, until it all ends in tears. What we are now beginning to see are the first signs of Push on a String. When that happens, monetary policy is already so accommodative that further rate cuts have virtually no effect on economic growth. QE also becomes largely ineffective, as risk premia are too low to drive investors to assume more risk. The very low returns that we currently see across almost all asset classes is a classic sign that we are approaching the end of the debt super-cycle.

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

Even Yale's James Tobin, a friendly critic, recognized its greatness: "This is one of those rare books that leaves their mark on all future research on the subject" (1965, 485). Friedman had a twofold mission in researching and writing Monetary History. First, he wanted to dispel the prevailing Keynesian notion that "money doesn't matter," that somehow an aggressive expansion of the money supply during a recession or depression cannot be effective, like "pushing on a string." Friedman and Schwartz showed time and time again that monetary policy was indeed effective in both expansions and contractions. Friedman's work on monetary economics became increasingly important and applicable as inflation headed upward in the 1960s and 1970s. His most famous line is "Inflation is always and everywhere a monetary phenomenon" (Friedman 1968, 105).

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For thirty years, an entire generation of economists did not really know the extent of the damage the Federal Reserve had inflicted on the U.S. economy from 1929 to 1933. They had been under the impression that the Fed had done everything humanly possible to keep the depression from worsening, but like "pushing on a string," were impotent in the face of overwhelming deflationary forces. According to the official apologia of the Federal Reserve System, it had done its best, but was powerless to stop the collapse. Friedman radically altered this conventional view. "The Great Contraction," as Friedman and Schwartz called it, "is in fact a tragic testimonial to the importance of monetary forces" (Friedman and Schwartz 1963, 300).

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

Meltzer added in the same portion of his landmark book that Eccles was not an apologist for deficits generally, but only to offset deficits in investment spending. He observes that despite the prominence of Keynes’s work at the time, Eccles claimed never to have read his books nor to have derived any of his own views on deficit spending from Keynes main work.61 Meltzer documents how Eccles came to be associated with the term “pushing on a string” in 1935 during testimony before the House Committee on Banking and Currency. He knew that monetary expansion did not work in the Depression because people were unwilling to spend or borrow. But Eccles went further than many of his contemporaries and attributed the excess of savings to inequitable income distribution.

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(Barron ownership) Dow Jones Industrial Average, decline (1929) Drew, Daniel Drysdale Government Securities, collapse Dunbar, Willis Dunkelberg, William Dunn, Susan du Pont, Pierre S. Durant, William Durant‘s Folly Earning power, assets (relationship, absence) Ebeling, Richard Eccles, Marriner Glass, opposition pushing on a string Truman anger Economic depression (1882-1884) Economic expansion, Burns limitation Economic growth, generation Economic output, WWI decline Economic Recovery Tax Act (1981) Economic Stabilization Act Economic stagnation, Nixon response Economy, American uncertainty/doubt Economy (angst), American political class (response) Einhorn, David Einstein, Albert Eisenhower, Dwight David defense industrial complex warning election Electrification, impact Embargos, removal (FDR support) Emergency Banking Act (1933) Emergency Banking Relief Act Employment Act (1946) passage Employment maximum, promotion Energy costs, impact Equity markets, decline Erie Railroad collapse control, theft Eurodollars deposits, dollar supply (visibility) Europe American imports, decline collapse credit, U.S. dependence deflation goods flow, American dependence unemployment (1873) WWI debt payment, failure/refusal WWII loans WWI loans European imports, WWI financing requirement European nations, U.S. trade deficit European style corporate statism, American version (FDR endorsement) European Union crisis (2010) emergence success Exchange medium Exchange Stabilization Fund (ESF) (1933) Executive Branch, power (growth) External deficits, increase (impact) Faris, Ralph Farley, James Farm cooperatives, formation Farm Credit Banks, usage Farmer’s Exchange Bank, failure Farm prices/wages, decline (continuation) Farm sector, commodity prices (collapse) Faulkner, Harold Federal debt (1945-1996) level (1974) shrinkage U.S. government servicing Federal deposit insurance, FDR support Federal Deposit Insurance Corporation (FDIC) idea, proposal panic role permanency Federal expenditures, Hoover avoidance Federal funds rate, increase Federal government greenback issuance, legality (debate) laissez faire role, return post-Civil War debt size (increase), FDR (impact) Federal Home Loan Bank Board, authorization Federal Home Loan Banks (FHLBs) authorization Hoover creation Federal Home Loan Mortgage Corporation (FHLMC) Federal insurance, access Federal Land Bank Federal Monetary Authority Federal National Mortgage Association (FNMA) creation Federal Open Market Committee (FOMC) capitulation federal funds rate, increase interest rate control Federal outlays (1968-1976) Federal outlays (1979-1988) Federal receipts (1929-1996) Federal Reserve Act (1913) amendment, banking lobby (impact) approval Bryan support compromise decentralized features evolution impact passage Byrd perspective political equation, shift Federal Reserve banks, National Monetary Commission organization Federal Reserve Money Federal Reserve System Board of Governors creation, McFadden Act (impact) original composition corportivist reform creation impact Jefferson/Jackson, cautionary views (confirmation) deflationary tone Durant complaints evolution Galbraith description High Tide imperfections independence, retention liquidity provider motivation (2000s) policies, questions rediscounting regulation changes, Warburg opposition RFC, relationship tunnel-vision policies, adoption warrants, purchase (Federal Reserve Act limitation) WWI actions Federal revenues, growth Federal spending, increase Federal Trade Act Fed of New York, discount rate (reduction) Feinberg, Robert Fessenden, William P.

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

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

There are times, such as our own, when low rates of interest and other monetary policies are insufficient to stimulate the kind of investment needed to increase employment, improve productivity and generate income. That is when it is important for monetary policy to work hand in hand with fiscal policy. In other words, when monetary policy is like pushing on a string and the private sector is reluctant to invest and spend, then it is time for governments to initiate investment and spending – to create jobs, expand activity and income, and generate economic recovery, Austerity leads to shortages of safe assets Keynes understood that the rate of interest is a social variable, one that can be deliberately managed by the public authorities, while at the same time holding finance capital at bay.

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

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

As John Maynard Keynes once put it, discussing financial globalisation and inequality in the oligarchical Gilded Age before the First World War (no relation of the Golden Age after the Second), ‘society was so framed as to throw a great part of the increased income into the control of the class least likely to consume it’. This three-trillion-dollar fact poses a large question for the tax cutters to answer. Why would a corporate tax reduction – adding to already vast uninvested cash piles – spur corporations to invest? Corporate tax cutting is like pushing on a string. And, given how quickly cash piles have been growing – a hefty 6 per cent a year, at the last count – any research based on past evidence can’t take this factor into account.21 How can our diligent researcher incorporate all this stuff into a serious cost-benefit analysis? She can’t. No one can.

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For example, if large multinationals are sitting on trillion-dollar cash piles that they aren’t investing, why would any pro-multinational reform – whether cutting corporate taxes or financial regulations, but also reducing workers’ rights or wages, or relaxing environmental rules – suddenly encourage them to start? Such measures may quantifiably boost corporate profits, but in terms of attracting or stimulating real investment, they would be pushing on a string. And it’s worse than that, for the same reason I explained earlier. Because these measures take wealth out of the hands of workers and other less wealthy stakeholders in society – stakeholders who generally spend a greater share of any extra wealth that comes their way – this will tend to reduce overall demand, making it less likely that corporations will invest, inflicting a second round of damage.

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

The expansion of credit might be controlled some by those at the helm of the Fed, but the animal spirits of those who would lend and borrow are equally important, as was proven back in the times when there was no Fed and gold was the monetary base. If the horse has been run too hot (as it was in the 1920s), loosening the reins may not be enough to entice it to speed up again after the race is over. To borrow from an old saying, the Fed governors could not “push on a string.” Fiat money, electronic or paper currency that is not redeemable into a hard asset, has dominated the modern financial era. Cultural and political change has trended against prudent management of credit growth for nearly a century. As a consequence, outside a few doomsayers, libertarians, and boldly curious economists or money managers, most observers in our time have little more than a theoretical conception of why a fiat currency system could come under stress, and whether the current crisis might be handled effectively or deepen to the point that the political demand for an alternative form of money 74 ENDLESS MONEY would emerge.

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Those who rooted for the deflationist camp looked to the depression years and saw a consumer heavily laden with debt and a highly leveraged banking system wherein over half of its loans relate to real estate.6 They saw interest rates at generational lows already, with the Fed discount rate near zero by year-end 2008. With loan demand sated and a need for banks and consumers to deleverage, they saw any Fed action to inject reserves into the monetary system as “pushing on a string,” to use the phrase invented by the monetarist Friedman in his analysis of the Great Depression. From within the Fed in the days that the policy of quantitative easing became official, Philadelphia Federal Reserve Bank President Plosser alerted us that “(recent economic statistics) prompted some commentators to suggest that the United States is facing a threat of sustained deflation, as we did in the Great Depression or as Japan faced for a decade.

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

Certainly, apparently reasonable monetary growth, measured by M2, did not generate a vigorous recovery, though it almost certainly stopped a far deeper recession. The difficulty, as we saw in Chapter Five, is that the economy suffers from a savings glut – desired savings exceed desired investment, despite the extremely low interest rates. In the well-known expression: money is pushing on a string.47 Moreover, though the short-term rate may be near to or at zero, it is impossible to bring the long-term rate that low, because of ‘liquidity preference’: at negligible long-term rates, the downside for holders is large (since investors would lose a fortune if yields returned to normal) and the upside negligible.

…

M2 consists of (1) currency outside the US Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) travellers’ checks of non-bank issuers; (3) demand deposits; (4) other checkable deposits (OCDs), which consist primarily of negotiable order of withdrawal (NOW) accounts at depository institutions and credit-union share-draft accounts; (5) savings deposits (which include money-market deposit accounts, or MMDAs); (6) small-denomination time deposits (time deposits in amounts of less than $100,000); and (7) balances in retail money-market mutual funds (MMMFs). Definitions are available at http://research.stlouisfed.org/fred2. 47. http://en.wikipedia.org/wiki/Pushing_on_a_string. 48. See, among many other things, Hyman P. Minsky, Stabilizing an Unstable Economy (New Haven: Yale University Press, 1986), and ‘Financial Instability and the Decline (?) of Banking: Future Policy Implications’, Working Paper No. 127, October 1994, The Jerome Levy Research Institute of Bard College, http://www.levyinstitute.org/pubs/wp127.pdf. 49.

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

In any event governments cannot cut nominal interest rates below zero (otherwise they would have to pay people to borrow from them). 104 The Great Economists While interest rates may be good at containing an expansion by pulling monetary policy tighter, they are less effective in a downturn – summed up in the phrase attributed to Keynes of ‘pushing on a string’. In a depression people will not want to borrow but will hoard money in their banks rather than spend or borrow more. The mere fact that cheap money and cheap labour are available will not be sufficient to make businesses invest and expand if they do not wish to. Expectations and uncertainty If there is one concept at the heart of Keynes’s thinking and which marks a break with the classicists it is the role played by people’s uncertainty about the future.

Let My People Go Surfing by Yvon Chouinard

"Friedman doctrine" OR "shareholder theory", air freight, business process, clean water, Donald Trump, Doomsday Book, Mahatma Gandhi, precautionary principle, pushing on a string, Ralph Waldo Emerson, rewilding, Rubik’s Cube, urban sprawl, work culture

However ingeniously adaptive and self-healing nature may be, human industry, especially during the past century, wreaks change far more quickly than nature can deal with it. Where we tip the balance, we yield desert, and at some point we may tip the balance planet-wide. At that point all mitigating human effort becomes, in Keynes’s memorable phrase, “like pushing on a string.” We are the last generation that can experience true wilderness. Already the world has shrunk dramatically. To a Frenchman, the Pyrenees are “wild.” To a kid living in a New York City ghetto, Central Park is “wilderness,” the way Griffith Park in Burbank was to me when I was a kid. Even travelers in Patagonia forget that its giant, wild-looking estancias are really just overgrazed sheep farms.

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

A recovery that was faster in the UK than in the US. This historical experience was somewhat ignored by the postwar fashion of simplifying Keynes’s message, leading to the rigid conclusion drawn by the earlier generation of Keynesians that monetary policy was ineffective in engineering a recovery. The adage was: “You cannot push on a string.” Yet the injection of a large quantity of liquidity has not revived the economies of the US and UK. The best you can say is that the recession was not deepened thanks to the regime of low interest rates. What is also surprising is that the enormous amount of money injected into the economy has not caused inflation, as was the doctrine of the monetarists during the 1970s.

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

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

However, sometimes the problem is deeper, and even very cheap money doesn’t restore market confidence. Low interest rates are like a string the central bank can use to draw entrepreneurs and investors back into taking the kind of risks that produce jobs and generate wealth. As has often been noted, you can’t push on a string. Flooding the market with cheap money is totally ineffective if risks outweigh any obvious opportunities to make money. Cheap money is useless if nobody wants to use it or if those who want to use it no longer should have it because of the risk they represent. It is like pumping more and more air into a balloon that has burst.

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

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

At the end of February, the huge insurer American International Group reported the largest quarterly loss, $5 billion, since the company started in 1919. After some delay, the Federal Reserve Board last summer started lowering interest rates on loans to the banks. But in a phrase from the bank crisis of the 1930s, it was like “pushing on a string.” The bankers’ problem was not that money was too expensive to lend out; it was that they were afraid they wouldn’t get their money back. When they did lend, they jacked up the rates to compensate for the higher perceived risks—even to solid customers. The Port Authority of New York and New Jersey suddenly had to borrow money at 20 percent.

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.

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. Board members felt that they had to do something. Launching their umpteenth round of ineffective monetary stimuli, Japanese central bankers resorted to marketing, rebranding QE as QQE (qualitative and quantitative expansion).

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

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

This is bound to change as the channels through which money is injected broaden, and as more sectors become recipients of the central banks’ flow of money, either by directly receiving money from the central bank or by receiving central bank funded state transfers. The response of broader price level indices to this money printing will be more in accordance with what standard economic theory predicts: there will be rises in standard inflation measures. For some time inflationary policy may appear like “pushing on a string,” but there will be a point at which it will gain traction. The decline in money’s purchasing power will accelerate when the public realizes to what extent income streams, asset prices, and the solvency of the banks and state institutions rest on the ongoing printing of money. The rush out of paper money will then accelerate dramatically.

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

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

We will see whether Greeks’ evident desire to remain in the eurozone (or their fears of the alternative) will prove sufficient counterweight to the pain that the country has yet to endure. As desirable as broad structural reforms may be in the medium to long run, they do very little to solve the short‐run problem of inadequate demand. Dealing with this problem through supply‐side reforms aimed at increasing productivity is like pushing on a string. What is needed instead is some good old‐fashioned Keynesianism: policies to boost eurozone–wide demand and stimulate greater spending in creditor countries, especially Germany. Back to Politics and Democracy At the heart of this economic misdiagnosis is also the absence of EU‐wide democratic accountability.

Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud by Ben McKenzie, Jacob Silverman

algorithmic trading, asset allocation, bank run, barriers to entry, Ben McKenzie, Bernie Madoff, Big Tech, bitcoin, Bitcoin "FTX", blockchain, capital controls, citizen journalism, cognitive dissonance, collateralized debt obligation, COVID-19, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-border payments, cryptocurrency, data science, distributed ledger, Dogecoin, Donald Trump, effective altruism, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, experimental economics, financial deregulation, financial engineering, financial innovation, Flash crash, Glass-Steagall Act, high net worth, housing crisis, information asymmetry, initial coin offering, Jacob Silverman, Jane Street, low interest rates, Lyft, margin call, meme stock, money market fund, money: store of value / unit of account / medium of exchange, Network effects, offshore financial centre, operational security, payday loans, Peter Thiel, Ponzi scheme, Potemkin village, prediction markets, proprietary trading, pushing on a string, QR code, quantitative easing, race to the bottom, ransomware, regulatory arbitrage, reserve currency, risk tolerance, Robert Shiller, Robinhood: mobile stock trading app, Ross Ulbricht, Sam Bankman-Fried, Satoshi Nakamoto, Saturday Night Live, short selling, short squeeze, Silicon Valley, Skype, smart contracts, Steve Bannon, systems thinking, TikTok, too big to fail, transaction costs, tulip mania, uber lyft, underbanked, vertical integration, zero-sum game

In 1932, Congress belatedly passed the Glass-Steagall Act, injecting $1 billion of cash into the banks by designating government securities as assets eligible to back the US dollar in addition to gold. But by then it was too late; credit kept shrinking at a rate of 20 percent a year. As Ahamed notes, “A similar measure in late 1930 or in 1931 might have changed the course of history. In 1932 it was like pushing on a string.” The economy continued in its tailspin, bottoming out in March 1933 as the commercial banking system collapsed. It would take years for the American economic engine to restart. Commitment to the gold standard did not cause the Great Depression, but adherence to it prolonged the extraordinary pain that ensued.

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

They cannot alter taxes or spend money directly into the economy, so the best they can do to promote employment is to try to establish financial conditions that will give rise to more borrowing and spending. Lower interest rates might work to induce enough new borrowing to substantially lower unemployment. But they might not. As Keynes famously observed, “You can’t push on a string.” What he meant was that the Fed can make it cheaper to borrow, but it cannot force anyone to take out a loan. Borrowing money puts companies and individuals on the hook for the debts they incur. Loans must be repaid out of future income, and there are good reasons why the private sector might be reluctant to increase its indebtedness at various stages of the business cycle.

Trillion Dollar Triage: How Jay Powell and the Fed Battled a President and a Pandemic---And Prevented Economic Disaster by Nick Timiraos

"World Economic Forum" Davos, Alan Greenspan, asset-backed security, banking crisis, Bear Stearns, Bernie Sanders, bitcoin, Black Monday: stock market crash in 1987, Bonfire of the Vanities, break the buck, central bank independence, collapse of Lehman Brothers, collective bargaining, coronavirus, corporate raider, COVID-19, credit crunch, cryptocurrency, Donald Trump, fear index, financial innovation, financial intermediation, full employment, George Akerlof, George Floyd, global pandemic, global supply chain, Greta Thunberg, implied volatility, income inequality, inflation targeting, inverted yield curve, junk bonds, lockdown, Long Term Capital Management, low interest rates, managed futures, margin call, meme stock, money market fund, moral hazard, non-fungible token, oil shock, Phillips curve, price stability, pushing on a string, quantitative easing, Rishi Sunak, risk tolerance, rolodex, Ronald Reagan, Savings and loan crisis, secular stagnation, Skype, social distancing, subprime mortgage crisis, Tesla Model S, too big to fail, unorthodox policies, Y2K, yield curve

With an exterior of imposing Georgia marble, the four-story structure is known, appropriately, as the Marriner S. Eccles Building. Eccles didn’t rush to use the Fed’s considerable new power. He believed the Fed’s tools were better suited for slowing down an overheating economy than for jump-starting a contracting one. “One cannot push on a string,” he told lawmakers at hearings in 1935.3 In the years after Roosevelt’s initial reforms, “the Treasury usually led and the Federal Reserve usually followed,” historian Allan Meltzer wrote.4 After the attack on Pearl Harbor drew the United States into the Second World War, long-term Treasury yields jumped.

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

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

Meanwhile, the Federal Reserve continued buying back government bonds to keep long-term interest rates low, causing the dollar’s value to diminish. Adding to the nation’s supply of money when companies were already awash with cash only confirmed the admonition by Marriner Eccles, Franklin Roosevelt’s Federal Reserve chairman, about the impotence of monetary policy as a stimulus; “You cannot push on a string,” that is, however much money you make available, you cannot force businesses to make investments. EIGHTEEN And the Winner Is . . . Avoiding the Great Recession, 2008 Onward So, eighty years after Hayek and Keynes first crossed swords, who won the most famous duel in the history of economics?

The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street by Justin Fox

"Friedman doctrine" OR "shareholder theory", Abraham Wald, activist fund / activist shareholder / activist investor, Alan Greenspan, Albert Einstein, Andrei Shleifer, AOL-Time Warner, asset allocation, asset-backed security, bank run, beat the dealer, behavioural economics, Benoit Mandelbrot, Big Tech, Black Monday: stock market crash in 1987, Black-Scholes formula, book value, Bretton Woods, Brownian motion, business cycle, buy and hold, capital asset pricing model, card file, Carl Icahn, Cass Sunstein, collateralized debt obligation, compensation consultant, complexity theory, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, democratizing finance, Dennis Tito, discovery of the americas, diversification, diversified portfolio, Dr. Strangelove, Edward Glaeser, Edward Thorp, endowment effect, equity risk premium, Eugene Fama: efficient market hypothesis, experimental economics, financial innovation, Financial Instability Hypothesis, fixed income, floating exchange rates, George Akerlof, Glass-Steagall Act, Henri Poincaré, Hyman Minsky, implied volatility, impulse control, index arbitrage, index card, index fund, information asymmetry, invisible hand, Isaac Newton, John Bogle, John Meriwether, John Nash: game theory, John von Neumann, joint-stock company, Joseph Schumpeter, junk bonds, Kenneth Arrow, libertarian paternalism, linear programming, Long Term Capital Management, Louis Bachelier, low interest rates, mandelbrot fractal, market bubble, market design, Michael Milken, Myron Scholes, New Journalism, Nikolai Kondratiev, Paul Lévy, Paul Samuelson, pension reform, performance metric, Ponzi scheme, power law, prediction markets, proprietary trading, prudent man rule, pushing on a string, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Richard Thaler, risk/return, road to serfdom, Robert Bork, Robert Shiller, rolodex, Ronald Reagan, seminal paper, shareholder value, Sharpe ratio, short selling, side project, Silicon Valley, Skinner box, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, statistical model, stocks for the long run, tech worker, The Chicago School, The Myth of the Rational Market, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, Thorstein Veblen, Tobin tax, transaction costs, tulip mania, Two Sigma, Tyler Cowen, value at risk, Vanguard fund, Vilfredo Pareto, volatility smile, Yogi Berra

Through the 1920s, Keynes and Irving Fisher had been on a similar economic wavelength, sharing the belief that misguided monetary policies caused most economic problems. During the Depression, Keynes took things a step further. The remedy Fisher prescribed was to print more money. Keynes despaired that this would amount merely to “pushing on a string,” and argued that government needed to spend money to get the economy moving again. As a matter of economic policy, this was a big difference. In terms of economic theory, not so much. The doctrine that took Keynes’s name came to consist of the mathematical economics of rational individual choice (that is, Fisher’s economics), combined with a few less-than-elegant additions that attempted to represent the maladies of the national economy known as recession and depression.17 “This was not a perfect bicycle,” recalled one of the young Keynesians, Paul Samuelson, “but it was the best wheel in town.”18 The perfect bicycle that was mathematical equilibrium economics remained intact.

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

But the collective cuts did little to stimulate loans, much less consumption, investment, or capital expenditures, as market rates remained very high given the fear and uncertainty that gripped banks, households, and firms. Nor did these cuts arrest the slide toward deflation. Conventional monetary policy ceased to have sway over the markets. The metaphor of choice was that exercising monetary policy was like “pushing on a string.” It was useless. The reason was simple: the cuts in the Federal funds rate (or its equivalent in other countries) did not percolate throughout the wider financial system. Banks had money, but they didn’t want to lend it: uncertainty bred by the crisis, and concerns that many of their existing loans and investments would eventually sour, made them risk averse.

Why We Can't Afford the Rich by Andrew Sayer

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

They failed to increase their already low level of lending for productive investment by businesses. Meanwhile, aggregate demand was depressed by austerity policies, rising unemployment and people cutting back on spending to pay off their debts. From the point of view of economic regeneration, the bailouts were about as successful as ‘pushing on a string’.135 Governments that had to fund substantial bailouts put themselves at risk. Stagnant or shrinking economies also mean increased government debt, because revenues from taxes decline and welfare expenditure goes up as unemployment rises, all of which increase the risk of default. When this predictably resulted in a worsening of the credit rating of those countries, the financial elite demanded more cuts, particularly cuts borne by ordinary taxpayers.

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. Lower interest rates also tend to push up the prices of shares, bonds, property and other assets, making investors feel wealthier and therefore more likely to spend.

Termites of the State: Why Complexity Leads to Inequality by Vito Tanzi

accounting loophole / creative accounting, Affordable Care Act / Obamacare, Alan Greenspan, Andrei Shleifer, Andrew Keen, Asian financial crisis, asset allocation, barriers to entry, basic income, behavioural economics, bitcoin, Black Swan, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, clean water, crony capitalism, David Graeber, David Ricardo: comparative advantage, deindustrialization, Donald Trump, Double Irish / Dutch Sandwich, experimental economics, financial engineering, financial repression, full employment, George Akerlof, Gini coefficient, Gunnar Myrdal, high net worth, hiring and firing, illegal immigration, income inequality, indoor plumbing, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jean Tirole, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labor-force participation, libertarian paternalism, Long Term Capital Management, low interest rates, market fundamentalism, means of production, military-industrial complex, moral hazard, Naomi Klein, New Urbanism, obamacare, offshore financial centre, open economy, Pareto efficiency, Paul Samuelson, Phillips curve, price stability, principal–agent problem, profit maximization, pushing on a string, quantitative easing, rent control, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Second Machine Age, secular stagnation, self-driving car, Silicon Valley, Simon Kuznets, synthetic biology, The Chicago School, The Great Moderation, The Market for Lemons, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, Tyler Cowen: Great Stagnation, universal basic income, unorthodox policies, urban planning, very high income, Vilfredo Pareto, War on Poverty, Washington Consensus, women in the workforce

In many countries there have been far fewer genuine structural reforms than would have been desirable. At the same time the public debts have continued to grow (see Tanzi, 2016b). As mentioned earlier, in the last three decades the attitude toward the role of monetary policy in promoting economic stabilization has changed. It has changed from the earlier view, that “you cannot push on a string” or “you can take a horse to the river but you cannot make it drink,” to one that believes monetary policy can bring “great moderation” and that those who conduct monetary policy have become accomplished “maestros” who know how to use the right policy instruments. Central banks have come to be expected to play a growing role, with their monetary actions, in the stabilization of national economies.

Stress Test: Reflections on Financial Crises by Timothy F. Geithner

Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, Atul Gawande, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Bernie Sanders, Black Monday: stock market crash in 1987, break the buck, Buckminster Fuller, Carmen Reinhart, central bank independence, collateralized debt obligation, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency risk, David Brooks, Doomsday Book, eurozone crisis, fear index, financial engineering, financial innovation, Flash crash, Goldman Sachs: Vampire Squid, Greenspan put, housing crisis, Hyman Minsky, illegal immigration, implied volatility, Kickstarter, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market fundamentalism, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, Nate Silver, negative equity, Northern Rock, obamacare, paradox of thrift, pets.com, price stability, profit maximization, proprietary trading, pushing on a string, quantitative easing, race to the bottom, RAND corporation, regulatory arbitrage, reserve currency, Saturday Night Live, Savings and loan crisis, savings glut, selection bias, Sheryl Sandberg, short selling, sovereign wealth fund, stock buybacks, tail risk, The Great Moderation, The Signal and the Noise by Nate Silver, Tobin tax, too big to fail, working poor

In an epic financial crisis that followed a major credit boom, easy money had much less power. Interest rates were already effectively zero; most banks had little ability and even less desire to lend; businesses had little desire to borrow; and consumers already had too much debt. As central bankers say, it felt like the Fed was pushing on a string. It had begun the first round of quantitative easing, or QE1, buying GSE mortgage bonds to help reduce the cost and increase the availability of mortgages. This was an innovative way to do monetary stimulus at a time when short-term rates were as low as they could go; the Fed would later expand the program to Treasuries to try to drive down long-term rates more generally.

Lords of Finance: The Bankers Who Broke the World by Liaquat Ahamed

Alan Greenspan, Albert Einstein, anti-communist, bank run, banking crisis, Bretton Woods, British Empire, business cycle, capital controls, central bank independence, centre right, credit crunch, currency manipulation / currency intervention, Etonian, Ford Model T, full employment, gentleman farmer, German hyperinflation, Glass-Steagall Act, index card, invisible hand, Lao Tzu, large denomination, Long Term Capital Management, low interest rates, margin call, market bubble, Mexican peso crisis / tequila crisis, mobile money, money market fund, moral hazard, new economy, open economy, plutocrats, price stability, purchasing power parity, pushing on a string, rolodex, scientific management, the market place

The two new measures combined—the infusion of additional capital into the banking system and the injection of reserves—allowed the Fed finally to pump money into the system on the scale required. But Meyer had left it too late. A similar measure in late 1930 or in 1931 might have changed the course of history. In 1932 it was like pushing on a string. Banks, shaken by the previous two years, instead of lending out the money used the capital so injected to build up their own reserves. Total bank credit kept shrinking at a rate of 20 percent a year. Bankers and financiers, the heroes of the previous decade, now became the whipping boys. No one provided a better target than Andrew Mellon.

The Golden Passport: Harvard Business School, the Limits of Capitalism, and the Moral Failure of the MBA Elite by Duff McDonald

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Albert Einstein, Apollo 13, barriers to entry, Bayesian statistics, Bear Stearns, Bernie Madoff, Bob Noyce, Bonfire of the Vanities, business cycle, business process, butterfly effect, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, Carl Icahn, Clayton Christensen, cloud computing, collateralized debt obligation, collective bargaining, commoditize, compensation consultant, corporate governance, corporate raider, corporate social responsibility, creative destruction, deskilling, discounted cash flows, disintermediation, disruptive innovation, Donald Trump, eat what you kill, Fairchild Semiconductor, family office, financial engineering, financial innovation, Frederick Winslow Taylor, full employment, George Gilder, glass ceiling, Glass-Steagall Act, global pandemic, Gordon Gekko, hiring and firing, Ida Tarbell, impact investing, income inequality, invisible hand, Jeff Bezos, job-hopping, John von Neumann, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kickstarter, Kōnosuke Matsushita, London Whale, Long Term Capital Management, market fundamentalism, Menlo Park, Michael Milken, new economy, obamacare, oil shock, pattern recognition, performance metric, Pershing Square Capital Management, Peter Thiel, planned obsolescence, plutocrats, profit maximization, profit motive, pushing on a string, Ralph Nader, Ralph Waldo Emerson, RAND corporation, random walk, rent-seeking, Ronald Coase, Ronald Reagan, Sam Altman, Sand Hill Road, Saturday Night Live, scientific management, shareholder value, Sheryl Sandberg, Silicon Valley, Skype, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, Steve Jurvetson, survivorship bias, TED Talk, The Nature of the Firm, the scientific method, Thorstein Veblen, Tragedy of the Commons, union organizing, urban renewal, vertical integration, Vilfredo Pareto, War on Poverty, William Shockley: the traitorous eight, women in the workforce, Y Combinator

The School has of late added a course on Leadership and Corporate Accountability, and the description of the topics for examination within it sound like a direct repudiation of Jensen: “decisions that involve responsibilities to each of a company’s core constituencies—investors, customers, employees, suppliers, and the public,” with discussions on insider trading rules, the fall of Enron, human character, employee responsibilities, labor laws, corporate citizenship, socially responsible investing, and serving the public interest. But in this, its influence can clearly be seen as akin to pushing on a string. “[While] the average firm has assiduously applied the agency theory principles that increase corporate entrepreneurialism and risk,” write Frank Dobbin and Jiwook Jung in their 2010 paper, “The Misapplication of Mr. Michael Jensen: How Agency Theory Brought Down the Economy and Might Do It Again,” “it has not applied the principles that bolster monitoring and foster executive self-restraint.

Conspiracy of Fools: A True Story by Kurt Eichenwald

"World Economic Forum" Davos, Alan Greenspan, Asian financial crisis, Bear Stearns, book value, Burning Man, California energy crisis, computerized trading, corporate raider, currency risk, deal flow, electricity market, estate planning, financial engineering, forensic accounting, intangible asset, Irwin Jacobs, John Markoff, junk bonds, Long Term Capital Management, margin call, Michael Milken, Negawatt, new economy, oil shock, price stability, pushing on a string, Ronald Reagan, transaction costs, value at risk, young professional

In early January 2001, Skilling and Baxter stood on the ground level of an Enron parking garage, smoking. Baxter dropped the butt to the ground, crushing it with his foot. He was cranky and frustrated, like he’d been most days in the months since the end of Project Summer. Every other sales effort had bombed out. “This is like pushing on a string, Jeff,” he said. “I’m not getting anywhere.” “We’re going to have to keep plugging,” Skilling replied. The international projects had to be sold. Baxter shook his head. “You don’t need me to do this,” he said. “I’m not having any fun doing this.” He breathed deeply. “Jeff, I think it’s probably time for me to go,” he said.