too big to fail

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pages: 430 words: 109,064

13 Bankers: The Wall Street Takeover and the Next Financial Meltdown by Simon Johnson, James Kwak

Alan Greenspan, American ideology, Andrei Shleifer, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, Bonfire of the Vanities, bonus culture, book value, break the buck, business cycle, business logic, buy and hold, capital controls, Carmen Reinhart, central bank independence, Charles Lindbergh, collapse of Lehman Brothers, collateralized debt obligation, commoditize, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency risk, Edward Glaeser, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, George Akerlof, Glass-Steagall Act, Gordon Gekko, greed is good, Greenspan put, Home mortgage interest deduction, Hyman Minsky, income per capita, information asymmetry, interest rate derivative, interest rate swap, junk bonds, Kenneth Rogoff, laissez-faire capitalism, late fees, light touch regulation, Long Term Capital Management, low interest rates, market bubble, market fundamentalism, Martin Wolf, Michael Milken, money market fund, moral hazard, mortgage tax deduction, Myron Scholes, Paul Samuelson, Ponzi scheme, price stability, profit maximization, proprietary trading, race to the bottom, regulatory arbitrage, rent-seeking, Robert Bork, Robert Shiller, Ronald Reagan, Saturday Night Live, Satyajit Das, Savings and loan crisis, sovereign wealth fund, Tax Reform Act of 1986, The Myth of the Rational Market, too big to fail, transaction costs, Tyler Cowen, value at risk, yield curve

Jamie Dimon, “No More ‘Too Big to Fail,’ ” The Washington Post, November 13, 2009, available at http://www.washingtonpost.com/wp-dyn/content/article/2009/11/12/AR2009111209924.html. 35. Gary H. Stern and Ron J. Feldman, Too Big to Fail: The Hazards of Bank Bailouts (Washington: Brookings Institution Press, 2009). 36. Andrew Ross Sorkin, Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves (New York: Viking, 2009), 236. 37. On the race to save Morgan Stanley and Goldman Sachs, see ibid. at 409–83. 38. See, e.g., Paul Krugman, “Too Big to Fail FAIL,” The Conscience of a Liberal Blog, The New York Times, June 18, 2009, available at http://krugman.blogs.nytimes.com/2009/06/18/too-big-to-fail-fail/. 39.

Market share is the top five bank holding companies’ share of all derivatives contracts held by all U.S. bank holding companies, by notional value. 64. From Federal Deposit Insurance Corporation data, cited in Dean Baker and Travis McArthur, “The Value of the ‘Too Big to Fail’ Big Bank Subsidy,” Center for Economic and Policy Research Issue Brief, September 2009, available at http://www.cepr.net/documents/publications/too-big-to-fail-2009–09.pdf. 65. Cho, “Banks ‘Too Big to Fail’ Have Grown Even Bigger,” supra note 62. 66. Tyler Durden, “Exclusive: AIG Was Responsible for the Banks’ January & February Profitability,” Zero Hedge, March 29, 2009, available at http://zerohedge.blogspot.com/2009/03/exclusive-aig-was-responsible-for-banks.html. 67.

A new agency also cannot reverse the political momentum of the last thirty years and dislodge Wall Street from its position of power in Washington. That will require stronger medicine. TOO BIG TO EXIST “Too big to fail” was the slogan of the financial crisis. It was the justification for bailing out Fannie Mae, Freddie Mac, AIG, Citigroup, and Bank of America (and, extended into the auto industry, General Motors, Chrysler, and GMAC as well). It was the problem that administration officials and congressmen swore they would fix; even bank CEOs agreed, including Jamie Dimon of JPMorgan Chase, who wrote, “The term ‘too big to fail’ must be excised from our vocabulary.”34 The phrase has been around at least since the 1984 government rescue of Continental Illinois, and was the subject of a 2004 book by the president and vice president of the Federal Reserve Bank of Minneapolis.35 But only in 2008 did it become a pillar of government policy.


pages: 566 words: 155,428

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

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

Fannie and Freddie were taken over: Sorkin, Too Big to Fail, chapter 11. Paulson refused: Paulson, On the Brink, 190. “what would you need from us?”: Sorkin, Too Big to Fail, 94. “‘I can’t do it again’”: Wessel, In Fed We Trust, 14. “financial crisis was lunacy”: Wessel, In Fed We Trust, 15–16. “statement is way out of line!”: Ibid. “import our cancer”: Sorkin, Too Big to Fail, 350. “take precautionary measures”: Bernanke, “The Economic Outlook,” testimony before the Joint Economic Committee, September 24, 2008. voiced the same opinion: Sorkin, Too Big to Fail, 343. “secure a Federal Reserve loan”: Bernanke, “Federal Reserve Policies in the Financial Crisis,” speech at the Greater Austin Chamber of Commerce.

The first natural thought is incorrect: that the Bear Stearns rescue was an application of the age-old too big to fail doctrine. The too big to fail idea is that some companies, financial or not, are simply so large that their failure, especially if abrupt, would do so much damage to other companies, to consumers, and to the overall economy that the government has to intervene in some way.* The doctrine is actually misnamed. In some cases, the preferred solution may be to lay the company to rest slowly and peacefully, with minimal disruption to other parties. So the idea should probably be called “too big to fail messily.” But labels, once assigned, have a way of sticking.

Chapter 6: The Panic of 2008 “most unbelievable week in America ever”: Quoted in Sorkin, Too Big to Fail, 2. 116,000 employees in 130 countries: FCIC Report, 139. “irresponsible bets”: Bernanke at a March 3, 2009, hearing of the Senate Budget Committee, as quoted by Wessel, In Fed We Trust, 194. “can’t think of one, than AIG”: Ibid virtually none of it was hedged: FCIC Report, 50. “losing $1 in any of those transactions”: Sorkin, Too Big to Fail, 160. “sleeping a bit easier at night”: Ibid. Scary stuff: Sorkin, Too Big to Fail, 239. “imminent danger”: Wessel, In Fed We Trust, 189–90. “Fed should bail it out”: Ibid.


When Free Markets Fail: Saving the Market When It Can't Save Itself (Wiley Corporate F&A) by Scott McCleskey

Alan Greenspan, Asian financial crisis, asset-backed security, bank run, barriers to entry, Bear Stearns, Bernie Madoff, break the buck, call centre, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, financial engineering, financial innovation, fixed income, Glass-Steagall Act, information asymmetry, invisible hand, Isaac Newton, iterative process, junk bonds, Long Term Capital Management, margin call, money market fund, moral hazard, mortgage debt, place-making, Ponzi scheme, prediction markets, proprietary trading, risk tolerance, Savings and loan crisis, shareholder value, statistical model, The Wealth of Nations by Adam Smith, time value of money, too big to fail, web of trust

Having institutions that are too big to fail may not sit well with everyone in the policy debate, but good policy would recognize this fact and consider why they pose a threat in the first place. C02 06/16/2010 11:16:2 Page 15 2 CHAPTER TWO Can an Institution Be Too Big to Fail? T O A G R E A T E X T E N T , the debate over how to fix the financial system has boiled down to an argument over how to handle institutions that are ‘‘too big to fail.’’ Do you ban a firm from getting that big? Do you penalize it for its size in order to create an incentive to remain small? Do you guarantee it against failure? This section delves into the nature of firms that are ‘‘too big to fail’’ and how policymakers have proposed to address the issues they raise. It begins by considering how these firms are identified in the first place and the complications that arise in doing so.

. & In the end, the fate of Bear Stearns and others shows that firms can grow to the point that they are systemically important because their size brings large exposures to a large number of firms in the financial system, making them too big to fail. But the financial system isn’t vulnerable to these firms simply because they’re big. Their size makes them too interconnected to fail, so that the opacity of the market means that no one knows who is exposed to the failing firm. A lack of confidence in one firm becomes a lack of confidence in all firms. Having institutions that are too big to fail may not sit well with everyone in the policy debate, but good policy would recognize this fact and consider why they pose a threat in the first place.

But (spoiler alert) it will also conclude that a fixation on the size of a firm is misleading and an exercise in self-deception, which can result in overlooking other systemically important institutions. The first problem with the too-big-to-fail concept is the phrase itself. The term was too catchy not to catch on, but it is an unfortunate choice of words since it implies a narrow focus on size. Because of the complexity of the markets, size is not the only factor that makes a firm important (as discussed in other chapters). Though the more accurate term systemically important is used in official documents, the nature of many policy proposals reflects an obsession 15 C02 06/16/2010 11:16:2 16 & Page 16 Can an Institution Be Too Big to Fail? with the size of the firm. Overlooking ‘‘unimportant’’ firms simply because they aren’t behemoths is courting disaster: As one market expert has put it, ‘‘The history of financial crises is the history of the threatened failure and default of financial institutions previously considered unimportant.’’1 What really matters is the magnitude of the impact an institution’s failure would have on the system, by which we mean on a large number of other firms.


pages: 218 words: 62,889

Sabotage: The Financial System's Nasty Business by Anastasia Nesvetailova, Ronen Palan

Alan Greenspan, algorithmic trading, bank run, banking crisis, barriers to entry, Basel III, Bear Stearns, Bernie Sanders, big-box store, bitcoin, Black-Scholes formula, blockchain, Blythe Masters, bonus culture, Bretton Woods, business process, collateralized debt obligation, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, critique of consumerism, cryptocurrency, currency risk, democratizing finance, digital capitalism, distributed ledger, diversification, Double Irish / Dutch Sandwich, en.wikipedia.org, Eugene Fama: efficient market hypothesis, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, gig economy, Glass-Steagall Act, global macro, Gordon Gekko, high net worth, Hyman Minsky, independent contractor, information asymmetry, initial coin offering, interest rate derivative, interest rate swap, Joseph Schumpeter, junk bonds, Kenneth Arrow, litecoin, London Interbank Offered Rate, London Whale, Long Term Capital Management, margin call, market fundamentalism, Michael Milken, mortgage debt, new economy, Northern Rock, offshore financial centre, Paul Samuelson, peer-to-peer lending, plutocrats, Ponzi scheme, Post-Keynesian economics, price mechanism, regulatory arbitrage, rent-seeking, reserve currency, Ross Ulbricht, shareholder value, short selling, smart contracts, sovereign wealth fund, Thorstein Veblen, too big to fail

Shaw, ‘Deposit Insurance and Wealth Effects: The Value of Being ‘Too Big to Fail’, Journal of Finance, vol. 45, 1990, pp. 1587–1600. 5. D. P. Morgan and K. J. Stiroh, ‘Too Big to Fail after All These Years (SSRN Scholarly Paper No. ID 813967), Social Science Research Network, Rochester, NY, 2005. 6. A. Haldane, ‘On Being the Right Size’, speech at the Institute of Economic Affairs, 22nd Annual Series, The 2012 Beesley Lectures, at the Institute of Directors, London, 25 October 2012, www.bis.org/review/r121030d.pdf. 7. M. J. Roe, ‘Structural Corporate Degradation Due to Too-Big-to-Fail Finance’, University of Pennsylvania Law Review, vol. 162, 2014, pp. 1419–64. 8.

These CEOs are using their considerable rhetorical skills to defend a very lucrative portion of their business: namely, the chance to be too big to fail (known as TBTF). TBTF is a classic sabotaging technique. Considering that the welfare of the entire nation depends on its banking institutions, if one bank becomes just big enough to the point that governments or, rather, the markets, believe that the state cannot afford to allow the bank to fail, such banks are able to borrow in the markets at lower rates. Or they may be in a position to take extra risks with their business without penalty (and presumably reap extra profits from those risky investments). The perception that a bank has become too big to fail is monetized, and becomes a great source of profit.

Minsky, H., Stabilizing an Unstable Economy, Yale University Press, 1986. Monaghan, A., ‘Too big to fail’ risks growing in asset management’, Guardian, 4 April 2014, www.theguardian.com/business/2014/apr/04/asset-management-risks-bailout-rising-warns-bank-of-england. Moody’s, ‘Danièle Nouy of ECB on consolidation in European banking sector’, 27 September 2017, www.moodysanalytics.com/regulatory-news/sept-27-daniele-nouy-of-ecb-on-consolidation-in-european-banking-sector. Morgan, D. P., and K. J. Stiroh, Too Big to Fail after All These Years (SSRN Scholarly Paper No. ID 813967), Social Science Research Network, 2005.


pages: 202 words: 66,742

The Payoff by Jeff Connaughton

Alan Greenspan, algorithmic trading, bank run, banking crisis, Bear Stearns, Bernie Madoff, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cuban missile crisis, desegregation, Flash crash, Glass-Steagall Act, locking in a profit, London Interbank Offered Rate, London Whale, Long Term Capital Management, naked short selling, Neil Kinnock, plutocrats, Ponzi scheme, proprietary trading, risk tolerance, Robert Bork, Savings and loan crisis, short selling, Silicon Valley, TED Talk, too big to fail, two-sided market, uptick rule, young professional

Every voter who wants to break Wall Street’s hold on Washington should put congressional and presidential candidates to the test with two questions (in addition to shunning lobbyist contributions and bundling): Will you agree not to take campaign contributions from too-big-to-fail banks and non-banks? Don’t stand idly by while too-big-to-fail institutions that will need Congress and the American taxpayer to bail them out when they fail—or else send us into another Great Depression—buy political influence. Politicians should pledge No on too-big-to-fail contributions. Will you support a tiny user fee on Wall Street trades to pay for adequate oversight and enforcement? A per trade fee would be specifically earmarked to construct a consolidated audit trail to allow better monitoring of trades and also strengthen the regulatory and law enforcement systems we need to prevent manipulation and wrongdoing.

I knew Ted talked to the vice president, but Ted never told me about the substance of those conversations. Those stayed forever in Ted’s vault. That’s one of the reasons Biden trusted him so much. That speech was the first time Ted used the phrase “too big to fail”—as recently popularized by Andrew Ross Sorkin’s book, which sat on Ted’s desk. In the next six months, he would practically wear it out, urging the Senate repeatedly to deal effectively with too-big-to-fail megabanks before they caused yet another disastrous financial crisis. On a subsequent trip to New York, we met with Bill Dudley, the former chief economist at Goldman Sachs who is president of the New York Fed.

He was determined to go to the Senate floor and start speaking out strongly. I began working on a major speech. We wanted to lay out Ted’s views on the importance of ending too-big-to-fail. He wanted it to be the foundational document (a favorite Biden tactic) for all he would argue during the debate. We went through several drafts. Simon Johnson, the former chief economist for the International Monetary Fund and leading critic of too-big-to-fail megabanks, was standing by to tout the speech in his blog and on Huffington Post, where he served as a senior contributor. It took us longer than I’d planned. At one point, I e-mailed Simon: “This is threatening to become the speech that ate the Senator.”


pages: 726 words: 172,988

The Bankers' New Clothes: What's Wrong With Banking and What to Do About It by Anat Admati, Martin Hellwig

Alan Greenspan, Andrei Shleifer, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, bonus culture, book value, break the buck, business cycle, Carmen Reinhart, central bank independence, centralized clearinghouse, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, diversified portfolio, en.wikipedia.org, Exxon Valdez, financial deregulation, financial engineering, financial innovation, financial intermediation, fixed income, George Akerlof, Glass-Steagall Act, Growth in a Time of Debt, income inequality, information asymmetry, invisible hand, Jean Tirole, joint-stock company, joint-stock limited liability company, junk bonds, Kenneth Rogoff, Larry Wall, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, margin call, Martin Wolf, Money creation, money market fund, moral hazard, mortgage debt, mortgage tax deduction, negative equity, Nick Leeson, Northern Rock, open economy, Paul Volcker talking about ATMs, peer-to-peer lending, proprietary trading, regulatory arbitrage, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Satyajit Das, Savings and loan crisis, shareholder value, sovereign wealth fund, subprime mortgage crisis, technology bubble, The Market for Lemons, the payments system, too big to fail, Upton Sinclair, Yogi Berra

Government guarantees and subsidies thus reinforce the effects of bankers’ compensation and the focus on ROE, as well as the effects of debt overhang, all of which encourage borrowing and risk. The prospect of becoming systemically important or too big to fail provides banks with incentives to grow and become more complex. The implicit guarantees reduce the funding costs of the too-big-to-fail institutions and give these banks an advantage over other banks and over other companies in the economy. If banks respond to these incentives by growing and becoming more complex, this in turn increases the damage to society should these institutions become distressed or insolvent.

They view equity as expensive; borrowing is always attractive. As discussed in the previous chapter, the focus on ROE in banking reinforces the effect by compensating bank managers in ways that encourage risk taking and borrowing. Perverse Incentives When large banks are treated as too big to fail, this status has strong and perverse effects on the banks’ behavior. The prospect of benefiting from too-big-to-fail status can give banks strong incentives to grow, merge, borrow, and take risks in ways that take the most advantage of the potential or actual guarantees. Banks may also want to draw advantages from taking risks that are similar in that they are all likely to turn out well or to turn out poorly at the same time.

Banks in those countries grew and invested so much that their losses were larger than the countries could bear.27 Spain may be facing a similar experience. Being considered too big to fail is extremely valuable for a bank, because it lowers its borrowing costs. Just as Kate was able to borrow at a lower rate because of Aunt Claire’s guarantees, banks that benefit from implicit guarantees are given higher credit ratings, and thus pay less interest when they borrow. This reduces the banks’ overall funding costs and increases the amount of the total pie available to their investors. There is significant evidence that subsidies associated with being too big to fail can make these banks seem more profitable, when in fact they are not generating more value but simply benefiting from more subsidized funding.28 Banks do not seem to become more efficient when they grow beyond about $100 billion in assets, yet growing can allow them to enjoy the subsidized funding that comes with the implicit guarantees.29 With subsidized funding through guarantees, growth is easy, and building empires can be quite profitable.30 Mergers in banking have also been shown to be partly motivated by a desire to attain too-big-to-fail status, which generally lowers costs and makes for easier borrowing terms.


pages: 515 words: 132,295

Makers and Takers: The Rise of Finance and the Fall of American Business by Rana Foroohar

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, additive manufacturing, Airbnb, Alan Greenspan, algorithmic trading, Alvin Roth, Asian financial crisis, asset allocation, bank run, Basel III, Bear Stearns, behavioural economics, Big Tech, bonus culture, Bretton Woods, British Empire, business cycle, buy and hold, call centre, Capital in the Twenty-First Century by Thomas Piketty, Carl Icahn, Carmen Reinhart, carried interest, centralized clearinghouse, clean water, collateralized debt obligation, commoditize, computerized trading, corporate governance, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, crowdsourcing, data science, David Graeber, deskilling, Detroit bankruptcy, diversification, Double Irish / Dutch Sandwich, electricity market, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial intermediation, Ford Model T, Frederick Winslow Taylor, George Akerlof, gig economy, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Greenspan put, guns versus butter model, High speed trading, Home mortgage interest deduction, housing crisis, Howard Rheingold, Hyman Minsky, income inequality, index fund, information asymmetry, interest rate derivative, interest rate swap, Internet of things, invisible hand, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", John Bogle, John Markoff, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, Kickstarter, knowledge economy, labor-force participation, London Whale, Long Term Capital Management, low interest rates, manufacturing employment, market design, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, offshore financial centre, oil shock, passive investing, Paul Samuelson, pensions crisis, Ponzi scheme, principal–agent problem, proprietary trading, quantitative easing, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, Rana Plaza, RAND corporation, random walk, rent control, Robert Shiller, Ronald Reagan, Satyajit Das, Savings and loan crisis, scientific management, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Snapchat, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, Steve Jobs, stock buybacks, subprime mortgage crisis, technology bubble, TED Talk, The Chicago School, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tobin tax, too big to fail, Tragedy of the Commons, trickle-down economics, Tyler Cowen: Great Stagnation, Vanguard fund, vertical integration, zero-sum game

“What we should probably do is go and split up investment banking from [commercial] banking,” Weill said. “Have banks be deposit takers. Have banks make commercial loans and real estate loans. Have banks do something that’s not going to risk the taxpayer dollars, that’s not going to be Too Big to Fail.”2 As conversions go, Weill’s was positively biblical. It came four years after a long chain of disastrous decisions by Citigroup and the rest of the Too Big to Fail banks had landed them at the epicenter of the financial crisis, with hundreds of billions of dollars of exploding securities on their books and worried customers on the verge of mass panic that threatened to throw the country into another Great Depression.

If Big Tech decided at any point to dump those bonds, it could become a market-moving event, an issue that is already raising concern among experts at the Office of Financial Research, the Treasury Department body founded after the 2008 financial crisis to monitor stability in financial markets.7 Big Tech isn’t alone in emulating finance. Airlines often make more money from hedging on oil prices than on selling seats—while bad bets can leave them with millions of dollars in losses. GE Capital, a subsidiary of the company launched by America’s original innovator, Thomas Alva Edison, was until quite recently a Too Big to Fail financial institution like AIG (GE has spun it off in part because of the risks it posed). Any number of Fortune 500 firms engage in complicated Whac-A-Mole schemes to keep their cash in a variety of offshore banks to avoid paying taxes not only in the United States but also in many other countries where they operate.

Many of the perverse trends associated with financialization, such as rising inequality, stagnating wages, financial market fragility, and slower growth, are often (rightly) spoken about in social terms and in highly politicized ways—with polarizing discussions of the 1 percent versus the 99 percent, and Too Big to Fail banks versus profligate consumers and rapacious investors. Indeed, the terms makers and takers were used in the 2012 US election cycle by conservative politicians to denigrate half the American population (an issue I’m hoping this book will go some way toward rectifying by redefining those terms).


pages: 306 words: 82,909

A Hacker's Mind: How the Powerful Bend Society's Rules, and How to Bend Them Back by Bruce Schneier

4chan, Airbnb, airport security, algorithmic trading, Alignment Problem, AlphaGo, Automated Insights, banking crisis, Big Tech, bitcoin, blockchain, Boeing 737 MAX, Brian Krebs, Capital in the Twenty-First Century by Thomas Piketty, cloud computing, computerized trading, coronavirus, corporate personhood, COVID-19, cryptocurrency, dark pattern, deepfake, defense in depth, disinformation, Donald Trump, Double Irish / Dutch Sandwich, driverless car, Edward Thorp, Elon Musk, fake news, financial innovation, Financial Instability Hypothesis, first-past-the-post, Flash crash, full employment, gig economy, global pandemic, Goodhart's law, GPT-3, Greensill Capital, high net worth, Hyman Minsky, income inequality, independent contractor, index fund, information security, intangible asset, Internet of things, Isaac Newton, Jeff Bezos, job automation, late capitalism, lockdown, Lyft, Mark Zuckerberg, money market fund, moral hazard, move fast and break things, Nate Silver, offshore financial centre, OpenAI, payday loans, Peter Thiel, precautionary principle, Ralph Nader, recommendation engine, ride hailing / ride sharing, self-driving car, sentiment analysis, Skype, smart cities, SoftBank, supply chain finance, supply-chain attack, surveillance capitalism, systems thinking, TaskRabbit, technological determinism, TED Talk, The Wealth of Nations by Adam Smith, theory of mind, TikTok, too big to fail, Turing test, Uber and Lyft, uber lyft, ubercab, UNCLOS, union organizing, web application, WeWork, When a measure becomes a target, WikiLeaks, zero day

When someone else’s things are involved, then maybe you should think twice—or be forced to fix what you’ve broken. 23 “Too Big to Fail” The phrase “too big to fail” captures a critical vulnerability in our market economy. If you are so large that your failure is a systemic risk to the economy, you are free to take bigger risks because you know you won’t be allowed to fail. The idea is captured in an old quote widely attributed to J. Paul Getty (though probably first said by John Maynard Keynes): “If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” That’s “too big to fail” in a nutshell. In more detail: some corporations are too critical to the functioning of our economy to be allowed to fail.

The most effective way to secure an economic system against companies that are too big to fail would be to ensure that there aren’t any in the first place. In 2009, sociologist Duncan Watts wrote an essay: “Too Big to Fail? How About Too Big to Exist?” He argued that some companies are so large and powerful that they can effectively use the government as insurance against their risky business decisions, with taxpayers left holding the bag. Hacks like these exemplify three attributes that we’ll revisit later on in the book. First, “too big to fail” is generalizable. As big banks, real estate, and other “essential” sectors of the economy recognize that they are able to employ the “too big to fail” hack, the market economy as a whole becomes vulnerable to enterprises that expand unsustainably.

As big banks, real estate, and other “essential” sectors of the economy recognize that they are able to employ the “too big to fail” hack, the market economy as a whole becomes vulnerable to enterprises that expand unsustainably. Second, hacks can be systematized and reshape decision-making: the bailouts in 2008 codified “too big to fail” into law. By demonstrating that the federal government was willing to bail out the banking, real estate, and automotive sectors, Congress normalized the hack as just another part of the high-finance game. And third, the very concept of “too big to fail” changes the incentives of those regulating the massive organizations, and consequently the organizations themselves.


pages: 576 words: 105,655

Austerity: The History of a Dangerous Idea by Mark Blyth

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

The Book in Brief Following this overview, chapter 2, “America: Too Big to Fail: Bankers, Bailouts, and Blaming the State,” explains why the developed world’s debt crisis is not due to profligate state spending, at least in any direct sense. Rather, we piece together how the debt increase was generated by the implosion of the US financial sector and how this impacted sovereigns from the United States to the Eurozone and beyond. To explain this I stress how the interaction of the repo (sale and repurchase) markets, complex instruments, tail risks, and faulty thinking combined to give us the problem of too big to fail. It takes us from the origins of the crisis in the run on the US repo market in September 2008 to the transmission of this US-based crisis to the Eurozone, noting along the way how a banking crisis was deftly, and most politically, turned into a public-sector crisis and how much it all cost.34 Chapter 3, “Europe: Too Big to Bail: The Politics of Permanent Austerity,” analyzes how the private debt generated by the US banking sector was rechristened as the “sovereign debt crisis” of profligate European states.

Was the US financial system, comprising shadow banks, opaque instruments, bad risk models, and flawed blueprints, actually too big to fail? Giving a definitive answer is impossible because it would involve taking account of all the off-balance-sheet activities of the banks in question as well as their CDS exposures and other derivative positions. That is extremely difficult. However, looking only at balance-sheet assets, liabilities, and leverage ratios, one can clearly see why, after the failure of Lehman Brothers, the state blinked and shouted too big to fail. By the third quarter of 2008, the height of the crisis, the top six US banks, Goldman Sachs, JP Morgan, Bank of America, Morgan Stanley, Citigroup, and Wells Fargo, had a collective asset-to-GDP ratio of 61.61 percent.

Europe usually sits to the left of the United States politically, but it was acting far to its right economically by mid-2010. The basic reason for this was the same one we saw in the United States. If you think the risk posed by hugely levered US banks that were too big to fail was terrifying, then consider the following: in November 2011 the Financial Stability Board, a coordinating body for national financial regulators, published a list of systemically important banks, in other words, the too big to fail list. Of the twenty-nine banks named, only eight were US banks; seventeen were European. The Europeans have managed to build a system that is too big to bail, which is the real reason why a bunch of putative lefties are squeezing the life out of their welfare states.


pages: 491 words: 131,769

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

International Monetary Fund, Economic Issues no. 32, March 8, 2004, online at http://www.imf.org/external/pubs/ft/issues/issues32/index.htm. 224 “living wills”: Noam Scheiber, “Can We Fix Too Big to Fail Without Shrinkage?” New Republic, October 28, 2009, online at http://www.tnr.com/blog/the-stash/can-we-fix-too-big-to-fail-without-shrinkage; David Wessel, “Three Theories on Solving the ‘Too Big to Fail’ Problem,” Wall Street Journal, October 29, 2009; Mike Konczal, “Fixing Too Big to Fail,” Nation, November 6, 2009, online at http://www.thenation.com/doc/20091123/konczal. 225 some kind of conservatorship: See, for example, “The FDIC’s Role as Receiver,” in FDIC, Resolutions Handbook (Washington, D.C.: FDIC, 2003), online at http://www.fdic.gov/bank/historical/reshandbook/. 226 supervising TBTF institutions: See, for example, William Buiter, “Too Big to Fail Is Too Big,” Financial Times, June 24, 2009, online at http://blogs.ft.com/maverecon/2009/06/too-big-to-fail-is-too-big/; Wessel, “Three Theories”; Daniel K.

New Republic, October 28, 2009, online at http://www.tnr.com/blog/the-stash/can-we-fix-too-big-to-fail-without-shrinkage; David Wessel, “Three Theories on Solving the ‘Too Big to Fail’ Problem,” Wall Street Journal, October 29, 2009; Mike Konczal, “Fixing Too Big to Fail,” Nation, November 6, 2009, online at http://www.thenation.com/doc/20091123/konczal. 225 some kind of conservatorship: See, for example, “The FDIC’s Role as Receiver,” in FDIC, Resolutions Handbook (Washington, D.C.: FDIC, 2003), online at http://www.fdic.gov/bank/historical/reshandbook/. 226 supervising TBTF institutions: See, for example, William Buiter, “Too Big to Fail Is Too Big,” Financial Times, June 24, 2009, online at http://blogs.ft.com/maverecon/2009/06/too-big-to-fail-is-too-big/; Wessel, “Three Theories”; Daniel K. Tarullo, “Confronting ‘Too Big to Fail,’ ” speech to Exchequer Club, Washington, D.C., October 21, 2009, online at http://www.bis.org/review/r091023e.pdf. 226 unilaterally doubling the Basel capital ratio: Christine Seib, “UBS Unveils £2bn Capital Raising and Warns of Second-Quarter Loss,” Times (London), June 26, 2009, online at http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6580096.ece.

Breaking Up Is Hard to Do The recent crisis highlighted what’s increasingly known as the “too-big-to-fail” problem. The collapse of Lehman Brothers and the resulting cardiac arrest of the global financial system revealed that many financial institutions had become so large, leveraged, and interconnected that their collapse could have systemic and catastrophic effects. In the United States, when your garden-variety bank fails, the FDIC assumes control via a receivership process. But the ranks of too-big-to-fail institutions—the TBTF club—contain few such traditional banks. Instead, most TBTF institutions belong to another species: big broker dealers like Morgan Stanley and Goldman Sachs; AIG and other sprawling insurance companies; government-sponsored enterprises like Fannie Mae and Freddie Mac; and hedge funds like Long-Term Capital Management.


pages: 193 words: 11,060

Ethics in Investment Banking by John N. Reynolds, Edmund Newell

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, banking crisis, Bear Stearns, collapse of Lehman Brothers, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, discounted cash flows, financial independence, Glass-Steagall Act, index fund, invisible hand, junk bonds, light touch regulation, margin call, Michael Milken, moral hazard, Nick Leeson, Northern Rock, proprietary trading, quantitative easing, shareholder value, short selling, South Sea Bubble, stem cell, the market place, The Wealth of Nations by Adam Smith, too big to fail, two and twenty, zero-sum game

The fact that integrating investment banking and commercial banking products can give rise to ethical problems does not in itself make such a practice unethical, in the same way that while owning a shop or market stall and setting products out to be viewed by customers can give rise to the temptation to steal it is not tantamount to theft. Too big to fail The investment banking sector as a whole, and the largest players in the sector individually, are too big for Governments to allow them to fail. This implies that investment banks receive some form of economic free-ride. There are different reasons why a company could be too big to fail: (a) the company itself is so important economically it could not be allowed to cease trading; (b) it provides essential services, and disruption to service supply could be unduly damaging for consumers; (c) its failure would spread to other companies, for example by creating a chain of defaults (such as via the non-payment of trade creditors); and (d) its failure would cause a systemic failure in a vital economic sector.

In the US, the Dodd–Frank Act (Dodd–Frank Wall Street Reform and Consumer Protection Act) has aimed to end the risk of “too big to fail” institutions being rescued by the state and has brought in major reforms aimed at providing financial stability, including a Financial Stability Oversight Council and Orderly Liquidation Authority. The Act stops short of requiring a separation of investment and commercial banking, which has been called for by some politicians. The Dodd–Frank Act specifically aims to end “too big to fail” by a combination of measures, including regulation and supervision, a levy to be paid by major financial institutions to create an Orderly Liquidation Fund and provisions for orderly liquidation.

Recent legislative change is aimed at reducing the wider impact of failure of an investment bank or banks. It may also reduce the risk of failure. It will not, however, deal with the other fundamental issue of the competence of management and the behaviour of shareholders of investment and commercial banks. Ethical implications The “too big to fail” argument has a number of ethical implications: • “Too big to fail” can lead to an asymmetric risk–reward profile for investment bankers, encouraging relatively risky behaviour, which may be unethical with regard to both the investment bank’s resources and potential Government liabilities. • Pushing risk onto tax payers and away from shareholders and/or lenders can reduce the level of pay that is ethically acceptable within an investment bank, notably where the investment bank receives direct Government support. • The profitability and stability of investment banking relies in part on Government support, which may impose an ethical duty on investment banks.


pages: 172 words: 54,066

The End of Loser Liberalism: Making Markets Progressive by Dean Baker

Alan Greenspan, Asian financial crisis, banking crisis, Bear Stearns, Bernie Sanders, business cycle, collateralized debt obligation, collective bargaining, corporate governance, currency manipulation / currency intervention, Doha Development Round, financial innovation, full employment, Glass-Steagall Act, Home mortgage interest deduction, income inequality, inflation targeting, invisible hand, low interest rates, manufacturing employment, market clearing, market fundamentalism, medical residency, patent troll, pets.com, pirate software, price stability, public intellectual, quantitative easing, regulatory arbitrage, rent-seeking, Robert Shiller, Silicon Valley, too big to fail, transaction costs

Yet somehow this massive intervention on behalf of these banks’ executives, shareholders, and bondholders – some of the richest people in the country – is not viewed as interference with the market.[1] While the bank bailouts were big news, there is no shortage of less-visible instances in which conservatives have long been eager for the government step in to support the interests of the wealthy. We’ll quickly discuss seven examples here: continued support for too-big-to-fail banks, patent and copyright protection, restrictions on organized labor, corporate liability limitations, Federal Reserve monetary controls, trade and dollar policy, and housing policy. Too-big-to-fail banks To start with an easy one, how many “free market fundamentalists” have rallied behind efforts to break up “too-big-to-fail” banks? This one should be a no-brainer for any genuine believer in free markets. A too-big-to-fail bank is a bank that everyone expects will be bailed out by the government if it gets in trouble, as happened in 2008.

Washington, DC: The Center for Economic and Policy Research. http://www.cepr.net/documents/publications/work-sharing-2011-06.pdf Baker, Dean and Rivka Deutsch. 2009. “The State and Local Drag on the Stimulus.” Washington, DC: Center for Economic and Policy Research. http://www.cepr.net/documents/publications/stimulus-2009-05.pdf Baker, Dean and Travis McArthur. 2009. “The Value of the ‘Too Big to Fail’ Big Bank Subsidy.” Washington, DC: Center for Economic and Policy Research. http://www.cepr.net/documents/publications/too-big-to-fail-2009-09.pdf Baker, Dean and Hye Jin Rho. 2009. “Free Trade in Health Care: The Gains from Globalized Medicare and Medicaid.” Washington, DC: Center for Economic and Policy Research. http://www.cepr.net/documents/publications/free-trade-hc-2009-09.pdf Baker, Dean and David Rosnick. 2011.

How could any believer in the virtue of free markets support the existence of large financial institutions that borrow at a lower cost than their competitors because of an implicit guarantee from the government? The fact that most of those claiming to be “free marketers” have overwhelmingly been on the side of the too-big-to-fail banks tells the world as clearly as possible that their motivations have nothing to do with a commitment to market fundamentalism and everything to do with a commitment to serving the interests of the rich and powerful. This is disguised as a commitment to the market for the obvious reason that doing things out of a commitment to free market principles sounds better than explicitly claiming to pursue policies that redistribute income from the vast majority of the population to the rich.


pages: 348 words: 99,383

The Financial Crisis and the Free Market Cure: Why Pure Capitalism Is the World Economy's Only Hope by John A. Allison

Affordable Care Act / Obamacare, Alan Greenspan, American ideology, bank run, banking crisis, Bear Stearns, Bernie Madoff, business cycle, clean water, collateralized debt obligation, correlation does not imply causation, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, disintermediation, fiat currency, financial innovation, Fractional reserve banking, full employment, Greenspan put, high net worth, housing crisis, inverted yield curve, invisible hand, life extension, low skilled workers, market bubble, market clearing, minimum wage unemployment, money market fund, moral hazard, negative equity, obamacare, open immigration, Paul Samuelson, price mechanism, price stability, profit maximization, quantitative easing, race to the bottom, reserve currency, risk/return, Robert Shiller, subprime mortgage crisis, The Bell Curve by Richard Herrnstein and Charles Murray, too big to fail, transaction costs, Tyler Cowen, yield curve, zero-sum game

This oligopoly has been created not by market forces, but by the arbitrary action of government regulators during a government-created crisis. There are at least six financial institutions that have clearly been defined as “too big to fail” (Citi, Bank of America, Wells Fargo, Goldman Sachs, JPMorgan Chase, and Morgan Stanley). The Dodd-Frank bill does not deal with the “too-big-to-fail” issue effectively, despite the comments of its proponents. In fact, the rating agencies have indicated that the credit ratings of these giant financial institutions are several grades higher than they would be without the implied government guarantee post-Dodd-Frank.

The legislation will be more detrimental to the healthy banks than to those financial institutions that should have failed. The well-run companies will be permanently damaged by the irrationality of their competitors and the related socialist/statist government reaction. I am opposed to the antitrust laws. Also, I do not believe that these oligopoly banks are too big to fail. However, if the government regulators do believe that these companies are too big to fail (and the government regulators and the rating agencies do believe it), they should be broken up. Unfortunately, the antitrust policy of the Federal Reserve is completely arbitrary to the point of being irrational. A short time before the financial crisis started, BB&T acquired a small bank in the Tennessee/North Carolina mountains.

The consumer compliance segment of the law is not about consumer compliance, it is about credit allocation. This is a fundamental move toward statism. If the government wants to control the economic system, the most effective way to do so is to control the allocation of credit and capital. 2. The legislation does not deal with “too big to fail.” Instead, it identifies companies that are “too big to fail” and ensures that they will be protected by the government. 3. The Durbin amendment on debit card fees is price fixing. It will reduce the availability of banking services to low-income consumers and increase costs for middle-income consumers. This is a government-mandated redistribution of wealth from bank shareholders and consumers to large retailers, such as Walgreens. 4.


pages: 300 words: 78,475

Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream by Arianna Huffington

Alan Greenspan, American Society of Civil Engineers: Report Card, Apollo 13, Bear Stearns, Bernie Madoff, Bernie Sanders, call centre, carried interest, citizen journalism, clean water, collateralized debt obligation, Cornelius Vanderbilt, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, do what you love, extreme commuting, Exxon Valdez, full employment, Glass-Steagall Act, greed is good, Greenspan put, guns versus butter model, high-speed rail, housing crisis, immigration reform, invisible hand, knowledge economy, laissez-faire capitalism, late fees, low interest rates, market bubble, market fundamentalism, Martin Wolf, medical bankruptcy, microcredit, military-industrial complex, Neil Armstrong, new economy, New Journalism, offshore financial centre, Ponzi scheme, post-work, proprietary trading, Report Card for America’s Infrastructure, Richard Florida, Ronald Reagan, Rosa Parks, Savings and loan crisis, single-payer health, smart grid, The Wealth of Nations by Adam Smith, Timothy McVeigh, too big to fail, transcontinental railway, trickle-down economics, winner-take-all economy, working poor, Works Progress Administration

Think Bigger, Way Bigger,” 13 May 2010, www.huffingtonpost.com. 54 The names of the Wall Streeters: Matthew Vadum, “Goldman Sachs Government,” 16 Oct. 2008, www.spectator.org. 55 The finance industry has 70 former members of Congress: Public Citizen, “Stop Congress’ Revolving Door of Corruption,” www.citizen.org. 56 This includes 33 chiefs of staff, 54 staffers of the House: Arthur Delaney, “Big Bank Takeover: Report Blames Revolving Door for ‘Too Big to Fail,’ ” 11 May 2010, www.huffingtonpost.com. 57 Five of Senate Banking Committee chair Chris Dodd’s: Kevin Connor, “Big Bank Takeover: How Too-Big-to-Fail’s Army of Lobbyists Has Captured Washington,” Institute for America’s Future, 11 May 2010, www.ourfuture.org. 58 Of course, the revolving door spins both ways: Arthur Delaney, “Big Bank Takeover: Report Blames Revolving Door for ‘Too Big to Fail,’ ” 11 May 2010, www.huffingtonpost.com. 59 On the mining front, former Massey chief operating officer: Brad Johnson, “Don Blankenship’s Record of Profits Over Safety: ‘Coal Pays the Bills,’ ” 8 Apr. 2010, www.thinkprogress.org. 60 At the time of the Upper Big Branch accident he was: Ibid. 61 And President Bush named Massey executive Richard Stickler: Ibid. 62 Stickler had such a lousy safety record: Ibid. 63 That’s what happened when Bush put Edwin Foulke: Stephen Labaton, “OSHA Leaves Worker Safety in Hands of Industry,” 25 Apr. 2007, www.nytimes.com. 64 Earlier in his career, while serving as chairman: Ibid. 65 Then there was Bush’s choice of Mary Sheila Gall: “Mary Sheila Gall Named to Chair CPSC,” 20 Apr. 2001, www.consumeraffairs.com. 66 In her ten years on the commission: Lizette Alvarez, “Consumer Product Safety Chief Sets Deadline to Resign,” 9 Aug. 2001, www.nytimes.com. 67 She even adopted a “Let them eat marbles” stance: Hearing on the nomination of Mary Sheila Gall to chair the Consumer Product Safety Commission before the Committee on Commerce, Science, and Transportation, U.S.

It’s no surprise that people such as Tim Geithner and Larry Summers believe in bank centrism—they’re both creatures of it. And in a bank-centric universe, funneling no-strings-attached money to too-big-to-fail banks is the logical thing to do. The longer this remains the dominant cosmology in the Obama administration—and the longer it takes to switch to a plan that reflects a cosmology in which the American people are the center of the universe and are deemed “too big to fail”—the greater the risk that the economic crisis will be more prolonged than necessary. And the greater the suffering. There is an enormous human cost to this dogma.

Create a Glass-Steagall Act for the twenty-first century, restoring the Chinese wall between commercial and investment banking. Follow the path of Teddy Roosevelt and break up the big banks. It’s essential to end “too big to fail” in order to ensure that taxpayers are not on the hook next time. Even Alan Greenspan, the oracle of free markets and a longtime cheerleader for banking deregulation, thinks the megabanks are too big.72 In October 2009, he said, “If they’re too big to fail, they’re too big.… So I mean, radical things—you know, break them up. In 1911, we broke up Standard Oil. So what happened? The individual parts became more valuable than the whole.


pages: 454 words: 134,482

Money Free and Unfree by George A. Selgin

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

AIG played a central role guaranteeing financial instruments, so its failure had the potential to lead to a cascade of failures and a meltdown of the global financial system. To contain this threat, the Federal Reserve provided secured loans to AIG. The trouble with such a mingling of Bagehotian and too-big-to-fail lending criteria is, as we have seen, that it raises a moral hazard. Bernanke himself was fully aware of the danger. “Some particularly thorny issues,” he observed after the Bear rescue, are raised by the existence of financial institutions that may be perceived as “too big to fail” and the moral hazard issues that may arise when governments intervene in a financial crisis. [Bear’s rescue was] necessary and justified under the circumstances that prevailed at that time.

“In its nearly 100-year history,” Allan Meltzer (2012: 261) observes, “the Fed has never announced its policy as lender of last resort. From the 1970s on, it acted on the belief that some banks were too-big-to-fail. Although the FOMC discussed last resort policy at times, the Fed never committed itself to a policy rule about assistance.” Michael Lewis (2008) was among those who correctly anticipated the consequences of the Bear rescue. “Investment banks,” Lewis wrote just afterwards, “now have even less pressure on them than they did before to control their risks.” He continued: There’s a new feeling in the Wall Street air: The big firms are now too big to fail. If the chaos that might ensue from Bear Stearns going bankrupt, and stiffing its counterparties on its billions of dollars of trades, is too much for the world to endure, the chaos that might be caused by Lehman Brothers Holdings Inc. or Goldman Sachs Group Inc. or Merrill Lynch & Co. or Morgan Stanley going bankrupt must also be too much to endure.  

When the inevitable reckoning came, the Fed faced a stark choice: it could either abandon “too big to fail” or set aside, more flagrantly than ever before, Bagehot’s call for lending only on good collateral. To the financial industry’s immense surprise, it took the former course, provoking a panic that was only compounded when Bernanke and Henry Paulson, in attempting to get $700 billion from Congress, warned that, without this assistance, the crisis “would threaten all parts of our economy” (U.S. Treasury 2008).22 Many Fed critics conclude that, having justified its rescue of Bear Stearns on too-big-to-fail grounds, the Fed ought also to have rescued Lehman.


pages: 257 words: 71,686

Swimming With Sharks: My Journey into the World of the Bankers by Joris Luyendijk

activist fund / activist shareholder / activist investor, bank run, barriers to entry, Bonfire of the Vanities, bonus culture, collapse of Lehman Brothers, collective bargaining, corporate raider, credit crunch, Credit Default Swap, Emanuel Derman, financial deregulation, financial independence, Flash crash, glass ceiling, Gordon Gekko, high net worth, hiring and firing, information asymmetry, inventory management, job-hopping, Large Hadron Collider, light touch regulation, London Whale, Money creation, Nick Leeson, offshore financial centre, regulatory arbitrage, Satyajit Das, selection bias, shareholder value, sovereign wealth fund, the payments system, too big to fail

Those commercial banks took over dozens of other banks and financial institutions across the globe and consequently became ‘too big to fail’. In a relatively short time the ownership structure of investment banks has radically changed. They are now publicly listed themselves so the risk lies with shareholders rather than partners, while bankers are paid partly in shares and options. The higher the share price, the more their shares and options are worth, and a really good way to raise that share price is by taking more risk. And as we’ve seen, what ‘too big to fail’ really means is that the taxpayer will bear much of that risk. There is an expression in the City for this new state of affairs: ‘It’s only OPM’ – Other People’s Money.

In today’s system, the risk and compliance department only serves to reassure the shareholders, regulators and taxpayers: those who shoulder the real risks. Now I began to understand why the interviewees who worked in hedge funds, private equity and venture capital scoffed at the publicly listed ‘too big to fail’ banks claiming to be part of the free market. Capitalism without the possibility of failure is like Catholicism without a hell, they’d say. Or: ‘Heads you lose, tails I win.’ And: ‘Banking today is like playing Russian roulette with someone else’s head.’ I was still mulling this over when an intriguing message popped into my inbox: ‘I’d be happy to discuss a part of banking that’s not really seen.’ 5 When the Call Comes ‘It’s amazing how fast the news spreads.

Whether interviewees were who they said they were was quite easy to check on social media such as LinkedIn. Verifying their stories was a different matter, frustratingly, because I was not allowed to observe anyone working in the banks. However, the most important things in their stories could be substantiated: the existence of caveat emptor, zero job security, the dangerous logic of ‘too big to fail’ and the implications and pressures of a listing on the stock exchange. It was clear that these conflicts of interest and perverse incentives are real, even if it came to light that each and every interviewee I spoke to was a delusional fantasist. A year into my research the blog was beginning to feel like an organisational detective.


pages: 183 words: 17,571

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

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

Shotgun weddings putting weak or walking-dead banks together into larger players are encouraged or compelled. Once this could be done with private capital, as when J. P. Morgan singlehandedly stopped the Panic of 1907. Now the banking sector is so large and interwoven that many individual banks are “too big to fail,” which in practice means the government (i.e., the taxpayers) has to save them from collapse. Although so-called bailouts are politically toxic, not doing them risks total economic collapse. Thus, sooner or later, they get into the story line. Scene Six More subtly, the authorities try to restore banks to profitability so they can go back to lending to businesses and households.

The ability to offset depressed US and European growth with emerging market dynamism will likely prove a delusion. 9 10 Chapter 1 | The Rise and Fall of the Finance-Driven Economy Final Scene and Fade to Credits Global financial markets will not long remain broken and dormant, as human ingenuity and the desire to make money will always find new ways to connect borrowers and investors. The entrenched, too-big-to-fail institutions left standing by the second leg of the crisis, as well as the most heavily regulated financial centers, will increasingly be bypassed as capital, talent, and customers go elsewhere. Money, like water, always finds a way around efforts to dam it. Innovation trumps regulation over time.

However, in the 1990s the US banking industry became very concentrated in the top ten or so banks for reasons noted above. The investment banks went from partnerships to public companies and also got very, very large.The global financial markets became so intertwined that these institutions were exposed to every other bank of every size and vice versa. This situation is often called “too big to fail” because all these complex interconnections between market players are impossible to understand in detail but clearly have the potential to bring down everybody if a really big institution suddenly ceased paying what they owed the other banks. The problem during the crisis was that it was not at all obvious who could be allowed to go to the wall and who had to be saved at all costs.


pages: 479 words: 113,510

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

He knew there would be a rocky period but that markets adapt. Looking past that, he ramped up his campaign for legislation to break up the “too-big-to-fail” banks. “I think the disagreeable but sound thing to do regarding institutions that are [too big to fail] is to dismantle them over time into institutions that can be prudently managed and regulated across borders,” Fisher said on March 3, 2010, in a speech before the Council on Foreign Relations. Even Greenspan had come around to this position. “If they’re too big to fail, they’re too big,” Greenspan had said in the autumn of 2009 in a speech before the same audience. “In 1911 we broke up Standard Oil—so what happened?

“I think the disagreeable but sound thing”: FRBD: Richard Fisher, “Lessons Learned, Convictions Affirmed” (speech, Council on Foreign Relations, New York City, New York, March 3, 2010), www.dallasfed.org/news/speeches/fisher/2010/fs100303.cfm. “If they’re too big to fail”: DealBook, “Greenspan Calls to Break Up Banks ‘Too Big to Fail,’” New York Times, October 15, 2009, DealBook.nytimes.com/2009/10/15/greenspan-break-up-banks-too-big-to-fail/?_r=0. But in the interim Volcker: Michael Lewis, Liar’s Poker (New York: W. W. Norton, 2014), 44. Now a household word: The CBOE VIX measures stock market volatility, www.cboe.com/micro/VIX/vixintro.aspx.

He was the lone member of the FOMC who voted against the professor’s theories at that fateful meeting. He fought the good but lonely fight, and I, in my capacity as trusted adviser, waged many a battle with him. But the sad truth is we lost the people’s war. In a world rendered unsafe by banks that were too big to fail, we came to understand the Fed was simply too big to fight. I wrote this book to tell from the inside the story of how the Fed went from being lender of last resort to savior—and then destroyer—of America’s economic system. During my nine-year tenure at the Federal Reserve Eleventh District Bank of Dallas, where I served as adviser to President Richard Fisher, I witnessed the tunnel vision and arrogance of Fed academics who can’t understand that their theoretical models bear little resemblance to real life.


pages: 354 words: 105,322

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

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

In plain English, G-SIFI means “too big to fail.” If your company is on the G-SIFI list, it will be propped up by governments because a failure topples the global financial system. That list went beyond large national banks into a stratosphere of super-size players who dominated global finance. G-SIFI even went beyond too big to fail. G-SIFI was a list of entities that were too big to leave alone. The G20 and IMF did not just want to watch the G-SIFIs. They wanted to control them. Each major country has its own sublists of SIFIs, and systemically important banks (SIBs) that are also too big to fail. In the United States, these banks include JPMorgan, Citibank, and some lesser-known entities such as the Bank of New York, the clearing nerve center for the U.S. treasury market.

In the real world, velocity is not constant, real growth is constrained by structural (i.e., nonmonetary) impediments, and money supply is ill defined. Apart from that, Mrs. Lincoln, how was the play? Prevailing theory does even more damage when weighing the statistical properties of risk. The extended balance sheet of too-big-to-fail banks today is approximately one quadrillion dollars, or one thousand trillion dollars poised on a thin sliver of capital. How is the risk embedded in this leverage being managed? The prevailing theory is called value at risk, or VaR. This theory assumes that risk in long and short positions is netted, the degree distribution of price movements is normal, extreme events are exceedingly rare, and derivatives can be properly priced using a “risk-free” rate.

A troika consisting of the European Central Bank (ECB), the European Union (EU), and the IMF had fought hard to preserve the euro in the 2011 sovereign debt crises and did not want to see that work undone in Cyprus. Cyprus did not have the clout to drive a hard bargain. It had to take whatever assistance it could get on whatever terms it could get it. For its part, the troika decided the days of too-big-to-fail banks were over. Cyprus was where they drew the line. Banks were temporarily shut down. ATM machines were taken offline. A mad scramble for cash ensued. Those who could flew to mainland Europe, returning with wads of euros stuffed in their luggage. Laiki Bank was closed permanently, and Bank of Cyprus was restructured by the government.


pages: 424 words: 121,425

How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy by Mehrsa Baradaran

access to a mobile phone, affirmative action, Alan Greenspan, asset-backed security, bank run, banking crisis, banks create money, barriers to entry, Bear Stearns, British Empire, call centre, Capital in the Twenty-First Century by Thomas Piketty, cashless society, credit crunch, David Graeber, disintermediation, disruptive innovation, diversification, failed state, fiat currency, financial innovation, financial intermediation, Glass-Steagall Act, Goldman Sachs: Vampire Squid, housing crisis, income inequality, Internet Archive, invisible hand, junk bonds, Kickstarter, low interest rates, M-Pesa, McMansion, Michael Milken, microcredit, mobile money, Money creation, moral hazard, mortgage debt, new economy, Own Your Own Home, Paul Volcker talking about ATMs, payday loans, peer-to-peer lending, price discrimination, profit maximization, profit motive, quantitative easing, race to the bottom, rent-seeking, Ronald Reagan, Ronald Reagan: Tear down this wall, Savings and loan crisis, savings glut, subprime mortgage crisis, the built environment, the payments system, too big to fail, trade route, transaction costs, unbanked and underbanked, underbanked, union organizing, W. E. B. Du Bois, white flight, working poor

Robert Solomon, an advocate for the community banking model, summarized the story of ShoreBank’s rescue as such: “If the lesson is that we will use taxpayer funds as a last resort for necessary interventions for those banks whose failure places an untenable risk on the financial system, i.e. those too big to fail, then we are privileging those institutions at the expense of smaller banks. Once we accept that, we can take for granted that small banks are inefficient, have no special purpose, and will inevitably be absorbed into larger, more efficient banks.”24 Perhaps ShoreBank failed because of toxic politics and the federal government’s decision to favor Too-Big-to-Fail over “Too Good to Fail,” but the bank also failed because of unavoidable financial realities: its loans were concentrated in a struggling geographic area, which probably exposed it to more significant risk during the economic downturn.25 REVIVAL OF BANKS WITH A SOUL?

And when it comes to these large banks, they rarely are “normal circumstances.”17 The truth is that even while the banking industry was rejecting any public duties, they were being supported by public funds. When commentators discuss this era of bank transformation, or deregulation, they tend to focus on the creation of Too-Big-to-Fail financial giants and their size, power, and riskiness. No less consequential, however, was the loss of banking services for average people. For much of U.S. history, the answer to banking for the poor—whether the rural farmer or the working-class city dweller—has been through local and community-controlled credit.

Because they were not banks and their creditors were not depositors, there was no established system of insurance. Once the run started, it rapidly spread and threatened to take down all of the uninsured shadow banks. This time, the federal government stepped in and stopped the hemorrhaging through bailouts. Thus began the era of “Too Big to Fail” institutions and a recognition that certain institutions are so large and powerful that the federal government cannot let them fail, lest trust in the entire financial system be undermined. This handful of banks controls the majority of the country’s banking assets. Trillions of dollars in federal bailouts flowed to these banks.22 It is important to understand why the federal government bailed out these banks.


pages: 257 words: 64,763

The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street by Robert Scheer

Alan Greenspan, banking crisis, Bear Stearns, Bernie Madoff, Bernie Sanders, business cycle, California energy crisis, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, do well by doing good, facts on the ground, financial deregulation, fixed income, Glass-Steagall Act, housing crisis, invisible hand, Long Term Capital Management, low interest rates, mega-rich, mortgage debt, new economy, old-boy network, Ponzi scheme, profit motive, Ralph Nader, rolling blackouts, Ronald Reagan, Savings and loan crisis, too big to fail, trickle-down economics

Left to their own devices, freed of rational regulatory restraint by an army of lobbyists and the politicians who serve them, one after another of the very top financial conglomerates imploded from the weight of their uncontrolled greed. Or would have imploded, as in the examples of Citigroup and AIG, if the government had not used taxpayer dollars to bail out those “too big to fail” conglomerates. Along the way, these companies—including the privatized quasi-governmental Fannie Mae and Freddie Mac monstrosities—were exposed as poorly run juggernauts, with top executives having embarrassingly little grasp of the chicanery and risk taking that was bolstering their bottom lines.

The near-collapse of Citigroup came nine years and six months after the Times editorial confidently assured America that “Citigroup threatens no one because it would not dominate banking, securities, insurance or any other financial market.” The federal government, later concluding that the merger celebrated by the Times had produced a true monster “too big to fail,” prevented its total collapse by pumping $50 billion directly into it, while also guaranteeing $300 billion of Citigroup’s “toxic assets.” Clearly, the merger of Citigroup had ended up a considerable threat to U.S. taxpayers and, indeed, to the entire world economy. Clinton was dispossessed of the wisdom to foresee this disastrous outcome of the bills he signed into law, or else he simply fell under the thrall of Wall Street hucksters—or both.

Among the few to sound the alarm, he raised his voice alongside that of Nader, pointing out that a major positive consequence of the New Deal regulations was that commercial banks had been prevented from gambling with depositors’ savings, which were insured by the Federal Deposit Insurance Corporation, created by Glass-Steagall. “No private enterprise should be allowed to think of itself as ‘too big to fail,’” wrote Safire in a foreshadowing of exactly what would ensue. Having the support of the FDIC—the federal government guaranteeing your accounts—had to come with restrictions, or it would be exploited, he argued. “Federal deposit insurance, protecting a bank’s depositors, should not become a subsidy protecting the risks taken by non-banking affiliates.


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

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

During the first week of September Fannie Mae and Freddie Mac, the US government-sponsored lenders that accounted for more than 50 percent of the credit risk on home mortgages, were taken over by the US Treasury – both institutions were bankrupt and the owners of their common shares and their preferred shares lost virtually all of their money. It appeared as if the US government had in effect adopted a ‘too big to fail’ policy – these institutions would continue in business, although there would be a dramatic change in ownership. At the outset of the crisis, the markets viewed the decision not to ‘save Lehman Brothers’ as a major change in policy, but a day after Lehman closed its doors, there was a run on AIG, then the largest insurance company in the world, and the ‘too big to fail’ policy was resurrected. Nevertheless, investors still panicked, evidenced by the sharp increase in the spreads on riskier assets.

If the shareholders lose 90 or 95 percent of their money before the government provides financial assistance, has the bank failed? Most of the shareholders are unlikely to agree to the statement that they have been bailed out. These bondholders may receive somewhat higher interest rates because the managers of the banks believe that they are ‘too big to fail’ and undertake somewhat riskier investments – and they will be able to pay higher interest rates – at least for a while. The ‘too big to fail’ doctrine may have the same impact as deposit insurance – unless the authorities reduce the value of the claims of the creditors below their face value if the banks are closed and re-organized with government assistance. Thereafter the owners of the deposits that are much larger than the amounts covered by deposit insurance may be ready to withdraw their money whenever there is modest skepticism about the solvency of the bank.

Lehman was not a commercial bank, and hence it was regulated by the Securities and Exchange Commission rather than by the Federal Reserve, although after the rescue of Bear the Fed had opened its discount window to investment banks. One interpretation of ‘too big to fail’ is that a faltering bank is so large that there is no other institution has sufficient excess capital to acquire the firm, much as Bear had been purchased by Morgan; hence the government must provide financial assistance to any of the five to ten very large firms because its demise would have costly consequences both for its competitors and the economy. One of the concerns implicit in the ‘too big to fail’ cliché is that the various stakeholders in the bank benefit from the proverbial ‘free lunch’ because they are protected against losses that their counterparts in smaller firms would have incurred when they failed.


pages: 408 words: 108,985

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

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

By 2010, as the worst of the banking crisis had passed, the top ten EU banks had about €15 trillion in assets, equivalent to 122 percent of GDP.6 And Europe remains home to ten globally systemically important banks (G-SIBs), the designation that the international Financial Stability Board set up in response to the crisis, which highlights banks whose failure would have a significant effect on the world’s economy. Because the failure of any of these huge banks imposes such large collateral damage on the rest of the economy, governments typically will not allow them to fail—hence the moniker “too big to fail.” Europe still has a serious too-big-to-fail dilemma on its hands. This is because too-big-to-fail banks represent a triple problem. First, they know that they are too big to fail so they take on inordinate risk since they will not pay the ultimate price of bankruptcy. They will be rescued, come what may—or at least with a high probability—thus, their incentives are distorted. Second, when these banks do fail, not only is the direct cost to the government and the economy large, but so are the indirect costs caused by their interlinkage with virtually all the other banks (even smaller banks can be too interlinked to fail).

More equity means a lower share price, which is a major benchmark for banker compensation. And with higher capital, the chances of a government bailout falls. Banks like these hidden subsidies; the public does not and for good reason. Overall, the increase in capital requirements is a move in the right direction, but it is not enough. Too-big-to-fail and other bank maladies The European Union, like the United States, nurtured the creation of large banks (whose collapse would one day threaten the financial system) for a variety of reasons including misplaced pride in having European mega-banks, and the political influence of large banks at the national and European level.

Second, when these banks do fail, not only is the direct cost to the government and the economy large, but so are the indirect costs caused by their interlinkage with virtually all the other banks (even smaller banks can be too interlinked to fail). Third, because of the greater likelihood of a bailout, the too-big-to-fail banks can borrow at a lower rate. This hidden subsidy, granted because they are perceived as safer borrowers, allows them to grow still larger. As the financial crisis unfolded, regulators, lawmakers, and eventually the public came to appreciate the consequences of letting banks grow to enormous size.


pages: 584 words: 187,436

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

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

Presented with an opportunity to borrow at near zero cost, people borrowed unsustainably. The crisis has also shown that financial firms are riddled with dysfunctional incentives. The clearest problem is “too big to fail”—Wall Street behemoths load up on risk because they expect taxpayers to bail them out, and other market players are happy to abet this recklessness because they also believe in the government backstop. But this too-big-to-fail problem exists primarily at institutions that the government has actually rescued: commercial banks such as Citigroup; former investment banks such as Goldman Sachs and Morgan Stanley; insurers such as AIG; the money-market funds that received an emergency government guarantee at the height of the crisis.

According to the International Monetary Fund, the cash infusions, debt guarantees, and other assistance provided to too-big-to-fail institutions in the big advanced economies came to a staggering $10 trillion, or $13,000 per citizen of those countries.3 The sums spent on rescuing well-heeled financiers damaged the legitimacy of the capitalist system. In December 2009, President Barack Obama said plaintively that he “did not run for office to be helping out a bunch of fat cat bankers.”4 But help them out is what he did, and populist anger at his openhanded policies is hardly surprising. Even more worryingly, neither Obama nor any other leader knows how to prevent too-big-to-fail institutions from fleecing the public all over again.

For example, if investors had been forced to absorb the cost of the Bear Stearns bankruptcy in early 2008, rather than having the blow softened by a Fed-subsidized rescue, they might have prepared themselves better to absorb the costs of Lehman’s failure some months later. But this purported solution to the too-big-to-fail problem denies its existence: Precisely because some institutions are indeed too big to fail, they cannot be left to go under. What’s more, the behemoths and those who lend to them understand their inviolability all too well; the government may claim that it won’t rescue them, but everybody understands that it will have no choice when the time comes.


pages: 701 words: 199,010

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

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

When the bubble burst, it left no real growth behind and destroyed the illusion of progress. Systemic Risk and Too Big to Fail The issue of companies that are “too big to fail” has been brought up many times throughout history, including during the LTCM crisis. Larger firms might be harder to manage, less transparent, and treated differently than smaller firms on the assumption that they will be bailed out in case of trouble. If they fail, large firms cause equally large reverberations, because so many other market participants are connected to it.4 Firms can be too big to fail for many different reasons, including the amount of leverage they have, the interconnectedness of their space, and the web of financial system connections they provide.

Morgan and legal opinion on bankruptcy of leverage liquidity pool liquidity stress test results losses of market imbalances and moving business strategy profits of real estate exposure Repo repo imbalance and Reserve Primary Fund and run on Russian default and size of stock price storage business strategy swap imbalance and Lehman Brothers Bank Lenders: of last resort marking to market by mortgage, and housing bubble Lessons from financial crisis: arbitrage conflicts of interest counterparty interaction derivatives hedge funds interconnectedness and crowds leverage overview of policy lessons risk management systemic risk and “too big to fail,” Lessons from LTCM failure: compensation contingency capital counterparties and clearinghouses counterparty due diligence Fed as coordinator of last resort interconnected crowds leverage overview of quantitative theory regulation size of firms and “too big to fail,” spread the love VaR Leverage: capital ratio and dangers of of investment banks lessons from financial crisis at LTCM Leveraged bank loans Levitt, Arthur Lewis, Joe Lewis, Ken LIBOR (London Interbank Offer Rate) Liebowitz, Martin Liew, John Lim, Steven Liquidity, price of during crisis Liquidity risk Liquid securities London Interbank Offer Rate (LIBOR) Long swap spread trade Long-Term Capital Management (LTCM).

Mortgage Securities Hedged The Box Spread in Japan The Italian Swap Spread Fixed-Income Volatility Trades The On-the-Run and Off-the-Run Trade Short Longer-Term Equity Index Volatility Risk Arbitrage Trades Equity Relative-Value Trades Emerging Market Trades Other Trades The Portfolio of Trades Chapter 5: The Collapse The Collapse Early Summer 1998 The Salomon Shutdown The Russian Default The Phone Calls The Meriwether Letter Buffett’s Hostile Alaskan Offer The Consortium Bailout Too Big To Fail Why Did It Happen? Appendix 5.1 The John Meriwether Letter Appendix 5.2 The Warren Buffett Letter Chapter 6: The Fate of LTCM Investors The Fate of LTCM Investors Chapter 7: General Lessons from the Collapse Interconnected Crowds VaR Leverage Clearinghouses Compensation What’s Size Got to Do with It?


pages: 320 words: 87,853

The Black Box Society: The Secret Algorithms That Control Money and Information by Frank Pasquale

Adam Curtis, Affordable Care Act / Obamacare, Alan Greenspan, algorithmic trading, Amazon Mechanical Turk, American Legislative Exchange Council, asset-backed security, Atul Gawande, bank run, barriers to entry, basic income, Bear Stearns, Berlin Wall, Bernie Madoff, Black Swan, bonus culture, Brian Krebs, business cycle, business logic, call centre, Capital in the Twenty-First Century by Thomas Piketty, Chelsea Manning, Chuck Templeton: OpenTable:, cloud computing, collateralized debt obligation, computerized markets, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crowdsourcing, cryptocurrency, data science, Debian, digital rights, don't be evil, drone strike, Edward Snowden, en.wikipedia.org, Evgeny Morozov, Fall of the Berlin Wall, Filter Bubble, financial engineering, financial innovation, financial thriller, fixed income, Flash crash, folksonomy, full employment, Gabriella Coleman, Goldman Sachs: Vampire Squid, Google Earth, Hernando de Soto, High speed trading, hiring and firing, housing crisis, Ian Bogost, informal economy, information asymmetry, information retrieval, information security, interest rate swap, Internet of things, invisible hand, Jaron Lanier, Jeff Bezos, job automation, John Bogle, Julian Assange, Kevin Kelly, Kevin Roose, knowledge worker, Kodak vs Instagram, kremlinology, late fees, London Interbank Offered Rate, London Whale, machine readable, Marc Andreessen, Mark Zuckerberg, Michael Milken, mobile money, moral hazard, new economy, Nicholas Carr, offshore financial centre, PageRank, pattern recognition, Philip Mirowski, precariat, profit maximization, profit motive, public intellectual, quantitative easing, race to the bottom, reality distortion field, recommendation engine, regulatory arbitrage, risk-adjusted returns, Satyajit Das, Savings and loan crisis, search engine result page, shareholder value, Silicon Valley, Snapchat, social intelligence, Spread Networks laid a new fibre optics cable between New York and Chicago, statistical arbitrage, statistical model, Steven Levy, technological solutionism, the scientific method, too big to fail, transaction costs, two-sided market, universal basic income, Upton Sinclair, value at risk, vertical integration, WikiLeaks, Yochai Benkler, zero-sum game

But, as Peter Boone and Simon Johnson have shown, the interconnections between the two can also erode confidence. Boone and Johnson foresee a “doom loop”: as financial institutions are increasingly treated as too big to fail, they are empowered to take greater and greater risks, which will inevitably lead to greater stresses on the governments that effectively sponsor them.146 These obligations foment worries about governments’ ability to support both too-big-to-fail banks and the tens of millions who depend on health and welfare benefits. Meanwhile, as interest rates on sovereign debt are suppressed to spark a recovery, investors feel compelled to flee to the finance sector to gain more than nominal returns.

Google is also reported to have entered into deals with the NSA, but an effort by the Electronic Privacy Information Center (EPIC) to find out whether that was indeed the case was quashed by a federal 50 THE BLACK BOX SOCIETY judge.184 The NSA neither confirms nor denies working with Google to develop its intelligence operations, even after the spectacular revelations of Edward Snowden in 2013. Armies and spies have always relied on stealth; after all, loose lips sink ships. But secrecy also breeds conflicts of interest. Why should Google worry about potential antitrust violations if it’s monitoring Internet access side by side with the DHS and the NSA?185 Like the “too big to fail” banks, it may be “too important to surveillance” for the government to alienate the firm. In 2013, in fact, leaked documents showed that the NSA (or a British partner) targeted the official who was in charge of investigating Google’s alleged violations of EU competition law.186 As a growing literature suggests, privatization can be more than a transaction between government and business.

To be sure, there are many conscientious souls working on Wall Street. But their voices and values matter little if they can be summarily overruled by their bosses. The aftermath of the housing crisis has exposed a critical mass of unethical and hugely costly deals. It has created a presumption of suspicion for large firms—particularly those that now enjoy “too big to fail” status. Black box finance ranges from the crude to the cunning, the criminal to the merely complex. Countless narratives and analyses of the crisis have tried to pin down whether bankers, mortgage brokers, regulators, and insurers knew or should have known that the mortgage industrial complex was building a house of cards.


pages: 1,242 words: 317,903

The Man Who Knew: The Life and Times of Alan Greenspan by Sebastian Mallaby

airline deregulation, airport security, Alan Greenspan, Alvin Toffler, Andrei Shleifer, anti-communist, Asian financial crisis, balance sheet recession, bank run, barriers to entry, Bear Stearns, behavioural economics, Benoit Mandelbrot, Black Monday: stock market crash in 1987, bond market vigilante , book value, Bretton Woods, business cycle, central bank independence, centralized clearinghouse, classic study, collateralized debt obligation, conceptual framework, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, Dr. Strangelove, energy security, equity premium, fiat currency, financial deregulation, financial engineering, financial innovation, fixed income, Flash crash, forward guidance, full employment, Future Shock, Glass-Steagall Act, Greenspan put, Hyman Minsky, inflation targeting, information asymmetry, interest rate swap, inventory management, invisible hand, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", junk bonds, Kenneth Rogoff, Kickstarter, Kitchen Debate, laissez-faire capitalism, Lewis Mumford, Long Term Capital Management, low interest rates, low skilled workers, market bubble, market clearing, Martin Wolf, Money creation, money market fund, moral hazard, mortgage debt, Myron Scholes, Neil Armstrong, new economy, Nixon shock, Nixon triggered the end of the Bretton Woods system, Northern Rock, paper trading, paradox of thrift, Paul Samuelson, Phillips curve, plutocrats, popular capitalism, price stability, RAND corporation, Reminiscences of a Stock Operator, rent-seeking, Robert Shiller, Robert Solow, rolodex, Ronald Reagan, Saturday Night Live, Savings and loan crisis, savings glut, secular stagnation, short selling, stock buybacks, subprime mortgage crisis, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Tipper Gore, too big to fail, trade liberalization, unorthodox policies, upwardly mobile, We are all Keynesians now, WikiLeaks, women in the workforce, Y2K, yield curve, zero-sum game

“None of us like this too-big-to-fail doctrine and we all look forward to its demise,” he concluded breezily. Greenspan’s new optimism about taming the too-big-to-fail problem was not altogether honest. He had spent much of his career lamenting that banks would act prudently only in a parallel world, one with no government bailouts, no central bank to act as a lender of last resort, and no deposit insurance. Something like this libertarian utopia might have confronted the nineteenth-century industrialists whom Greenspan had idolized in his youth, but in the late twentieth century, the too-big-to-fail problem was far less tractable than Greenspan now pretended.

The United States had to provide the money to allow Mexico to repay its creditors. But for Greenspan and the Treasury, there were risks in saying yes. The weakening of market discipline that results from any bailout would be replicated on an international scale. Just as Continental Illinois had been revealed to be too big to fail, so Mexico would now appear too big to fail, or too geopolitically important. The resulting “moral hazard”—the precedent suggesting that Wall Street could spray money at emerging markets and expect taxpayers to make good their losses—would be more toxic by far than anything that had happened during the third-world debt crises of the previous decade.

Cynics quipped that the Financial Services Modernization Act of 1999 would be better named the “Citicorp Authorization Act.”18 But what was more astonishing was the nature of the debate leading up to the reform. Rather than questioning whether the nation could afford too-big-to-fail banks, the Treasury had focused on a turf question: whether securities operations of banks should be structured as subsidiaries, implying that they would be overseen by the Treasury, or as affiliates, in which case the Fed would supervise them. Congress, for its part, had staged a battle royal over banks’ obligations to low-income communities—a worthy issue, perhaps, but not one that came close to the too-big-to-fail question. Greenspan’s dubious bet on market discipline was left unaddressed. The elephant in the room was too enormous to confront directly.


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

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

Whether this change in bank behaviour will actually happen is not guaranteed, but regardless, banks that become insolvent will be allowed to fail, rather than being rescued by the taxpayer. The ‘too big to fail’ subsidy is removed Since it is possible to allow banks to fail under the reformed system, the banking sector will lose its ‘too big to fail’ subsidy. This subsidy was partly a consequence of the implicit guarantee that the government would rescue any banks that failed, due to the fact that within the current system it is more expensive for the government to allow a bank to fail than to rescue it. The ‘too big to fail’ subsidy also arose as a direct result of deposit insurance. Deposit insurance effectively makes lending to a bank risk-free, lowering the interest rates that banks need to pay to depositors and on their other borrowings.

3.1 The demand for credit Borrowing due to insufficient wealth Borrowing for speculative reasons Borrowing due to legal incentives 3.2 The demand for money Conclusion: the demand for money & credit 3.3 Factors affecting banks’ lending decisions The drive to maximise profit Government guarantees & ‘too big to fail’ Externalities and competition 3.4 Factors limiting the creation of money Capital requirements (the Basel Accords) Reserve ratios & limiting the supply of central bank reserves Controlling money creation through interest rates Unused regulations 3.5 So what determines the money supply?

7.3 Accounting for money creation 7.4 The mechanics of creating new money 7.5 Spending new money into circulation Weighing up the options 7.6 Lending money into circulation to ensure adequate credit for businesses 7.7 Reducing the money supply MAKING THE TRANSITION An overview of the process 8.1 The overnight ‘switchover’ to the new system Step 1: Updating the Bank of England’s balance sheet Step 2: Converting the liabilities of banks into electronic state-issued money Step 3: The creation of the ‘Conversion Liability’ from banks to the Bank of England 8.2 Ensuring banks will be able to provide adequate credit immediately after the switchover Funds from customers Lending the money created through quantitative easing Providing funds to the banks via auctions 8.3 The longer-term transition Repayment of the Conversion Liability Allowing deleveraging by reducing household debt Forcing a deleveraging of the household sector UNDERSTANDING THE IMPACTS OF THE REFORMS 9.1 Differences between the current & reformed monetary systems 9.2 Effects of newly created money on inflation and output 9.3 Effects of lending pre-existing money via Investment Accounts Lending pre-existing money for productive purposes Lending pre-existing money for house purchases and unproductive purposes Lending pre-existing money for consumer spending 9.4 Limitations in predicting the effects on inflation and output 9.5 Possible financial instability in a reformed system A reduced possibility of asset price bubbles Central bank intervention in asset bubbles When an asset bubble bursts 9.6 Debt 9.7 Inequality 9.8 Environment 9.9 Democracy IMPACTS ON THE BANKING SECTOR 10.1 Impacts on commercial banks Banks will need to acquire funds before lending The impact on the availability of lending Banks will be allowed to fail The ‘too big to fail’ subsidy is removed The need for debt is reduced, shrinking the banking sector’s balance sheet Basel Capital Adequacy Ratios could be simplified Easier for banks to manage cashflow and liquidity Reducing the ‘liquidity gap’ 10.2 Impacts on the central bank Direct control of money supply No need to manipulate interest rates A slimmed down operation at the Bank of England 10.3 Impacts on the UK in an international context The UK as a safe haven for money Pound sterling would hold its value better than other currencies No implications for international currency exchange Would speculators attack the currency before the changeover?


pages: 492 words: 118,882

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

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

The exponential growth of the transformation of risk via increased financialization has led to a proliferation of financial claims and obligations, as a result of which a growing percentage of total wealth now exists not in the form of real assets but in the form of financial assets or claims by creditors. Its growth has also led to banks getting too big to fail. TBTF The term Too Big to Fail (TBTF) has captured the headlines since the crisis. But the growing popularity of this term should not come as a surprise. In the same way that financialization can be considered as a process of events, TBTF was a looming event being built to fruition well before the crisis.

Coupled with these limitations is the fragility caused by individual nodes. The complexity article goes on the state that “systemic repercussions of the failure of individual nodes…shows that the issue of too-central-to-fail may be more important than too-big-to-fail” (Battiston et al., 2016). Hence, although Kashkari and others who are pushing for the end of TBTF are right in generating scenarios, what needs to be done is to think about the concept of ending too big to fail from a more multidisciplinary perspective. Using the scientific methods cited in the aforementioned article would not only give the regulators the ability to simulate more scenarios, but would also help answer the questions of those critics who have defended the current structure of the financial system under the pretext of advantages offered by economies of scale.

Retrieved from Fintech Innovation: http://www.enterpriseinnovation.net/article/accenture-study-says-chinese-deals-dominate-q1-2016-global-fintech-investment-1052478246 Accenture. (2016). Fintech’s Golden Age: Competition to Collaboration . Accenture. Bernanke, B. S. (2016, May 13). Ending “too big to fail”: What’s the right approach? Retrieved from Brookings: https://www.brookings.edu/2016/05/13/ending-too-big-to-fail-whats-the-right-approach/ Bipartisan Policy Center. (2014). The Big Bank Theory: Breaking Down the Breakup Arguments. Bipartisan Policy Center. Birch, D. (2014). Identity is the New Money. London: London Publishing Partnership. Buterin, V. (2016).


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The System: Who Rigged It, How We Fix It by Robert B. Reich

"World Economic Forum" Davos, Adam Neumann (WeWork), affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, Bernie Madoff, Bernie Sanders, Big Tech, Boeing 737 MAX, business cycle, Carl Icahn, clean water, collective bargaining, Cornelius Vanderbilt, corporate governance, corporate raider, corporate social responsibility, Credit Default Swap, crony capitalism, cryptocurrency, Donald Trump, ending welfare as we know it, financial deregulation, Glass-Steagall Act, Gordon Gekko, green new deal, Greta Thunberg, immigration reform, income inequality, independent contractor, Jeff Bezos, job automation, junk bonds, London Whale, Long Term Capital Management, market fundamentalism, mass incarceration, Michael Milken, mortgage debt, Occupy movement, opioid epidemic / opioid crisis, Paris climate accords, peak TV, Ponzi scheme, race to the bottom, Robert Bork, Ronald Reagan, Savings and loan crisis, shareholder value, Sheryl Sandberg, stock buybacks, too big to fail, trickle-down economics, union organizing, WeWork, women in the workforce, working poor, zero-sum game

JPMorgan returned its bailout money quicker than other big banks, but it has continued to make a nice profit from being “too big to fail.” By 2019, America’s five biggest banks, including Dimon’s, accounted for 46 percent of all U.S. bank deposits. In the early 1990s, they had accounted for only 12 percent. Their giant size has translated into a huge but hidden federal subsidy estimated to be $83 billion annually, reflecting the premium investors are willing to pay for the stocks and bonds of banks they believe are too big to fail. Dimon says it’s wrong to “vilify” people who succeed under free market capitalism, like himself.

It seems not to include the bank bailout and its ongoing $83 billion hidden government insurance. Take this subsidy away and Wall Street’s entire bonus pool would disappear, along with most of its profits, and Dimon would be worth far less than $1.6 billion. A few years after the crisis Dimon told Roger Lowenstein of The New York Times that “no bank should be too big to fail” and that if JPMorgan couldn’t pay its bills, “Morgan should have to file for bankruptcy.” Dimon was either stunningly naïve or was pandering to Times readers, saying what he assumed they wanted to hear. Given the mammoth size and dominance of JPMorgan and the other behemoths on the Street, their failures would put the national economy into a tailspin.

(In 2018, the Trump tax cut saved Buffett’s businesses $37 billion.) But Buffett’s investment strategy is indirectly taking money out of the pockets of average Americans. As I’ve explained, the sky-high profits at JPMorgan and the other banking behemoths on the Street are due to their being too big to fail, along with their political power to keep regulators at bay. Similarly, high profits at the four remaining major American airlines come from inflated prices, overcrowded planes, overbooked flights, and weak unions. High profits of Big Tech come from wanton invasions of personal privacy, the weaponizing of false information, and a widening moat that’s discouraging innovation.


pages: 455 words: 138,716

The Divide: American Injustice in the Age of the Wealth Gap by Matt Taibbi

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", Alan Greenspan, banking crisis, Bear Stearns, Bernie Madoff, book value, butterfly effect, buy and hold, collapse of Lehman Brothers, collateralized debt obligation, company town, Corrections Corporation of America, Credit Default Swap, credit default swaps / collateralized debt obligations, Edward Snowden, ending welfare as we know it, fake it until you make it, fixed income, forensic accounting, Glass-Steagall Act, Gordon Gekko, greed is good, illegal immigration, information retrieval, London Interbank Offered Rate, London Whale, Michael Milken, naked short selling, off-the-grid, offshore financial centre, Ponzi scheme, profit motive, regulatory arbitrage, Savings and loan crisis, short selling, social contagion, telemarketer, too big to fail, two and twenty, War on Poverty

Everyone else—the politicians, the company itself, the towns that see new jobs for white folks—they all win. And someone else wins, too: Wall Street. Some of the biggest investors in private prison companies are, you guessed it, the too-big-to-fail banks. Wells Fargo, for instance, has nearly $100 million invested in the GEO Group, plus about $6 million in CCA. Bank of America, General Electric, Fidelity, and Vanguard are all major investors in at least one of the three big prison companies. And why not? Like too-big-to-fail banking itself, private prisons are an industry that depends not on the unpredictable economy but upon political connections. It’s the perfect kind of business in the oligarchical capitalism age, with guaranteed profits to provide a low-cost public insurance against the vagaries of the market.

After all, these companies had all been involved in countless scandals since the financial crisis of ’08, a disaster caused by an epidemic of criminal fraud that wiped out some 40 percent of the world’s wealth in less than a year, affecting nearly everyone in the industrialized world. If ever there was a wave of white-collar crime that cried out for a criminal trial, it was this period of fraud from the mid-2000s. And it would make sense that the defendants should come from one of these companies. In the years since the crash, all of them, and a half-dozen more too-big-to-fail megafirms just like them, had already paid hundreds of millions of dollars in civil settlements for virtually every kind of fraud and manipulation known to man. Moreover, District Attorney Vance had once seemingly had all these Wall Street firms in his sights. He’d sent subpoenas out to Goldman and other companies the previous year.

JPMorgan Chase … another $3.3 billion for the same purpose, civil settlement, no criminal charges.” Talkin’s point was clear—all these other, far richer banks had been caught selling defective loans that had actually cost victims huge amounts of money, and nobody from those giant companies was being arrested. But in the Abacus case, unlike in cases involving too-big-to-fail banks, the state could not identify so much as a dollar of loss suffered by the state as a result of the loans. The defense lawyer pleaded with the judge: How did this make sense? The judge frowned. “Are you arguing selective prosecution?” she grumbled. “I don’t know what the point is.” The room was silent for a moment.


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The Impulse Society: America in the Age of Instant Gratification by Paul Roberts

"Friedman doctrine" OR "shareholder theory", 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, Abraham Maslow, accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Alan Greenspan, American Society of Civil Engineers: Report Card, AOL-Time Warner, asset allocation, business cycle, business process, carbon tax, Carl Icahn, Cass Sunstein, centre right, choice architecture, classic study, collateralized debt obligation, collective bargaining, computerized trading, corporate governance, corporate raider, corporate social responsibility, creative destruction, crony capitalism, David Brooks, delayed gratification, disruptive innovation, double helix, Evgeny Morozov, factory automation, financial deregulation, financial engineering, financial innovation, fixed income, Ford Model T, full employment, game design, Glass-Steagall Act, greed is good, If something cannot go on forever, it will stop - Herbert Stein's Law, impulse control, income inequality, inflation targeting, insecure affluence, invisible hand, It's morning again in America, job automation, John Markoff, Joseph Schumpeter, junk bonds, knowledge worker, late fees, Long Term Capital Management, loss aversion, low interest rates, low skilled workers, mass immigration, Michael Shellenberger, new economy, Nicholas Carr, obamacare, Occupy movement, oil shale / tar sands, performance metric, postindustrial economy, profit maximization, Report Card for America’s Infrastructure, reshoring, Richard Thaler, rising living standards, Robert Shiller, Rodney Brooks, Ronald Reagan, shareholder value, Silicon Valley, speech recognition, Steve Jobs, stock buybacks, technological determinism, technological solutionism, technoutopianism, Ted Nordhaus, the built environment, the long tail, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, Tyler Cowen, Tyler Cowen: Great Stagnation, value engineering, Walter Mischel, winner-take-all economy

Peter Beinart, “The Republicans’ Reagan Amnesia,” The Daily Beast, Feb. 1, 2010, http://www.thedailybeast.com/articles/2010/02/01/the-republicans-reagan-amnesia.html. 15. Richard W. Fisher, “Ending ‘Too Big to Fail.” 16. Evan Pérez, “First on CNN: Regulator Warned against JPMorgan Charges,” CNN, Jan. 9, 2014, http://www.cnn.com/2014/01/07/politics/jpmorgan-chase-regulators-prosecutors/. 17. Fisher, “Ending ‘Too Big to Fail.’ ” 18. George F. Will, “Time to Break Up the Big Banks,” Washington Post, Feb. 9, 2013, http://www.washingtonpost.com/opinions/george-will-break-up-the-big-banks/2013/02/08/2379498a-714e-11e2-8b8d-e0b59a1b8e2a_story.html. 19. Fisher, “Ending ‘Too Big to Fail.’ ” 20. Communication with author. 21. Liz Benjamin, “What Would Cuomo Do to Get Public Financing” Capital New York, Jan. 20, 2014, http://www.capitalnewyork.com/article/albany/2014/01/8539039/what-would-cuomo-do-get-public-financing. 22.

Consider: just twelve banks, including JPMorgan, Citicorp, and Goldman Sachs, control 69 percent of the entire U.S. banking industry15—a share so large that, no matter how egregious or reckless the banks’ behavior, the government can’t let them fail lest they take the rest of the economy down with them. Indeed, megabanks are not only too big to fail or regulate, but also too big for government even to prosecute for blatantly criminal activities. As U.S. attorney general Eric Holder admitted in congressional testimony in 2013, U.S. megabanks are so large that “if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.”16 As the saying goes, megabanks are not only “too big to fail,” but “too big to jail.” For this reason, financial policy experts have long argued that the risks of a financialized economy won’t truly be curbed until so-called TBTF (“too big to fail”) banks have been broken up into smaller, more regulatable entities.

Rubin also helped defeat efforts to regulate credit swaps and other financial derivatives. Both these deregulatory initiatives would open up huge new streams of revenues and profits for Wall Street—and a huge new source of campaign finance for Democrats. But both actions were also pivotal in the meltdown in 2007, when “too-big-to-fail” banks playing the markets lost hundreds of billions of dollars in unregulated derivatives and nearly destroyed the global financial system. But, if anything, the alliance between Democrats and Wall Street has remained strong. Although Barack Obama has pursued an unabashedly progressive agenda in many arenas, notably health care, his stance on finance has been largely old-school.


Global Financial Crisis by Noah Berlatsky

"World Economic Forum" Davos, accounting loophole / creative accounting, Alan Greenspan, asset-backed security, banking crisis, Bear Stearns, Bretton Woods, capital controls, Celtic Tiger, centre right, circulation of elites, collapse of Lehman Brothers, collateralized debt obligation, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, Doha Development Round, energy security, eurozone crisis, financial innovation, Food sovereignty, George Akerlof, Glass-Steagall Act, God and Mammon, Gordon Gekko, housing crisis, illegal immigration, income inequality, low interest rates, market bubble, market fundamentalism, mass immigration, Money creation, moral hazard, new economy, Northern Rock, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Robert Shiller, Ronald Reagan, Savings and loan crisis, shareholder value, social contagion, South China Sea, structural adjustment programs, subprime mortgage crisis, too big to fail, trade liberalization, transfer pricing, working poor

In the past few weeks we have seen leading executives at Barclays awarding themselves millions while the bank ultimately remains dependent on government guarantees, despite its precarious independence. It is not surprising that executives of the seminationalised banks want to follow suit. What has brought the issue to a head is the judgement that the major UK-based banks are “too big to fail” and have to be rescued in a financial emergency. This concept is an economic and democratic outrage. Either they must be subject to tight state control or they should be broken up so that they are not “too big to fail”. The point has been grasped, improbably, by ministers in banker-friendly countries such as Switzerland, and by our own central bank’s governor. Yet ministers today seem no less terrified of confronting the banks than when Brown initially fled the battlefield a decade ago. 46 Causes of the Global Financial Crisis Change in UK Regulations Contributed to the Crisis In 1997 Mr.

Shiller 32 Boom thinking is a kind of social contagion; once a commodity starts rising in price, people convince themselves and then each other that the price will keep going up. This happened in the United States with home prices, which rose to unsustainable levels. 4. The Weakness of Banking Regulations Caused the Crisis Vince Cable Some British banks have grown too big to fail, and perhaps too big for regulators to handle. Yet they want freedom from regulation and freedom to persue high risk investments. But the British taxpayer should not be responsible for financial risks taken outside the nation’s borders. 42 5. Low Interest Rates Caused the Crisis Tito Boeri and Luigi Guiso 53 The housing crisis was fueled by the actions of the chairman of the Federal Reserve, Alan Greenspan, who kept interest rates low.

This text has been suppressed due to author restrictions. 37 The Global Financial Crisis This text has been suppressed due to author restrictions. 38 Causes of the Global Financial Crisis This text has been suppressed due to author restrictions. 39 The Global Financial Crisis This text has been suppressed due to author restrictions. 40 Causes of the Global Financial Crisis This text has been suppressed due to author restrictions. 41 4 Viewpoint The Weakness of Banking Regulations Caused the Crisis Vince Cable Vince Cable, economic spokesman for the Liberal Democrats, is the author of The Storm: The World Economic Crisis and What It Means. In the following viewpoint, Cable discusses various options that are available for fixing the banking industry in the United Kingdom (UK). Certain UK banks are considered “too big to fail” and they want to retain their investment banking wings, but these pose a great financial risk to the taxpayer; therefore, the author favors either tighter government regulation of them or less government protection for them. Cable suggests that lack of regulation as well as the inability of regulators to monitor financial activity effectively were failures of the banking system revealed by the financial crisis.


pages: 580 words: 168,476

The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph E. Stiglitz

affirmative action, Affordable Care Act / Obamacare, airline deregulation, Alan Greenspan, Andrei Shleifer, banking crisis, barriers to entry, Basel III, battle of ideas, Bear Stearns, behavioural economics, Berlin Wall, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collapse of Lehman Brothers, collective bargaining, colonial rule, corporate governance, Credit Default Swap, Daniel Kahneman / Amos Tversky, Dava Sobel, declining real wages, deskilling, electricity market, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, framing effect, full employment, George Akerlof, Gini coefficient, Glass-Steagall Act, Great Leap Forward, income inequality, income per capita, indoor plumbing, inflation targeting, information asymmetry, invisible hand, jobless men, John Bogle, John Harrison: Longitude, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kenneth Rogoff, London Interbank Offered Rate, lone genius, low interest rates, low skilled workers, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, mass incarceration, medical bankruptcy, microcredit, moral hazard, mortgage tax deduction, negative equity, obamacare, offshore financial centre, paper trading, Pareto efficiency, patent troll, Paul Samuelson, Paul Volcker talking about ATMs, payday loans, Phillips curve, price stability, profit maximization, profit motive, public intellectual, purchasing power parity, race to the bottom, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, search costs, shareholder value, short selling, Silicon Valley, Simon Kuznets, spectrum auction, Steve Jobs, stock buybacks, subprime mortgage crisis, technology bubble, The Chicago School, The Fortune at the Bottom of the Pyramid, The Myth of the Rational Market, The Spirit Level, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, Tragedy of the Commons, transaction costs, trickle-down economics, ultimatum game, uranium enrichment, very high income, We are the 99%, wealth creators, women in the workforce, zero-sum game

Dean Baker and Travis McArthur have estimated that the difference between the interest rates at which too-big-to-fail banks can raise capital and the rate smaller banks have access to increased from 0.29 percentage points—where it had been for about seven years before the crisis—to 0.78 percentage points in a matter of months after the bailouts. This, they argue, shows that markets recognized that too-big-to-fail banks had become “official government policy,” and implied “a government subsidy of $34.1 billion a year to the 18 bank holding companies with more than $100 billion in assets in the first quarter of 2009.” Baker and McArthur, “The Value of the ‘Too Big to Fail’ Big Bank Subsidy,” Center for Economic and Policy Research, September 2009, available at http://www.cepr.net/documents/publications/too-big-to-fail-2009-09.pdf (accessed March 5, 2012).

In the aftermath of the crisis, the Fed’s position in the regulatory debate showed where their allegiance was. Regulations should have been designed to encourage banks to go back to the boring business of lending. Recognizing that the too-big-to-fail banks had perverse incentives, they should have focused on how to limit the size and interconnectedness of the banks. Moreover, too-big-to-fail banks have a competitive advantage over other banks—those who provide them finance know that they can count, in effect, on a government guarantee, and thus they are willing to provide them funds at lower interest rates. The big banks can thus prosper not because they are more efficient or provide better service but because they are in effect subsidized by taxpayers.

Bernanke and the big banks that made billions a year from the credit default swaps, or CDSes, won. Meanwhile, there emerged a broad consensus among economists and policy makers (including at least one Federal Reserve regional governor and the governor of the Bank of England, Mervyn King) that something ought to be done about the too-big-to-fail banks. King pointed out that if they were too big to fail, they were too big to exist. Even earlier, Paul Volcker, former chairman of the Federal Reserve, had observed that these banks were also too big to be managed. But the Federal Reserve Board’s current and past chairmen (Greenspan and Bernanke, responsible for bringing on the crisis) have never seemed even to recognize the problem, at least not enough to suggest that something be done.


pages: 405 words: 109,114

Unfinished Business by Tamim Bayoumi

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

Estimated output losses in Euro area crisis countries. 4. Euro area banking boomed after 1985. 5. Investment banking in the Euro area core expanded rapidly after 1996. 6. Most European bank mergers involved domestic agglomeration. 7. Euro area banks were largely national in 2002. 8. Euro area mega-banks were already becoming too big to fail. 9. Mergers in the late 1990s completed the European mega-banks. 10. Internal risk models led to thin capital buffers. 11. Structure of Euro area banking in 2002. 12. Regulated banking did not grow from 1980–2002. 13. Securitization of mortgages boomed after 1980. 14. Banks sold most mortgages via securitizations by 2002. 15.

They were smaller than most of their rivals in the core and were still basically commercial banks. In many ways, the southern Euro area mega-banks are best seen as a defensive agglomeration of commercial banks in response to the rapid expansion of their northern counterparts. Figure 8: Euro area mega-banks were already becoming too big to fail. Source: Scientific Committee of the European Systemic Risk Board (2014). Figure 9: Mergers in the late 1990s completed the European mega-banks. Source: Corporate websites. The rapidly expanding mega-banks were already becoming too large to be managed by the corresponding national governments.

Controversially, after Continental Illinois filed for bankruptcy regulators decided to fully recompense deposits above the federal insurance cap (including the 179 banks that had deposits worth more than half of their equity capital) and also bondholders, rather than let them absorb the losses. The bailout of these uninsured lenders caused outrage and popularized the phrase “too big to fail”. The outrage was compounded by the even larger and costlier Savings and Loans crisis.6 Savings and Loans were a specialized sector that lent for home mortgages using savings deposits. Their deposits were popular with investors because under Regulation Q they could offer slightly higher deposit rates than regulated banks.


pages: 413 words: 117,782

What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences by Steven G. Mandis

activist fund / activist shareholder / activist investor, algorithmic trading, Bear Stearns, Berlin Wall, Bob Litterman, bonus culture, book value, BRICs, business process, buy and hold, Carl Icahn, collapse of Lehman Brothers, collateralized debt obligation, commoditize, complexity theory, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, disintermediation, diversification, eat what you kill, Emanuel Derman, financial innovation, fixed income, friendly fire, Glass-Steagall Act, Goldman Sachs: Vampire Squid, high net worth, housing crisis, junk bonds, London Whale, Long Term Capital Management, merger arbitrage, Myron Scholes, new economy, passive investing, performance metric, proprietary trading, radical decentralization, risk tolerance, Ronald Reagan, Saturday Night Live, Satyajit Das, shareholder value, short selling, sovereign wealth fund, subprime mortgage crisis, systems thinking, The Nature of the Firm, too big to fail, value at risk

Ellis (The Partnership—The Making of Goldman Sachs [New York: Penguin, 2008], 667) wrote that all could be lost—in fact, that all “would be lost if the firm squandered its reputation or failed to anticipate, understand, and manage the potential conflicts or failed to excel in its important agency business.” 19. A. R. Sorkin, Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System from Crisis—and Themselves (New York: Viking, 2009). 20. Ibid. 21. The business standards committee investigation and report are discussed in detail in chapter 8 as one of the outcomes of Goldman’s experience during the credit crisis. 22. See, for example, Sorkin (Too Big to Fail) and W. D. Cohan, “Goldman’s Double Game,” Businessweek, March 14, 2012, http://www.businessweek.com/articles/2012-03-14/goldmans-double-game. 23.

A coinvestment relationship was seen to have many advantages, including establishment of a closer relationship than did a merely advisory one. The industry consolidation brought about in part by the changes to Glass–Steagall resulted in fewer but much larger banks—banks that many would later argue were “too big to fail,” so large that their failure was deemed a risk to the stability of the entire banking system. Another result was that the pace at which these companies now had to grow in order to stay competitive challenged their organizational cultures. Companies growing via acquisition have significant cultural and integration challenges.

Thornton co-founds Goldman’s European M & A business in London (O). 1984: Continental Illinois National Bank and Trust becomes the largest-ever bank failure in US history. Continental was at one time the seventh-largest bank in the United States as measured by deposits, with approximately $40 billion in assets. Because of the size of Continental Illinois, regulators are not willing to let it fail (R). The term “too big to fail” becomes popularized. 1985: Bear Stearns goes public (C). Whitehead leaves Goldman after thirty-eight years and later becomes deputy secretary of state to George Schultz, serving until 1989 (O). Steve Friedman, a former M&A banker, and Bob Rubin, a former equities proprietary trader, co-head Goldman’s fixed income division (O). 1986: Goldman’s capital has grown to $1 billion, almost entirely through retained earnings.


Firefighting by Ben S. Bernanke, Timothy F. Geithner, Henry M. Paulson, Jr.

Asian financial crisis, asset-backed security, bank run, Basel III, Bear Stearns, break the buck, Build a better mousetrap, business cycle, Carmen Reinhart, collapse of Lehman Brothers, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Doomsday Book, financial deregulation, financial engineering, financial innovation, Glass-Steagall Act, housing crisis, Hyman Minsky, income inequality, invisible hand, Kenneth Rogoff, labor-force participation, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, money market fund, moral hazard, mortgage debt, negative equity, Northern Rock, opioid epidemic / opioid crisis, pets.com, price stability, quantitative easing, regulatory arbitrage, Robert Shiller, Savings and loan crisis, savings glut, short selling, sovereign wealth fund, special drawing rights, tail risk, The Great Moderation, too big to fail

In 2018, the Fed concluded they would still have more capital after a severe global recession with losses larger than those experienced in the 2007–2009 crisis than they had during the good times before the crisis. And a report back in 2014 by the Government Accountability Office, commissioned by congressional critics who expected it to prove the too-big-to-fail problem was worse than ever, found the biggest banks could no longer borrow at much lower rates than small banks, a sign markets are less convinced that they are too big to fail. We would have liked to see more restructuring of the antiquated financial regulatory system, a key element of Hank’s original blueprint for reform, with the Fed in charge of monitoring systemic risks and several redundant agencies consolidated to create more consistency and accountability.

And this crisis was particularly difficult to anticipate because it was the result of not just one or two evident factors, but of a host of complex interactions among many evolving trends: the explosion of financial leverage, the reliance on runnable short-term funding, the migration of risk to the shadow banking system, the rise of “too-big-to-fail” institutions, and the ubiquity of murky derivatives backed by shoddy mortgages. Each of these factors would play an independent role in what unfolded, but their rolling interactions created a particularly dangerous panic. Of course, we were not alone in our failures; the crisis caught just about everyone by surprise.

But the explosion was devastating anyway. The cost of insuring the bonds of Morgan Stanley and Goldman Sachs doubled on Monday, as markets lost confidence in the investment bank business model. The run also extended into the commercial banking sector. Citi’s credit default swaps spiked, reflecting growing market fears that even too-big-to-fail banks might fail, and spooked depositors withdrew twice as much from Washington Mutual as they had withdrawn after the run on IndyMac. Even the industrial giant General Electric struggled to roll over its commercial paper, a troubling sign that the financial virus had infected the broader economy.


pages: 504 words: 143,303

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

Offloading the risk allows the lender to issue more credit and escape capital controls on the ratio of loans to cash reserves. Apologists call this managing or distributing risk, but all too often it has just encouraged more risky lending. More on this when we come to the financial crisis. Worst of all, when banks are deemed ‘too big to fail’, they have less reason to manage risk prudently, for they know that if they get into trouble they will be bailed out by taxpayers. The very fact that one group of people’s debts can be treated by another group as assets – as a reliable source of income – should give us pause. Finally, the risk defence tries to treat charging interest at rates related to risk purely as a matter of prudence.

As long as the value of financial assets was inflating, this was extraordinarily lucrative, particularly for those whose pay was tied to the profit made through bonuses or fixed shares of profits (‘the comp ratio’); no wonder they imagined they were masters of the universe. But, as leverage rose to over 1:30 in some banks, even a small percentage of failures in their ‘investments’ could land them in deep trouble. And it did, only they could rely on ‘socialism for bankers’ to rescue them: governments, recognising that the banks were too big to fail, or too interconnected to the rest of the economy, had guaranteed retail deposits.46 This of course means that taxpayers pick up the bill for protecting their own deposits and rescuing failing banks. So leverage was key to how the banks privatised the gains from using other people’s money to take risks and managed to socialise the losses, leaving ordinary taxpayers to pick up the bill.

In 2010, the notional value of derivatives held by commercial banks in the US was $212.8 trillion. ‘Of the 1,030 US commercial banks that submitted information on their derivatives exposure, the top five claimed 97% of this notional value.’51 In this situation, the risk ended up being held by taxpayers, because banks of this size were too big to fail and had to be bailed out. For all the hubris and macho talk about ‘risk management’ to be found on the websites of the financial sector and in the textbooks teaching its practices, prudence and long-term perspectives were dumped in favour of quick gains and offloaded risk. Deregulation allowed the buyers of the securities to use them as collateral for borrowing, so streams of interest payments on loans supposedly backed by collateral in the shape of houses were themselves used as collateral by holders of these asset-backed securities for borrowing.


pages: 309 words: 95,495

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

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

Bernanke and Hank Paulson, the Treasury secretary who would have had to sign off on a bailout, felt similarly. Certainly, the “too big to fail” label should never have been allowed to take root; it was an implicit taxpayer subsidy to big firms and their executives that put smaller firms at a disadvantage. But once the status had been accorded, its abrupt withdrawal triggered panic. The failure of Lehman shattered assumptions about the safety of all the major financial institutions. If Lehman wasn’t too big to fail, nobody was: not Goldman Sachs, Morgan Stanley, Citigroup, or any other institution. The second assumption that had been allowed to take root was that money market funds were basically the same as bank deposits.

Two years after the Deauville Declaration, the European Central Bank sought to undo its damage when its president, Mario Draghi, promised to do “whatever it takes” to save the euro. This meant that if a private saver wouldn’t buy Italy’s or Spain’s bonds, the ECB would. Much as the Federal Reserve responded to its Lehman moment by treating the big banks as too big to fail, the ECB responded to its own by declaring sovereign governments too big to fail. This proved remarkably successful: at the time of this writing, in early 2015, the ECB has yet to invoke this emergency authority to buy a single bond, and interest rates on southern governments’ bonds have fallen substantially, although not to northern levels.

When other banks could not be persuaded to take over the slowly capsizing bank, the FDIC did, becoming its largest shareholder—an unfamiliar role for an agency whose main job was to regulate and when necessary close banks, not run them. The rescue of Continental prompted a congressman to observe that a new class of banks now existed: “too big to fail.” The crises didn’t end with Volcker. In 1987, a few months after his successor, Alan Greenspan, took office, the stock market crashed. Greenspan slashed interest rates while his colleagues persuaded banks to keep lending to crippled Wall Street dealers. A total meltdown in the markets was narrowly averted; the economy never skipped a beat.


pages: 327 words: 90,542

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 June 2013, Bank of England governor Sir Mervyn King stated: “It is not in our national interest to have banks that are too big to fail, too big to jail, or simply too big.”10 But the combination of government support (which protects depositors and creditors), limited liability (which protects shareholders), profit maximization, and incentive pay for financiers continued to encourage a culture among large banks of “rational carelessness.”11 Too-big-to-fail banks have been increasingly joined by too-big-to-fail fund managers, who are responsible for investing over US$87 trillion in retirement and other savings, around three-quarters of the size of the global banking system and 150 percent of global GDP.

In the US, the six largest banks now control nearly 70 percent of all the assets in the US financial system, having increased their share by around 40 percent. The largest US bank, JP Morgan, with over US$2.4 trillion in assets, is larger than most countries. Banks continue to be regarded as too big to fail by governments. Individual countries have sought to export their troubles, abandoning international cooperation for beggar-thy-neighbor strategies. Destructive retaliation, in the form of tit-for-tat interest rate cuts, currency wars, and restrictions on trade, limits the ability of any nation to gain a decisive advantage.

American imports were rising again, with the trade deficit approaching 3 percent of GDP and heading towards its pre-recession peak of 6 percent, despite the much lower prices of imported energy. Germany and China continued to run ever-larger trade surpluses and to export capital. The imbalances remained unbalanced. In the years since the GFC, too-big-to-fail banks have become larger, not smaller, increasing in both size and concentration. This is the result of forced consolidation (shotgun mergers), regulations that favor larger banks, and promotion of them internationally by governments as national champions. A flight by customers to the perceived safety of large banks, a reduction in alternative funding sources, and less competition from smaller institutions have also enhanced the position of these entities.


pages: 358 words: 106,729

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

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

A recent example of the differences may be useful.11 In early 2009, as a result of the financial panic and the associated difficulty in securing financing, car demand plummeted around the world. In both North America and Europe, politicians approved billions of dollars of aid to car manufacturers because they felt the millions of jobs tied to the industry made it too big to fail. In the United States, General Motors and Chrysler secured government funding on condition that they take drastic action to restructure their firms, close unviable plants, and sell unprofitable brands. After an initial restructuring plan was rejected by government overseers as too timid, the firms did indeed take drastic action, emerging from bankruptcy significantly shrunken.

Even as conspiracy theorists have a field day, painting everyone remotely associated with the financial system into a web of corruption, the damage to the public’s faith in the system of private enterprise is enormous: it senses two sets of rules, one for the systemically important and another for the rest of us. And the conspiracy theorists do have a point: the leeway afforded to the authorities in choosing who is too systemic to fail allows tremendous scope for discretion, and hence corruption. I have avoided referring to institutions as too big to fail. This is because there are entities that are very large but have transparent, simple structures that allow them to be closed down easily—for example, a firm running a family of regulated mutual funds. By contrast, some relatively small entities—examples include the monoline bond insurers who guaranteed municipal bonds, and Bear Stearns—caused substantial stress to build up through the system.

To the extent that these small banks are important in making loans in the local community—to the local bakery or toy shop—they have some economic and social value. One possibility is to retain deposit insurance for small and medium-sized banks in return for their paying a fair insurance premium, but to reduce it progressively for larger banks until it is eliminated. Clearly, if banks are seen as too big to fail, eliminating deposit insurance is moot, as the bank will be bailed out anyway. The United Kingdom deposit insurance system, which was partial, did not prevent Northern Rock from getting into trouble or the government from coming to the rescue. The point of eliminating deposit insurance, however, is to make depositors think before they make a bank too big.


pages: 459 words: 103,153

Adapt: Why Success Always Starts With Failure by Tim Harford

An Inconvenient Truth, Andrew Wiles, banking crisis, Basel III, behavioural economics, Berlin Wall, Bernie Madoff, Black Swan, Boeing 747, business logic, car-free, carbon footprint, carbon tax, Cass Sunstein, charter city, Clayton Christensen, clean water, cloud computing, cognitive dissonance, complexity theory, corporate governance, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, Dava Sobel, Deep Water Horizon, Deng Xiaoping, disruptive innovation, double entry bookkeeping, Edmond Halley, en.wikipedia.org, Erik Brynjolfsson, experimental subject, Fall of the Berlin Wall, Fermat's Last Theorem, financial engineering, Firefox, food miles, Gerolamo Cardano, global supply chain, Great Leap Forward, Herman Kahn, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, Jane Jacobs, Jarndyce and Jarndyce, Jarndyce and Jarndyce, John Harrison: Longitude, knowledge worker, loose coupling, Martin Wolf, mass immigration, Menlo Park, Mikhail Gorbachev, mutually assured destruction, Netflix Prize, New Urbanism, Nick Leeson, PageRank, Piper Alpha, profit motive, Richard Florida, Richard Thaler, rolodex, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, South China Sea, SpaceShipOne, special economic zone, spectrum auction, Steve Jobs, supply-chain management, tacit knowledge, the market place, The Wisdom of Crowds, too big to fail, trade route, Tyler Cowen, Tyler Cowen: Great Stagnation, Virgin Galactic, web application, X Prize, zero-sum game

After those fateful few days in 2008 when the US government let Lehman Brothers fail and then propped up AIG, many people drew one of two contradictory conclusions: either AIG should have been treated like Lehman, or Lehman should have been treated like AIG. But the real lesson is that it should have been possible to let both Lehman and AIG collapse without systemic damage. Preventing banks from being ‘too big to fail’ is the right kind of sentiment but the wrong way of phrasing it, as the domino analogy shows: it would be absurd to describe a single domino as being too big to fail. What we need are safety gates in the system that ensure any falling domino cannot topple too many others. Above all, when we look at how future financial crises could be prevented, we need to bear in mind the two ingredients of a system that make inevitable failures more likely to be cataclysmic: complexity and tight coupling.

Kemeny, ‘President’s Commission: the need for change: the legacy of TMI’, October 1979, Overview, http://www.threemileisland.org/resource/item_detail.php?item_id=00000138 192 ‘When you look at the way the accident happened’: author interview with Philippe Jamet, 24 March 2010. 194 Turned back to concentrate on the Lehman Brothers problem: Andrew Ross Sorkin,Too Big to Fail (London: Allen Lane, 2009), pp. 235–7. 194 ‘Hold on, hold on’: Sorkin, Too Big to Fail, p. 372. 195 ‘We’re a million miles away from that at the moment’: Squam Lake Working Group on Financial Regulation, ‘A new information infrastructure for financial markets’, February 2009, http://www.cfr.org/publication/18568/new_information_infrastructure_for_financial_markets.html; and Andrew Haldane, ‘Rethinking the financial network’, speech given on 28 April 2009 to the Financial Student Association in Amsterdam, http://www.bankofengland.co.uk/publications/speeches/2009/speech386.pdf, and author interview with Andrew Haldane, August 2010. 196 And that man was Tony Lomas: for the account of Lehman’s bankruptcy in Europe, I have relied on the superb account by Jennifer Hughes, ‘Winding up Lehman Brothers’, FT Magazine,8 November 2008, http://www.ft.com/cms/s/2/e4223c20-aad1-11dd-897c-000077b07658.html 198 It had one million derivatives contracts open: Andrew Haldane, ‘The $100 billion question’, speech given at Institute of Regulation & Risk, Hong Kong, 30 March 2010, http://www.bankofengland.co.uk/publications/speeches/2010/speech433.pdf 199 The courts refused: Jane Croft, ‘Definition on Lehman client money sought’, Financial Times, 10 November 2009; and Anousha Sakoui & Jennifer Hughes, ‘Lehman creditors face long delays’, Financial Times, 14 September 2009. 199 It is quite possible that Lehman’s financial indicators: Henny Sender & Jeremy Lemer, ‘“epo 105” accounting in focus’, Financial Times, 12 March 2010, http://www.ft.com/cms/s/0/1be0aca2-2d79-11df-a262-00144feabdc0.html 199 About three years after the bankruptcy process began: Sakoui & Hughes, ‘Lehman creditors’. 200 Dominoes, unlike banks, are supposed to fall over: Andrew Haldane, ‘The $100 billion question’. 201 The job the poor bird had started: BBC News, ‘Sparrow death mars record attempt’, 19 November 2005, http://news.bbc.co.uk/1/hi/world/europe/4450958.stm; and embedded video at http://news.bbc.co.uk/player/nol/newsid_4450000/newsid_4452600/4452646.stm?

Transocean defended its safety record. 7 The adaptive organisation 221 ‘One doesn’t have to be a Marxist’: Gary Hamel with Bill Breen, The Future of Management (Harvard Business Press, 2007), p. 130. 221 ‘Your first try will be wrong’: Cory Doctorow, ‘How to prototype and iterate for fun and profit’, 9 November 2010, http://www.bomg-boing.net/2010/11/09/howto-prototype-and.html 222 Endler decided to test his hypothesis: Richard Dawkins, The Greatest Show on Earth (London: Bantam Press, 2009), pp. 135–9, and http://highered.mcgraw-hill.com/sites/dl/free/0072437316/120060/evolution_in_action20.pdf 225 Sales were $8 billion in 2009: Whole Foods Presentation at Jeffries 2010 Global Consumer Conference, 22 June 2010, http://www.wholefoodsmarket.com/pdfs/jefferieswebcast.pdf 226 The description of many of the management practices: Hamel with Breen, Future of Management, chapter 4. 226 Timpson has several hundred: Timpson website accessed July 2010, http://www.timpson.co.uk/ 227 And he drops in frequently: details about Timpson’s management methods, and interview with John Timpson, from In Business: Hell for Leather, broadcast Thursday, 7 August 2009, 8.30 pm, BBC Radio 4, http://www.bbc.co.uk/programmes/b00lvlv3 228 Nor do we want to allow a situation: John Kay, ‘Too big to fail? Wall Street, we have a problem’, Financial Times, 22 July 2009, http://www.johnkay.com/2009/07/22/too-big-to-fail-wall-street-we-have-a-problem/ 229 ‘It made us pay more attention’: Glynn Davis, ‘Interview with James Timpson’, HR Magazine, 4 January 2010, http://www.hrmagazine.co.uk/news/9749k/"iew-Top-Interview-James-Timpson-managing-director-Timpsons/ 230 Views his role at Google as: Hamel with Breen, Future of Management, p. 119. 230 Schmidt took the second desk without protest: Ken Auletta, Googled (London: Virgin Books, 2010), p. 71. 230 ‘If you tell anybody what to do here’: Hamel with Breen, Future of Management, pp. 88–92. 231 The instant correction of a problem: author visit to Hinkley Point, Somerset, 22 July 2010. 231 A machine he’d built himself: Auletta, Googled, p. 95. 232 The book went from paper to pixels in forty minutes: Hamel with Breen, Future of Management, p. 115. 232 Every engineer at Google had the same deal: Auletta, Googled, p. 18; and Google website, ‘What’s it like to work in Engineering, Operations, & IT?’


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Don't Be Evil: How Big Tech Betrayed Its Founding Principles--And All of US by Rana Foroohar

"Susan Fowler" uber, "World Economic Forum" Davos, accounting loophole / creative accounting, Airbnb, Alan Greenspan, algorithmic bias, algorithmic management, AltaVista, Andy Rubin, autonomous vehicles, banking crisis, barriers to entry, behavioural economics, Bernie Madoff, Bernie Sanders, Big Tech, bitcoin, Black Lives Matter, book scanning, Brewster Kahle, Burning Man, call centre, Cambridge Analytica, cashless society, clean tech, cloud computing, cognitive dissonance, Colonization of Mars, computer age, corporate governance, creative destruction, Credit Default Swap, cryptocurrency, data is the new oil, data science, deal flow, death of newspapers, decentralized internet, Deng Xiaoping, digital divide, digital rights, disinformation, disintermediation, don't be evil, Donald Trump, drone strike, Edward Snowden, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Etonian, Evgeny Morozov, fake news, Filter Bubble, financial engineering, future of work, Future Shock, game design, gig economy, global supply chain, Gordon Gekko, Great Leap Forward, greed is good, income inequality, independent contractor, informal economy, information asymmetry, intangible asset, Internet Archive, Internet of things, invisible hand, Jaron Lanier, Jeff Bezos, job automation, job satisfaction, junk bonds, Kenneth Rogoff, life extension, light touch regulation, low interest rates, Lyft, Mark Zuckerberg, Marshall McLuhan, Martin Wolf, Menlo Park, military-industrial complex, move fast and break things, Network effects, new economy, offshore financial centre, PageRank, patent troll, Paul Volcker talking about ATMs, paypal mafia, Peter Thiel, pets.com, price discrimination, profit maximization, race to the bottom, recommendation engine, ride hailing / ride sharing, Robert Bork, Sand Hill Road, search engine result page, self-driving car, shareholder value, sharing economy, Sheryl Sandberg, Shoshana Zuboff, side hustle, Sidewalk Labs, Silicon Valley, Silicon Valley startup, smart cities, Snapchat, SoftBank, South China Sea, sovereign wealth fund, Steve Bannon, Steve Jobs, Steven Levy, stock buybacks, subscription business, supply-chain management, surveillance capitalism, TaskRabbit, tech billionaire, tech worker, TED Talk, Telecommunications Act of 1996, The Chicago School, the long tail, the new new thing, Tim Cook: Apple, too big to fail, Travis Kalanick, trickle-down economics, Uber and Lyft, Uber for X, uber lyft, Upton Sinclair, warehouse robotics, WeWork, WikiLeaks, zero-sum game

Yet unlike many other countries, including a number of thriving free markets such as Finland and Israel, the U.S. taxpayer does not reap a penny of the profits these innovations yield.13 Instead, these companies were offshoring both profits and labor at the very time that tech titans were asking the government to spend more money on things like educational reform to ensure that the twenty-first-century workforce would be digitally savvy. The consequences are not just economic; by fueling populist discontent with capitalism and liberal democracy, they have high-stakes political ramifications, too. For someone who’d been tracking the financial industry closely since 2007, the parallels were fascinating. There was a new too-big-to-fail, too-complex-to-manage industry out there, one that had grown like ragweed right under our noses. It had more wealth and a bigger market capitalization than any other industry in history, yet it created fewer and fewer jobs than the behemoths of the past. It was reshaping our economy and labor force in profound ways, turning people into products via the collection and monetization of their personal data, and yet went virtually unregulated.

I always found it interesting, for example, that the Lean In approach to gender equality seemed to put all the onus on the woman, versus focusing on the public responsibility to provide things like, say, humane working hours or decent childcare. It’s a view that’s common within the corporatist wing of the Democratic Party that many in the tech community gravitate toward, just like many of their “liberal” brethren on Wall Street do. (On that note, it’s worth remembering that Sandberg was a protégé of corporatist Democrat and “too-big-to-fail” deregulator Larry Summers, for whom she was chief of staff in the Treasury Department.) While the Silicon Valley crew likes to think of themselves as do-gooders, they often don’t make much room for the common good. It’s always seemed ironic to me that even as many tech titans complain about the need for public sector education reform to create a twenty-first-century workforce, they also push for tax cuts and corporate subsidies that starve government of its ability to pay for such reform.

CHAPTER 10 Too Fast to Fail The late, great management guru Peter Drucker once said, “In every major economic downturn in U.S. history the ‘villains’ have been the ‘heroes’ during the preceding boom.”1 I can’t help but wonder if that might be the case over the next few years, as the United States (and possibly the world) heads toward its next big slowdown. Downturns historically come about once every decade, and it’s been more than that since the 2008 financial crisis. Back then, banks were the “too-big-to-fail” institutions responsible for our falling stock portfolios, home prices, and salaries. Technology companies, by contrast, have led the market upswing over the past decade. But this time around, it’s the Big Tech firms that could play the spoiler role. You wouldn’t think it could be so when you look at the biggest and richest tech firms today.


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Risk: A User's Guide by Stanley McChrystal, Anna Butrico

"Hurricane Katrina" Superdome, Abraham Maslow, activist fund / activist shareholder / activist investor, airport security, Albert Einstein, Apollo 13, banking crisis, Bernie Madoff, Boeing 737 MAX, business process, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, computer vision, coronavirus, corporate governance, cotton gin, COVID-19, cuban missile crisis, deep learning, disinformation, don't be evil, Dr. Strangelove, fake news, fear of failure, George Floyd, Glass-Steagall Act, global pandemic, Googley, Greta Thunberg, hindsight bias, inflight wifi, invisible hand, iterative process, late fees, lockdown, Paul Buchheit, Ponzi scheme, QWERTY keyboard, ride hailing / ride sharing, Ronald Reagan, San Francisco homelessness, School Strike for Climate, Scientific racism, Silicon Valley, Silicon Valley startup, Skype, social distancing, source of truth, Stanislav Petrov, Steve Jobs, Thomas L Friedman, too big to fail, Travis Kalanick, wikimedia commons, work culture

like Joe Gregory at Lehman Brothers: Sorkin, Too Big to Fail, 124. dedicated risk-management committee: Sorkin, Too Big to Fail, 370. stopped inviting the CRO: Sorkin, Too Big to Fail, 124. fully understand the complex derivative: Sorkin, Too Big to Fail, 204; Emilia Klepczarek, “The Importance of the Board of Directors. Lessons from Lehman’s Failure,” Ekonomia I Prawo. Economics and Law 16, no. 1 (March 2017): 63–64, https://doi.org/10.12775/EiP.2017.005. “This is a day of disgrace!”: Sorkin, Too Big to Fail, 371. then “sidelined” her: “Not Too Big to Fail: Why Lehman Brothers Had to Go Bankrupt,” Knowledge @ Wharton, September 28, 2018, https://knowledge.wharton.upenn.edu/article/the-good-reasons-why-lehman-failed/.

Burying Responsibility The collapse of Lehman Brothers in 2008 is a well-known story of corporate mismanagement: Lehman Brothers made some ill-fated investment choices for a good part of the first decade of the twenty-first century, accumulating high-risk mortgage-backed securities. Andrew Ross Sorkin’s excellent account, Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves, presents a startling truth: Lehman Brothers couldn’t manage risk properly because its risk management functions were buried in corporate hierarchy. Make no mistake: the team’s risk assessments were not incorrect because they disregarded the idea of risk management entirely—in fact, Lehman Brothers had several formal mechanisms to Detect, Assess, and Respond to risk—they were simply rendered ineffective and powerless by the organization’s structure.

then “sidelined” her: “Not Too Big to Fail: Why Lehman Brothers Had to Go Bankrupt,” Knowledge @ Wharton, September 28, 2018, https://knowledge.wharton.upenn.edu/article/the-good-reasons-why-lehman-failed/. isolating the CRO: Sorkin, Too Big to Fail, 124; Wiggins and Metrick, “Lehman Brothers Bankruptcy B.” board was ill-equipped to understand: Grant Kirkpatrick, “The Corporate Governance Lessons from the Financial Crisis,” OECD Journal: Financial Market Trends, no. 1 (September 2009): 61–87, https://doi.org/10.1787/fmt-v2009-art3-en. made worse by increasing risk-appetite limits: Wiggins and Metrick, “Lehman Brothers Bankruptcy B: Risk Limits and Stress Tests”, 4–10.


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The Great Divide: Unequal Societies and What We Can Do About Them by Joseph E. Stiglitz

"World Economic Forum" Davos, accelerated depreciation, accounting loophole / creative accounting, affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Alan Greenspan, Asian financial crisis, banking crisis, Bear Stearns, Berlin Wall, Bernie Madoff, Branko Milanovic, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Carmen Reinhart, carried interest, classic study, clean water, collapse of Lehman Brothers, collective bargaining, company town, computer age, corporate governance, credit crunch, Credit Default Swap, deindustrialization, Detroit bankruptcy, discovery of DNA, Doha Development Round, everywhere but in the productivity statistics, Fall of the Berlin Wall, financial deregulation, financial innovation, full employment, gentrification, George Akerlof, ghettoisation, Gini coefficient, glass ceiling, Glass-Steagall Act, global macro, global supply chain, Home mortgage interest deduction, housing crisis, income inequality, income per capita, information asymmetry, job automation, Kenneth Rogoff, Kickstarter, labor-force participation, light touch regulation, Long Term Capital Management, low interest rates, manufacturing employment, market fundamentalism, mass incarceration, moral hazard, mortgage debt, mortgage tax deduction, new economy, obamacare, offshore financial centre, oil shale / tar sands, Paul Samuelson, plutocrats, purchasing power parity, quantitative easing, race to the bottom, rent-seeking, rising living standards, Robert Solow, Ronald Reagan, Savings and loan crisis, school vouchers, secular stagnation, Silicon Valley, Simon Kuznets, subprime mortgage crisis, The Chicago School, the payments system, Tim Cook: Apple, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Turing machine, unpaid internship, upwardly mobile, urban renewal, urban sprawl, very high income, War on Poverty, Washington Consensus, We are the 99%, white flight, winner-take-all economy, working poor, working-age population

Moreover, when an ordinary business fails, there are consequences for its owners and their families, but not typically for the entire economy. As our political leaders and the banks themselves said, we cannot allow any of the big banks to fail. But if that is the case, then they must be regulated. For if they are too big to fail, and they know it, excessive risk-taking is a one-sided bet: if they win, they keep the profits; if they lose, taxpayers pick up the tab. Dodd-Frank, the financial sector reform bill, did nothing to address the too-big-to-fail problem. Indeed, the way we addressed the crisis made it worse: we encouraged, in some cases forced, banks to merge, so that today concentration of market power is even greater than it was before the crisis.

The repeal of the Glass-Steagall Act played an especial role, not just because of the conflicts of interest that it opened up (made so evident in the Enron and WorldCom scandals), but also because it transmitted the risk-taking culture of investment banking to commercial banks, which should have acted in a far more prudential manner. It was not just financial regulation and regulators that were at fault. There should have been tougher enforcement of antitrust laws. Banks were allowed to grow to be too big to fail—or too big to be managed. And such banks have perverse incentives. When it’s heads I win, tails you lose, too-big-to-fail banks have incentives to engage in excessive risk taking. Corporate governance laws, too, are partly to blame. Regulators and investors should have been aware of the risks that the peculiar incentive structures engendered. These did not even serve shareholder interests well.

There were economists who provided the politicians, the bankers, and the regulators with a convenient ideology: According to this ideology, the policies and practices that they were pursuing would supposedly benefit all. There are those who now would like to reconstruct the system as it was prior to 2008. They will push for regulatory reform, but it will be more cosmetic than real. Banks that are too big to fail will be allowed to continue little changed. There will be “oversight,” whatever that means. But the banks will continue to be able to gamble, and they will continue to be too big to fail. Accounting standards will be relaxed, to give them greater leeway. Little will be done about incentive structures or even risky practices. If so, then, another crisis is sure to follow. Notes 1. Greenspan supported the 2001 tax cut even though he should have known that it would lead to the deficits which previously he has treated as such an anathema.


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

Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Bonfire of the Vanities, bonus culture, book value, Bretton Woods, buy and hold, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, Cornelius Vanderbilt, corporate governance, Credit Default Swap, cross-subsidies, currency risk, dematerialisation, disinformation, disruptive innovation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial engineering, financial innovation, financial intermediation, financial thriller, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Greenspan put, Growth in a Time of Debt, Ida Tarbell, income inequality, index fund, inflation targeting, information asymmetry, intangible asset, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, it is difficult to get a man to understand something, when his salary depends on his not understanding it, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jim Simons, John Meriwether, junk bonds, light touch regulation, London Whale, Long Term Capital Management, loose coupling, low cost airline, M-Pesa, market design, Mary Meeker, megaproject, Michael Milken, millennium bug, mittelstand, Money creation, money market fund, moral hazard, mortgage debt, Myron Scholes, NetJets, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, Paul Samuelson, Paul Volcker talking about ATMs, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, reality distortion field, regulatory arbitrage, Renaissance Technologies, rent control, risk free rate, risk tolerance, road to serfdom, Robert Shiller, Ronald Reagan, Schrödinger's Cat, seminal paper, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, vertical integration, Washington Consensus, We are the 99%, Yom Kippur War

Interdependencies between financial institutions have increased to a point at which the system as a whole displays fragility born of complexity. The phrase ‘too big to fail’ came into wide use in the global financial crisis to describe the dilemma that policymakers faced in resolving the affairs of systemically important financial institutions.4 The phrase provoked the justified rejoinder that ‘too big to fail is too big’. But ‘too big to fail’ misses the key point. Financialisation has led to increases in the size of financial institutions, but the central problem is not size but complexity. Size in banking can enhance stability, at least up to a point.

The geographer John Adams has coined the metaphor of the ‘risk thermostat’: we have a certain tolerance for risk and adjust our behaviour accordingly.31 Fewer children are killed in road accidents today than eighty years ago: although traffic has increased very substantially, precautions taken by children and their parents have fully offset this. The issue of moral hazard takes on particular importance in the financial sector in the context of ‘too big to fail’ banks. Critics of bail-outs complain that public indemnity of the liabilities of risktaking financial institutions encourages these institutions to take more risk. This is a complex issue. It is unlikely that the chief executives of failed banks thought, ‘I needn’t worry about running my institution into the ground because the government will see the creditors right.’

In the sub-prime mortgage fiasco such moral hazard arose at every level. Fannie Mae and Freddie Mac, the failed US mortgage agencies, could not conceivably have built their enormous, and severely under-capitalised, balance sheets had their lenders not believed (correctly, as it turned out) that their liabilities were guaranteed by the US government. ‘Too big to fail’ takes responsibility for the supervision of credit risks away from market participants and places it more or less exclusively in the hands of regulators: a duty that in this instance (and many others) they were not capable of discharging. The term ‘moral hazard’ is perhaps unfortunate, because moral hazard is about incentives, not about ethics: about deterrence rather than punishment.


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The Globalization of Inequality by François Bourguignon

Berlin Wall, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, Credit Default Swap, deglobalization, deindustrialization, Doha Development Round, Edward Glaeser, European colonialism, Fall of the Berlin Wall, financial deregulation, financial intermediation, gender pay gap, Gini coefficient, Glass-Steagall Act, income inequality, income per capita, labor-force participation, liberal capitalism, low interest rates, minimum wage unemployment, offshore financial centre, open economy, Pareto efficiency, purchasing power parity, race to the bottom, Robert Gordon, Simon Kuznets, structural adjustment programs, The Spirit Level, too big to fail, very high income, Washington Consensus

In particular, returning to a strict separation between managing savings and offering loans to individuals or companies, and investing in financial markets,15 would allow us to cease being held hostage to these giant banks whose risky investments threaten individual savings as well as the financing of the economy. It is in part this idea that some banks are “too big to fail” that has allowed them to extract the rents that make possible the astronomical remuneration they offer a portion of their employees. More generI.e., re-­establishing some form of the Glass-­Steagall Act in the United States, which was abolished in 1999. 15 Policies for a Fairer Globalization 175 ally, any regulation that would lower the probability of systemic risk and by extension decrease the pressure that the large financial institutions are able to exert on elected officials would have the same effect.

Index 9/11 attacks, 139 Abacha, 151 Abu Dhabi, 127 Africa: Economic Partnership Agreements (EPAs) and, 156; evolution of inequality and, 46t, 54–55; fairer globalization and, 147, 151, 154–56, 179, 183; global inequality and, 16, 21, 23, 30–31, 34, 36; globalization and, 122–23, 126–27; population growth and, 183; rise in inequality and, 90, 109, 111–12, 185 African Growth Opportunity Act (AGOA), 155 agriculture, 12, 82, 84, 122–23, 127–28, 155 AIDS, 156 Alesina, Alberto, 134 Anand, Sudhir, 13n4 Argentina, 46t, 110, 172 artists, 86–87 Asian dragons, 34, 82 Bangladesh, 30, 46t, 54 Belgium, 46t, 53, 101–2, 169 Berlin Wall, 91 Big Bang, 95 Bolivia, 16, 24 Bolsa Familia, 166 bonuses, 87, 174 Bottom Billion, The (Collier), 23 Brazil, 110, 186; evolution of inequality and, 46t, 55, 59, 70; fairer globalization and, 150, 154, 166–68, 173; Gini coeffi- cient of, 22; global inequality and, 21–23; globalization and, 127, 133 Buffett, Warren, 5–6, 159–60 Cameroon, 46t, 54 Canada, 46t, 51f capital: developed/developing countries and, 5; evolution of inequality and, 55–58, 60, 73; fairer globalization and, 158–62, 167, 171, 175, 182; GDP measurement and, 13–15, 20–21, 23, 26, 27f, 29–30, 39, 41–45, 56–57, 94, 123, 127, 165–66, 176; globalization and, 117, 125–26, 132, 137; human, 74, 167, 175; labor and, 3–4, 55– 58, 60, 158, 161n7, 185; liberalization and, 96; mobility of, 3, 73–74, 93, 98–99, 115, 160, 162, 182, 185; rise in inequality and, 74, 76–80, 84–85, 89, 93, 95–99, 103, 109, 114–15; taxes and, 187, 189 (see also taxes) Card, David, 105–6 Caruso, Enrico, 86 Checchi, Daniele, 107 China: evolution of inequality and, 47, 53, 57–60; fairer globalization and, 150, 154, 165–66, 172, 178; geographical disequilibria and, 83; global inequality and, 16; globalization and, 120– 22, 128; Huajian and, 155; Human Development Report and, 25; international trade and, 75; Kuznets hypothesis and, 192 China (cont.) 113; protectionism and, 178; Revolution of, 26; rise in inequality and, 2, 11n2, 17, 25, 30, 36, 38, 46t, 75, 82–83, 112–13; standard of living and, 16, 120– 22; taxes and, 165 Cold War, 149, 153 Collier, Paul, 23 Colombia, 133 commodity prices, 147, 182 competition: Asian dragons and, 34, 82; deindustrialization and, 75–82; effect of new players and, 75–76; emerging economies and, 178, 187–88; fairer globalization and, 155, 169, 173, 176–79, 182; globalization and, 117–18, 130; markets and, 76– 77, 79–82, 84, 86, 94–98, 102, 104, 115–18, 130, 155, 169, 173, 176–79, 182, 186–88; offshoring and, 81–82; rents and, 102; rise in inequality and, 76– 77, 79–82, 84, 86, 94–96, 98, 102, 104, 115–16; Southern perspective on, 82–85; United Kingdom and, 78–79; United States and, 78–79; wage ladder effects and, 78–79 conditional cash transfers, 165–66 consumers: fairer globalization and, 177–78; spending of, 10, 12–13, 61; subsidies and, 109–10 consumption: evolution of inequality and, 42t, 44t; expenditure per capita and, 13, 15, 42t, 44t; fairer globalization and, 159, 177; globalization and, 137–39; growth and, 13–15, 42t, 44t, 80, 137–39, 159, 177; protection- Index ism and, 7, 147, 154, 157, 176– 79; rise in inequality and, 80 convergence: evolution of inequality and, 65, 69; fairer globalization and, 146–47, 157; globalization and, 120–22, 125; growth and, 16; income and, 16; poverty reduction and, 147–48; standard of living and, 7, 147–48 credit: default swaps and, 139; evolution of inequality and, 61; fairer globalization and, 164–65, 172, 180; globalization and, 131–32, 137–40; rise in inequality and, 96; taxes and, 164 credit cards, 165 criminal activity, 133–34, 152 crises: evolution of inequality and, 48, 50, 54, 57, 73–74; fairer globalization and, 163, 176; Glass-­ Steagall Act and, 174n15; global inequality and, 20, 38–41; globalization and, 119–22, 125, 135–39, 142; recent, 48, 110, 135, 142, 163, 188; rise in inequality and, 92, 94, 96, 99, 109–11; “too big to fail” concept and, 174–75 Current Population Survey, 21 debit cards, 165 deindustrialization, 1, 102, 188; effects on developed countries, 75–82; exports and, 76, 82; globalization and, 120; international trade and, 75–76, 78–79; manufacturing and, 75–82, 84, 123; North vs. South and, 77; offshoring and, 81–82; single market and, 76; wage ladder effects and, 78–79 Index193 Dell, Michael, 70–71 Democratic Republic of Congo, 127 democratic societies, 135–36 Denmark, 46t, 51f, 108 deregulation: disinflation and, 95, 102, 110; efficiency and, 94, 96, 105, 108; fairer globalization and, 173; globalization of finance and, 95–99; institutions and, 91–112; Kuznets hypothesis and, 113; labor market and, 99–109; liberalization and, 96– 99, 108–10, 112; privatization and, 94–112; Reagan and, 91; rise in inequality and, 76, 83, 91, 94–116; Thatcher and, 91; United Kingdom and, 91, 94, 97n14; United States and, 91, 94–95, 97–98, 102–8 developed countries: deindustrialization and, 75–82; evolution of inequality and, 47, 52–53, 56, 59–64, 66; fairer globalization and, 150, 154–57, 160, 162, 164, 168–72, 176, 178–79, 181; global inequality and, 10–11, 21, 34–39; globalization effects on, 75–82, 117, 119, 121, 127n4, 128, 133, 143; rise in inequality and, 7, 75–86, 92–93, 96, 99–100, 102, 105, 107–9, 113, 115, 186, 188–89 developing countries: aid to, 148– 53, 157; effect of new players, 75–76; evolution of inequality and, 47, 53–55, 57, 63, 68; fairer globalization and, 154, 166; global inequality and, 10–11, 13, 21, 32, 34–39; globalization and, 121, 127n4, 128, 132, 143; Millennium Development Goals and, 149–50, 185; rise in inequality and, 76, 79, 82–85, 90, 186; Southern perspective on, 82–85.

See also emerging economies development aid, 148–53, 157 development gap, 34–35, 83 Di Bao program, 166 discrimination: ghettos and, 66– 67; immigrants and, 64, 66, 127; labor and, 64–66, 69, 132, 142, 180–81; non-­material inequalites and, 64–66, 69; racial, 65; women and, 64–65, 103 disinflation, 95, 102, 110 distribution, 10n1, 186; capital-­ labor split and, 55–58, 60; efficiency and, 142–45; evolution of inequality and, 41, 42t, 44t, 45, 46t, 48–59, 64, 71–72; fairer globalization and, 148, 153, 156–73, 175, 178; geographical disequilibria and, 83; Gini coefficient and, 18 (see also Gini coefficient); global, 18–19, 25, 29, 39, 41, 46t, 121, 124–38, 141– 45, 156; growth and, 49–50, 188; international, 17–18, 30, 148; median of, 31; OECD countries and, 10–11, 12n3; policy and, 26, 72, 135, 188; range of, 16; real earnings loss and, 78; redistribution and, 4, 7, 37 (see also redistribution); rise in inequality and, 74, 77–79, 82, 85, 90–92, 94–96, 99, 103–4, 106–7, 112, 114–15; Southern perspective on, 82–85; standard of living and, 16, 18 (see also standard of living); taxes and, 37, 92–94 (see also taxes); Theil coefficient and, 18–19, 37–38, 194 distribution (cont.) 52; transfers and, 4, 14, 48, 105, 110, 130, 135–36, 142, 148, 153, 158–67, 170, 175, 181, 183, 187; wage, 3, 78–79, 107 Divided We Stand report, 52 Doha negotiations, 154 drugs, 66, 133 Dubai, 127 Economic Partnership Agreements (EPAs), 156 education, 34, 187; college, 132; evolution of inequality and, 61, 65–68; fairer globalization and, 149, 152, 167–73, 180–81; globalization and, 132, 140, 143; labor and, 168, 180; Millennium Development Goals and, 149– 50; national inequality and, 167–73; poverty and, 24; preschool, 169–70; redistribution and, 149, 152, 167–73; rise in inequality and, 111; taxes and, 167–73; tuition and, 170 efficiency: data transfer technology and, 78; deregulation and, 94, 96, 105, 108; economic, 1, 4, 6, 111, 116, 119, 129–33, 135, 140–45, 158, 164, 167, 171, 181; emerging economies and, 78; equality and, 116, 129–31; fairness and, 8, 129– 31; globalization and, 1, 4, 6, 8, 36, 78, 94, 96, 105, 108, 111, 116, 118–19, 129–35, 140–45, 157–58, 164, 167, 170–71, 175, 180–81, 188; human capital and, 175; import substitution and, 34, 180; inefficiency and, 105, 129–30, 132–33, 135, 140, 170–71, 180, 188; labor Index and, 175; loss of, 142, 164; opportunity and, 142–45; Pareto, 130n5; privatization and, 94, 96, 105, 108; redistribution and, 142–45; rents and, 180; social tensions and, 188; spontaneous redistribution and, 133; taxes and, 170; technology and, 78; weak institutions and, 36; wealth of nations and, 1 elitism, 182; fairer globalization and, 151, 165; globalization and, 127n4, 136, 138; rise in inequality and, 4, 6–7 emerging economies: Africa and, 122–23 (see also Africa); competition and, 178, 187–88; conditional cash transfers and, 165– 66; credit cards and, 165; domestic markets and, 120, 125; efficient data transfer and, 78; evolution of inequality and, 57; fairer globalization and, 147, 154, 158, 165–66, 177–78, 182; global inequality and, 40, 77– 80, 82, 109, 113, 115, 188–89; globalization and, 117, 119–22, 125–27; institutions and, 109– 12; Kuznets curve and, 113; labor and, 77; natural resources and, 127; profits and, 117; rise in inequality and, 109–12; structural adjustment and, 109– 12; taxes and, 165; trends in, 57; Washington consensus and, 109–10, 153 entrepreneurs, 83, 92, 96, 131–32, 135, 143, 170–71, 188 equality: efficiency and, 116, 129– 31; policy for, 184–89; relative gap and, 18, 28, 30, 31–32, 36 Ethiopia, 21–22, 46t, 155 Index195 European Union (EU), 24, 156, 174, 177 Everything But Arms (EBA) initiative, 155 evolution of inequality: Africa and, 46t, 54–55; Brazil and, 46t, 55, 59, 70; capital and, 55–58, 60, 73; China and, 47, 53, 57–60; consumption and, 42t, 44t; convergence and, 65, 69; credit and, 61; crises and, 48, 50, 54, 57, 73–74; developed countries and, 47, 52–53, 56, 59–64, 66; developing countries and, 47, 53–55, 57, 63, 68; distribution and, 41, 42t, 44t, 45, 46t, 48–59, 64, 71– 72; education and, 61, 65–68; elitism and, 4, 6–7, 46t; emerging economies and, 57; exceptions and, 52–53; France and, 46t, 51f, 52–53, 55, 58, 59n8, 62–63, 66, 70–71; ghettos and, 66–67; Gini coefficient and, 39, 42t, 44t, 48, 50, 51f, 53, 58–59; Great Depression and, 48; growth and, 33, 49–50, 54; India and, 54, 57, 59–60; institutions and, 55, 69; investment and, 56; labor and, 55–58, 60; markets and, 48–50, 53–54, 64, 69; national income inequality and, 48–52; non-­monetary inequalities and, 49, 60–70; normalization and, 41, 43–44; opportunity and, 61–62, 68, 70–71; perceptions of inequality and, 69–73; policy and, 55, 72; primary income and, 48–50, 58; production and, 57; productivity and, 63; profit and, 56; reform and, 54, 72; rise in inequality in, 48–52, 73, 77–80, 91–95, 97–98, 102–8; risk and, 63, 66; standard of living and, 41, 43– 45, 46t, 53–55, 58, 60–62, 67, 69, 73; surveys and, 42t, 43–45, 56, 68n17, 69–71; taxes and, 12–14, 37, 48, 50, 56n5; Theil coefficient and, 42; United Kingdom and, 46t, 50, 51f, 59, 67, 68n17; United States and, 2, 4–6, 9, 11, 21, 33, 46t, 47–50, 51f, 58, 59n9, 66–70, 73; wealth and, 58–60 executives, 73, 88–89, 97, 174 expenditure per capita, 13, 15, 42t, 44t exports: deindustrialization and, 76, 82; fairer globalization and, 147, 154–55, 176, 178; globalization and, 124, 128; rise in inequality and, 76, 82–84 fairer globalization: Africa and, 147, 151, 154–56, 179, 183; African Growth Opportunity Act (AGOA) and, 155; Bolsa Familia and, 166; Brazil and, 150, 154, 166–68, 173; capital and, 158–62, 167, 171, 175, 182; China and, 150, 154, 165–66, 172, 178; competition and, 155, 169, 173, 176–79, 182; consumers and, 177–78; consumption and, 159, 177; convergence and, 146–47, 157; correcting national inequalities and, 158–80; credit and, 164–65, 172, 180; crises and, 163, 176; deregulation and, 173; developed countries and, 150, 154–57, 160, 162, 164, 168–72, 176, 178–79, 181; developing countries and, 154, 166; development aid and, 196 fairer globalization (cont.) 148–53, 157; Di Bao program and, 166; distribution and, 148, 153, 156–73, 175, 178; Economic Partnership Agreements (EPAs) and, 156; education and, 149, 152, 167–73; 180–81; elitism and, 151, 165; emerging economies and, 147, 154, 158, 165–66, 177–78, 182; Everything But Arms (EBA) initiative and, 155; exports and, 147, 154–55, 176, 178; France and, 147, 159–61, 164, 169, 175, 177; Gini coefficient and, 156, 166; goods and services sector and, 180; growth and, 147–52, 155, 162, 167–68, 171, 177, 180, 183; health issues and, 152, 166; imports and, 154, 177–78, 180; India and, 150, 154, 165– 66, 172; inheritance and, 170– 73; institutions and, 151, 168, 174–75; international trade and, 176–77; investment and, 150, 155, 157, 160, 170, 174, 179; liberalization and, 156, 179; markets and, 147–48, 154–58, 168, 173–75, 178–81; Millennium Development Goals and, 149–50; national inequality and, 147, 158; opportunity and, 155, 167, 170, 172; policy and, 147–53, 157, 167–73, 175, 177, 179–83; poverty and, 147–52, 164, 166, 175; prices and, 147– 48, 176, 178, 182; primary income and, 158, 163n10, 167, 173; production and, 155–57, 167, 176, 178–79; productivity and, 155, 177–78; profit and, 173, 176; Progresa program and, Index 166; protectionism and, 7, 147, 154, 157, 176–79; redistribution and, 148, 153, 156–73, 175, 178; reform and, 151, 161, 163, 168–69; regulation and, 152, 173–76, 181–82; risk and, 148, 154, 156, 159, 164, 171, 174–75, 178; standard of living and, 146–48, 154, 156–58, 160, 165, 168–69; surveys and, 169; taxes and, 148, 158–73, 175, 181–83; technology and, 156, 173; TRIPS and, 156; United Kingdom and, 163, 169; United States and, 155, 159–61, 163– 64, 169, 174–75, 182; wealth and, 162, 164, 167, 170–73 Fitoussi, Jean-­Paul, 14 France: evolution of inequality and, 46t, 51f, 52–53, 55, 58, 59n8, 62–63, 66, 70–71; fairer globalization and, 147, 159–61, 164, 169, 175, 177; Gini coefficient of, 20; global inequality and, 2, 9, 11, 20–21; offshoring and, 81; rise in inequality and, 80, 88, 92–93, 95, 97, 99, 103; soccer and, 87; wage deductions and, 159 G7 countries, 56 G20 countries, 182 Garcia-­Panalosa, Cecilia, 107 Gates, Bill, 5–6, 70, 150 Germany, 2, 21, 46t, 50, 51f, 80, 88, 92 Ghana, 46t, 54 ghettos, 66–67 Giertz, Seth, 160–61 Gini coefficient: Brazil and, 22; Current Population Survey and, 21; evolution of inequality and, Index197 39, 42t, 44t, 48, 50, 51f, 53, 58– 59; fairer globalization and, 156, 166; France and, 20; historical perspective on, 27–28; meaning of, 18–19; purchasing power parity and, 28; rise in inequality and, 110; United States and, 21; wealth inequality and, 58–60 Glass-­Steagall Act, 174n15 global distribution, 18–19, 25, 29, 39, 41, 46t, 121, 156 global inequality: Africa and, 16, 21, 23, 30–31, 34, 36; between countries, 2–3, 5, 7, 9, 16–19, 23, 33, 36, 38–39, 42–45, 47, 53, 58, 68, 90–91, 107, 117–19, 123, 128, 153; Brazil and, 21– 23; crises and, 20, 38–41; cross-­ country heterogeneity and, 13; definition of, 3–4, 9–10, 25–26, 30–32, 39; developed countries and, 10–11, 21, 34–39; developing countries and, 10–11, 13, 21, 32, 34–39; effects of, 38–40; emerging economies and, 40, 77–80, 82, 109, 113, 115, 188– 89; at the end of the 2000s, 20– 25; evolution of inequality and, 41 (see also evolution of inequality); expenditure per capita and, 13, 15, 42t, 44t; France and, 2, 9, 11, 20–21; globalization and, 117–18, 121–23, 128; great gap and, 33–36; historic turning point for, 25–32; Human Development Report and, 25; institutions and, 36; measuring, 10– 20; Millennium Development Goals and, 149–50, 185; normalization and, 13, 15, 22–23, 26, 29; OECD Database on Household Income Distribution and Poverty and, 11–12; policy and, 185–89; Povcal database and, 10, 12, 42t, 43, 44t; prices and, 27–28, 74, 80, 84, 91–92, 94, 97, 110; profit and, 13; reduction of, 2, 185–86; relative gap and, 18, 28, 30–32, 36; rise of, 2–4, 7; risk and, 20; standard of living and, 10–26, 29, 31–33, 36, 39; surveys on, 10, 12–15, 20n10, 21–22, 29, 42t, 43–45; technology and, 3–4, 34–35; trend reversal in, 37–38; within countries, 2, 5–7, 9, 16, 30, 33, 35–45, 47, 113–14, 118, 124– 29, 184–85, 189 globalization: Africa and, 122–23, 126–27; Asian dragons and, 34, 82; Brazil and, 127, 133; capital and, 117, 125–26, 132, 137; China and, 120–22, 128; competition and, 117–18, 130, 186 (see also competition); as complex historical phenomenon, 1–2; consumption and, 137–39; convergence and, 120–22, 125; credit and, 131–32, 137–40; crises and, 119–22, 125, 135–39, 142; debate over, 1; deindustrialization in developed countries and, 75–82; democratic societies and, 135–36; deregulation and, 95–99; developed countries and, 117, 119, 121, 127n4, 128, 133, 143; developing countries and, 121, 127n4, 128, 132, 143; education and, 132, 140, 143; efficiency and, 1, 4, 6, 8, 36, 78, 94, 96, 105, 108, 111, 116, 118–19, 129–35, 140–45, 157–58, 164, 167, 170–71, 175, 180–81, 188; elitism and, 127n4, 136, 138; 198 globalization (cont.) emerging economies and, 117, 119–22, 125–27; exports and, 124, 128; fairer, 146–83 (see also fairer globalization); future of inequality between countries and, 119–22; global inequality and, 117–18, 121–23, 128; goods and services sector and, 127, 130; growth and, 118–29, 134–39; health issues and, 140– 41, 144; Heckscher-­Ohlin model and, 76; imports and, 119, 124; inequality within countries and, 124–29; inheritance and, 144–45; institutions and, 124; as instrument for modernization, 1; international trade and, 3, 75–76, 78–79, 83, 112, 114, 176–77; investment and, 119, 130, 134–35, 143; laissez-­faire approach and, 118, 129; markets and, 118, 120–21, 124–37, 140, 143–44; as moral threat, 1; national inequality and, 119; negative consequences of inequality and, 131–42; opportunity and, 133–34, 139, 142–44; as panacea, 1; policy and, 118–19, 124, 126, 128–31, 139, 143–44; poverty and, 117, 123, 126–27, 134, 144; prices and, 118, 122, 126, 136–38; primary income and, 135, 143–44; production and, 119, 124, 126, 129, 131, 133, 137; productivity and, 120, 125, 127, 144; profit and, 117; redistribution and, 121, 124–38, 141–45; reform and, 124, 126–27, 138; regulation and, 136; rise in inequality and, 117–18; risk and, 127–28, Index 137–39, 144; shocks and, 38, 55, 91–92, 175; Southern perspective on, 82–85; standard of living and, 120–23, 126, 138, 143; surveys and, 127n4, 141n15; taxes and, 74, 89n10, 91–94, 104, 114–15, 129–30, 135–36, 142–45; technology and, 86–91, 118–20, 125; trends and, 118; United States and, 135–39; wealth and, 74, 95, 98, 125, 127, 129, 131–32, 139, 143–45 Great Depression, 48 Greece, 46t, 135 gross domestic product (GDP) measurement: Current Population Survey and, 21; evolution of inequality and, 41–45, 56–57; fairer globalization and, 123, 127, 165–66, 176; global inequality and, 13–15, 20–21, 23, 26, 27f, 29–30, 39; normalization and, 29, 41, 43–45; rise in inequality and, 94; Sen-­Stiglitz-­ Fitoussi report and, 14 Gross National Income (GNI), 148–49 Growing Unequal report, 52 growth, 4; African Growth Opportunity Act (AGOA) and, 155; constraints and, 35; consumption and, 13–15, 42t, 44t, 80, 137–39, 159, 177; convergence and, 16; determinants of, 34; distribution and, 49–50, 188; emerging economies and, 125 (see also emerging economies); evolution of inequality and, 33, 49–50, 54; fairer globalization and, 147–52, 155, 162, 167–68, 171, 177, 180, 183; GDP mea- Index199 surement of, 30, 39 (see also gross domestic product (GDP) measurement); globalization and, 118–29, 134–39; great gap in, 33–36; import substitution and, 34, 180; inflation and, 50, 95, 102, 110; negative, 31; political reversals and, 36; poverty and, 28–29; production and, 3, 34–35, 57, 74, 76–81, 84–86, 119, 124, 126, 129, 131, 133, 137, 155–57, 167, 176, 178–79; rate of, 15, 29–35, 79, 125, 185; recession and, 6, 31, 99, 120; relative gap and, 18, 20, 30–32, 36; rise in inequality and, 75, 79, 82, 84, 109–12; trends in, 40, 121 health issues, 24, 187; fairer globalization and, 152, 166; globalization and, 140–41, 144; public healthcare and, 37, 111, 140 Heckscher-­Ohlin model, 76 Hong Kong, 34, 82, 174 housing, 12, 61, 137 human capital, 74, 167, 175 Human Development Report, 25 Ibrahimovich, Zlata, 87 IKEA, 172 immigrants, 64, 66, 127 imports: fairer globalization and, 154, 177–78, 180; globalization and, 119, 124; import substitution and, 34, 180; rise in inequality and, 80 income: average, 9, 18, 21, 29–30, 43, 72; bonuses and, 87, 174; convergence and, 16; currency conversion and, 11; definition of, 45; deindustrialization and, 75–82; developed/developing countries and, 5, 36; disposable, 20, 22, 24, 48, 50, 51f, 74, 91, 163; distribution of, 3 (see also distribution); executives and, 73, 88–89, 97, 174; family, 10; financial operators and, 87–88, 90–91; gap in, 3, 5–6, 27f, 33– 36, 42t, 44t, 149; GDP measurement and, 13–15, 20–21, 23, 26, 27f, 29–30, 39, 41–45, 56–57, 94, 123, 127, 165–66, 176; high, 50, 52, 56, 85–93, 97–99, 140, 143, 158–62, 164, 189; household, 10–12, 43, 45, 50, 58, 105, 107, 137, 163, 177; inequality in, 2, 4, 41, 48–50, 56–64, 68, 70, 72–73, 83, 98, 102–3, 107–8, 114, 125, 132– 34, 137, 140–41, 143–44, 163; inflation and, 50, 95, 102, 110; international scale for, 17–18, 23, 30; lawyers and, 89–90; mean, 17, 20n10, 27f, 42t, 44t; median, 6, 49, 71, 102–3, 106; minimum wage and, 52–53, 100, 102–8, 175, 177; national, 7, 16–19, 30, 43, 48–52, 60, 73, 84n6, 125, 149, 153, 172; OECD Database on Household Income Distribution and Poverty and, 11; opportunity and, 5; payroll and, 53, 93, 100, 104, 107, 175; pension systems and, 167; per capita, 20, 25, 29–30, 42t, 45, 48, 55–56, 120; portfolios and, 88; poverty and, 1, 11, 15n6, 19–20, 22–25, 28–29, 32, 44t, 109, 117, 123, 126–27, 134, 144, 147–52, 164, 166, 175; primary, 48–50, 58, 135, 143–44, 158, 163n10, 167, 173; 200 income (cont.) purchasing power and, 11, 13, 19–24, 27f, 28, 50, 80, 144, 158, 178; real earnings loss and, 78; relative gap and, 18, 28, 30, 31– 32, 36; superstars and, 85–87, 89–90; taxes and, 37, 89n10, 92–93, 145, 159, 161–65, 170 (see also taxes); technology and, 34, 180; virtual, 12; wage inequality and, 51–53, 79, 101–3, 106, 108; wage ladder effects and, 78–79; wealth inequality and, 58–60; women and, 64– 65, 103 India: evolution of inequality and, 54, 57, 59–60; fairer globalization and, 150, 154, 165– 66, 172; household consumption and, 15; international trade and, 75; Kuznets hypothesis and, 113; rise in inequality and, 2, 15–16, 19, 30, 34, 46t, 75, 83, 90, 112–13; taxes and, 165 Indonesia, 30, 46t, 54, 111, 127 industrialization: deindustrialization and, 1, 75–82, 102, 120, 188; labor and, 1, 26, 29, 33, 35, 54, 82, 84, 102, 113, 120, 127, 179, 188 Industrial Revolution, 26, 29, 33, 35 inequality: between countries, 2–3, 5, 7, 9, 16–19, 23, 33, 36, 38– 39, 42–45, 47, 53, 58, 68, 90– 91, 107, 117–19, 123, 128, 153; efficiency and, 1, 4, 6, 8, 36, 78, 94, 96, 105, 108, 111, 116, 118– 19, 129–35, 140–45, 157–58, 164, 167, 170–71, 175, 180–81, 188; Gini coefficient and, 18 (see Index also Gini coefficient); income, 2, 4, 41, 48–50, 56–64, 68, 70, 72–73, 83, 98, 102–3, 107–8, 114, 125, 132–34, 137, 140–41, 143–44, 163; international, 17; inverted U curve and, 54, 113; measurement of, 18; negative consequences of, 131–42; non-­ monetary, 49, 60–70; perceptions of, 69–73; social tensions and, 188; standard of living and, 18 (see also standard of living); Theil coefficient and, 18–19, 37–38, 42; wealth, 58–60; within countries, 2, 5–7, 9, 16, 30, 33, 37–45, 47, 113–14, 118, 124–29, 184–85, 189 infant mortality, 150 inflation, 50, 95, 102, 110 inheritance: fairer globalization and, 170–73; globalization and, 144–45; rise in inequality and, 93 institutions: deregulation and, 91– 112 (see also deregulation); disinflation and, 95, 102, 110; emerging economies and, 109– 12; evolution of inequality and, 55, 69; fairer globalization and, 151, 168, 174–75; global inequality and, 36; globalization and, 124; markets and, 91–92; privatization and, 94–109; reform and, 91–112; rise in inequality and, 91–112, 114; structural adjustment and, 109– 12; taxes and, 92–94; “too big to fail” concept and, 174–75; Washington consensus and, 109–10, 153 International Development Association, 149 Index201 international income scale, 17–18, 23, 30 International Labor Organization, 51 International Monetary Fund (IMF), 54, 57, 84, 90, 109–10 international trade: capital mobility and, 74; China and, 75; de­ industrialization and, 75–76, 78–79; effect of new players, 75–76; Heckscher-­Ohlin model and, 76; India and, 75; offshoring and, 81–82; rise in inequality and, 75–76, 78–79, 83, 112, 114; Soviet Union and, 75; theory of, 76; wage ladder effects and, 78–79 inverted U curve, 54, 113 investment: direct, 76, 79; evolution of inequality and, 56; fairer globalization and, 150, 155, 157, 160, 170, 174, 179; foreign, 83, 85, 112, 155, 157, 160, 179; globalization and, 119, 130, 134– 35, 143; production and, 119; public services and, 143; re-­ investment and, 56; rise in inequality and, 76, 79, 82–83, 85, 92, 97–98, 112; taxes and, 92 Ivory Coast, 54 Japan, 34, 46t, 51f, 103 job training, 34, 181, 187 Kenya, 46t, 54 kidnapping, 133 Kuznets, Simon, 113, 126 labor: agriculture and, 12, 82, 84, 122–23, 127–28, 132, 155; artists and, 86–87; bonuses and, 87, 174; capital and, 3–4, 55– 58, 60, 158, 161n7, 185; capital mobility and, 3; cheap, 77, 117; costs of, 81, 100, 104–5, 117, 176, 187; decline in share of national income and, 73; deindustrialization and, 75–82; demand for, 168; deregulation and, 99– 109; discrimination and, 64–66, 69, 132, 142, 180–81; distribution of income and, 175 (see also distribution); education and, 168, 180; efficiency and, 96–97, 175; emerging economies and, 77; entrepreneurs and, 83, 92, 96, 131–32, 135, 143, 170–71, 188; evolution of inequality and, 55–58, 60; excess, 81, 83; executives and, 73, 88–89, 97, 174; goods and services sector and, 13, 73, 80, 85, 91, 102, 127, 130, 180; growth and, 154, 179; immigrant, 64, 66, 127; increased mobility and, 90–91; industrialization and, 1, 26, 29, 33, 35, 54, 80, 82, 84, 102, 113, 120, 127, 179, 188; inflation and, 50, 95, 102, 110; International Labor Organization and, 51; job training and, 34, 181, 187; manufacturing and, 57, 80–82, 84, 123, 154–55, 157; median wage and, 49, 71, 102– 3, 106; minimum wage and, 52– 53, 100, 102–8, 175, 177; mobility of, 185; offshoring and, 81–82; payroll and, 53, 93, 100, 104, 107, 175; pension systems and, 167; portfolios and, 88; poverty and, 1, 11, 15n6, 19– 20, 22–25, 28–29, 32, 44t, 109, 117, 123, 126–27, 134, 144, 147–52, 164, 166, 175; 202 labor (cont.) privatization and, 99–109; productivity and, 63, 79, 81–82, 89, 100, 102, 104, 114, 120, 125, 127, 144, 155, 177–78; protectionism and, 7, 147, 154, 157, 176–79; real earnings loss and, 78; reserve, 84; security and, 133; skilled, 76–78, 82–83, 86, 90, 114, 117, 126, 176; standard of living and, 69 (see also standard of living); superstars and, 85, 87, 89–90; supply of, 130– 31, 164; taxes and, 159–60, 171; technology and, 85–91 (see also technology); unemployment and, 37, 39, 53, 62–63, 66, 69, 77, 94, 100–108, 164, 175–76; unions and, 100–106, 108, 156, 179; unskilled, 3, 76–77, 79, 83, 105, 117, 154; wage inequality and, 51–53, 79, 101–3, 106, 108; wage ladder effects and, 78–79; women and, 64–65, 103, 114; writers and, 86–87 Lady Gaga, 5–6 laissez-­faire approach, 118, 129 Latin America, 9, 34, 36, 54–55, 58, 109–11, 155, 165–66, 168, 180 lawyers, 89–90 liberalization: capital and, 96; customs, 156; deregulation and, 96–99, 108–9, 112 (see also deregulation); fairer globalization and, 156, 179; mobility of capital and, 115; policy effects of, 97–99; Reagan administration and, 91; recession and, 6, 31, 99, 120; rise in inequality and, 76, 91, 93, 96–99, 108–9, 112, 115; tax rates and, 93 Luxembourg, 16, 19 Index Madonna, 71 Malaysia, 127 manufacturing: deindustrialization and, 75–82, 84, 123; emerging economies and, 57, 84; fairer globalization and, 154–55, 157; France and, 81; offshoring and, 81–82; United Kingdom and, 80; United States and, 80 markets: competition and, 76–77, 79–82, 84, 86, 94–98, 102, 104, 115–18, 130, 155, 169, 173, 176–79, 182, 186–88; credit, 131; deindustrialization and, 1, 75–82, 102, 120, 188; deregulation and, 91–92, 99–109 (see also deregulation); development gap and, 34–35, 83; Economic Partnership Agreements (EPAs) and, 156; effect of new players, 75–76; emerging economies and, 120 (see also emerging economies); entrepreneurs and, 83, 92, 96, 131–32, 135, 143, 170–71, 188; evolution of inequality and, 48–50, 53–54, 64, 69; exports and, 76, 82–84, 124, 128, 147, 154–55, 176, 178; fairer globalization and, 147–48, 154–58, 168, 173–75, 178–81; GDP measurement and, 13–15, 20–21, 23, 26, 27f, 29–30, 39, 41–45, 56–57, 94, 123, 127, 165–66, 176; globalization and, 35, 118, 120–21, 124–37, 140, 143–44; Heckscher-­Ohlin model and, 76; housing, 12, 61, 137; imports and, 1, 34, 80, 119, 124, 154, 177–78, 180; institutions and, 91–112; international trade and, 3, 75–76, 78–79, 83, 112, 114, 176–77; labor and, Index203 144 (see also labor); liberalization and, 112 (see also liberalization); monopolies and, 94, 111, 127, 136; offshoring and, 81– 82; protectionism and, 7, 147, 154, 157, 176–79; purchasing power and, 11, 13, 19–24, 27f, 28, 50, 80, 144, 158, 178; reform and, 54 (see also reform); regulation and, 74 (see also regulation); rise in inequality and, 74, 76– 79, 83, 86, 90–112, 114; shocks and, 38, 55, 91–92, 175; single market and, 76; South-­South exchange and, 35; TRIPS and, 156 median wage, 49, 71, 102–3, 106 Mexico, 46t, 57, 59, 109–10, 133, 166, 172 middle class, 51, 71, 93, 109, 133– 34, 136, 140 Milanovic, Branko, 4–5, 17n8, 29n16 Millennium Development Goals, 149–50, 185 minerals, 84, 127 minimum wage, 52–53, 100, 102– 8, 175, 177 monopolies, 94, 111, 127, 136 Morocco, 173 Morrisson, Christian, 28 movies, 87 Murtin, Fabrice, 28 national inequality, 2–4; correcting, 158–80; education and, 167–73; fairer globalization and, 147, 158; Gini coefficient and, 27 (see also Gini coefficient); globalization and, 119; market regulation and, 173–75; protectionism and, 147, 157, 176–79; redistribution and, 158–73, 175, 178; rise in, 6, 48– 52, 115, 204; taxes and, 158–73, 175, 181–83 natural resources, 84–85, 92, 122, 126–28, 127, 151 Netherlands, 46t, 50, 66, 70, 102 Nigeria, 9, 46t, 54, 127, 151 non-­monetary inequalities: access and, 61, 67–68; capability and, 61; differences in environment and, 66–68; discrimination and, 64–66, 69; employment precariousness and, 63–64; evolution of inequality and, 49, 60–70; intergenerational mobility and, 68; opportunities and, 49, 60– 70; social justice and, 60, 70; unemployment and, 62–63 normalization: evolution of inequality and, 41, 43–44; GDP measurement and, 29, 41, 43– 45; global inequality and, 13, 15, 22–23, 26, 29 Occupy Wall Street movement, 6, 135 OECD countries, 27t; evolution of inequality and, 42t, 43, 44t, 50– 52, 64, 65n13; fairer globalization and, 149, 159, 162, 164– 65; Gini coefficient and, 51; income distribution and, 51; relaxation of regulation and, 99; restrictive, 64; rise in inequality and, 50–51, 94, 99, 102, 106n18, 107; social programs and, 94; standard of living and, 11–12, 43, 50–52, 64, 94, 99, 102, 107, 120, 149, 159, 162, 164–65; U-­shaped curve on income and, 50 OECD Database on Household 204 Income Distribution and Poverty, 11–12 offshoring, 81–82 oil, 92, 127 opportunity, 5; African Growth Opportunity Act (AGOA) and, 155; as capability, 61; efficiency and, 142–45; evolution of inequality and, 61–62, 68, 70–71; fairer globalization and, 155, 167, 170, 172; globalization and, 133–34, 139, 142–44; redistribution and, 142–45; rise in inequality and, 102 Pakistan, 46t, 111 Pareto efficiency, 130n5 Pavarotti, Luciano, 86–87 payroll, 53, 93, 100, 104, 107, 175 Pearson Commission, 149 pension systems, 167 Perotti, Roberto, 134 Philippines, 46t, 111 Pickett, Kate, 140 Piketty, Thomas, 4, 48, 59n8, 60, 89n10, 125, 160n4 PISA survey, 169–70 policy, 4; adjustment, 109, 153; Cold War and, 149, 153; convergence and, 147–48; development aid and, 148–53; distributive, 26, 72, 135, 188; educational, 149, 152, 167–73; evolution of inequality and, 55, 72; fairer globalization and, 147–53, 157–58, 167–73, 175–83; Glass-­Steagall Act and, 174n15; global inequality and, 185–89; globalization and, 118–19, 124, 126, 128–31, 139, 143–44; globalizing equality and, 184–89; import substi- Index tution and, 34; Millennium Development Goals and, 149– 50, 185; poverty reduction and, 147–48; protectionist, 7, 99– 100, 107–8, 147, 154, 157, 176–79; reform and, 74 (see also reform); rise in inequality and, 34, 74–75, 85, 94, 97, 99– 100, 104, 106–11, 114–16; social, 7; standard of living and, 147–48 population growth, 28–29, 110, 183 portfolios, 88 Povcal database, 10, 12, 42t, 43, 44t poverty, 1, 44t, 109; Collier on, 23; convergence and, 147–48; criminal activity and, 133–34; definition of, 24; development aid and, 147–52; fairer globalization and, 147–52, 164, 166, 175; ghettos and, 66–67; global inequality and, 11, 15n6, 19–20, 22–25, 28–29, 32; globalization and, 117, 123, 126–27, 134, 144; growth and, 28–29; measurement of, 23–24; Millennium Development Goals and, 149– 50, 185; OECD Database on Household Income Distribution and Poverty and, 11–12; reduction policies for, 147–48; traps of, 144, 150, 164 prices: commodity, 84, 182; exports and, 178; factor, 74, 126; fairer globalization and, 147–48, 176, 178, 182; global inequality and, 27–28, 74, 80, 84, 91–92, 94, 97, 110; globalization and, 118, 122, 126, 136–38; imports and, 80; international compari- Index205 sons of, 11; lower, 94, 137; oil, 92; rise in inequality and, 74, 80, 84, 91–92, 94, 97, 110; rising, 110, 122, 178; shocks and, 38, 55, 91–92, 175; statistics on, 11, 27; subsidies and, 109–10, 175 primary income: evolution of inequality and, 48–50, 58; fairer globalization and, 158, 163n10, 167, 173; globalization and, 135, 143–44 privatization: deregulation and, 94–112; efficiency and, 94, 96, 105, 108; globalization of finance and, 95–99; institutions and, 94–109; labor market and, 99–109; reform and, 94–109; telecommunications and, 111 production: deindustrialization and, 75–82; evolution of inequality and, 57; fairer globalization and, 155–57, 167, 176, 178–79; globalization and, 119, 124, 126, 129, 131, 133, 137; growth and, 3, 34–35, 57, 74, 76–81, 84–86, 119, 124, 126, 129, 131, 133, 137, 155–57, 167, 176, 178–79; material investment and, 119; North vs.


Investment: A History by Norton Reamer, Jesse Downing

activist fund / activist shareholder / activist investor, Alan Greenspan, Albert Einstein, algorithmic trading, asset allocation, backtesting, banking crisis, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, book value, break the buck, Brownian motion, business cycle, buttonwood tree, buy and hold, California gold rush, capital asset pricing model, Carmen Reinhart, carried interest, colonial rule, Cornelius Vanderbilt, credit crunch, Credit Default Swap, Daniel Kahneman / Amos Tversky, debt deflation, discounted cash flows, diversified portfolio, dogs of the Dow, equity premium, estate planning, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, family office, Fellow of the Royal Society, financial innovation, fixed income, flying shuttle, Glass-Steagall Act, Gordon Gekko, Henri Poincaré, Henry Singleton, high net worth, impact investing, index fund, information asymmetry, interest rate swap, invention of the telegraph, James Hargreaves, James Watt: steam engine, John Bogle, joint-stock company, Kenneth Rogoff, labor-force participation, land tenure, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, low interest rates, managed futures, margin call, means of production, Menlo Park, merger arbitrage, Michael Milken, money market fund, moral hazard, mortgage debt, Myron Scholes, negative equity, Network effects, new economy, Nick Leeson, Own Your Own Home, Paul Samuelson, pension reform, Performance of Mutual Funds in the Period, Ponzi scheme, Post-Keynesian economics, price mechanism, principal–agent problem, profit maximization, proprietary trading, quantitative easing, RAND corporation, random walk, Renaissance Technologies, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Sand Hill Road, Savings and loan crisis, seminal paper, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spinning jenny, statistical arbitrage, survivorship bias, tail risk, technology bubble, Teledyne, The Wealth of Nations by Adam Smith, time value of money, tontine, too big to fail, transaction costs, two and twenty, underbanked, Vanguard fund, working poor, yield curve

the regulatory response The regulatory experience in the wake of the Great Recession has been rather different than that following the Great Depression. The ultimate effect of the bank bailouts during the Great Recession has been to introduce an essential and oft-discussed question: have banks become too big to fail? The concept of too big to fail is problematic for two reasons. The first is that if true, moral hazard may arise whereby exceptionally large institutions take on more risk than is prudent, thinking there will be a bailout in case the risk taking results in outsized losses. In particular, has the offering of bank bailouts to exceptionally large institutions altered their behavior in a way that has created moral hazard?

,” accessed January 2015, http://www.treasury.gov/initiatives/fsoc/about /council/Pages/default.aspx. Board of Governors of the Federal Reserve System, “Press Release,” October 23, 2014, http://www.federalreserve.gov/newsevents/press /bcreg/20141023a.htm. Simon Johnson, “Sadly, Too Big to Fail Is Not Over,” Economix (blog), New York Times, August 1, 2013, http://economix.blogs.nytimes .com/2013/08/01/sadly-too-big-to-fail-is-not-over. James B. Stewart, “Volcker Rule, Once Simple, Now Boggles,” New York Times, October 21, 2011, http://www.nytimes.com/2011/10/22 /business/volcker-rule-grows-from-simple-to-complex.html. Ibid.; Dan Kedmey, “2 Years and 900 Pages Later, the Volcker Rule Gets the Green Light,” TIME.com, December 11, 2013, http://business.time .com/2013/12/11/2-years-and-900-pages-later-the-volcker-rule-gets -the-green-light.

March 20, 2009. http://www.pbs.org/wnet/religionandethics/2009/03/20 /march-20-2009-jewish-reaction-to-madoff-scandal/2474. Johnson, Philip McBride, and Thomas Lee Hazen. Derivatives Regulation. Vol. 3. New York: Aspen, 2004. Johnson, Simon. “Sadly, Too Big to Fail Is Not Over.” Economix (blog), New York Times, August 1, 2013. http://economix.blogs.nytimes .com/2013/08/01/sadly-too-big-to-fail-is-not-over. Jones, Chris. Hedge Funds of Funds: A Guide for Investors. Hoboken, NJ: Wiley, 2007. Jones, Norman. “Usury.” In Encyclopedia of Economic and Business History, ed. Robert Whaples. Economic History Association. February 10, 2008. http://eh.net/encyclopedia/usury.


pages: 339 words: 99,674

Pay Any Price: Greed, Power, and Endless War by James Risen

air freight, airport security, banking crisis, clean water, drone strike, Edward Snowden, greed is good, illegal immigration, income inequality, independent contractor, large denomination, Michael Milken, military-industrial complex, Occupy movement, off-the-grid, pattern recognition, pre–internet, RAND corporation, Seymour Hersh, Silicon Valley, Stanford prison experiment, Stuxnet, too big to fail, traumatic brain injury, WikiLeaks

That includes the most infamous catch phrase of the global financial crisis—“too big to fail.” When applied to banks, “too big to fail” referred to financial institutions that were so large and critical to the economy that they had to be bailed out by the government, no matter how execrable their past behavior or how badly they had been mismanaged. Letting them fail, refusing to bail them out, would only sink the American economy. In the global war on terror as well, Washington has treated some of its biggest military and intelligence contractors as if they are too big to fail. The American enterprise in the Middle East has been so heavily outsourced, and the Pentagon, CIA, and other agencies have become so dependent on a handful of large corporations, that the government has been reluctant to ever hold those firms accountable for their actions.

Table of Contents Title Page Table of Contents Copyright Dedication Epigraph A Note on Sources Prologue GREED Pallets of Cash The Emperor of the War on Terror The New Oligarchs POWER Rosetta Alarbus Too Big to Fail ENDLESS WAR The War on Decency The War on Normalcy The War on Truth Afterword Index About the Author Footnotes Copyright © 2014 by James Risen All rights reserved For information about permission to reproduce selections from this book, write to Permissions, Houghton Mifflin Harcourt Publishing Company, 215 Park Avenue South, New York, New York 10003.

One Pentagon official contacted me while I was doing reporting on Alarbus/JACO and confided that my reporting was “making people at SOCOM nervous.” Asimos declined to discuss the operation other than to warn that writing about him would put him and his family at risk. His New York lawyer, Kelly Moore, also declined repeated requests to respond to questions. 6 Too Big to Fail Far more than any other conflict in American history, the global war on terror has been waged along free-market principles. In Iraq and Afghanistan, American soldiers actually on the payroll of the U.S. Army were outnumbered by independent contractors working for private companies hired to provide services from meals to base security.


pages: 831 words: 98,409

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

"World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Alan Greenspan, Anthropocene, assortative mating, bank run, barriers to entry, Bear Stearns, Bernie Sanders, Black Swan, Blythe Masters, Bretton Woods, butterfly effect, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, commoditize, conceptual framework, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, digital divide, diversification, Dunbar number, East Village, eat what you kill, Elon Musk, eurozone crisis, fake it until you make it, family office, financial engineering, financial repression, Gini coefficient, glass ceiling, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Google bus, Gordon Gekko, haute cuisine, high net worth, hindsight bias, income inequality, index fund, intangible asset, Jaron Lanier, Jim Simons, John Meriwether, junk bonds, Kenneth Arrow, Kenneth Rogoff, Kevin Roose, knowledge economy, London Whale, Long Term Capital Management, longitudinal study, Mark Zuckerberg, mass immigration, McMansion, mittelstand, Money creation, money market fund, Myron Scholes, NetJets, Network effects, no-fly zone, offshore financial centre, old-boy network, Parag Khanna, Paul Samuelson, peer-to-peer, performance metric, Peter Thiel, plutocrats, Ponzi scheme, power law, public intellectual, quantitative easing, Renaissance Technologies, rent-seeking, reserve currency, risk tolerance, Robert Gordon, Robert Shiller, rolodex, Satyajit Das, search costs, shareholder value, Sheryl Sandberg, Silicon Valley, social intelligence, sovereign wealth fund, Stephen Hawking, Steve Jobs, subprime mortgage crisis, systems thinking, tech billionaire, The Future of Employment, The Predators' Ball, The Rise and Fall of American Growth, too big to fail, Tyler Cowen, women in the workforce, young professional

Hammond, “Systemic Risk in the Financial System: Insights from Network Science,” Pew Charitable Trust, Financial Reform Project, Briefing Paper No. 12, 2009, http://www.brookings.edu/research/papers/2009/10/23-network-science-hammond. 35. Haldane, “Rethinking the Financial Network.” 36. Meadows, Thinking in Systems, 155. 37. Neel Kashkari, “Lessons from the Crisis: Ending Too Big to Fail,” speech at the Brookings Institution, Washington, D.C., February 16, 2016, https://www.minne-apolisfed.org/news-and-events/presidents-speeches/lessons-from-the-crisis-ending-too-big-to-fail. 38. Kelly Shue, “Executive Networks and Firm Policies: Evidence from the Random Assignment of MBA Peers,” University of Chicago, Booth School of Business, January 12, 2013, http://rfs.oxfordjournals.org/content/26/6/1401.abstract. 39.

All their reports have one theme in common: the crucial role that personal relationships played in solving problems too large for any individual to tackle alone. For instance, Hank Paulson, President Bush’s “war general” during the crisis, repeatedly stressed the significance of deep relationships in his book On the Brink, an account that was mirrored in Andrew Ross Sorkin’s book Too Big to Fail.15 While Paulson may come across as aloof and somewhat dry, he is actually the embodiment of a master networker. Prior to serving as secretary of the treasury, he was CEO of Goldman Sachs and forged relationships with leaders all over the world, particularly with the Chinese elite. His connections in China were said to have been better than even those of the U.S. administration and would later become an important asset during the financial crisis.

Systems with unchecked reinforcing loops, however, ultimately destroy themselves.36 Through feedback loops and power-laws, superhubs and their networks have significantly contributed to skewing the system. Potentially corrective shocks like the financial crisis have failed to rebalance it because the overly influential superhub networks have blocked fundamental changes to protect their vested interests. An example of this is the persistence of systemically important “too big to fail” banks, which still present a risk to taxpayers. Wall Street CEOs have put up a fabulous fight against measures threatening the size of their institutions, and, thus, their financial interests. Even Neel Kashkari, who as assistant secretary of the treasury was instrumental in orchestrating the bank bailouts, is now spearheading efforts to decrease the size of banks to minimize the risks for taxpayers.37 “Executive Contagion”: Executives Becoming Super-Spreaders of Risk The formation of hubs and superhubs follows the laws of nature, so that the same type of network topology will always form, be it among tradespeople in a city, students at a university, or movie stars on the global stage.


pages: 363 words: 98,024

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

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

Encouraged by the Fed, which was providing emergency lending, the FDIC and a group of a couple dozen banks provided a $1.5 billion rescue made up of loans and a line of credit. They also received twenty million warrants to purchase common stock—enough to provide a controlling majority. It would prove to be an important model. Continental Illinois: Too Big to Fail? The failure of two minor government securities dealers over the next year or two could be handled without setting off alarm bells. The story was different with respect to the July 1982 bankruptcy of a seemingly innocuous Oklahoma bank called Penn Square with under $500 million in deposits, about half covered by FDIC insurance.

In July the FDIC negotiated a second rescue that gave it effective control of the company and installed new management. Continental Illinois survived for a while but, amid management turmoil, lost its competitive position. Shareholders never recovered their losses. This episode has often been credited with popularizing the phrase “too big to fail.” Any ambiguity about the willingness of the government to bail out the big banks seemed to be lost when the comptroller of the currency, the supervisor of most of the big banks, went beyond his authority, seeming to commit to such support for the eleven largest in his later congressional testimony.

The Independent Community Bankers of America, representing thousands of small banks (including, for instance, the Penn Square Bank) argued that its constituents were placed at a competitive disadvantage: depositors, perhaps all creditors, of “systematically important” lenders would be protected from losses. In practice, most depositors of small banks tended themselves to be small and had the full protection of FDIC insurance. And it seemed to me, then and now, that Continental Illinois, its management, and its stockholders, did, by any reasonable definition, “fail.” The too-big-to-fail debate resumed loudly during the 2008 financial crisis. It continues to roil the politics of banking legislation and regulation to this day. In my view, the Dodd-Frank legislation signed by President Barack Obama in 2010 goes a long way toward creating an effective resolution process for failing banks.


pages: 416 words: 124,469

The Lords of Easy Money: How the Federal Reserve Broke the American Economy by Christopher Leonard

2021 United States Capitol attack, Affordable Care Act / Obamacare, Airbnb, Alan Greenspan, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, collateralized debt obligation, coronavirus, corporate governance, COVID-19, Donald Trump, Dutch auction, financial engineering, financial innovation, fixed income, Ford Model T, forensic accounting, forward guidance, full employment, glass ceiling, Glass-Steagall Act, global reserve currency, Greenspan put, hydraulic fracturing, income inequality, inflation targeting, Internet Archive, inverted yield curve, junk bonds, lockdown, long and variable lags, Long Term Capital Management, low interest rates, manufacturing employment, market bubble, Money creation, mortgage debt, new economy, obamacare, pets.com, power law, proprietary trading, quantitative easing, reserve currency, risk tolerance, Robinhood: mobile stock trading app, Ronald Reagan, Silicon Valley, stock buybacks, too big to fail, yield curve

This precedent brought a new term into the vocabulary of American banking. During a congressional hearing about the Continental bailout, a Republican congressman from Connecticut named Stewart McKinney described the situation in a pithy statement: “Mr. Chairman, let us not bandy words. We have a new kind of bank. It is called too big to fail.” * * * Paul Volcker’s career as chairman did not end pleasantly. He had whipped inflation, and was then driven back to the wilderness. FOMC members cast dissenting votes against Volcker more often than at almost any chairman in modern Fed history. He asked not to be reappointed after his term ended in 1987.

After the banking crisis of the 1980s, Congress relaxed the laws that prohibited banks from doing business in multiple states, hoping to make it easier for the survivors to stay in business. Loosening the interstate banking laws allowed stronger banks to buy up weaker competitors, paving the way for a new breed of giants. Continental Illinois had been deemed too big to fail in the 1980s, but it was a small bank compared to some of those the Federal Reserve was now charged with regulating. What worried Hoenig, as he traveled to Arizona, wasn’t just the size and the scale of the new banking corporations. It was what they were doing. These bigger banks were making the same kinds of loans that marked the boom years of the late 1970s.

“He clearly had Brady’s trust, if he went to Treasury,” Fitts said. “Brady was no fool.” Brady’s trust in Powell would be validated almost immediately after Powell arrived in Washington, D.C. A scandal erupted inside the Treasury Department involving criminal fraud, risky derivatives contracts, and a too-big-to-fail Wall Street investment house. Powell was called upon to help fix the mess, and it provided him with the next phase of his education in the ways of power in Washington. * * * The problem started inside the large bureaucracy that Powell oversaw. He was assistant Treasury secretary for domestic finance, a job that put him in charge of issuing the government’s debt.


pages: 823 words: 206,070

The Making of Global Capitalism by Leo Panitch, Sam Gindin

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

Actively playing the role of lender of last resort—through 1974 the Federal Reserve Bank of New York lent Franklin $1.7 billion—US regulators delayed closing Franklin as long as they could out of “concern that a failure of a bank of Franklin’s size might cause a general scramble for liquidity.”84 What was especially significant was that, even by the mid 1970s, the concern that certain banks were “too big to fail” was not confined to what the effect of their failure would be in US financial markets. Much of the Fed’s intervention involved purchasing foreign currencies on Franklin’s behalf, assuring foreign creditors they would be paid—and even extending its lender-of-last-resort function to Franklin’s London office, on the grounds that “the failure of Franklin to perform on such a volume of international commitments would lead to a crisis of confidence in foreign exchange markets and possibly to an international banking crisis.”85 The grounds for such fears were real enough.

Besides mandating greater regulatory cooperation between the Federal Reserve, the Treasury’s Office of the Controller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC), the Act—“the most massive change in banking laws since the Depression”—widened the state’s regulatory remit over the whole banking system.38 All deposit institutions were now required to hold reserves with the Fed, and new rules were established for more uniform reporting to regulators, and for extended federal deposit insurance coverage. And it was this joint supervisory capacity that allowed the Fed, working more and more closely with the OCC and the FDIC, to sustain the Volcker shock by undertaking selective bailouts of those banks that were deemed “too big to fail.” This included the largest bailout in US history to that point, that of First Philadelphia Bank (whose roots went back two centuries to the first private bank in the US). The regulators feared that if the bank “collapsed slowly, in the manner of Franklin National [in 1973–74], it might provoke a crisis of confidence in the banking system.”39 The Fed’s autonomy with respect to the financial system, and the detailed information it had about its precise workings that was unavailable to anyone else, was decisive in terms of the flexibility and persistence it needed to act.

Troubled small banks which could not be safely merged with larger ones were closed by the Fed and the Treasury, and their depositors paid off by the FDIC, while the large banks were bailed out—thanks to their importance not only for the US economy but also for the international clearing-house system, whose hundreds of billions of dollars of daily interbank payments greased the wheels of global capitalism. The pattern of letting banks that were too small to matter go under, while acting as lender of last resort to save the ones that were “too big to fail” was set in 1982, when Volcker bluntly told the Federal Open Market Committee (FOMC): “If it gets bad enough, we can’t stay on the side or we’ll have a major liquidity crisis. It’s a matter of judgment as to when and how strongly to react. We are not here to see the economy destroyed in the interest of not bailing somebody out.”78 The “moral hazard” tightrope that the state had to walk in this respect was nothing compared with the practical hazard involved in figuring out whether allowing even a small bank to collapse might have systemic effects.


pages: 350 words: 103,270

The Devil's Derivatives: The Untold Story of the Slick Traders and Hapless Regulators Who Almost Blew Up Wall Street . . . And Are Ready to Do It Again by Nicholas Dunbar

Alan Greenspan, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, Black Swan, Black-Scholes formula, bonus culture, book value, break the buck, buy and hold, capital asset pricing model, Carmen Reinhart, Cass Sunstein, collateralized debt obligation, commoditize, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, delayed gratification, diversification, Edmond Halley, facts on the ground, fear index, financial innovation, fixed income, George Akerlof, Glass-Steagall Act, Greenspan put, implied volatility, index fund, interest rate derivative, interest rate swap, Isaac Newton, John Meriwether, junk bonds, Kenneth Rogoff, Kickstarter, Long Term Capital Management, margin call, market bubble, money market fund, Myron Scholes, Nick Leeson, Northern Rock, offshore financial centre, Paul Samuelson, price mechanism, proprietary trading, regulatory arbitrage, rent-seeking, Richard Thaler, risk free rate, risk tolerance, risk/return, Ronald Reagan, Salesforce, Savings and loan crisis, seminal paper, shareholder value, short selling, statistical model, subprime mortgage crisis, The Chicago School, Thomas Bayes, time value of money, too big to fail, transaction costs, value at risk, Vanguard fund, yield curve, zero-sum game

Morgan and other big commercial banks had also been in the dark about trading derivatives, but they got over those qualms and poured money into this new market. In March 1994, rumors were circulating that Corrigan’s nightmare was about to become reality. Bankers Trust had supposedly been wiped out by the rise in federal funds rates, and its stock would be suspended. In a phrase that Corrigan had recently invented, Bankers Trust was “too big to fail”—the Fed would have to bail it out. Peter Fisher, one of the few New York Fed staffers who knew about the new derivatives markets, called up Steve Thieke, a former New York Fed colleague who now worked at J.P. Morgan. Hearing the worry in his voice, Thieke let Fisher in on the secret. He and a handful of executives at Bankers Trust and Citibank had decided to look at the problem scientifically.

Toward the end of the month, Goldman Sachs and Morgan Stanley got new equity investments and became bank holding companies. Making the Fed the primary regulator and taking the SEC out of the picture, the switch formalized their status as banks that were, in the cruelly paradoxical phrase of that season, “too big to fail.” A month later, the New York Fed created a pair of financial androids. Maiden Lane II would buy the distressed mortgage bonds from AIG’s securities lending program. Maiden Lane III would do what Goldman’s Dan Sparks had suggested nine months earlier: buy the underlying CDOs behind the AIGFP deals and tear up the default swap contracts with the two dozen or so counterparty banks.

Morgan margin call.31 On October 3, Congress passed a revised TARP bill that made $700 billion of taxpayer funds available to prop up the system and permitted the government to directly invest in troubled banks. The contagion had spread worldwide. On October 6, Wells Fargo scooped up troubled Wachovia while Germany, Belgium, and Holland announced bailouts for some of the “too big to fail” banks (including the pioneering CDO investor LB Kiel, by now part of a larger institution called HSH Nordbank). On October 8, the Federal Reserve and international central banks imposed coordinated emergency interest rate cuts, hoping to restart the frozen interbank lending markets. The next day, Iceland’s biggest banks collapsed and were nationalized.


pages: 662 words: 180,546

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

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

They have also funded their own Hayekian critiques of the economics profession: see Frydman and Goldberg, Beyond Mechanical Markets, which was distributed gratis to participants at the 2011 meeting of INET at Bretton Woods. 119 This section is joint work with Edward Nik-Khah. 120 Swagel, “The Financial Crisis”; Sorkin, Too Big to Fail; “Break the Glass Bank Recapitalization Plan,” dated 4/15/2008, available at www.scribd.com/doc/21266810/Too-Big-To-Fail-Confidential-Break-the-Glass-Plan-from-Treasury (accessed 2/21/2012). 121 “Secretary Paulson’s intent to use TARP to purchase assets reflected a philosophical concern with having the government buy equity stakes in banks: he saw it as fundamentally a bad idea to have the government involved in bank ownership” (Swagel, “The Financial Crisis,” p. 50). 122 Oliver Armantier and James Vickery of the N.Y.

Surprisingly, the financial crisis did not receive much attention at the conference. Many of the sessions on macroeconomics and finance didn’t mention it at all, and when it was finally discussed, the reasons cited for the financial meltdown were all over the map. It was the banks, the Fed, too much regulation, too little regulation, Fannie and Freddie, moral hazard from too-big-to-fail banks, bad and intentionally misleading accounting, irrational exuberance, faulty models, and the ratings agencies. In addition, factors I view as important contributors to the crisis, such as the conditions that allowed troublesome runs on the shadow banking system after regulators let Lehman fail, were hardly mentioned.9 Public disputations on the crisis had begun to take on the air of a bad Rodney Dangerfield film.

Bernanke insists upon the prodigious intellectual capacity of the Fed to regulate the postcrisis financial sector and the shadow banking sphere, even though he and his former lieutenant at the New York Fed Timothy Geithner had been asleep at the wheel in the run-up to the crisis, and then outsourced much of the bailout. Bernanke has stood in the way of most attempts to restructure the U.S. financial sector, from opposing the Volcker Rule to blocking attempts to break up “too big to fail” firms. Bernanke resisted most attempts to financially penalize banks or hedge funds, with the excuse that they were too fragile to face the music. The Fed’s ability to even anticipate contractions had been persistently addled, dating from the onset of the crisis, as demonstrated in Figure 4.5.


pages: 322 words: 77,341

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

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

It was the taxpayer who ended up picking up the bill for counterparty insolvencies, and the sums involved were and are huge. As chance would have it, it was insurance against those very counterparty insolvencies which was to destroy AIG. This is a gigantic insurance company, worth $200 billion at its peak and definitely “too big to fail.” It was AIG which was, in effect, the Joneses. It was the company which underwrote all the insurance: it was the single biggest player in the CDS market. Entertainingly for fans of financial acronyms, AIG was done in by CDSs on CDOs. That’s to say, it took part in credit default swaps on collateralized debt obligations, the pools of subprime mortgages whose dramatic collapse in value in 2008 was the proximate cause of the financial crisis.

If the Joneses don’t have that kind of money immediately at hand, they will have to borrow it. If they can’t borrow it, they’re toast. And that’s exactly what happened to AIG. When it had to increase its collateral cover, it couldn’t, because the credit markets had tightened up. For the Joneses, that would be end of story: they’d be bankrupt. But because AIG was “too big to fail,” the U.S. government stepped in with a bailout on September 16 worth $85 billion, in return for 79.9 percent of the company. (This bailout—they come in different varieties—was in the form of a twenty-four-month credit facility. To adopt an analogy to personal finances, that meant AIG could draw on the government’s bank account.)

Treasury statement accompanying the fourth bailout, “Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high.” To stabilize AIG would “take time and possibly further government support.” That’s what “too big to fail” means. You could put it like this: AIG + CDS + CDO + TBTF= $173,000,000,000. In Britain, we had our entertaining but essentially distracting row over Sir Fred “Knighted for Services to Banking” Goodwin’s pension; it’s the similar outcry over bonuses paid to senior AIG executives after the bailouts.


pages: 248 words: 57,419

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

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

It is unclear how much damage would be caused by the bankruptcy of a financial institution with a derivatives exposure equivalent to one year’s worth of global economic output. It can only be imagined that the damage would range between catastrophic and cataclysmic. That is what is meant by too big to fail. Regarding their size, there is another possibility that warrants consideration. Banks may have been allowed to remain too big to fail because they are too bankrupt to split apart. Due to the size and opacity of the derivatives market, there is at least some risk that the sum of the banks’ parts could add up to a multitrillion dollar negative number. Were that the case, it would explain why the government did not nationalize at least some banks when injecting large amounts of capital into the financial system in 2009: it had no desire to consolidate massive bank losses onto its own balance sheet.

Quantitative Easing: Round Two Monetizing the Debt The Role of the Trade Deficit Diminishing Returns The Other Money Makers Notes Chapter 6: Where Are We Now? How Bad so Far? Credit Growth Drove Economic Growth So, Where Does that Leave Us? Why Can’t TCMD Grow? The Banking Industry: Why Still Too Big to Fail? Global Imbalances: Still Unresolved Vision and Leadership Are Still Lacking Notes Chapter 7: How It Plays Out The Business Cycle Debt: Public and Private 2011: The Starting Point 2012: Expect QE3 Impact on Asset Prices 2013–2014: Three Scenarios Impact on Asset Prices Conclusion Notes Chapter 8: Disaster Scenarios The Last Great Depression And This Time?

Every boom busts. And the bust occurs when credit ceases to expand. This chapter considers why the debt of the private sector in the United States cannot expand further. Next, this chapter looks at the overconcentrated and underregulated U.S. banking sector in order to clarify exactly what is meant by “too big to fail.” The chapter concludes with a discussion of the global imbalances that continue to destabilize the world. Global supply greatly exceeds sustainable demand. The gap between the two has been filled with U.S. demand, financed by debt. If credit in the United States now ceases to expand, there is a real danger that this 40-year boom will break down into a New Great Depression.


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

Furthermore, in increasingly common, real-life settings, some market operators may acquire so much space in the economy, and implicit monopoly power, that they may come to believe that, if things go badly in 80 Termites of the State some of their market operations, the government will be forced to come to their rescue. This belief may encourage them to take more risks than they would or should have taken otherwise. This is now believed to happen when some financial institutions, and especially some banks, become “too big to fail” (see Shiller, 2000; Lowenstein, 2000). Some operators may simply not be as well informed as they believe they are when they make investments, and these errors may not be completely random. Some may underestimate the risks they are taking, or believe that they are nimble enough to outrun potential bad events.

As the justifiers might put it, when a house is on fire, firefighters cannot worry about the moral hazard consequences of putting out the fire! Of course, these interpretations of what might have happened might be right or wrong, and we shall never know. The same argument will be offered in probable future crises, as long as the banks and the other financial institutions remain “too big to fail.” See Bernanke (2015) and Geithner (2014) for a defense of the rescue operations in 2008–2009. See King (2016) for a more skeptical view. Market capitalism was replaced, at least in some areas, by what some have called “casino capitalism” (see Sinn, 2010). In casino capitalism the government would allow gamblers to bet any amount, but it would assist them in case of losses, to prevent potentially bad social outcomes.

This second alternative would require the removal, or at least the reduction, of illegitimate or undesirable market power from some individuals and enterprises, or from some economic activities, especially, but not only, Growth of Termites 119 when that power comes, directly or indirectly, from governmental actions or often inactions. It also requires better rules and more efficient institutions, which may not be easy to provide. For example, financial institutions that are “too big to fail” or are too much in the shadow would need to be reduced in size and made more transparent; enterprises that have acquired too much power would need to be made truly competitive; positions that, because of difficulties to enter provide too much market power and generate rents to some individuals, would need to lose their monopoly power; and some protection now justified on grounds of “intellectual property” for some individuals and enterprises would need to be reduced.


pages: 593 words: 189,857

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

These changes—along with the new limits on concentration, the stronger shock absorbers across the system, and the “systemic surcharge” imposing higher capital requirements on the largest banks—are quietly reducing the risks of too-big-to-fail. As the FDIC has formalized its rules for resolution authority, the rating agencies have reduced their “ratings uplift” for the unsecured debt of larger banks; they’re no longer considered negligible default risks regardless of their financial condition, because markets are less confident the government would step in to save them if they fail. Today, many small and midsize institutions pay less to borrow than the supposedly too-big-to-fail banks. On a less positive note, Dodd-Frank’s elimination of the broader FDIC guarantee authority, together with the loss of the Fed’s power to lend to individual nonbanks, leaves the financial system weaker and more exposed to future panics.

But while the century-old insurer had become a three-letter symbol of excessive risk, AIG also had tens of millions of innocent policyholders and pensioners who depended on it, plus tens of thousands of derivatives contracts with businesses around the world. A default on its debts or even a downgrade of its credit rating would reignite the panic. Citi and Bank of America were the biggest of the bombs, Exhibits A and B for the outrage over “too big to fail” banks; my aides called them the Financial Death Stars. But the world was so fragile, and they really were so big, that if we didn’t want a reprise of the Depression—an obliterated banking sector, 25 percent unemployment, thousands of businesses shuttered—we had to make sure they didn’t drag down the system, even if it looked like we were rewarding the reckless.

While the direct impact of Bear’s failure would be bad, the real danger was that it would spark runs or margin calls on other firms perceived to have similar vulnerabilities or exposure to counterparties with similar vulnerabilities, triggering a chain reaction of fear and uncertainty that could imperil the entire system. “Too big to fail” has become the catchphrase of the crisis, but that night, our fear was that Bear was “too interconnected to fail” without causing catastrophic damage. And it was impossible to guess the magnitude of that damage. There were too many other firms that looked like Bear in terms of their leverage, their dependence on short-term funding, and their exposure to devastating losses as the housing market dropped and recession fears mounted.


pages: 460 words: 122,556

The End of Wall Street by Roger Lowenstein

"World Economic Forum" Davos, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, benefit corporation, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, break the buck, Brownian motion, Carmen Reinhart, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fear of failure, financial deregulation, financial engineering, fixed income, geopolitical risk, Glass-Steagall Act, Greenspan put, high net worth, Hyman Minsky, interest rate derivative, invisible hand, junk bonds, Ken Thompson, Kenneth Rogoff, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market bubble, Martin Wolf, Michael Milken, money market fund, moral hazard, mortgage debt, negative equity, Northern Rock, Ponzi scheme, profit motive, race to the bottom, risk tolerance, Ronald Reagan, Rubik’s Cube, Savings and loan crisis, savings glut, short selling, sovereign wealth fund, statistical model, the payments system, too big to fail, tulip mania, Y2K

Betraying his fear of another Bear Stearns, Paulson declared, “We need to create a resolution process that ensures the financial system can withstand the failure of a large complex financial firm.” He stressed that he wanted to reduce the “perception” that the government considered some firms too big to fail. Yet he added, in somewhat contradictory fashion, that his first duty was ensuring market stability.12 The tension between stability and moral hazard had raged since Bear Stearns, and it was not going away. Investors in Fannie Mae and Freddie Mac were highly unsettled, and Fannie and Freddie—responsible for about half of America’s mortgages—were as close to “too big to fail” as any corporations in existence. On June 30, two days prior to Paulson’s speech, Fannie Mae’s stock had plunged by 6 percent and Freddie Mac’s by 8 percent.

Having won from the government a massive guarantee, Citi was hungrily, even greedily, attempting to extract from its partner every morsel of its remaining worth. Perhaps Pandit judged that he could dictate terms because, as he knew, the government was so invested in the agreement. Citigroup was seen as truly too big to fail, and any upset to it horrified the Fed. For the better part of the week, Pandit’s negotiators ploddingly pressed their case. On Thursday, the two CEOs met in New York again. With the deadline only twenty-four hours away, the rival teams were laboring under tremendous pressure, two of the execs frantically scribbling terms on a napkin.

In general, there was greater agreement that reform was necessary than over what it should entail. Legislative attention focused on four areas:1. Protecting consumers of financial products such as mortgages and credit cards 2. Regulating complex instruments such as derivatives 3. Obviating the need for future government bailouts, either by (a) keeping banks from becoming too big to fail or (b) ensuring that big banks did not assume too much risk 4. Limiting Wall Street bonuses The public embraced only the last of these. Early in 2009, after revelations of continued outsized bonus payments at AIG and Merrill Lynch, an uproar ensued. Astonishingly, Merrill had paid million-dollar bonuses to approximately seven hundred employees in 2008, a year in which the firm lost $27 billion and in which both it and its acquirer were rescued with federal TARP monies.


pages: 538 words: 121,670

Republic, Lost: How Money Corrupts Congress--And a Plan to Stop It by Lawrence Lessig

air traffic controllers' union, Alan Greenspan, asset-backed security, banking crisis, carbon tax, carried interest, circulation of elites, cognitive dissonance, corporate personhood, correlation does not imply causation, crony capitalism, David Brooks, Edward Glaeser, Filter Bubble, financial deregulation, financial innovation, financial intermediation, Glass-Steagall Act, Greenspan put, invisible hand, jimmy wales, low interest rates, Martin Wolf, meta-analysis, Mikhail Gorbachev, moral hazard, Pareto efficiency, place-making, profit maximization, public intellectual, Ralph Nader, regulatory arbitrage, rent-seeking, Ronald Reagan, Sam Peltzman, Savings and loan crisis, Silicon Valley, single-payer health, The Wealth of Nations by Adam Smith, too big to fail, TSMC, Tyler Cowen, upwardly mobile, WikiLeaks, Yochai Benkler, Zipcar

Simon Johnson and James Kwak, 13 Bankers (New York: Pantheon Books, 2010), 151–52. The change was in the Federal Deposit Insurance Corporation Improvement Act of 1991. 42. Ibid., 180. In a later analysis, Kwak writes “that the [‘too big to fail’] subsidy exists, even after controlling for other factors that explain bank funding costs, and that it is in the range of 50 to 73 basis points.” James Kwak, “Who Is Too Big to Fail?” Presented at “New Ideas for Limiting Bank Size,” conference of the Fordham Corporate Law Center, Fordham Law School, New York, March 12, 2010, 26. 43. Financial Crisis Inquiry Commission, Financial Crisis Inquiry Report (2011), 58. 44.

“The obvious explanation,” Raghuram Rajan writes, “is that [they] did not think they would need to bear losses because the government would step in.”40 Simon Johnson and James Kwak point to at least one case in which the financial executives of one major bank calibrated the risk they would take based upon the government’s decision to expand the bailout capacity of the Federal Reserve.41 They and others have pointed to the discount the market gave big banks for their cost of capital as evidence that the market believed those banks “too big to fail”: “Large banks were able to borrow money at rates 0.78 percentage points more cheaply than smaller banks, up from an average of 0.29 percentage points from 2000 through 2007.”42 Harvey Miller, the bankruptcy counsel for Lehman Brothers, was even more explicit than this: As he told the Financial Crisis Inquiry Commission, hedge funds “expected the Fed to save Lehman, based on the Fed’s involvement in [previous crises].

As Simon Johnson and James Kwak calculated the advantage in 2009: “Large banks were able to borrow money at rates 0.78nsu mo percentage points more cheaply than smaller banks, up from an average of 0.29 percentage points from 2000 through 2007.”37 “In the period since” the crisis, as Oliver Hart and Luigi Zingales summarize a study by economists Dean Baker and Travis McArthur: “the spread had grown to 0.49 percentage points. This increased spread is the market’s estimate of the benefit of the implicit insurance offered to large banks by the ‘too big to fail’ policy. For the 18 American banks with more than $100 billion each in assets, this advantage corresponds to a roughly $34 billion total subsidy per year.”38 A $34 billion subsidy per year: that’s 500,000 elementary school teachers, or 600,000 firefighters, or 4.4 million slots for kids in Head Start programs, or coverage for 4 million veterans in VA hospitals.39 We don’t spend that money on those worthy causes in America.


pages: 351 words: 102,379

Too big to fail: the inside story of how Wall Street and Washington fought to save the financial system from crisis--and themselves by Andrew Ross Sorkin

"World Economic Forum" Davos, affirmative action, Alan Greenspan, Andy Kessler, Asian financial crisis, Bear Stearns, Berlin Wall, book value, break the buck, BRICs, business cycle, Carl Icahn, collapse of Lehman Brothers, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, deal flow, Dr. Strangelove, Emanuel Derman, Fall of the Berlin Wall, fear of failure, financial engineering, fixed income, Glass-Steagall Act, Goldman Sachs: Vampire Squid, housing crisis, indoor plumbing, invisible hand, junk bonds, Ken Thompson, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market bubble, Michael Milken, Mikhail Gorbachev, money market fund, moral hazard, naked short selling, NetJets, Northern Rock, oil shock, paper trading, proprietary trading, risk tolerance, Robert Shiller, rolodex, Ronald Reagan, Savings and loan crisis, savings glut, shareholder value, short selling, sovereign wealth fund, supply-chain management, too big to fail, uptick rule, value at risk, éminence grise

Too Big to Fail TOO BIG TO FAIL The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves Andrew Ross Sorkin VIKING VIKING Published by the Penguin Group Penguin Group (USA) Inc., 375 Hudson Street, New York, New York 10014, U.S.A. • Penguin Group (Canada), 90 Eglinton Avenue East, Suite 700, Toronto, Ontario, Canada M4P 2Y3 (a division of Pearson Penguin Canada Inc.) • Penguin Books Ltd, 80 Strand, London WC2R 0RL, England • Penguin Ireland, 25 St. Stephen’s Green, Dublin 2, Ireland (a division of Penguin Books Ltd) • Penguin Books Australia Ltd, 250 Camberwell Road, Camberwell, Victoria 3124, Australia (a division of Pearson Australia Group Pty Ltd) • Penguin Books India Pvt Ltd, 11 Community Centre, Panchsheel Park, New Delhi–110 017, India • Penguin Group (NZ), 67 Apollo Drive, Rosedale, North Shore 0632, New Zealand (a division of Pearson New Zealand Ltd) • Penguin Books (South Africa) (Pty) Ltd, 24 Sturdee Avenue, Rosebank, Johannesburg 2196, South Africa Penguin Books Ltd, Registered Offices: 80 Strand, London WC2R 0RL, England First published in 2009 by Viking Penguin, a member of Penguin Group (USA) Inc.

Macchiaroli, associate director, Division of Trading and Markets Erik R. Sirri, director, Division of Market Regulation Linda Chatman Thomsen, director, Division of Enforcement White House Joshua B. Bolten, chief of staff, Office of the President George W. Bush, president of the United States Too Big to Fail PROLOGUE Standing in the kitchen of his Park Avenue apartment, Jamie Dimon poured himself a cup of coffee, hoping it might ease his headache. He was recovering from a slight hangover, but his head really hurt for a different reason: He knew too much. It was just past 7:00 a.m. on the morning of Saturday, September 13, 2008.

But never have I witnessed such fundamental and dramatic changes in business paradigms and the spectacular self-destruction of storied institutions. This extraordinary time has left us with a giant puzzle—a mystery, really—that still needs to be solved, so we can learn from our mistakes. This book is an effort to begin putting those pieces together. At its core Too Big to Fail is a chronicle of failure—a failure that brought the world to its knees and raised questions about the very nature of capitalism. It is an intimate portrait of the dedicated and often baffled individuals who struggled—often at great personal sacrifice but just as often for self-preservation—to spare the world and themselves an even more calamitous outcome.


pages: 1,066 words: 273,703

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

"there is no alternative" (TINA), "World Economic Forum" Davos, Affordable Care Act / Obamacare, Alan Greenspan, Apple's 1984 Super Bowl advert, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bond market vigilante , book value, Boris Johnson, bread and circuses, break the buck, Bretton Woods, Brexit referendum, BRICs, British Empire, business cycle, business logic, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, company town, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, currency risk, dark matter, deindustrialization, desegregation, Detroit bankruptcy, Dissolution of the Soviet Union, diversification, Doha Development Round, Donald Trump, Edward Glaeser, Edward Snowden, en.wikipedia.org, energy security, eurozone crisis, Fall of the Berlin Wall, family office, financial engineering, financial intermediation, fixed income, Flash crash, forward guidance, friendly fire, full employment, global reserve currency, global supply chain, global value chain, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, high-speed rail, housing crisis, Hyman Minsky, illegal immigration, immigration reform, income inequality, interest rate derivative, interest rate swap, inverted yield curve, junk bonds, Kenneth Rogoff, large denomination, light touch regulation, Long Term Capital Management, low interest rates, margin call, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, military-industrial complex, mittelstand, money market fund, moral hazard, mortgage debt, mutually assured destruction, negative equity, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shale / tar sands, old-boy network, open economy, opioid epidemic / opioid crisis, paradox of thrift, Peter Thiel, Ponzi scheme, Post-Keynesian economics, post-truth, predatory finance, price stability, private sector deleveraging, proprietary trading, purchasing power parity, quantitative easing, race to the bottom, reserve currency, risk tolerance, Ronald Reagan, Savings and loan crisis, savings glut, secular stagnation, Silicon Valley, South China Sea, sovereign wealth fund, special drawing rights, Steve Bannon, structural adjustment programs, tail risk, The Great Moderation, Tim Cook: Apple, too big to fail, trade liberalization, upwardly mobile, Washington Consensus, We are the 99%, white flight, WikiLeaks, women in the workforce, Works Progress Administration, yield curve, éminence grise

Morgan did not need the money, and by agreeing to go along with the government’s efforts to stop the run, Dimon passed up the opportunity to predate any more of his weaker competitors. For critics of the bailout, like Sheila Bair of the FDIC, it seemed that the entire process was a smoke screen put up to hide a bailout of Citigroup.112 The Clinton-era network was still at work. Citi was not just too big to fail. It was too well connected. Whatever one thinks of this interpretation, it is undeniable that as soon as the extreme panic of early October had passed, the pretense of equal treatment was dropped. The October stabilization was not enough for Citigroup. In November it disclosed huge losses and announced fifty-two thousand layoffs.

When Geithner resisted bank nationalization it was to shield the monetary authorities as much as any individual bank. A comprehensive attack on Wall Street could all too easily spill over into an attack on the agencies that oversaw its business. In 2009 “audit the Fed” was a battle cry on both left and right. With Geithner at the helm, the Treasury’s response to the crisis was not to tackle “too big to fail” by breaking up the biggest banks. Nor was it to bring the interests of wider society to bear by way of politicized oversight. Instead, the Treasury’s solution was to increase the oversight and managerial capacities of the state’s regulatory agencies—the Treasury itself, the key regulators and the Fed.

Was it the breakdown of responsibility in the extended chains of mortgage securitization that poisoned the well? In which case securitizers should be required to have skin in the game (Title IX—Investor Protections). Was the sheer size of banks at the root of all the problems? Were they simply too big to fail? In which case the answer was to restrict bailouts and to make the industry pay for them (Title II—Orderly Liquidation Authority) and to cap banks’ further growth (Title VI, sections 622 and 623). Had investment banks used client money to gamble? If so, the thing to do was to reinstate 1930s-style divisions between commercial and investment banking by way of the so-called Volcker rule banning “proprietary trading” (Title VI, Volcker rule).


Undoing the Demos: Neoliberalism's Stealth Revolution by Wendy Brown

Affordable Care Act / Obamacare, bitcoin, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, corporate governance, credit crunch, crowdsourcing, David Brooks, Food sovereignty, haute couture, Herbert Marcuse, immigration reform, income inequality, invisible hand, labor-force participation, late capitalism, means of production, new economy, obamacare, occupational segregation, Philip Mirowski, public intellectual, Ronald Reagan, sexual politics, shareholder value, sharing economy, subprime mortgage crisis, TED Talk, The Chicago School, the long tail, the market place, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, trickle-down economics, Washington Consensus, Wolfgang Streeck, young professional, zero-sum game

This is not true of strategic sacrifice in a game, such as chess, where one calculates the gains expected from the move. 35. According to many analysts, the “too big to fail” problem is far worse than it was in 2008. “The six largest banks in the nation now have 67% of all the assets in the U.S. financial system, according to bank research firm SNL Financial. That amounts to $9.6 trillion, up 37% from five years ago.” Stephen Gandel, “By Every Measure, the Big Banks are Bigger,” CNN Money, September 13, 2013, http://finance.fortune.cnn.com/2013/09/13/too-big-to-fail-banks. 36. Hubert and Mauss, Sacrifice, pp. 98–99. 37. Girard, “Violence and the Sacred,” p. 247. 38.

Financialization also spurs the state to develop derivative markets of its own in everything from terror prediction to student loans and mortgages. 6) The rise of “governance,” the meshing of political and business lexicons through which neoliberal reason is disseminated; the antipathy of governance to politics; and the displacement of the rule of law with instruments of governance such as benchmarks, guidelines, buyins, and best practices. 7) The transformation of economic actors and action by governance such that teamwork, responsibilization, and stakeholder consensus replace individual interest; the shift, in short from a neoliberal discourse of free subjects to a discourse featuring more explicitly governed, “responsibilized,” and managed subjects. 8) The way that governance integrates self-investing and responsibilized human capital into the project of a growing economy, further mitigating the importance of individual “interests” and freedom. 9) As elements of this governance, the combination of devolved authority and responsibilization of the subject, which together intensify the effect of “omnes et singulatim” — all and each — power exercised through massification and isolation. 10) The way these features of governance and human capital generate a citizen who is both integrated into and identified with the project C h a r t in g N eo l ib e r a l P o l i t i c a l R at i o n a l i t y 71 of the economic health of a nation, a citizen who can be legitimately shed or sacrificed when necessary, especially in the context of austerity politics. 11) The way that “too big to fail” has as its complement “too small to protect”: where there are only capitals and competition among them, not only will some win while others lose (inequality and competition unto death replaces equality and commitment to protect life), but some will be rescued and resuscitated, while others will be cast off or left to perish (owners of small farms and small businesses, those with underwater mortgages, indebted and unemployed college graduates).

Moreover, the addressee of sacrifice is not the nation, not the demos, but the spectacularly imbricated state and economy on which all life depends, but which also command destruction and deprivation. In the 2008 subprime mortgage crisis, for example, 700 billion taxpayer dollars and over five million homeowners were fed to banks “too big to fail.”35 Thus we are returned to the religious valence of sacrifice. In shared sacrifice for economic restoration, we sacrifice “to,” rather than “for,” and make an offering to a supreme power on which we are radically dependent, but that owes us nothing. We are called to offer life to propitiate and regenerate its life-giving capacities . . . but without any guarantee that the benefits of this sacrifice will redound to us.


pages: 387 words: 119,244

Making It Happen: Fred Goodwin, RBS and the Men Who Blew Up the British Economy by Iain Martin

Alan Greenspan, asset-backed security, bank run, Basel III, Bear Stearns, beat the dealer, Big bang: deregulation of the City of London, Bletchley Park, call centre, central bank independence, computer age, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, deindustrialization, deskilling, Edward Thorp, Etonian, Eugene Fama: efficient market hypothesis, eurozone crisis, falling living standards, financial deregulation, financial engineering, financial innovation, G4S, Glass-Steagall Act, high net worth, interest rate swap, invisible hand, joint-stock company, Kickstarter, light touch regulation, London Whale, Long Term Capital Management, long term incentive plan, low interest rates, moral hazard, negative equity, Neil Kinnock, Nick Leeson, North Sea oil, Northern Rock, old-boy network, pets.com, proprietary trading, Red Clydeside, shareholder value, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile, value at risk, warehouse robotics

Since the financial crisis that notion has been challenged, most notably in the UK by Andrew Haldane of the Bank of England. It is a well-established theory that some banks were so systematically important that when the crisis came they were ‘too big to fail’. Government felt it had no choice other than to rescue them. Haldane refers in addition to them being ‘too big to be efficient’ in the first place. Academics have explored the ‘implicit subsidy’ of ‘too big to fail’ banks, which suggests that they obtain lower funding costs from the markets because it is factored in that we, the taxpayer, will not let them go bust if it comes to it.4 So their apparent efficiencies of scale may well depend on us being there to foot the bill and bail them out.5 As Professor John Kay has pointed out, this is not a sustainable set-up in a democracy: ‘When the next crisis hits, and it will, that frustrated public is likely to turn, not just on politicians who have been negligently lavish with public funds, or on bankers, but on the market system.

He wrote: ‘Large global institutions have often proved more resilient than others because their diversified business model ensures that losses in one part of the enterprise can be cushioned by revenues in other parts.’ This seems not to have been the case in the collapse of RBS. 4 ‘The Social Costs and Benefits of Too-Big-To-Fail Banks: A “Bounding”Exercise’, John H. Boyd and Amanda Heitz, University of Minnesota, February 2012. 5 ‘The implicit subsidy of banks’, Joseph Noss and Rhiannon Sowerbutts, Financial Stability paper, 15 May 2012. Bank of England. 6 ‘“Too big to fail” is too dumb an idea to keep’, John Kay, Financial Times, 27 October 2009. 7 The credit for the development of the efficient market hypothesis is often given to Professor Eugene Fama, of the University of Chicago Booth School of Business.

Academics have explored the ‘implicit subsidy’ of ‘too big to fail’ banks, which suggests that they obtain lower funding costs from the markets because it is factored in that we, the taxpayer, will not let them go bust if it comes to it.4 So their apparent efficiencies of scale may well depend on us being there to foot the bill and bail them out.5 As Professor John Kay has pointed out, this is not a sustainable set-up in a democracy: ‘When the next crisis hits, and it will, that frustrated public is likely to turn, not just on politicians who have been negligently lavish with public funds, or on bankers, but on the market system. What is at stake now may not just be the future of finance, but the future of capitalism.’6 If they are too big to fail and too big to be efficient, then ultimately the mega-banks are too big to be useful. So far the UK government has been resistant to radical ideas of ordering the break-up of the banks, although it wants to encourage new entrants to the banking market and has done a little, not much, to encourage that.


pages: 526 words: 158,913

Crash of the Titans: Greed, Hubris, the Fall of Merrill Lynch, and the Near-Collapse of Bank of America by Greg Farrell

"World Economic Forum" Davos, Airbus A320, Apple's 1984 Super Bowl advert, bank run, banking crisis, Bear Stearns, Black Monday: stock market crash in 1987, bonus culture, call centre, Captain Sullenberger Hudson, collapse of Lehman Brothers, collateralized debt obligation, compensation consultant, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, financial engineering, financial innovation, fixed income, glass ceiling, Glass-Steagall Act, high net worth, junk bonds, Ken Thompson, Long Term Capital Management, mass affluent, Mexican peso crisis / tequila crisis, Michael Milken, Nelson Mandela, plutocrats, Ronald Reagan, six sigma, sovereign wealth fund, technology bubble, too big to fail, US Airways Flight 1549, yield curve

., p. 614. 9 Paulson declared that Lehman was in deep trouble: On the Brink, p. 192. 10 Thain’s driver took him to a restaurant: Too Big to Fail, pp. 305–306. CHAPTER 13. THE LONGEST DAY 1 Geithner reiterated his stance: Too Big to Fail, p. 311. 2 Before hanging up, Herlihy: Ibid., p. 314. 3 Sometime after 10:30, the group comprised: Ibid., p. 321. 4 “We have to figure out how to organize ourselves”: On the Brink, pp. 197–98. 5 The treasury secretary warned his former subordinate: Ibid., pp. 203–204. 6 After brief opening remarks from Thain: Too Big to Fail, p. 331. 7 Fleming said he was going to ask for a “three-handle,”: Ibid., p. 339.

PROLOGUE 1 Waccabuc: golf scores from Metropolitan Golf Association website. 2 Roanoke, grew up in Wedowee: “Shaking Up Merrill,” by Emily Thornton, with Anne Tergesen and David Welch, BusinessWeek, Nov. 12, 2001. 3 “The modest sums of the thrifty”: from an unpublished history of Merrill Lynch, by William Ecenbarger, obtained by the author. 4 “bullish on America”: Ibid. 5 “In 2001”: “Merrill Picks Heir Apparent to Top Job,” by Joseph Kahn, The New York Times, July 25, 2001; “Merrill Lynch Names O’Neal President,” by Charles Gasparino, The Wall Street Journal, July 25, 2001. 6 “O’Neal was about to meet with Ken Lewis”: Too Big to Fail, by Andrew Ross Sorkin, Viking, 2009, p. 314. 7 played golf almost every day: Metropolitan Golf Association website. 8 “Through a series of mergers”: The Story of NationsBank, by Howard E. Covington, Jr., and Marion A. Ellis. 9 “Curl and Lewis … exchanged glances as the moments ticked by”: Too Big to Fail, p. 315. CHAPTER 1. THE YOUNG TURK 1 “My name’s Tom Spinelli”: transcript of Stan O’Neal’s presentation at Merrill Lynch annual meeting in Princeton, New Jersey, April 27, 2007. 2 caused investors such as Merrill Lynch to seize some of the CDOs as collateral: The Sellout, by Charles Gasparino, Harper Business, 2009, p. 265. 3 Stan O’Neal was one of the best paid executives on Wall Street: O’Neal’s compensation figures taken from documents prepared on behalf of Rep.

THE ADVENTURES OF SUPER-THAIN 1 He was a star on his high school wrestling team … (and other details from Thain’s background in Illinois): “The Adventures of Super-Thain,” by Justin Schack, Institutional Investor, June 14, 2006. 2 That summer, he shipped off to Cincinnati: Ibid. 3 Thain’s move to the Exchange: “NYSE’s Steady Pilot,” by Joe Weber, BusinessWeek, Feb. 28, 2006. 4 When Thain called his first management committee meeting to order (and other details about Thain’s arrival at the Exchange): “The Exchange Faces Change,” by Julie Creswell, Fortune, Aug. 9, 2004. 5 Thain fires the barber at the NYSE: “The Taming of Merrill Lynch,” by Gary Weiss, Portfolio, April 14, 2008. 6 Then there was the special elevator: Sorkin, Too Big to Fail, p. 139. 7 Details about Thain’s office and the bill for individual items: “John Thain’s $87,000 Rug,” by Charlie Gasparino, the Daily Beast/CNBC, Jan. 22, 2009. 8 John Thain reached out to Stan O’Neal: Sorkin, Too Big to Fail, pp. 141–42. CHAPTER 7. THE SMARTEST GUY IN THE ROOM 1 Thain arrived the evening before his speech: “The Taming of Merrill Lynch,” by Gary Weiss, Portfolio. 2 “When you’re the smartest guy in the room”: “Merrill’s Repairman,” by Lisa Kassenaar and Yalman Onaran, Bloomberg Markets, February 2008. 3 In an interview with a French newspaper: Le Figaro, March 8, 2008. 4 That same month, he told a Spanish newspaper: El Pais, March 16, 2008. 5 “He is a very popular guy”: “Merrill’s Risk Manager—New Chief John Thain on What Led to the Losses and Why He’s Hiring Goldman Sachs Executives,” by Susanne Craig and Randall Smith, The Wall Street Journal, Jan. 18, 2008.


pages: 303 words: 100,516

Billion Dollar Loser: The Epic Rise and Spectacular Fall of Adam Neumann and WeWork by Reeves Wiedeman

Adam Neumann (WeWork), Airbnb, asset light, barriers to entry, Black Lives Matter, Blitzscaling, Burning Man, call centre, carbon footprint, company town, coronavirus, corporate governance, COVID-19, cryptocurrency, digital nomad, do what you love, Donald Trump, driverless car, dumpster diving, East Village, eat what you kill, Elon Musk, Erlich Bachman, fake news, fear of failure, Gavin Belson, Gordon Gekko, housing crisis, index fund, Jeff Bezos, low interest rates, Lyft, Marc Benioff, margin call, Mark Zuckerberg, Masayoshi Son, Maui Hawaii, medical residency, Menlo Park, microapartment, mortgage debt, Network effects, new economy, prosperity theology / prosperity gospel / gospel of success, reality distortion field, ride hailing / ride sharing, Salesforce, Sand Hill Road, sharing economy, Sheryl Sandberg, Silicon Valley, Silicon Valley startup, Skype, Snapchat, SoftBank, software as a service, sovereign wealth fund, starchitect, stealth mode startup, Steve Jobs, Steve Wozniak, subscription business, TechCrunch disrupt, the High Line, Tim Cook: Apple, too big to fail, Travis Kalanick, Uber for X, uber lyft, Vision Fund, WeWork, zero-sum game

The company was on target to overtake JPMorgan as New York’s largest office tenant, just as Adam had promised it would, and he hoped to make a splash in doing so: WeWork was planning to lease a dozen floors in One World Trade Center, where the Twin Towers once stood, including space occupied by Condé Nast, the once-glamorous magazine publisher—another bastion of the old guard pushed out by Adam and Masa’s expansion. Andrew Ross Sorkin, the New York Times reporter who wrote the book Too Big to Fail, about the 2008 financial crisis, thought that the phrase Adam had long hoped would define his company might now realistically apply to WeWork. “The idea of ‘too big to fail’ has long applied to banks and whether the government would come to the rescue to prop them up,” Sorkin wrote. “In this case, landlords all over the world might find themselves in the uncomfortable position of having to help save a failing tenant simply because the tenant is so large.”

Neumann had been racing against time for the past decade, riding the longest economic expansion in American history while telling anyone who questioned his risky growth strategy that he wasn’t playing by traditional business rules: he had launched WeWork on the heels of the Great Recession, and his goal was to become the kind of institution deemed Too Big to Fail before the next one arrived. Now, in the decade’s final turn, he was racing to the finish line. WeWork was running out of money. Neumann had tapped out the world of private capital and racked up hundreds of millions of dollars in debt. He was preparing to take WeWork public: the only viable path to continue its growth, as well as an opportunity to cash in on what he and others at WeWork had built.

“We got out of coworking because the margins were so bad it didn’t seem like you were going to ever get there.” Later, Schwartz met Adam for lunch, during which he expressed his concern about Neumann’s industry. “I don’t have to worry about that,” Adam said, explaining that so long as the economy was humming along, he had only one goal. “My job is to keep growing until I’m too big to fail.” Adam wanted to become just as enmeshed in the real estate world as the big banks had become in the broader economy; if WeWork grew large enough, landlords would have to bend to its will. Adam’s focus on growth at the expense of profitability fit with an emerging business theory that it was best to acquire customers by any means necessary and then figure out how to make money later.


pages: 549 words: 147,112

The Lost Bank: The Story of Washington Mutual-The Biggest Bank Failure in American History by Kirsten Grind

"World Economic Forum" Davos, Alan Greenspan, asset-backed security, bank run, banking crisis, Bear Stearns, big-box store, call centre, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, financial engineering, fixed income, fulfillment center, Glass-Steagall Act, housing crisis, junk bonds, low interest rates, Maui Hawaii, money market fund, mortgage debt, naked short selling, NetJets, Savings and loan crisis, shareholder value, short selling, Shoshana Zuboff, Skype, too big to fail, Y2K

After Reuters ran a story suggesting Continental would file for bankruptcy, the bank’s customers began withdrawing their money. Other banks stepped up with a $4.5 billion bailout package to help Continental, fearful of what its failure could mean to the industry. The money wasn’t enough. The federal government had to decide: Was Continental too big to fail? It was the first time the description arose. (An acronym was born: TBTF.) If too many other financial institutions and companies were tied up with it, the bank’s failure could spark an even bigger crisis. The government looked for another company to buy Continental but couldn’t find one. Finally, it cobbled together a bailout package that included buying some of the bank’s $400 million in bad loans and propping it up with capital.

The day after WaMu failed, when a reporter from The Seattle Times called, asking for a quote, he unleashed his anger.3 “That it comes to a demise like this is absolutely pathetic,” he said. “It was a great institution for 110 years or more, and to see it so mishandled that it would be the largest bank failure in the country is abominable, to put it mildly.” While the debate over whether banks had grown too large (“too big to fail”) had entered popular consciousness, Pepper didn’t think that was the problem at WaMu. “Big institutions can succeed,” he told the newspaper, “but they have to be run like little institutions. You have to give autonomy to the branches, and have people being nice to each other. You can’t have this monolith.”

On the roots of the financial crisis: All the Devils Are Here: The Hidden History of the Financial Crisis by Bethany McLean and Joe Nocera. On the early years at Long Beach Mortgage: The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America—and Spawned a Global Crisis by Michael W. Hudson. On the ticktock of the crucial months of the crisis in 2008: Too Big to Fail by Andrew Ross Sorkin. And on JPMorgan Chase: Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase by Duff McDonald. To research Long Beach Mortgage, I took a weeks-long road trip to Southern California, interviewing brokers and account executives at Long Beach and at other companies in the subprime industry.


pages: 554 words: 158,687

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

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

The third and most striking aspect of market-negating regulation in the course of financialization, however, has been the gradual prevalence of the principle of ‘too big to fail’ among financial institutions. Banks considered ‘too big to fail’ have often been effectively (if tacitly) protected against failure on the grounds that failure would have severe externalities, including the possibility of generalized collapse of the financial system. Intervention has, therefore, focused on avoiding the putative ‘systemic’ risk by protecting the solvency of banks, rather than simply providing liquidity; public funds have frequently been made available to financial institutions for this purpose. The principle of ‘too big to fail’ clearly poses moral hazard problems since it protects bank shareholders and bondholders from the consequences of failure.

Acharya and Matthew Richardson, ’Causes of the Financial Crisis’, Critical Review 21:2, 2009; Darrell Darrell Duffie, How Big Banks Fail and What to Do About It, Princeton, NJ: Princeton University Press, 2011. Note that Gary Dymski has offered a critical perspective on ‘too big to fail’ banks, arguing that their emergence has placed a constraint on the ability of the authorities to adopt radical measures to resolve a crisis. ‘Megabanks’ have a hold on financial and regulatory policy, shaping it according to their own preferences. Gary Dymski, ‘Genie out of the Bottle: The Evolution of Too-Big-to-Fail Policy and Banking Strategy in the US’, 8 June 2011, at postkeynesian.net. 33 The following account of the crisis draws heavily on Costas Lapavitsas, ‘Financialised Capitalism: Crisis and Financial Expropriation’, Historical Materialism 17:2, 2009, pp. 114–48. 34 Markus Brunnermeier and Lasse Heje Pedersen have distinguished between ‘funding’ and ‘market’ liquidity in the context of the crisis (‘Market Liquidity and Funding Liquidity’, Review of Financial Studies 22:6, 2009).

The cause of the run was concern about the liquidity of the bonds used as collateral for repos, particularly when these bonds were related to the subprime market. The result was that the US financial system became insolvent since it could not service its debts. The causes of the US banking crisis have also been attributed to the emergence of banks that are ‘too big to fail’. This issue is directly related to the regulation of the financial system – and is thus discussed in Chapter 10 – but it also has a bearing on the unfolding of the crisis. Lisa DeFerrari and David Palmer recognized the dominant role of a few financial institutions already in the early 2000s, coining the term ‘large complex banking organizations’.


pages: 278 words: 82,069

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

During the heady days of 1999, for example, the magazine edi-torialized in “Breaking Glass-Steagall” against the “grossly misnamed ‘Financial Services Modernization Act,’” which would remove the Depression-era wall between commercial and in- ix vestment banks and thus pave the way for “future taxpayer bailouts of too-big-to-fail financial institutions.” As far back as 1990, Robert Sherrill discerned in the S&L crisis the early signs that something similar might be in store for the banking sector. At that time, Sherrill noted, the chorus calling for deregulation was recklessly demanding the repeal of laws that “protect the banking sector from its worst instincts by insisting that the banks remain banks, and not become gamblers, hucksters and hustlers in other lines as well.”

A photo op Obama arranged with his economic advisers a few weeks before the election tells the story. Arrayed on either side were policy leaders from the old order. Former Federal Reserve chair Paul Volcker collaborated in the initial deregulation of banking in 1980 and presided over the initial bail-outs of banks deemed “too big to fail.” Robert Rubin was the architect of Clinton’s center-right economic strategy and is now senior counselor at Citigroup, itself endangered and the recipient of $25 billion in public aid. Lawrence Summers, disgraced as president of Harvard, is now managing partner of D. E. Shaw, a $39 billion private-equity firm and hedge fund that specializes in es-oteric mathematical investing strategies.

Now the ban on common ownership has been lifted—and the wall separating banking and commerce is likely soon to be breached. The misnamed Financial Services Modernization Act will usher in another round of record-breaking mergers, as companies rush to combine into “one stop shopping” operations, concentrating financial power in trillion-dollar global giants and paving the way for future taxpayer bailouts of too-big-to-fail financial corporations. Regulation of this new universe will be minimal, with powers scattered among a half-dozen federal agencies and fifty state insurance departments—none with sufficient clout to do the job. The final two major debates over the bill’s provisions focused not on the core-questions of concentrated financial power and regulatory controls but on issues of privacy and lending practices.


pages: 316 words: 87,486

Listen, Liberal: Or, What Ever Happened to the Party of the People? by Thomas Frank

Affordable Care Act / Obamacare, Airbnb, Alan Greenspan, Amazon Mechanical Turk, American ideology, antiwork, barriers to entry, Berlin Wall, Bernie Sanders, Black Lives Matter, blue-collar work, Burning Man, centre right, circulation of elites, Clayton Christensen, collective bargaining, Credit Default Swap, David Brooks, deindustrialization, disruptive innovation, Donald Trump, driverless car, Edward Snowden, Evgeny Morozov, Fall of the Berlin Wall, financial engineering, financial innovation, Frank Gehry, fulfillment center, full employment, George Gilder, gig economy, Gini coefficient, Glass-Steagall Act, high-speed rail, income inequality, independent contractor, Jaron Lanier, Jeff Bezos, knowledge economy, knowledge worker, Lean Startup, mandatory minimum, Marc Andreessen, Mark Zuckerberg, market bubble, mass immigration, mass incarceration, McMansion, microcredit, mobile money, moral panic, mortgage debt, Nelson Mandela, new economy, obamacare, payday loans, Peter Thiel, plutocrats, Ponzi scheme, post-industrial society, postindustrial economy, pre–internet, profit maximization, profit motive, race to the bottom, Republic of Letters, Richard Florida, ride hailing / ride sharing, Ronald Reagan, Savings and loan crisis, sharing economy, Silicon Valley, Steve Jobs, Steven Levy, TaskRabbit, tech worker, TED Talk, Thorstein Veblen, too big to fail, Travis Kalanick, Uber for X, union organizing, urban decay, WeWork, women in the workforce, Works Progress Administration, young professional

The smaller banks Clinton was pushing toward extinction (i.e., “the weak”) tended to be much more prudent lenders than their giant cousins (“the strong”), which before long were issuing mortgages to anyone who wanted one. After the orgy of insane lending climaxed in catastrophe a decade later, of course, “the strong” had to be bailed out. They were “too big to fail” by then.32 Let us continue down the list of Democratic achievements of the 1990s. Telecom deregulation turned out to encourage monopoly building, not innovation; its main effects were the extinction of locally controlled radio stations and the bidding up of telecom shares in the great stock market bubble that burst during Clinton’s last year in office.

For fear of frightening the men of lower Manhattan, the Obama team dared undertake none of the serious measures the times obviously called for. No big Wall Street institutions were put into receivership or cut down to size. No important Wall Street bankers were terminated in the manner of the unfortunate chairman of General Motors. As a result, the situation continued as follows: The Wall Street banks, being “too big to fail,” enjoyed a more-or-less explicit government guarantee against bankruptcy, but in order to enjoy that protection they were not required to stop doing the risky things that had got them in so much trouble in the first place. It was the perfect outcome for them, with the taxpayers of an entire nation essentially staking them to endless turns at the roulette wheel.* Writing of this awful period, Elizabeth Warren (who worked then as a bailout oversight official) concluded that “the president chose his team, and when there was only so much time and so much money to go around, the president’s team chose Wall Street.”7 The classic and most direct solution to an epidemic of corrupt bank management and fraudulent bank lending is to use the authority that comes with rescuing failed banks to close those banks down or to fire those banks’ top managers.

Another landmark Thirties policy option—requiring banks to separate their investment operations from their commercial banking services—was ultimately taken up by Democrats, and a version of it was even written into the Dodd-Frank bank reform measure. Whether and how it will actually be enforced is unknown as of this writing, since the law’s provisions and loopholes are still being written and hollowed out by lawyers and regulators. We do know this: the too-big-to-fail banks are bigger than they were before the crisis, having swallowed up other banks as part of the rescue scheme. We also know that people who work in securities still make far more than those who toil in other industries—the average salary for people in that line of work in New York City was $404,000 in 2014—and their bonuses have almost returned to the levels achieved in the days before the crash.


pages: 457 words: 128,838

The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order by Paul Vigna, Michael J. Casey

Airbnb, Alan Greenspan, altcoin, Apple Newton, bank run, banking crisis, bitcoin, Bitcoin Ponzi scheme, blockchain, Bretton Woods, buy and hold, California gold rush, capital controls, carbon footprint, clean water, Cody Wilson, collaborative economy, collapse of Lehman Brothers, Columbine, Credit Default Swap, cross-border payments, cryptocurrency, David Graeber, decentralized internet, disinformation, disintermediation, Dogecoin, driverless car, Edward Snowden, Elon Musk, Ethereum, ethereum blockchain, fiat currency, financial engineering, financial innovation, Firefox, Flash crash, Ford Model T, Fractional reserve banking, Glass-Steagall Act, hacker house, Hacker News, Hernando de Soto, high net worth, informal economy, intangible asset, Internet of things, inventory management, Joi Ito, Julian Assange, Kickstarter, Kuwabatake Sanjuro: assassination market, litecoin, Long Term Capital Management, Lyft, M-Pesa, Marc Andreessen, Mark Zuckerberg, McMansion, means of production, Menlo Park, mobile money, Money creation, money: store of value / unit of account / medium of exchange, Nelson Mandela, Network effects, new economy, new new economy, Nixon shock, Nixon triggered the end of the Bretton Woods system, off-the-grid, offshore financial centre, payday loans, Pearl River Delta, peer-to-peer, peer-to-peer lending, pets.com, Ponzi scheme, prediction markets, price stability, printed gun, profit motive, QR code, RAND corporation, regulatory arbitrage, rent-seeking, reserve currency, Robert Shiller, Ross Ulbricht, Satoshi Nakamoto, seigniorage, shareholder value, sharing economy, short selling, Silicon Valley, Silicon Valley startup, Skype, smart contracts, special drawing rights, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, supply-chain management, Ted Nelson, The Great Moderation, the market place, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, Turing complete, Tyler Cowen, Tyler Cowen: Great Stagnation, Uber and Lyft, uber lyft, underbanked, Vitalik Buterin, WikiLeaks, Y Combinator, Y2K, zero-sum game, Zimmermann PGP

However, the freelance journalist: Ryan Selkis, “Dark Wallets Are a Regulatory Nightmare for Bitcoin,” TwoBitIdiot blog, May 1, 2014, http://two-bit-idiot.tumblr.com/post/84454892629/dark-wallets-are-a-regulatory-nightmare-for-bitcoin. 11. A New New Economy has by many measures only got more intense since that crisis: Luke Johnson, “Elizabeth Warren: ‘Too Big to Fail Is Worse Than Before Financial Crisis,” Huffington Post, November 12, 2013, http://www.huffingtonpost.com/2013/11/12/elizabeth-warren-too-big-to-fail_n_4260871.html. the widest wealth gap since the Great Depression: Scott Neuman, “Study Says America’s Income Gap Widest Since Great Depression,” NPR, September 10, 2013, http://www.npr.org/blogs/thetwo-way/2013/09/10/221124533/study-says-americas-income-gap-widest-since-great-depression.

It also created huge new opportunities for Wall Street to develop foreign-exchange trading. Now that the dollar was no longer pegged to gold, banks could take their credit-creation business global, setting the stage for the globalization of the world economy. It also paved the way to the multinational megabanks that would become too big to fail … and all the problems these would create. The happy experience of American manufacturing’s post-1971 revival was quickly marred by a new, entirely predictable scourge. Coupled with the oil blockade imposed by petroleum-exporting nations in 1973, the weaker and unhinged dollar immediately generated inflation; as the value of the world’s most important currency sank, the price of all the goods and services it bought rose.

The Fed’s zero-interest-rate policies and more than $3 trillion in bond-buying, along with similar actions from its counterparts in Europe and Japan, have forestalled disaster. But little has been done to resolve the long-term fiscal imbalances in the United States or to restructure a financial system dominated by the same TBTF (too big to fail) banks. The structural flaws of the European monetary system, with its untenable split between its political and monetary functions, are still firmly in place even after having been exposed when Greece, Ireland, Portugal, Spain, and then Italy all plunged into crisis from 2010 on. Meanwhile, in an entirely globalized economy in which the dollar is the currency of the world, not merely that of the United States, the limitations of a monetary policy dictated by domestic political imperatives have also been exposed.


pages: 429 words: 120,332

Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens by Nicholas Shaxson

Asian financial crisis, asset-backed security, bank run, battle of ideas, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, call centre, capital controls, collapse of Lehman Brothers, computerized trading, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, David Ricardo: comparative advantage, Double Irish / Dutch Sandwich, export processing zone, failed state, financial deregulation, financial engineering, financial innovation, Fractional reserve banking, full employment, Glass-Steagall Act, Global Witness, Golden arches theory, high net worth, income inequality, Kenneth Rogoff, laissez-faire capitalism, land reform, land value tax, light touch regulation, Londongrad, Long Term Capital Management, low interest rates, Martin Wolf, Money creation, money market fund, New Journalism, Northern Rock, offshore financial centre, oil shock, old-boy network, out of africa, passive income, plutocrats, Ponzi scheme, race to the bottom, regulatory arbitrage, reserve currency, Ronald Reagan, shareholder value, Suez crisis 1956, The Spirit Level, too big to fail, transfer pricing, vertical integration, Washington Consensus

The inflows have made matters worse still for ordinary U.S. taxpayers, let alone for foreigners being stiffed by their own wealthy and unaccountable elites. As the following chapters will show, the inflows delivered massive rewards to a small financial elite, while helping Wall Street to gain its too-big-to-fail stranglehold on the U.S. economy and the politicians in Washington. “Tax havens are engaged in economic warfare against the United States, and honest, hardworking Americans,” says Senator Carl Levin. He is quite right—but we should add that the United States in its role as a tax haven is conducting economic warfare against honest, hardworking people at home and around the world.

The offshore system provided Wall Street with a “get out of regulation free” card that enabled it to rebuild its powers overseas and then, as the United States turned itself in stages into a tax haven in its own right, at home. The end result was that the biggest banks were able to grow large enough to attain “too big to fail” status—which helped them in turn to become increasingly influential in the bastions of political power in Washington, eventually getting a grip on both main political parties, Democrat and Republican—a grip that is so strong that it amounts to political capture. Part of this process has involved a constant race to the bottom between jurisdictions.

In particular, the London-based Euromarkets, then the wider offshore world, provided the platform for U.S. banks in particular to escape tight domestic constraints and grow larger again, setting the stage for the political capture of Washington by the financial services industry, and the emergence of too-big-to-fail banking giants, fed by the implicit subsidies of taxpayer guarantees, plus the explicit subsidies of offshore tax avoidance, that continue to hold western economies in their stranglehold today. The emergence of the United States as an offshore jurisdiction in its own right attracted vast financial flows into the country, bolstering bankers’ powers even further.


pages: 291 words: 91,783

Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America by Matt Taibbi

addicted to oil, affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, Bear Stearns, Bernie Sanders, Bretton Woods, buy and hold, carried interest, classic study, clean water, collateralized debt obligation, collective bargaining, computerized trading, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, desegregation, diversification, diversified portfolio, Donald Trump, financial innovation, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Greenspan put, illegal immigration, interest rate swap, laissez-faire capitalism, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, medical malpractice, military-industrial complex, money market fund, moral hazard, mortgage debt, Nixon triggered the end of the Bretton Woods system, obamacare, passive investing, Ponzi scheme, prediction markets, proprietary trading, prudent man rule, quantitative easing, reserve currency, Ronald Reagan, Savings and loan crisis, Sergey Aleynikov, short selling, sovereign wealth fund, too big to fail, trickle-down economics, Y2K, Yom Kippur War

At this writing, Tea Partiers in Tennessee have just launched protests against Republican senator Bob Corker for announcing his willingness to work with outgoing Democrat Chris Dodd on the Consumer Financial Protection Agency Act, a bill that is pitifully weak in its specifics but at least addresses some of the major causes of the financial crisis—including mandating a new resolution authority section that would help prevent companies from becoming too big to fail and would force banks to pay for their own bailouts in the future. The same Tea Partiers who initially rallied against bailouts of individual homeowners now find themselves protesting against new laws that would force irresponsible banks in the future to bail themselves out. How was this accomplished?

The merger was frankly and openly illegal, precisely the sort of thing that Glass-Steagall had been designed to prevent—the dangerous concentration of capital in the hands of a single megacompany, creating potential conflicts of interest in which insurers and investment banks might be pressed to promote stocks or policies that benefit banks, not customers. Moreover, Glass-Steagall had helped prevent exactly the sort of situation we found ourselves subject to in 2008, when a handful of companies that were “too big to fail” went belly up thanks to their own arrogance and stupidity, and the government was left with no choice but to bail them out. But Weill was determined to do this deal, and he had the backing of Bill Clinton, Clinton’s Treasury secretary Bob Rubin (who would go on to earn $100-plus million at postmerger Citigroup), and, crucially, Alan Greenspan.

They have been pulling this same stunt for decades, and they’re preparing to do it again. If you want to understand how we got into this crisis, you first have to understand where all the money went—and in order to understand that, you first need to understand what Goldman has already gotten away with, a history exactly three bubbles long. Goldman wasn’t always a too-big-to-fail Wall Street behemoth and the ruthless, bluntly unapologetic face of kill-or-be-killed capitalism on steroids—just almost always. The bank was actually founded in 1882 by a German Jewish immigrant named Marcus Goldman, who built it up with his son-in-law, Samuel Sachs. They were pioneers in the use of commercial paper, which is just a fancy way of saying they made money lending out short-term IOUs to small-time vendors in downtown Manhattan.


pages: 261 words: 64,977

Pity the Billionaire: The Unexpected Resurgence of the American Right by Thomas Frank

Affordable Care Act / Obamacare, Alan Greenspan, bank run, Bear Stearns, big-box store, bonus culture, business cycle, carbon tax, classic study, collateralized debt obligation, collective bargaining, commoditize, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Deng Xiaoping, false flag, financial innovation, General Magic , Glass-Steagall Act, housing crisis, invisible hand, junk bonds, Kickstarter, low interest rates, money market fund, Naomi Klein, obamacare, Overton Window, payday loans, profit maximization, profit motive, road to serfdom, Robert Bork, Ronald Reagan, shareholder value, strikebreaker, The Chicago School, The Myth of the Rational Market, Thorstein Veblen, too big to fail, union organizing, Washington Consensus, white flight, Works Progress Administration

It could have put the “zombie banks” into receivership and commenced an orderly bankruptcy process, with no one allowed to get out of it by gimmicking their accounting. It could have broken up the banking industry and brought back strict regulation, along with a policy of zero tolerance for financial entities that are “too big to fail,” so that the temptation to rescue such institutions would disappear. Instead, our leaders allowed the biggest banks to get even bigger. They offered the banks an open-ended guarantee against failing without really restricting their activities—a guarantee that might well encourage them to bet on the riskiest propositions available, secure in the knowledge that the taxpayer would make good their losses.

Similarly, the movement’s reverence for an imaginary past, for “taking our country back,” is merely a displaced longing for the distant days when small-business people were men of preeminence in their community. The conservative revival’s single-minded focus on bailouts stems from small business’s historic hostility toward monster banks, now reincarnated as “too big to fail” institutions and locked in an unholy union with monster government.* (“Congress spent billions of dollars in stimulus money to bail out big banks and financial institutions,” declared Congressman-to-be Pat Meehan of Pennsylvania in 2010. “But your average small business owner simply has not seen the benefits.”)

John Lippert, “Friedman Would Be Roiled as Chicago Disciples Rue Repudiation,” Bloomberg, December 23, 2008. 5. Gary Becker, quoted in John Cassidy, “After the Blowup,” New Yorker, January 11, 2010. His colleagues, Becker further confessed, had not fully understood derivatives, deregulation, or the problem of banks that were “too big to fail.” Becker also admitted that federal intervention had spared the nation a much greater disaster. 6. Richard Posner, A Failure of Capitalism: The Crisis of ’08 and the Descent into Depression (Cambridge, MA: Harvard University Press, 2009), p. 306. The crash was the result, Posner wrote, of “innate limitations of the free market—limitations rooted in individuals’ incentives, in irresponsible monetary policy adopted and executed by conservative officials inspired by conservative economists … and in excessive, ideologically motivated deregulation of banking and finance compounded by lax enforcement of the remaining regulations.”


pages: 519 words: 155,332

Tailspin: The People and Forces Behind America's Fifty-Year Fall--And Those Fighting to Reverse It by Steven Brill

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, airport security, American Society of Civil Engineers: Report Card, asset allocation, behavioural economics, Bernie Madoff, Bernie Sanders, Blythe Masters, Bretton Woods, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Carl Icahn, carried interest, clean water, collapse of Lehman Brothers, collective bargaining, computerized trading, corporate governance, corporate raider, corporate social responsibility, Credit Default Swap, currency manipulation / currency intervention, deal flow, Donald Trump, electricity market, ending welfare as we know it, failed state, fake news, financial deregulation, financial engineering, financial innovation, future of work, ghettoisation, Glass-Steagall Act, Gordon Gekko, hiring and firing, Home mortgage interest deduction, immigration reform, income inequality, invention of radio, job automation, junk bonds, knowledge economy, knowledge worker, labor-force participation, laissez-faire capitalism, low interest rates, Mahatma Gandhi, Mark Zuckerberg, Michael Milken, military-industrial complex, mortgage tax deduction, Neil Armstrong, new economy, Nixon triggered the end of the Bretton Woods system, obamacare, old-boy network, opioid epidemic / opioid crisis, paper trading, Paris climate accords, performance metric, post-work, Potemkin village, Powell Memorandum, proprietary trading, quantitative hedge fund, Ralph Nader, ride hailing / ride sharing, Robert Bork, Robert Gordon, Robert Mercer, Ronald Reagan, Rutger Bregman, Salesforce, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, stock buybacks, Tax Reform Act of 1986, tech worker, telemarketer, too big to fail, trade liberalization, union organizing, Unsafe at Any Speed, War on Poverty, women in the workforce, working poor

In 2013, that previously unspoken rationale was actually spoken when then–Attorney General Eric Holder told the Senate Judiciary Committee that he was “concerned that the size of some of these [financial] institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.” In other words, if banks had to be bailed out because they were too big to fail, prosecuting them fully had to be avoided because they were also too big to jail. As with the bailout dilemma, that would seem like an argument for breaking up the giant banks. Instead, it has become, like too big to fail, yet another moat for America’s most powerful businesses, allowing even recidivists like JPMorgan to escape effective accountability. Again, these kinds of moats eat away at the fabric of the American community, reminding average Americans that the basic rules of responsibility and accountability do not apply to those at the top.

When the Obama administration arrived in 2009, there was broad sentiment on both sides of the aisle, at least rhetorically, that these rescued financial institutions now had to be reined in. That way, the country would never again be whipsawed into having to bail out the Wall Street gamblers because they were, in a phrase that had quickly become a cliché, “too big to fail.” The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, named for Democratic co-sponsors Senator Chris Dodd of Connecticut and Congressman Barney Frank of Massachusetts, was supposed to create that protection. The usual imbalance of passion and resources between special interests and the public that so often blocks change in Washington can occasionally be erased when the population at large is focused and angry.

The real work for us starts now, with the regs. With the press gone and the [C-Span] cameras [that televised the joint committee deliberations] gone, now we go to work.” A bedrock goal of the Obama administration and Dodd-Frank’s congressional sponsors, of course, had been to eliminate the risk of banks being too big to fail. From the beginning, the lobbyists succeeded in blocking the obvious solution: No banks were broken into smaller entities. In fact, by 2016 the share of all banking assets (in essence their market share) held by the top five banks was slightly higher than it was the day Dodd-Frank passed. Each had grown bigger in revenue, profit, and their grip on the economy.


pages: 435 words: 127,403

Panderer to Power by Frederick Sheehan

Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, book value, Bretton Woods, British Empire, business cycle, buy and hold, California energy crisis, call centre, central bank independence, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, deindustrialization, diversification, financial deregulation, financial innovation, full employment, Glass-Steagall Act, Greenspan put, guns versus butter model, inflation targeting, interest rate swap, inventory management, Isaac Newton, John Meriwether, junk bonds, low interest rates, margin call, market bubble, Mary Meeker, McMansion, Menlo Park, Michael Milken, money market fund, mortgage debt, Myron Scholes, new economy, Nixon triggered the end of the Bretton Woods system, Norman Mailer, Northern Rock, oil shock, Paul Samuelson, place-making, Ponzi scheme, price stability, reserve currency, rising living standards, Robert Solow, rolodex, Ronald Reagan, Sand Hill Road, Savings and loan crisis, savings glut, shareholder value, Silicon Valley, Silicon Valley startup, South Sea Bubble, stock buybacks, stocks for the long run, supply-chain management, supply-chain management software, The Great Moderation, too big to fail, transaction costs, trickle-down economics, VA Linux, Y2K, Yom Kippur War, zero-sum game

He lent money to brokers, bought the largest insurance company in the world (AIG), allowed overleveraged investment banks to convert themselves into commercial banks, thus permitting them to snuggle underneath the Fed’s too-big-to-fail umbrella. When the commercial paper market floundered, the Federal Reserve decided it would lend to corporations. (Commercial paper is used by large corporations to fund short term obligations.) Thus, General Electric, General Motors Acceptance Corporation, and American Express were among the companies fortunate enough to sell their paper to the Fed. Bernanke opened more borrowing facilities (at last count there were 16). Even when the credit markets heal, the precedent has been established, just as Continental Illinois was the precursor, in 1984, to too-big-to-fail-banks.

Continental Illinois was the nation’s sixth-largest bank and was overloaded with oil and gas loans and neck deep in sovereign loans.23 On May 17, 1984, a new era of financial collectivism was ushered into being. The Federal Deposit Insurance Corporation (FDIC) decided that the nation’s (by now) ninth-largest bank was “too big to fail.” The FDIC announced a $2 billion capital injection into the holding company. The government followed with other initiatives that are all too familiar today, including $3.4 billion borrowed from the Fed’s discount window.24 The government committed itself to insuring all deposits, not merely the $100,000 deposit limit.25 In addition, it also protected creditors of the holding company.26 This and other wrinkles of the bailout are interesting precedents, too involved to discuss here.

During the late housing boom, the Fed chairman gave many speeches extolling Americans’ rising wealth (house prices) while not addressing the fixed debt “which obviously does not decline” that home buyers acquired when buying those houses. 9 Dialogue between Greenspan and Proxmire about Greenspan’s record: Senate Committee on Banking, Housing and Urban Affairs transcript, July 21, 1987, pp. 41–42. The Leveraged Too-Big-to-Fail Megabank Foretold Dismal as Greenspan’s forecasting record was, Proxmire seemed more concerned about another topic: the growing concentration in banking. Greenspan was testifying during the great deregulation of banking. Initiatives, other than those mentioned in previous chapters, included authorization for commercial banks to cross state lines, to enter the brokerage business, and to change themselves into conglomerates offering all of the above services and more.


pages: 370 words: 102,823

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

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

An empirical study by Philippon and Reshef shows that in the past two decades workers in the financial industry have enjoyed a huge ‘pay-premium’ with respect to similar sectors, which cannot be explained by the usual proxies for productivity (such as the level of education or unobserved ability). According to their estimates, financial sector compensations have been about 40 per cent higher than the level that would have been expected under perfect competition.30 It is also well documented that banks deemed ‘too big to fail’ enjoy a rent due to an implicit state guarantee. Investors know that these large financial institutions can count, in effect, on a government guarantee, and thus they are willing to provide them funds at lower interest rates. The big banks can thus prosper not because they are more efficient or provide better service but because they are in effect subsidised by taxpayers.

Stiglitz, Rewriting the Rules, Hyde Park, NY, The Roosevelt Institute, May 2015. 30 T. Philippon and A. Reshef, ‘Wages and human capital in the US financial industry: 1909–2006’, The Quarterly Journal of Economics, vol. 127, no. 4, 2012, pp. 1551–609. 31 D. Baker and T. McArthur, The Value of the ‘Too Big to Fail’ Big Bank Subsidy, Center for Economic and Policy Social Research Issue Brief, September 2009. For a different view, see United States Government Accountability Office, Large Bank Holding Companies: Expectations of Government Support, 2014, GAO-14-621, Washington, DC, United States General Accounting Office, which argues that funding advantages existed before the recent financial crash but disappeared afterwards. 32 See L.

Large firms threaten to relocate to another country unless they are permitted to negotiate the amount of tax they will pay. These actions distort the level playing field that the market requires, usually privileging very large firms against smaller ones. Rather different, but with similar outcomes, are the sectors that are ‘too big to fail’, those that are both dominated by a small number of firms and strategically important for a national (or the global) economy, such that the collapse of a small number of them could provoke a massive shock to the whole system. This was notoriously the case with the banking industry and to a lesser extent the motor industry after the 2008 crash, and some other industries, for example energy, fit this model too.2 These firms have managed to become defined as a collective good, and therefore as requiring protection from the market, just as much as did the national champions of the protectionist age.


pages: 381 words: 101,559

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

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

Now we had a war game rulebook, but this would go quite differently. I wanted to break as many rules as I could to help the Pentagon understand how capital markets really work in an age of greed, deregulation and bad intent. Wall Street was like the Wild West in the best of times, but with globalization and too-big-to-fail government backing, it was now even more out of control. After a few hours of instruction, orientation and snap training on the groupware, we broke out to our separate capitals to work on move one. This broadly involved a long-term trade agreement between Russia and Japan that would reduce the availability of Russian oil and natural gas to the rest of the world.

Federal Reserve System is the most powerful central bank in history and the dominant force in the U.S. economy today. The Fed is often described as possessing a dual mandate to provide price stability and to reduce unemployment. The Fed is also expected to act as a lender of last resort in a financial panic and is required to regulate banks, especially those deemed “too big to fail.” In addition, the Fed represents the United States at multilateral central-bank meeting venues such as the G20 and the Bank for International Settlements, and conducts transactions using the Treasury’s gold hoard. The Fed has been given new mandates under the Dodd-Frank reform legislation of 2010 as well.

The destructive legacy of financial economics, with its false assumptions about randomness, efficiency and normal risk distributions, is hard to quantify, but $60 trillion in destroyed wealth in the months following the Panic of 2008 is a good estimate. Derivatives contracts did not shift risk to strong hands; instead derivatives concentrated risk in the hands of those too big to fail. VaR did not measure risk; it buried it behind a wall of equations that intimidated regulators who should have known better. Human nature and all its quirks were studiously ignored by the banks and regulators. When the financial economy was wrecked and its ability to aid commerce was well and truly destroyed, the growth engine went into low gear and has remained there ever since.


pages: 348 words: 97,277

The Truth Machine: The Blockchain and the Future of Everything by Paul Vigna, Michael J. Casey

3D printing, additive manufacturing, Airbnb, altcoin, Amazon Web Services, barriers to entry, basic income, Berlin Wall, Bernie Madoff, Big Tech, bitcoin, blockchain, blood diamond, Blythe Masters, business process, buy and hold, carbon credits, carbon footprint, cashless society, circular economy, cloud computing, computer age, computerized trading, conceptual framework, content marketing, Credit Default Swap, cross-border payments, crowdsourcing, cryptocurrency, cyber-physical system, decentralized internet, dematerialisation, disinformation, disintermediation, distributed ledger, Donald Trump, double entry bookkeeping, Dunbar number, Edward Snowden, Elon Musk, Ethereum, ethereum blockchain, failed state, fake news, fault tolerance, fiat currency, financial engineering, financial innovation, financial intermediation, Garrett Hardin, global supply chain, Hernando de Soto, hive mind, informal economy, information security, initial coin offering, intangible asset, Internet of things, Joi Ito, Kickstarter, linked data, litecoin, longitudinal study, Lyft, M-Pesa, Marc Andreessen, market clearing, mobile money, money: store of value / unit of account / medium of exchange, Network effects, off grid, pets.com, post-truth, prediction markets, pre–internet, price mechanism, profit maximization, profit motive, Project Xanadu, ransomware, rent-seeking, RFID, ride hailing / ride sharing, Ross Ulbricht, Satoshi Nakamoto, self-driving car, sharing economy, Silicon Valley, smart contracts, smart meter, Snapchat, social web, software is eating the world, supply-chain management, Ted Nelson, the market place, too big to fail, trade route, Tragedy of the Commons, transaction costs, Travis Kalanick, Turing complete, Uber and Lyft, uber lyft, unbanked and underbanked, underbanked, universal basic income, Vitalik Buterin, web of trust, work culture , zero-sum game

But that doesn’t mean that other companies don’t have a clear interest in reviewing how these permissioned networks are set up. Would a distributed ledger system that’s controlled by a consortium of the world’s biggest banking institutions be incentivized to act in the interests of the general public it serves? One can imagine the dangers of a “too-big-to-fail blockchain”: massive institutions could once again hold us hostage to bailouts because of failures in the combined accounting system. Perhaps that could be prevented with strict regulation; perhaps there needs to be public oversight of such systems. Either way, it’s incumbent upon us to ensure that the control over the blockchains of the future is sufficiently representative of broad-based interests and needs so that they don’t just become vehicles for collusion and oligopolistic power by the old guard of finance.

Not only would that company gain an unprecedented, privileged window onto the entire world of material things and human activity, but it would, in effect, put those centrally controlled companies in charge of what will be billions of machine-to-machine transactions of tokens and digital currencies. That would give a new meaning to the phrase “too big to fail.” One alternative is for governments to act as gatekeepers—but if you think Edward Snowden’s NSA snooping allegations were bad, just imagine the Feds intermediating all the personally revealing data flowing from your gadgets. No thanks. “The Internet was originally built on trust,” write the authors of the IBM paper, Veena Pureswaran and Paul Brody.

The nine founding members were Barclays, BBVA, Commonwealth Bank of Australia, Credit Suisse, Goldman Sachs, J.P. Morgan, Royal Bank of Scotland, State Street, and UBS. All but two—BBVA and Commonwealth—were listed in the Financial Stability Board’s 2016 list of G-SIBs, global systemically important banks. They weren’t just plain-vanilla, “too-big-to-fail” banks whose gargantuan balance sheets posed problems for their domestic markets; they were part of a special category whose loan books were so large they could pose a danger to the global economy. And many were on the receiving end of billions of dollars in fines. To followers of trends in financial technology, this looked familiar.


pages: 414 words: 101,285

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

air freight, air traffic controllers' union, Andrei Shleifer, Asian financial crisis, asset-backed security, bank run, barriers to entry, Basel III, Bear Stearns, behavioural economics, Berlin Wall, biodiversity loss, Bretton Woods, BRICs, business cycle, butterfly effect, carbon tax, clean water, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, connected car, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, digital divide, discovery of penicillin, diversification, diversified portfolio, Douglas Engelbart, Douglas Engelbart, Edward Lorenz: Chaos theory, energy security, eurozone crisis, Eyjafjallajökull, failed state, Fairchild Semiconductor, Fellow of the Royal Society, financial deregulation, financial innovation, financial intermediation, fixed income, Gini coefficient, Glass-Steagall Act, global pandemic, global supply chain, global value chain, global village, high-speed rail, income inequality, information asymmetry, Jean Tirole, John Snow's cholera map, Kenneth Rogoff, light touch regulation, Long Term Capital Management, market bubble, mass immigration, megacity, moral hazard, Occupy movement, offshore financial centre, open economy, precautionary principle, profit maximization, purchasing power parity, race to the bottom, RAND corporation, regulatory arbitrage, reshoring, risk free rate, Robert Solow, scientific management, Silicon Valley, six sigma, social contagion, social distancing, Stuxnet, supply-chain management, systems thinking, tail risk, TED Talk, The Great Moderation, too big to fail, Toyota Production System, trade liberalization, Tragedy of the Commons, transaction costs, uranium enrichment, vertical integration

Consequently, national intervention in financial institutions became increasingly difficult as banks grew more powerful and more influential. At the same time that regulators were stumbling, the collapse of the U.S.-based hedge fund Long-Term Capital Management following the 1997–98 financial crisis signaled that banks deemed “too big to fail” could expect to be bailed out by national governments. Together with the widespread use of value-at-risk models (which underestimated tail risks), this expectation obscured risk managers’ incentives and effectively eliminated the downside risk for those large financial institutions that were systemically the most relevant.

Systemic analysis must examine nodes, pathways, and the relationships between them, because “catastrophic changes in the overall state of a system can ultimately derive from how it is organized—from feedback mechanisms within it, and from linkages that are latent and often unrecognised.”86 All banks should be required to map their interdependencies in terms of the volume and frequency of their trade, and their net and gross exposures to their counterparties, not least in trading, should be fully understood by their audit and risk committees. Similarly, national and global regulators need to be able to map the evolving financial landscape to ensure that no one particular trading house or institution—or, over time, one geographic location—is systemically becoming too big to fail. They also need to use a combination of the soft power of persuasion and the hard power of regulation and competition policy to ensure the stability of the system. Reforms like these necessarily imply a major renewal of the mandate, resources, skills, and executive capabilities of the regulators at the national and the international levels.

Lesson 5: Competition policy needs to address the geographical risks that emanate from the concentration of industry in specific localities Competition policy can play a key role in improving certain dimensions of system stability. In particular, such policy can seek to guard against the risk that any one firm or supplier will be too big to fail in terms of the consequences for society. In competition policy, more attention needs to be paid to geography. For example, competition policy that allowed many firms to co-locate in one place that was prone to flooding or might be overwhelmed by a pandemic or terror attack would not provide comfort.


pages: 279 words: 76,796

The Unbanking of America: How the New Middle Class Survives by Lisa Servon

Affordable Care Act / Obamacare, Airbnb, basic income, behavioural economics, Build a better mousetrap, business cycle, Cass Sunstein, choice architecture, creative destruction, Credit Default Swap, cross-border payments, do well by doing good, employer provided health coverage, financial exclusion, financial independence, financial innovation, gender pay gap, gentrification, George Akerlof, gig economy, Glass-Steagall Act, income inequality, independent contractor, informal economy, Jane Jacobs, Joseph Schumpeter, late fees, low interest rates, Lyft, M-Pesa, medical bankruptcy, microcredit, Occupy movement, payday loans, peer-to-peer lending, precariat, Ralph Nader, Richard Thaler, Robert Shiller, Ronald Reagan, Savings and loan crisis, sharing economy, subprime mortgage crisis, too big to fail, transaction costs, unbanked and underbanked, underbanked, universal basic income, Unsafe at Any Speed, We are the 99%, white flight, working poor, Zipcar

The idea that banks have become “too big to fail” has a longer history than many of us realize. The Connecticut congressman Stewart McKinney coined that term in 1984, justifying the government bailout of Continental Illinois, the nation’s seventh-largest bank, twenty-four years before the recent financial crisis that made it a common catchphrase. The situation has only worsened since then. When Washington Mutual went under during the financial crisis in 2008, the bank was seven times larger than Continental Illinois had been. But because banks know they’re “too big to fail” and that the government will bail them out, they continue to engage in risky behavior with “other people’s money”—our money.

The big banks are complaining about the increased scrutiny they’ve experienced since the crisis. But others, like Marla Blow, who heads Fenway Summer’s credit card division, doesn’t have much sympathy for these banks: “They will say that they get regulatory scrutiny because now they’re deemed to be too big to fail,” she said, “meaning that they go through extra exams and people are looking at them even more closely. And I pretty openly said to people, ‘So cry me a river. Because you’re a gigantic financial institution and somebody’s looking at you? Hard, huh? Hard to live on the billions and billions of dollars you’re making every quarter, and the price you pay is you’ve got a little bit of extra scrutiny?’”

The government has allowed banks to focus too narrowly on profits, creating no incentive for them to provide safe, affordable services for everyone. The market is now rigged in favor of the wealthy and in favor of large financial institutions. Banks benefit from government in all kinds of ways. The FDIC insures consumer deposits. Loan guarantees and direct injection of public funds into banks, especially those deemed “too big to fail,” enable them to borrow at lower rates and take bigger risks. A recent study found that the biggest banks have been among the top recipients of government subsidies, grants, loans, and tax credits over the past fifteen years. And banks continue to operate with the knowledge that the government will rescue them should anything go wrong.


pages: 283 words: 77,272

With Liberty and Justice for Some: How the Law Is Used to Destroy Equality and Protect the Powerful by Glenn Greenwald

Alan Greenspan, Ayatollah Khomeini, banking crisis, Bear Stearns, Bernie Madoff, Clive Stafford Smith, collateralized debt obligation, Corrections Corporation of America, crack epidemic, Credit Default Swap, credit default swaps / collateralized debt obligations, David Brooks, deskilling, financial deregulation, full employment, high net worth, income inequality, Julian Assange, mandatory minimum, nuremberg principles, Ponzi scheme, Project for a New American Century, rolodex, Ronald Reagan, Seymour Hersh, too big to fail, Washington Consensus, WikiLeaks

No matter how much Obama talks about his “tough” new financial regulatory reforms or offers rote condemnations of Wall Street greed, few believe there’s been real change. That’s not just because so many have lost their jobs, their savings and their homes. It’s also because so many know that the loftiest perpetrators of this national devastation got get-out-of-jail-free cards, that too-big-to-fail banks have grown bigger and that the rich are still the only Americans getting richer. Those responsible have plundered with impunity and kept their ill-gotten gains. Inside Job examined numerous Wall Street executives who, as the film put it, “destroyed their own companies and plunged the world into crisis” only to “walk away from the wreckage with their fortunes intact.”

In January 2010, the Treasury Department’s independent watchdog over the Wall Street bailout, Neil Barofsky, issued a scathing report documenting that many of the factors behind the financial crisis are still with us, and that in some respects the situation has actually worsened. “It is hard to see how any of the fundamental problems in the system have been addressed to date,” Barofsky wrote. Banks that were said to be “too big to fail” are now “even larger,” and Wall Street is “more convinced than ever” that it will be saved from failure by the government, thus increasing the motivation to take enormous risks. Wall Street bonuses in the year immediately after the crisis reveal “little fundamental change” in troublesome compensation schemes, while federal efforts to support the housing market “risk reinflating that bubble.”

Wall Street bonuses in the year immediately after the crisis reveal “little fundamental change” in troublesome compensation schemes, while federal efforts to support the housing market “risk reinflating that bubble.” Moreover, the so-called financial regulation legislation enacted by Congress in the summer of 2010 was so diluted by lobbyists and donors from the very industry it purported to regulate that the primary causes of the crisis—including the “too-big-to-fail” quandary and unregulated derivatives markets—went almost entirely unaddressed. Indeed, the government’s ties to Wall Street are stronger than ever. In September 2010, the Huffington Post reviewed Geithner’s calendars as treasury secretary—just as the New York Times had done for his calendars as New York Fed chair—and found the same pattern: Geithner still spends most of his time speaking with the very banking executives whom he’s supposedly regulating.


pages: 225 words: 11,355

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

These mega-banks enjoyed vast scale and market share in everything from consumer finance to corporate lending. They were, as recent events prove, almost too big to be managed safely and effectively but they were too certainly too big to be allowed to fail without risking national economic calamity. Too big to fail continues to undermine efforts at effective and equitable regulation, however what motivated the banks was earnings growth. Market cap was the key to survival and buying earnings was far easier than growing them in highly competitive markets, Banks not only grew earnings by buying up bread and butter banking businesses but by expanding their securities businesses.

In 1994 the largest New York bank, much weakened by market mishaps, was purchased by a financial conglomerate that included insurance and investment banking interests under a Fed waiver. In 1999 Congress finally bit the bullet and passed the Gramm-Leach-Bliley Act driving the last nail into the coffin of New Deal banking laws. Soon almost all the major commercial banks were bulking up their investment banking businesses and in several cases becoming global players. TOO BIG TO FAIL Wall Street soon discovered that having a big balance sheet to lend gave their less accomplished commercial bank rivals an inside track in attracting corporate business. The most venerable Wall Street partnership, Goldman Sachs, became a public company in 1999 the last of the broker dealers to do so.

The public seems to hate the idea of putting tax dollars into banks or keeping them there. That might prove decisive in preventing long-term government takeover of the financial economy. Second, how should the banks be governed? Here, public outrage is really only justified when banks that depend on being ‘‘too big to fail’’ push their luck too far. Even among the largest banks, some managed themselves far more responsibly than others. The problem is that many of the largest banks became too large to manage but are too big to let fail. We cannot remain their hostages, however, and the public understands this. Thus far, the handling of the crisis has caused the industry to become more consolidated into a few hands.


pages: 484 words: 136,735

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

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

As Mervyn King said six months later:16 “The world economy changed after the events of Lehman, but it wasn’t the failure of Lehman’s as such. What changed everything was the complete collapse of confidence in the financial system around the world [after Lehman].” Why did this happen? After all, Lehman was only a middle-sized bank with no customer deposits. It was not, by any normal definition, “too big to fail.” Investment banks of comparable size had failed in the past with no catastrophic damage, most notably Drexel Burnham Lambert in 1989. In the end, the total losses from Lehman’s bankruptcy came to about $75 billion.17 This was a lot of money by the standards of normal business bankruptcies, but modest in comparison with the multitrillion dollar write-downs already suffered by banks around the world before Lehman went down.

When governments left any doubt about which bank liabilities were protected, they usually ended up offering guarantees to all creditors, no matter how junior, in all banks, no matter how small. Constructive ambiguity, far from saving taxpayer money, has turned out to be the greatest source of moral hazard. This experience also refutes suggestions that moral hazard can be overcome by breaking up banks that are too big to fail. Breaking up some banking dinosaurs may well be sensible, for reasons of competition and managerial efficiency. But it is misleading to believe that any bank, however small, will be allowed to renege on its depositors or senior creditors in a period of systemic financial turmoil. Situations are bound to arise from time to time—perhaps only once every generation—when governments simply cannot allow any bank to fail.

It was a colossal error and many people said so at the time.” See David Wessel, In Fed We Trust, 23. Tim Geithner reportedly shared this view: “Geithner thought that publicly drawing a ‘line in the sand’ during a financial crisis was lunacy.” Geithner quoted in Wessel, 15-16. 5 Andrew Ross Sorkin, Too Big to Fail, and Wessel, In Fed We Trust. 6 Milton Friedman and Anna Jacobson Schwartz, A Monetary History of the United States, 1867-1960. 7 Mellon’s role in the decision to liquidate the U.S. banking system was emphasized by Milton Friedman and also by President Hoover in his memoirs. Herbert Hoover, The Memoirs of Herbert Hoover: Vol. 3, The Great Depression, 28-30.


pages: 457 words: 143,967

The Bank That Lived a Little: Barclays in the Age of the Very Free Market by Philip Augar

"Friedman doctrine" OR "shareholder theory", activist fund / activist shareholder / activist investor, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Bonfire of the Vanities, bonus culture, book value, break the buck, business logic, call centre, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, family office, financial deregulation, financial innovation, fixed income, foreign exchange controls, Glass-Steagall Act, high net worth, hiring and firing, index card, index fund, interest rate derivative, light touch regulation, loadsamoney, Long Term Capital Management, long term incentive plan, low interest rates, Martin Wolf, money market fund, moral hazard, Nick Leeson, Northern Rock, offshore financial centre, old-boy network, out of africa, prediction markets, proprietary trading, quantitative easing, risk free rate, Ronald Reagan, shareholder value, short selling, Sloane Ranger, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, too big to fail, vertical integration, wikimedia commons, yield curve

Linkedin, Carol, Corporate Risk Manager 28. Darling, Back from the Brink, p. 326 14. Twilight of the Gods, 2008 1. Tom Junod, ‘The deal of the century’, Esquire, 11 September 2009 2. Andrew Ross Sorkin, Too Big to Fail: Inside the Battle to Save Wall Street, Penguin, London and New York, 2009, p. 127 3. Philip Augar, The Greed Merchants, Penguin, London, 2006, pp. 40–41 4. Sorkin, Too Big to Fail, p. 128 5. ‘Barclays announces share issue to raise approximately £4.5 billion’, 25 June 2008, barclays.com 6. Project Long Island Discussion Document, July 2008, Barclays Capital, jenner.com/lehman/docs/barclays 7.

., para 15 23. Ibid., para 20 24. Paulson, On the Brink, p. 162 25. Darling, Back from the Brink, p. 121 26. Sorkin, Too Big to Fail, p. 357 27. Darling, Back from the Brink, p. 121 28. Ibid. 29. FSA Statement, 20 January 2010, para 26 30. Email from Heidi Smith to Bob Diamond, 12 September 2008, jenner.com/lehman/docs/barclays 31. Barclays, Internal Presentation, Long Island key exposures – key due diligence findings, jenner.com/lehman/docs/barclays 32. Sorkin, Too Big to Fail, pp. 357–8 33. Paulson, On the Brink, p. 164 34. Ibid., p. 169 35. Ibid., p. 175 36. Ibid., pp. 169, 174 37. Ibid., p. 177 38.

Paulson, On the Brink, p. 178 45. Sorkin, Too Big to Fail, p. 420; Paulson, On the Brink, p. 178 46. FSA Statement, 20 January 2010, paras 46–9 47. Geithner, Stress Test, p. 229 48. FSA Statement, 20 January 2010, para 54 49. Paulson, On the Brink, p. 179 50. Ibid., p. 180; Darling, Back from the Brink, p. 123; Geithner, Stress Test, pp. 186–8 51. Email from Bob Diamond to Rich Ricci and Jerry del Missier, 15 September 2008, jenner.com/lehman/barclays 52. Email from Bob Diamond to John Varley and Chris Lucas, 15 September 2008, jenner.com/lehman/barclays 53. Sorkin, Too Big to Fail, p. 552; ‘The deal of the century’, Esquire, 11 September 2009 54.


pages: 372 words: 107,587

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

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

• A commodities boom (which drove up gasoline and food prices) and temporarily rising interest rates (especially on adjustable-rate mortgages) ultimately undermined consumer spending and confidence, helping to burst the housing bubble — which, once it started to deflate, set in motion a chain reaction of defaults and bankruptcies. Each element of that brief description has been unpacked at great length in books like Andrew Ross Sorkin’s Too Big to Fail and Bethany McLean’s and Joe Nocera’s All the Devils Are Here, and in the documentary film “Inside Job.”1 It’s old, sad news now, though many parts of the story are still controversial (e.g., was the problem deregulation or bad regulation?). And yet, many analyses overlook the fact that these events were manifestations of a deeper trend toward dramatically and unsustainably increasing debt, credit, and leverage.

Attorneys General in 50 states are investigating banks’ foreclosure processes. Many observers are questioning whether the banks actually technically own hundreds of billions of dollars’ worth of securitized mortgage assets on their balance sheets. If further court rulings go against the banks, the result could be fatal for several “too-big-to-fail” institutions. Investors who bought MBSs are filing fraud claims against the banks, arguing that these securities were never properly collateralized. Their claims against the banks could amount to trillions of dollars. The Federal government is implicated as well. Fannie Mae and Freddie Mac now face much higher losses on their portfolios of trillions of dollars’ worth of home mortgages, and will therefore likely have to turn to the government for further capital infusions.

Governments and central banks will be acting under the assumption that they are merely priming the pump of the economy until conventional consumer-driven growth resumes. But as growth fails to revive, one intervention after another will be required — propping up major banks, guaranteeing hundreds of billions of dollars’ worth of mortgages, or bailing out “too-big-to-fail” businesses. The result will be an incremental government takeover of large swaths of national economies, with central banks assuming more of the functions of commercial banking, and national governments underwriting production and even consumption. In the US, this process will be enormously complicated by politics.


pages: 772 words: 203,182

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

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 8-hour work day, active measures, activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, benefit corporation, Black Swan, blood diamond, blue-collar work, Bolshevik threat, bonus culture, British Empire, business cycle, business process, buy and hold, capital controls, Carmen Reinhart, carried interest, cognitive dissonance, collateralized debt obligation, collective bargaining, commoditize, company town, compensation consultant, corporate governance, corporate personhood, corporate raider, corporate social responsibility, creative destruction, credit crunch, crony capitalism, crowdsourcing, currency manipulation / currency intervention, David Brooks, David Graeber, David Ricardo: comparative advantage, declining real wages, deindustrialization, Diane Coyle, disruptive innovation, Double Irish / Dutch Sandwich, eurozone crisis, financial deregulation, financial engineering, financial innovation, fixed income, Ford Model T, Francis Fukuyama: the end of history, full employment, George Akerlof, George Gilder, Gini coefficient, Glass-Steagall Act, Gordon Gekko, Greenspan put, hiring and firing, Ida Tarbell, income inequality, independent contractor, invisible hand, job satisfaction, John Markoff, joint-stock company, Joseph Schumpeter, junk bonds, Kenneth Rogoff, labor-force participation, laissez-faire capitalism, lake wobegon effect, light touch regulation, Long Term Capital Management, low interest rates, manufacturing employment, market clearing, market fundamentalism, Martin Wolf, minimum wage unemployment, mittelstand, Money creation, moral hazard, Myron Scholes, Naomi Klein, Northern Rock, obamacare, offshore financial centre, Paul Samuelson, Paul Volcker talking about ATMs, pension reform, performance metric, Pershing Square Capital Management, pirate software, plutocrats, Ponzi scheme, precariat, price stability, profit maximization, profit motive, prosperity theology / prosperity gospel / gospel of success, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, reshoring, Richard Thaler, rising living standards, road to serfdom, Robert Gordon, Robert Shiller, rolling blackouts, Ronald Reagan, Sand Hill Road, Savings and loan crisis, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, Steve Ballmer, Steve Jobs, stock buybacks, subprime mortgage crisis, The Chicago School, 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, transcontinental railway, transfer pricing, trickle-down economics, tulip mania, Tyler Cowen, Tyler Cowen: Great Stagnation, union organizing, Upton Sinclair, upwardly mobile, women in the workforce, working poor, zero-sum game

It’s called corporate socialism.68 Handelsbatt reporter Olaf Storbeck in February 2011 explained the new banking industry incentive structure created by deregulation and the Greenspan Put: “State protection is also so attractive that banks have systematically attempted to reach the ‘too big to fail’ status—the implied government guarantees were a key engine for the many mergers and acquisitions in the industry since the 1990s.”69 The rest, as they say, is history. To seize perpetual life, quick-witted entrepreneurs on Wall Street created Red Queens. They paid premiums estimated by economists at $14 to $17 billion apiece for mid-sized banks in order to become behemoths impervious to the existential dangers normally posed by competition.70 The acquiring bank can afford to pay higher prices because attaining “too-big-to-fail” stature translates to lower deposit costs and adds an average $4.7 billion to their return annually, according to research by economists Priyank Gandhi and Hanno Lustig at the University of California, Los Angeles.71 Like investing in lobbying, any banking executive would be foolish indeed not to exploit Reaganomics to become an immortal behemoth—which is about as bizarre a concept as an economist can imagine occurring in Schumpeterian capitalism.

Rajan, “Illiquid Banks, Financial Stability, and Interest Rate Policy,” University of Chicago, May 2012, http://faculty.chicagobooth.edu/douglas.diamond/research/Illiquidty%20JPE%20May%2010%20%202012%20with%20refs.pdf. 69 Olaf Storbeck, “Too Big to Fail,” Handelsblatt, Feb. 7, 2011. 70 Elijah Brewer III and Julapa Jagtiani, “How Much Would Banks Be Willing to Pay to Become ‘Too-Big-To-Fail’ and to Capture Other Benefits?,” Federal Reserve Bank of Kansas City, July 2007, research working paper, 07-05. 71 Priyank Gandhi and Hanno Lustig, “Size Anomalies in US Bank Stock Returns: A Fiscal Explanation,” National Bureau of Economic Research, working paper no. 16553, November 2010.

Problem was, the big audit firms alone held the cost data. We asked them for those data, which they declined to provide.”60 Regulatory Capture Reduced Antitrust Enforcement Antitrust enforcement was dialed down significantly during the Reagan era. This is most evident in the case of banks grown too big to fail. But the problem is general. When combined with deregulation, lax antitrust enforcement is an invitation to collusion. It’s as though control over bed nets, mosquito repellant, and antimalarial medicines in Africa was abruptly turned over to malaria parasites. As Washington Post columnist Steven Pearlstein summarized: “For years now, the courts and regulators have turned a blind eye as industry after industry consolidates into two or three dominant firms.”61 The need for vigorous antitrust enforcement was one of the clearest lessons drawn by economists from the early days of capitalism.


pages: 165 words: 48,594

Democracy at Work: A Cure for Capitalism by Richard D. Wolff

asset-backed security, Bear Stearns, Bernie Madoff, business cycle, collective bargaining, Credit Default Swap, declining real wages, feminist movement, financial intermediation, Glass-Steagall Act, green new deal, Howard Zinn, income inequality, John Maynard Keynes: technological unemployment, laissez-faire capitalism, means of production, military-industrial complex, moral hazard, mortgage debt, Occupy movement, Ponzi scheme, profit maximization, quantitative easing, race to the bottom, Ronald Reagan, too big to fail, trickle-down economics, wage slave, women in the workforce, Works Progress Administration

Large banks and major corporations had generally changed political conditions in their favor. They had learned how to devote more resources in better ways to influence legislative outcomes. At the height of the post-2007 crisis, major banks demanded and received massive government help on the basis of a threat. They were, they insisted, “too big to fail.” The idea seemed to be that letting them collapse or default would have such devastating consequences for the larger economy that the government had to help them “in the national interest.” The fallout from the collapse of the Lehman Brothers investment bank was used as the perfect example of why such a “colossal mistake” could not be replicated.

If there was a “moral hazard” that bailing out big banks during and after 2008 might weaken their resolve to avoid excess risk thereafter, then allowing big banks to become bigger accelerated the moral hazard involved. The second implication that had to be repressed was this: if big banks and other financial enterprises were too big to fail, then perhaps the solution was to nationalize them. Making their assets and liabilities fully transparent and publicly available would minimize the chance of behaviors that placed society at risk. Officials of government banking agencies would be subject to political scrutiny and to elections, thereby making them more accountable.

The dependence of enterprises and the public on electricity, water, postal service, the broadcast spectrum, and other such services has led governments in many countries to either regulate or nationalize the private enterprises producing those services. When regulation proves inadequate or insufficient, nationalization is often a logical next step. However, neoliberal ideology effectively enforced a taboo against recognizing this implication of the “too big to fail” arguments. In the end, the last century of capitalism teaches a profound truth by means of repeated, specific lessons regarding government economic interventions that regulate, limit, or constrain capitalists’ goals. Such economic interventions are resisted by major capitalist enterprises. If they pass into law, corporations use their expanding resources (rising net incomes) to evade, weaken, and eliminate those restrictions, as we saw with the successful campaign to repeal Glass-Steagall.


pages: 223 words: 10,010

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

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

‘It is hard to see how any of the fundamental problems in the (financial) system have been addressed to date’ said Neil Barofsky, the independent inspector general for the US bank bailout, in his official report to Congress in February 2010.398 Barofsky claimed that the financial system had become more dangerous because the banks still have an incentive to take excessive risks, knowing that the government would step in again when their speculative bets go wrong rather than bring down global finance. Even if the bailout ‘saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car.’ In his quarterly report issued a year later, he warned that the ‘too big to fail issue’ had not been resolved. The big financial institutions ‘and their leaders are incentivised to engage in precisely the sort of behaviour that could trigger the next financial crisis, thus perpetuating a doomsday cycle of booms, busts and bailouts.’399 Much of this failure to impose tougher regulation is down to the continuing power of finance to block reform.

Hands, who lost $2 billion buying EMI for an inflated price, had learned the hard way. ‘And in my 30 years of investing, whenever I have seen deals done just to get the money out of the door, it does not end well.’408 Despite widespread calls for the shrinking of the finance sector, the banks not only remain ‘too big to fail’. As shown earlier, they grew even larger through the downturn. ‘We are sowing the seeds for the next crisis,” said David Lascelles, senior fellow at the London-based research group, the Centre for the Study of Financial Innovation. ‘What we have been doing in the last two years is making banks much bigger.

Fourthly, a number of finance-specific measures are needed which remove current perverse incentives to risk and ensure finance carries out its primary function—of providing the level of credit and liquidity needed to finance world trade and productive investment. As has been widely recognised by a number of commentators, including Meryyn King, the new global rules on capital ratios do not go nearly far enough to solve the ‘too big to fail’ problem. One radical proposal would be to impose a statutory limit on the size of bank assets in relation to GDP. 428 Another would be to internalise the risk either by holding top executives legally responsible for bank failures with heavy penalties, or by making directors hold a minimum proportion of the banks’ capital.


Hopes and Prospects by Noam Chomsky

air traffic controllers' union, Alan Greenspan, Albert Einstein, banking crisis, Bear Stearns, Berlin Wall, Bretton Woods, British Empire, capital controls, colonial rule, corporate personhood, Credit Default Swap, cuban missile crisis, David Ricardo: comparative advantage, deskilling, en.wikipedia.org, energy security, failed state, Fall of the Berlin Wall, financial deregulation, Firefox, Glass-Steagall Act, high-speed rail, Howard Zinn, Hyman Minsky, invisible hand, liberation theology, market fundamentalism, Martin Wolf, Mikhail Gorbachev, Monroe Doctrine, moral hazard, Nelson Mandela, new economy, nuremberg principles, one-state solution, open borders, Plutonomy: Buying Luxury, Explaining Global Imbalances, public intellectual, Ralph Waldo Emerson, RAND corporation, Robert Solow, Ronald Reagan, Savings and loan crisis, Seymour Hersh, structural adjustment programs, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, trade liberalization, uranium enrichment, Washington Consensus

In the United States, the share of the financial sector in corporate profit rose from a few percent in the 1960s to over 30 percent in 2004. Concentration also sharply increased, thanks substantially to the deregulatory zeal of the Clinton administration, which set the stage for the doubling of the share of banking industry assets held by the twenty largest institutions to 70 percent from 1990 to 2009, helping create the “too big to fail” disaster of 2007–8. Financialization of the economy had a direct effect on the dismantling of the manufacturing sector, along with other policy decisions, such as the “trade agreements” that were designed to set manufacturing workers in competition with low-wage workers without benefits and protections elsewhere, while evading the “free trade” principle of competition in the case of highly educated professionals.24 The business press sometimes recognizes the dilemmas of the state-corporate economic policies—and also has few illusions about “free markets.”

But for the West in 2008–9, the phrase “the crisis” refers unambiguously to the financial crisis that has its deeper roots in inherent market inefficiencies, neoliberal doctrines about the alleged value of financial liberalization, dogmas about “efficient markets” and “rational expectations,”6 deregulation, exotic financial instruments that yielded profits beyond the dreams of avarice for a few—all brought to a head by an $8 trillion housing bubble that somehow regulators and economists did not perceive, portending ultimate disaster, as a few warned all along, notably economist Dean Baker. The costs of underpricing of risk are magnified by the perverse incentives designed by policy makers, primary among them the government insurance policy called “too big to fail.” After the bursting of the housing bubble in 2007, Fed chairman Alan Greenspan was criticized because he hadn’t followed through on his brief warning about “irrational exuberance” at the height of the late ’90s tech bubble. But that is the wrong criticism: it was quite rational exuberance, when the taxpayer is there to bail you out under the operative principles of state capitalism.

And of course the major corporate brigands, like those ripping off billions of dollars for “reconstructing Iraq,” are exempt even from censure.11 No less impressive is the assault of the financial institutions on regulation of the practices that led to the near-collapse of the international economy in 2007–8, and are now even better placed for the next chapter of “rational exuberance,” with the world’s ten largest banks, all “deemed ‘too big to fail,’” having increased their share of assets from 18 percent of the top 1,500 banks at the end of 2008 to 26 percent a year later. The measures by which they ensured that the “moderate Democrats”—that is, the “pro-business Democrats” whose “ties to Wall Street are strong”—would join the Republicans in blocking any serious regulation at the behest of the major business lobbies are spelled out in a Business Week cover story, aptly entitled “In Wall Street’s Pocket: The Inside Story of Who’s Really Running Financial Regulation.”12 No one answerable to the public, surely.


pages: 393 words: 115,263

Planet Ponzi by Mitch Feierstein

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

Naturally, if you move at that speed, there are legal niceties which are going to be trampled underfoot. That’s too bad. Those legal niceties benefit lawyers and accountants and absolutely nobody else. Fast, decisive bankruptcies are essential to a well-functioning financial system. That also means that no firm will ever again be ‘too big to fail.’ If a firm fails, it fails. Too big to fail is too big to exist. Creditors who lent their money to a failing firm will get the most appropriate possible reminder about why credit analysis matters. And in the meantime, taxpayers will be able to watch the whole drama unfolding on the weekend news, knowing that they themselves won’t contribute a single dime.

Given the scale of leverage at the firm‌—‌its capital represented just 3% of assets‌—‌there was no return from that misjudgment. A bailout, organized by the New York Fed, saw the firm’s creditors take control. The $1.9 billion which the firm’s principals had invested in it was wiped out.6 The story contains another moral. The Fed organized a bailout of the fund because it was deemed too big to fail, because it was seen as being of systemic importance. That was a crazy decision. Lenders who make bad credit decisions should lose money. That’s the only mechanism which will force them to improve their decisionmaking. The Fed chose to send precisely the opposite message: lenders who lend money to large, well-connected Wall Street firms will never lose money, because the government will protect them.

It also means that regulations need to be enforced properly, so that miscreants know they will be sent to jail if caught. The process of adjustment may be brutal, but it won’t last for long‌—‌and once it’s over, we’ll have a global economy ready to march forwards once again. Part of that rebuilding effort will need to involve the dismantling of the over-large, ‘too big to fail’ institutions that dominate both investment and retail banking. As rumors spread earlier this year of huge losses emerging on its proprietary trading book, JP Morgan’s chief executive, Jamie Dimon, dismissed those concerns as a ‘tempest in a teapot’. That tempest was later estimated to have cost the bank some $2 billion‌…‌except that as the final numbers were crunched, it turned out that the actual cost was closer to $7 billion.


pages: 354 words: 118,970

Transaction Man: The Rise of the Deal and the Decline of the American Dream by Nicholas Lemann

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, Abraham Maslow, Affordable Care Act / Obamacare, Airbnb, airline deregulation, Alan Greenspan, Albert Einstein, augmented reality, basic income, Bear Stearns, behavioural economics, Bernie Sanders, Black-Scholes formula, Blitzscaling, buy and hold, capital controls, Carl Icahn, computerized trading, Cornelius Vanderbilt, corporate governance, cryptocurrency, Daniel Kahneman / Amos Tversky, data science, deal flow, dematerialisation, diversified portfolio, Donald Trump, Elon Musk, Eugene Fama: efficient market hypothesis, Fairchild Semiconductor, financial deregulation, financial innovation, fixed income, future of work, George Akerlof, gig economy, Glass-Steagall Act, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, Ida Tarbell, index fund, information asymmetry, invisible hand, Irwin Jacobs, Joi Ito, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kickstarter, life extension, Long Term Capital Management, Mark Zuckerberg, Mary Meeker, mass immigration, means of production, Metcalfe’s law, Michael Milken, money market fund, Mont Pelerin Society, moral hazard, Myron Scholes, Neal Stephenson, new economy, Norman Mailer, obamacare, PalmPilot, Paul Samuelson, Performance of Mutual Funds in the Period, Peter Thiel, price mechanism, principal–agent problem, profit maximization, proprietary trading, prudent man rule, public intellectual, quantitative trading / quantitative finance, Ralph Nader, Richard Thaler, road to serfdom, Robert Bork, Robert Metcalfe, rolodex, Ronald Coase, Ronald Reagan, Sand Hill Road, Savings and loan crisis, shareholder value, short selling, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, Snow Crash, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, TaskRabbit, TED Talk, The Nature of the Firm, the payments system, the strength of weak ties, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, too big to fail, transaction costs, universal basic income, War on Poverty, white flight, working poor

The notes of one Treasury conference call have one of its top officials saying, “The firm can’t survive because of liquidity problems—the firm was very successful in getting a huge book on such little capital … Could it cause a broker-dealer [meaning an investment bank] to fail?… Are some hedge funds too big to fail?” After last-minute attempts to save the firm were unsuccessful, the Fed decided it had to organize a rescue: it would extend credit to a group of big banks that would enable them in turn to buy low-priced ownership stakes in Long-Term Capital Management. This worked in the sense that, although it didn’t save Long-Term Capital Management, it did save the banks that were its major lenders.

Elmendorf wrote: One specific effect of asymmetric information [meaning that in over-the-counter derivatives markets, no party to a transaction knew the underlying economic condition of the other parties] is to increase the risk of a general financial panic (“systemic risk”). Because market participants cannot judge the financial health of institutions they deal with, bad news about one institution has a contagion effect on other institutions, reducing their access to capital as well. The doctrine of “too big to fail” is based on this point … Financial innovation has worsened this problem. Institutions have many new avenues for taking risk that are difficult for even sophisticated market participants to fully understand, and the interrelationships are even more complex … In the case of banks, the existence of deposit insurance coupled with access to the payments system [operated by the Federal Reserve] creates moral hazard with a clear incentive for excessive risk-taking.

Institutions have many new avenues for taking risk that are difficult for even sophisticated market participants to fully understand, and the interrelationships are even more complex … In the case of banks, the existence of deposit insurance coupled with access to the payments system [operated by the Federal Reserve] creates moral hazard with a clear incentive for excessive risk-taking. This is, after all, the rationale for regulating and supervising banks. In the case of other financial intermediaries there may be implicit but not explicit guarantees because many are too big to fail—a recognition that the failure of such entities also creates a systemic risk. A couple of weeks later, Elmendorf wrote Yellen to say that he was going to tell one of Rubin’s deputies that her view was that “on balance, more regulation could, and probably should, occur.” But in the spring of 1999, when the Working Group on Financial Markets issued its report on the collapse of Long-Term Capital Management, it called only for what Rubin, in a memo to Clinton describing the report, described as “indirect regulation”—mostly requirements that hedge funds disclose more information to their lenders.


pages: 209 words: 53,236

The Scandal of Money by George Gilder

Affordable Care Act / Obamacare, Alan Greenspan, bank run, behavioural economics, Bernie Sanders, bitcoin, blockchain, borderless world, Bretton Woods, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, Claude Shannon: information theory, Clayton Christensen, cloud computing, corporate governance, cryptocurrency, currency manipulation / currency intervention, currency risk, Daniel Kahneman / Amos Tversky, decentralized internet, Deng Xiaoping, disintermediation, Donald Trump, fiat currency, financial innovation, Fractional reserve banking, full employment, George Gilder, glass ceiling, guns versus butter model, Home mortgage interest deduction, impact investing, index fund, indoor plumbing, industrial robot, inflation targeting, informal economy, Innovator's Dilemma, Internet of things, invisible hand, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jeff Bezos, John Bogle, John von Neumann, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, Law of Accelerating Returns, low interest rates, Marc Andreessen, Mark Spitznagel, Mark Zuckerberg, Menlo Park, Metcalfe’s law, Money creation, money: store of value / unit of account / medium of exchange, mortgage tax deduction, Nixon triggered the end of the Bretton Woods system, obamacare, OSI model, Paul Samuelson, Peter Thiel, Ponzi scheme, price stability, Productivity paradox, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, Ray Kurzweil, reality distortion field, reserve currency, road to serfdom, Robert Gordon, Robert Metcalfe, Ronald Reagan, Sand Hill Road, Satoshi Nakamoto, Search for Extraterrestrial Intelligence, secular stagnation, seigniorage, Silicon Valley, Skinner box, smart grid, Solyndra, South China Sea, special drawing rights, The Great Moderation, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Tim Cook: Apple, time value of money, too big to fail, transaction costs, trickle-down economics, Turing machine, winner-take-all economy, yield curve, zero-sum game

Declaring that the Internet has passed beyond its entrepreneurial phase, a bureaucracy of lawyers and accountants at the Federal Communications Commission is taking it over, putting the net in “neutral,” where the government can follow it better, probing all its nodes and prices as a public utility under Title II of the Communications Act of 1934, like an old telephone or railroad monopoly. The Dodd-Frank Act is an invitation to nationalize the large banks as too big to fail and to marginalize the small ones as too little to succeed. Free of all legislative constraint, the federal Consumer Financial Protection Bureau is regulating all consumer finance, from investment advisors to pawn shops. Obamacare (also known as the Affordable Care Act) is extending its web of taxation and control over all healthcare, requiring sixteen thousand new Internal Revenue Service agents to make it all work.

Once associated with research, analysis, and support for the independent enterprises of America, the new Wall Street simply means giant banks informally nationalized by Washington. Deutsche Bank, Goldman Sachs, Morgan Stanley, UBS, Citibank, JPMorgan Chase, and the rest, eminent institutions all, are full of dazzling financial prestidigitators. But they are too big to fail and too dependent on government to succeed. Their horizons are too short to foster entrepreneurial wealth and growth. The bulk of financial profits now comes from “proprietary trading,” with a time horizon measured in minutes and weeks rather than years and decades. They impart liquidity but not learning.

Dwarfing all positive investment by “inside traders” and knowledge brokers are the financial power brokers in the major banks. Thriving through leverage and arbitrage, fast trading and risk shuffling, they have long had access to virtually unlimited funds at near-zero interest rates, while the government has anointed most of them as too big to fail. In effect, the federal government, through the Federal Reserve and scores of other regulators, has socialized the downside of these institutions, enabling them to carry on what they call “creative risk taking.” But what in fact they do is cockeyed extension of ever more cantilevered loans and compound securities with only tiny slivers of actual equity at risk.


pages: 482 words: 149,351

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

Different but also familiar are too-big-to-fail monopolies. Large institutions, usually banks, become so systemically important that a collapse would trigger mayhem, which is what happened in the global financial crisis of 2007–8. They milk markets by making profits from risky business, then get taxpayers to bail them out when the risks crystallise in a crisis. There is actually an official list of these monsters published by the Financial Stability Board, an international body based in Switzerland. There were thirty too-big-to-fail banks at the last count in 2017, plus nine too-big-to-fail insurers, including Barclays, HSBC, Deutsche Bank, Prudential, JP Morgan Chase and Citigroup.19 This is not just a matter for financial regulators; it is an antitrust issue, but in Britain, Europe and the United States the antitrust regulators are asleep.

This capture is mostly a subtle, networked thing, backed up by dollops of well-aimed sponsorship as banks, insurance firms and hedge funds hurl funding at opinion-forming think tanks, throw banquets for visiting dignitaries, or organise drunken grouse-hunting expeditions for politicians or distinguished members of the metropolitan punditry. I call it ‘country capture’ because it goes far beyond the political system, penetrating deep into our economy, our culture and our society. This widely accepted story about the pressing need to preserve the City’s ‘competitiveness’ goes a long way towards explaining why our banks are too big to fail and our bankers too important to jail, why our hospitals aren’t getting funded, why your favourite local bookshop closed down, and why tax havens seem to be so hard to tackle. The concept of ‘national competitiveness’ is a complex, tricky area, whose history and meaning I will explore throughout this book.

Or, once again, making Europe more ‘competitive’ by allowing less competition in Europe. These ideas are not just confused; history shows us that they can be dangerous. When Germany’s monopolies commission warned in 2004 that plans to nurture a national banking champion (Deutsche Bank, in other words) would lead to ‘too big to fail’ banks and a financial crisis, and that a similar policy in 1931 had contributed to the conditions that fed the rise of the Nazi Party, the government told it to get lost. Bank regulation was excellent, they said.30 Deutsche Bank’s shaky finances remain a source of concern to Germany and to the European economy today.


pages: 444 words: 151,136

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 straining of our historic linkage to a hard reserve also mirrors a gradual shift in cultural norms from individual responsibility for failure and immediate financial correction to socialization of risk, redistribution of wealth, and statist economic intervention. The decentralized banking structure of the early 19th century kept moral hazard in check, as no institution was too big to fail, including national banks that would arise. By the 1920s restraining people and countries from converting cash to specie may have postponed the cleansing process of economic cycles, leading to a new height of speculation and the Great Depression. Later in this work the role cultural norms play in the selection of monetary systems will be explored.

This injection, which was partly made to accommodate a 122 ENDLESS MONEY federal government budget deficit of $3 billion, failed to discourage the destruction of some $3.2 billion of deposits, and a similar contraction of the money supply to $65 billion. In 2008, the Fed would explicitly espouse a “too big to fail” policy, having been blamed for causing the crisis by not saving Lehman Brothers. Although Bear Stearns was “saved” and Lehman Brothers was not, in reality the Fed’s reserve injections were widely disbursed, and later would be augmented by direct Treasury assistance through the Troubled Asset Relief Program (TARP).

Over 50 percent of loans made are real estate related, including commercial real estate.2 The cottage industry of doom-and-gloom prognosticators has long predicted the end, but a more humble opinion might be that in this cycle we may be institutionalizing socialization of assets and debts as a priority, and that its cost will be less control over dilution of currency value (inflation), greater seigniorage (a tax that degrades incentives and therefore erodes capitalistic growth), and the concentration of risk into large institutions that are “too big to fail,” producing de-facto nationalization of banking. With the unanimous prescription of even greater regulation H 209 210 ENDLESS MONEY and oversight, our largest banking institutions may have become quasigovernment entities well before the federal government made a direct investment in the nation’s nine largest banks in October 2008.


pages: 261 words: 57,595

China's Future by David Shambaugh

Berlin Wall, capital controls, demographic dividend, demographic transition, Deng Xiaoping, facts on the ground, financial intermediation, financial repression, Gini coefficient, Great Leap Forward, guns versus butter model, high net worth, high-speed rail, Kickstarter, knowledge economy, low skilled workers, market bubble, megacity, middle-income trap, Mikhail Gorbachev, military-industrial complex, New Urbanism, offshore financial centre, open economy, Pearl River Delta, rent-seeking, secular stagnation, short selling, South China Sea, special drawing rights, too big to fail, urban planning, Washington Consensus, working-age population, young professional

Contents Cover Dedication Title Page Copyright Acknowledgments Preface 1 Pathways to China’s Future China Today: Paying the Price for a Path Already Taken Is China Too Big to Fail? Variables and Questions Shaping China’s Future Notes 2 China’s Economy Where Do They Want to Go? The Third Plenum Revisited Rebalancing Growth Rates Worrying Sectoral Signs The Financial System Personal Consumption and Spending State-Owned Enterprise Reform The Key to Success: Innovation Pathways to China’s Economic Future Prospects Notes 3 China’s Society China’s Shifting Class Composition The Volatile Periphery Civil Society Urbanization Migration and the Labor Market Demographic Transition Provision of Public Goods Pathways to China’s Social Future Notes 4 China’s Polity China’s Recent Political Evolution Pathways to China’s Political Future Notes 5 China’s Future and the World Rising Tensions on China’s Periphery China’s Relations with Other Powers The Global South: Fraternity or Neo-Colonialism?

The US-China Business Council, for example, maintains a running online tracker of its implementation—by 2015 it reported a dismal implementation rate of less than 10 percent.7 The European Chamber of Commerce in China released a similarly downbeat assessment entitled “Third Plenum Reality Check.”8 Most other economists and China watchers are similarly unimpressed with the progress to date. Is China Too Big to Fail? China’s reforms thus seem stuck in a trap, or series of traps. The situation today (2015) combines the hardened political repression evident since 2009 (but intensified since Xi Jinping took office in 2012) with very marginal economic reforms and increasingly acute social problems. This is precisely the new juncture China currently faces.

Some analysts, such as Andy Rothman of Matthews Asia, dismiss the potential for local government defaults on debts (on the basis that the party-state will always step in to prevent this from occurring). See Andy Rothman, “Diagnosing China’s Debt Disease” (San Francisco: Matthews Asia, May 14, 2015). Another leading research company (and Rothman’s former employer), CLSA, has a more bearish take in their report China Banks: Not Too Big to Fail (Hong Kong: CLSA Ltd., 2015). 34. Tyler Durden, “The $8 Trillion Black Swan: Is China’s Shadow Banking System About to Collapse?”: http://www.zerohedge.com/news/2015-08-18/8-trillion-black-swan-chinas-shadow-banking-system-about-collapse. 35. Paul Krugman, “China’s Naked Emperors,” New York Times, July 31, 2015. 36.


pages: 309 words: 91,581

The Great Divergence: America's Growing Inequality Crisis and What We Can Do About It by Timothy Noah

air traffic controllers' union, Alan Greenspan, assortative mating, autonomous vehicles, Bear Stearns, blue-collar work, Bonfire of the Vanities, Branko Milanovic, business cycle, call centre, carbon tax, collective bargaining, compensation consultant, computer age, corporate governance, Credit Default Swap, David Ricardo: comparative advantage, Deng Xiaoping, easy for humans, difficult for computers, Erik Brynjolfsson, Everybody Ought to Be Rich, feminist movement, Ford Model T, Frank Levy and Richard Murnane: The New Division of Labor, Gini coefficient, government statistician, Gunnar Myrdal, income inequality, independent contractor, industrial robot, invisible hand, It's morning again in America, job automation, Joseph Schumpeter, longitudinal study, low skilled workers, lump of labour, manufacturing employment, moral hazard, oil shock, pattern recognition, Paul Samuelson, performance metric, positional goods, post-industrial society, postindustrial economy, proprietary trading, purchasing power parity, refrigerator car, rent control, Richard Feynman, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, Stephen Hawking, Steve Jobs, subprime mortgage crisis, The Spirit Level, too big to fail, trickle-down economics, Tyler Cowen, Tyler Cowen: Great Stagnation, union organizing, upwardly mobile, very high income, Vilfredo Pareto, War on Poverty, We are the 99%, women in the workforce, Works Progress Administration, Yom Kippur War

The perfect is the enemy of the good, and the good can be improved in the long term. The next step in banking reform ought to be more radical. The too-big-to-fail banks must be broken up. This is yet another left-wing-sounding idea that has been promoted (though more tentatively) by former Fed chairman Alan Greenspan. “If they’re too big to fail, they’re too big,” Greenspan said in a 2009 speech. “In 1911, we broke up Standard Oil. So what happened? The individual parts became more valuable than the whole. Maybe that’s what we need.”11 If the too-big-to-fail banks are allowed to remain as large as they are now, they will continue to pose what bankers call a “moral hazard,” a market distortion in which decisions are made with no consideration of risk because the decision-makers themselves are protected from any possible downside.

“Despite the widespread assumption in both New York and Washington that big banks provide societal benefits,” Simon Johnson and James Kwak wrote in 13 Bankers, “there is no proof that these benefits exist and no quantification of their size—certainly no quantification sufficient to show that they outweigh the very obvious costs of having banks that are too big to fail.” Breaking up the big banks ought to reduce compensation levels by introducing greater competition in the banking sector. That wouldn’t be the purpose—the purpose would be to prevent catastrophic banking failures that require government bailouts—but it would be a beneficial side effect. Elect Democratic Presidents This sounds glibly partisan, but as I noted in chapter 7, the Vanderbilt political scientist Larry Bartels has pretty convincingly demonstrated that for the bottom 95 percent of the income distribution, Democratic administrations have since 1948 presided over income gains that diminish as you move up the income scale, while Republican administrations have presided over income gains that diminish as you move down the income scale.


pages: 312 words: 93,836

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

Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, Big bang: deregulation of the City of London, bonus culture, capital controls, collapse of Lehman Brothers, credit crunch, Credit Default Swap, Eugene Fama: efficient market hypothesis, eurozone crisis, financial deregulation, financial innovation, fixed income, foreign exchange controls, game design, Gordon Gekko, inflation targeting, information asymmetry, interest rate derivative, interest rate swap, London Interbank Offered Rate, loss aversion, mental accounting, millennium bug, Nick Leeson, Northern Rock, oil shock, Post-Keynesian economics, price stability, profit maximization, proprietary trading, regulatory arbitrage, reserve currency, Rubik’s Cube, Snapchat, Suez crisis 1956, the market place, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, work culture , Y2K

In fact, the arguments used back then were surprisingly similar to some of those used during and after the financial crisis of 2007–08. Banks were seen as having lent recklessly. Banks had created financial instruments that hardly anybody understood. The deregulation process had gone too far. Many banks had become too big to fail. Central banks had to resort to extraordinary measures to save the global financial system from collapse. And so on … *** On 12 December 2012, the United States of America charged two of my former trading counterparties, Tom Hayes and Roger Darin, with conspiracy, wire fraud and price fixing in relation to LIBOR.11 In a bid to dismiss the charges (which he lost), Roger and his lawyer argued that the US authorities had no jurisdiction over his actions.

Likewise, despite the differences in size (ranging from just five members in the STIBOR club to 43 in the EURIBOR club), they also tended to increasingly include international banks that were not under the direct jurisdiction of the central bank issuing the underlying currency for that particular benchmark. In other words, they were either typical so-called too-big-to-fail banks within a country, or international banks of gigantic proportions. For instance, 14 of the 18 members of the US dollar LIBOR club were classified as ‘global systematically important banks’.13 The clubs, in turn, appointed an organisation to govern and supervise both themselves and the process.

The LIBOR definition remains exactly the same as it used to be, and the new rules hardly challenge its existence. On the contrary, making the process more formal and robust will probably only serve to justify and encourage its further use. In a sense, LIBOR, like the large banks that are part of the panels setting it, has been deemed ‘too big to fail’. Overall, these measures should be seen as steps in the right direction – but only as long as the process is moving towards greater transparency. A pair of 3D glasses might make a film more realistic. However, it will not make it real. *** The perception of the industry has also changed at a more micro level.


pages: 433 words: 125,031

Brazillionaires: The Godfathers of Modern Brazil by Alex Cuadros

"World Economic Forum" Davos, affirmative action, Asian financial crisis, benefit corporation, big-box store, bike sharing, BRICs, buy the rumour, sell the news, cognitive dissonance, creative destruction, crony capitalism, Deng Xiaoping, Donald Trump, Elon Musk, facts on the ground, family office, financial engineering, high net worth, index fund, invisible hand, Jeff Bezos, Mark Zuckerberg, megaproject, NetJets, offshore financial centre, profit motive, prosperity theology / prosperity gospel / gospel of success, rent-seeking, risk/return, Rubik’s Cube, savings glut, short selling, Silicon Valley, sovereign wealth fund, stem cell, stock buybacks, tech billionaire, The Wealth of Nations by Adam Smith, too big to fail, transatlantic slave trade, We are the 99%, William Langewiesche

William Grossman) Contents PROLOGUE: THE CRASH PART ONE: ROOTS OF WEALTH CHAPTER 1: GOD IS BRAZILIAN CHAPTER 2: THE PRICE OF PROGRESS CHAPTER 3: MANIFEST DESTINY CHAPTER 4: NATION BUILDING CHAPTER 5: PROSPERITY GOSPEL PART TWO: THE BRAZILIAN DREAM CHAPTER 6: VISIONARY CHAPTER 7: HELPING HANDS CHAPTER 8: THE PROFIT MOTIVE CHAPTER 9: THE BACKLASH CHAPTER 10: TOO BIG TO FAIL EPILOGUE: AFTER THE CRASH ACKNOWLEDGMENTS NOTES GLOSSARY INDEX PROLOGUE THE CRASH ON A STRETCH OF HIGHWAY NOT FAR FROM RIO DE JANEIRO, a silver SLR McLaren idled on the shoulder, its futuristic door hinged open at the top like a wing extended toward the evening sky. The warning lights blinked yellow.

It would be the first time someone had ever served time for financial crimes in Brazil—though of course, insider trading became a crime here only in 2001, a fitting delay in the land of the cordial man. As with his son, few believed someone like Eike could ever go to jail. But the case against him was much better than the one against Thor for manslaughter. And Brazilians wanted to see someone rich and powerful get his due. CHAPTER 10 TOO BIG TO FAIL DEBT, CRISIS, AND A COMEBACK “When you’ve done the right thing, you just keep on going.” —EIKE BATISTA (NEGATIVE $1 BILLION) WHEN I FIRST STARTED REPORTING ON BILLIONAIRES, I assumed I’d speak to Eike all the time. It was only later that I realized I didn’t fully believe my own skepticism of him, and some large part of me imagined he’d just stay on top forever.

After Judge Moro ordered the arrest of Marcelo Odebrecht, the heir who now led the family empire, one well-known blogger even wrote that tycoons like him deserved to be treated not just as citizens but as national institutions. An antitrust official compared Dilma’s Faustian logic to the one that prevailed in the United States in 2008, according to which some banks were “too big to fail,” regardless of what they’d done wrong. Brazil’s “bribe club” was responsible for the country’s most important public works—including the projects for the Olympic Games in Rio. If Camargo Corrêa and Odebrecht went under, the country could face international embarrassment in 2016, and the economy truly would suffer.


pages: 505 words: 142,118

A Man for All Markets by Edward O. Thorp

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", 3Com Palm IPO, Alan Greenspan, Albert Einstein, asset allocation, Bear Stearns, beat the dealer, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, Black-Scholes formula, book value, Brownian motion, buy and hold, buy low sell high, caloric restriction, caloric restriction, carried interest, Chuck Templeton: OpenTable:, Claude Shannon: information theory, cognitive dissonance, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Edward Thorp, Erdős number, Eugene Fama: efficient market hypothesis, financial engineering, financial innovation, Garrett Hardin, George Santayana, German hyperinflation, Glass-Steagall Act, Henri Poincaré, high net worth, High speed trading, index arbitrage, index fund, interest rate swap, invisible hand, Jarndyce and Jarndyce, Jeff Bezos, John Bogle, John Meriwether, John Nash: game theory, junk bonds, Kenneth Arrow, Livingstone, I presume, Long Term Capital Management, Louis Bachelier, low interest rates, margin call, Mason jar, merger arbitrage, Michael Milken, Murray Gell-Mann, Myron Scholes, NetJets, Norbert Wiener, PalmPilot, passive investing, Paul Erdős, Paul Samuelson, Pluto: dwarf planet, Ponzi scheme, power law, price anchoring, publish or perish, quantitative trading / quantitative finance, race to the bottom, random walk, Renaissance Technologies, RFID, Richard Feynman, risk-adjusted returns, Robert Shiller, rolodex, Sharpe ratio, short selling, Silicon Valley, Stanford marshmallow experiment, statistical arbitrage, stem cell, stock buybacks, stocks for the long run, survivorship bias, tail risk, The Myth of the Rational Market, The Predators' Ball, the rule of 72, The Wisdom of Crowds, too big to fail, Tragedy of the Commons, uptick rule, Upton Sinclair, value at risk, Vanguard fund, Vilfredo Pareto, Works Progress Administration

That’s what is done on regulated futures exchanges, where contracts are also standardized. This model has worked well for decades, is easy to regulate, mostly by the exchanges themselves, and has had few problems. Institutions that are “too big to fail,” and have a significant risk of doing so, should be broken into pieces that are small enough to fail without jeopardizing the financial system. As Alan Greenspan finally admitted, “Too big to fail is too big.” This is a catchy sound bite but it misstates the real problem. It’s not the mere size of an institution that creates the danger. It is the size of the risk to the financial system from a failure.

In August 1998, the hedge fund Long-Term Capital Management (LTCM), a pool of $4 billion, lost nearly all its money. Highly leveraged, it threatened to default on something like $100 billion in contracts. Some claimed that the world financial system itself was threatened. The Federal Reserve decided LTCM was “too big to fail” and brokered a bailout by a consortium of brokers and banks, each of whom had a financial self-interest in saving LTCM. At about the same time several Asian economies got sick, and Russia defaulted on its debt. The combination of events greatly increased volatility in the financial markets.

They expanded to $7 billion in capital before giving back $2.7 billion, which increased both the risk and the return on the remaining capital. Later, when adverse market conditions created fairly small losses in percentage terms, the leverage magnified the impact and nearly wiped them out. After losing 90 percent of their capital in weeks, and with total ruin imminent, the fact that they were “too big to fail” led to a rescue effort encouraged by the Federal Reserve. The fund was liquidated in an orderly fashion and investors recovered a small percentage of their stake. Not long after, Meriwether and four others of the sixteen partners started a new hedge fund similar to LTCM, but using less leverage.


pages: 503 words: 131,064

Liars and Outliers: How Security Holds Society Together by Bruce Schneier

Abraham Maslow, airport security, Alvin Toffler, barriers to entry, behavioural economics, benefit corporation, Berlin Wall, Bernie Madoff, Bernie Sanders, Brian Krebs, Broken windows theory, carried interest, Cass Sunstein, Chelsea Manning, commoditize, corporate governance, crack epidemic, credit crunch, CRISPR, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Graeber, desegregation, don't be evil, Double Irish / Dutch Sandwich, Douglas Hofstadter, Dunbar number, experimental economics, Fall of the Berlin Wall, financial deregulation, Future Shock, Garrett Hardin, George Akerlof, hydraulic fracturing, impulse control, income inequality, information security, invention of agriculture, invention of gunpowder, iterative process, Jean Tirole, John Bogle, John Nash: game theory, joint-stock company, Julian Assange, language acquisition, longitudinal study, mass incarceration, meta-analysis, microcredit, mirror neurons, moral hazard, Multics, mutually assured destruction, Nate Silver, Network effects, Nick Leeson, off-the-grid, offshore financial centre, Oklahoma City bombing, patent troll, phenotype, pre–internet, principal–agent problem, prisoner's dilemma, profit maximization, profit motive, race to the bottom, Ralph Waldo Emerson, RAND corporation, Recombinant DNA, rent-seeking, RFID, Richard Thaler, risk tolerance, Ronald Coase, security theater, shareholder value, slashdot, statistical model, Steven Pinker, Stuxnet, technological singularity, The Market for Lemons, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Timothy McVeigh, too big to fail, traffic fines, Tragedy of the Commons, transaction costs, ultimatum game, UNCLOS, union organizing, Vernor Vinge, WikiLeaks, World Values Survey, Y2K, Yochai Benkler, zero-sum game

But as long as the maximum possible penalty to the corporation is bankruptcy, there will be illegal activities that are perfectly rational to undertake as long as the probability of penalty is small enough.20 Any company that is too big to fail—that the government will bail out rather than let fail—is the beneficiary of a free insurance policy underwritten by taxpayers. So while a normal-sized company would evaluate both the costs and benefits of defecting, a too-big-to-fail company knows that someone else will pick up the costs. This is a moral hazard that radically changes the risk trade-off, and limits the effectiveness of institutional pressure.

Until recently, Amazon.com used its large national footprint and lack of physical stores to avoid having to charge sales tax in most states. Punishing a large corporation might result in so much cost or damage to society that it makes sense to let them get away with their wrongdoing. The ultimate expression of this is when a company is “too big to fail”: when the government is so afraid of the secondary effects of a company going under that they will bail the company out in order to prevent it.17 Individuals within large corporations can be emotionally further away from the individuals they're affecting when they make decisions about whether to cooperate or defect.

Technology aids in both of those: travel technology to allow people to move around, communications technology to allow better coordination and cooperation, and information technology to allow information to move around the organization. The fact that all of these technologies have vastly improved in the past few decades is why organizations are growing in size. (17) Senator Bernie Sanders actually had a reasonable point when he said that any company that is too big to fail is also too big to exist. (18) The people who use sites like Google and Facebook are not those companies’ customers. They are the products that those companies sell to their customers. In general: if you're not paying for it, then you're the product. Sometimes you're the product even if you are paying for it.


pages: 515 words: 142,354

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

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

This, in turn, is a consequence of institutional and market imperfections (for example, rules about knowing your customer, designed to curb money laundering), which, interestingly, the neoclassical model underlying much of Europe’s policy agenda ignored. There is far less of a single market than is widely thought to exist. 11 There are similar distortions within countries. Because the likelihood of a government bailout is greater for big banks—especially the banks that are viewed to be too big to fail—such banks can acquire funds at a lower rate than small banks. They can thus expand, not based on their relative competency or efficiency, but on the basis of the relative size of the implicit subsidy that they receive from the government. But the system is again divergent: as the large banks get larger, the likelihood of a bailout increases, and thus the difference in the implicit subsidy gets larger. 12 This would not fully fix the problem: given that banks in weak countries would, in any case be weaker and perceive the risks they face as higher, lenders to these banks would demand higher interest rates, and the banks in turn would charge higher interest rates, putting firms in their country at a disadvantage.

But whether that is so is not the point: the government lent money to the banks at far below the market interest rate, and that in itself is a major gift. There were many other ways that central banks (sometimes working in conjunction with government, sometimes seemingly independently) provided hidden subsidies to the banks. They perpetuated the prevalence of too-big-to-fail (too-correlated-to-fail, and too-interconnected-to-fail) banks; indeed, on both sides of the Atlantic, governments encouraged mergers, exacerbating the problem. The lower interest rates that such banks can obtain acts as a hidden subsidy. Quantitative easing itself represented in part a hidden recapitalization of the banks, much as the policies pursued in the Clinton administration had done after the savings and loan (S&L) crisis.

Galbraith, Inequality and Instability: A Study of the World Economy Just before the Great Crisis (New York: Oxford University Press, 2012); and Stiglitz, Price of Inequality. 15 For a further development of this critique, see my book Freefall. 16 This is especially so, through the privatization of gains and the socialization of losses that has become a regular feature in economies with too-big-to-fail banks. (See Freefall.) 17 The system is symmetric. The central bank may decide that there is too much money in the economic system—that is, the banks are lending too much, using “money” that they receive in repayment. In that case, the government can buy back rights to issue credit: they buy back the money that they have allowed the banks to effectively manage on their behalf.


pages: 261 words: 103,244

Economists and the Powerful by Norbert Haring, Norbert H. Ring, Niall Douglas

accounting loophole / creative accounting, Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, asset allocation, bank run, barriers to entry, Basel III, Bear Stearns, Bernie Madoff, book value, British Empire, buy and hold, central bank independence, collective bargaining, commodity trading advisor, compensation consultant, corporate governance, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, diversified portfolio, financial deregulation, George Akerlof, illegal immigration, income inequality, inflation targeting, information asymmetry, Jean Tirole, job satisfaction, Joseph Schumpeter, Kenneth Arrow, knowledge worker, land bank, law of one price, light touch regulation, Long Term Capital Management, low interest rates, low skilled workers, mandatory minimum, market bubble, market clearing, market fundamentalism, means of production, military-industrial complex, minimum wage unemployment, Money creation, moral hazard, new economy, obamacare, old-boy network, open economy, Pareto efficiency, Paul Samuelson, pension reform, Ponzi scheme, price stability, principal–agent problem, profit maximization, purchasing power parity, Renaissance Technologies, Robert Solow, rolodex, Savings and loan crisis, Sergey Aleynikov, shareholder value, short selling, Steve Jobs, The Chicago School, the payments system, The Wealth of Nations by Adam Smith, too big to fail, Tragedy of the Commons, transaction costs, ultimatum game, union organizing, Vilfredo Pareto, working-age population, World Values Survey

Interestingly, in both the UK and Switzerland, steps to force primary loss-absorbing capacity for “too big to fail” banks to more than twice that required by Basel III (to around 15–20 percent), and the separation of deposit operations from all other kinds of banking as the sole kind protected by government guarantee, are well under way – and up to the time of writing the dire warnings from bankers that banks would relocate in response have been ignored by policymakers. Unfortunately, the Fed has elected to implement the minimum required by Basel III for most banks, and is still deciding what capacity will apply to the eight largest “too big to fail” banks. It seems unlikely that they will be as principled and erudite as the British or Swiss.

The goal of the operation was usually cast as improving the international competitiveness of the banks of the respective nations or as increasing the attractiveness of the respective financial centers. These expressions cloak the goal of conferring profits to the banking sector into a respectable-seeming public purpose. The bigger the bank, the more valuable the implicit insurance subsidy by the government is. Big banks are too big to fail, and they know governments and central banks will bail them out if they run into trouble. Thus bigger banks can take on more risk and make more profit in good times than smaller banks. This is a recipe for ever-increasing bank size. The main argument of the banking lobby against 100 percent banking or 100 percent money has always been its potential to reduce the availability of credit.

Morgan (bank) 54, 59, 70, 87, 105 labor xii, 4–6, 8, 10, 18, 33–4, 137, 139, 141, 143, 146, 153–5, 157–9, 163–5, 167–73, 176, 178–83, 189–94, 197, 200, 203–5 legitimacy 16, 25 Lehman Brothers 17, 90, 94, 96 Leviathan (government) 210 liberty 8, 25, 207 liquidity xi, 66, 103–5, 112 London School of Economics 20, 27, 40, 144 Long-Term Capital Management (LCTM) 66, 92 macroeconomics 14 Madoff, Bernard 217 managerial power approach 119, 120, 124, 126, 132 marginal cost 142–4 marginal product 156–8, 189, 192 marginal rate of substitution 14 marginal utility 5–6, 13, 214 marginalism 1, 4–5 market forces x, 126, 169, 171–2, 180–82 market power xii, 154, 161, 164, 170, 203 Marshall, Alfred 5, 10, 16, 188, 193 Marx, Karl 5, 188, 198 Marxism 5–6, 10, 165 mass production 7, 15, 143, 161 Mazur, Paul 17–18 median voter theory 212, 214 Menger, Carl 5, 12 mercantilism 2–3 Merrill Lynch 90, 112, 133 Methuen Treaty 3 military vii, 3, 19–20, 22, 25, 45, 116, 208, 215 minimum wage 140–41, 154, 158, 183, 188–9, 192–7, 203–4 Mises, Ludwig von 12 monopoly viii, 9, 18, 26, 41, 86–7, 97–9, 142, 145–7, 149–54, 161, 171, 177 monopsony 153–4 Moody’s (ratings agency) 97–9 Morgan Stanley 49, 63, 90, 217 mutual fund 56, 58, 64–6, 68, 97, 134 NASDAQ 55 natural selection 167 negotiating power 160, 179, 205 net present value 159 new welfare economics 14, 19 news 53, 56, 114, 122, 143, 220 Nobel Prize 7, 17, 20, 22–4, 26, 44, 170, 186 Organisation for Economic Cooperation and Development (OECD) 20, 30, 41, 187, 189, 203 Olson, Mancur 23–4 optimal contracting 109, 119–20, 124, 126–7, 132 ordinalism 1, 11, 17, 21 outrage constraint 119–21, 124, 126–7, 136 outsourcing 165, 177, 184–6 over the counter (OTC) (derivatives) 90 Paretian welfare economics 14 Pareto, Vilfredo 12–13, 21, 157 INDEX pay-for-performance 95, 107–8, 111–12, 115, 119, 121–2, 126, 128, 139 pensions viii, 36, 39, 57, 58, 98, 113, 140, 134 perfect competition (economic) x, xii, 141–2, 145–6, 168, 187, 193 perfectly substitutable (economically) x performance-related pay 109, 111; see also pay-for-performance perverse incentive 113, 133 Pigou, Arthur C. 10, 188, 192–3, 198 Pimco (fund) 96, 215 Ponzi (scheme) 95, 217 poststructuralism 8 power viii–xii, 1–4, 8–9, 18, 25, 27–32, 42, 145, 147, 153–4, 159–61, 164, 166–8, 171, 174, 177–9, 184–7, 193, 198, 203–4 corporate 107–40 economic xii, 1, 32, 45, 46, 54, 208, 219 financial 47–106 informational 207–20 managerial (see managerial power approach) political ix, xii, 32, 86, 208, 210, 219 principal–agent theory 107 prisoner’s dilemma 38 private equity 68, 136 productivity (economic) ix, 10, 32, 34–6, 48, 79–80, 101, 137, 141, 146–7, 156, 171, 173, 176, 178, 180, 186, 189, 192, 194, 196, 201, 204–5 professions, the viii, 1, 25 profit xii, 2, 7, 43, 46, 54–6, 59, 61–2, 65, 68, 76, 82–3, 85, 91, 97, 99– 100, 105, 109–10, 112–13, 118, 127–8, 130, 135, 137, 141–3, 145–50, 153, 155, 157, 159–60, 164, 166, 171, 173, 175, 177–9, 184, 186, 197, 205, 215–16 profitability 49, 53, 60, 74, 84, 95, 97, 100, 132–3, 139, 143, 151, 183, 191, 194 245 profit margin 3, 195 profit maximization 120, 143, 147, 149–51 property rights 22, 215 public relations (PR) 15–16 quadratic weighting (inflation) 33 rating agencies x, 97–100 rational choice movement 1, 21–3, 25, 214 raw materials 2–3, 184 redistribution 10, 12, 19, 39, 161, 186, 210, 213 representative agent 14 reserve requirement 82–4, 103–4 risk management 94 Robbins, Lionel 12–13, 17, 21, 210–11 Robinson, Joan 146, 159–60, 208 Ross, Edward 9–10, 18, 38 Rothschild, Mayer Amschel 72–3, 75 S&P 500 110, 120 Samuelson, Paul 159–60 Sarbanes–Oxley Act 92, 99, 123 Schumpeter, Joseph 19 Second (Workingmen’s) International 5 Second World War 2, 18–19, 30, 79–80 Securities and Exchange Commission (SEC) 52–3, 69, 90, 93–4, 97–8, 115, 123–4, 130, 217 securitization 112 selfishness 7, 38, 40, 108, 167, 170, 211, 213 shareholder franchise 133 shareholders xii, 93, 102, 107–10, 112–15, 120–22, 128, 131, 133–6, 138 SMD assumptions/conditions 7, 14 Smith, Adam 3–4, 42, 155, 163, 188, 198 social norms 38, 108, 117, 120, 135, 138–9, 164 social security 36, 39, 188, 198–9 246 ECONOMISTS AND THE POWERFUL socialism 5–6 , 9–10, 19, 24, 27, 193 Solow, Robert 159 Sonnenschein–Mantel–Debreu theorem: see SMD assumptions/ conditions Soros, George 47, 67, 105 spring loading (stock options) 122 Squam Lake Group 44 Sraffa, Piero 141, 144, 159–60 staggered board (of directors) 126, 134 stagnation 32, 101, 218 stakeholders xii, 107–8, 117, 136–7 Standard & Poor’s (rating agency) 97, 99 Stanford University 10, 18, 93 stock option backdating 122 stock options 43, 67, 92–3, 96, 108–10, 112–13, 120, 122–5, 128, 131–3 structural reforms 188–9 subprime xi, 43, 47, 69–71, 82, 88, 90, 95, 97–8, 101, 105, 108, 111, 113, 120, 133, 136, 205, 217 supply and demand 108, 167 sustainability ix, 13 Syracuse University 9 takeover 70, 102, 113, 126, 135 tariffs 3, 16, 84 TARP: see Troubled Asset Relief Program (TARP) taxation 83, 109, 139, 214 Thatcher, Margaret 40 “too big to fail” 83, 105 transaction costs 7, 74, 168–9 transportation 7, 41, 73, 118, 143, 144–5, 169, 186 treasury secretary xi, 69, 71, 87, 90, 96 Troubled Asset Relief Program (TARP) 70 UBS (bank) 105 unemployment 170, 180–81, 188–9, 197–200, 203–5, 213 university 9, 16–17, 20–21, 27, 41, 101, 117, 142 University of Chicago: see Chicago, University of value added 31, 136 Wall Street xi, 38, 42, 54, 63, 67, 69–70, 88, 92–3, 96, 99, 105, 122–3 Walras, Leon 5–7 Warwick Commission 100–101, 103 Washington Mutual (bank) 95–6 wealth viii, xii, 2, 9, 42, 45, 69, 71–2, 96, 101, 110–11, 120, 135, 207–10 welfare economics 14–15 welfarism 10–11 Wieser, Friedrich von 12–13 worker representatives 137 World Bank 27–8, 31 Worldcom 52, 61, 92, 98, 110, 113, 128, 132 Yale University 10, 13


pages: 364 words: 99,613

Servant Economy: Where America's Elite Is Sending the Middle Class by Jeff Faux

air traffic controllers' union, Alan Greenspan, back-to-the-land, Bear Stearns, benefit corporation, Bernie Sanders, Black Swan, Bretton Woods, BRICs, British Empire, business cycle, call centre, centre right, classic study, cognitive dissonance, collateralized debt obligation, collective bargaining, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, David Brooks, David Ricardo: comparative advantage, disruptive innovation, falling living standards, financial deregulation, financial innovation, full employment, Glass-Steagall Act, guns versus butter model, high-speed rail, hiring and firing, Howard Zinn, Hyman Minsky, illegal immigration, indoor plumbing, informal economy, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, junk bonds, Kevin Roose, Kickstarter, lake wobegon effect, Long Term Capital Management, low interest rates, market fundamentalism, Martin Wolf, McMansion, medical malpractice, Michael Milken, military-industrial complex, Minsky moment, mortgage debt, Myron Scholes, Naomi Klein, new economy, oil shock, old-boy network, open immigration, Paul Samuelson, plutocrats, price mechanism, price stability, private military company, public intellectual, radical decentralization, Ralph Nader, reserve currency, rising living standards, Robert Shiller, rolodex, Ronald Reagan, Savings and loan crisis, school vouchers, Silicon Valley, single-payer health, Solyndra, South China Sea, statistical model, Steve Jobs, Suez crisis 1956, Thomas L Friedman, Thorstein Veblen, too big to fail, trade route, Triangle Shirtwaist Factory, union organizing, upwardly mobile, urban renewal, War on Poverty, We are the 99%, working poor, Yogi Berra, Yom Kippur War, you are the product

When the day of reckoning arrived, like water cascading through widening cracks in a dam, the money gushed out faster than it had come in, draining the financial lake behind and exposing the dried-up wreckage of the fraudulent loans and worthless collateral that lay at the bottom. The rest is history: the crash of Bear Stearns, the bankruptcy of Lehman Brothers, and the panicked response of the Republican White House and a Democratic Congress to pour massive amounts of money into the banks, investment companies, and insurance firms that were deemed “too big to fail.” Although there undoubtedly were challenged intellects among the public and business leaders who were most responsible for the economic crisis, David Brooks’s stupidity explanation does not fit. As John Maynard Keynes, Charles Kindleberger, and many, many other economists, such as Hyman Minsky, had shown, financial excesses were built into the modern economy.

On issue after issue, the final bill failed to specify remedies, instead leaving them to the regulatory agencies. It also provided no incentive for talented dedicated people to devote their lives to policing the financial markets and to protect them from the political interference of the powerful special interests. By omission, Dodd-Frank codified the de facto and bipartisan policy of “too big to fail.” During the debate, Democratic senators Sherrod Brown of Ohio and Ted Kaufman of Delaware offered an amendment to put a cap on the size of banks. The administration was against it. According to Bloomberg News, Timothy Geithner told Kaufman that “the issue of limiting bank size was too complex for Congress and that people who know the markets should handle these decisions.”

The Obama SEC continued the bizarre Bush SEC practice of asking suspected financial firms themselves to hire lawyers to tell the government whether the firm has broken the law. And the result is predictable. As law professor and former assistant U.S. attorney Mary Ramirez commented, “If you do not punish crimes, there really is no reason they won’t happen again.”26 “If you thought the ‘too big to fail’ issues of 2008–9 were bad in the United States,” commented former International Monetary Fund chief economist Simon Johnson in an article he co-wrote with investment banker Peter Boone, “wait until our biggest banks become even bigger.”27 Just before the 2010 election, a Wall Street Journal poll reported that Americans thought that free trade had harmed rather than helped the country by 53 to 17 percent.


pages: 328 words: 96,678

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

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

At that point, Greece restructured and reduced its public debt while also receiving a 200-billion-euro bailout package from the European Commission, the European Central Bank (ECB), and the IMF, dubbed the Troika. Greece barely survived that crisis—but it was only a prelude. Italy owed ten times more public debt, making it too big to fail and too big to rescue. The eurozone might be able to survive without Greece. But losing Italy, Europe’s third largest economy, would put an end to the dreams of eurozone planners. Earlier in 2007–8, the Great Financial Crisis had erupted in the United States, this time driven by profligate consumer debt.

In exchange for loans, they must commit to fiscal austerity and/or structural reforms to make the underlying debts more sustainable. Lenders try to make a distinction between a company or a government that just needs to get through a temporary liquidity crisis versus one that is fundamentally unhealthy and insolvent. Here, governments have an advantage over corporations. Some of them truly are too big to fail, and the IMF is likely to bail them out to avoid systemic effects on global financial markets. But that doesn’t mean there won’t be a lot of risk and pain involved in any rescue, as conditionality rules. When debtors turn out to be insolvent rather than just illiquid, they become zombies that cash handouts cannot resuscitate.

Bigger worries lurk now in many parts of Europe. Low growth, low productivity, severe brain drain, high deficits, and massive public debt make Italy the current weak link. Anti-EU and anti-euro populism is on the rise throughout the union. As the European Union’s third largest economy, Italy is too big to fail and too big to save. Best efforts by the EU, the IMF, and the ECB cannot muster a bailout sufficient in size if debt exceeding 2.6 trillion euros forces Italy to default. Failure to repay creditors would drive Italy from the EMU or Italexit. Such an ignominious departure could spur other countries to exit voluntarily while the choice is still theirs, in a domino effect that would end the EMU with a whimper.


pages: 318 words: 99,524

Why Aren't They Shouting?: A Banker’s Tale of Change, Computers and Perpetual Crisis by Kevin Rodgers

Alan Greenspan, algorithmic trading, bank run, banking crisis, Basel III, Bear Stearns, Berlin Wall, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black-Scholes formula, buy and hold, buy low sell high, call centre, capital asset pricing model, collapse of Lehman Brothers, Credit Default Swap, currency peg, currency risk, diversification, Fall of the Berlin Wall, financial innovation, Financial Instability Hypothesis, fixed income, Flash crash, Francis Fukuyama: the end of history, Glass-Steagall Act, Hyman Minsky, implied volatility, index fund, interest rate derivative, interest rate swap, invisible hand, John Meriwether, latency arbitrage, law of one price, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, Minsky moment, money market fund, Myron Scholes, Northern Rock, Panopticon Jeremy Bentham, Ponzi scheme, prisoner's dilemma, proprietary trading, quantitative easing, race to the bottom, risk tolerance, risk-adjusted returns, Silicon Valley, systems thinking, technology bubble, The Myth of the Rational Market, The Wisdom of Crowds, Tobin tax, too big to fail, value at risk, vertical integration, Y2K, zero-coupon bond, zero-sum game

Faster computers also tempted banks to rely on quantitative risk measurement that was fundamentally flawed and that tempted some of them to take on too much risk and operate with too much leverage. Last, more powerful computers have allowed banks to grow (since, in theory, technology means that they can still be managed centrally) and become ‘too big to understand’ and often ‘too big to fail’. There have been lots of books about banking since the crisis and in them the themes of complexity, leverage and size have become familiar. But although these explanations are good on the ‘why’ of the crisis, they are less good on the ‘when’. How is it that the crisis happened when it did? The focus on computation gives one plausible answer to that question – in short, the crisis of 2008 would not have been possible without the computers of 2008.

Ben Bernanke, Chairman of the Federal Reserve, put it like this: ‘Prospective sub-prime losses were clearly not large enough on their own to account for the magnitude of the crisis … rather, the system’s vulnerabilities … were the principal explanations of why the crisis was so severe and had such devastating effects on the broader economy.’1 And what were these vulnerabilities? First, complexity: both the complexity of products and that of the web of linkages between firms. Second, leverage: the risk banks took compared to the amount of shareholders’ capital they had to absorb it. Last, size: the sheer size of institutions made the problems worse – the familiar ‘too big to fail’ syndrome. Each of these vulnerabilities came about as a result of years of gradual change, which, just like the transformation of the FX market, was prompted, enabled or accelerated by the availability of more and more powerful computers. All through my career, these changes had been occurring around me.

The idea is this: the most common real backstop preventing a bank’s failure is its home government’s willingness to recapitalise it – that is, buy shares in it – in the event that the bank’s share price collapses because the market believes failure is imminent. This is precisely what happened in 2007 and 2008 in numerous instances. The UK government’s takeover of RBS is a classic example. Seen through the eyes of a derivatives trader, each bank that is ‘too big to fail’ is long a huge put option on its own equity granted by its own government. But there are two problems with this statement. First, the option is not explicit. In a crisis the government may step in (RBS) or may not (Lehman). This creates uncertainty and extra panic in a crisis. Second, the potential beneficiary of the option – the bank – pays no premium.


pages: 206 words: 70,924

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

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

The court ruled that $106 million in accounting losses did not meet the economic substance test, and the partners were obliged to pay $40 million for the illegal tax savings they had booked earlier. During the unwinding of Long Term Capital Management, the New York Fed was involved in its first huge financial company bailout of a financial company deemed too big to fail. It would not be its last. At the time, as in the aftermath of even larger bailouts in 2008 and 2009, some expressed grave concern that to bail out firms deemed too big to fail encouraged similarly positioned firms to take inordinate risks. Suddenly, the insurance concept of moral hazard had entered the finance lexicon. In the aftermath, executives of related companies were forced to resign by their boards.

However, with the advent of the Black-Scholes options pricing theory and its subsequent extensions, the options market burgeoned, primarily on the Chicago Board Options Exchange. In addition, global financial markets traded amongst themselves, created mammoth global finance companies that became too big to fail, and brought to the forefront concepts previously left only to high financiers, until the failure of these markets affected us all and plunged the world into a global financial meltdown. Clearly, finance markets can be both blessings and curses. However, there is no doubt that these financial markets benefited from the scientific tools of analyses and pricing that these great minds provided.


pages: 247 words: 69,593

The Creative Curve: How to Develop the Right Idea, at the Right Time by Allen Gannett

Alfred Russel Wallace, collective bargaining, content marketing, data science, David Brooks, deliberate practice, Desert Island Discs, Elon Musk, en.wikipedia.org, gentrification, glass ceiling, iterative process, lone genius, longitudinal study, Lyft, Mark Zuckerberg, McMansion, pattern recognition, profit motive, randomized controlled trial, recommendation engine, Richard Florida, ride hailing / ride sharing, Salesforce, Saturday Night Live, sentiment analysis, Silicon Valley, Silicon Valley startup, Skype, Snapchat, South of Market, San Francisco, Steve Jobs, TED Talk, too big to fail, uber lyft, work culture

It’s still a critical part of understanding and mastering the creative process in a digital world. A Modern Application Andrew Ross Sorkin is a media renaissance man. He created the uber-popular DealBook blog for The New York Times, is an anchor on CNBC’s Squawk Box, wrote the bestselling book Too Big to Fail, and cocreated the Showtime hit drama Billions. As with Benjamin Franklin, for Sorkin it all started with imitation. Sorkin and I connected over Skype. He was in his Manhattan apartment, barricaded in his bedroom while his children sporadically knocked at the door. Over the occasional shouts of his kids, he told me how he built a modern media brand.

He began building outlines of an ideal format based on what worked, then fit his own story into that container. “I hate to say it,” Sorkin says today, “but I was always trying to find the formula.” The Franklin method quickly taught him the basics of great business writing, and helped skyrocket his career. When Sorkin began writing Too Big to Fail, he once again followed a variation of the Franklin method. “I went to the bookstore and bought five or ten of my favorite business narratives and studied what they were doing, how did they do it, what was it that I liked about it, and what didn’t I like about it.” He soon discovered that his favorite books had a lot of breaks, hopping between scenes, and creating a breathless narrative.

Sorkin emulated this in his own book, making it accessible and brisk. He didn’t stop there. For example, he loved how the book Conspiracy of Fools opened with a driving scene, and how it gave the book propulsion and movement. Learning of a moment that took place in a car as he was reporting on Too Big to Fail, Sorkin decided to open his book with it. For Sorkin and most other creators, standing on the shoulders of others, and seeing and mastering the patterns laid down by those creative ancestors, allows them to create exceptional work that brings together the familiar with the right twists of novelty.


pages: 100 words: 31,338

After Europe by Ivan Krastev

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

On January 1, 1992, the world woke up to learn that the Soviet Union was no longer on the map. One of the world’s two superpowers had collapsed without a war, an alien invasion, or any other catastrophe, with the exception of one farcical, unsuccessful coup. The collapse happened contrary to every expectation that the Soviet empire was too big to fail, too stable to collapse, and too nuked-up to be defeated and had survived too much turbulence to simply implode. As late as 1990, a group of leading American experts insisted that “sensationalist scenarios make for exciting reading but . . . in the real world various stabilizers and retarding factors exist; societies frequently undergo crises, even grave and dangerous ones, but they seldom commit suicide.”5 But in reality, societies sometimes do commit suicide, and they do it with a certain élan as well.

This is a European version of the “Galapagos Syndrome” experienced by Japanese technology companies. A few years ago, these companies became aware that although Japan made the best 3G phones in the world, they could not find a global market because the rest of the world could not catch up with the technological innovations to use these “perfect” devices. Rather than being too big to fail, Japan’s phones, developed in protected isolation from the challenges of the outside world, had become too perfect to succeed. Now it is Europe that is facing its own “Galapagos” moment.8 It may be that Europe’s postmodern order has become so advanced and particular to its environment that it is impossible for others to follow.


pages: 121 words: 31,813

The Art of Execution: How the World's Best Investors Get It Wrong and Still Make Millions by Lee Freeman-Shor

Alan Greenspan, behavioural economics, Black Swan, buy and hold, Carl Icahn, cognitive bias, collapse of Lehman Brothers, credit crunch, Daniel Kahneman / Amos Tversky, diversified portfolio, family office, I think there is a world market for maybe five computers, index fund, Isaac Newton, Jeff Bezos, Long Term Capital Management, loss aversion, Market Wizards by Jack D. Schwager, Pershing Square Capital Management, Richard Thaler, Robert Shiller, rolodex, Skype, South Sea Bubble, Stanford marshmallow experiment, Steve Jobs, technology bubble, The Wisdom of Crowds, too big to fail, tulip mania, world market for maybe five computers, zero-sum game

Various studies focused on betting have shown that while more information increases a person’s confidence, it does not increase their accuracy (success ratio). “Sometimes I have to tell myself to not focus on the math. The danger with the math is that it can make you think you know more than you do. Instead of thinking about what the other player is doing, you end up obsessing over the percentages.”6 – Johan Lehrer 9. Too big to fail Like many managers, the Rabbits were less inclined to walk away from a large losing investment than a small losing investment. The denomination effect7 described by Himanshu Mishra, Arul Mishra and Dhananjay Nayakankuppam and Priya Raghubir and Joydeep Srivastava8 helps explain this phenomenon.

Indeed, it is one of three banks, excluding the Bank of England, permitted to issue UK banknotes. Sadly, nowadays the Royal Bank of Scotland has become synonymous with the credit crunch because it needed to be bailed out by the government, a source of anger for many in the UK. It was deemed too big to fail. At the time of writing the government owns 82% of the shares outstanding, having been forced to recapitalise the bank in order to prevent a run on the banking system. An Assassin bought shares in the Royal Bank of Scotland on 30 May 2008, before the collapse of Lehman Brothers and the onset of the credit crunch, at £22.29.


pages: 398 words: 105,917

Bean Counters: The Triumph of the Accountants and How They Broke Capitalism by Richard Brooks

"World Economic Forum" Davos, accounting loophole / creative accounting, Alan Greenspan, asset-backed security, banking crisis, Bear Stearns, Big bang: deregulation of the City of London, blockchain, BRICs, British Empire, business process, Charles Babbage, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Strachan, Deng Xiaoping, Donald Trump, double entry bookkeeping, Double Irish / Dutch Sandwich, energy security, Etonian, eurozone crisis, financial deregulation, financial engineering, Ford Model T, forensic accounting, Frederick Winslow Taylor, G4S, Glass-Steagall Act, high-speed rail, information security, intangible asset, Internet of things, James Watt: steam engine, Jeremy Corbyn, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, junk bonds, light touch regulation, Long Term Capital Management, low cost airline, new economy, Northern Rock, offshore financial centre, oil shale / tar sands, On the Economy of Machinery and Manufactures, Ponzi scheme, post-oil, principal–agent problem, profit motive, race to the bottom, railway mania, regulatory arbitrage, risk/return, Ronald Reagan, Savings and loan crisis, savings glut, scientific management, short selling, Silicon Valley, South Sea Bubble, statistical model, supply-chain management, The Chicago School, too big to fail, transaction costs, transfer pricing, Upton Sinclair, WikiLeaks

When the bubble burst in September 1720, it became obvious that the nation’s finances had been hijacked by breathtaking fraud, underpinned by false accounting. Prime minister Robert Walpole – who had initially called the scheme an ‘evil of first rate magnitude’ before investing and then getting out at the top of the market – kept the ‘too big to fail’ South Sea Company afloat with the first government bailout. Meanwhile, a committee of MPs began investigating the affair. Thanks to investigations by ‘master accomptant and writer’ Charles Snell, who could stake a claim to being the first independent auditor, they discovered that fraudulent accounting had both fuelled the vertiginous 1720 rise in the South Sea Company’s share price and concealed unprecedented levels of corruption in launching the 1719 government debt swap scheme in the first place.

Would any government dare threaten the licence, and therefore the survival, of an accountancy firm on which it was dependent in certain critical areas of cyber security (and thus perhaps even national security)? The prospect of such a firm being properly held to account over its accountancy, which is what it really exists for, diminishes further. The Big Four may become not just too big to fail and too few to fail, but also too critical to fail. NEW ERA, NEW DANGER The risks to which the accountants ought to be alive have certainly not receded in the way that their attention to them has. The sticking plasters applied to flawed economic and financial systems after the 2008 crash, such as relatively mild tightening of banking regulations, fail to address major systemic risks.

Northern Rock’s 2007 annual report, for example, showed that it earned £0.8m from auditing the bank and its subsidiaries and £1m from other services, £0.7m from ‘services provided in respect of securitisation transactions and the raising of wholesale funding’. 38. Interview with author, 28 November 2016. 39. Quoted in Andrew Ross Sorkin, Too Big to Fail: Inside the Battle to Save Wall Street, Penguin, 2009. The financial controller was Michael McGarvey; the senior banker was head of equities Bart McDade. 40. Bankruptcy examiner’s report in re Lehman Brothers Holdings Inc. Report of Anton R. Valukas, Chapter 11, Case No. 08-13555 (JMP), US Bankruptcy Court, Southern District New York, 11 March 2010, p. 959. 41.


pages: 401 words: 109,892

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

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

Berger and colleagues find little evidence of cost efficiency improvement, which is consistent with Figure 11.3. Robert De Young, Douglas Evanoff, and Philip Molyneux (2009) show that consolidation continued during the 2000s. They argue that there is growing evidence that consolidation is partly motivated by the desire to obtain too-big-to-fail status, and that mergers and acquisitions have a negative impact on certain types of borrowers, depositors, and other external stakeholders. Entry in finance is also limited by heavy—and sometimes biased—regulations. A good example of the benefits of entry, one that brings us back to Chapter 2, is Walmart.

Serge Darolles (2016) discusses this idea in the context of fintech and argues, from a microeconomic perspective, that regulators should indeed ensure a level playing field. This line of argument, however, cannot be readily applied to many of the distortions that plague the finance industry. For instance, what does a level playing field mean when incumbents are too big to fail? Or when they rely excessively on short-term leverage? The level-playing-field principle applies when entrants are supposed to do the same things as incumbents, only better and cheaper. But if the goal is to change some structural features of the industry, then a strict application of this principle could be a hindrance.

Several groups of researchers have found that the new abuse-deterrent formulation led many consumers to substitute heroin, however.d Today more than half a million Americans are addicted to heroin, and 80 percent of these abused opioids beforehand. A Failure of Public Policy The dynamics of concentration in the US health-care industry are worrisome. If the players had to appear in a dramatic reading, their script might be: HOSPITALS:  We want to consolidate so that, like the banks, we are also too big to fail. Then we can treat our patients like the airlines treat their customers. INSURERS:  We need to consolidate. Then we can negotiate better with hospitals and big Pharma. BIG PHARMA:  We are already concentrated, but why not continue? Especially if these hospitals and insurers start merging. Delivering health care efficiently is a global fight.


pages: 741 words: 179,454

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

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", "there is no alternative" (TINA), "World Economic Forum" Davos, affirmative action, Alan Greenspan, Albert Einstein, algorithmic trading, Andy Kessler, AOL-Time Warner, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Basel III, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, bonus culture, book value, Bretton Woods, BRICs, British Empire, business cycle, buy the rumour, sell the news, capital asset pricing model, carbon credits, Carl Icahn, Carmen Reinhart, carried interest, Celtic Tiger, clean water, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, Daniel Kahneman / Amos Tversky, deal flow, debt deflation, Deng Xiaoping, deskilling, discrete time, diversification, diversified portfolio, Doomsday Clock, Dr. Strangelove, Dutch auction, Edward Thorp, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, eurozone crisis, Everybody Ought to Be Rich, Fall of the Berlin Wall, financial engineering, financial independence, financial innovation, financial thriller, fixed income, foreign exchange controls, full employment, Glass-Steagall Act, global reserve currency, Goldman Sachs: Vampire Squid, Goodhart's law, Gordon Gekko, greed is good, Greenspan put, happiness index / gross national happiness, haute cuisine, Herman Kahn, high net worth, Hyman Minsky, index fund, information asymmetry, interest rate swap, invention of the wheel, invisible hand, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", job automation, Johann Wolfgang von Goethe, John Bogle, John Meriwether, joint-stock company, Jones Act, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kenneth Rogoff, Kevin Kelly, laissez-faire capitalism, load shedding, locking in a profit, Long Term Capital Management, Louis Bachelier, low interest rates, margin call, market bubble, market fundamentalism, Market Wizards by Jack D. Schwager, Marshall McLuhan, Martin Wolf, mega-rich, merger arbitrage, Michael Milken, Mikhail Gorbachev, Milgram experiment, military-industrial complex, Minsky moment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, Naomi Klein, National Debt Clock, negative equity, NetJets, Network effects, new economy, Nick Leeson, Nixon shock, Northern Rock, nuclear winter, oil shock, Own Your Own Home, Paul Samuelson, pets.com, Philip Mirowski, Phillips curve, planned obsolescence, plutocrats, Ponzi scheme, price anchoring, price stability, profit maximization, proprietary trading, public intellectual, quantitative easing, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Ray Kurzweil, regulatory arbitrage, Reminiscences of a Stock Operator, rent control, rent-seeking, reserve currency, Richard Feynman, Richard Thaler, Right to Buy, risk free rate, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Rod Stewart played at Stephen Schwarzman birthday party, rolodex, Ronald Reagan, Ronald Reagan: Tear down this wall, Satyajit Das, savings glut, shareholder value, Sharpe ratio, short selling, short squeeze, Silicon Valley, six sigma, Slavoj Žižek, South Sea Bubble, special economic zone, statistical model, Stephen Hawking, Steve Jobs, stock buybacks, survivorship bias, tail risk, Teledyne, The Chicago School, The Great Moderation, the market place, the medium is the message, The Myth of the Rational Market, The Nature of the Firm, the new new thing, The Predators' Ball, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, trickle-down economics, Turing test, two and twenty, Upton Sinclair, value at risk, Yogi Berra, zero-coupon bond, zero-sum game

In 1902, Paul Warburg warned James Stillman, president of National City Bank: “Your bank is so big and powerful, Mr. Stillman, that when the next panic comes, you may wish your responsibilities were smaller.”11 Asked about government assistance to firms considered too big to fail, George Schultz, secretary of the Treasury under President Nixon, snapped: “If they are too big to fail, make them smaller.”12 But now big financial institutions were all TBTF—“too big to fail.” Governments everywhere rushed to prop them up. Dubbed WIT (whatever it takes) by British Prime Minister Gordon Brown, or WIN (whatever is necessary) by U.S. President Obama, the actions were designed to stabilize the financial system and maintain economic growth.

Coined by Harvard economist James Stock, the term referred to an era of strong economic growth, increased prosperity, and the perceived end to economic cycles and volatility. Prosperity was increasingly based on financial services and the speculation economy. The cycles were still there, papered over by the free money from central banks when necessary. Speculation and risk-taking behavior were almost risk free, as long as everybody, especially large, too-big-to-fail institutions, bet on the same color. Manufacturing, which provided significant employment and prospects of social improvement for millions, was wound back, with production and jobs shifting to cheaper locations. Workers inhabited an insecure world of part-time or casual work or temporary contracts.

“The financial crisis: an inside view of a stormy White House summit” (27 September 2008) Wall Street Journal. 9. Joe Nocera “As credit crisis spiraled, alarm led to action” (1 October 2008) New York Times. 10. Ibid. 11. Quoted in Ron Chernow (1993) The Warburgs: The Twentieth-Century Odyssey of a Remarkable Jewish Family, Vintage Books, New York: 89. 12. PBS Newshour “How big is too big to fail?” (15 December 2009) (www.pbs.org/newshour/bb/business/july-dec09/schultz_12-15.html). 13. Mervyn King, Governor of the Bank of England, Speech to the CBI Dinner (20 January 2009), East Midlands Conference Centre, Nottingham. 14. Senator Jim Bunning, Statement to the Senate Banking Committee on the Federal Reserve Monetary Policy Report (15 July 2008), Senate Banking Committee. 15.


pages: 632 words: 159,454

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

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

(This quotation is from Act II.) 24Andrew Ross Sorkin, Too Big to Fail: Inside the Battle to Save Wall Street, London, 2009, p. 449. 25Ibid., p. 456. 26Hank Paulson, On the Brink: Inside the Race to Stop the Collapse of the Global Financial System, New York, 2010, pp. 266–7. 27Ibid., pp. 279–80. 28Ibid., p. 290. 29Ibid., p. 335. 30Sorkin, Too Big to Fail, p. 513. 31Paulson, On the Brink, p. 369. 32Sorkin, Too Big to Fail, p. 513. 33Gordon Brown, Beyond the Crisis: Overcoming the First Crisis of Globalization, London, 2010, p. 65. 34Sorkin, Too Big to Fail, p. 514. 35Alistair Darling, Back from the Brink, London, 2011, pp. 140–1. 36www.treasurydirect.gov. 37Time, ‘The US Deficit’, 25 August 2009. 38www.treasurydirect.gov. 39www.usgovernmentspending.com. 40Quoted in Matthew Lynn, Bust: Greece, the Euro and the Sovereign Debt Crisis, London, 2011, p. 37. 41Michael Lewis, Boomerang, London, 2011, p. 47. 42Lynn, Bust, p. 115. 43Ibid., pp. 115, 46. 44Ibid., p. 120. 45Ibid., pp. 121,123. 46New York Times, ‘Greek Leader Offers Plan to Tackle Debt Crisis’, 15 December 2009. 47New York Times, ‘Greece’s Stumble Follows a Headlong Rush into the Euro’, 5 May 2010. 48Economist, ‘A Very European Crisis’, 4 February 2010. 49Evangelos Venizelos, ‘The Greek Debt Crisis: Prospects and Opportunities’, remarks delivered at the Peterson Institute for International Economics, Washington, DC, 25 July 2011. 50Coggan, Paper Promises, p. 206. 51Lewis, The Big Short, p. 264. 52Wall Street Journal, ‘US Debt and the Greece Analogy’, 18 June 2010 (article written by Alan Greenspan). 53www.lbma.org.uk. 54Paul Krugman, End This Depression Now!

Smith, Adam, An Inquiry into the Nature and Causes of the Wealth of Nations, London, 2007 (1st edn 1776). Smith, Vera C., The Rationale of Central Banking, London, 1936. Sobel, Robert, The Last Bull Market: Wall Street in the 1960s, New York, 1980. Sobel, Robert, The Worldly Economists, New York, 1980. Sorkin, Andrew Ross, Too Big to Fail: Inside the Battle to Save Wall Street, London, 2009. Soros, George, The Alchemy of Finance, New York, 1994 (1st edn 1987). Soros, George, with Wien, Byron and Koenen, Krisztina, Soros on Soros: Staying Ahead of the Curve, New York, 1995. Stacey, Nicholas A. H., English Accountancy: A Study in Social and Economic History, 1800–1954, London, 1954.


pages: 475 words: 155,554

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

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

Lord Myners, a Treasury minister at the table, would later tell Parliament that at RBS’s futuristic Gogarburn HQ a man was employed to ensure that only notes with Sir Fred’s signature should be stocked in the cash machines (RBS denies this). Here was a man who not only ran the world’s sixth largest bank, but who could also delude himself that he ran his own currency. Indeed, his bank had assets of £2.2 trillion, one and half times the size of the UK’s annual GDP. The UK’s assets were still far bigger, but if any bank was too big to fail, it was RBS. Perhaps that is why Sir Fred remained defiant to the end, despite admitting that his bank was entirely reliant on the day-to-day life support of overnight borrowing from the Bank of England. Delusion and denial were combined with a knowledge that an uncontrolled collapse of RBS would wreak havoc across the nation.

Barclays had learnt the lessons of its history on one side of its bank; less so – perhaps not at all – on the other side of the bank. The answer for some would be a legal split of some sort. The coalition government that came to power in 2010 opted for a ring fence to remove the implicit multibillion subsidy to the borrowing costs of investment banks. The so-called ‘too-big-to-fail’ subsidy arose from the presumption that a troubled investment bank connected to a high street bank would always get bailed out by a government. Darling and others pointed out that the most high-profile failures in the banking crisis – Lehman, Northern Rock and HBoS – would fall and fail on either side of a ring fence.

FROB’s initial attempts to sort out the cajas failed horrifically in the case of Bankia, which it created out of the merger of seven cajas – three of which, including Caja Madrid, were in a bad state. It turned out to be a monster worthy of Dr Frankenstein, a monster that increased, concentrated and made systemic the financial problem, rather than reducing or even solving it. In Bankia, Spain had created a too-big-to-fail institution, two years after the 2008 crisis had shown the dangers presented by such vast financial organisations. In December 2010 Rodrigo Rato, ex-managing director of the IMF, was brought in on a multi-million-pound salary to run Bankia – seemingly at a profit. But weeks after he resigned in May 2012 it became apparent that Bankia was making multibillion-pound losses.


pages: 543 words: 147,357

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

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

The more sellers it attracts, the more it will attract potential buyers, so attracting yet more sellers. In this universe of the knowledge economy there are virtuous-circle effects everywhere: the successful become more successful; the powerful grow more powerful. The strength of companies like Microsoft and Google in ICT, Boeing in aerospace and banks that have become too big to fail in the financial sector is testimony to this new truth. As capitalism mutates, the challenge of staying open to the new and the innovative – productive entrepreneurship – is unceasing. I hope the message from history is convincing. Democratic public power and public institutions are necessary to secure the openness and access on which the best private outcomes depend, and those outcomes in turn come from a regime that tries to offer fairness for all.

After all, many of the banks constituting New York’s interbank lending market operated in London, too. It became clear that the likes of Citigroup, Bank of America, RBS and the insurance company AIG could not be be allowed to collapse. These massive, complex financial institutions had become too big to fail. But failure was never more likely because their belief that they held less risk was delusional, a fundamental error compounded by vastly expanding their balance sheets but underwriting them with ever less capital. It turned out that financial randomness was a fairy tale. The risk of default was co-related when general economic conditions turned adverse, despite the confident assertions by bankers that there was no such correlation.

Two European investment banks, Deutsche Bank and UBS, allowed their leverage to rise to 60:1 and 100:1, respectively, in the years after 2004. Shadow banking was overwhelming banking in full daylight. Basel 2, agreed in 2004, struggled unsuccessfully to come to terms with the new innovations and the risks they posed. Now, with the benefit of hindsight, it seems obvious that larger banks that are deemed too big to fail should be obliged to carry more capital to underwrite their business. In 2004 the view of both regulators and the bankers themselves was that the large banks would have more diversified risks, and so needed less capital. The claim was also made that they utilised sophisticated risk-management techniques, notably value at risk (VaR), which allegedly allowed them to assess risk more accurately than smaller banks and thus had a more carefully calibrated view of the amount of capital they needed.


pages: 238 words: 73,121

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

affirmative action, blood diamond, Bretton Woods, BRICs, British Empire, business cycle, butterfly effect, company town, creative destruction, deindustrialization, demographic transition, Deng Xiaoping, discovery of the americas, distributed generation, Dr. Strangelove, eurozone crisis, fiat currency, financial engineering, full employment, gentrification, Gini coefficient, global village, hydraulic fracturing, income inequality, Isaac Newton, job automation, joint-stock company, Joseph Schumpeter, junk bonds, land tenure, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, loose coupling, low skilled workers, market bubble, market fundamentalism, mass immigration, means of production, mega-rich, Mikhail Gorbachev, military-industrial complex, mutually assured destruction, offshore financial centre, oil shale / tar sands, Ponzi scheme, postindustrial economy, reserve currency, Ronald Reagan, shareholder value, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, Suez crisis 1956, too big to fail, transaction costs, vertical integration, Washington Consensus, WikiLeaks

In addition, and more basically, it increased the interconnection of capitalist institutions joined not only in more or less transparent market transactions but also in a host of complicated and often opaque financial relationships. This was particularly true of the financial industry. When major banks were described in 2008–2009 as “too big to fail” it might have been more accurate to say: “too connected to fail.” But financialization did not only affect firms in the financial sector; it became a basic part of all large-scale global capitalism. Car companies became auto-finance companies. Mining companies were tied centrally to exchange-rate arbitrage.

In any case, it is sobering to consider that regulatory improvements since the financial crisis began have been minimal. Almost nothing has been done to reduce the potential for systemic risk. THINKING FROM THE CRISIS In March 2008 stock markets plummeted; retirement savings were wiped out. Major banks failed, especially in Britain and the United States. Other banks were judged “too big to fail” (in a process we now know to be partly a matter of insider-dealing between corporate executives and government officials). They were bailed out on a massive scale, turning public revenues not only into a compensation for excessive private risk-taking but also a direct source of private wealth.

The cuts in social redistribution (in a broad sense, including policies of industrial growth and employment) freed the money still flowing through the gigantic state machineries and channeled it to the financial oligarchies. This could take the scandalous form of bailouts extended to corporations ostensibly too big to fail, yet in the main it was the endless generation of credit which in recent decades had been extensively used to cover the budget shortfalls of states and individual families. Here comes the rub. The reason why governments and families had to be provided with ample credits is both nefarious (yes, greed and debt bondage) and clearly vital to capitalism.


pages: 268 words: 74,724

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

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

Smith was told, “If we submitted a plan to the regulators to enter this business, it would most likely take two or three years to receive their approval for this change.”9 The American electorate correctly loathed the bank bailouts, but the irony, as Smith’s stories of modern banking reveal, is that the federal government saved the banking system only to subsequently suffocate it. While the size of banks had nothing to do with a “financial” crisis that was authored by government intervention, it’s worth noting that the Washington reaction to what took place was to set about shrinking the banks deemed “too big to fail.” Missed by Washington is the fact that in a capitalist system, the bigger the market-driven failure the better, simply because poorly run companies of substantial size are wasteful consumers of a lot more credit than smaller ones are. Companies of all sizes, including banks, should be allowed to go under without governmental response.

If we love the banks, if we think them essential for our economic health, then we shouldn’t want the Fed to be lending to members of the banking system that are insolvent or unable to raise private credit. The existence of such “zombie banks” weakens the banking system overall. Failure is a source of strength, and to suggest that banks are different in this regard, that they can’t be allowed to fail or are too big to fail, amounts to willful blindness. No economic sector and no economy can truly thrive if some participants—particularly the biggest ones—are a protected class. This notion of the Fed as the lender of last resort is no longer relevant. Indeed, it’s almost unthinkable. As Robert Smith put it in Dead Bank Walking, going to the Fed for a loan is “nearly unheard of.”4 Indeed, a request for a loan from the Fed’s “Discount Window” is an admission of failure.

Smith, The Changed Face of Banking: Who Will Be the Last Bank Standing? (Portland, Ore.: CreateSpace Independent Publishing Platform, 2014), 3. 1. Karen Talley, “Sam’s Club to Offer Loans Up to $25,000,” Wall Street Journal, July 6, 2010. 2. G. Edward Griffin, “The Creature from Jekyll Island,” American Media, July 2009 print, 12–13. 3. Andrew Ross Sorkin, Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves (New York: Viking, 2009), 443. 4. Thomas E. Woods Jr., Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse (Washington, D.C.: Regnery, 2009), 49. 5.


pages: 113 words: 37,885

Why Wall Street Matters by William D. Cohan

Alan Greenspan, Apple II, asset-backed security, bank run, Bear Stearns, Bernie Sanders, Blythe Masters, bonus culture, break the buck, buttonwood tree, Carl Icahn, corporate governance, corporate raider, creative destruction, Credit Default Swap, Donald Trump, Exxon Valdez, financial innovation, financial repression, Fractional reserve banking, Glass-Steagall Act, Gordon Gekko, greed is good, income inequality, Joseph Schumpeter, junk bonds, London Interbank Offered Rate, margin call, Michael Milken, money market fund, moral hazard, Potemkin village, quantitative easing, secular stagnation, Snapchat, South Sea Bubble, Steve Jobs, Steve Wozniak, tontine, too big to fail, WikiLeaks

“To restore economic fairness,” the platform reads, “Wall Street cannot be an island unto itself, gambling trillions in risky financial instruments and making huge profits, all the while thinking that taxpayers will be there to bail them out again. We must tackle dangerous risks in big banks and elsewhere in the financial system.” And to do this, the Democrats advocated “breaking up too-big-to-fail financial institutions that pose a systemic risk to the stability of our economy” and an “updated and modernized” version of the so-called Glass-Steagall Act of 1933, which forced the separation of investment banking from commercial banking for the next sixty-six years, until its repeal in 1999.

That may seem like the right way to curb the chance of another financial crisis, but it also, needlessly, condemns the economy to sluggishness, which makes it harder and harder for people to improve their economic standing and gives credence to the extraordinary statistic that some 46 percent of Americans surveyed told the Federal Reserve that they would be unable to write a $400 check in an emergency and instead would have to borrow from friends or put it on a credit card—a credit card they never would have had but for Wall Street. There are other examples of dumb regulations that have been enacted in the wake of the 2008 financial crisis. For instance, the Federal Reserve has mandated that each “systematically important financial institution,” what are known colloquially as the too-big-to-fail banks, be required to produce “living wills,” hugely labor-intensive and costly documents that pretend to show what will happen the next time one of these banks gets into financial difficulty and how the Fed or the Treasury won’t have to again intervene because it will all supposedly go down just as written on the living will.


pages: 457 words: 125,329

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

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

Today, the concept of unearned income has therefore disappeared. From being seen by Smith, Ricardo and their successors as semi-parasitic behaviour -extracting value from value-creating activity - it has in mainstream economic discourse become just a ‘barrier' on the way to ‘perfect competition'. Banks which are judged ‘too big to fail' and therefore enjoy implicit government subsidy - a form of monopoly - contribute to GDP, as do the high earnings of their executives. Our understanding of rent and value profoundly affects how we measure GDP, how we view finance and the ‘financialization' of the economy, how we treat innovation, how we see government's role in the economy, and how we can steer the economy in a direction that is propelled by more investment and innovation, sustainable and inclusive.

This, indeed, was the economic verdict on finance before the 1970s, incorporated into national accounts, until a decision was taken to ascribe ‘value added' to banks and their financial-market activities. That decision redesignated, as results of productive activity, financial profits that economists previously had little problem ascribing to banks' monopoly power, associated with economies of scale and governments' recognition that the biggest were ‘too big to fail'. The redrawing of the production boundary to include finance was in part a response to banks' lobbying, which was itself a feature of their market power and influence. By showing finance as a large and growing source of national output, it overthrew the logic of previous financial regulation.

But while such competitive instability was averted by restricting entry, and giving banks some monopoly power, they still inflicted damage on the rest of the economy in other ways - by artificially inflating the price of loans, and coordinating their buying and selling to cause artificial boom and bust in the prices of key commodities. Small banks were especially vulnerable because their (and clients') activities were insufficiently spread across different industries and geographical regions. But big banks quickly became ‘too big to fail', assured of expensive government rescue when overextended because their collapse would do too much economic damage. Such assurances only led them to behave even more recklessly. Governments' appetite for financial regulation increased after the global depression of the 1930s, heralded by the collapse of insufficiently regulated stock markets and banks, and the world war to which this indirectly contributed.


pages: 362 words: 83,464

The New Class Conflict by Joel Kotkin

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, affirmative action, Affordable Care Act / Obamacare, Alvin Toffler, American Society of Civil Engineers: Report Card, back-to-the-city movement, Bob Noyce, Boston Dynamics, California gold rush, Californian Ideology, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, classic study, Cornelius Vanderbilt, creative destruction, crony capitalism, David Graeber, degrowth, deindustrialization, do what you love, don't be evil, Downton Abbey, driverless car, Edward Glaeser, Elon Musk, energy security, falling living standards, future of work, Future Shock, Gini coefficient, Google bus, Herman Kahn, housing crisis, income inequality, independent contractor, informal economy, Internet of things, Jane Jacobs, Jaron Lanier, Jeff Bezos, job automation, John Markoff, John von Neumann, Joseph Schumpeter, Kevin Kelly, Kevin Roose, labor-force participation, Larry Ellison, Lewis Mumford, low interest rates, low-wage service sector, Marc Andreessen, Mark Zuckerberg, Mary Meeker, mass affluent, McJob, McMansion, medical bankruptcy, microapartment, Nate Silver, National Debt Clock, New Economic Geography, new economy, New Urbanism, obamacare, offshore financial centre, Paul Buchheit, payday loans, Peter Calthorpe, plutocrats, post-industrial society, public intellectual, RAND corporation, Ray Kurzweil, rent control, rent-seeking, Report Card for America’s Infrastructure, Richard Florida, Sheryl Sandberg, Silicon Valley, Silicon Valley billionaire, Silicon Valley ideology, Solyndra, Steve Jobs, stock buybacks, tech worker, techlash, technoutopianism, The Death and Life of Great American Cities, Thomas L Friedman, Tony Fadell, too big to fail, transcontinental railway, trickle-down economics, Tyler Cowen, Tyler Cowen: Great Stagnation, upwardly mobile, urban planning, urban sprawl, Virgin Galactic, War on Poverty, women in the workforce, working poor, young professional

In 1995, the assets of the six largest bank holding companies accounted for 15 percent of gross domestic product; by 2011, aided by the massive bailout of “too big to fail” banks, this percentage had soared to 64 percent. For such state-dependent banks, preserving and inflating assets, and winning friends in Washington, constitute the key business priorities; overall economic growth that creates jobs and greater wealth among the populace often seems secondary at best.10 This shift has been exacerbated by a Fed monetary policy that, purposely or not, has favored the interests of the wealthy over those of the middle class. “Qualitative easing,” notes one former high-level official, essentially constituted a “too big to fail” windfall to the largest Wall Street firms.

Small companies spend $4,101 per employee, compared to $1,294 at medium-sized companies (20 to 499 employees) and $883 at the largest companies, to meet these requirements.20 The nature of federal policy in regard to finance further worsened the situation for the small-scale entrepreneur. The large “too big to fail” banks received huge bailouts, yet they have remained reluctant to loan to small business. The rapid decline of community banks, for example, down by half since 1990, particularly hurts small businesspeople who have depended historically on loans from these institutions.21 The Descent of the Yeomanry, with Cheers from the Clerisy Despite America’s egalitarian roots, the prospect of mass downward mobility has been embraced widely by some business Oligarchs and much of the Clerisy.


Rethinking Money: How New Currencies Turn Scarcity Into Prosperity by Bernard Lietaer, Jacqui Dunne

3D printing, 90 percent rule, agricultural Revolution, Albert Einstein, Asian financial crisis, banking crisis, Berlin Wall, BRICs, business climate, business cycle, business process, butterfly effect, carbon credits, carbon footprint, Carmen Reinhart, clockwork universe, collapse of Lehman Brothers, complexity theory, conceptual framework, credit crunch, different worldview, discounted cash flows, en.wikipedia.org, Fall of the Berlin Wall, fear of failure, fiat currency, financial innovation, Fractional reserve banking, full employment, German hyperinflation, Glass-Steagall Act, happiness index / gross national happiness, holacracy, job satisfaction, John Perry Barlow, liberation theology, low interest rates, Marshall McLuhan, microcredit, mobile money, Money creation, money: store of value / unit of account / medium of exchange, more computing power than Apollo, new economy, Occupy movement, price stability, reserve currency, Silicon Valley, systems thinking, the payments system, too big to fail, transaction costs, trickle-down economics, urban decay, War on Poverty, working poor

Ironically, whenever a banking crisis unfolds, governments invariably help the larger banks absorb the smaller ones, believing that the efficiency of the system is thereby increased. Instead, when a bank has proven to be “too big to fail,” why not consider the option of breaking it up into smaller units that compete with each other? This has been done in the United States before; for instance, the Bell Telephone monopoly was broken into competing “Baby Bells.” But more often, what tends to happen is that banks that are too big to fail are made into still bigger ones, until they become “too big to bail.” In the midst of today’s widespread discontent and lack of access to credit, a number of successful solutions using cooperative currencies have popped up in various parts of the world.

See also Fraud Sewerage, 21 Shari’a, 112–113 Shortage, 39 Short-termism, 44– 46, 217; mandatory growth and, 2, 52– 53; sustainable money and, 85– 86, 192; Terra and, 138–139 Slum, 141 Small and medium-sized enterprise (SME), 120–124 Smith, Adam, 29 Social capital, 2, 46– 49 Social construct, 57– 58 Social decay, 34– 35, 159 Social media, 82 Social Security, 12 Social Trade Organization (STRO), 121, 127, 170, 194 Social values, 194, 210–211 Solidus, 24, 65, 227n2, 230n9 Sovereign debt, 42– 43, 70, 145–147, 227n21 Speculation, 33 Spender-signed currency, 196–198 Spice, 160 Square, 115–116 Stamp scrip, 180–181 Sterile reserve, 40 Sternthaler, 88– 89 Stimulus, 23–24, 145–146 INDEX Store of value, 58; conflicting with medium of exchange, 66; Fisher equation and, 64; money defined as, 28; professionals describing, 1–2 Street children, 143 Strike, 96– 98 Stripe, 115–116 Student loan: debt, 17–18, 226–227n13; GI Bill and, 153; JAK and, 110 Subak, 187 Subprime crisis, 70 Subsidiarity, 69, 231n14 Success, 222 Sufficiency, 80, 222 Superstition, 3 Sustainability, 14, 32, 52– 53; decentralization and, 219; demurrage and, 67, 206; leadership and, 222; MHBA and, 128–129; in monetary ecosystem, 199; regio and, 191; self-sustaining system, 208; sustainable abundance, 5– 6, 55, 224; sustainable money, 85– 86, 192; Terra and, 134, 206; threat to, 216 Sweat equity, 165 Swedish Central Bank, 25–26, 35– 36 Taboo: academic, 35– 36; money as, 4 Talents, 155 Tally stick, 65 Tax, 26–27, 57– 58; changing behavior through, 157; Creative Currencies Project and, 155; exemption, 85; Hub and, 131; paid in C3, 123, 128; paid in civic, 147–148; paid in commodities, 27; paid in Terra, 139; paid in uang kepeng, 189; paid in Wörgl, 177–178 Taxi, 126–128 Technology, 115–117, 120, 192, 218 Tenth Amendment, 231n14 Terra Alliance, 137 Terra initiative, 67 Terra Trade Reference Currency (TRC), 5, 134–135; cash-in, 136, 139–140; circulation of, 136, 138; creation of, 136, 137; as reference currency, 140 Terra Unit Value, 137 Thank-you (T), 132–133, 183–184 Therapy, 17 259 Third Industrial Revolution, 218 3D printing, 218–219 Three-body problem, 31 TimeBank, 75, 80– 85, 81; in Blaengarw, 159–161, 161; Hub, 131; Patch Adams Free Clinic and, 165; Rotating Loan Club, 172 Time currency, 5, 74–75, 78– 85; fureai kippu as, 168; Ithaca HOURS, 162–165, 163; in Nyanza, 208 Time Dollar. See TimeBank Time Dollar Youth Court, 83 Time horizon, 44 Time-slot exchange, 195–197 Titus, 197–198 Token Exchange System, 193 Too big to fail, 96 Torekes, 74–75, 151, 151–153 Total system throughput (TST), 33 Totnes, 75 Trade reference currency. See Terra Trade Reference Currency Transmutation. See Alchemy Transportation, 126–128, 201, 218–219 Trash, 141–142, 143, 145, 165–166 Treaty of Maastricht, 231n14 Triangle, 171 Trickle-down economics, 217 Trueque club, 182–184, 183 Trust, 19–20, 46; creating community, 171–172; in Friendly Favors, 132; WIR and, 100 Tutoring, 82 Twister, 156–157 Two-body problem, 30– 31 Uang kepeng, 189, 237n4, 237n5 Underclass, 216 Unemployment, 15–18; college and, 226–227n13; JAK bank and, 113; LETS and, 76; Nazi Party fueled by, 180; Patch Adams Free Clinic and, 164; in Rabot, 151; in Weimar Republic, 236n10; Wörgl and, 175–178 UN Happiness Resolution, 131 Union, 16, 119 United Nations Environmental Program (UNEP), 144 260 INDEX Unit of account, 58; money defined as, 28; professionals describing, 1–2; time as, 80– 81.


pages: 247 words: 81,135

The Great Fragmentation: And Why the Future of All Business Is Small by Steve Sammartino

3D printing, additive manufacturing, Airbnb, augmented reality, barriers to entry, behavioural economics, Bill Gates: Altair 8800, bitcoin, BRICs, Buckminster Fuller, citizen journalism, collaborative consumption, cryptocurrency, data science, David Heinemeier Hansson, deep learning, disruptive innovation, driverless car, Dunbar number, Elon Musk, fiat currency, Frederick Winslow Taylor, game design, gamification, Google X / Alphabet X, haute couture, helicopter parent, hype cycle, illegal immigration, index fund, Jeff Bezos, jimmy wales, Kickstarter, knowledge economy, Law of Accelerating Returns, lifelogging, market design, Mary Meeker, Metcalfe's law, Minecraft, minimum viable product, Network effects, new economy, peer-to-peer, planned obsolescence, post scarcity, prediction markets, pre–internet, profit motive, race to the bottom, random walk, Ray Kurzweil, recommendation engine, remote working, RFID, Rubik’s Cube, scientific management, self-driving car, sharing economy, side project, Silicon Valley, Silicon Valley startup, skunkworks, Skype, social graph, social web, software is eating the world, Steve Jobs, subscription business, survivorship bias, The Home Computer Revolution, the long tail, too big to fail, US Airways Flight 1549, vertical integration, web application, zero-sum game

What it means for business Large mass audiences will become more rare and more expensive. CHAPTER 12 Too big to fail?: the great financial disruption While everyone knows that certain industries are ripe for change, there are others that may seem too big, too powerful and so omnipotent that they can cruise right through the shift to the technology era. It wouldn’t be whimsical to think that the banking and finance industry is one of those because they’re so ensconced in all that we do commercially and in life that we can’t do without them — or even to think that they’re too big to fail. We may even have thought that about the media, the previous purveyors of all that the world knows.

Screen first Media then/media now Platforms on platforms How to live in niche land People don’t have average interests Channelology The price of attention Channelling an audience This ain’t no Super Bowl Fill the channel void The easiest way to get attention Curation We’re all media companies We’re all nodes On the fast track to amazing Subscription television is doomed On-demand subscription We don’t want your packaged deal The usability gap In-home demos Demographics to the people Screens and cave walls Advice from a pirate The content producers forgot Winners and losers Chapter 12: Too big to fail?: the great financial disruption Their own private Napster They lost the most important asset So what do banks actually do? It’s virtual and data driven The leaky bucket Circumventing banks What is currency? Digital and crypto currencies It’s just another technology stack Why should banks care?


pages: 269 words: 83,307

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

activist fund / activist shareholder / activist investor, Basel III, Bear Stearns, Carl Icahn, cognitive dissonance, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, deal flow, discounted cash flows, Donald Trump, East Village, eat what you kill, eurozone crisis, financial engineering, fixed income, forward guidance, glass ceiling, Goldman Sachs: Vampire Squid, hedonic treadmill, information security, Jane Street, jitney, junk bonds, Kevin Roose, knowledge worker, Michael Milken, new economy, Occupy movement, off-the-grid, plutocrats, proprietary trading, Robert Shiller, selection bias, shareholder value, side project, Silicon Valley, Skype, Steve Jobs, tail risk, The Predators' Ball, too big to fail, two and twenty, urban planning, We are the 99%, work culture , young professional

So they stuck with the wrong sequence of letters. This is the most astonishing discovery since Joseph Smith found the Book of Mormon in an abandoned mine in Elmira, New York.” Looking up at Ross from an elegant dinner of rack of lamb and fois gras were many of the most famous investors in the world, including executives from nearly every too-big-to-fail bank, private equity megafirm, and major hedge fund. AIG CEO Bob Benmosche was there, as were Wall Street superlawyer Marty Lipton and Alan “Ace” Greenberg, the former chairman of Bear Stearns. And those were just the returning members. Among the neophytes were hedge fund billionaire and major Obama donor Marc Lasry and Joe Reece, a high-ranking dealmaker at Credit Suisse.

Lowenstein, Roger. The End of Wall Street. New York: Penguin Press, 2010. Rolfe, John, and Peter Troob. Monkey Business: Swinging through the Wall Street Jungle. New York: Warner Books, 2000. Smith, Greg. Why I Left Goldman Sachs: A Wall Street Story. New York: Grand Central, 2012. Sorkin, Andrew Ross. Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—And Themselves. New York: Viking, 2009. Stewart, James B. Den of Thieves. New York: Simon & Schuster, 1991. Stiles, Paul. Riding the Bull: My Year inside the Madness at Merrill Lynch. New York: Times Business, 1998.

“The firm’s stock price had tumbled, thousands of workers had gotten laid off, and one well-regarded hedge fund manager jolted Wall Street that summer by proclaiming that Lehman wasn’t properly accounting for its real estate investments”: The hedge fund manager, David Einhorn, was profiled by Hugo Lindgren in “The Confidence Man,” New York, June 15, 2008. “In September 2008, while Arjun was starting his senior year at Fordham, Lehman filed for bankruptcy”: The nitty-gritty details of the financial crisis are available in thousands of books, websites, and articles. I found Andrew Ross Sorkin’s Too Big to Fail the most comprehensive guide to the events of 2008, but others, including Roger Lowenstein’s The End of Wall Street and Bethany McLean and Joe Nocera’s All the Devils Are Here, were indispensable as well. “Arjun knew that Wall Street operated on a strict power hierarchy”: For more on the employee hierarchy at investment banks, see chapter 2 of Ho’s Liquidated, in which she discusses the stratification within firms, and writes that “the boundaries between front, middle, and back offices reinscribe social hierarchies.”


pages: 265 words: 80,510

The Enablers: How the West Supports Kleptocrats and Corruption - Endangering Our Democracy by Frank Vogl

"World Economic Forum" Davos, active measures, Alan Greenspan, Asian financial crisis, bank run, Bear Stearns, Bernie Sanders, blood diamond, Brexit referendum, Carmen Reinhart, centre right, corporate governance, COVID-19, crony capitalism, cryptocurrency, Donald Trump, F. W. de Klerk, failed state, Global Witness, Greensill Capital, income inequality, information security, joint-stock company, London Interbank Offered Rate, Londongrad, low interest rates, market clearing, military-industrial complex, moral hazard, Nelson Mandela, offshore financial centre, oil shale / tar sands, profit maximization, quantitative easing, Renaissance Technologies, Silicon Valley, Silicon Valley startup, stock buybacks, too big to fail, WikiLeaks

Grassley felt that after all the disclosures of HSBC’s far-reaching money-laundering activities, a fine of $1.9 billion amounted to little more than a slap on the wrist.9 Holder argued that some of the banks were so large that a criminal prosecution of one of them could risk the stability of the global financial system only five years after the great 2008 crash. He stressed that banks are just “too big to fail.” It was a view that was held by then US Treasury secretary Timothy Geithner, who today enjoys a career on Wall Street.10 The argument echoed that of the UK government when it called on Geithner and the US Federal Reserve to press for leniency in fining HSBC. The argument is spurious. The banks by 2012 were being forced by the Federal Reserve Board to build robust capital reserves; they were back making profits and they could have easily digested larger fines, as became evident when, under formidable public pressure, giant settlements were reached for assorted charges related to the sub-prime mortgage crisis.

—Charles Prince, then chairman and chief operating officer of Citigroup, in a 2007 interview with the Financial Times1 The West’s largest banks have become larger and more powerful than many nations.2 They should have a core responsibility to serve the public interest by ensuring the health and integrity of the global financial system and the democratic values of the countries which host their headquarters. If their boards of directors do not recognize this obligation, then Western governments should act. The biggest banks are far too big to fail. They are crucial pillars in supporting the world’s economy, and because of this, the Western governments have obligations to ensure that the operations of these institutions are transparent, publicly accountable, and honest. As of the end of 2019, the largest bank in the world (except for the government-owned leading Chinese banks) was JPMorgan Chase, which served half of all US households and had total assets under management at just under $2.7 trillion.

The “2018 National Strategy for Combating Terrorist and Other Illicit Financing (Illicit Finance Strategy)” was prepared by the Office of Terrorism and Financial Intelligence (TFI) of the Department of the Treasury (Treasury) in consultation with the many agencies, bureaus, and departments of the US federal government that also have roles in combating illicit finance. 11. “U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History,” Majority staff report, Permanent Subcommittee on Investigations, US Senate, July 17, 2012. 12. “Too Big to Fail: Inside the Obama Justice Department’s Decision Not to Hold Wall Street Accountable”: report prepared by the Republican staff of the Committee on Financial Services, US House of Representatives, July 11, 2016. 13. US Justice Department press release headlined: “HSBC Holdings Plc. and HSBC Bank USA N.A.


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Finance and the Good Society by Robert J. Shiller

Alan Greenspan, Alvin Roth, bank run, banking crisis, barriers to entry, Bear Stearns, behavioural economics, benefit corporation, Bernie Madoff, buy and hold, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, cognitive dissonance, collateralized debt obligation, collective bargaining, computer age, corporate governance, Daniel Kahneman / Amos Tversky, democratizing finance, Deng Xiaoping, diversification, diversified portfolio, Donald Trump, Edward Glaeser, eurozone crisis, experimental economics, financial engineering, financial innovation, financial thriller, fixed income, full employment, fundamental attribution error, George Akerlof, Great Leap Forward, Ida Tarbell, income inequality, information asymmetry, invisible hand, John Bogle, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, land reform, loss aversion, Louis Bachelier, Mahatma Gandhi, Mark Zuckerberg, market bubble, market design, means of production, microcredit, moral hazard, mortgage debt, Myron Scholes, Nelson Mandela, Occupy movement, passive investing, Ponzi scheme, prediction markets, profit maximization, quantitative easing, random walk, regulatory arbitrage, Richard Thaler, Right to Buy, road to serfdom, Robert Shiller, Ronald Reagan, selection bias, self-driving car, shareholder value, Sharpe ratio, short selling, Simon Kuznets, Skype, social contagion, Steven Pinker, tail risk, telemarketer, Thales and the olive presses, Thales of Miletus, The Market for Lemons, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, Vanguard fund, young professional, zero-sum game, Zipcar

Yet the mortgage credit risk of Freddie and Fannie together rose 16% a year from 1980 to 2007.4 But both enterprises later went bankrupt and came under U.S. government conservatorship in 2008, after the collapse in home prices left many mortgages in foreclosure and brought on the nancial crisis. These GSEs had never thought a home price decline of such magnitude was possible, and so they did not plan for it. In common with the so-called systemically important private rms considered earlier, they enjoyed “too big to fail” status. The government could never let them fail as that might bring down the whole economy; it was therefore clear that the government would inevitably bail them out with taxpayer money. There was faulty oversight of their aggressive pursuit of advantages from their implicit government guarantee.5 Why did this system crash so terribly?

In the United States the Dodd-Frank Act of 2010 introduced a concentration limit for nancial rms: subject to some discretion and with a few exceptions, no nancial company may merge with, consolidate with, or acquire another company if the resulting company’s consolidated liabilities would “exceed 10 percent of the aggregate consolidated liabilities of all financial companies.”17 The motivation for creating this concentration limit was ostensibly to reduce the “too big to fail” problem, the concern that some nancial companies had become so central to the economy that they would have to be bailed out by the government in the event of pending failure. But this limit plausibly had something to do as well with some of the issues emphasized in this chapter—those of making our nancial markets more democratic amidst widespread resentment of the concentration of wealth and power.

See also market designers financialengines.com, 81–82 Financial Industry Regulatory Authority (FINRA), 80, 96–97 financial innovations: complex concepts, 145–47; consequences, 9, 13, 42; in crises, 148–49; electronic units of money, 118; GDP-linked bonds, 117; history, 11; market designers, 69–71, 73–74; in mortgage market, 56, 117, 148; patents, 13; political constraints on, xvii–xviii; risks associated with, 144; shadow banking system, 42–43; slow adoption of, 143–45, 147, 148, 153; for stability, 116–17; structured investment vehicles, 43; use of term, 13. See also derivatives financial institutions: concentration limits, 217, 254n17; designs, 9, 177; functions, 6; lobbyists, 87, 88–89, 90, 92; “too big to fail,” 23, 53, 217. See also banks; mortgage lenders; regulation, financial financial literacy programs, 84 Financial Stability Board, 157 Financial Stability Oversight Council, 114, 157, 184, 217 financial theory: beauty, 131; conservation laws, 132, 133; Modigliani-Miller theorems, 132; option pricing, 132; portfolio management, 7.


pages: 510 words: 120,048

Who Owns the Future? by Jaron Lanier

3D printing, 4chan, Abraham Maslow, Affordable Care Act / Obamacare, Airbnb, augmented reality, automated trading system, barriers to entry, bitcoin, Black Monday: stock market crash in 1987, book scanning, book value, Burning Man, call centre, carbon credits, carbon footprint, cloud computing, commoditize, company town, computer age, Computer Lib, crowdsourcing, data science, David Brooks, David Graeber, delayed gratification, digital capitalism, digital Maoism, digital rights, Douglas Engelbart, en.wikipedia.org, Everything should be made as simple as possible, facts on the ground, Filter Bubble, financial deregulation, Fractional reserve banking, Francis Fukuyama: the end of history, Garrett Hardin, George Akerlof, global supply chain, global village, Haight Ashbury, hive mind, if you build it, they will come, income inequality, informal economy, information asymmetry, invisible hand, Ivan Sutherland, Jaron Lanier, Jeff Bezos, job automation, John Markoff, John Perry Barlow, Kevin Kelly, Khan Academy, Kickstarter, Kodak vs Instagram, life extension, Long Term Capital Management, machine translation, Marc Andreessen, Mark Zuckerberg, meta-analysis, Metcalfe’s law, moral hazard, mutually assured destruction, Neal Stephenson, Network effects, new economy, Norbert Wiener, obamacare, off-the-grid, packet switching, Panopticon Jeremy Bentham, Peter Thiel, place-making, plutocrats, Ponzi scheme, post-oil, pre–internet, Project Xanadu, race to the bottom, Ray Kurzweil, rent-seeking, reversible computing, Richard Feynman, Ronald Reagan, scientific worldview, self-driving car, side project, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, Skype, smart meter, stem cell, Steve Jobs, Steve Wozniak, Stewart Brand, synthetic biology, tech billionaire, technological determinism, Ted Nelson, The Market for Lemons, Thomas Malthus, too big to fail, Tragedy of the Commons, trickle-down economics, Turing test, Vannevar Bush, WikiLeaks, zero-sum game

To put it another way, the promise of the homeowner to repay the loan can only be made once, but that promise, and the risk that the loan will not be repaid, can be received innumerable times. Therefore the homeowner will end up paying for that amplified risk, somehow. It will eventually turn into higher taxes (to bail out a financial concern that is “too big to fail”), reduced property values in a neighborhood burdened by stupid mortgages, and reduced access to credit. Access to credit becomes scarce for all but those with the absolute tip-top credit ratings once all the remote recipients of the promise to repay have amplified risk. Even the wealthiest nations can have trouble holding on to top ratings.

By accepting this agreement, you agree to receive information about our premium services by phone and other means. [This clause was inspired by the practices of certain social networking and review sites.] 10. Portions of your local, state, and federal taxes are being applied to the government bailout of StreetBook, which is obviously too big to fail. You have no say in this, but this clause is included just to rub it in. [This clause is inspired by the success of the high-tech finance industry.] Please click “next” to proceed to page 2 of 37 pages of conditions. Click here to accept. StreetBook is proud to support a new generation of entrepreneurs.

Corruption, senility, and brutality emerge in democratically elected governments, of course, but the whole point of a viably designed democracy is to provide a persistent baseline for society. You can vote in new politicians without killing a democratic government, while a free market is a fake if companies aren’t allowed to die due to competition. When giant remote companies own everyone’s digital identities, they become “too big to fail,” which is a state of affairs that degrades both markets and governments. One reason companies like Facebook should be interested in what I am proposing is that planning a regulation regime is better than morphing involuntarily into a dull regulated utility, which is what would probably happen otherwise.


pages: 597 words: 172,130

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

"World Economic Forum" Davos, Alan Greenspan, Ayatollah Khomeini, bank run, banking crisis, Bear Stearns, Berlin Wall, Bernie Sanders, break the buck, Bretton Woods, business climate, business cycle, capital controls, central bank independence, centre right, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, currency peg, eurozone crisis, financial engineering, financial innovation, Flash crash, foreign exchange controls, George Akerlof, German hyperinflation, Google Earth, hiring and firing, inflation targeting, Isaac Newton, Julian Assange, low cost airline, low interest rates, market bubble, market design, middle-income trap, Money creation, money market fund, moral hazard, mortgage debt, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, Paul Samuelson, price stability, public intellectual, quantitative easing, rent control, reserve currency, Robert Shiller, Robert Solow, rolodex, Ronald Reagan, Savings and loan crisis, savings glut, Socratic dialogue, sovereign wealth fund, The Great Moderation, too big to fail, union organizing, WikiLeaks, yield curve, Yom Kippur War

Hoenig, president of the Kansas City Fed since 1991. A veteran of supervising banks, he had been manning the discount-window desk when an Oklahoma bank called Penn Square failed in 1982, in turn causing the failure of Continental Illinois National Bank and Trust, the biggest in U.S. history until the 2008 crisis. Hoenig loathed the too-big-to-fail banks, which he saw as benefiting from a public safety net that the smaller banks lacked. He also saw the ultra-low-interest-rate policies embraced by Bernanke as a major cause of the financial crisis. And from attending events around his Federal Reserve district, which encompasses parts of seven states in the center of the nation and contains no giant banks but hundreds of smaller ones, Hoenig had picked up early on the depth of public rage at the Fed.

Robertson’s staff even arranged events at the Fed’s headquarters in Washington in which reserve bank presidents would invite congressional staff from their districts to come for hours of briefings. Ironically, some of the sources of tension between the board and the reserve banks at times proved an asset. Hoenig gave speeches assailing bailouts and the culture of too big to fail, implicitly criticizing the Fed’s crisis-era decisions. As if trying to atone for his acquiescence to the low-interest-rate policies of the mid-2000s that may have helped stoke the crisis, he dissented from the Fed’s monetary policy decisions at each meeting in 2010, objecting to the central bank’s promise to keep interest rates low for an “extended period.”

Spain and Italy together have about four times the population of Greece, Ireland, and Portugal. Whereas the earlier rescues were easily affordable by the other European countries and the IMF, the cost to rescue Spain and Italy could stretch their resources to the breaking point. The nations were simultaneously too big to fail and too big to save. At the end of June, the Italian government could borrow money for a decade for 4.25 percent, or about 1.25 percent more than Germany could. On July 14, while the Greek haircuts were being negotiated, the Italian government held one of its regular auctions of bonds, seeking to sell €5 billion worth of five- and fifteen-year securities to pay off older ones that were coming due.


pages: 161 words: 44,488

The Business Blockchain: Promise, Practice, and Application of the Next Internet Technology by William Mougayar

Airbnb, airport security, Albert Einstein, altcoin, Amazon Web Services, bitcoin, Black Swan, blockchain, business logic, business process, centralized clearinghouse, Clayton Christensen, cloud computing, cryptocurrency, decentralized internet, disintermediation, distributed ledger, Edward Snowden, en.wikipedia.org, Ethereum, ethereum blockchain, fault tolerance, fiat currency, fixed income, Ford Model T, global value chain, Innovator's Dilemma, Internet of things, Kevin Kelly, Kickstarter, market clearing, Network effects, new economy, peer-to-peer, peer-to-peer lending, prediction markets, pull request, QR code, ride hailing / ride sharing, Satoshi Nakamoto, sharing economy, smart contracts, social web, software as a service, too big to fail, Turing complete, Vitalik Buterin, web application, Yochai Benkler

If traditional “trust checking” has become a costly, friction-rich element of a given process or service, maybe the blockchain could offer a solution. The central question is: can the blockchain give us Trust 2.0, a better form of trust that does not always depend on central intermediaries who may have become too big to fail, too bureaucratic to see risk, or too slow to change? Here are seven principles that we will need to believe in, if we are to believe in the future of decentralized trust: It would be inaccurate to label blockchains as a tool for the disintermediation of trust. In reality, they only enable a re-intermediation of trust.

., European, and Asian regulators dictated a consolidation of regulatory agencies, resulting in further centralization of post-trade in the over-the-counter derivatives markets, reducing that oversight to a single point of failure. The Dodd-Frank’s3 mandatory central counterparty clearing provisions were a heavy-handed policy that actually amplified systemic risk, instead of reducing it. As a result, central counterparty clearinghouses have become a new class of “too big to fail” institutions, whereas, ironically, they were previously more widely distributed. In a 2012 New York Times article titled “Stabilization Will not Save Us,” Nassim Nicholas Taleb, author of Antifragile and The Black Swan, opined: “In decentralized systems, problems can be solved early and when they are small.”4 Indeed, not only was the Web hijacked with too many central choke points, regulators supposedly continue to centralize controls in order to lower risk, whereas the opposite should be done.


pages: 147 words: 45,890

Aftershock: The Next Economy and America's Future by Robert B. Reich

Abraham Maslow, Alan Greenspan, Berlin Wall, business cycle, carbon tax, declining real wages, delayed gratification, Doha Development Round, endowment effect, Ford Model T, full employment, George Akerlof, high-speed rail, Home mortgage interest deduction, Hyman Minsky, illegal immigration, income inequality, invisible hand, job automation, junk bonds, labor-force participation, Long Term Capital Management, loss aversion, low interest rates, Michael Milken, military-industrial complex, mortgage debt, new economy, offshore financial centre, Ralph Nader, Ronald Reagan, school vouchers, sovereign wealth fund, The Theory of the Leisure Class by Thorstein Veblen, Thorstein Veblen, too big to fail, We are all Keynesians now, World Values Survey

E-mails from officials at the New York Fed instructed executives at AIG not even to disclose the payments in its public filings with the Securities and Exchange Commission. The inspector general concluded that the AIG deal “offered little opportunity for success,” and left taxpayers holding the bag. Paulson and Geithner defended the bank bailouts, arguing that Goldman and other major Wall Street banks were “too big to fail” because the rest of the financial system had become so dependent on them. Yet Paulson’s and Geithner’s subsequent actions made several of the big banks even bigger—providing Bank of America, Wells Fargo, and JPMorgan Chase additional subsidies in order to consolidate with other, weaker institutions.

Proposed rules to constrain the trading of derivatives—bets made on changes in the values of real assets—were riddled with loopholes big enough for bankers to drive their Ferraris through. Yet Congress did not allow distressed homeowners to declare bankruptcy. Nor was there any enthusiasm in Congress or in the White House for using the antitrust laws to break up the biggest banks—a traditional tonic for any capitalist entity “too big to fail.” If it was in the public’s interest to break up giant oil companies and railroads a century ago, and years ago the mammoth telephone company AT&T, it was not unreasonable to break up the extensive tangles of Citigroup, Bank of America, JPMorgan Chase, Goldman Sachs, and Morgan Stanley. There was no clear reason why such large-scale banks were crucial to the U.S. economy or to the living standards of most Americans.


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

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

This protection by governments can sometimes be very perverse. Large banks profit from it because they are so big that the government cannot allow them to fail as a result of the crisis. That would damage the economy too badly, because many people would be pulled into bankruptcy. Large banks are too big to fail and they know it. In fact governments provide these banks with a guarantee that they will not go bankrupt. This leads to what economists call ‘moral hazard’. A large bank which enjoys implicit government insurance will therefore take  THE L IMI TS OF TH E MAR KET more risks. These high risks lead to large profits when everything is going well, and when things go badly, governments step in and the taxpayer must cover the losses.

.  South Korea liberalization and material prosperity  real GDP per capita , f Soviet Union see Russia Spain eurozone and weakening of government – eurozone government bond spreads, ten-year f global financial crisis ()  government debt f,  gross domestic product (GDP) per capita f interest rate on ten-year government bonds f labour costs, gross hourly f liquidity crisis  Spartacus movement – specialization – stagnation ,  structural problems in currency union  supply and demand , f Sweden employer contribution and labour costs   INDEX labour costs, gross hourly f productivity, labour costs and public sector  total income, share of received by top % f, f system I intuitive, emotional behaviour –, b, , –b,  system II individuals’ rational, calculating capacities –, b, , b,  taxation  and environment , – external limits of governments  increase  progressive wealth tax  see also income tax technological optimism ,  technological pessimism  technological progress , –, – tipping points , ,  Tocqueville, A. de  too big to fail banks  top-down control mechanisms  top managers/CEOs and winner-takesall – transaction costs  trickle-down theory  Tuymans, L.  ultimatum game  unemployment , , , , – United Kingdom ,  Bank of England , , ,  capital, share of belonging to top % and top % t debt issuance in own currency  government control over currency  government debt f,  gross domestic product (GDP) in constant prices , f gross domestic product (GDP) per capita f income taxes f, , f,  interest rate on ten-year government bonds f labour costs, gross hourly f social security spending as percentage of government spending f total income received by top % f, f United States , ,  capital, share of belonging to top % and top % t consumption per capita  Federal Reserve (Fed) , , , n gross domestic product (GDP) in constant prices , f income, share of total received by top % f, f income taxes f, , f,  New Deal  productivity, annual growth in f,  social security spending as percentage of government spending f taxation policies capping top incomes  value added tax (VAT) –,  virtuous circle  wages –, ,  wealth inequalities ,  well-being ,  collective , , , ,  consumer ,  economic  individual , , ,  Western Europe ,  gross domestic product (GDP) per capita, average annual economic growth of , f, f,  growth  growth production per capita since industrial revolution , f labour costs, high and prosperity  social security  willingness to pay , , b, b winner-takes-all phenomenon – World Bank  World Economic Forum – world inequality, development of –b 


pages: 466 words: 127,728

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

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

In early September gold prices reached an all-time high, near $1,900 per ounce, up more than 200 percent from the average price in 2006, just before the new depression began. Twenty-first-century popular culture enjoyed its own version of Rollover, a televised tale of financial collapse called Too Big to Fail. The parallels between 1978 and recent events are eerie but imperfect. There was an element ravaging the world then that is not apparent today. It is the dog that didn’t bark: inflation. But the fact that we aren’t hearing the dog doesn’t mean it poses no danger. Widely followed U.S. dollar inflation measures such as the consumer price index have barely budged since 2008; indeed, mild deflation has emerged in certain months.

Andy Marshall and other futurists in the national security community are taking such threats seriously. They receive little or no support from the Treasury or Federal Reserve; both are captive to mirror imaging. Ironically, solutions are not hard to devise. These solutions involve breaking big banks into units that are not too big to fail; returning to a system of regional stock exchanges, to provide redundancy; and reintroducing gold into the monetary system, since gold cannot be wiped out in a digital flash. The first-order costs of these changes are more than compensated by increased robustness and second-order benefits. None of these remedial steps is under serious consideration by Congress or the White House.

Instead, they have repeated every one of Japan’s mistakes in their failure to pursue needed structural changes in labor markets, eliminate zombie banks, cut taxes, and reduce regulation on the nonfinancial sector. The United States is Japan on a larger scale, with the same high taxes, low interest rates that penalize savers, labor market rigidities, and too-big-to-fail banks. Abenomics and Federal Reserve money printing share a frenzied focus on avoiding deflation, but the underlying deflation in both Japan and the United States is not anomalous. It is a valid price signal that the system had too much debt and too much wasted investment prior to the crash.


pages: 537 words: 144,318

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

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

Real money funds are important and worth analyzing because: (1) they are some of the largest pools of capital in the world; (2) they have a direct impact on the functioning of society; (3) they lost staggering amounts of money in 2008; and (4) in many cases, these funds are ultimately backstopped by the taxpayer if they fail to deliver their promises. Real money funds are in crisis and are “too big to fail.” Size Real money funds comprise a majority of world’s managed assets, which totaled $62 trillion at the end of 2008. Within this grouping, pensions are by far the largest category, at $24 trillion, with U.S. pensions at $15 trillion, or almost one-quarter of total managed assets (see Figure 1.1).

We have huge overcapacity in everything from cars to consumables. We will see inflation in real assets but not in consumer prices, the latter of which impact bonds. China cannot stop buying Treasuries because China is the one with the problem. They will do anything to help us because they are the ones holding all that worthless paper. The U.S. is too big to fail. Will U.S. Treasuries become worthless? Global GDP is approximately $60 trillion, and that is during a high-growth period. The U.S. has unfunded liabilities of around $125 trillion, which includes counties, states, federal, Medicare/Medicaid, Social Security, and off-balance-sheet expenditures like Katrina and Iraq.

The U.S. has unfunded liabilities of around $125 trillion, which includes counties, states, federal, Medicare/Medicaid, Social Security, and off-balance-sheet expenditures like Katrina and Iraq. Officially, our current deficit is $11 trillion, but if you add the off-balance-sheet items and exclude the unfunded liabilities, we believe it’s closer to $25 trillion. If that is true, we are running a deficit of 200 percent of GDP. In some ironic way, we are already too big to fail, so the more debt we issue, the safer we are. This is the real conundrum, and the next few years will be exciting, at the very least. Chapter 11 The Equity Trader “The Equity Trader” started trading in middle school and has been passionate about markets ever since. A soft-spoken but aggressive trader, his first forays in the markets were with mutual funds, after which time he joined an equity-focused prop desk before finally starting his own hedge fund.


pages: 332 words: 89,668

Two Nations, Indivisible: A History of Inequality in America: A History of Inequality in America by Jamie Bronstein

Affordable Care Act / Obamacare, back-to-the-land, barriers to entry, basic income, Bernie Sanders, big-box store, Black Lives Matter, blue-collar work, Branko Milanovic, British Empire, Capital in the Twenty-First Century by Thomas Piketty, clean water, cognitive dissonance, collateralized debt obligation, collective bargaining, Community Supported Agriculture, corporate personhood, crony capitalism, deindustrialization, desegregation, Donald Trump, ending welfare as we know it, Frederick Winslow Taylor, full employment, Gini coefficient, Glass-Steagall Act, income inequality, interchangeable parts, invisible hand, job automation, John Maynard Keynes: technological unemployment, labor-force participation, land reform, land tenure, longitudinal study, low skilled workers, low-wage service sector, mandatory minimum, mass incarceration, minimum wage unemployment, moral hazard, moral panic, mortgage debt, New Urbanism, non-tariff barriers, obamacare, occupational segregation, Occupy movement, oil shock, plutocrats, price discrimination, race to the bottom, rent control, road to serfdom, Ronald Reagan, Sam Peltzman, scientific management, Scientific racism, Simon Kuznets, single-payer health, Strategic Defense Initiative, strikebreaker, the long tail, too big to fail, trade route, transcontinental railway, Triangle Shirtwaist Factory, trickle-down economics, universal basic income, Upton Sinclair, upwardly mobile, urban renewal, vertical integration, W. E. B. Du Bois, wage slave, War on Poverty, women in the workforce, working poor, Works Progress Administration

A housing crash in 2006, however, produced waves of mortgage defaults, showing that defaults were not random.11 The collapse of the housing market transformed CDOs into “toxic assets,” precipitating the failure of Lehman Brothers, one of the nation’s largest banks. This propelled the federal government to rescue other banks that were thought “too big to fail.” While the government had bailed out banks before, it was new and expensive for the government to rescue bank holding companies that had many assets not insured by the FDIC.12 Figure 8.1 Percentage Share of Income by Quintile, 1982–2006. (Computed from Edward Nathan Wolff, “Recent Trends in Household Wealth, 1983–2006: The Irresistible Rise of Household Debt,” Review of Economics and Institutions vol. 2 no. 1 (Winter 2001): 1–31, at 7.)

These show that while the average American is quite good at estimating how much people ranging from retail workers to surgeons earn, he or she underguesses executive compensation by a factor of almost 30. Americans polled guessed that the average corporate CEO earned $500,000 per year, when the actual average was around $14 million.23 Under the 2008 Troubled Assets Relief Program (TARP), federal dollars were used to bail out large firms and rescue banks that were “too big to fail.” Despite this use of public money, financial institutions argued that no further regulations of Wall Street were necessary.24 Large financial companies and automakers argued that to cut executives’ cash pay to $500,000 a year—even though the vast majority of executive pay is not paid out in cash—would leave executives inappropriately cash-poor.

Edward Nathan Wolff, “Recent Trends in Household Wealth, 1983–2006: The Irresistible Rise of Household Debt,” Review of Economics and Institutions vol. 2 no. 1 (Winter 2001): 1–31, at 12. 11. Peter Temin, “The Great Recession and the Great Depression,” Daedalus vol. 4 no. 9 (2010): 115–130, at 118. 12. James R. Barth and Apanard Penny Prabha, “An Analysis of Resolving Too-Big-to-Fail Banks throughout the United States,” The Journal of Regional Analysis and Policy vol. 44 no. 1 (2014): 1–19. 13. Fabian T. Pfeffer, Sheldon Danziger, and Robert F. Schoeni, “Wealth Disparities Before and After the Great Recession,” Annals of the American Academy of Political and Society Science no. 650 (2013): 98–123. 14.


pages: 284 words: 92,387

The Democracy Project: A History, a Crisis, a Movement by David Graeber

Bretton Woods, British Empire, company town, corporate personhood, David Graeber, deindustrialization, dumpster diving, East Village, feminist movement, financial innovation, George Gilder, John Markoff, Kim Stanley Robinson, land bank, Lao Tzu, late fees, Money creation, Murray Bookchin, Occupy movement, Paul Volcker talking about ATMs, payday loans, planetary scale, plutocrats, radical decentralization, Ralph Nader, reserve currency, Ronald Reagan, Savings and loan crisis, seigniorage, too big to fail, trickle-down economics, unpaid internship, We are the 99%, working poor

The United States does, of course, continue to have a manufacturing base, especially in armaments, medical technology, and farm equipment. Yet except for military production, these play an increasingly minor role in the generation of corporate profits. With the crisis of 2008, the government made clear that not only was it willing to grant “too big to fail” institutions the right to print money, but to itself create almost infinite amounts of money to bail them out if they managed to get themselves into trouble by making corrupt or idiotic loans. This allowed institutions like Bank of America to distribute that newfound cash to the very politicians who voted to bail them out and, thus, secure the right to have their lobbyists write the very legislation that was supposed to “regulate them.”

Considering the state of crisis the U.S. economy was in when Obama took over in 2008, it required perversely heroic efforts to respond to a historic catastrophe by keeping everything more or less exactly as it was. Yet Obama did expend those heroic efforts, and the result was that, in every dimension, the status quo did indeed remain intact. No part of the system was shaken up. There were no bank nationalizations, no breakups of “too big to fail” institutions, no major changes in finance laws, no change in the structure of the auto industry, or of any other industry, no change in labor laws, drug laws, surveillance laws, monetary policy, education policy, transportation policy, energy policy, military policy, or—most crucially of all, despite campaign pledges—the role of money in the political system.

That year saw a wave election that left Democrats in control of both houses of Congress, a Democratic president elected on a platform of “Change” coming to power at a moment of economic crisis so profound that radical measures of some sort were unavoidable, and at a time when Republican economic policies were utterly discredited and popular rage against the nation’s financial elites was so intense that most Americans would have supported almost any policy directed against them. Polls at the time indicated that Americans were overwhelmingly in favor of bailing out mortgage holders, but not bailing out “too big to fail” banks, whatever the negative impact on the economy. Obama’s position here was not only the opposite, but actually more conservative than George W. Bush’s: the outgoing Bush administration did agree, under pressure from Democratic representative Barney Frank, to include mortgage write-downs in the TARP program, but only if Obama approved.


pages: 162 words: 50,108

The Little Book of Hedge Funds by Anthony Scaramucci

Alan Greenspan, Andrei Shleifer, asset allocation, Bear Stearns, Bernie Madoff, business process, carried interest, corporate raider, Credit Default Swap, diversification, diversified portfolio, Donald Trump, Eugene Fama: efficient market hypothesis, fear of failure, financial engineering, fixed income, follow your passion, global macro, Gordon Gekko, high net worth, index fund, it's over 9,000, John Bogle, John Meriwether, Long Term Capital Management, mail merge, managed futures, margin call, mass immigration, merger arbitrage, Michael Milken, money market fund, Myron Scholes, NetJets, Ponzi scheme, profit motive, proprietary trading, quantitative trading / quantitative finance, random walk, Renaissance Technologies, risk-adjusted returns, risk/return, Ronald Reagan, Saturday Night Live, Sharpe ratio, short selling, short squeeze, Silicon Valley, tail risk, Thales and the olive presses, Thales of Miletus, the new new thing, too big to fail, transaction costs, two and twenty, uptick rule, Vanguard fund, Y2K, Yogi Berra, zero-sum game

As hedge funds are smaller than mutual funds and large banks, their investments have less of a direct impact on the overall move of the market. Moreover, as “small enough to fail” institutions, a hedge fund blowup generally does not require government intervention and taxpayer dollars, whereas “too big to fail” banks require such intervention. That being said, the tremendous growth in the hedge fund industry—which has slowed down a bit since the 2007 to 2009 economic crisis—has often been described as the Achilles’ heel for many funds and their bottom lines. Why? More funds equals an increasing amount of hedge fund dollars crowding similar trades and utilizing similar strategies, which equals diminished ability to execute trade and increase performance.

With heavy losses occurring in the credit market, many hedge funds were losing money at an alarming rate. The culprit behind their demise: leverage. Some funds got caught in overleveraged positions (Think = Sowood Capital), while other funds desperately needed access to leverage but were unable to borrow money because of the fear and panic imposed by the collapse of too-big-to-fail Lehman Brothers. To add insult to injury, the government stepped in and imposed restrictions on short selling—taking the bread and butter tool from an industry whose very livelihood depended on it. By the end of 2008, approximately 1,500 hedge funds were forced to sell their portfolios or shut down, while others lost tremendous amounts of capital and some legendary managers even lost their stellar reputations.


All About Asset Allocation, Second Edition by Richard Ferri

activist fund / activist shareholder / activist investor, Alan Greenspan, asset allocation, asset-backed security, barriers to entry, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, book value, buy and hold, capital controls, commoditize, commodity trading advisor, correlation coefficient, currency risk, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, equity premium, equity risk premium, estate planning, financial independence, fixed income, full employment, high net worth, Home mortgage interest deduction, implied volatility, index fund, intangible asset, inverted yield curve, John Bogle, junk bonds, Long Term Capital Management, low interest rates, managed futures, Mason jar, money market fund, mortgage tax deduction, passive income, pattern recognition, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, selection bias, Sharpe ratio, stock buybacks, stocks for the long run, survivorship bias, too big to fail, transaction costs, Vanguard fund, yield curve

Unprecedented shocks caused extremes in market volatility over the period. The decade began with the deflation of technology and communication stock expectations, followed by two attacks on U.S. soil that lead to two wars fought halfway around the world, and finished with a housing price collapse that brought too-big-to-fail global financial institutions to their knees and massive government bailouts. The events of the past decade have shaken the foundations of investment knowledge and have forced people to rethink their own investment strategies from the ground up. People are questioning the validity of modern portfolio theory (MPT) that had become well indoctrinated into portfolios.

Over the next decade, thousands of bankruptcies and near bankruptcies claimed the retirement savings of hundreds of thousands of rank and file employees who believed in those companies by purchasing their bonds. Some of those companies are household names, including General Motors, Lehman Brothers, AIG, Bear Stearns, and Chrysler. Will these bankruptcies of too-big-to-fail companies teach others to diversify their investments and lower their portfolio risk using asset allocation? Not likely. 8 CHAPTER 1 WHY PROFESSIONAL ADVICE DOES NOT ALWAYS HELP How do you learn about investing and at the same time avoid costly mistakes? One way is to hire a professional investment consultant, if you are lucky enough to find a good one.

Needless to say, both Dow 36,000 and Dow 100,000 can now be found at most flea markets priced at less than $1. By 2007, the S&P 500 had crawled back and was hitting new highs in October. Then an economic tsunami hit the U.S. housing market causing a domino effect that tore apart financial markets throughout the world. Too-big-to-fail financial institutions ruptured at their base. First Bear Sterns went under and then Lehman Brothers and AIG. The entire U.S. banking industry was in peril. How Behavior Affects Asset Allocation Decisions 277 The financial industry might have come to a screeching halt if not for the innovation of the Federal Reserve along with the Treasury Department.


pages: 417 words: 97,577

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

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

—Frank Pasquale, Professor of Law, University of Maryland “If you want to start a business in America today, or just want to know what's gone wrong with our country, The Myth of Capitalism is a great place to start. Tepper and Hearn provide a highly readable and very useful guide to America's monopoly problem, and to the many great and growing harms of economic concentration. Inequality, political disfunction, the choking off of opportunity, the rise of too-big-to-fail, the book shows how all stem largely or mainly from monopolization. Best of all, the authors make clear this concentration is not the inevitable result of any natural force within capitalism, but of political decisions that we can begin to reverse today.” —Barry C. Lynn, director of Open Markets Institute, author of Cornered: The New Monopoly Capitalism and the Economics of Destruction “A deeply insightful analysis of the rapidly creeping tentacles of the corporatocracy and the devastating impacts of a predatory form of capitalism.

No one can ever compute the price that all of us have paid for that Act which, by inducing less effective use of capital, has kept our standard of living lower than would otherwise have been possible.”54 Never mind that when he said that the US economy was booming, productivity was high, investment was high, and wages were rising for the middle class. You may remember Greenspan as the man who became chairman of the Federal Reserve and brought us “too big to fail” and the financial crisis. For him, big was beautiful, and markets always worked perfectly. After the crisis, he, too, wrote a book saying there may have been flaws in his views on the perfect functioning of markets. We'll never know how much damage he caused. Yet if there is one man who is responsible for the revolution in antitrust thinking, it is Robert Bork.

According to the Federal Reserve between 2009 and 2013, only seven new banks were formed.52 The main reason for almost no new competition is extensive new regulations. A study by the Manhattan Institute concluded that the Dodd–Frank Act has created a protected class of financial firms with assets above $50 billion. The Act did nothing to break up America's largest banks or end the status of banks that are too big to fail. What it has done is to discourage new competition.53 Just as Freireich discovered, Dodd Frank is selectively toxic, choking off smaller banks. That's why carefully selecting drugs and calibrating the dose is essential in cancer treatment, but it is not even considered when it comes to regulation.


pages: 182 words: 53,802

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

Andy Haldane, responsible for Financial Stability at the Bank of England, argued once that even if bankers were to compensate society for the losses endured, ‘it is clear that banks would not have deep enough pockets to foot this bill.’8 Despite massive bailouts by taxpayer-backed central banks, it is my contention that, even as I write in 2016, global banks are still effectively insolvent. Government guarantees, cheap finance and quantitative easing, coupled with the manipulation of balance sheets, are all that appear to stand between today’s ‘too big to fail’ banks and insolvency. The deregulated financial system – and liquidity Under our deregulated financial system, and despite the Great Financial Crisis of 2007–09, commercial bankers can create credit or liquidity (i.e. assets that can easily and readily be turned into cash) effectively without limit, and with few regulatory constraints.

Nor did the world’s politicians have the political will to regulate and stabilise the mobile, footloose flows of ‘offshore’ capital controlled by the private, and often corrupt, global banking system. Partly because of this regulatory spinelessness, and in spite of a broken transmission system, the finance sector enjoyed ‘business better than usual’. Although bankers and financiers may have faced solvency questions, they had been told that their institutions were too big to fail and they themselves too ‘too big to jail’, as US Attorney General Eric Holder said in evidence to a Congressional committee on 6 March 2013: I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute – if we do bring a criminal charge – it will have a negative impact on the national economy, perhaps even the world economy.


End the Fed by Ron Paul

affirmative action, Alan Greenspan, Bear Stearns, Bernie Madoff, Bernie Sanders, Bretton Woods, business cycle, crony capitalism, currency manipulation / currency intervention, fiat currency, Fractional reserve banking, guns versus butter model, hiring and firing, housing crisis, illegal immigration, invisible hand, Khyber Pass, Long Term Capital Management, low interest rates, market bubble, means of production, military-industrial complex, Money creation, moral hazard, Ponzi scheme, price mechanism, reserve currency, road to serfdom, Robert Gordon, Ronald Reagan, Savings and loan crisis, too big to fail, tulip mania, We are all Keynesians now, Y2K

There are other benefits as well, such as stopping the business cycle, ending inflation, building prosperity for all Americans, and putting an end to the corrupt collaboration between government and banks that virtually defines the operations of public policy in the post-meltdown era. Ending the Fed would put the American banking system on solid financial footing. The industry would thrive without the moral hazard of banks that are “too big to fail.” Its loan operations would take a more realistic account of risks, and the bank’s capital would not be put at risk in the service of politically driven priorities. Customers’ deposits would be safer than they are today, as banks would compete with one another in their most important function of providing a secure means of preserving wealth.

Even with a government-guaranteed system of fractional reserves, the system is always vulnerable to collapse at the right moments, namely, when all depositors come asking for their money in the course of a run (think of the scene in It’s a Wonderful Life). The whole history of modern banking legislation and reform can be seen as an elaborate attempt to patch the holes in this leaking boat. Thus have we created deposit insurance, established the “too big to fail” doctrine, created schemes for emergency injections, and all the rest, so as to keep afloat a system that is inherently unstable. What I’ve described is a telescoped version of several hundreds of developments, but it accurately explains the continued drive to push forward with money that is infinitely elastic and with banking institutions that are guaranteed through government legislation not to fail, that is, central banking as we know it.


pages: 488 words: 144,145

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

Jay Gould, we believe, who first developed the idea of a railway receivership until it became merely one of a series of strategic moves for the control of a great corporation or for some special financial result.8 The railroads of the nineteenth century were, in this respect, similar to the “too big to fail” banks and commercial companies of the later part of the twentieth century. In the same way that Gould and his contemporaries used the guise of bankruptcy at the end of the nineteenth century to hide their true strategic agendas, a century later the government-led bailouts of Penn Central, Chrysler, Continental Illinois, Citicorp, General Motors, Chrysler (again), GMAC, and American International Group would all be used to avoid liquidation and to pursue a political agenda, namely to conceal the prevalence of incompetence and outright fraud in the financial world.

Thus his attention to Mexico and close political contacts in that country, and Bush’s eventual pursuit of a free trade agreement with Mexico, make a great deal of geopolitical sense in terms of helping to stabilize that country.29 The Latin Debt crisis illustrates how Paul Volcker and many of his contemporaries laid the intellectual and practical foundations for policies such as “too big to fail” for the largest banks. The tendency to bail out large financial institutions and eventually whole countries in the 2008–2010 period dates from the late 1970s and the tenure of Paul Volcker at the Fed and James Baker at Treasury. Whether one speaks of the WWI and WWII loans to Europe or the bad foreign debts of the largest banks, Washington’s tendency in the twentieth century was to paper over the problem with more debt and inflation.

His concern with the well being of the financial system essentially made the argument for bailing out particular banks. The good of the many, to borrow the old phrase, was more important than market discipline for the one failed institution, even if that meant embracing public subsidies and moral hazard writ large. In a very real sense, Paul Volcker and not Gerry Corrigan was the father of “too big to fail” with respect to the largest U.S. banks. Apart from fighting inflation, Volcker’s legacy to the Fed was to support and enhance the tendency of the central bank to bail out large banks. But the actions of both Volcker and Corrigan were driven by the growing reliance of America on inflation and debt; but they compounded the problem.


pages: 524 words: 143,993

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

air freight, 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

Resolution A second area of focus has been ‘resolution’, particularly resolution of systemically significant banks.10 Resolution allows the authorities to reorganize the finances of troubled institutions by imposing losses on shareholders and creditors in an orderly way. Individual firms would, at the same time, need to develop their own resolution plans – so-called ‘living wills’. The aim of this effort is to eliminate the widely advertised threat of ‘too big to fail’. One of the arguments for ring-fencing subsidiaries with separate capital and ‘bail-inable’ debt (debt issued under the clear understanding that it could – and probably would – be converted into equity if the issuing institution was deemed to need additional capital) is that it would make it much easier to ‘resolve’ banks that get into trouble.

The financial sector and markets that have emerged from this approach are, however, in essence the same as the ones that went into the crisis. Banking has even been further concentrated in a remarkably small number of banks: the official list includes just twenty-nine globally significant international banks.12 It is not clear that these are all ‘too big to fail’, but it is highly unlikely that such banks could be resolved smoothly in a significant crisis, partly because they are still too interconnected to fail. Moreover, these institutions remain the beneficiaries of significant explicit and implicit subsidies from central banks and governments.13 The new orthodoxy also generally failed to bring about a rapid restructuring of private debt, outside the financial sector, though, particularly in the US, bankruptcy procedures resulted in significant reductions in household debt, after house prices crashed.

Hank Paulson, On the Brink: Inside the Race to Stop the Collapse of the Global Financial System (New York and London: Business Plus and Headline, 2010), pp. 435–6. 3. Anatole Kaletsky, Capitalism 4.0: The Birth of a New Economy (London: Bloomsbury, 2010), pp. 147–8. 4. The literature on what happened in the crisis is now enormous. For detailed accounts of the US crisis, I would particularly recommend Andrew Ross Sorkin, Too Big to Fail: Inside the Battle to Save Wall Street (London: Penguin, 2010), and Alan S. Blinder, After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead (New York: Penguin 2013). Robert Skidelsky provides an excellent short-hand account of the crisis in Keynes: The Return of the Master (London: Allen Lane, 2009), ch. 1.


pages: 655 words: 156,367

The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era by Gary Gerstle

2021 United States Capitol attack, A Declaration of the Independence of Cyberspace, affirmative action, Affordable Care Act / Obamacare, air traffic controllers' union, Airbnb, Alan Greenspan, Alvin Toffler, anti-communist, AOL-Time Warner, Bear Stearns, behavioural economics, Bernie Sanders, Big Tech, Black Lives Matter, blue-collar work, borderless world, Boris Johnson, Brexit referendum, British Empire, Broken windows theory, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, collective bargaining, Cornelius Vanderbilt, coronavirus, COVID-19, creative destruction, crony capitalism, cuban missile crisis, David Brooks, David Graeber, death from overwork, defund the police, deindustrialization, democratizing finance, Deng Xiaoping, desegregation, Dissolution of the Soviet Union, Donald Trump, Electric Kool-Aid Acid Test, European colonialism, Ferguson, Missouri, financial deregulation, financial engineering, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, future of work, Future Shock, George Floyd, George Gilder, gig economy, Glass-Steagall Act, global supply chain, green new deal, Greenspan put, guns versus butter model, Haight Ashbury, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, Ida Tarbell, immigration reform, informal economy, invention of the printing press, invisible hand, It's morning again in America, Jeff Bezos, John Perry Barlow, Kevin Kelly, Kitchen Debate, low interest rates, Lyft, manufacturing employment, market fundamentalism, Martin Wolf, mass incarceration, Menlo Park, microaggression, Mikhail Gorbachev, military-industrial complex, millennium bug, Modern Monetary Theory, money market fund, Mont Pelerin Society, mortgage debt, mutually assured destruction, Naomi Klein, neoliberal agenda, new economy, New Journalism, Northern Rock, obamacare, Occupy movement, oil shock, open borders, Peter Thiel, Philip Mirowski, Powell Memorandum, precariat, price stability, public intellectual, Ralph Nader, Robert Bork, Ronald Reagan, scientific management, Seymour Hersh, sharing economy, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, social distancing, Steve Bannon, Steve Jobs, Stewart Brand, Strategic Defense Initiative, super pumped, technoutopianism, Telecommunications Act of 1996, The Bell Curve by Richard Herrnstein and Charles Murray, The Chicago School, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, Uber and Lyft, uber lyft, union organizing, urban decay, urban renewal, War on Poverty, Washington Consensus, We are all Keynesians now, We are the 99%, white flight, Whole Earth Catalog, WikiLeaks, women in the workforce, Works Progress Administration, Y2K, Yom Kippur War

Moreover, if the banks got through the stress tests and raised the necessary private capital, they would receive an all-important federal stamp of approval, which would then raise their standing in capital markets and increase dramatically their advantage over the smaller commercial banks that were not subjected to stress tests and thus could not hope to be rewarded with a federal certificate of approval. Through this process, Obama’s stress test plan actually ended up increasing the concentration of power and resources in a small number of gigantic financial institutions deemed “too big to fail.”87 Obama’s decision to weight a recovery package so heavily toward financial elites and their institutions did not get good reviews on Main Street. As millions of Americans were wrestling with the effects of economic calamity on their lives, the bankers responsible for issuing ruinous mortgages seemed to be facing few consequences.

Wall Street and corporate America, he declared, were “destroying the fabric of our nation.”63 To the Wall Streeters listening to his speech, Sanders issued this warning: “If you do not end your greed, we will end it for you.”64 A month later, after emerging victorious in the Iowa caucuses that launched the 2016 presidential contest, Sanders declared that a “political revolution was coming.”65 Were he to win the nomination and then the presidency, he made clear, there would be no more bank bailouts, no more privileges given to finance, no more toleration of a shadow finance sector allowed to operate free of regulation, no more tolerating the existence of banks claiming they had to be bailed out because they were “too big to fail.” Wall Street, of course, was integral to the winning Democratic Party coalition that Bill Clinton assembled in the 1990s. At the time, Robert Rubin from Goldman Sachs was often seen as the most powerful and wisest member of Clinton’s cabinet. Obama, meanwhile, had turned over responsibility for handling the 2009 economic recovery to Rubin’s Wall Street disciples, including Lawrence Summers, Timothy Geithner, and Peter Orszag.

Did they think that the Lehman collapse was bearable, and even useful in setting limits on their willingness to bail out financial institutions? Or had the Bush advisors simply miscalculated? Whatever the motivation, the refusal to step in backfired. On the crisis days of September and October 2008, see Andrew Ross Sorkin, Too Big to Fail: Inside the Battle to Save Wall Street (London: Allen Lane, 2009); David Wessel, In FED We Trust: Ben Bernanke’s War on the Great Panic (London: Scribe, 2009); Ron Suskind, Confidence Men: Wall Street, Washington, and the Education of a President (New York: HarperCollins, 2011); Jonathan Levy, Ages of American Capitalism: A History of the United States (New York: Random House, 2021), 702–732; Lawrence Jacobs and Desmond King, Fed Power: How Finance Wins (2016; New York: Oxford University Press, 2021); Ben S.


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In FED We Trust: Ben Bernanke's War on the Great Panic by David Wessel

Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Bear Stearns, Berlin Wall, Black Swan, break the buck, business cycle, central bank independence, credit crunch, Credit Default Swap, crony capitalism, debt deflation, Fall of the Berlin Wall, financial engineering, financial innovation, financial intermediation, fixed income, full employment, George Akerlof, Glass-Steagall Act, Greenspan put, housing crisis, inflation targeting, information asymmetry, junk bonds, London Interbank Offered Rate, Long Term Capital Management, low interest rates, market bubble, Michael Milken, money market fund, moral hazard, mortgage debt, new economy, Northern Rock, price stability, quantitative easing, Robert Shiller, Ronald Reagan, Saturday Night Live, Savings and loan crisis, savings glut, Socratic dialogue, too big to fail

“Everything fell apart after Lehman,” Alan Blinder, a Princeton economist — Bernanke’s former colleague — and former Fed vice chairman, later wrote. “People in the market often say they can make money under any set of rules, as long as they know what they are. Coming just six months after Bear’s rescue, the Lehman decision tossed the presumed rulebook out the window. If Bear was too big to fail, how could Lehman, at twice its size, not be? If Bear was too entangled to fail, why was Lehman not? After Lehman went over the cliff, no financial institution seemed safe. So lending froze, and the economy sank like a stone. It was a colossal error, and many people said so at the time.” Bernanke and Paulson implied initially that they deliberately let Lehman go.

It was, actually, a profound observation: a banker who didn’t dance, who didn’t make ever more risky loans, would find his bank’s market share falling and near-term profits less impressive than his competitors’. Prince was one of several Wall Street chief executives who, it turned out, didn’t understand the risks their own institutions were taking or who were powerless to stop them. Citi, it would become clear, was not only too big to fail, it was too big to manage. (By November 2007, Prince would be gone.) Ben Bernanke soon would discover what happens when the music stops, but he had good reason to believe that his team had the experience, smarts, and tools to manage the situation. Chapter 6 THE FOUR MUSKETEERS: BERNANKE’S BRAIN TRUST By the summer of 2007, the Fed was stocked with veterans of market crises: the stock market crash of 1987, the savings and loan scandal of the late 1980s and early 1990s, the commercial banking and real estate woes of the early 1990s, the Asian financial crisis of the late 1990s, the bursting of the tech-stock bubble in 2000, and the September 11 terrorist attacks.

The Fed would now have to begin examining the books of all investment banks because the Bear Stearns loan was certain to be seen as a precedent. “Everybody on the phone knew that this was hugely consequential, an irreversible decision that would have consequences that were very hard to say at the time,” Don Kohn said. “My stomach hurt for sure.” Others would later say that Bear wasn’t too big to fail; it was too interconnected to fail, a new standard. Bear Stearns had open trades with 5,000 other firms and was a party to 750,000 derivatives contracts. It would not have gone into bankruptcy quietly. “In my mind, what was foremost was that lots of other folks would be brought down with it with consequences I couldn’t imagine,” Kohn said.


pages: 357 words: 110,017

Money: The Unauthorized Biography by Felix Martin

Alan Greenspan, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, call centre, capital asset pricing model, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, creative destruction, credit crunch, David Graeber, en.wikipedia.org, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, fixed income, Fractional reserve banking, full employment, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Hyman Minsky, inflation targeting, invention of writing, invisible hand, Irish bank strikes, joint-stock company, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kenneth Rogoff, land bank, Michael Milken, mobile money, moral hazard, mortgage debt, new economy, Northern Rock, Occupy movement, Paul Volcker talking about ATMs, plutocrats, private military company, proprietary trading, public intellectual, Republic of Letters, Richard Feynman, Robert Shiller, Savings and loan crisis, Scientific racism, scientific worldview, seigniorage, Silicon Valley, smart transportation, South Sea Bubble, supply-chain management, The Wealth of Nations by Adam Smith, too big to fail

Those who doubted the wisdom of all this were dismissed as economic Luddites—until the pyramid of credit developed the odd crack when interest rates spiked and a few of the smaller firms went under. Then came rumours that a really big fish was in trouble. It seemed inconceivable that the regulators would let it go: everyone knew that it was “too big to fail.” Yet the sanctimonious talk of the dangers of moral hazard emanating from the central bank was far from reassuring. And then, taking everyone by surprise, it happened. There was a full-blown run, and the central bank let it fail. All hell broke loose: a panic the like of which hadn’t been seen for decades.

And if their loans went bad and their equity capital was too thin, the taxpayer would backstop their credit losses. The consequences were, in retrospect, utterly predictable. Around the world, banks had grown in size, reduced their capital buffers, made riskier loans, and decreased the liquidity of their assets. More and more had become too big to fail. As a result, the level of credit insurance that sovereigns had implicitly been providing had ballooned. Only when the crisis had struck, and the policy-makers’ initial efforts to control moral hazard collapsed, had the true scale of the subsidy become clear. In November 2009, a year after the collapse of Lehman Brothers, total sovereign support for the banking sector worldwide was estimated at some $14 trillion—more than 25 per cent of global GDP.20 This was the scale of the downside risks, taxpayers realised, that they had been bearing all along—whilst all the upside went to the shareholders, debt investors, and employees of the banks themselves.

Both restrictions lasted right into the 1990s.11 And it is notable that it was the relaxation of these structural constraints on the activities and size of banks that contributed to the unmanageable size of the problem that was exposed by the 2007–8 crash. It was when the mid-century interlude of strict structural regulation ended that the age of “too big to fail” definitively arrived.12 Since the crisis, this historical experience has constituted the default framework for the flurry of legislative activity aimed at changing the structure of the banking sector itself. In early 2009, President Obama appointed an Economic Recovery Advisory Board, chaired by ex-Chairman of the Federal Reserve Paul Volcker, to make proposals on thoroughgoing reform of the financial sector.


pages: 247 words: 60,543

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

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

, but in this case it was because they had been lending money to railway companies who could not pay it back, rather than to American homeowners who could not pay it back. Still, then as in our very own crash in 2007, the government had to respond. It did so by suspending the Bank Act of 1844, allowing banks to pay out in paper money rather than gold, which kept them going; however, they were not ‘too big to fail’, and the famous bank Overend Gurney went under. When it suspended payments after a run on 10 May 1866 (which was, as frequently noted, the last run on a British bank until the Northern Rock debacle), Overend Gurney not only ruined its own shareholders, but also caused the collapse of about 200 other companies (including other banks).22 The railway companies were huge, and a great many ordinary people had invested in them.

This would boost stability by easing the concentration of liquidity risk and credit risk via, as an ECB working paper puts it, reducing moral hazard by downscaling banks (Bindseil 2020). This means that commercial banks would become credit brokers rather than credit creators, losing the private seigniorage attendant on credit creation. As a non-economist, I can see the attraction of reducing the systemic importance of ‘too big to fail’ institutions in order to abate the externalities stemming from potential instability in the banking system. This is not all about the stability of banks, though. Non-bank financial institutions in particular would benefit from being able to hold funds in central bank money as opposed to in the form of an uninsured bank account.


pages: 559 words: 169,094

The Unwinding: An Inner History of the New America by George Packer

"World Economic Forum" Davos, Affordable Care Act / Obamacare, Alan Greenspan, Apple's 1984 Super Bowl advert, bank run, Bear Stearns, big-box store, citizen journalism, clean tech, collateralized debt obligation, collective bargaining, company town, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, DeepMind, deindustrialization, diversified portfolio, East Village, El Camino Real, electricity market, Elon Musk, Fairchild Semiconductor, family office, financial engineering, financial independence, financial innovation, fixed income, Flash crash, food desert, gentrification, Glass-Steagall Act, global macro, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, high-speed rail, housing crisis, income inequality, independent contractor, informal economy, intentional community, Jane Jacobs, Larry Ellison, life extension, Long Term Capital Management, low skilled workers, Marc Andreessen, margin call, Mark Zuckerberg, market bubble, market fundamentalism, Maui Hawaii, Max Levchin, Menlo Park, military-industrial complex, Neal Stephenson, Neil Kinnock, new economy, New Journalism, obamacare, Occupy movement, off-the-grid, oil shock, PalmPilot, Patri Friedman, paypal mafia, peak oil, Peter Thiel, Ponzi scheme, proprietary trading, public intellectual, Richard Florida, Robert Bork, Ronald Reagan, Ronald Reagan: Tear down this wall, Savings and loan crisis, shareholder value, side project, Silicon Valley, Silicon Valley billionaire, Silicon Valley startup, single-payer health, smart grid, Snow Crash, Steve Jobs, strikebreaker, tech worker, The Death and Life of Great American Cities, the scientific method, too big to fail, union organizing, uptick rule, urban planning, vertical integration, We are the 99%, We wanted flying cars, instead we got 140 characters, white flight, white picket fence, zero-sum game

“The next big thing this area can be known for is clean energy,” he said, and he gave a shout-out to Red Birch, calling Gary and Dean “freedom fighters and entrepreneurs.” “Instead of driving by their truck stop and leaving three or four cents on a dollar spent, you leave ninety cents at theirs. When things are ‘too big to fail,’ maybe they’re a little too big to be the model in the first place. We are right on the cusp of a transformation, and that’s why it’s so exciting. This is a kind of industrial revolution moment.” He blamed both parties for policies that favored big corporations and made America’s small producers less competitive.

When they both worked for Biden, and Connaughton wanted to bring something new to the senator’s attention, Kaufman used to say, “Jeff, every time you want to put something into the boat, you have to take something out of the boat.” From the outset Kaufman, who wasn’t even a member of the Banking Committee, focused on two things: fraud, and the problem of “too big to fail.” He cowrote a bill that authorized $340 million for hiring more FBI agents and funding federal prosecutors to go after the fraudsters—not just petty mortgage originators in Long Beach and Tampa, but top Wall Street executives who had concealed the damage until the whole edifice collapsed. It was the Justice Department’s job to decide who should be investigated, but presumably people like Lehman’s Dick Fuld and AIG’s Joseph Cassano and Merrill’s Stanley O’Neal and, who knew, maybe Goldman’s Lloyd Blankfein himself.

After a crisis of this magnitude, it amazes me that some of our reform proposals effectively maintain the status quo in so many critical areas.” He added that he didn’t trust the regulators to do a better job of enforcing rules the next time a bank started to implode. Congress had to do the job for them, by writing a bill with clear and simple lines. Dodd’s bill wouldn’t solve the problem of too big to fail. “We need to break up these institutions before they fail, not stand by with a plan waiting to catch them when they do fail.” On March 15, after the release of the bankruptcy examiner’s report on Lehman Brothers, which strongly suggested that fraud had led to the firm’s demise, Kaufman took to the floor again.


pages: 598 words: 172,137

Who Stole the American Dream? by Hedrick Smith

Affordable Care Act / Obamacare, Airbus A320, airline deregulation, Alan Greenspan, anti-communist, asset allocation, banking crisis, Bear Stearns, Boeing 747, Bonfire of the Vanities, British Empire, business cycle, business process, clean water, cloud computing, collateralized debt obligation, collective bargaining, commoditize, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, David Brooks, Deng Xiaoping, desegregation, Double Irish / Dutch Sandwich, family office, financial engineering, Ford Model T, full employment, Glass-Steagall Act, global supply chain, Gordon Gekko, guest worker program, guns versus butter model, high-speed rail, hiring and firing, housing crisis, Howard Zinn, income inequality, independent contractor, index fund, industrial cluster, informal economy, invisible hand, John Bogle, Joseph Schumpeter, junk bonds, Kenneth Rogoff, Kitchen Debate, knowledge economy, knowledge worker, laissez-faire capitalism, Larry Ellison, late fees, Long Term Capital Management, low cost airline, low interest rates, manufacturing employment, market fundamentalism, Maui Hawaii, mega-rich, Michael Shellenberger, military-industrial complex, MITM: man-in-the-middle, mortgage debt, negative equity, new economy, Occupy movement, Own Your Own Home, Paul Samuelson, Peter Thiel, Plutonomy: Buying Luxury, Explaining Global Imbalances, Ponzi scheme, Powell Memorandum, proprietary trading, Ralph Nader, RAND corporation, Renaissance Technologies, reshoring, rising living standards, Robert Bork, Robert Shiller, rolodex, Ronald Reagan, Savings and loan crisis, shareholder value, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Solyndra, Steve Jobs, stock buybacks, tech worker, Ted Nordhaus, The Chicago School, The Spirit Level, too big to fail, transaction costs, transcontinental railway, union organizing, Unsafe at Any Speed, Vanguard fund, We are the 99%, women in the workforce, working poor, Y2K

He and the Federal Reserve Board, lobbied by Wall Street bankers, permitted an escalating expansion by commercial banks into underwriting securities and other investment banking operations by allowing them to do first 5 percent, then 10 percent, and finally 25 percent of their business in those higher-risk areas by the late 1990s. The Rise of “Too Big to Fail” But that was not enough for Sandy Weill, Wall Street’s most ambitious banker. Weill wanted to create the world’s largest superbank. To do that, he needed to demolish Glass-Steagall. By the late 1990s, Weill had formed a financial giant that combined Travelers Insurance and Salomon Brothers investment house.

Consumer groups and community bankers protested that this would create uncontrollable financial empires. Former commerce undersecretary Jeffrey Garten, then dean of the Yale School of Management, warned prophetically that bank megamergers would come back to haunt the government. If the superbanks got in trouble, Garten predicted, the taxpayers would have to bail them out because they would be “too big to fail” without causing a wider financial disaster. But with Wall Street lobbyists in full cry and with “wise men” from Wall Street like Greenspan and Rubin arguing that superbanks would generate “synergies” that would “enhance the competitiveness” of U.S. banking in the global economy, Congress repealed Glass-Steagall, a law that had worked well for six decades.

The banks shrewdly calculated that mass amnesia would save them: The longer it took to craft regulatory reforms, the greater the likelihood that the drive for reform would lose momentum. The public lost track—and lost interest. In May 2010, a group of Democratic senators tried to pass a provision shrinking the biggest banks and limiting their size to deal with the “too big to fail” problem, but the banks and their allies in Congress killed that measure. President Obama wanted a freestanding consumer protection agency. The bankers hated the idea. They lobbied successfully to have the new agency tucked inside the Federal Reserve and then, in 2011, got Senate Republicans to block any consideration of Elizabeth Warren, the vigorous consumer advocate who was Obama’s choice to head it, forcing her to quit the administration and abandon her chance to head the new agency that she had proposed and helped to organize.


pages: 575 words: 171,599

The Billionaire's Apprentice: The Rise of the Indian-American Elite and the Fall of the Galleon Hedge Fund by Anita Raghavan

"World Economic Forum" Davos, airport security, Asian financial crisis, asset allocation, Bear Stearns, Bernie Madoff, Boeing 747, British Empire, business intelligence, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, delayed gratification, estate planning, Etonian, glass ceiling, high net worth, junk bonds, kremlinology, Larry Ellison, locking in a profit, Long Term Capital Management, Marc Andreessen, mass immigration, McMansion, medical residency, Menlo Park, new economy, old-boy network, Ponzi scheme, risk tolerance, rolodex, Ronald Reagan, short selling, Silicon Valley, sovereign wealth fund, stem cell, technology bubble, too big to fail

Gupta, Testimony of Byron Trott, May 23, 2008. Trott’s conversation with Buffett: Ibid.; Andrew Ross Sorkin, Too Big to Fail (New York: Penguin, 2009). The call from Jon Winkelried and subsequent conversation: US v. Gupta, Trott testimony. Trott’s conversation with Goldman’s executives in New York and the overture to Buffett: Trott testimony; Sorkin, Too Big to Fail; Chris Blackhurst, “Billionaire Buffett and the Only Banker He Trusts,” Evening Standard (London), September 25, 2008. Buffett going to the Dairy Queen: Sorkin, Too Big to Fail; Trott testimony. Subsequent meetings on the thirtieth floor: US v. Gupta, Trott testimony.

Blankfein has a bald pate and elephantine ears, but based on the anticipation surrounding his appearance, he might as well have been a supermodel. US attorney Preet Bharara, who had been attending the trial regularly, was in the courtroom with four of his deputies. Andrew Ross Sorkin, the New York Times writer and author of the best-selling book Too Big to Fail, made a cameo. The only person unfazed by Blankfein’s appearance seemed to be Judge Holwell, who, a couple of weeks earlier, when lawyers were picking a jury for the case, mispronounced Blankfein’s name. He rhymed the second syllable with “bean” rather than “fine.” The task of drawing testimony from Blankfein fell to Andrew Michaelson, a moment in the sun for an attorney who had worked the case for both the SEC and the US attorney’s office.


pages: 424 words: 115,035

How Will Capitalism End? by Wolfgang Streeck

"there is no alternative" (TINA), accounting loophole / creative accounting, air traffic controllers' union, Airbnb, Alan Greenspan, basic income, behavioural economics, Ben Bernanke: helicopter money, billion-dollar mistake, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, Clayton Christensen, collective bargaining, conceptual framework, corporate governance, creative destruction, credit crunch, David Brooks, David Graeber, debt deflation, deglobalization, deindustrialization, disruptive innovation, en.wikipedia.org, eurozone crisis, failed state, financial deregulation, financial innovation, first-past-the-post, fixed income, full employment, Gini coefficient, global reserve currency, Google Glasses, haute cuisine, income inequality, information asymmetry, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, junk bonds, Kenneth Rogoff, labour market flexibility, labour mobility, late capitalism, liberal capitalism, low interest rates, market bubble, means of production, military-industrial complex, moral hazard, North Sea oil, offshore financial centre, open borders, pension reform, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, post-industrial society, private sector deleveraging, profit maximization, profit motive, quantitative easing, reserve currency, rising living standards, Robert Gordon, savings glut, secular stagnation, shareholder value, sharing economy, sovereign wealth fund, tacit knowledge, technological determinism, The Future of Employment, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transaction costs, Uber for X, upwardly mobile, Vilfredo Pareto, winner-take-all economy, Wolfgang Streeck

Finance is an ‘industry’ where innovation is hard to distinguish from rule-bending or rule-breaking; where the pay-offs from semi-legal and illegal activities are particularly high; where the gradient in expertise and pay between firms and regulatory authorities is extreme; where revolving doors between the two offer unending possibilities for subtle and not-so-subtle corruption;40 where the largest firms are not just too big to fail, but also too big to jail, given their importance for national economic policy and tax revenue; and where the borderline between private companies and the state is more blurred than anywhere else, as indicated by the 2008 bailout or by the huge number of former and future employees of financial firms in the American government.

Nothing prevents financial firms from using the surplus of money provided by the central banks to enter whatever appear to be the new growth sectors, on behalf of their favourite clients and, of course, themselves. After all, with regulatory reform in the financial sector having failed in almost all respects, capital requirements are little higher than they were, and the banks that were too big to fail in 2008 can count on being so also in 2012 or 2013. This leaves them with the same capacity for blackmailing the public that they were able to deploy so skilfully three years ago. But now the public bailout of private capitalism on the model of 2008 may be impossible to repeat, if only because public finances are already stretched to the limit.

It is not ‘our’ money but that of the banks which is at stake, and not solidarity with the Greeks but with ‘the markets’. As we know, the latter had virtually thrust their money at the former, in anticipation of being paid back, if not by them, then by other Eurozone states, if necessary by means of the ‘too big to fail’ blackmail of 2008. Governments have not contradicted these expectations, even though the giant surveillance apparatuses of the large nation states and international organizations cannot have failed to notice how countries like Greece saturated themselves with cheap credit after their accession to the Eurozone.


pages: 474 words: 120,801

The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being in Charge Isn’t What It Used to Be by Moises Naim

"World Economic Forum" Davos, additive manufacturing, AOL-Time Warner, barriers to entry, Berlin Wall, bilateral investment treaty, business cycle, business process, business process outsourcing, call centre, citizen journalism, Clayton Christensen, clean water, collapse of Lehman Brothers, collective bargaining, colonial rule, conceptual framework, corporate governance, creative destruction, crony capitalism, deskilling, disinformation, disintermediation, disruptive innovation, don't be evil, Evgeny Morozov, failed state, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, illegal immigration, immigration reform, income inequality, income per capita, intangible asset, intermodal, invisible hand, job-hopping, Joseph Schumpeter, Julian Assange, Kickstarter, Lewis Mumford, liberation theology, Martin Wolf, mega-rich, megacity, military-industrial complex, Naomi Klein, Nate Silver, new economy, Northern Rock, Occupy movement, open borders, open economy, Peace of Westphalia, plutocrats, price mechanism, price stability, private military company, profit maximization, prosperity theology / prosperity gospel / gospel of success, radical decentralization, Ronald Coase, Ronald Reagan, seminal paper, Silicon Valley, Skype, Steve Jobs, The Nature of the Firm, Thomas Malthus, too big to fail, trade route, transaction costs, Twitter Arab Spring, vertical integration, Washington Consensus, WikiLeaks, World Values Survey, zero-sum game

And though it may seem to be an unalloyed good that the powerful are less powerful than before (after all, power corrupts, doesn’t it?), their demotion can also generate instability, disorder, and paralysis in the face of complex problems. The coming chapters will also show how the decay of power has accelerated, despite such seemingly contradictory trends as the “big is back” and “too big to fail” bailouts at the end of the last decade, the constant increases in the military budgets of the United States and China, and the growing disparities in income and wealth throughout the world. Indeed, the decay of power is a more important and far-reaching issue than the superficial trends and developments that currently clog debates among policymakers and analysts.

But no one disagreed that it existed. The global recession and financial crisis have done little to clarify our picture of corporate power. On the one hand, the need for governments to rein in unbridled corporate behavior again became apparent. But so did the notion that certain businesses—banks, insurers, automakers—were “too big to fail”; they could not be allowed to go out of business without immense adverse regional, national, or even global consequences. Some, like General Motors and Chrysler, were saved by government intervention. Others, like Lehman Brothers, were allowed to go under. Banks deemed too shaky to survive were sold to larger ones, creating ever-larger behemoths and bolstering claims of critics who saw power concentrating in a tight-knit, untouchable financial elite.

See also Cellphones; Prepaid phone cards Ten Commandments, 24 Tenner, Edward, 3 Terrible Simplifiers, 229, 236, 237, 241 Terrorism, 12, 18, 54, 108, 109, 110, 111, 112, 114–115, 118, 140, 221, 226 attacks of 9/11, 107, 114, 121, 122, 126, 127, 139 Foreign Terrorist Organizations (designation), 114 Texas Pacific Group, 189 Textiles, 37, 186 Text messaging, 53, 103, 210, 230 Thailand, 50, 97–98, 165, 172 Tharoor, Shashi, 148 Thatcher, Margaret, 172 The Gap, 176 Thermopylae, battle of, 112 Thirty Years War 135 Thom, Randall, 175 Thus Spake Zarathustra (Nietzsche), 16 Time Warner, 212, 213 Timex, 169 Tiririca, 79 “Too big to fail,” 167 Torture, 114 Tourism, 61–62, 145, 153 Toyota, 184, 205 Trade, 13, 53, 62, 73, 101, 102, 138, 144, 151, 155, 157, 183, 187, 191, 219, 235 growth of, 172–173 See also Tariffs Tradition, 24, 27, 60, 65, 73, 78, 98, 123, 153 Trafficking, 18, 127 Trafigura trading firm, 216 Treaties, 137–138, 139, 151, 185, 228 Trends, 28, 71, 74, 84(fig.), 86–87, 90, 93, 94, 96, 109, 113–114, 158, 163, 164, 166, 184, 186, 201, 253 in number of democratic regimes, 248 regional trends in democracy, 249–250(figs.), 251 Trierweiler, Valérie, 93 Trust, 15, 68, 232, 237–239, 240, 242, 243 Tuberculosis, 43 Tunisia, 14, 57, 95, 100, 242 Turkey, 13, 147, 186, 201 Turkmenistan, 131 Tuvalu, 152 Twitter, 14, 28, 53, 62–63, 100, 125, 166, 179, 212, 216, 229 TXU energy company, 189 Tyranny, 224, 226.


pages: 397 words: 112,034

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

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

The Fed’s political independence is a necessary, though clearly not sufficient, ingredient for sound monetary policy. Key Dodd-Frank Provisions The biggest flash point in the debate over the Dodd-Frank law was bailouts, with Democrats claiming that the law would put an end to them while Republicans argued that it continued the “too-big-to-fail” mindset, guaranteeing more bailouts. Who is right? Both are, to some extent. Since any too-big-to-fail firms would remain nearly as big under Dodd-Frank, there is still a risk of bailouts. Technically, these would not be taxpayer funded, because any such action would trigger a new levy on all other large financial firms to cover the costs (though those firms—or rather, their shareholders—are taxpayers, as are their customers who would ultimately pay higher prices).

Congress plans to address the future of these agencies in 2011. The Federal Reserve has received more power from the legislation, but there was tremendous controversy in Congress about the Fed’s role in propping up troubled banks. Lewis notes that there was also great controversy over the issue of “too big to fail” because of Republican allegations that the new law would not curtail bank size, but he says that the regulatory authorities now have more power to “unwind” the positions of large entities that could pose a systemic risk. He does not believe that the new law will prevent future financial crises, but it will prevent a repetition of many of the factors that led to the recent one.


pages: 289 words: 113,211

A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation by Richard Bookstaber

affirmative action, Albert Einstein, asset allocation, backtesting, beat the dealer, behavioural economics, Black Swan, Black-Scholes formula, Bonfire of the Vanities, book value, butterfly effect, commoditize, commodity trading advisor, computer age, computerized trading, disintermediation, diversification, double entry bookkeeping, Edward Lorenz: Chaos theory, Edward Thorp, family office, financial engineering, financial innovation, fixed income, frictionless, frictionless market, Future Shock, George Akerlof, global macro, implied volatility, index arbitrage, intangible asset, Jeff Bezos, Jim Simons, John Meriwether, junk bonds, London Interbank Offered Rate, Long Term Capital Management, loose coupling, managed futures, margin call, market bubble, market design, Mary Meeker, merger arbitrage, Mexican peso crisis / tequila crisis, moral hazard, Myron Scholes, new economy, Nick Leeson, oil shock, Paul Samuelson, Pierre-Simon Laplace, proprietary trading, quantitative trading / quantitative finance, random walk, Renaissance Technologies, risk tolerance, risk/return, Robert Shiller, Robert Solow, rolodex, Saturday Night Live, selection bias, shareholder value, short selling, Silicon Valley, statistical arbitrage, tail risk, The Market for Lemons, time value of money, too big to fail, transaction costs, tulip mania, uranium enrichment, UUNET, William Langewiesche, yield curve, zero-coupon bond, zero-sum game

While many saw the writing on the wall, the arbitrage group was still holding on. They and a number of other trading desks remained enamored with the huge yields on Russian bonds and kept their 97 ccc_demon_097-124_ch06.qxd 7/13/07 2:43 PM Page 98 A DEMON OF OUR OWN DESIGN positions with the hope the country was “too big to fail.” And not just “too big”; the Russians had nuclear weapons. So, some argued, the West would have to bail them out. Dimon was not going to take that bet; he had pushed for months to get positions down, but got little cooperation. Finally, toward the end of June 1998, after having listened to Franklin’s optimistic assessment yet one more time, Dimon simply presented the decree.

Even with Hilibrand’s efforts, over time it became increasingly difficult to execute a trade without that trade revealing the new opportunity, and then before long the opportunity would vanish. 112 ccc_demon_097-124_ch06.qxd 7/13/07 2:43 PM Page 113 LT C M R I D E S THE LEVERAGE CYCLE TO HELL While opaqueness may have actually been beneficial in normal times, it was a different story when the firm was on the ropes. Short-term lenders have a stunted sense of risk-return trade-offs. Unlike commercial banks, whose creditors can look to the Federal Deposit Insurance Corporation (FDIC) or to the “too big to fail” doctrine, securities firms have no declared sugar daddy to deter runs. It is not a matter of simply paying a higher price if lenders perceive that their capital is at risk. In fact, waving a premium rate in front of them can be counterproductive; it makes them suspicious. Since no bank knew the other side of the position they were financing, they treated the position as an outright trade, and required multiples more in margin than they would have required if they had known they were financing a spread.

., 165, 189, 243 Shiller, Robert, 179 Shopkorn, Stan, 181 Shuttle disasters, 159–161 Simon, Jim, 165 Singapore International Monetary Exchange (SIMEX), Osaka Exchange (matched positions), 39 Smith Barney, 75 Solow, Robert, 208–209 Soros, George, 179–180 Speculative traders, economic service, 219 Spread trades, holding periods, 83 Standard & Poor’s (S&P) futures contracts, sale, 20 Statistical arbitrage concept, 194 emergence, 182–188 origination, 184 traders, 191–192 Statistics, objective, 134–135 Stavis, Rob, 53, 59, 70–80, 84 Stock clearance/finance, 27–28 StockGeneration, web site, 168 Stock market crash (1929), 137 Stock market crash (1987), 1–2 demons, 7 impact/meditation, 18–20 mechanism, understanding, 28 meltdown, physics, 25–30 postmortem, 13–14 warning signs, 16–18 Strauss, Thomas, 196 resignation, 199 STRIPS, 40–41 Sunbeam, restatements/liability, 135 SuperDOT, linkage, 189 Swap maturity/rate level, interaction, 47 Systems, interactive complexity, 155 Takeovers, impact, 15–16 Tartaglia, Nunzio, 187–189 Thorp, Ed, 188 Three Mile Island, 159 safety systems, dangers, 147–150 Tight coupling, 143 accidents, 154–157 complexity, combination, 256 failure, cascade, 145–146 interactive complexity, relationship, 157–159 origination, 144–145 reduction, 260 Tilley, Jim, 8–9, 46 Time disintermediation, 21 Toevs, Alden, 9 Too big to fail doctrine, 113 Top-down approach, 167 Travelers brokerage unit, 75 Citigroup merger, 125, 140 Shearson American Express, merger, 78 Tribeca Investments, 204 Tulip mania, 174–177 Turnover, demand satisfaction, 173 Two-plus model, 85–86 U.K. tax code, change (1997), 117, 118 Ukraine Radiological Institute, 163 Unanticipated events, 239 Uncertainty, implications, 257 Uncertainty Principle, 223–227 behavioral analogue, 226 Undecidability Theorem, 223–224 Underwriting, profitability, 33–34 Union Bank of Switzerland (UBS), 48 Epstein, impact, 48–49 Goldstein, impact, 116–118 LTCM impact, 118–120 LTCM losses, 113–116, 120 monetary loss, 49 Swiss Bank Corporation, merger, 49 Unwind/unrealized losses, 68 275 bindex.qxd 7/13/07 2:44 PM Page 276 INDEX U.S. arbitrage, losses, 100 U.S. swap market, 92 U.S.


pages: 402 words: 110,972

Nerds on Wall Street: Math, Machines and Wired Markets by David J. Leinweber

"World Economic Forum" Davos, AI winter, Alan Greenspan, algorithmic trading, AOL-Time Warner, Apollo 11, asset allocation, banking crisis, barriers to entry, Bear Stearns, Big bang: deregulation of the City of London, Bob Litterman, book value, business cycle, butter production in bangladesh, butterfly effect, buttonwood tree, buy and hold, buy low sell high, capital asset pricing model, Charles Babbage, citizen journalism, collateralized debt obligation, Cornelius Vanderbilt, corporate governance, Craig Reynolds: boids flock, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Danny Hillis, demand response, disintermediation, distributed generation, diversification, diversified portfolio, electricity market, Emanuel Derman, en.wikipedia.org, experimental economics, fake news, financial engineering, financial innovation, fixed income, Ford Model T, Gordon Gekko, Hans Moravec, Herman Kahn, implied volatility, index arbitrage, index fund, information retrieval, intangible asset, Internet Archive, Ivan Sutherland, Jim Simons, John Bogle, John Nash: game theory, Kenneth Arrow, load shedding, Long Term Capital Management, machine readable, machine translation, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, market fragmentation, market microstructure, Mars Rover, Metcalfe’s law, military-industrial complex, moral hazard, mutually assured destruction, Myron Scholes, natural language processing, negative equity, Network effects, optical character recognition, paper trading, passive investing, pez dispenser, phenotype, prediction markets, proprietary trading, quantitative hedge fund, quantitative trading / quantitative finance, QWERTY keyboard, RAND corporation, random walk, Ray Kurzweil, Reminiscences of a Stock Operator, Renaissance Technologies, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Metcalfe, Ronald Reagan, Rubik’s Cube, Savings and loan crisis, semantic web, Sharpe ratio, short selling, short squeeze, Silicon Valley, Small Order Execution System, smart grid, smart meter, social web, South Sea Bubble, statistical arbitrage, statistical model, Steve Jobs, Steven Levy, stock buybacks, Tacoma Narrows Bridge, the scientific method, The Wisdom of Crowds, time value of money, tontine, too big to fail, transaction costs, Turing machine, two and twenty, Upton Sinclair, value at risk, value engineering, Vernor Vinge, Wayback Machine, yield curve, Yogi Berra, your tax dollars at work

(Something like this actually happened in Diamond Bar, California.) 297 298 Nerds on Wall Str eet Value of Mortgage Based CDO trillions billions millions squat Excellent OK Crappy Dreadful Quality of Borrower Figure 12.9 Oops. Greenspan was right. Garbage in, garbage out. Throw in 30-to-1 leverage and hope you’re too big to fail! Send U.S. taxpayers bill for $700 billion. This is an oversimplified, wise-ass version of a much more complicated story. But sadly, it is the low-tech version of Greenspan’s correct high-tech explanation: These guys should have known better. Tech Hall of Shame We’ve pinned part of the blame for the meltdown on three technological screw-ups: • One of omission—a lack of transparency that let the problem be ignored for too long. • And two of commission: • Creation of excessively complex, nearly incomprehensible derivative securities. • Creation of even more complex, more incomprehensible pricing models, driven by the wrong data.

These governments do not have the expertise or resources to force the lending into areas of the real economy where it is needed most. Most likely, they will throw good money after bad investments (in order to avoid further write-downs), causing these banks to become an even bigger black hole of taxpayer money than in the TARP variations. Most damningly, it exacerbates the too-big-to-fail problem and will crowd out new, healthy private banks that may have otherwise emerged in the next few years. A Simple Structural Solution The $700 billion is a huge amount of money—more than the equity book values of Goldman Sachs, Morgan Stanley, JPMorgan, Citigroup, Washington Mutual, Bank of America, and Wachovia combined.

Larger banks’ buying weaker banks just defers and worsens the problem. If the weaker bank is insolvent and has negative equity (likely), then the acquisition will just infect the balance sheet of the stronger bank (making it potentially insolvent). We will then be left with a more structurally important bank being at risk—a bank that is possibly considered too big to fail. Also, as the balance sheets are merged, asset values will become further muddled and opaque, which will only increase market uncertainty. Bottom line: this is akin to placing a burning match under a flammable carpet and pretending that it is not there. Still Mad, but Ever Hopeful It took great deal of imagination, in a negative sense, to create the Great Mess of ’08, and we will need a great deal of positive imagination to get out of it.


pages: 288 words: 64,771

The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality by Brink Lindsey

Airbnb, Asian financial crisis, bank run, barriers to entry, Bernie Sanders, Build a better mousetrap, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Carmen Reinhart, Cass Sunstein, collective bargaining, creative destruction, Credit Default Swap, crony capitalism, Daniel Kahneman / Amos Tversky, David Brooks, diversified portfolio, Donald Trump, Edward Glaeser, endogenous growth, experimental economics, experimental subject, facts on the ground, financial engineering, financial innovation, financial intermediation, financial repression, hiring and firing, Home mortgage interest deduction, housing crisis, income inequality, informal economy, information asymmetry, intangible asset, inventory management, invisible hand, Jones Act, Joseph Schumpeter, Kenneth Rogoff, Kevin Kelly, knowledge worker, labor-force participation, Long Term Capital Management, low skilled workers, Lyft, Mark Zuckerberg, market fundamentalism, mass immigration, mass incarceration, medical malpractice, Menlo Park, moral hazard, mortgage debt, Network effects, patent troll, plutocrats, principal–agent problem, regulatory arbitrage, rent control, rent-seeking, ride hailing / ride sharing, Robert Metcalfe, Robert Solow, Ronald Reagan, Savings and loan crisis, Silicon Valley, Silicon Valley ideology, smart cities, software patent, subscription business, tail risk, tech bro, too big to fail, total factor productivity, trade liberalization, tragedy of the anticommons, Tragedy of the Commons, transaction costs, tulip mania, Tyler Cowen, Uber and Lyft, uber lyft, Washington Consensus, white picket fence, winner-take-all economy, women in the workforce

, it is creating major distortions in some of the most important sectors of the American economy: finance, mass media and entertainment, healthcare, legal services, and housing. In all four areas, the trajectory of policy change in recent decades has been toward ever-greater rent extraction. In finance, subsidies for excessive risk-taking have expanded dramatically with the advent and metastasis of “too big to fail.” In intellectual property law, the scope of monopoly privileges has grown by leaps and bounds. As to occupational licensing, the percentage of total employment caught in its web has nearly tripled. With regard to zoning, restrictions on the construction of new housing, especially in the big coastal cities, have become draconian in their rigor.

Harris, 379 F.3d 1208 (10th Cir. 2004). 35.Patel v. Texas Department of Licensing and Regulation, No. 12-0657, 469 S.W.3d 69 (2015). 36.License to Uber: A Better Way to Fix Irrational Licensing, 64 UCLA LAW REVIEW __ (forthcoming 2017). 37.See, e.g., Maria Santos Bier, “Warren and Vitter on ‘Too Big to Fail,’ ” Cato at Liberty (blog), September 17, 2015, http://www.cato.org/blog/warren-vitter-too-big-fail. 38.See “Occupational Licensing: A Framework for Policymakers,” July 2015, https://www.whitehouse.gov/sites/default/files/docs/licensing_report_final_nonembargo.pdf; “Housing Development Toolkit,” September 2016, https://www.whitehouse.gov/sites/whitehouse.gov/files/images/Housing_Development_Toolkit%20f.2.pdf. 39.See, e.g., Derthick and Quirk, The Politics of Deregulation. 40.For the origins of this ungainly term for a liberal-libertarian synthesis, see Brink Lindsey, “Liberaltarians,” New Republic, December 4, 2006, http://www.cato.org/publications/commentary/liberaltarians. 41.John Aldrich and David Rohde, “The Transition to Republican Rule in the House: Implications for Theories of Congressional Government,” Political Science Quarterly (Winter 1997–98): 541–67. 42.David Dagan and Steven Teles, Prison Break: Why Conservatives Turned against Mass Incarceration (New York: Oxford University Press, 2016). 43.Heather Hurlburt and Chayenne Polimedio, “Can Transpartisan Coalitions Overcome Polarization?


pages: 247 words: 68,918

The End of the Free Market: Who Wins the War Between States and Corporations? by Ian Bremmer

"World Economic Forum" Davos, affirmative action, Asian financial crisis, banking crisis, Berlin Wall, BRICs, British Empire, centre right, collective bargaining, corporate governance, creative destruction, credit crunch, Credit Default Swap, cuban missile crisis, Deng Xiaoping, diversified portfolio, Doha Development Round, Exxon Valdez, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, Glass-Steagall Act, global reserve currency, global supply chain, household responsibility system, invisible hand, joint-stock company, Joseph Schumpeter, Kickstarter, laissez-faire capitalism, low skilled workers, mass immigration, means of production, megacity, Mikhail Gorbachev, military-industrial complex, mutually assured destruction, Naomi Klein, Nelson Mandela, new economy, offshore financial centre, open economy, race to the bottom, reserve currency, risk tolerance, Savings and loan crisis, shareholder value, Shenzhen special economic zone , South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, trade route, tulip mania, uranium enrichment, Washington Consensus, Yom Kippur War, zero-sum game

During the financial crisis and global recession, an enormous market meltdown that provided globalization with its first true stress test, political officials in both the developed and the developing worlds seized responsibility for decisions that are usually left to market forces—and on a scale not seen in decades. Governments around the world responded to the implosion of major financial institutions and key economic sectors with massive doses of state spending meant to kick-start growth and, in some cases, to bail out companies considered “too big to fail.” States grabbed control of firms once considered industry flagships. They did all this because they believed it was necessary—and because no one else could do it. During the financial crisis and its aftermath, this dynamic generated a massive shift in financial decision-making power from New York to Washington.

Those that succeed are rewarded with generous state subsidies and a dominant (and protected) position within a particular economic sector, further tilting the playing field by allowing these companies to crowd out competition from privately owned foreign and domestic potential rivals that operate on a purely commercial basis. In the process, politics trumps efficiency, entrepreneurship, and innovation. Finally, the financial crisis helped popularize an especially frightening phrase in America and other free-market countries: “too big to fail.” But how many American companies really fit that description? In a country where the government practices large-scale state capitalism, many state-owned enterprises were created in part to provide jobs for large numbers of people who might otherwise find themselves on the street demanding change from their government.


pages: 828 words: 232,188

Political Order and Political Decay: From the Industrial Revolution to the Globalization of Democracy by Francis Fukuyama

Affordable Care Act / Obamacare, Andrei Shleifer, Asian financial crisis, Atahualpa, banking crisis, barriers to entry, Berlin Wall, blood diamond, British Empire, centre right, classic study, clean water, collapse of Lehman Brothers, colonial rule, conceptual framework, Cornelius Vanderbilt, cotton gin, crony capitalism, Day of the Dead, deindustrialization, Deng Xiaoping, disruptive innovation, double entry bookkeeping, Edward Snowden, Erik Brynjolfsson, European colonialism, facts on the ground, failed state, Fall of the Berlin Wall, first-past-the-post, Francis Fukuyama: the end of history, Francisco Pizarro, Frederick Winslow Taylor, full employment, Gini coefficient, Glass-Steagall Act, Great Leap Forward, Hernando de Soto, high-speed rail, Home mortgage interest deduction, household responsibility system, income inequality, information asymmetry, invention of the printing press, iterative process, Kickstarter, knowledge worker, labour management system, land reform, land tenure, life extension, low interest rates, low skilled workers, manufacturing employment, means of production, Menlo Park, Mohammed Bouazizi, Monroe Doctrine, moral hazard, Nelson Mandela, new economy, open economy, out of africa, Peace of Westphalia, Port of Oakland, post-industrial society, post-materialism, price discrimination, quantitative easing, RAND corporation, rent-seeking, road to serfdom, Ronald Reagan, scientific management, Scientific racism, Scramble for Africa, Second Machine Age, Silicon Valley, special economic zone, stem cell, subprime mortgage crisis, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, too big to fail, trade route, transaction costs, Twitter Arab Spring, Tyler Cowen, Tyler Cowen: Great Stagnation, Vilfredo Pareto, women in the workforce, work culture , World Values Survey, zero-sum game

Despite widespread recognition of the enormous risk posed by “too-big-to-fail” banks, the American banking sector became even more concentrated than it was in 2008. In the years following the crisis, Congress passed the Dodd-Frank Act that was supposed to solve this problem. But the legislation ignored simpler remedies, such as sharply raising bank capital requirements or putting hard caps on the size of financial institutions, in favor of a highly complex stew of new regulations. Three years after passage of the legislation, many of those detailed rules had not yet been written and would likely not solve the underlying too-big-to-fail problem even if they were.

But, as the scholars Anat Admati and Martin Hellwig among others have shown, large banks are very different from nonfinancial firms, due to their ability to harm the rest of the economy in ways not possible for a manufacturing company.2 The second reason for the failure is that the banks are very rich and powerful, and can hire a legion of high-priced lobbyists to work on their behalf. Despite enormous public anger against the banking sector and the taxpayer bailouts, these lobbyists have succeeded in blocking meaningful regulation that would have gone directly to the heart of the too-big-to-fail problem. Some legislators may have found the bankers’ arguments against new regulation persuasive based on their ideological beliefs; for others, the arguments were a useful cover to protect the stream of campaign contributions flowing from the banking sector.3 A third scenario links the Arab Spring to the protests that broke out in Turkey and Brazil in 2013.

What emerged instead was the Wall Street Reform and Consumer Protection, or Dodd-Frank, Act, which, while better than no regulation at all, extended to hundreds of pages of legislation and mandated reams of further detailed rules that will impose huge costs on banks and consumers down the road. Rather than simply capping bank size, it creates a Financial Stability Oversight Council tasked with the enormous job of assessing and managing institutions deemed to pose systemic risks, which in the end will still not solve the problem of banks being too big to fail. Though no one will ever find a smoking gun linking bank campaign contributions to the votes of specific congressmen, it defies belief that the banking industry’s legions of lobbyists did not have a major impact in preventing the simpler solution of simply breaking up the big banks or subjecting them to stringent capital requirements.8 PASSIONS AND INTERESTS Ordinary Americans express widespread disdain for interest groups and their sway over Congress.


pages: 602 words: 120,848

Winner-Take-All Politics: How Washington Made the Rich Richer-And Turned Its Back on the Middle Class by Paul Pierson, Jacob S. Hacker

accounting loophole / creative accounting, active measures, affirmative action, air traffic controllers' union, Alan Greenspan, asset allocation, barriers to entry, Bear Stearns, Bonfire of the Vanities, business climate, business cycle, carried interest, Cass Sunstein, clean water, collective bargaining, corporate governance, Credit Default Swap, David Brooks, desegregation, employer provided health coverage, financial deregulation, financial innovation, financial intermediation, fixed income, full employment, Glass-Steagall Act, Home mortgage interest deduction, Howard Zinn, income inequality, invisible hand, John Bogle, knowledge economy, laissez-faire capitalism, Martin Wolf, medical bankruptcy, moral hazard, Nate Silver, new economy, night-watchman state, offshore financial centre, oil shock, Paul Volcker talking about ATMs, Powell Memorandum, Ralph Nader, Ronald Reagan, Savings and loan crisis, shareholder value, Silicon Valley, Tax Reform Act of 1986, The Wealth of Nations by Adam Smith, three-martini lunch, too big to fail, trickle-down economics, union organizing, very high income, War on Poverty, winner-take-all economy, women in the workforce

Wall Street Journal, April 28, 2008. 58 Martin Wolf, “Regulators Should Intervene in Bankers’ Pay,” Financial Times, January 16, 2008. 59 Jenny Anderson, “Atop Hedge Funds, Richest of the Rich Get Even More So,” New York Times, May 26, 2006; Jenny Anderson and Julie Creswell, “Top Hedge Fund Managers Earn Over $240 Million,” New York Times, April 24, 2007; Jenny Anderson, “Wall Street Winners Get Billion-Dollar Paydays,” New York Times, April 16, 2008. 60 Christine Harper, “Wall Street Bonuses Hit Record $39 Billion for 2007,” Bloomberg, January 17, 2008, http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHPBhz66H9eo. 61 Robert Kuttner, The Squandering of America (New York: Knopf, 2007). 62 David Moss, “An Ounce of Prevention: Financial Regulation, Moral Hazard, and the End of ‘Too Big to Fail,’” Harvard Magazine, September–October 2009, 24–29. 63 Robert J. Gordon and Ian Dew-Becker, “Controversies About the Rise of American Inequality: A Survey,” NBER Working Paper No. 13982 (May 2008), 25. 64 Philippon and Reshef, “Wages and Human Capital in the U.S. Financial Industry: 1909–2006.” 65 Kuttner, Squandering of America, 77. 66 Philippon and Reshef, “Wages and Human Capital,” 30. 67 Lucian A.

Smith, Income, Poverty, and Health Insurance Coverage in the United States: 2008 (Washington, D.C.: U.S. Census Bureau, September 2009), http://www.census.gov/prod/2009pubs/p60–236.pdf. 3 Lynnley Browning, “Ex-UBS Banker Pleads Guilty in Tax Evasion,” New York Times, June 20, 2008. 4 Andrew Ross Sorkin, Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves (New York: Viking, 2009), 489. 5 Barbara Sinclair, “Barack Obama and the 111th Congress: Politics as Usual?” Extensions (Spring 2009). 6 Barack Obama, “Renewing the American Economy,” March 27, 2008. http://www.nytimes.com/2008/03/27/us/politics/27text-obama.html?

Through good times and bad, however, the GOP maintained its steady rightward march. 19 Sean Theriault, “Party Polarization in the 111th Congress,” www.apsanet.org/~lss/Newsletter/jan2009/Theriault.pdf. 20 Ibid; extension of remarks, published in the Legislative Studies Newsletter, American Political Science Association, January 2009. 21 Andrew Ross Sorkin, Too Big to Fail (New York: Penguin, 2009), 499, 504; Eve Fairbanks, “From the GOP’s New Guard, The Audacity of Nope,” Washington Post, October 5, 2008. 22 Theriault sees little rise in conservatism in the GOP Senate caucus after 2008, but he wrote assuming that Coleman would win and before Specter left the caucus.


pages: 782 words: 187,875

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

On March 24, The Fed and the Treasury each announced plans to overhaul financial regulations and expand government power in seizing “too big to fail” banks, as well as insurers, investment banks, and other investment funds. Two days later, Secretary Geithner outlined a wider overhaul of financial regulations, which greatly increased federal regulatory oversight of insurance companies, hedge funds, and private equity funds, with expanded regulatory powers over any company deemed “too big to fail.” While not a key part of the stimulative counter-attack, the move was well-received by markets. At the end of March, Summers and Geithner oversaw a team led by Steven Rattner, a smart financier, to create the plan that would push GM and Chrysler into what Larry Summers described as a “cushioned bankruptcy.”

Moreover, Bear and its nearly 400 subsidiaries had activities that touched almost every other major financial firm. It had 5,000 trading counterparties and 750,000 open derivatives contracts. As Bernanke put it in his memoirs21 , “size alone wasn’t the problem. Bear was big, but not that big compared to the largest commercial banks.” It was not “too big to fail,” it was “too interconnected to fail.” Bernanke’s greatest fear was that a Bear bankruptcy could trigger a collapse in the $2.8 trillion tri-party repo market (a significant credit pipe for financial institutions), an event that would have “disastrous consequences for financial markets and, as credit froze and asset prices plunged, the entire economy.”

After frantic behind the scenes negotiations, the Treasury was able to get a bill passed by Congress on July 23 allowing it to use a virtually unlimited (Paulson chose the term “unspecified”) amount of dollars to provide funds to the two GSE’s (limited only by the overall federal debt ceiling), and expanded regulatory oversight of them. The Treasury basically acquired a blank check, backstopped by the taxpayer, to do whatever it took to keep these institutions solvent. Nationalizing too-big-to-fail financial institutions on the brink of failure is a classic move in a deleveraging that is usually well received, as it signifies that the government is willing to provide a blanket of safety over the system. Remember that when debts are denominated in a country’s own currency, the government has the power to eliminate the risks of default.


pages: 661 words: 185,701

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

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

This has resulted in greater concentration in the banking system, meaning that there is less competition (as measured by the number of banks), and the size of the average bank (as measured by the value of its assets) has increased. Rising concentration has worsened the too-big-to-fail problem. The shock waves from the Lehman Brothers collapse that triggered the financial crisis in September 2008 were so large and damaging that it is now a reasonable proposition that the Fed will never allow such a big bank, whether a commercial bank or an investment bank, to fail in the future. The same proposition holds in other countries, none of whose central banks would ever want to be responsible for their own Lehman moment. This belief that some banks are too big to fail gives depositors and investors more confidence in bigger institutions, allowing those banks to grow even bigger, take on more risks, and create a self-fulfilling prophecy of not failing.

Diem is unlikely to dent the prominence of major reserve currencies, but it could become a viable competitor to the fiat currencies issued by many other economies, especially smaller ones and those that lack strong, independent, and credible central banks. And even major central banks seem to have been put on notice about a medium of exchange that could become too big to fail and that might someday be delinked from and compete with fiat money. Whatever the ultimate fate of cryptocurrencies, blockchain and the related technologies underlying their creation could have major impacts in the realms of money and finance. The digitalization of money and the decentralization of finance are already introducing changes in these realms, with far-reaching transformations now on the near horizon.

Singh, Simon. 1999. The Code Book: The Evolution of Secrecy from Mary Queen of Scots to Quantum Cryptography. New York: Doubleday. Soman, Dilip. 2003. “The Effect of Payment Transparency on Consumption: Quasi-experiments from the Field.” Marketing Letters 14, no. 3: 173–183. Sorkin, Andrew Ross. 2010. Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves. New York: Penguin. Statham, Rachel, Lesley Rankin, and Douglas Sloan. 2020. Not Cashless, but Less Cash: Economic Justice and the Future of UK Payments. Scotland: Institute for Public Policy Research.


pages: 278 words: 74,880

A World of Three Zeros: The New Economics of Zero Poverty, Zero Unemployment, and Zero Carbon Emissions by Muhammad Yunus

"Friedman doctrine" OR "shareholder theory", active measures, Bernie Sanders, biodiversity loss, Capital in the Twenty-First Century by Thomas Piketty, clean water, conceptual framework, crony capitalism, data science, distributed generation, Donald Trump, financial engineering, financial independence, fixed income, full employment, high net worth, income inequality, Indoor air pollution, Internet of things, invisible hand, Jeff Bezos, job automation, Lean Startup, Marc Benioff, Mark Zuckerberg, megacity, microcredit, new economy, Occupy movement, profit maximization, Silicon Valley, the market place, The Wealth of Nations by Adam Smith, too big to fail, Tragedy of the Commons, unbanked and underbanked, underbanked, urban sprawl, young professional

And while governments around the world responded to the crises by putting into place many emergency programs, including expensive bailout programs to prop up troubled financial institutions and giant corporations, they have not done enough to address the long-term problem of poverty. By focusing on support for giant institutions that are “too big to fail,” they implied that billions of poor people are “too small to matter.” A new approach to capitalism that includes making space for social business offers hope to alleviate this problem. SOCIAL BUSINESS AS A REMEDY FOR THE MANY IMPACTS OF POVERTY THE CONCEPT OF SOCIAL BUSINESS crystallized in my mind through my experience with the Grameen companies.

During the crisis, a number of highly regulated banks in the United States experienced huge losses and, in some cases, required vast infusions of government funds to avoid complete financial collapse. Enormous sums of public money were used to meet a newly defined public responsibility to protect financial enterprises that were deemed “too big to fail.” The problem had many causes, including fraudulent lending practices by some bankers. But most experts agree that the central cause was flaws in the pricing and trading systems used in the markets for mortgage-backed securities and other complex financial instruments devised by the so-called rocket scientists on Wall Street.


pages: 279 words: 72,659

Gaza in Crisis: Reflections on Israel's War Against the Palestinians by Ilan Pappé, Noam Chomsky, Frank Barat

"Friedman doctrine" OR "shareholder theory", Ayatollah Khomeini, Boycotts of Israel, British Empire, desegregation, disinformation, European colonialism, facts on the ground, failed state, friendly fire, ghettoisation, Islamic Golden Age, military-industrial complex, New Journalism, one-state solution, price stability, Suez crisis 1956, too big to fail

And it is unlikely that there will be any serious investigation of these atrocities, despite calls for an inquiry into war crimes by Amnesty International, Human Rights Watch, and the Israeli human rights organization B’Tselem. Crimes of official enemies are subjected to rigorous investigation, but our own are systematically ignored. General practice, again, and understandable on the part of the masters, who rigorously adhere to a variant of the “too big to fail” insurance policy granted to major financial institutions by Washington, which provides them with great competitive advantages in a form of protectionism that is protected from the usage of the unfavourable term protectionism. The United States is just “too big to hold to account,” whether by judicial inquiry, boycott and sanctions, or other means.

-supplied weapons in “serious violations of international humanitarian law,” and called on “the U.N. Security Council to impose an immediate and comprehensive arms embargo on the Jewish state.”55 Though conscious U.S. complicity is hardly in doubt, it is excluded from the call for punishment by the analogue of the “too big to fail” doctrine. It is, however, a mistake to concentrate too much on Israel’s severe violations of jus in bello, the laws designed to bar wartime practices that are too savage. The invasion itself is a far more serious crime. And if Israel had inflicted horrendous damage by bows and arrows, it would still be a criminal act of extreme depravity.


pages: 270 words: 73,485

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

Metzler, eds, Carnegie-Rochester Conference Series on Public Policy, 1.1 (1976): 19–46. 8.See, for instance, Frank Smets and Raf Wouters, An Estimated Stochastic Dynamic General Equilibrium Model of the Euro Area, ECB Working Paper 171 (European Central Bank, Frankfurt, 2002). 9.Fisher Black and Myron Scholes, “The Pricing of Options and Corporate Liabilities,” Journal of Political Economy, 81.3 (May–June 1973): 637–54. 6 The New Globalization 1.For some historical background, see Meghnad Desai, Marx’s Revenge: The Resurgence of Capitalism and the Death of Statist Socialism (Verso, London, 2002). 2.For background on the Asian crisis see Julia Leung, The Tides of Capital: How Asia Surmounted the Crisis and Is Now Guiding World Recovery (Official Monetary and Financial Institutions Forum, London, 2015). 3.See Roger Lowenstein, When Genius Failed: Rise and Fall of Long Term Capital Management (Fourth Estate, New York, 2002). 4.J. M. Keynes, The General Theory of Employment, Interest and Money (1936), in The Collected Writings of John Maynard Keynes, vol. 7 (Macmillan, London, 1978), pp. 158–9. 5.Many books describe and analyze the crisis in detail. See Andrew Ross Sorkin, Too Big to Fail (Viking, New York, 2009); Raghuram Rajan, Fault Lines: How Hidden Fractures Still Threaten the World Economy (Princeton University Press, Princeton, NJ, 2010). 6.Alan Greenspan’s testimony to the Senate Committee on Oversight and Government Reform, US House of Representatives, October 23, 2008.

Raphael and A. L. Macfie. University of Glasgow Press, Glasgow, 1976. Solomou, S., “Economic Fluctuations 1870–1913.” In R. Floud and D. McCloskey, eds, The Economic History of Modern Britain since 1700, 2nd edn, vol. 2: 1860–1939. Cambridge University Press, Cambridge, 1994. Sorkin, A. R., Too Big to Fail. Viking, New York, 2009. Summers, L., “Why Stagnation May Prove to Be the New Normal,” Financial Times, Dec. 15, 2013. Thornton, H., An Enquiry into the Nature and Effects of the Paper Credit of Great Britain (1802), ed. F. A. Hayek. Allen & Unwin, London, 1939. Walras, L., Éléments d’économie politique pure, ou Théorie de la richesse sociale (1874), trans. from 4th edn (1900) by William Jaffe, with annotations, as Elements of Pure Economics.


pages: 246 words: 74,341

Financial Fiasco: How America's Infatuation With Homeownership and Easy Money Created the Economic Crisis by Johan Norberg

accounting loophole / creative accounting, Alan Greenspan, bank run, banking crisis, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, business cycle, capital controls, central bank independence, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Brooks, diversification, financial deregulation, financial innovation, Greenspan put, helicopter parent, Home mortgage interest deduction, housing crisis, Howard Zinn, Hyman Minsky, Isaac Newton, Joseph Schumpeter, Long Term Capital Management, low interest rates, market bubble, Martin Wolf, Mexican peso crisis / tequila crisis, millennium bug, money market fund, moral hazard, mortgage tax deduction, Naomi Klein, National Debt Clock, new economy, Northern Rock, Own Your Own Home, precautionary principle, price stability, Ronald Reagan, savings glut, short selling, Silicon Valley, South Sea Bubble, The Wealth of Nations by Adam Smith, too big to fail

All that will have been achieved is a redistribution of burdens, from those who were less competitive to those who were more so, and this will preserve old solutions and structures while making it more difficult for new businesses to expand and hire more people. What's more, centralization is a frequent outcome when politicians save the big fish-those that are too big to fail-at the expense of the little fish. The sum of inventiveness is constant, so clever executives now adjusted their operations to make efficient use of the new support systems. In July 2008, the housing industry received a bailout as the Federal Housing Administration was told to guarantee a further $300 billion of subprime mortgages.

No regulation has had greater effect on the risk taking of the banking sector than the lifeguard role of central banks (and now finance ministries as well). This has taught the major financial players to take hair-raising risks in the knowledge that they can privatize any gains and socialize any losses because they are far too big to fail. The dilemma, however, is that they would never have grown that big if they had not had that safety net. Present-day capitalism is sometimes attacked for being nothing but a "casino economy." But I know of no casino where the head of the central bank and the finance minister accompany customers to the roulette table, kindly offering to cover any losses.


pages: 258 words: 71,880

Street Fighters: The Last 72 Hours of Bear Stearns, the Toughest Firm on Wall Street by Kate Kelly

Alan Greenspan, bank run, Bear Stearns, book value, buy and hold, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Donald Trump, eat what you kill, fixed income, housing crisis, index arbitrage, Long Term Capital Management, margin call, moral hazard, proprietary trading, quantitative hedge fund, Renaissance Technologies, risk-adjusted returns, shareholder value, technology bubble, too big to fail, traveling salesman

He had reminded Schwartz of their conversation early that morning in which he had asked the CEO if he really wanted to accept the government’s money knowing that Bear’s future would no longer be in his hands. Yes, Schwartz had said, he remembered. This is going to end this weekend, Paulson had replied. Molinaro, still exhausted, couldn’t believe it. We have no friends, he thought. And, unlike some firms, Bear is not too big to fail. He climbed back into the car and finished the drive home. 8:00 P.M. After his awkward phone call with Geithner and Schwartz, Hank Paulson had gone downtown to the National Geographic Society building on M Street. He and his wife were donors to the organization, and Paulson had promised her they could attend a screening that night of a film called Lord God Bird, about the rare ivory-billed woodpecker.

Spooked by a stockpile of bad loans the bank had purchased from another bank that failed, depositorsabruptly pulled $10 billion out of Continental Illinois, then the country’s seventh-largest bank. Within just a few days that May, the bank was teetering on the brink of insolvency. Government regulators were alarmed. Deeming Conti Illinois, as it was known, “too big to fail,” the Federal Deposit Insurance Corporation pledged $4.5 billion to stabilize the situation. Shareholders were ultimately wiped out as the company’s stock price plummeted, but bondholders were protected, and the bank lived. As a midlevel partner in Sullivan & Cromwell’s banking practice, Cohen spent a good deal of time working with Dave Taylor, the executive who was brought in to become chairman of the rescued bank.


pages: 309 words: 78,361

Plenitude: The New Economics of True Wealth by Juliet B. Schor

Asian financial crisis, behavioural economics, big-box store, business climate, business cycle, carbon footprint, carbon tax, clean tech, Community Supported Agriculture, creative destruction, credit crunch, Daniel Kahneman / Amos Tversky, decarbonisation, degrowth, dematerialisation, demographic transition, deskilling, Edward Glaeser, en.wikipedia.org, Gini coefficient, global village, Herman Kahn, IKEA effect, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, Jevons paradox, Joseph Schumpeter, Kenneth Arrow, knowledge economy, life extension, McMansion, new economy, ocean acidification, off-the-grid, peak oil, pink-collar, post-industrial society, prediction markets, purchasing power parity, radical decentralization, ride hailing / ride sharing, Robert Shiller, sharing economy, Simon Kuznets, single-payer health, smart grid, systematic bias, systems thinking, The Chicago School, Thomas L Friedman, Thomas Malthus, too big to fail, transaction costs, Yochai Benkler, Zipcar

When mainstream economists have addressed scale, they tended to interpret the growth in the size of production facilities and companies as evidence of superior efficiency, or what are termed economies of scale. This perspective typically ignored environmental impacts, such as the emissions associated with long-distance transport. If there was a worry, it was about such large concentrations of market and political power, one consequence of which is the “too big to fail” dilemma that has resulted in taxpayer bailouts of reckless financial institutions and failing automobile companies. Beginning in the late 1970s, a productivity slowdown and squeeze on corporate profitability led to questions about whether the mass production model had outlived its usefulness.

.: BEA environmental studies and climate change and consumption, consumerism carbon and product scores and clothing and, see clothing end of life (EOL) and environmental impact of expansion of fashion and material flows and population and storage and disposal issues in symbolic value and well-being and Container Store cooperatives copyrights coral reefs Costa Rica cost-benefit analysis cotton Craigslist Creative Commons creative destruction credit credit unions currency Daily, Gretchen Daly, Herman dams Dasgupta, Partha debt deforestation de Graaf, John Denmark, ecological footprint in Depression, Great desertification DICE (Dynamic Integrated Climate-Economy) digital fabricators discount rate-5n diseases droughts Dudley Street Neighborhood Initiative durable goods: department store index for prices of weight of dynamic efficiency Earth Institute Earth Restoration Corps Easterlin, Richard eBay ecocide eco-efficiency ecological commons ecological footprint hours worked and ecological modernization ecological optimism economy: aggregate growth and business-as-usual form of, see business-as-usual (BAU) economy climate change and community and energy efficiency and extra-market diversification and financialization and flexible production and human behavior and information exchange and Keynes and materials use and extraction and need for alternative form of physical capital and rebound effect and scale of production and efficiency of self-provisioning and service sector of shifting the conversation on time wealth and “too big to fail” dilemma and U.S., historical profitability of value as measure in world, growth of see also environmental economics ecovillages education efficiency Egypt Ehrlich, Paul electric industry electric vehicles electronics, consumer imports of material flow and multifunctionality and storage and disposal of see also specific products Elpel, Renee Elpel, Tom Empire of Fashion (Lipovetsky) employee-owned companies employment, see labor; unemployment end of life (EOL) energy: housing and price of rebound effect from efficient use of systems dynamics and taxes and use of see also specific energy sources energy economics environment ecological footprint in, see ecological footprint ecological optimism and economic activity and feedback loops and full-cost pricing and integrated assessment models and mainstream economics and planetary boundaries and restoration of UN assessment of (2005) water footprint and see also climate change environmental economics cost-benefit analysis and customization and household production and production possibilities curve and reciprocity and resale and reuse and sharing and trade-off view of -4n working less and see also economy Environmental Kuznets Curve (EKC) -3n Europe: cohousing in ecological footprint in health care in historical carbon emissions of materials consumption in passive solar building in population decline in product life extension policies in European Society for Ecological Economics EV1 electric car extensive growth extinctions extra-market diversification ExxonMobil fabrication laboratories (fab labs) cost of Factor e Farm Farm, The (Tenn.)


pages: 333 words: 76,990

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

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

In the US in particular, the collapse in the housing market had resulted in a huge loss of household wealth. With more than $1 trillion in sub-prime mortgages outstanding, the spread of losses throughout the economy and financial institutions was significant. At the same time, according to then Fed chairman Ben Bernanke, ‘too-big-to-fail financial institutions were both a source (though by no means the only source) of the crisis and among the primary impediments to policymakers’ efforts to contain it’.7 Between 2007 and 2010, the median wealth of a household in the United States fell 44%, resulting in levels falling below those of 1969.8 But the action put in place to contain the crisis was unprecedented.

Index 100 year bond 34 1920s, United States 148, 154, 157, 160 1945-1968, post-war boom 129–131 1960s ‘Nifty Fifty’ 114, 130–131, 233, 235 structural bear market 130 1970s Dow Jones 131 equity cycle 56 oil crisis 108 1980s bull markets 131–133 Dow Jones 15–16, 131–132 equity cycle 56–57 Japan 114, 148–149, 155–156, 158, 160–161, 162, 164 technology 12–15 1990s 16–17 Asia crisis 108, 133 equity cycle 57 S&P concentration 114 technology bubble 33, 93–94, 149–150, 156–157, 158–159, 161, 164 2000-2007 equity cycle 57 2007-2009 financial crisis 169–174 emerging markets 171–173 forecasting 19–21 growth vs. value company effects 94–96 impact 169–170 phases 171–174 quantitative easing 173–174, 178–179 sovereign debt 170, 171–173 structural bear market 110, 118–119 A accounting, bubbles 163–165 adjustment speed 74, 89–90 Akerflof, G.A. 23 American Telephone and Telegraph (AT&T) 154, 225, 235–236, 238 Asia crisis, 1998 108, 133 ASPF see Association of Superannuation and Pension Funds asset classes across phases 66–68 contractions and expansions 63–65 cyclical 83–89 defensive 83–89 diversification 42, 45–47, 178–179 growth 83–84, 90–96 and inflation 65–66, 70 levels of yield 74–76 relationship through cycle 68–76 returns across cycle 63–79 speed of adjustment 74 structural shifts 76–79 value 83–84, 90–96 see also bonds; commodities; equities Association of Superannuation and Pension Funds (ASPF) 77 AT&T see American Telephone and Telegraph austerity 239 Austria, 100 year bond 34 B bank margins 214–215 bear markets 49, 99–125 1960s 130 characteristics 100–106, 117–118 cyclical 105, 106–107 deflation 109, 113 duration 100–101, 106–111, 117 employment 121–124 event-driven 105, 107–109 false negatives 119–120 financial crisis 118–119 growth momentum 122–123 indicators 106, 108, 109–110, 119–125 inflation 101–103, 109, 121–122 interest rates 106, 111–113 prior conditions 121–124 private sector financial balance 124 profitability 115–117 recovery 101 risk indicator vs MSCI index 124–125 S&P 500 103–105 structural 105 triggers 101–105, 106, 108, 111 valuations 123 yield curve 122 behavioural factors 5, 22–25 Berlin Wall, fall of 133 Bernanke, B. 133 betas 65, 85 ‘Big Bang’ deregulation 12 Bing 237 Black Monday 16, 102, 148 Black Wednesday 16–17 ‘bond-like’ equities 96 bonds, 100 year 34 bond yields across phases 66–68, 72–76 current cycle 95–96, 191–193, 201–220 cyclical vs. defensive companies 87–88 and demographics 215–217 and equity valuations 72–76, 206–208 and growth companies 92–94 historical 43, 202 and implied growth 210–215 and inflation 65, 70 quantitative easing 173–174, 202–205 and risk asset demand 217–220 S&P 500 correlation 72–73 speed of adjustment 74, 89–90 ultra-low 201–220 and value companies 92–94 vs. dividends 78–79 vs. equities 43–45, 68–76, 78–79 Bretton Woods monetary system 102, 130–131 broadcast radio 154, 225 Bubble Act 147, 157 bubbles 143–165 1920s US 148, 154, 157, 160 1980s Japan 114, 148–149, 155–156, 158, 160–161, 162, 164 accounting 163–165 canal mania 152 characteristics 145–146 deregulation 157–159 easy credit 160–161 famous 145 financial innovation 158–159 government-debt-for-equity swaps 151–152 Mississippi Company 147, 151 ‘new eras’ 150–157 personal computers 155 psychology 144–145 radio manufacturing 154 railways 148, 152–154, 157, 160, 163 Shanghai composite stock price index 156 South Sea Company 147, 151, 153 structural bear markets 113 sub-prime mortgages 70, 102, 118, 133, 145, 159 technology, 1990s 33, 93–94, 149–150, 156–157, 158–159, 161, 164 tulip mania 146–147 valuations 161–162 bull markets 49, 127–142 characteristics 127–141 composition 138 cyclical 134–136 disinflation 131–133 duration 136–138, 139–141 equity performance 135–136 Great Moderation 133–134, 187–189 non-trending 138–141 post-war boom 129–131 quantitative easing 134 secular 127–134 United States 136 C canal mania 152 CAPE see cyclically adjusted price-to-earnings ratio capital investment, Juglar cycle 3 CDO see collateralised debt obligations characteristics bear markets 100–109, 111, 117–118 bubbles 145–146 bull markets 127–141 cyclical bear markets 106–107 event-driven bear markets 108–109 structural bear markets 111 China 15, 156 Cold War 14–15, 133 collateralised debt obligations (CDO) 159 commodities across phases 66–68 Kitchin cycle 3 composition of bull markets 138 concentration structural bear markets 115 and technology 238–240 contractions asset performance 63–65 mini cycles 60 see also recessions Cooper, M. 162 corporate debt 65, 110, 114, 160–161 corporate profitability bear markets 107, 115–117 current equity cycle 185–186 monetary policy 239 credit crunch 78–79, 170, 171 crowds, psychology of 21–22, 144–145 cult of the equity 77–78 current equity cycle 57–58, 167–240 bank profitability 214–215 bond yields 191–193 demographic shifts 215–217 drivers 179–180 earnings per share 195–196 employment and unemployment 183–185 equity valuations 206–208 ‘first mile problem’ 226–227 future expectations 246–247 global relative performance 193–196 growth momentum 174–178, 182–183, 227–231 growth and value companies 190–196, 239–240 implied growth 210–215 inflation 180–182, 203–205 interest rates 180–182, 239–240 Japan, lessons from 196–200 lessons from 244–245 market and economy incongruence 174–178 monetary policy 178–179, 201–205 opportunities 230–231 profitability 185–186 quantitative easing 202–205 returns 174–179 risk asset demand 217–220 structural changes 76–79, 93–96, 169–200 technology 189–190, 221–241 term premium collapse 204–205 ultra-low bond yields 201–220 valuations 233–235 volatility 187–189 cycles 1970s 56 asset returns 63–79 cyclical vs. defensive companies 85–89 equities 49–62 growth vs. value companies 90–96 investment styles 81–96 long-term returns 29–47 riding 11–27 sectors 83–85 valuations 53 cyclical bear markets 105, 106–107, 117, 118 vs. event-driven 109 cyclical bull markets 134–136 cyclical companies bond yields 193 inflation 88 sectors 83–84 vs. defensive 85–89 cyclical growth 83–84 cyclically adjusted price-to-earnings ratio (CAPE) 37–38, 44–45 cyclical value 83–84 D DDM see discounted dividend model debt levels bubbles 160–161 structural bear markets 110, 114 decarbonization 13 defensive companies 63–65 bond yields 193 inflation 88 Japan 198 sectors 83–84 vs. cyclical 85–89 defensive growth 83–84 defensive value 83–84 deflation bear markets 109, 113 Volker 102, 131 delivery solutions 226–227 demographics and zero bond yields 215–217 deregulation 12, 132–133, 157–159 derivative markets 158–159 design of policy 25–26 despair phase 50–52, 53, 55–56, 60, 66–68 cyclical vs. defensive companies 86, 88 growth vs. value companies 92 Dice, C. 161 Dimitrov, O. 162 discounted dividend model (DDM) 36, 69 discount rate 68 disinflation 131–133 disruption 1980s 12–15 current equity cycle 189–190, 221–241 electricity 226 historical parallels 222–227 printing press 223–224 railway infrastructure 224–227 telecoms 225–226 divergence, and technology 238–240 diversification 42, 45–47, 178–179 dividends asset yields 38–41, 69 reinvestment 38–40 value of future streams 209 vs. bonds 78–79 Dodd, D. 163, 164 domain registrations 12–13 dominance of technology 231–233 dotcoms 12–13, 33, 93–94, 102, 161, 237 Dow Jones 1970s 131 1980s 15–16, 131 Black Monday 16, 102, 148 Draghi, M. 17, 173 drivers of bull markets 138 current equity cycle 179–180 duration bear markets 100–101, 106–111, 117 bull markets 135–138, 139–141 cyclical bear markets 106–107, 117, 118 cyclical bull markets 135–136 dominance of technology 231–233 event-driven bear markets 108–109, 117–118 non-trending bull markets 139–141 structural bear markets 109–111, 117 term premia 204–205 DVDs 227 E earnings per share (EPS) bear markets 115–117 historical 189 since pre-financial crisis peak 195–196, 209–210 easy credit, and bubbles 160–161 ECB see European Central Bank Economic Recovery Act, 1981 132 efficient market hypothesis 4 electricity 226 email 13 employment 121–124, 183–185 Enron 164 environmental issues 13 EPS see earnings per share equities across phases 66–68 ‘bond-like’ 96 and bond yields 72–73, 74–76, 206–208 bull market performance 135–136 CAPE 37–38, 44–45 dividends 38–41, 69, 78–79, 209 and inflation 65–66, 70 mini/high-frequency cycles 58–61 narrowing and structural bear markets 114–115 overextension 36–37 phases of investment 50–58 quantitative easing 173–174, 178–179 S&P 500 historical performance 42 valuations and future returns 43–45 vs. bonds 43–45, 68–76, 78–79 equity cycle 49–62 1970s 56 1980s 56–57 1990s 57 2000-2007 57 current 57–58, 76–79 historical periods 56–58 length 49 mini/high-frequency 58–61 phases 50–56 structural shifts 76–79 equity risk premium (ERP) 35–38, 69–72, 210 ERM see exchange rate mechanism ERP see equ ity risk premium ESM see European stability mechanism Europe dividends 39–40 exchange rate mechanism 16–17, 111 Maastricht Treaty 17 market narrowing in 1990s 115 privatisation 132 quantitative easing 17, 204–205 sovereign debt crisis 170, 171–173 European Central Bank (ECB) 17, 171, 173 European Recovery Plan 129–131 European stability mechanism (ESM) 173 event-driven bear markets 105, 107–109, 117–118 vs. cyclical 109 excess see bubbles exchange rate mechanism (ERM) 16–17, 111 exogenous shocks 108 expansions, asset performance 63–65 F false negatives, bear markets 119–120 fat and flat markets 128, 139 features see characteristics Federal Reserve 16, 102, 131, 134, 150–151, 157, 203 financial crisis, 2007–2009 169–174 forecasting 19–21 growth vs. value company effects 94–96 impact 169–170 structural bear market 110, 118–119 financial innovation 158–159 ‘first mile problem’ 226–227 Fish, M. 19 fixed costs 84–85, 173–174 fixed income assets 35, 65, 69–70, 205 flat markets 138–141 see also non-trending bull markets forecasting 2008 financial crisis 19–21 bear markets 106, 108, 109–110, 119–125 behavioural aspects 22–25 difficulties of 18–22 future growth 211–212 neuroeconomics 24–25 and policy setting 25–26 recessions 20–21 and sentiment 21–25 short-term 17–18 weather 18–19 France Mississippi Company 147, 151 privatisation 132 Fukuyama, F. 15 future expectations 246–247 G Galbraith, J.K. 160 GATT see General Agreement on Tariffs and Trade General Agreement on Tariffs and Trade (GATT) 129 Germany Bund yield 207 fall of Berlin Wall 133 wage inflation 185 Glasnost 14 Glass-Steagall Act, 1933 132 global growth 182–183 globalisation 14–16 global relative performance 193–196 global sales growth 212 global technology bubble 33, 93–94, 149–150, 156–157, 158–159, 161, 164 Goetzmann, F. 151 ‘Golden Age of Capitalism’ 129–131 Gold Standard 130 see also Bretton Woods monetary system Goobey, G.R. 77 Google 237 Gorbachev, M. 14 Gordon Growth model 209 government-debt-for-equity swaps 151–152 Graham, B. 161, 163, 164 Great Britain South Sea Company 147, 151, 153 see also United Kingdom Great Depression 4 Great Moderation 133–134, 187–189 Greenspan, A. 16, 113, 150–151 gross domestic product (GDP) cyclical vs. defensive companies 87 labour share of 185, 238–239 phases of cycle 52–53 profit share of, US. 186 growth bear markets 122–123 current equity cycle 174–178, 182–183, 227–231 technology impacts 227–231 and zero bond yields 208–210, 210–215 growth companies bond yields 92–94, 191–193 current cycle 190–196 definition 90–91 since financial crisis 94–96 interest rates 92–94 outperformance 239–240 sectors 83–84 vs. value 90–96 growth phase 50–52, 54–56, 67–68 cyclical vs. defensive companies 86 growth vs. value companies 92 Gulf war 102 H herding 21–22, 144–145 high-frequency cycles 58–61 historical performance 10 year bonds, US 43 bonds 43, 202 equities cycles 49, 56–58 S&P 500 38–39, 42 trends 29–31 holding periods 31–34 Holland, tulip mania 146–147 hope phase 50–52, 53–54, 55–56, 66–67 cyclical vs. defensive companies 86 growth vs. value companies 92 housing bubble, US 70, 102, 118, 133, 145, 159 Hudson, G. 163 I IBM 13, 155, 236 IMAP see Internet Message Access Protocol IMF see International Monetary Fund impacts of diversification 42, 45–47 financial crisis, 2007-2009 169–170 technology on current cycle 221–241 ultra-low bond yields 201–220 Imperial Tobacco pension fund 77 implied growth 210–215 income, Kuznets cycle 3 indicators bear markets 106, 108, 109–110, 119–125 cyclical bear markets 106 event-driven bear markets 108 structural bear markets 109–110 industrial revolution 224–226 industry leadership, S&P 500 232–233, 237–238 inflation asset performance 65–66, 70 bear markets 101–103, 109, 121–122 current equity cycle 180–182, 203–205 cyclicals 88 Volker 102, 131 Institute of Supply Management index (ISM) 59–61 bear markets 123 cyclical vs. defensive companies 86–87 interest rates bear markets 106, 111–113 current equity cycle 180–182, 239–240 growth vs. value companies 92–94 structural bear markets 111–113 and yield 69, 74–76 International Monetary Fund (IMF) 129 internet 12–13, 225–227 search 237 see also dotcoms Internet Message Access Protocol (IMAP) 13 inventories 84–85 Kitchin cycle 3 investment, Juglar cycle 3 investment cycle bear markets 122–123 current 57–58, 76–79 historical periods 56–58 lengths 49 mini/high-frequency 58–61 phases 50–56 structural shifts 76–79 see also cycles ISM see Institute of Supply Management index J Japan bubbles 114, 148–149, 155–156, 158, 160–161, 162, 164 defensive companies 198 dividends 39–40 lessons from 196–200 John Crooke and Company 160 Juglar cycle 3 K Kahneman, D. 22–23 Kennedy Slide bear market 102 Keynes, J.M. 22 Kindleberger, C.P. 22 Kitchin cycle 3 Kondratiev cycle 3 Kuznets cycle 3 L labour share of GDP 185, 238–239 land and property bubble, Japan 114, 148–149, 155–156, 158, 160–161, 162, 164 laptop computers 13 largest companies S&P 500 237–238 technology 234–237 light touch regulation 157–159 see also deregulation Live Aid 13–14 Loewenstein, G. 21–22 long-term returns 29–47 M Maastricht Treaty 17 Mackay, C. 21 market forecasts short-term 17–18 see also forecasting market narrowing structural bear markets 114–115 and technology 238–240 markets current equity cycle 174–178 psychology of 21–25, 144–145 see also bear markets; bubbles; bull markets market timing 41–43 market value of technology companies 234, 235–238 Marks, H. 6–7 Marshall Plan 129–131 MBS see mortgage-backed securities Microsoft 12, 236–237 mini cycles 58–61 Mississippi Company 147, 151 monetary policy 157–159, 178–179, 201–205, 239 austerity 239 European Central Bank 17, 171, 173 Federal Reserve 16, 102, 131, 134, 150–151, 157, 203 quantitative easing 17, 70–71, 119, 133–134, 173–174, 178–179, 202–205 Montreal Protocol 13 mortgage-backed securities (MBS) 159 MSCI indices 91 N narrow equity markets 114–115, 238–240 NASDAQ 149–150, 161 negative bond yields 201–220 demographics 215–217 and equity valuations 206–208 and growth 208–210 implied growth 210–215 monetary policy 201–205 quantitative easing 202–205 risk asset demand 217–220 neuroeconomics 24–25 ‘new eras’ 113–114, 150–157 ‘Nifty Fifty’ 114, 233 non-trending bull markets 138–141 nudges 26 O oil 108, 226 opportunities, technology 230–231 optimism phase 50–52, 54–56, 67–68 cyclical vs. defensive companies 86 growth vs. value companies 91–92 output gaps 4 Outright Monetary Transactions (OMT) 171, 173 overextension 36–37 ozone layer 13 P pension funds 77, 218–219 Perestroika 14 Perez, C. 159 performance bull markets 134–136 current equity cycle 174–179 and cycles 53–56 diversification impacts 42, 45–47 dividends 38–41 equities vs. bonds 43–45 factors 41–45 historical trends 29–31 holding periods 31–34 interest rates 69, 74–76 long-term 29–47 market timing 41–43 risks and rewards 35–38 valuations 43–45 volatility 30–31 personal computing introduction 12–13, 155 phases 2007-2009 financial crisis 171–174 asset classes 66–68 bear markets 123 cyclical vs. defensive companies 86 of equities cycle 50–56 growth vs. value companies 91–92 Phillips curve 182 Plaza Accord, 1985 148–149, 158 PMI see purchasing managers’ index policy, design of 25–26 population decline 216 post-financial crisis see current equity cycle post-war boom 129–131 prediction see forecasting price-to-earnings ratio (P/E) 53–56 printing press 223–224 prior conditions to bear markets 121–124 private sector debt 65, 110, 114, 160–161 private sector financial balance 124 privatisation 132 productivity growth 227–230 profit labour share of 185, 238–239 share of GDP, US. 186 profitability banks 214–215 bear markets 107, 115–117 current equity cycle 185–186 property and land bubble, Japan 114, 148–149, 155–156, 158, 160–161, 162, 164 psychology bubbles 144–145 of markets 21–25 policy setting 25–26 public ownership 132 purchasing managers' index (PMI) 59–61, 86–87, 89–90 Q QE see quantitative easing Qualcom 149–150 quality companies 193 quantitative easing (QE) asset returns 70–71, 119, 178–179 bond yields 173–174, 202–205 start of 17, 133–134, 171 United Kingdom 17, 204–205 United States 134, 171, 202–204 R radio, expansion of 154, 225 Radio Corporation of America (RCA) 154 railways bubbles UK 148, 152–153, 157, 163 US 153–154, 160 infrastructure development 224–227 Rau, P. 162 RCA see Radio Corporation of America Reagan, R. 14, 131–132 real assets 68 real estate bubble, US 70, 102, 118, 133, 145, 159 recessions bear markets 101–103 current equity cycle 174–178 forecasting 20–21 recovery bear markets 101 current equity cycle 174–178 reinvestment of dividends 38–40 return on equity (ROE) 43–45 returns bull markets 134–136 current equity cycle 174–179 cycles 53–56 diversification impacts 42, 45–47 dividends 38–41 equities vs. bonds 43–45 factors 41–45 historical trends 29–31 holding periods 31–34 interest rates 69, 74–76 long-term 29–47 market timing 41–43 risks and rewards 35–38 valuations 43–45 volatility 30–31 reverse yield gap 77 risk assets, demand for 217–220 risk-free interest rate 68 risk indicators bear markets 119–125 event-driven bear markets 108 structural bear markets 110–111, 113–114 risk premia equity 35–38, 69 neuroeconomics 25 term premia 204–205 ROE see return on equity Rouwenhorst, G. 151 Russian debt default, 1997 108 S S&P 500 bear markets 103–105 and bond yields 72–73 concentration in 1990s 115 dividends 38–39 historical performance 38–39, 42 industry leadership 232–233, 237–238 and ISM 60 largest companies 237–238 US Treasury yields 206 sales growth 212 savings, current equity cycle 182 Schumpeter, J. 150 search companies 237 ‘search for yield’ 217–220 secondary-market prices 229–230 sectors across the cycle 83–85 dominance 231–233 secular bull market 127–134 disinflation 131–133 Great Moderation 133–134, 187–189 post-war boom 129–131 secular stagnation hypothesis 181 sentiment 5, 21–25 see also bubbles Shanghai composite stock price index 156 Shiller, R.J. 4–5, 23 short-term market forecasts 17–18 skinny and flat markets 139–140 smartphones 226, 229–230 Solow, R. 229 South Sea Company 147, 151, 153 sovereign debt crisis 170, 171–173 Soviet Union 14–15, 133 speed of adjustment 74, 89–90, 122–123 Standard Oil 235 structural bear markets 105, 109–115 1960s 130 bubbles 113 debt levels 110, 114 deflation 113 duration 109–111, 117 financial crisis, 2007 118–119 interest rates 111–113 narrow equity markets 114–115 ‘new eras’ 113–114 risk indicators 110–111, 113–114 triggers 111 volatility 105, 115 structural changes 6 1980s 12–15 current equity cycle 76–79, 93–96, 169–200 sub-prime mortgage bubble 70, 102, 118, 133, 145, 159 Summers, L. 181 Sunstein, C.R. 26 ‘super cycle’ secular bull market 127–134 see also secular bull market T technology 1920s America 154 bubble in 1990s 33, 93–94, 149–150, 156–157, 158–159, 161, 164 current equity cycle 189–190, 221–241 and disruption in 1980s 12–15 dominance 231–233 and growth 227–231 historical parallels 222–227 industrial revolution 224–226 Kondratiev cycle 3 largest companies 234–237 market value 234, 235–238 opportunities 230–231 personal computers 12–13, 155 printing press 223–224 railway bubbles 148, 152–154, 157, 160, 163 railway infrastructure 224–227 and widening gaps 238–240 telecommunications 13, 154, 225, 235–236, 238 telegrams 225 term premium collapse 204–205 TFP see total factor productivity growth Thaler, R.H. 26 Thatcher, M. 14, 132 Tokkin accounts 158 ‘too-big-to-fail’ 133 total factor productivity (TFP) growth 238–240 triggers bear markets 101–105, 106, 108, 111 cyclical bear markets 106 event-driven bear markets 108 structural bear markets 111 tulip mania 146–147 Tversky, A. 22–23 U ultra-low bond yields 201–220 demographics 215–217 and equity valuations 206–208 and growth 208–210 implied growth 210–215 monetary policy 201–205 quantitative easing 202–205 risk asset demand 217–220 UNCTAD see United Nations Conference on Trade and Development unemployment 121–124, 183–185 unexpected shocks 108 United Kingdom (UK) Black Wednesday 16–17 bond yields, historical 202 canal mania 152 deregulation 132 exchange rate mechanism 16–17, 111 privatisation 132 quantitative easing 204–205 railway bubble 148, 152–153, 157, 163 South Sea Company 147, 151, 153 United Nations Conference on Trade and Development (UNCTAD) 129 United States (US) 10 year bond returns 43 Black Monday 16, 102, 148 bull markets 136 credit crunch 78–79, 170, 171 disinflation 132 dividends 38–39 Dow Jones 15–16, 131 equities in current cycle 207–208 housing bubble 70, 102, 118, 133, 145, 159 labour share of GDP 185, 238–239 market narrowing 114 NASDAQ 149–150, 161 ‘Nifty Fifty’ 114, 130–131, 233, 235 post-war boom 129–131 profit share of GDP 186 quantitative easing 133–134, 171, 202–204 radio manufacturing 154, 225 railway bubble 153–154, 160 stock market boom, 1920s 148, 154, 157, 160 vs.


pages: 555 words: 80,635

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

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

Thus, the real burden of repayment should not be excessive. All of that said, it is still important to rely on sound financial regulation to ensure that our financial system is channeling funds toward productive investments.6 Making sure that financial institutions are adequately capitalized and not “too big to fail,” paying attention to risks associated with the parts of the financial system that are less subject to regulation (the “shadow” banking sector), and reducing the distortions that encourage excessive leverage in the economy are all important steps toward reducing financial frailty in times of economic stress.

When the financial system flounders, this can have large spillover effects on the real economy, as we saw when the 2008 financial crisis gave way to the Great Recession. Adequate financial regulation is essential. This means ensuring sufficient capitalization of financial institutions; not allowing institutions to reach a point of being “too big to fail”; containing the larger financial system (such as “shadow banks”) within the regulatory system; and making sure that risks to the larger economy are well understood and managed. Robust infrastructure. A healthy and well-functioning infrastructure is fundamental to economic success; it facilitates the smooth flow of goods, services, and ideas.


pages: 245 words: 75,397

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

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

It told people to get greedy. I’m not talking about everyday risk taking and speculation, normal human greed. I’m not even talking about Gordon Gekko in the ‘80s. This is much more than “greed is good.” I’m talking about steal as much as you can, and if you’re wrong, we’ll bail you out. I’m talking about too big to fail and moral hazard. I’m talking about Rihanna playing to a bunch of hustlers at a mortgage convention boondoggle. “Does that mean that Greenspan caused it?” Jerry asks. I don’t think it’s the best question he could have asked. He has been doing this for seven or eight years now and should know this, but that’s what happens.

It was a combination of economic incentives, bailouts, and just finding ways to prop up the markets. Programs like Cash for Clunkers, TARP, TALF—you name it.7 The biggest of the programs allowed them to purchase all of the crap that the banks had bought, all of the illiquid, difficult-to-value crap. You know, stuff like the CDOs.” I go on. “You should go read Andrew Ross Sorkin’s book Too Big to Fail. He describes it step by step.” “Why did QE stick? Why is it still here?” “It’s one of those cases where we were never able to get off the juice. QE was supposed to improve the real economy, but it never did that. The economy never got enough traction. All it did was to drive the prices of financial assets higher.


China's Superbank by Henry Sanderson, Michael Forsythe

"World Economic Forum" Davos, addicted to oil, Asian financial crisis, Bretton Woods, BRICs, Carmen Reinhart, Credit Default Swap, deindustrialization, Deng Xiaoping, Dutch auction, failed state, financial innovation, financial repression, fixed income, Great Leap Forward, high-speed rail, if you build it, they will come, income inequality, invisible hand, joint-stock company, junk bonds, Kenneth Rogoff, land bank, London Interbank Offered Rate, low interest rates, megacity, new economy, New Urbanism, price mechanism, race to the bottom, reserve currency, Ronald Reagan, Shenzhen special economic zone , Shenzhen was a fishing village, Silicon Valley, Solyndra, South Sea Bubble, sovereign wealth fund, special drawing rights, special economic zone, too big to fail, urban renewal, urban sprawl, work culture

That’s a total of over 1 trillion yuan that the public, let alone the international and domestic investors who buy its bonds, has no right to know about. Buying CDB bonds, as Fan Wei, a young fixed-income analyst at Hongyuan Securities in Beijing, said, is “a political duty.” The banks could earn more by lending their money out. But if banks stopped buying the bonds, CDB would be out of business in a matter of days, and it is too big to fail. The West Self-Destructs: The Financial Crisis Chen wanted to be more than just a lender for overseas ventures. He wanted to own an overseas financial institution. In the early summer of 2007, just as the subprime real estate market in the United States was beginning to collapse, CDB agreed to purchase a 3.1 percent stake in England’s Barclays Bank for £1.45 billion at £7.2 a share so that Barclays could increase its offer to purchase the Dutch lender, ABN Amro, in one of the biggest proposed bank acquisitions in history.75 Singapore’s sovereign wealth fund Temasek also had agreed to pump money in.

With earnings for Chinese renewable energy companies dropping, the banks and local governments own the companies, as the long list of collateralized loans on Yingli’s bond prospectus shows. LDK said in a filing in 2012 that CDB’s loans contain covenants that if the debt-to-asset ratio breaches 75 percent, the bank “may take actions.” In the end the companies become state owned through loans from the state banking system. As a result, not only are the banks in China too big to fail, but so are the companies they lend to. As China ramps up its own demand and prices drop, the Chinese firms eventually will benefit. The long-held dream of the US pioneers in the 1970s that solar would be close in price to other power sources is close to being realized, and China is leading the way, with the world’s most powerful bank taking center stage.


pages: 545 words: 137,789

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

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

We are too quick to say—and the media feeds this—that if a bad thing happens it’s because a bad person did it, and that person had evil intentions. It is much more likely that there were some bad systems in place.” In banking, the CEO incentive problem is even more severe than in other industries. This is partly because the existence of deposit insurance, securitization, and the widespread assumption that some institutions are “too big to fail” induce moral hazard, but the speculative nature of finance also plays a role. On Wall Street, many decisions, such as whether to enter a certain business or underwrite a certain deal, can be thought of as risky gambles. In certain states of the world, they will pay off; in others, they won’t.

Unlike in the 1930s, no thought has been given to splitting up the essential utility aspects of the financial system—customer deposits, check clearing, and other payment systems—and the casino aspects, such as investment banking and proprietary trading. There will be no return to the Glass-Steagall Act, which means “too big to fail” financial supermarkets, such as Bank of America and JPMorgan Chase, will continue to dominate the financial system. The administration has said new mandatory capital requirements will be extended to any financial firm “whose combination of size, leverage and interconnectedness could pose a threat to financial stability if it failed,” but none of these terms has been defined, and it isn’t clear how far the new rules will be applied to big hedge funds, private equity firms, and the finance arms of industrial companies.

Incentives for excessive risk-taking will revive, and so will the lobbying power of banks and other financial firms. If these special interests succeed in blocking meaningful reform, we could well end up with the worst of all worlds: a financial system dominated by a handful of firms that are “too big to fail,” but that can take on as much risk as they please, secure in the knowledge that if things go wrong the taxpayer will be there to bail them out. Such an arrangement would amount to crony capitalism writ large, and it would make a mockery of the democratic ideals that both major parties claim to represent.


pages: 464 words: 139,088

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

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

Even traditional mutual building societies in Britain (the UK equivalent of US savings and loan associations) decided to convert into limited companies in order to be free to engage in a wider range of banking activities, and every single one that did so from 1990 onwards failed in the crisis.17 Those two developments altered the business model and the culture of our largest banks. Size became an objective because a bank that was clearly too important and too big to fail was able to borrow more cheaply, and even a small advantage in funding costs meant that it could offer cheaper loans to its customers. That enabled such a bank to expand more rapidly than its rivals in a virtuous circle of growth. So the size of the financial sector grew and grew. Along the way it included a massive expansion of trading in new and complex financial instruments, covering activities such as sub-prime mortgage lending.

For those reasons, when the crisis hit, banks had grown to a size where it was risky to the system as a whole to allow them to be subject to normal market disciplines, where they had become almost impossible to manage (as the growing revelations of misconduct by most large banks have revealed), and where they were immune to the usual due process of law out of fear of the consequence of their failure for the financial system as a whole. Banks had become too big to fail, too big to sail, and too big to jail. And in some countries, the size of the banking sector had increased to the point where it was beyond the ability of the state to provide bailouts without damaging its own financial reputation – for example in Iceland and Ireland – and it proved a near thing in Switzerland and the UK.

Data are for end 2014. 7 Worldwide bank assets are the total assets of the largest 1000 banks in the world, as listed in the Banker Database. 8 The Banker Database, www.thebankerdatabase.com 9 The description ‘socially useless’ was used by Adair Turner, chairman of the Financial Services Authority in the UK from 2008 to 2013, in his Turner Report on the financial crisis in United Kingdom; The phrase ‘doing God’s work’ was used by the CEO of Goldman Sachs, Lloyd Blankfein, in an interview published in the Sunday Times, 8 November 2009. 10 Figures from the Banker Database, www.thebankerdatabase.com, as of end 2014. 11 Because for any bank total assets must equal total liabilities, leverage can be measured by the ratio of either assets or liabilities to equity capital. 12 Brennan, Haldane and Madouros (2010). 13 I prefer ‘too important to fail’ (TITF) to ‘too big to fail’ (TBTF) as a description of the problem, because a small bank can be significant if it is highly interconnected with other banks or if its failure would be a signal leading to contagion to other banks. 14 Wolf (2010). 15 Bank of England (2009). 16 Bank for International Settlements (BIS), Derivative Statistics 2015. 17 Abbey National demutualised in 1989 and has survived as part of Santander UK. 18 That attitude was brilliantly captured in the book Liar’s Poker by Michael Lewis (1989). 19 CCP Research Foundation estimates of conduct costs 2010–14, http://conductcosts.ccpresearchfoundation.com/conduct-costs-results.


pages: 601 words: 135,202

Limitless: The Federal Reserve Takes on a New Age of Crisis by Jeanna Smialek

Alan Greenspan, bank run, banking crisis, Bear Stearns, Berlin Wall, Bernie Sanders, bitcoin, Black Lives Matter, blockchain, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, Colonization of Mars, coronavirus, COVID-19, crowdsourcing, cryptocurrency, decarbonisation, distributed ledger, Donald Trump, Fall of the Berlin Wall, fiat currency, financial engineering, financial innovation, financial intermediation, Fractional reserve banking, full employment, George Akerlof, George Floyd, Glass-Steagall Act, global pandemic, Henri Poincaré, housing crisis, income inequality, inflation targeting, junk bonds, laissez-faire capitalism, light touch regulation, lockdown, low interest rates, margin call, market bubble, market clearing, meme stock, Modern Monetary Theory, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Nixon shock, offshore financial centre, paradox of thrift, price stability, quantitative easing, race to the bottom, risk tolerance, Robinhood: mobile stock trading app, Ronald Reagan, secular stagnation, short squeeze, social distancing, sovereign wealth fund, The Great Moderation, too big to fail, trade route, Tragedy of the Commons, working-age population, yield curve

.[*3] But his adventures in the wilderness and in state politics weren’t enough to get 2008 off his mind. When the Minneapolis Fed’s board selected him as president in 2016, Kashkari remained haunted by his time as “TARP czar.” He kicked off his tenure by running a series of research conferences examining whether the issue of so-called Too Big to Fail banks had truly been dealt with, annoying many within the Fed by relitigating something that the entire system had been working on for years. The conclusion of the analyses and conferences, perhaps unsurprisingly, was that the changes had not gone far enough. As a central banker, Kashkari struck a pro-worker posture, arguing that the job market had more room to heal even a decade after the start of the 2008 crisis.

Lawmakers’ answer to that was the Dodd–Frank Wall Street Reform and Consumer Protection Act, a sweeping overhaul of financial regulation that created the new Consumer Financial Protection Bureau and a Financial Stability Oversight Council, a consortium of regulators headed by the Treasury Department that was meant to identify emerging financial risks. The Fed had gained new powers to regulate systemically important financial institutions, the “too big to fail” giants that had brought the system to its knees and required government bailouts. While it’s a lesser-known fact, the Fed itself made important changes behind the scenes, tearing discretion over bank supervision away from its regional branches and consolidating it in Washington. Bank overseers were newly rotated around institutions, instead of embedded for longer stretches.

See also power and authority of Federal Reserve Federal Reserve Act, 55–8, 61n, 158–62, 175n, 180, 344n47, 346n3 Federal Reserve Bank of Atlanta, 59, 67, 230 Federal Reserve Bank of Boston, 27, 59, 151, 171, 206n, 213–14, 233, 247, 295, 349n3 Federal Reserve Bank of Cleveland, 59, 154n Federal Reserve Bank of Dallas, 59, 206n, 232, 285, 295 Federal Reserve Bank of Kansas City, 59, 238–9, 285 Federal Reserve Bank of Minneapolis: creation of, 59; Kashkari as president of, 6–7, 37, 38–9, 198–9, 230; PPP role of, 206; research conferences on Too Big to Fail banks, 38 Federal Reserve Bank of New York: budget of, 62; creation of, 59; criticism of, 62; FIMA repo role of, 198; Geithner as president of, 91–2, 342n37; pandemic response role of, 31, 32–3, 34–5, 149–50, 151, 206n; power and authority of, 13, 68, 128, 130–1, 342n37; salary of president of, 130; Strong as president of, 61–2, 130; Williams as president of, 129–31, 130n Federal Reserve Bank of Philadelphia, 59, 165 Federal Reserve Bank of Richmond, 59 Federal Reserve Bank of St.


pages: 77 words: 18,414

How to Kick Ass on Wall Street by Andy Kessler

Andy Kessler, Bear Stearns, Bernie Madoff, buttonwood tree, call centre, collateralized debt obligation, eat what you kill, family office, fixed income, hiring and firing, invention of the wheel, invisible hand, London Whale, low interest rates, margin call, NetJets, Nick Leeson, pets.com, risk tolerance, Silicon Valley, sovereign wealth fund, time value of money, too big to fail, value at risk

I’ll invest in Pets.com because dotcom stocks only go up (because there wasn’t much liquidity and every growth fund piled in). I’ll make take on another sub-prime loan derivative in my portfolio because home prices can’t go down, (because the Fed is so accommodative with low interest rates and this whole housing finance monstrosity is too big to fail, or so went the thinking.) Momo-ism almost always leads to losses. As efficient as markets are, there are always misallocation all over the place. You can always find political entrepreneurs who create attractive profits even though they are killing the economic engine. Cable TV franchises are given (buy really) local monopolies, so they can charge whatever they want for cable service.


pages: 700 words: 201,953

The Social Life of Money by Nigel Dodd

"hyperreality Baudrillard"~20 OR "Baudrillard hyperreality", accounting loophole / creative accounting, bank run, banking crisis, banks create money, behavioural economics, Bernie Madoff, bitcoin, Bitcoin Ponzi scheme, blockchain, borderless world, Bretton Woods, BRICs, business cycle, capital controls, capitalist realism, cashless society, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computer age, conceptual framework, credit crunch, cross-subsidies, currency risk, David Graeber, debt deflation, dematerialisation, disintermediation, Dogecoin, emotional labour, eurozone crisis, fiat currency, financial engineering, financial exclusion, financial innovation, Financial Instability Hypothesis, financial repression, floating exchange rates, Fractional reserve banking, gentrification, German hyperinflation, Goldman Sachs: Vampire Squid, Herbert Marcuse, Hyman Minsky, illegal immigration, informal economy, interest rate swap, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, Kickstarter, Kula ring, laissez-faire capitalism, land reform, late capitalism, liberal capitalism, liquidity trap, litecoin, London Interbank Offered Rate, M-Pesa, Marshall McLuhan, means of production, mental accounting, microcredit, Minsky moment, mobile money, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, National Debt Clock, Neal Stephenson, negative equity, new economy, Nixon shock, Nixon triggered the end of the Bretton Woods system, Occupy movement, offshore financial centre, paradox of thrift, payday loans, Peace of Westphalia, peer-to-peer, peer-to-peer lending, Ponzi scheme, post scarcity, post-Fordism, Post-Keynesian economics, postnationalism / post nation state, predatory finance, price mechanism, price stability, quantitative easing, quantitative trading / quantitative finance, remote working, rent-seeking, reserve currency, Richard Thaler, risk free rate, Robert Shiller, Satoshi Nakamoto, scientific management, Scientific racism, seigniorage, Skype, Slavoj Žižek, South Sea Bubble, sovereign wealth fund, special drawing rights, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, Veblen good, Wave and Pay, Westphalian system, WikiLeaks, Wolfgang Streeck, yield curve, zero-coupon bond

In the most indebted countries, Americans now owe around $775 billion on 686 million credit cards, and Britons owe more than £55 billion on about 54.5 million cards (Source: Euromonitor International, see http://uk.creditcards.com/credit-card-news/uk-britain-credit-debit-card-statistics-international.php). Student loan debt in the United States now totals around $1 trillion, at an average of $28,000 per student (Federal Reserve Bank of New York; Consumer Finance Protection Bureau, see “Too big to fail: Student debt hits a trillion,” March 21, 2012, http://www.consumerfinance.gov/blog/too-big-to-fail-student-debt-hits-a-trillion/). 4 Since 2000, government debt has risen from just under 50 percent of GDP to around 100 percent in Britain, from 42 percent to 82 percent in the United States, 104 to 172 percent in Japan, and 39 to 56 percent in Germany.

In April 2006, the IMF’s “Global Financial Stability Report” noted a “growing recognition that the dispersion of credit risk by banks to a broader and more diverse group of investors, rather than warehousing such risks on their balance sheets, has helped to make the banking and overall financial system more resilient” (IMF 2006: 51). By 2008, the phrase “Minsky moment”39—when overindebted investors are forced to sell even their good assets to pay off their debt—had become as much a part of the lexicon surrounding the crisis as “too big to fail.”40 According to Paul Krugman, Minsky had previously been quite a marginalized figure who “was warning—to a largely indifferent economics profession—not just that something like that crisis could happen but that it would happen” (Krugman 2012: 42). Minsky’s big idea was to focus on the problem that excessive leverage poses, not just to indebted households and firms but also to the economy as a whole.

See also currency; pure territorial money territory, 13, 60; sea, 222–23 terrorism, 197, 198 Thaler, Richard, 290 theory, actor network, 296; critical, 327, 331; European, 301; as experimentation, 227 Thilenius, Georg, 283 Third Reich, 224 Thompson, Edward Palmer, 325 Thoreau, Henry David, 151 Tietmeyer, Hans, 46n43 time, in Baudelaire, 184–85; and calculation, 298; and capital, 234; and capitalism, 144, 145; and circulation, 87; and compound interest, 147, 151, 153, 159; and debt, 201; in Derrida, 210; and financial markets, 233n; and guilt, 145; and labor money, 342–46; and language, 180–81; as money, 86, 176; in Negri, 251; and Peter Schlemihl, 186; scarcity of, 196; and the Shabbat, 334–35, 338, 341; and utopia, 335, 342; and the Zahir, 385, 394. See also Messianic time time banks, 344 time dollars, 214, 293, 345–46, 375, 376. See also labor money; time banks Titmuss, Richard, 286–87 Tiv, 283–84 tobacco, 185, 189, 209 Tognato, Carlo, 46 too big to fail, 119 Tor, 366 total social fact, 31, 33, 170, 195 trade, 18, 21, 68, 94, 96, 97, 108, 112, 122, 161, 218, 233, 252, 294, 302, 325; and borders, 307; and colonialism, 222; and the development of money, 23, 26, 31n23, 219, 222, 359, 360; and gold, 299; and LETS, 84; liberalization, 207; traders, 284; Wall Street, 200, 293, 299.


pages: 840 words: 202,245

Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present by Jeff Madrick

Abraham Maslow, accounting loophole / creative accounting, Alan Greenspan, AOL-Time Warner, Asian financial crisis, bank run, Bear Stearns, book value, Bretton Woods, business cycle, capital controls, Carl Icahn, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, desegregation, disintermediation, diversified portfolio, Donald Trump, financial deregulation, fixed income, floating exchange rates, Frederick Winslow Taylor, full employment, George Akerlof, Glass-Steagall Act, Greenspan put, Hyman Minsky, income inequality, index fund, inflation targeting, inventory management, invisible hand, John Bogle, John Meriwether, junk bonds, Kitchen Debate, laissez-faire capitalism, locking in a profit, Long Term Capital Management, low interest rates, market bubble, Mary Meeker, Michael Milken, minimum wage unemployment, MITM: man-in-the-middle, Money creation, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Myron Scholes, new economy, Nixon triggered the end of the Bretton Woods system, North Sea oil, Northern Rock, oil shock, Paul Samuelson, Philip Mirowski, Phillips curve, price stability, quantitative easing, Ralph Nader, rent control, road to serfdom, Robert Bork, Robert Shiller, Ronald Coase, Ronald Reagan, Ronald Reagan: Tear down this wall, scientific management, shareholder value, short selling, Silicon Valley, Simon Kuznets, tail risk, Tax Reform Act of 1986, technology bubble, Telecommunications Act of 1996, The Chicago School, The Great Moderation, too big to fail, union organizing, V2 rocket, value at risk, Vanguard fund, War on Poverty, Washington Consensus, Y2K, Yom Kippur War

Volcker was determined to take emergency measures in 1982 and 1983 because the LDC debt, not large in itself compared to the world economy, was concentrated in a dozen or so large commercial banks. He feared the bad debts in a few of them could take down the entire banking system. The commercial banks were in his mind “too big to fail.” Wriston had long bridled at the regulations that kept him from offering a wider array of consumer services. In 1981, Ronald Reagan now president, there were major alliances made among brokers, insurance companies, and traditional retailers, confident the weakened antitrust departments of the Reagan administration would not challenge such mergers.

Meanwhile, the foundation of the American economy was neglected: government investment in transportation infrastructure, education, health care, and energy technologies was not raised to the levels needed. In 2010, the top four banks in America had a higher market share than they did in 2005. Banks that were considered too big to fail then were bigger now, though some of their more risky trading was to be restricted by the new financial regulations. A new group was established, made up of financial regulators, to oversee the giant banks but none of the banks was broken up. On the other hand, there were few new restrictions on what Wall Street investment banks could do with their money.

In 2010, Congress passed a financial reregulation bill, supported by President Obama. It is by no means clear it will prevent future catastrophe. Many of the difficult decisions regarding capital requirements, limitations on leverage, restrictions on investing, and the power of the consumer protection agency have yet to be made. The huge financial institutions once declared too big to fail, if subject to more oversight and potentially higher capital requirements, were left in place. The effectiveness of the new regulations will depend on how vigorously the new rules are enforced, and there is a great deal of leeway regarding that. In coming years, once the 2008 crisis is forgotten, regulators may again neglect the dangers of financial speculation in favor of a set of dubious economic principles similar to those that have influenced them since the 1970s.


pages: 72 words: 21,361

Race Against the Machine: How the Digital Revolution Is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy by Erik Brynjolfsson

Abraham Maslow, Amazon Mechanical Turk, Any sufficiently advanced technology is indistinguishable from magic, autonomous vehicles, business cycle, business process, call centre, combinatorial explosion, corporate governance, creative destruction, crowdsourcing, David Ricardo: comparative advantage, driverless car, easy for humans, difficult for computers, Erik Brynjolfsson, factory automation, first square of the chessboard, first square of the chessboard / second half of the chessboard, Frank Levy and Richard Murnane: The New Division of Labor, general purpose technology, hiring and firing, income inequality, intangible asset, job automation, John Markoff, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Khan Academy, Kickstarter, knowledge worker, Loebner Prize, low skilled workers, machine translation, minimum wage unemployment, patent troll, pattern recognition, Paul Samuelson, Ray Kurzweil, rising living standards, Robert Gordon, Robert Solow, self-driving car, shareholder value, Skype, the long tail, too big to fail, Turing test, Tyler Cowen, Tyler Cowen: Great Stagnation, Watson beat the top human players on Jeopardy!, wealth creators, winner-take-all economy, zero-sum game

While home ownership has many laudable benefits, it likely reduces labor mobility and economic flexibility, which conflicts with the economy’s increased need for flexibility. 17. Reduce the large implicit and explicit subsidies to financial services. This sector attracts a disproportionate number of the best and the brightest minds and technologies, in part because the government effectively guarantees “too big to fail” institutions. 18. Reform the patent system. Not only does it take years to issue good patents due to the backlog and shortage of qualified examiners, but too many low-quality patents are issued, clogging our courts. As a result, patent trolls are chilling innovation rather than encouraging it. 19.


pages: 302 words: 83,116

SuperFreakonomics by Steven D. Levitt, Stephen J. Dubner

agricultural Revolution, airport security, An Inconvenient Truth, Andrei Shleifer, Atul Gawande, barriers to entry, behavioural economics, Bernie Madoff, Boris Johnson, call centre, clean water, cognitive bias, collateralized debt obligation, creative destruction, credit crunch, Daniel Kahneman / Amos Tversky, deliberate practice, Did the Death of Australian Inheritance Taxes Affect Deaths, disintermediation, endowment effect, experimental economics, food miles, indoor plumbing, Intergovernmental Panel on Climate Change (IPCC), John Nash: game theory, Joseph Schumpeter, Joshua Gans and Andrew Leigh, longitudinal study, loss aversion, Louis Pasteur, market design, microcredit, Milgram experiment, Neal Stephenson, ocean acidification, oil shale / tar sands, patent troll, power law, presumed consent, price discrimination, principal–agent problem, profit motive, randomized controlled trial, Richard Feynman, Richard Thaler, selection bias, South China Sea, Stanford prison experiment, Stephen Hawking, The Wealth of Nations by Adam Smith, too big to fail, trickle-down economics, ultimatum game, urban planning, William Langewiesche, women in the workforce, young professional

And then what appeared to be an inexhaustible resource was—quite suddenly and, in retrospect, quite obviously—heading toward exhaustion. Too many ships were hunting for too few whales. A ship that once took a year at sea to fill its hold with whale oil now needed four years. Oil prices spiked accordingly, rocking the economy back home. Today, such an industry might be considered “too big to fail,” but the whaling industry was failing indeed, with grim repercussions for all America. That’s when a retired railway man named Edwin L. Drake, using a steam engine to power a drill through seventy feet of shale and bedrock, struck oil in Titusville, Pennsylvania. The future bubbled to the surface.

., 16 Teller, Edward, 181 terrorism aftereffects of, 66 and banks, 89–95 bio-, 74 costs of, 65–66, 87 definitions of, 63–64 effectiveness of, 65 prevention of, 87–92 purpose of, 64 terrorists biographical background of, 62–63 goals of, 63–64 identification of possible, 90–95 and life insurance, 94 methods used by, 88 and profiles of, 90–95 revolutionaries as different from, 63–64 See also September 11, 2001 Thirty-Eight Witnesses (Rosenthal), 126 Thomas, Frank, 116 Time magazine, shark story in, 14 Title IX, 22 “To Err Is Human” (Institute of Medicine report), 204 “too big to fail,” 143 traffic deaths, 65–66, 87 trash-pickup fees, 139 trees, and climate, 186 trimmers, price of, 35 trophy wives, 52–53 Trotsky, Leon, 63 trust and altruism, 116,117 and baseball card experiment, 116,117 typical behavior, 13–14,15–16 Uganda, babies in, 57–58 Ultimatum (game), 108–9, 110, 113 unintended consequences, law of, 6–8, 12, 138–41 United Kingdom banks in, 89–95 climate change in, 166 University of Chicago List appointment at, 118 MBA study of graduates of, 45–46 urban planning conference, and horse problem, 10 users versus sellers, 25–26 Variable X, 95 Vaux, Calvert, 42 Venkatesh, Sudhir, 26, 28, 29, 30, 32–37, 38, 40–42, 70–71 Vice Commission, Chicago, 23–24, 26 Vienna General Hospital (Austria), 137–38, 203–4 Vietnam War, 146 violence and prostitutes, 38 visas, 66 volcanic eruptions, 176–77, 188–90, 192 volunteers, in experiments, 121 Vonnegut, Bernard, 191 Vonnegut, Kurt, 191 wages and gender issues, 21–22, 44, 45–47 as incentives, 46–47 and sex-change operations, 47–48 teachers and, 44 walking, drunk, 2–3, 12, 14, 96 “war on drugs,” 25 warm-glow altruism, 124 washing hands, 203–8, 209 Washington, D.C., shootings in, 64, 66 Washington Hospital Center emergency medicine at, 66–73, 75, 81 and September 11, 66–67, 68 Weber, Christopher, 167 Weitzman, Martin, 11, 12, 169 welfare program, data about, 27–28 whaling, 142–43 white slavery, 23 wind farms, 187 wind-powered fiberglass boats, 202 Wiswall, Matthew, 48 women as CEOs, 44–45 difficulties of, 20–22 discrimination against, 21–22, 45 as doctors, 80–81 as dominant in prostitution, 23–26, 40 and feminist revolution, 43–44 in India, 3–8, 14 men compared with, 20–21 as prostitutes, 54–55 shift in role of, 43–44 in sports, 22 as teachers, 43, 44 wages for, 21–22, 44, 45–46 Women’s National Basketball Association (WNBA), 22 Wood, Lowell, 181,182,184–85,186, 192,194,197,198–99 World Health Organization (WHO), 5 World Trade Center, 15 World War II, use of data in, 147 Yale-New Haven Hospital, monkey experiment at, 212–16 Zelizer, Viviana, 200 Zimbardo, Philip, 123 Zyzmor, Albert, 59 About the Authors STEVEN D.


pages: 207 words: 86,639

The New Economics: A Bigger Picture by David Boyle, Andrew Simms

Abraham Maslow, Alan Greenspan, Alvin Toffler, Apollo 11, Asian financial crisis, back-to-the-land, banking crisis, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, capital controls, carbon footprint, carbon tax, clean water, collateralized debt obligation, colonial rule, Community Supported Agriculture, congestion charging, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Crossrail, delayed gratification, deskilling, digital divide, en.wikipedia.org, energy transition, financial deregulation, financial exclusion, financial innovation, full employment, garden city movement, Glass-Steagall Act, green new deal, happiness index / gross national happiness, if you build it, they will come, income inequality, informal economy, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, John Elkington, junk bonds, Kickstarter, land bank, land reform, light touch regulation, loss aversion, mega-rich, microcredit, Mikhail Gorbachev, Money creation, mortgage debt, neoliberal agenda, new economy, North Sea oil, Northern Rock, offshore financial centre, oil shock, peak oil, pension time bomb, pensions crisis, profit motive, purchasing power parity, quantitative easing, Ronald Reagan, seigniorage, Simon Kuznets, sovereign wealth fund, special drawing rights, systems thinking, the long tail, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, trickle-down economics, Vilfredo Pareto, Washington Consensus, wealth creators, working-age population

We must make sure that the means by which we find our way out of the crisis – through injecting liquidity into the system, and looking for signs of recovery in the return of consumer binge spending on the high street – don’t, perversely, build a larger crisis for the future. Done well, responding to the triple crunch of the credit, climate and natural resources crises provides the opportunity for transformational change. *** 1 Demerge banks that are ‘too big to fail’ – to reduce the risks of systemic failure Instead of further consolidation, the discredited financial institutions that have needed so much public money to prop them up during the credit crisis should be reduced to a size whereby their failure would not jeopardize the system itself. We are calling for the forced demerger of large banking and finance groups.

We are calling for the forced demerger of large banking and finance groups. Retail banking should be split from both corporate finance (merchant banking) and from securities dealing. The demerged units should then be split into smaller banks. Mega-banks make mega-mistakes that affect us all. Instead of institutions that are ‘too big to fail’, we need institutions that are small enough to fail without creating problems for depositors and the wider public. In the rush to nationalize and force ‘shotgun weddings’ on the banks, we are storing up worse crises for the future. A major cause of the meltdown has been unchecked consolidation of the banking sector.


pages: 250 words: 87,722

Flash Boys: A Wall Street Revolt by Michael Lewis

automated trading system, bash_history, Berlin Wall, Bernie Madoff, collateralized debt obligation, computerized markets, drone strike, Dutch auction, Fall of the Berlin Wall, financial intermediation, Flash crash, High speed trading, information security, latency arbitrage, National best bid and offer, pattern recognition, payment for order flow, Pershing Square Capital Management, proprietary trading, risk tolerance, Rubik’s Cube, Sergey Aleynikov, Small Order Execution System, Spread Networks laid a new fibre optics cable between New York and Chicago, the new new thing, too big to fail, trade route, transaction costs, Vanguard fund

If you worked for a big Wall Street bank, the easiest way to find out what other banks were up to was to seek out their employees who were looking for new jobs and interview them. In the wake of the financial crisis, the too-big-to-fail end of Wall Street was in turmoil, and Brad was able to talk to people who, just a few years before, would never have considered working for the Royal Bank of Canada. By the time he was finished picking their collective brains, he had spoken to more than a hundred employees at too-big-to-fail banks but hired only about thirty-five of them. “They all wanted jobs,” he said. “It’s not that they wouldn’t tell me. It’s that they didn’t know how their own electronic systems worked.”


pages: 353 words: 81,436

Buying Time: The Delayed Crisis of Democratic Capitalism by Wolfgang Streeck

"there is no alternative" (TINA), "World Economic Forum" Davos, activist fund / activist shareholder / activist investor, air traffic controllers' union, Alan Greenspan, banking crisis, basic income, Bretton Woods, business cycle, capital controls, Carmen Reinhart, central bank independence, collective bargaining, corporate governance, creative destruction, currency risk, David Graeber, deindustrialization, Deng Xiaoping, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial repression, fixed income, full employment, Garrett Hardin, Gini coefficient, Growth in a Time of Debt, income inequality, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, labour market flexibility, labour mobility, late capitalism, liberal capitalism, low interest rates, means of production, moral hazard, Myron Scholes, Occupy movement, open borders, open economy, Plutonomy: Buying Luxury, Explaining Global Imbalances, profit maximization, risk tolerance, shareholder value, too big to fail, Tragedy of the Commons, union organizing, winner-take-all economy, Wolfgang Streeck

If we trace the roots of the current fiscal crisis, we find that since the Second World War the most dramatic leap in indebtedness, which took place after 2008 (Fig. 2.1), has obviously nothing at all to do with a democratically empowered inflation of demand on the part of the electorate. If any inflated demands were in play, they came from banks that got into difficulties but managed to present themselves as ‘too big to fail’, as so important to the system that they deserved to be rescued politically, not least by their agents in the state apparatus such as Hank Paulson, the former boss of Goldman Sachs and treasury secretary under George W. Bush.5 In doing so, they played on the fear of people and governments about a collapse of the real economy, paving the way for a costly rescue-Keynesianism that had nothing to do with frivolous enrichment of the mass of voters with ownerless assets but was believed to be necessary for the prevention of collective impoverishment.

If crisis management is not to be the prelude to the next crisis, if post-crisis is not to mean pre-crisis, there will have to be another growth spurt – and one, as things stand politically, that can take place only under the aegis of neoliberalism, as a result of ‘reforms’ aligned to the remodelling of the state in the last few decades. This is why the governing central bank combines its beneficence with strict political conditions. Whether it can impose them is another matter, of course; governments, in particular, may also be tempted to speculate that they are ‘too big to fail’.4 Nor can anyone guarantee that supply-side policies will actually work: witness the four-year stagnation in the United States, the country where a combination of looser central bank money and neoliberal ‘flexibilization’ – like that now taking shape in Europe – had for decades brought only a pseudo-growth liable to implode in periods of crisis.


pages: 262 words: 83,548

The End of Growth by Jeff Rubin

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

After years of deregulation, no one should have been surprised. Give investment bankers all the financial incentive in the world to borrow money, strip away most of the rules and consequences, and the real question is how these brokerage houses stayed afloat as long as they did. Wall Street’s only salvation was that it had become too big to fail. As brokerage houses expanded, so did the financial industry’s importance to the economy. Since the Second World War, the finance, insurance and real estate sector (FIRE) has doubled in size, rising from 10 percent of US GDP to 20 percent. Similar growth occurred in Canada and other OECD countries.

The last round of bailouts has also stoked pent-up public demand for change. If another round of bank failures leads to more public bailouts, no amount of campaign funding from investment banks will save politicians from the wrath of taxpayers who are still waiting to see any meaningful regulatory reforms for the industry. If financial institutions are now too big to fail, the solution seems simple: make them smaller. Returning to the divisions sanctioned under Glass-Steagall is a step in that direction. Regulating the derivatives market and reining in the industry’s use of leverage are two more measures that will help shrink the size of the institutions and the financial sector’s economic footprint.


pages: 75 words: 22,220

Occupy by Noam Chomsky

Alan Greenspan, corporate governance, corporate personhood, deindustrialization, high-speed rail, Howard Zinn, income inequality, invisible hand, Martin Wolf, Nate Silver, Occupy movement, Plutonomy: Buying Luxury, Explaining Global Imbalances, precariat, Ralph Nader, Ronald Reagan, too big to fail, union organizing

For much of the population, that’s all they had. Many African Americans’ net worth was practically reduced to nothing, and many others, too. It’s a disaster. This kind of thing is going to happen as long as you have unregulated capital markets, which furthermore have a government insurance policy. It’s called “too big to fail”: if you get in trouble, the taxpayer will bail you out—policies that, of course, lead to underestimation of risk. Credit agencies already take into account the fact that it’s going to be rescued next time it goes bust. Well, that of course increases risk even further. If not housing, it’ll be something else, commodities or whatever.


pages: 92

The Liberal Moment by Nick Clegg, Demos (organization : London, England)

banking crisis, credit crunch, failed state, Glass-Steagall Act, housing crisis, income inequality, mass immigration, mass incarceration, Right to Buy, smart grid, too big to fail, Winter of Discontent

And this new global financial regulator must have the power to bring into line, and enforce sanctions on, any organisations or countries who fail to meet their obligations. The London Summit in March made a tentative nod in the right direction, but stronger leadership could have delivered this. The second way in which we must shift power in banking is in their size and scope. Banks which are too big to fail are, according to liberal principles, too big per se and must be broken up. In the run up to the current crisis, power became too concentrated in the few global banking players right at the top. One of the problems with the rescue as currently enacted is that it has the potential to worsen that situation, merging some of the the economic crisis big competitors while others have disappeared altogether, meaning market shares are more concentrated than ever.


pages: 82 words: 24,150

The Corona Crash: How the Pandemic Will Change Capitalism by Grace Blakeley

Anthropocene, asset-backed security, basic income, Big Tech, bond market vigilante , Bretton Woods, business cycle, capital controls, carbon tax, central bank independence, coronavirus, corporate governance, COVID-19, creative destruction, credit crunch, crony capitalism, debt deflation, decarbonisation, degrowth, deindustrialization, don't be evil, financial deregulation, Francis Fukuyama: the end of history, full employment, gig economy, global pandemic, global value chain, green new deal, Greenspan put, income inequality, informal economy, inverted yield curve, invisible hand, Jeff Bezos, liberal capitalism, light touch regulation, lockdown, low interest rates, Martin Wolf, Modern Monetary Theory, moral hazard, move fast and break things, Network effects, North Sea oil, Northern Rock, offshore financial centre, pensions crisis, Philip Mirowski, post-war consensus, price mechanism, quantitative easing, regulatory arbitrage, rent control, reshoring, Rishi Sunak, savings glut, secular stagnation, shareholder value, social distancing, structural adjustment programs, too big to fail, universal basic income, unorthodox policies, Washington Consensus, yield curve

We have seen how the stabilising of the financial system after 2008 required not only unprecedented but prolonged state intervention. Without it, the international financial system would have collapsed, bringing down with it large chunks of the real estate and professional services sectors. Banks were ‘too big to fail’ – and the bankers ‘too big to jail’ – while low interest rates meant any number of debt-laden corporations were able to survive where otherwise they might well have collapsed. In effect, by dramatically expanding access to cheap debt, central banks nullified the Schumpetarian forces that are supposed to regulate competitive markets, keeping unviable firms alive for longer.5 When the inevitable downturn hit in 2020, however, falling revenues had an immediate impact on the delicate balance sheets of so-called ‘zombie firms’, pushing many into insolvency.6 Quantitative easing exacerbated this problem.


pages: 351 words: 93,982

Leading From the Emerging Future: From Ego-System to Eco-System Economies by Otto Scharmer, Katrin Kaufer

Affordable Care Act / Obamacare, agricultural Revolution, Albert Einstein, Asian financial crisis, Basel III, behavioural economics, Berlin Wall, Branko Milanovic, cloud computing, collaborative consumption, collapse of Lehman Brothers, colonial rule, Community Supported Agriculture, creative destruction, crowdsourcing, deep learning, dematerialisation, Deng Xiaoping, do what you love, en.wikipedia.org, European colonialism, Fractional reserve banking, Garrett Hardin, Glass-Steagall Act, global supply chain, happiness index / gross national happiness, high net worth, housing crisis, income inequality, income per capita, intentional community, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Johann Wolfgang von Goethe, Joseph Schumpeter, Kickstarter, market bubble, mass immigration, Mikhail Gorbachev, Mohammed Bouazizi, mutually assured destruction, Naomi Klein, new economy, offshore financial centre, Paradox of Choice, peak oil, ride hailing / ride sharing, Ronald Reagan, Silicon Valley, smart grid, Steve Jobs, systems thinking, technology bubble, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, Tragedy of the Commons, vertical integration, Washington Consensus, working poor, Zipcar

While working in this role, Froman remained an employee of Citigroup for two more months, even as he helped appoint the very people who would shape the future of his own firm in the following weeks and months.8 The result is history. Likewise, many of the same people responsible for the deregulation of the financial industry during the Clinton administration returned to key government positions in the Obama administration, where they devised massive bailout programs for their former colleagues at their too-big-to-fail banks. This pattern is repeated in the food industry. A revolving door between Monsanto, the agribusiness giant, and its two regulating government agencies, the Food and Drug Administration (FDA) and the Environmental Protection Agency (EPA), hinders effective oversight. The potential damage from this alliance is no less catastrophic than the alliances in the financial sector.

Money does for the economy what blood does for the human body: It keeps the system moving, connected, and alive. If that circulatory system is broken, it means that the health of the whole economy is at risk. The 3.0 response to these crises is more and better regulation, including (1) limiting the size of banks so that they are no longer capable of taking a country hostage (by being “too big to fail”); (2) regulating financial products (limiting derivatives); (3) taxing speculative financial transactions; and (4) separating the core banking business from the investment business so that risky investments no longer put core banking services, especially loans to small and medium-sized companies and innovators, at risk.


pages: 265 words: 93,231

The Big Short: Inside the Doomsday Machine by Michael Lewis

Alan Greenspan, An Inconvenient Truth, Asperger Syndrome, asset-backed security, Bear Stearns, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, diversified portfolio, facts on the ground, financial engineering, financial innovation, fixed income, forensic accounting, Gordon Gekko, high net worth, housing crisis, illegal immigration, income inequality, index fund, interest rate swap, John Meriwether, junk bonds, London Interbank Offered Rate, Long Term Capital Management, low interest rates, medical residency, Michael Milken, money market fund, moral hazard, mortgage debt, pets.com, Ponzi scheme, Potemkin village, proprietary trading, quantitative trading / quantitative finance, Quicken Loans, risk free rate, Robert Bork, short selling, Silicon Valley, tail risk, the new new thing, too big to fail, value at risk, Vanguard fund, zero-sum game

Jamie penned a memo to his two partners, in which he asked them if they were making a bet on the collapse of a society--and therefore a bet that the government would never allow to succeed. "If a broad range of CDO spreads starts to widen," he wrote,* "it means that a material global financial clusterfuck is likely occurring.... The U.S. Fed is in a position to fix the problem by intervening.... I guess the question is, How wide would the meltdown need to be in order to be 'too big to fail'?" The conference in Las Vegas had been created, among other things, to boost faith in the market. The day after the subprime mortgage market insiders left Las Vegas and returned to their trading desks, the market cracked. On January 31, 2007, the ABX, a publicly traded index of triple-B-rated subprime mortgage bonds--exactly the sort of bonds used to create subprime CDOs--fell more than a point, from 93.03 to 91.98.

Citigroup's failure, however, would also trigger the payoff of a massive bet of unknown dimensions: from people who had sold credit default swaps on Citigroup to those who had bought them. This was yet another consequence of turning Wall Street partnerships into public corporations: It turned them into objects of speculation. It was no longer the social and economic relevance of a bank that rendered it too big to fail, but the number of side bets that had been made upon it. At some point I could not help but ask John Gutfreund about his biggest and most fateful act: Combing through the rubble of the avalanche, the decision to turn the Wall Street partnership into a public corporation looked a lot like the first pebble kicked off the top of the hill.


pages: 345 words: 92,849

Equal Is Unfair: America's Misguided Fight Against Income Inequality by Don Watkins, Yaron Brook

3D printing, Affordable Care Act / Obamacare, Apple II, barriers to entry, Berlin Wall, Bernie Madoff, blue-collar work, business process, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, collective bargaining, colonial exploitation, Cornelius Vanderbilt, corporate governance, correlation does not imply causation, creative destruction, Credit Default Swap, crony capitalism, David Brooks, deskilling, Edward Glaeser, Elon Musk, en.wikipedia.org, financial deregulation, immigration reform, income inequality, indoor plumbing, inventory management, invisible hand, Isaac Newton, Jeff Bezos, Jony Ive, laissez-faire capitalism, Louis Pasteur, low skilled workers, means of production, minimum wage unemployment, Naomi Klein, new economy, obamacare, Peter Singer: altruism, Peter Thiel, profit motive, rent control, Ronald Reagan, Silicon Valley, Skype, Solyndra, statistical model, Steve Jobs, Steve Wozniak, The Spirit Level, too big to fail, trickle-down economics, Uber for X, urban renewal, War on Poverty, wealth creators, women in the workforce, working poor, zero-sum game

When it comes to the financial industry, that scramble for influence is magnified, both because government is so involved and because the stakes are so high. It is hardly surprising that the most regulated industry in America also spends the most on lobbying.24 Perhaps the most blatant form of cronyism over the last few decades is the government’s semi-official policy that certain financial institutions are “too big to fail,” which played a central role in the Great Recession. Economists continue to debate exactly what went wrong with the housing boom and bust. But one thing that is very clear is that many people in the financial industry engaged in incredibly risky behavior—risks that allowed them to make huge profits on the upside, but the downside of which harmed the rest of us to a far greater degree than it did them.

., 45–6 Singer, Peter, 201, 205 Smith, Adam, 160 Smith, Hedrick, 32, 181–2 Smith International, 158 social justice, 185–90 Social Security, 31, 35, 41, 69–70, 127, 138, 170, 181–3, 225 Solyndra, 150 Soviet Union, 51–2, 108 Sowell, Thomas, 29–30, 119 stagflation, 32 stagnation, 32, 38–48 standard of living, 39–41, 43, 45, 64, 84–5 and collectivism, 182, 216 and egalitarianism, 201 and finance, 155 and inequality, 175 and innovation, 102 and life expectancy, 24 and productivity, 95 and progress, 24, 26–8 and regulation, 126 and retirement, 181 and unions, 128 and the welfare state, 141 Stiglitz, Joseph, 4, 6, 8, 20, 38, 81, 117 Summers, Lawrence, 166 Sunstein, Cass, 183–4 tall poppy syndrome, 213–18 Tanner, Michael, 142 taxes and taxation and health care, 135–6 and income data, 44–5 in the inequality narrative, 20, 23, 27, 30–3 inheritance taxes, 79, 165–9 and mobility, 120–1 policy, 6–7, 20, 120, 138, 142–4 and poverty, 126–7, 143–4 and Scandinavian countries, 112–13 and stagnation, 44–7 and wealth, 169–73, 212 Temkin, Larry, 194, 206 Tesla, 150 Tesla, Nikola, 89 Thiel, Peter, 60, 130 Thompson, Don, 124 “too big to fail,” 157 Tooley, James, 133 trickle-down economics, 95 Uber, 101–2, 107, 155 Ubl, Stephen, 136 unions. See labor unions Vanderbilt, Cornelius, 148–9 Virgin Group, 198–9 voluntary trade, 12, 59–66, 186 wages, 23–4, 44, 46–7, 99–100, 106, 113 maximum wage, 52, 178, 212 minimum wage, 5, 7, 20, 24, 52, 62, 68–9, 114, 124–9, 139–42, 178, 180, 211, 213, 222, 224 and post-war era, 27–30 “slave” wages, 62–5 and stagnation, 38, 222 Wagner Act (National Labor Relations Act of 1935), 29 Warren, Elizabeth, 182, 188, 196, 210 Washington, George, 96–7 Watkins, Don, 66, 101, 219, 225 wealth and collectivism, 167–8 defined, 57 fixed pie assumption, 8–9, 87 group pie assumption, 9 redistribution of, 51, 108, 114, 144 and “the rich” as a label, 173–5 and taxation, 169–73, 212 Welfare Reform Act (1996), 35 welfare state, 68–9, 170, 174, 181, 189, 224–5 and the middle class, 30–1 and mobility, 120–1 vs. opportunity, 138–44 and Scandinavian countries, 111–13 See also entitlement programs Westinghouse, George, 105 Whitworth, Joseph, 107 Wilkinson, Richard, 7, 79, 118, 121, 123, 211–12 Winship, Scott, 46–7, 237n53 Wooldridge, Adrian, 32 Wozniak, Steve, 87–9, 91, 191, 193 Wright, Carroll D., 26 Yergin, Daniel, 11 Yglesias, Matthew, 212 “you didn’t build that,” 190–9, 213 Zingales, Luigi, 155 About the Authors © Amanda Patrice DON WATKINS, one of today’s most vocal opponents of the welfare state, is coauthor, with Yaron Brook, of the national bestseller, Free Market Revolution: How Ayn Rand’s Ideas Can End Big Government.


pages: 295 words: 89,430

Small Data: The Tiny Clues That Uncover Huge Trends by Martin Lindstrom

autonomous vehicles, Berlin Wall, big-box store, correlation does not imply causation, driverless car, Edward Snowden, Fall of the Berlin Wall, land reform, Mikhail Gorbachev, Murano, Venice glass, Richard Florida, rolodex, self-driving car, Skype, Snapchat, Steve Jobs, Steven Pinker, too big to fail, urban sprawl

Regardless of what everyday life is actually like there, from a branding perspective, both London and Paris are Too Big to Fail. This is seldom the case when I’m called in to brand a country or city—otherwise, why would you even need a marketing consultant? A country’s “brand” is an aggregate of its wars, music, sports, climate, leadership, location, tacit traditions and national character—its entire social, political and cultural history—which blur and intersect over time. In the case of London, Big Ben and rain cannot be teased apart any more than love and food can be separated in Paris. Reputationally speaking, if there is anything to learn from a country that is Too Big to Fail, it’s what I call the Power of Less—which, in today’s overcrowded Information Age, matters more than ever.


pages: 319 words: 89,477

The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion by John Hagel Iii, John Seely Brown

Albert Einstein, Andrew Keen, barriers to entry, Black Swan, business process, call centre, Clayton Christensen, clean tech, cloud computing, commoditize, corporate governance, creative destruction, disruptive innovation, Elon Musk, en.wikipedia.org, future of work, game design, George Gilder, intangible asset, Isaac Newton, job satisfaction, Joi Ito, knowledge economy, knowledge worker, loose coupling, Louis Pasteur, Malcom McLean invented shipping containers, Marc Benioff, Maui Hawaii, medical residency, Network effects, old-boy network, packet switching, pattern recognition, peer-to-peer, pre–internet, profit motive, recommendation engine, Ronald Coase, Salesforce, shareholder value, Silicon Valley, Skype, smart transportation, software as a service, supply-chain management, tacit knowledge, The Nature of the Firm, the new new thing, the strength of weak ties, too big to fail, trade liberalization, transaction costs, TSMC, Yochai Benkler

Twentieth-century firms have been remarkably successful in pursuing this quest, so much so that we are now wrestling with the public policy issues associated with scale. In particular, we have developed in the United States (and likely in most developed economies) a view that many companies are now becoming “too big to fail.” This public policy posture means that many of our largest companies are insulated from the full force of competitive intensity by safety cushions that get deployed in times of crisis. As a result, the companies most in need of confronting a fundamental reorientation of their firms are precisely the ones most protected from the increasingly dysfunctional consequences of pursuing their traditional quest for scale.

See Geographic spikes Standards adopted through shaping strategies adoption of McLean’s containerized shipping driven through shaping strategies Novell’s network operating system as de facto of protocols designed to facilitate interactions Visa Start-up companies Stocks (equities) Stocks of knowledge compared to flows of new knowledge as diminishing in value as means, ends, toward knowledge flows Storage law for data Stress in push systems Stress in the workplace Strong ties Success Super-nodes Surfaces, exposing Surfermag.com Surfingthemag.com Surfline.com Sur vival access as essential toig and serendipity Tacit knowledge about how to do new things conveyed through conferences cultivated through listening, empathy described versus explicit Taiwan Semiconductor Manufacturing Company (TSMC) Talent development institutions reoriented around needed by institutions as new trajectory of institutions and open-innovation efforts supported by focused initiatives TCP/IP standard Teahupoo, Tahiti Teams and guilds as collaborative creation efforts interacting, as creation space success elements as peer-to-peer networks performance-driven of surfers World of Warcraft (WoW) social networks Teasers for online social network attention Technological Revolutions and Financial Capital (Perez) Technology CPU innovation breaks down push distinguished from platforms as tool for reaching talent outside institutions Tertius Gaudens Tertius Iungens Tesla Motors Texas Instruments Thinking for a Living (Davenport) Thomas, Doug T-Mobile Too big to fail concept Toshiba Tow-in surfing Toyota Toys and games industries Training programs Trajectory defined as meaningful destination as element of journey toward pull igigig for finding, motivating, individual passion, creativity as shaping view of talent development for institutions Travel services as search engines Travelocity The Travels and Adventures of Serendipity (Merton and Barber) “The Travels and Adventures of Three Princes of Sarendip” fable Twitter in corporate contexts Iranian protests videos secured script used by protestors in Iran TWsurf.com Uncertainty.


pages: 372 words: 92,477

The Fourth Revolution: The Global Race to Reinvent the State by John Micklethwait, Adrian Wooldridge

"World Economic Forum" Davos, Admiral Zheng, affirmative action, Affordable Care Act / Obamacare, Asian financial crisis, assortative mating, banking crisis, barriers to entry, battle of ideas, Berlin Wall, Bernie Madoff, bike sharing, Boris Johnson, Bretton Woods, British Empire, cashless society, central bank independence, Chelsea Manning, circulation of elites, classic study, Clayton Christensen, Corn Laws, corporate governance, credit crunch, crony capitalism, Deng Xiaoping, Detroit bankruptcy, disintermediation, Disneyland with the Death Penalty, driverless car, Edward Snowden, Etonian, failed state, Francis Fukuyama: the end of history, full employment, Gunnar Myrdal, income inequality, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", junk bonds, Khan Academy, Kickstarter, knowledge economy, Kodak vs Instagram, labor-force participation, laissez-faire capitalism, land reform, Les Trente Glorieuses, liberal capitalism, Martin Wolf, means of production, Michael Milken, minimum wage unemployment, mittelstand, mobile money, Mont Pelerin Society, Nelson Mandela, night-watchman state, Norman Macrae, obamacare, oil shale / tar sands, old age dependency ratio, open economy, Parag Khanna, Peace of Westphalia, pension reform, pensions crisis, personalized medicine, Peter Thiel, plutocrats, popular capitalism, profit maximization, public intellectual, rent control, rent-seeking, ride hailing / ride sharing, road to serfdom, Ronald Coase, Ronald Reagan, school choice, school vouchers, Shenzhen special economic zone , Silicon Valley, Skype, special economic zone, TED Talk, the long tail, three-martini lunch, too big to fail, total factor productivity, vertical integration, War on Poverty, Washington Consensus, Winter of Discontent, working-age population, zero-sum game

Wall Street has all but dug an underground passage to the treasury: Four of the past seven treasury secretaries had close ties to investment banks. Luigi Zingales of the University of Chicago’s Booth School of Business (who left Italy in 1988 because he felt his country was being destroyed by cronyism) calculates that the implicit subsidy that comes from banks being too big to fail is worth $34 billion a year.9 Two other economists, Thomas Philippon and Ariell Reshef, argue that between a third and a half of the huge increase in Wall Street pay has come from rents rather than productivity improvements.10 The fact that private-equity people can treat their income as capital gains is particularly disgraceful.

.: Cato Institute, June 2009), available at http://www.downsizinggovernment.org/agriculture/subsidies. 7. “The Agriculture Reform Act of 2012 Creates Jobs and Cuts Subsidies,” Democratic Policy and Communications Center, June 13, 2012, available at http://www.dpcc.senate.gov/?p=issue&id=163. 8. Edwards, “Agricultural Subsidies.” 9. Luigi Zingales, “How Political Clout Made Banks Too Big to Fail,” Bloomberg View, May 29, 2012. 10. Thomas Philippon and Ariell Reshef, “Wages and Human Capital in the U.S. Financial Industry: 1906–2006,” Quarterly Journal of Economics 127, no. 4 (November 2012). 11. Hamilton Project, 15 Ways to Rethink the Federal Budget (Washington, D.C.: Hamilton Project, 2013). 12.


pages: 369 words: 94,588

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

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

It seemed like Wall Street had launched a financial coup against the government and the people of the United States. A few weeks later, with caveats here and there and a lot of rhetoric, Congress and then President George Bush caved in and the money was sent flooding off, without any controls whatsoever, to all those financial institutions deemed ‘too big to fail’. But credit markets remained frozen. A world that had earlier appeared to be ‘awash with surplus liquidity’ (as the IMF frequently reported) suddenly found itself short on cash and awash with surplus houses, surplus offices and shopping malls, surplus productive capacity and even more surplus labour than before.

The ability of the US to launch a go-it-alone debt-financed recovery plan is limited politically by staunch conservative opposition at home as well as by the huge debt-overhang accumulated from the 1990s on. The US has been borrowing at the rate of around $2 billion a day for several years now and while the lenders – such as Chinese and other East Asian Central banks along with those of the Gulf States – have so far kept lending because the US economy is far too big to fail, the increasing power of the lenders over US policy is palpable. Meanwhile, the position of the dollar as the global reserve currency is threatened. The Chinese have resurrected Keynes’ original suggestion and urged the creation of a global currency of special drawing rights to be managed by a presumably democratised IMF (in which the Chinese would have an important voice).


pages: 345 words: 87,745

The Power of Passive Investing: More Wealth With Less Work by Richard A. Ferri

Alan Greenspan, asset allocation, backtesting, Benchmark Capital, Bernie Madoff, book value, buy and hold, capital asset pricing model, cognitive dissonance, correlation coefficient, currency risk, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, endowment effect, estate planning, Eugene Fama: efficient market hypothesis, fixed income, implied volatility, index fund, intangible asset, John Bogle, junk bonds, Long Term Capital Management, money market fund, passive investing, Paul Samuelson, Performance of Mutual Funds in the Period, Ponzi scheme, prediction markets, proprietary trading, prudent man rule, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Sharpe ratio, survivorship bias, Tax Reform Act of 1986, too big to fail, transaction costs, Vanguard fund, yield curve, zero-sum game

Brokerage firms repackaged low-quality mortgages and sold them as AAA rated securities to insurance companies, financial firms, pension plans, and even to foreign governments. Banks scooped up thousands of subprime loans like children scooping up candy thrown by clowns in a parade. The allure of high returns with low risk put these firms in peril when the assets failed. The taxpayers were left on the hook for billions of dollars because these too-big-to-fail firms needed to be rescued. Wall Street Sells the Sizzle I joined the investment industry as a rookie stockbroker in 1988. Like all rookies, I was sent to the firm’s three-week boot camp in New York City to learn about the company and the industry. This school didn’t have much to do with learning about investing.

Swensen, David Swiss Finance Institute Systematic risk Tactical asset allocation: passive asset allocation and strategic asset allocation and timing gap and as zero-sum game Taxes: active funds and control of income tax payment personal trusts and tax-deferred savings tax efficiency Tax loss harvesting/tax swapping Tax Reform Act of 1986 Terminated funds Term risk Testamentary trusts Thatcher, William Theory of Investment Value, The (Williams) Three-factor international portfolios Three-Factor Model. See Fama-French Three-Factor Model Thrift Savings Plan (TSP) Time weighted returns Timing gap: DALBAR performance gap studies market timing gaps Morningstar studies time- vs. dollar-weighted returns Timing skill Titman, Sheridan Tobin, James Too-big-to-fail firms Top performance, predictors of: fund expenses as qualitative factors as ratings as Top quartile funds, mutual fund persistence Total return approach Transaction costs Treasury exposure Trend-following behavior: by individual investors by institutions Treynor, Jack Treynor Ratio TrimTabs Investment Research Triumph of the Optimists: 101 Years of Global Investment Returns (Dimson, Marsh & Staunton) T.


pages: 382 words: 92,138

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

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

Suntech was preserved by the State during the downturn, and its 20,000 jobs have already become critical to the Jiangsu province, which may experience a painful structural adjustment should the firm be liquidated, shuttered and forgotten (imagine firms like Google with its 54,000 employees, or Facebook with its 4,600, suddenly shuttering). Solyndra was too ‘small to survive’ (versus too big to fail) to warrant a ‘bail-out’, yet the government had, as it always has, the ability to ‘rewrite the rules’ and could have weighed the cost of letting Solyndra fail against letting it succeed. It might have even, as with Suntech, considered firing the executives responsible for its financial decline.

In the financial sector, banks have sliced risk so finely, traded it, and cashed it in so many times that their share of profits far outstrips those of the ‘real economy’. Financial firms have grown to such incomprehensible sizes and embedded themselves so deeply into the global economy that they could be described as ‘too big to fail’; many fear that regardless of their recklessness, their essential survival ensures that the next time their hubris peaks they will get bailed out by the State (bankrupting the State in the process). Fairly or not, they are positioned to win on the upside, and also on the downside. The fact that interest rates are counted in GDP as a ‘service’ rendered for the sector’s intermediation of risk should be revisited now that we know who assumes the real risk.


pages: 328 words: 90,677

Ludicrous: The Unvarnished Story of Tesla Motors by Edward Niedermeyer

autonomous vehicles, barriers to entry, Bear Stearns, bitcoin, business climate, call centre, carbon footprint, Clayton Christensen, clean tech, Colonization of Mars, computer vision, crowdsourcing, disruptive innovation, Donald Trump, driverless car, Elon Musk, en.wikipedia.org, facts on the ground, fake it until you make it, family office, financial engineering, Ford Model T, gigafactory, global supply chain, Google Earth, housing crisis, hype cycle, Hyperloop, junk bonds, Kaizen: continuous improvement, Kanban, Kickstarter, Lyft, Marc Andreessen, Menlo Park, minimum viable product, new economy, off grid, off-the-grid, OpenAI, Paul Graham, peak oil, performance metric, Ponzi scheme, ride hailing / ride sharing, risk tolerance, Sand Hill Road, self-driving car, short selling, short squeeze, side project, Silicon Valley, Silicon Valley startup, Skype, smart cities, Solyndra, stealth mode startup, Steve Jobs, Steve Jurvetson, tail risk, technoutopianism, Tesla Model S, too big to fail, Toyota Production System, Uber and Lyft, uber lyft, union organizing, vertical integration, WeWork, work culture , Zipcar

After the humiliating bailout of the US automakers and the general gloom of the global financial crisis, Tesla presented a fresh-faced optimism that seemed to reflect the dawning of a new morning in America. While the Detroit automakers went right back to their pre-recession truck and SUV dependence, Tesla was becoming a global leader in electric cars and pointing the way to a high-tech green future. With faith in national institutions irreparably damaged by the mortgage bubble and Too Big to Fail, Tesla gave Americans something to believe in and (just as important) invest in. CHAPTER 8 THE LOVERS AND THE HATERS Pied Piper’s product is its stock. Whatever makes the value of the stock go up is what we are going to make. Maybe sometime in the future, we can change the world and perform miracles and all of that stuff.

Edwards, 56 Department of Energy (DOE) loans from, 68–89, 118, 120, 121 as shareholder of Tesla, 82–86, 90 detractors, 102–108 Detroit, Michigan, 2, 4 Detroit Auto Show, 68 disruptive innovator, Tesla as, 195–197 DOE. see Department of Energy doors falcon-wing, 137–141 gull-wing, 136–137 Downey, California, 76 Drori, Ze’ev, 49–50, 65 Dunlay, Jim, 58 E Eberhard, Martin as advocate of Tesla, 67 founding of Tesla by, 21–24, 27–31, 35, 37–40 ouster of, 44–48, 50, 79 EBITDA, 215 Eisner, Michael, 45 Electrek, 97–101 electric vehicles (EVs), 3, 12–14, 24, 77, 202, 207 Energy Independence and Security Act, 67 Enron, 105 environmental issues, 112–113, 119 Esquire, 61 e-tron quattro, 203 EV1, 13, 24, 34 EVs. see electric vehicles F Facebook, 41 Falcon One, 28 falcon-wing doors, 137–141 FCW (Forward Collision Warning), 125 Ferrari, 60, 200–201 Fiat, 11, 34 financial crisis (2008), 75–76, 105 fixed costs, 54 Flextronics, 47 FOIA (Freedom of Information Act), 72, 131 Ford, Henry, 56, 194 Ford Focus, 159 Ford Fusion, 75 Ford Motor Company, 3, 4, 56, 75, 181, 194, 204, 216 Forward Collision Warning (FCW), 125 Founders Edition Roadster, 215 Freedom of Information Act (FOIA), 72, 131 Fremont, California, 53, 206, 218 funding (fundraising), 29, 40, 44–47, 50, 69–71, 85 G Gage, Tom, 27–29 Galileo Galilei, 105 Gao Yaning, 128 Gartner, 175 gas prices, 11, 14 General Motors (GM). see also specific models bankruptcy and bailout of, 2–3, 88 and electric cars, 11–13, 34 Impact concept car, 24 and Lotus, 36, 37, 53 OnStar system, 194 Germany, 203, 204 Ghosn, Carlos, 197–200 Gigafactory, 77, 183–184, 189, 218 GM. see General Motors G170J1-LE1 screens, 228 Goodwill Agreements, 149 Google, 44, 120–124, 171 Graham, Paul, 41 “A Grain of Salt” (blog post), 152–153 Grant, Charley, 100 “green car” companies, 11 GT Advanced Technologies (GTAT), 95–97 gull-wing doors, 136–137 H Harrigan, Mike, 30 Harris Ranch, 115–116, 119 Harvard Business School, 195 herd mentality, 96 Hethel, England, 49 Hoerbiger, 138–140 Holzhausen, Franz von, 137 Honda, 201 “How to Be Silicon Valley” (speech by Paul Graham), 41 Hyperloop, 16, 88, 217 I IDEO, 38 IGBT (insulated-gate bipolar transistor), 49 Impact concept car, 13, 24 imperfection, 55 incumbent companies, 196–197 innovation, 193–210 by Citroën, 193–195 disruptive, 195–197 by Carlos Ghosn, 197–200 by Tesla, 201–210 “Innovation Killers: How Financial Tools Destroy Your Capacity to Do New Things” (Christensen), 196–197 The Innovator’s Dilemma, 197 insulated-gate bipolar transistor (IGBT), 49 internal conflict, 29–32 InvestorsHub, 99 Israel, 4, 12 J Jaguar I-PACE, 202–203 Jivan, Jon, 98 Jonas, Adam, 172 K kaizen, 58, 60 Krafcik, John, 176 L Lambert, Fred, 98–101 Lamborghini, 204 Land Rover, 60 lead-acid batteries, 23–24, 197 Leech, Keith, 146–147, 156 Level 4 autonomous cars, 175–176 Level 5 autonomous cars, 170, 172, 175–176, 178 Lexus, 204 lithium-ion batteries, 22–24, 26, 34 “long tailpipe,” 110 losses, 11 Lotus, 36–37, 38, 43, 44, 49, 59 Lotus Elise, 28, 36, 37, 38, 40, 43 Lotus Evora, 59 “Ludicrous Mode,” 16 Lyons, Dave, 64 M Mac, Ryan, 218 Magna Powertrain, 48–49 Magna Steyr, 202 manufacturing, 180–192 of batteries, 183–184, 188–189 and continuous reiteration of Model 3s, 182–192 Elon Musk on, 180–182 preproduction as, 187–188 Marchionne, Sergio, 11 market saturation, 10 Marks, Michael, 47, 48, 50 Mars, 25 “Master Plan, Part Deux” (blog post), 164 McLaren F1, 25–26, 39 media hype, 88, 90–91, 93–95, 97–102, 130, 211–224 and base version of Model 3, 220–224 Elon Musk as cause of, 217–224 at Semi/Roadster unveiling, 211–215 as stock price stimulant, 215–216 Menlo Park, California, 28, 58 Michelin, 194 Miles, 11 Mobileye, 167–170 mobility technology, 11 Model 3, 8–10, 180–182 base version of, 220–224 production of, 182–192 Model S, 15, 74–75, 81–84, 90, 99, 135–137. see also Whitestar Model T, 56 Model X, 101, 134–145 Model Year 2008, 69 Moggridge, Bill, 38–39 Montana Skeptic, 105–108 Morgan Stanley, 172 Morris, Charles, 43 Motley Fool, 98 Musk, Elon on belief, 21 and branding of Tesla, 16–17 as cause of media hype, 217–224 childhood and personality of, 25–26 clientele knowledge of, 60 “cluelessness” of, 33–35 and culture of Tesla, 60 and Daimler, 68 detractors of, 102–108 and electric cars, 25–28 and Elise-Roadster conversion, 38–39 on financial viability of Tesla, 72–73 and fundraising, 44, 69–71 and loans, 70, 78 on manufacturing, 180–181, 190 on Model 3, 8–9 on Model S, 74 on Model X, 144–145 on obstacles faced by Tesla, 46 offers of, to sell Tesla, 120–121 on price increases, 71 and production process, 142, 165 as public figure, 15 on Series D, 47 and JB Straubel, 26 and stress, 64–67, 77–78 and Superchargers, 109–119 and Tesla cofounders, 29–32, 45, 47–48 on Tesla’s master plan, 21–22, 30–31, 58, 163 at town hall meeting, 70–71 and Whitestar, 51 Musk, Errol, 25 Musk, Justine, 25–26 Musk, Kimball, 65 N National Aeronautics and Space Administration (NASA), 66 National Highway Traffic Safety Administration (NHTSA), 127, 131–132, 149–162 National Transportation Safety Board (NTSB), 132, 167 NDAs. see non-disclosure agreements Neil, Dan, 59 Neuralink, 16, 217 New Mexico, 48, 67 New United Motor Manufacturing, 53 New York Times, 2, 30, 66 NHTSA. see National Highway Traffic Safety Administration Nissan Leaf, 198 Nissan-Renault Alliance, 197–200, 207 Noble M12, 27 nondisclosure agreements (NDAs), 5, 149–151, 152, 155–156 Norway, 12 NTSB (National Transportation Safety Board), 132, 167 NUMMI plant, 76, 81 Nürburgring, 203 NuvoMedia, 23 O Occupy Wall Street, 80–81 Ohno, Taiichi, 57 OnStar, 194 Opel, 36 Opel Speedster, 36 OpenAI, 217 operating profits and losses, 89 P Packet Design, 23 Page, Larry, 44 Paine, Chris, 13, 64, 71, 73–74 Panasonic, 77 Pandora, 41 PayPal, 16, 28 Peak Oil, 11 Pinnacle Research, 25 platforms, 135–136 Porsche, 24, 26, 39, 203–204 Porsche 911, 39 power electronics module (PEM), 49 Powertrain Technology, 58 Prenzler, Christian, 100 preproduction, 187–188 price increases, 71 Prius, 24 profitability, 81–82, 89 Project Better Place, 4–5, 11–12 public, going, 80–81 Q quality, 55, 59–60 Quality Control Systems, 131 R Ranger, 60 Reddit, 97, 99–100 reliability, 143 Renault Kwid, 207 Renault Zoe, 198 Reuters, 66 Revenge of the Electric Car (film), 64 Roadster as Elise conversion, 37–39 launch of, 14–15, 29, 42, 47–51, 59–61 new model of, 211–215 profitability of, 71–72, 81 securing investments for, 44, 45 and Tesla startup, 2–3 robotaxis, 166–167 Rogan, Joe, 219 Rosen, Harold, 26 Rosen Motors, 26 S Saleen, 99–100 San Carlos, California, 28 San Francisco, California, 59 San Jose, California, 75–76 Santa Monica, California, 45 Saudi Arabia, 218–219 Schwarzenegger, Arnold, 45 Scion xB, 27 Seagate, 23 “The Secret Tesla Motors Master Plan” (blog post), 21 Securities and Exchange Commission (SEC), 67, 160, 219–220, 224, 234 Seeking Alpha, 103, 105–107 self-driving cars, 120–133 Semi, 211–215 Senate Finance Committee, 67 Series A funding, 29 Series C funding, 40, 44–45 Series D funding, 46, 47 Series E funding, 50 S 40 model, 84 Shashua, Amnon, 167–170 Silicon Valley, 4, 14, 15, 17, 45, 53, 54, 58 Siry, Darryl, 65, 73 60 Minutes, 66 S 60 model, 84 “skateboard” chassis, 134, 202 Skype, 41 Smart (Tesla car), 68 software startups, 54–55 SolarCity, 110–111, 164 solar power, 109–114 Sorbonne University, 66 South Africa, 25 SpaceX, 15, 16, 25, 28, 39, 66, 78, 100 Spiegel, Mark, 102–103 Stanford University, 4, 26, 27, 28, 121 startups, 41–43, 59, 62, 76 “stealth recalls,” 160–161 stock price, 89, 90, 93, 97, 100, 102–103 StockTwits, 98 Straubel, JB, 26, 28, 48 SunCube, 146–147 Superchargers, 109–119 SYNC, 194 T TACC (Traffic Aware Cruise Control), 125 Tama, 197 Tarpenning, Marc, 21–24, 27, 31, 37, 43, 113 Tea Party movement, 80–81 “Tesla Death Watch” (blog posts), 3 Tesla Energy Group, 68 Tesla Founders Blog, 50 Tesla Motors. see also specific headings and barriers to entry, 35, 56 branding of, 16–17, 18, 59–63, 225–234 and collisions, 127–133 concept of, 34–36 continuous improvement at, 58 culture of, 51–52, 60 detractors of, 102–108 as disruptive innovator, 195–197 EBITDA of, 215 and environmental issues, 112–113, 119 “factory-less” model of, 35–36 innovation by, 201–210 internal conflict at, 29–32 legacy of, 19 Model 3 introduced by, 8–10 personal approach to public relations, xii raising capital for, 44, 69–71, 85 “shaky ground” of, 4, 5 as startup, 2–3 stock price of, 89, 90, 93, 97, 100, 102–103 strategy of, 22 and Supercharger network, 109–119 and whistleblowers, xii Tesla Motors Club (TMC), 95–97 Teslarati, 100 “Tesla stare,” 60 “Tesla Suspension Breakage: It’s Not the Crime, It’s the Coverup” (blog post), 151 Thailand, 48, 218 Think Global, 11, 67 Thrun, Sebastian, 121 TMC (Tesla Motors Club), 95–97 Too Big to Fail, 91 Toyoda, Akio, 76 Toyoda, Sakichi, 57 Toyota, 184, 201. see also specific models auto sales, 11 contract with, 81, 83 electric vehicles of, 159–160 and 2008 financial crisis, 76–77 pragmatism of, 209 safety scandal, 149–151 Toyota Previa, 214 Toyota Production System (TPS), 56–60, 76–77, 142, 183 Toyota Way, 58, 77 TPS. see Toyota Production System Traction Avant, 193–194 trading volume, 89 Traffic Aware Cruise Control (TACC), 125 The Truth About Cars (TTAC) (blog), 1–3 Tse, Bernard, 67 turnarounds, financial, 83–87 Twitter, 41, 98, 104–108, 113, 152, 156, 217–220, 224, 236 tzero, 23–24, 26, 27, 31, 37 V Valor Equity Partners, 47 Vance, Ashlee, 38, 47, 66, 73, 84, 120–121, 137, 227–228 VantagePoint Capital Partners, 66 variable costs, 54 V8 engine, 62 Volkswagen, 11, 171, 203–205 W Wall Street Journal, 2, 18, 100, 129, 132, 168, 187 Waymo, 173–174 Web 2.0, 41 Weintraub, Seth, 97–98, 101 Wharton School of Business, 25 whistleblowers, xii Whitestar, 46–48, 51, 65, 67, 68, 73 Who Killed the Electric Car?


pages: 326 words: 91,532

The Pay Off: How Changing the Way We Pay Changes Everything by Gottfried Leibbrandt, Natasha de Teran

"World Economic Forum" Davos, Alan Greenspan, Ayatollah Khomeini, bank run, banking crisis, banks create money, Bear Stearns, Big Tech, bitcoin, blockchain, call centre, cashless society, Clayton Christensen, cloud computing, coronavirus, COVID-19, Credit Default Swap, cross-border payments, cryptocurrency, David Graeber, Donald Trump, Edward Snowden, Ethereum, ethereum blockchain, financial exclusion, global pandemic, global reserve currency, illegal immigration, information asymmetry, initial coin offering, interest rate swap, Internet of things, Irish bank strikes, Julian Assange, large denomination, light touch regulation, lockdown, low interest rates, M-Pesa, machine readable, Money creation, money: store of value / unit of account / medium of exchange, move fast and break things, Network effects, Northern Rock, off grid, offshore financial centre, payday loans, post-industrial society, printed gun, QR code, RAND corporation, ransomware, Real Time Gross Settlement, reserve currency, Rishi Sunak, Silicon Valley, Silicon Valley startup, Skype, smart contracts, sovereign wealth fund, special drawing rights, tech billionaire, the payments system, too big to fail, transaction costs, WikiLeaks, you are the product

They wanted to do away with banks being ‘too big to fail’, while also making banks stronger. To achieve this, they required banks to hold more capital, to report regularly on their activities and to pool their risk in central infrastructures to improve transparency and help neutralise the effects of any individual bank defaulting. These infrastructures are set up to withstand collapse, not least through the stringent access requirements they impose on participants. But regardless (or because) of these impositions, the fact remains that most of these banks are still too big to fail, as are the central infrastructures they rely on.


pages: 581 words: 162,518

We the Corporations: How American Businesses Won Their Civil Rights by Adam Winkler

"Friedman doctrine" OR "shareholder theory", 1960s counterculture, affirmative action, Affordable Care Act / Obamacare, anti-communist, Bernie Sanders, British Empire, Cass Sunstein, clean water, collective bargaining, company town, Cornelius Vanderbilt, corporate governance, corporate personhood, corporate social responsibility, desegregation, Donald Trump, financial innovation, Ford Model T, glass ceiling, income inequality, invisible hand, joint-stock company, laissez-faire capitalism, land reform, obamacare, offshore financial centre, plutocrats, Powell Memorandum, profit maximization, profit motive, race to the bottom, Ralph Nader, Ralph Waldo Emerson, refrigerator car, Robert Bork, Ronald Reagan, Rosa Parks, shareholder value, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, the scientific method, too big to fail, trade route, transcontinental railway, Unsafe at Any Speed, Upton Sinclair, vertical integration, yellow journalism

The most dramatic manifestation of their passionate objection took place in December of 1773, when scores of Bostonians boarded ships docked in the local harbor and dumped 342 crates of tea overboard. The tea belonged to a corporation, the East India Company. And what became known as the Boston Tea Party occurred because the East India Company, as they would later say about American financial institutions in the Great Recession of 2008, was “too big to fail.” Founded several years before the Virginia Company, the East India Company by the mid-eighteenth century had grown into the most powerful corporation in the world. In 1757, the company effectively took control of India, which it ruled for the next century. Although the Scottish economic philosopher Adam Smith called this exercise of sovereign power by a joint-stock company a “strange absurdity,” it was similar to what had happened in Virginia, Massachusetts, and several other American colonies, just on a far grander scale.

The country was still reeling from the Great Recession, and public anger was directed at the nation’s banks and other financial institutions that had received massive bailouts after speculative investments in subprime mortgage derivatives, popular but opaque securities with hidden risks, went bust. The firms, like the East India Company in the colonial era, were deemed “too big to fail.” The crisis helped propel Barack Obama into the White House, and the new president proposed a number of monetary policies and reforms to stimulate the economy. These measures, coupled with the bailouts, led to a backlash among grassroots conservatives, who staged protests around the country in early 2009 calling for smaller government and lower taxes.

., 148 Tillman, Benjamin “Pitchfork Ben,” 217–19 Tillman Act (1907), 218–19, 220, 223, 227, 238, 315–16, 317, 321, 324, 362, 368–69, 371, 401 Time, 280, 289 tobacco industry, xxi, 14–15, 18, 161–69, 162, 170, 171, 173–75, 185, 189, 191, 202, 213, 279–83, 287–89, 295, 298, 299, 303, 321 Tobacco Trust, 161–63, 162, 170, 173, 175, 185, 189, 191, 298, 303 Tokyo Rose, 367 toll bridges, 35–36, 95–97 “too big to fail” firms, 359–60 “total attack” program, 304 trade, 97–103, 170–71, 298, 305–23, 359–60, 385 transcontinental railroad, 142 treason, 51, 164 Treasury Department, US, 93–94 Treatise on the Law of Corporations, A, (Field), 51 Trenton riots (1968), 349 trials, xvi, 23, 24, 121, 164, 172–73, 282, 283, 359, 369, 400 Tribe, Laurence, 347 Tribune Tower, 241–42 trucking companies, 275–76 Trump, Donald, 327 trusts, 157, 161–62, 169, 171, 177, 179, 185, 189, 196–97, 197, 202–3, 218, 282, 298, 320, 382 see also monopolies Tutankhamen, 167 Twain, Mark, 155 Twenty-Eighth Amendment, 375–76 20,000 Leagues Under the Sea (Verne), 139 ultra vires (“beyond the power”), 49 “umpire” analogy, 139, 298, 356, 388–89 “unalienable rights,” 28 unemployment rate, 118, 344 union dues, 331–32, 332 United Fruit Corp., 305 United Negro College Fund, 300 United States: agriculture of, 40, 106, 118, 198 budget of, 213 citizenship of, 44, 53–54, 55, 57, 59, 60, 61, 65, 74, 97–103, 109–10, 115, 125, 128, 135–36, 254, 257–58, 265–67, 309, 368, 392 colonial period of, 3–19, 20, 24–25, 26, 28, 76, 270, 399–400 concentration of wealth in, 4, 40, 145, 196–97, 212–16, 285 corruption in, 36, 90–91, 103–4, 123, 129, 142, 149–50, 165, 173, 176, 196–97, 197, 202–8, 212 215–17, 226–27, 236, 286, 309, 314, 315–16, 320–23, 329, 361 currency of, 38 democratic system of, 5, 14, 15, 17, 18–19, 21–22, 31, 90–92, 101, 192, 212, 222, 232, 248, 249, 251, 252–55, 263, 293–94, 319, 320, 337, 356, 365–68, 374–75, 389–95 economy of, 25, 26, 38–39, 44, 69, 90, 93, 97–103, 117–18, 122, 140–41, 154, 163, 198, 233, 235, 256, 285, 308, 344, 359–60 federal government of, 177, 218, 240 immigration to, 153–54, 199, 232, 238, 239–40 industrialization of, 106, 117–18, 140–41, 213–14, 247 living standards in, 140 mass media in, 326–27, 360 national debt of, 25, 38–39, 70 national enterprises of, 35–36 northern states of, 40, 69, 90 partisan politics in, 94, 148, 208, 217–18, 302–4, 308–9, 326–28, 329 polarization in, 326–27 southern states of, 123–28, 131, 158, 159, 217–18, 256–75, 284, 327 territories of, 261 two-party system of, 36, 39, 40 unemployment rate in, 118, 344 United States Brewers Association, 223–26, 402 United States Court of Claims, 149–50 United States Reports, 149–53, 157, 231 United States v.


Unfinished Empire: The Global Expansion of Britain by John Darwin

Alfred Russel Wallace, British Empire, classic study, colonial rule, Corn Laws, David Ricardo: comparative advantage, European colonialism, financial independence, friendly fire, full employment, imperial preference, Khartoum Gordon, Khyber Pass, Kowloon Walled City, land tenure, mass immigration, Nelson Mandela, open economy, plutocrats, principal–agent problem, quantitative easing, reserve currency, Right to Buy, Scientific racism, South China Sea, special economic zone, spice trade, Suez canal 1869, Suez crisis 1956, The Wealth of Nations by Adam Smith, too big to fail, trade route, transcontinental railway, union organizing

The price of such continuous investment by joint stock investors was the exclusion of interlopers and free-riders from the long-distance trade between England and India. But to an extent barely noticed until the second half of the century, this Indian ‘exception’ created a powerful new interest with a mind of its own. Too big to fail, too far away to control, it turned into the kernel of a mighty new empire. NEW EMPIRES FOR OLD? For all its contradictions, it had been possible to think of Britain’s Atlantic empire as a unity. Its (white) inhabitants had shared (as ‘free-born Englishmen’) the right to representative government in their own colonial assemblies.

This great change in its role on the Indian subcontinent raised a series of questions about its constitutional status. The government in London, the Company’s guarantor against other great powers, demanded more control over the men on the spot and feared that over-expansion would wreck its finances. Like a modern-day bank, the Company was too big to fail: the effect of its bankruptcy on British finance would have been catastrophic. So a series of measures led to the India Act of 1784, by which the Company’s Indian budgets for its three ‘presidencies’ in Bombay, Madras and Bengal, its external and military policy and its choice of governor-general would be supervised by a Board of Control and a cabinet minister.

‘The loss of Jamaica,’ said Dundas in August 1796, ‘would be complete ruin to our credit.’26 Losing its exports, remittances and the revenue from sugar duties would be a shattering blow. Dundas thought the same about India (where three of his brothers had sought their fortune). Indeed, it had long been acknowledged in London that the East India Company was ‘too big to fail’. But even fighting a naval or maritime war against an opponent commanding the navies of the Dutch and the Spanish as well as his own was no easy matter. The British use of blockade alienated possible friends. Naval warfare required large supplies of naval stores, the timber and tar needed for repair and construction – a consideration that made the Baltic and even Corsica strategically vital.


pages: 356 words: 103,944

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

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

That means it has to hold the same level of capital reserves as domestic firms, face the same disclosure requirements, and abide by the same trading rules. It’s a simple principle: if you want to be part of our game, you have to play by our rules. As Simon Johnson rightly asks, why should the United States be left hostage to European resistance when its lawmakers agree that capital requirements need to be increased or banks “too big to fail” need to be broken up?13 It is better for the United States to go it alone, he argues, than be slowed down by “the glacial nature of international economic diplomacy, and the self-interest of the Europeans.” Take the example of capital requirements, where the United States wants tougher rules than Europe.

Terrones, “Growth and Volatility in an Era of Globalization,” IMF Staff Papers, vol. 52, Special Issue (September 2005). 19 “Crisis may be worse than Depression, Volcker says,” Reuters, February 20, 2009 (http://uk.reuters.com/article/ idUKN2029103720090220). 20 Craig Torres, “Bernanke Says Crisis Damage Likely to Be Long-Lasting,” Bloomberg News Service, April 17, 2009. 21 David A. Moss, “An Ounce of Prevention: Financial regulation, moral hazard, and the end of ‘too big to fail,’” Harvard Magazine (September–October 2009) (http://harvardmagazine.com/2009/09/ financial-risk-management-plan?page=0,1). 22 Enrque G. Mendoza and Vincenzo Quadrini, “Did Financial Globalisation Make the US Crisis Worse?” VoxEU.org, November 14, 2009 (http://voxeu.org/index.php?q=node/4206). 23 And not just financial havens.


pages: 443 words: 98,113

The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay by Guy Standing

"World Economic Forum" Davos, 3D printing, Airbnb, Alan Greenspan, Albert Einstein, Amazon Mechanical Turk, anti-fragile, Asian financial crisis, asset-backed security, bank run, banking crisis, basic income, Ben Bernanke: helicopter money, Bernie Sanders, Big bang: deregulation of the City of London, Big Tech, bilateral investment treaty, Bonfire of the Vanities, Boris Johnson, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, carried interest, cashless society, central bank independence, centre right, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, commons-based peer production, credit crunch, crony capitalism, cross-border payments, crowdsourcing, debt deflation, declining real wages, deindustrialization, disruptive innovation, Doha Development Round, Donald Trump, Double Irish / Dutch Sandwich, ending welfare as we know it, eurozone crisis, Evgeny Morozov, falling living standards, financial deregulation, financial innovation, Firefox, first-past-the-post, future of work, Garrett Hardin, gentrification, gig economy, Goldman Sachs: Vampire Squid, Greenspan put, Growth in a Time of Debt, housing crisis, income inequality, independent contractor, information retrieval, intangible asset, invention of the steam engine, investor state dispute settlement, it's over 9,000, James Watt: steam engine, Jeremy Corbyn, job automation, John Maynard Keynes: technological unemployment, labour market flexibility, light touch regulation, Long Term Capital Management, low interest rates, lump of labour, Lyft, manufacturing employment, Mark Zuckerberg, market clearing, Martin Wolf, means of production, megaproject, mini-job, Money creation, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, Neil Kinnock, non-tariff barriers, North Sea oil, Northern Rock, nudge unit, Occupy movement, offshore financial centre, oil shale / tar sands, open economy, openstreetmap, patent troll, payday loans, peer-to-peer lending, Phillips curve, plutocrats, Ponzi scheme, precariat, quantitative easing, remote working, rent control, rent-seeking, ride hailing / ride sharing, Right to Buy, Robert Gordon, Ronald Coase, Ronald Reagan, Sam Altman, savings glut, Second Machine Age, secular stagnation, sharing economy, Silicon Valley, Silicon Valley startup, Simon Kuznets, SoftBank, sovereign wealth fund, Stephen Hawking, Steve Ballmer, structural adjustment programs, TaskRabbit, The Chicago School, The Future of Employment, the payments system, The Rise and Fall of American Growth, Thomas Malthus, Thorstein Veblen, too big to fail, Tragedy of the Commons, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, Y Combinator, zero-sum game, Zipcar

A second feature has been the resort by governments and central banks since the crash to inject cash into the banking system, to bail out failing banks and to pump up the money supply to stimulate growth via ‘quantitative easing’. QE is discussed later in this chapter. Here it is enough to recall the self-serving statement used to justify the bailouts, that the banks were ‘too big to fail’. The cringing justification for giving them vast amounts of public money was that if they went bankrupt due to their recklessness the contagion effects would have sunk the whole economy. So their owners and managers were helped to restore their lavish earnings. A third feature has been growth of non-bank financial intermediaries, including some inside non-financial corporations.

But there is no moral justification for using public money to boost the incomes of bankers and other financiers, especially as the mess was largely due to their negligence and rapaciousness. Instead of taking a temporary stake in failing banks and then selling them once profitable, governments could have enabled a sovereign wealth fund to take permanent stakes, with the returns going to the fund for the benefit of the public. If any institution is deemed too big to fail, the implicit moral hazards justify a substantial public stake. Tony Atkinson has advocated a sovereign wealth fund that would increase the net worth of the state by taking stakes in companies and property. This would not amount to nationalisation, but would derive a public benefit from minority shareholdings in high-tech, financial and resource-intensive sectors.


pages: 327 words: 103,336

Everything Is Obvious: *Once You Know the Answer by Duncan J. Watts

"World Economic Forum" Davos, active measures, affirmative action, Albert Einstein, Amazon Mechanical Turk, AOL-Time Warner, Bear Stearns, behavioural economics, Black Swan, business cycle, butterfly effect, carbon credits, Carmen Reinhart, Cass Sunstein, clockwork universe, cognitive dissonance, coherent worldview, collapse of Lehman Brothers, complexity theory, correlation does not imply causation, crowdsourcing, death of newspapers, discovery of DNA, East Village, easy for humans, difficult for computers, edge city, en.wikipedia.org, Erik Brynjolfsson, framing effect, Future Shock, Geoffrey West, Santa Fe Institute, George Santayana, happiness index / gross national happiness, Herman Kahn, high batting average, hindsight bias, illegal immigration, industrial cluster, interest rate swap, invention of the printing press, invention of the telescope, invisible hand, Isaac Newton, Jane Jacobs, Jeff Bezos, Joseph Schumpeter, Kenneth Rogoff, lake wobegon effect, Laplace demon, Long Term Capital Management, loss aversion, medical malpractice, meta-analysis, Milgram experiment, natural language processing, Netflix Prize, Network effects, oil shock, packet switching, pattern recognition, performance metric, phenotype, Pierre-Simon Laplace, planetary scale, prediction markets, pre–internet, RAND corporation, random walk, RFID, school choice, Silicon Valley, social contagion, social intelligence, statistical model, Steve Ballmer, Steve Jobs, Steve Wozniak, supply-chain management, tacit knowledge, The Death and Life of Great American Cities, the scientific method, The Wisdom of Crowds, too big to fail, Toyota Production System, Tragedy of the Commons, ultimatum game, urban planning, Vincenzo Peruggia: Mona Lisa, Watson beat the top human players on Jeopardy!, X Prize

Honolulu, Hawaii: Association for Computational Linguistics. Somers, Margaret R. 1998. “ ‘We’re No Angels’: Realism, Rational Choice, and Relationality in Social Science.” American Journal of Sociology 104 (3):722–84. Sorkin, Andrew Ross (ed). 2008. “Steve & Barry’s Files for Bankruptcy.” New York Times, July 9. Sorkin, Andrew Ross. 2009a. Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System from Crisis—and Themselves. New York: Viking Adult. Sorkin, Andrew Ross (ed). 2009b. “A Friend’s Tweet Could Be an Ad.” New York Times, November 23. Staw, Barry M. 1975. “Attribution of the “ ‘Causes’ of Performance: A General Alternative Interpretation of Cross-Sectional Research on Organizations.”

Small Worlds : The Dynamics of Networks Between Order and Randomness. Princeton, NJ: Princeton University Press. ———. 2003. Six Degrees: The Science of a Connected Age. New York: W. W. Norton. Watts, Duncan J. 2004. “The ‘New’ Science of Networks.” Annual Review of Sociology, 30:243–270. ———. 2007. “A 21st Century Science.” Nature 445:489. ———. 2009. “Too Big to Fail? How About Too Big to Exist?” Harvard Business Review, 87(6):16. Watts, Duncan J., P. S. Dodds, and M. E. J. Newman. 2002. “Identity and Search in Social Networks.” Science 296 (5571):1302–1305. Watts, Duncan J., and Peter Sheridan Dodds. 2007. “Influentials, Networks, and Public Opinion Formation.”


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Dreaming in Public: Building the Occupy Movement by Amy Lang, Daniel Lang/levitsky

activist lawyer, Bay Area Rapid Transit, bonus culture, British Empire, capitalist realism, clean water, cognitive dissonance, collective bargaining, corporate governance, corporate personhood, crowdsourcing, David Graeber, deindustrialization, different worldview, facts on the ground, gentrification, glass ceiling, housing crisis, housing justice, Kibera, late capitalism, lolcat, mass incarceration, military-industrial complex, Naomi Klein, Nelson Mandela, Occupy movement, oil shale / tar sands, out of africa, plutocrats, Port of Oakland, Rosa Parks, Saturday Night Live, Slavoj Žižek, social contagion, structural adjustment programs, the medium is the message, too big to fail, trade liberalization, union organizing, upwardly mobile, urban renewal, War on Poverty, We are Anonymous. We are Legion, We are the 99%, white flight, working poor

Is it better than losing everything, claiming to stand for compromise, bipartisanship, and rational deliberative process, and standing powerless in the middle of what is already a tribal war? You tell me. What’s an aquifer or an ice cap worth to you? How lonely are you willing to be? ♦ huntgathermedicine.com/2011/11/16/heirs-to-the-autonomen/ THE PEOPLE ARE TOO BIG TO FAIL Statement DeColonize LA 16 October 2011 On October first, hundreds of people from around Los Angeles answered the call from Occupy Wall Street to start claiming public spaces to meet and decide together what to do to build an economy that meets the needs of the people in the place of capitalism.

.’ ♦ rabble.ca/news/2011/10/acknowledgement-occupations-occupied-land-essential 1 For example, JohnPaul Montano’s open letter to OWS: http://nin.tl/H9onBM 2 http://nin.tl/H5tfGi 3 Link to an account of ‘unintended marginalization’ at OWS: http://nin.tl/GPKS0I 4 http://nin.tl/GQqr17 5 A gallery of OWS participants: http://nin.tl/GTUtlc 6 http://nin.tl/GQqUR6 7 http://pmarcuse.wordpress.com/2011/10/07/97/ 8 http://nin.tl/H64b5L 9 See Earl McCabe’s assessment of Occupy: http://nin.tl/GR7gSI 10 The relevant meeting minutes are at http://nin.tl/GPO8cm 99%: TOO BIG TO FAIL the last thing we need low end theory 10 November 2011 All of this has left Oakland’s blacks and Latinos in a difficult position. They rightly criticize the police, but they also criticize the other invading army, the whites from other cities, and even other states, whom they blame for the vandalism that tends to break out whenever there is a heated protest in town: from the riots after the murder of Oscar Grant by a transit police officer in 2009, to the violence of the last two weeks downtown and, most recently, near the port.


Rockonomics: A Backstage Tour of What the Music Industry Can Teach Us About Economics and Life by Alan B. Krueger

"Friedman doctrine" OR "shareholder theory", accounting loophole / creative accounting, Affordable Care Act / Obamacare, Airbnb, Alan Greenspan, autonomous vehicles, bank run, behavioural economics, Berlin Wall, bitcoin, Bob Geldof, butterfly effect, buy and hold, congestion pricing, creative destruction, crowdsourcing, digital rights, disintermediation, diversified portfolio, Donald Trump, endogenous growth, Gary Kildall, George Akerlof, gig economy, income inequality, independent contractor, index fund, invisible hand, Jeff Bezos, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kickstarter, Larry Ellison, Live Aid, Mark Zuckerberg, Moneyball by Michael Lewis explains big data, moral hazard, Multics, Network effects, obamacare, offshore financial centre, opioid epidemic / opioid crisis, Paul Samuelson, personalized medicine, power law, pre–internet, price discrimination, profit maximization, random walk, recommendation engine, rent-seeking, Richard Thaler, ride hailing / ride sharing, Saturday Night Live, Skype, Steve Jobs, the long tail, The Wealth of Nations by Adam Smith, TikTok, too big to fail, transaction costs, traumatic brain injury, Tyler Cowen, ultimatum game, winner-take-all economy, women in the workforce, Y Combinator, zero-sum game

Allison Stewart, “What Genres Have Benefited Most from the Streaming Era of Music,” Chicago Tribune, Apr. 4, 2018. 15. Hugh McIntyre, “What Do the Major Streaming Services Pay per Stream,” Forbes, Jul. 27, 2017. 16. Jem Aswad and Janko Roettgers, “With 70 Million Subscribers and a Risky IPO Strategy, Is Spotify Too Big to Fail?,” Variety, Jan. 24, 2018. 17. Donald S. Passman, All You Need to Know About the Music Business (New York: Free Press, 2012). 18. AudienceNet, “2017 Music Consumption: The Overall Landscape.” These data are based on a nationally representative online survey of 3,006 U.S. residents age sixteen and older. 19.

Subscriber Count,” Digital Music News, Jul. 5, 2018; “2017 Letter to Shareholders,” Amazon, Apr. 18, 2018; Erin Griffith, “Pandora Learns the Cost of Ads, and of Subscriptions,” Wired, Apr. 30, 2018; “Tencent Platforms Overview in Q1 2018; WeChat MAU Exceeded 1bn,” China Internet Watch, May 17, 2018. 8. From Marc Geiger’s presentation at MIRA in Los Angeles, CA, 2017. 9. Jem Aswad and Janko Roettgers, “With 70 Million Subscribers and a Risky IPO Strategy, Is Spotify Too Big to Fail?,” Variety, Jan. 24, 2018. 10. Some further complications are that the mechanical rate component of royalties for interactive streaming services is set by the Copyright Board, and labels could negotiate for minimum payments. Also, as explained later in this chapter, the labels and streaming services can negotiate for promotion and other benefits in addition to streaming royalties.


pages: 379 words: 99,340

The Revolt of the Public and the Crisis of Authority in the New Millennium by Martin Gurri

Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, anti-communist, Arthur Eddington, Ayatollah Khomeini, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Burning Man, business cycle, citizen journalism, Climategate, Climatic Research Unit, collective bargaining, creative destruction, crowdsourcing, currency manipulation / currency intervention, dark matter, David Graeber, death of newspapers, disinformation, Eddington experiment, en.wikipedia.org, Erik Brynjolfsson, facts on the ground, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, Great Leap Forward, housing crisis, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of writing, job-hopping, military-industrial complex, Mohammed Bouazizi, Nate Silver, Occupy movement, Port of Oakland, Republic of Letters, Ronald Reagan, scientific management, Skype, Steve Jobs, the scientific method, The Signal and the Noise by Nate Silver, too big to fail, traveling salesman, University of East Anglia, urban renewal, War on Poverty, We are the 99%, WikiLeaks, Yochai Benkler, young professional

Cognitive Surplus: Creativity and Generosity in a Connected Age. Penguin Books, 2010. Shirky, Clay. Here Comes Everybody: The Power of Organizing Without Organizations. Penguin Books, 2008. Silver, Nate. The Signal and the Noise: Why So Many Predictions Fail – But Some Don’t. The Penguin Press, 2012. Sorkin, Andrew. Too Big To Fail: The Inside Story of How Wall Street and Washington Fought To Save the Financial System – And Themselves. Penguin Books, 2009. Sreberny, Annabelle, and Khiabany, Gholam. Blogistan: The Internet and Politics in Iran. I.B. Tauris, 2011. Taleb, Nassim Nicholas. Antifragile: Things That Gain From Disorder.

[124] “After Alan,” The Economist, October 13, 2005, at http://www.economist.com/node/5025627. [125] Lippmann, Public Opinion, 233-4. [126] I have excluded agencies employed by the government to fund its own activities, such as IRS and the Office of Management and Budget. [127] Silver, p. 29 [128] Andrew Sorkin, Too Big To Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System – and Themselves (Penguin Books, 2009), 439-440. [129] Ibid., 448-9. [130] Ibid., 368. [131] Silver, Signal, Kindle location 388-397. [132] Ibid., Kindle location 397 forward. [133] Nassim Nicholas Taleb, Fooled By Randomness: The Hidden Role of Chance in Life and in the Markets (Random House Trade Paperbacks, 2004), 79-91


pages: 393 words: 91,257

The Coming of Neo-Feudalism: A Warning to the Global Middle Class by Joel Kotkin

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", "World Economic Forum" Davos, Admiral Zheng, Alvin Toffler, Andy Kessler, autonomous vehicles, basic income, Bernie Sanders, Big Tech, bread and circuses, Brexit referendum, call centre, Capital in the Twenty-First Century by Thomas Piketty, carbon credits, carbon footprint, Cass Sunstein, clean water, company town, content marketing, Cornelius Vanderbilt, creative destruction, data science, deindustrialization, demographic transition, deplatforming, don't be evil, Donald Trump, driverless car, edge city, Elon Musk, European colonialism, Evgeny Morozov, financial independence, Francis Fukuyama: the end of history, Future Shock, gentrification, gig economy, Gini coefficient, Google bus, Great Leap Forward, green new deal, guest worker program, Hans Rosling, Herbert Marcuse, housing crisis, income inequality, informal economy, Jane Jacobs, Jaron Lanier, Jeff Bezos, Jeremy Corbyn, job automation, job polarisation, job satisfaction, Joseph Schumpeter, land reform, liberal capitalism, life extension, low skilled workers, Lyft, Marc Benioff, Mark Zuckerberg, market fundamentalism, Martin Wolf, mass immigration, megacity, Michael Shellenberger, Nate Silver, new economy, New Urbanism, Northpointe / Correctional Offender Management Profiling for Alternative Sanctions, Occupy movement, Parag Khanna, Peter Thiel, plutocrats, post-industrial society, post-work, postindustrial economy, postnationalism / post nation state, precariat, profit motive, public intellectual, RAND corporation, Ray Kurzweil, rent control, Richard Florida, road to serfdom, Robert Gordon, Salesforce, Sam Altman, San Francisco homelessness, Satyajit Das, sharing economy, Sidewalk Labs, Silicon Valley, smart cities, Social Justice Warrior, Steve Jobs, Stewart Brand, superstar cities, technological determinism, Ted Nordhaus, The Death and Life of Great American Cities, The future is already here, The Future of Employment, The Rise and Fall of American Growth, Thomas L Friedman, too big to fail, trade route, Travis Kalanick, Uber and Lyft, uber lyft, universal basic income, unpaid internship, upwardly mobile, Virgin Galactic, We are the 99%, Wolfgang Streeck, women in the workforce, work culture , working-age population, Y Combinator

BBC, February 22, 2017, https://www.bbc.com/news/technology-37384152. 6 Greg Ferenstein, “Silicon Valley’s political endgame, summarized in 12 visuals,” Medium, November 5, 2015, https://medium.com/the-ferenstein-wire/silicon-valley-s-political-endgame-summarized-1f395785f3c1. 7 Geoff Nesnow, “73 Mind-blowing Implications of Driverless Cars and Trucks,” Medium, February 9, 2018, https://medium.com/@DonotInnovate/73-mind-blowing-implications-of-a-driverless-future-58d23d1f338d; Steve Andriole, “Already Too Big to Fail—The Digital Oligarchy Is Alive, Well (& Growing),” Forbes, July 29, 2017, https://www.forbes.com/sites/steveandriole/2017/07/29/already-too-big-to-fail-the-digital-oligarchy-is-alive-well-growing/#71125b7667f5. 8 Marisa Kendall, “Tech execs back California bill that aims to build more housing near transit,” Mercury News, January 25, 2018, https://www.mercurynews.com/2018/01/24/tech-execs-back-bill-that-aims-to-build-more-housing-near-transit/. 9 Ferenstein, “Silicon Valley’s political endgame, summarized in 12 visuals.” 10 Nellie Bowles, “Dorm Living for Professionals Comes for San Francisco,” New York Times, March 4, 2018, https://www.nytimes.com/2018/03/04/technology/dorm-living-grown-ups-san-francisco.html; Emmie Martin, “Facebook and Google are both building more affordable housing in Silicon Valley,” CNBC, July 10, 2017, https://www.cnbc.com/2017/07/07/facebook-and-google-are-building-affordable-housing-in-silicon-valley.html; Avery Hartmans, “Facebook is building a village that will include housing, a grocery store and a hotel,” Business Insider, July 7, 2017, https://www.businessinsider.com/facebook-building-employee-housing-silicon-valley-headquarters-2017-7. 11 Ben Tarnoff, “Tech’s push to teach coding isn’t about kids’ success—it’s about cutting wages,” Guardian, September 21, 2017, https://www.theguardian.com/technology/2017/sep/21/coding-education-teaching-silicon-valley-wages. 12 Gerard C.


pages: 362 words: 97,288

Ghost Road: Beyond the Driverless Car by Anthony M. Townsend

A Pattern Language, active measures, AI winter, algorithmic trading, Alvin Toffler, Amazon Robotics, asset-backed security, augmented reality, autonomous vehicles, backpropagation, big-box store, bike sharing, Blitzscaling, Boston Dynamics, business process, Captain Sullenberger Hudson, car-free, carbon footprint, carbon tax, circular economy, company town, computer vision, conceptual framework, congestion charging, congestion pricing, connected car, creative destruction, crew resource management, crowdsourcing, DARPA: Urban Challenge, data is the new oil, Dean Kamen, deep learning, deepfake, deindustrialization, delayed gratification, deliberate practice, dematerialisation, deskilling, Didi Chuxing, drive until you qualify, driverless car, drop ship, Edward Glaeser, Elaine Herzberg, Elon Musk, en.wikipedia.org, extreme commuting, financial engineering, financial innovation, Flash crash, food desert, Ford Model T, fulfillment center, Future Shock, General Motors Futurama, gig economy, Google bus, Greyball, haute couture, helicopter parent, independent contractor, inventory management, invisible hand, Jane Jacobs, Jeff Bezos, Jevons paradox, jitney, job automation, John Markoff, John von Neumann, Joseph Schumpeter, Kickstarter, Kiva Systems, Lewis Mumford, loss aversion, Lyft, Masayoshi Son, megacity, microapartment, minimum viable product, mortgage debt, New Urbanism, Nick Bostrom, North Sea oil, Ocado, openstreetmap, pattern recognition, Peter Calthorpe, random walk, Ray Kurzweil, Ray Oldenburg, rent-seeking, ride hailing / ride sharing, Rodney Brooks, self-driving car, sharing economy, Shoshana Zuboff, Sidewalk Labs, Silicon Valley, Silicon Valley startup, Skype, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, SoftBank, software as a service, sovereign wealth fund, Stephen Hawking, Steve Jobs, surveillance capitalism, technological singularity, TED Talk, Tesla Model S, The Coming Technological Singularity, The Death and Life of Great American Cities, The future is already here, The Future of Employment, The Great Good Place, too big to fail, traffic fines, transit-oriented development, Travis Kalanick, Uber and Lyft, uber lyft, urban planning, urban sprawl, US Airways Flight 1549, Vernor Vinge, vertical integration, Vision Fund, warehouse automation, warehouse robotics

The first practical demonstration of the new technology took place in 1887 in Richmond, Virginia, and within ten years “electric traction” had completely supplanted horse-drawn railways across the US, Canada, and much of Europe too. Much like Uber and Lyft today, streetcar companies were backed by deep-pocketed investors. And like their latter-day counterparts, they, too, quickly grew too big to fail. Electrification unleashed enormous pent-up demand for urban mobility. In Philadelphia, 75 percent of the streetcar network was electrified by 1895. The number of streetcar passengers citywide doubled between 1885 and 1895, to more than 220 million trips a year. But the expansion was hasty and uncoordinated.

It makes money on its investments in traction monopolies, and fosters an innovation that improves its beneficiaries’ lives and eases pressure on public finances. The alternative—allowing the housing market to collapse as retirees move en masse into care centers—is unthinkable. But what happens when such policies turn a traction monopoly into a vital service deemed “too big to fail”? Will health-system savings simply be gobbled by a rent-seeking traction company? Aside from the ethical concerns, the numbers involved in this web of money are so enormous that the future solvency of the welfare state may well hang in the balance. Even as tomorrow’s global traction monopolies take shape, we don’t yet know where their ambitions end.


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Chaos Kings: How Wall Street Traders Make Billions in the New Age of Crisis by Scott Patterson

"World Economic Forum" Davos, 2021 United States Capitol attack, 4chan, Alan Greenspan, Albert Einstein, asset allocation, backtesting, Bear Stearns, beat the dealer, behavioural economics, Benoit Mandelbrot, Bernie Madoff, Bernie Sanders, bitcoin, Bitcoin "FTX", Black Lives Matter, Black Monday: stock market crash in 1987, Black Swan, Black Swan Protection Protocol, Black-Scholes formula, blockchain, Bob Litterman, Boris Johnson, Brownian motion, butterfly effect, carbon footprint, carbon tax, Carl Icahn, centre right, clean tech, clean water, collapse of Lehman Brothers, Colonization of Mars, commodity super cycle, complexity theory, contact tracing, coronavirus, correlation does not imply causation, COVID-19, Credit Default Swap, cryptocurrency, Daniel Kahneman / Amos Tversky, decarbonisation, disinformation, diversification, Donald Trump, Doomsday Clock, Edward Lloyd's coffeehouse, effective altruism, Elliott wave, Elon Musk, energy transition, Eugene Fama: efficient market hypothesis, Extinction Rebellion, fear index, financial engineering, fixed income, Flash crash, Gail Bradbrook, George Floyd, global pandemic, global supply chain, Gordon Gekko, Greenspan put, Greta Thunberg, hindsight bias, index fund, interest rate derivative, Intergovernmental Panel on Climate Change (IPCC), Jeff Bezos, Jeffrey Epstein, Joan Didion, John von Neumann, junk bonds, Just-in-time delivery, lockdown, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, Mark Spitznagel, Mark Zuckerberg, market fundamentalism, mass immigration, megacity, Mikhail Gorbachev, Mohammed Bouazizi, money market fund, moral hazard, Murray Gell-Mann, Nick Bostrom, off-the-grid, panic early, Pershing Square Capital Management, Peter Singer: altruism, Ponzi scheme, power law, precautionary principle, prediction markets, proprietary trading, public intellectual, QAnon, quantitative easing, quantitative hedge fund, quantitative trading / quantitative finance, Ralph Nader, Ralph Nelson Elliott, random walk, Renaissance Technologies, rewilding, Richard Thaler, risk/return, road to serfdom, Ronald Reagan, Ronald Reagan: Tear down this wall, Rory Sutherland, Rupert Read, Sam Bankman-Fried, Silicon Valley, six sigma, smart contracts, social distancing, sovereign wealth fund, statistical arbitrage, statistical model, stem cell, Stephen Hawking, Steve Jobs, Steven Pinker, Stewart Brand, systematic trading, tail risk, technoutopianism, The Chicago School, The Great Moderation, the scientific method, too big to fail, transaction costs, University of East Anglia, value at risk, Vanguard fund, We are as Gods, Whole Earth Catalog

The idea, at least for banks, was that management needs to have a much deeper, personal financial commitment to their firms. If the failure of a bank could cause management to go bankrupt as well, institutions would be much safer. As it stood, management faced few repercussions, if any, when a bank blew up, especially the “too big to fail” kind that socialized risk by passing it off to the taxpayer. That’s why banks remained too large, too fragile, Taleb said, and the risk of collapse was greater than ever. Summers’s hackles went up. He was a chief architect of the Obama administration’s bailout of the financial system and reforms put in place to shore up bank balance sheets.

CHAPTER 12: THE DISORDER CLUSTER One of the main draws: a debate between Taleb and Larry Summers The account of Taleb’s debate with Larry Summers was told to me by Taleb and Brandon Yarckin. Quotes from the debate were taken from https://www.yahoo.com/entertainment/news/larry-summers-takes-fight-nassim-172010890.html and https://www.marketwatch.com/story/too-big-to-fail-battle-between-larry-summers-nassim-taleb-1400205931. “There’s a panic in the West” Video, 37:40, https://arxiv.org/ftp/arxiv/papers/0911/0911.0454.pdf. CHAPTER 13: VOLMAGEDDON “You might get lucky” Interview with Lagnado. “It feels like I’ve been shelled all week by artillery” Corrie Driebusch and Riva Gold, “Wild Week for Stocks Ends in Gain—Final-Hour Bounce Caps Worst Week in Two Years for U.S.


pages: 274 words: 93,758

Phishing for Phools: The Economics of Manipulation and Deception by George A. Akerlof, Robert J. Shiller, Stanley B Resor Professor Of Economics Robert J Shiller

Andrei Shleifer, asset-backed security, Bear Stearns, behavioural economics, Bernie Madoff, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carl Icahn, collapse of Lehman Brothers, compensation consultant, corporate raider, Credit Default Swap, Daniel Kahneman / Amos Tversky, dark matter, David Brooks, desegregation, en.wikipedia.org, endowment effect, equity premium, financial intermediation, financial thriller, fixed income, full employment, George Akerlof, greed is good, income per capita, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, junk bonds, Kenneth Arrow, Kenneth Rogoff, late fees, loss aversion, market bubble, Menlo Park, mental accounting, Michael Milken, Milgram experiment, money market fund, moral hazard, new economy, Pareto efficiency, Paul Samuelson, payday loans, Ponzi scheme, profit motive, publication bias, Ralph Nader, randomized controlled trial, Richard Thaler, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, short selling, Silicon Valley, stock buybacks, the new new thing, The Predators' Ball, the scientific method, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, theory of mind, Thorstein Veblen, too big to fail, transaction costs, Unsafe at Any Speed, Upton Sinclair, Vanguard fund, Vilfredo Pareto, wage slave

Paulson, On the Brink: Inside the Race to Stop the Collapse of the Global Financial System (New York: Business Plus, 2010), on the US Treasury; Raghuram Rajan, Fault Lines: How Hidden Fractures Still Threaten the World Economy (Princeton: Princeton University Press, 2010), on the financial system; Robert J. Shiller, Subprime Solution: How Today’s Global Financial Crisis Happened and What to Do about It (Princeton: Princeton University Press, 2008); Andrew Ross Sorkin, Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System (New York: Viking, 2009), on the US Treasury; Gillian Tett, Fool’s Gold: How the Bold Dream of a Small Tribe at J. P. Morgan Was Corrupted by Wall Street Greed (New York: Free Press, 2009); and David Wessel, In Fed We Trust: Ben Bernanke’s War on the Great Panic (New York: Crown Business, 2009).

Nixon (1969–1974).” May 8, 2011. http://socialsecurityperspectives.blogspot.com/2011/05/president-6-richard-m-nixon-1969-1974.html. Solow, Robert M. “Technical Change and the Aggregate Production Function.” Review of Economics and Statistics 39, no. 3 (August 1957): 312–20. Sorkin, Andrew Ross. Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System. New York: Viking, 2009. Stahre, Mandy, Jim Roeber, Dafna Kanny, Robert D. Brewer, and Xingyou Zhang. “Contribution of Excessive Alcohol Consumption to Deaths and Years of Potential Life Lost in the United States.”


pages: 440 words: 108,137

The Meritocracy Myth by Stephen J. McNamee

Abraham Maslow, affirmative action, Affordable Care Act / Obamacare, American ideology, antiwork, Bernie Madoff, British Empire, business cycle, classic study, collective bargaining, computer age, conceptual framework, corporate governance, deindustrialization, delayed gratification, demographic transition, desegregation, deskilling, Dr. Strangelove, equal pay for equal work, estate planning, failed state, fixed income, food desert, Gary Kildall, gender pay gap, Gini coefficient, glass ceiling, helicopter parent, income inequality, informal economy, invisible hand, job automation, joint-stock company, junk bonds, labor-force participation, longitudinal study, low-wage service sector, marginal employment, Mark Zuckerberg, meritocracy, Michael Milken, mortgage debt, mortgage tax deduction, new economy, New Urbanism, obamacare, occupational segregation, old-boy network, pink-collar, plutocrats, Ponzi scheme, post-industrial society, prediction markets, profit motive, race to the bottom, random walk, Savings and loan crisis, school choice, Scientific racism, Steve Jobs, The Bell Curve by Richard Herrnstein and Charles Murray, The Spirit Level, the strength of weak ties, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, too big to fail, trickle-down economics, upwardly mobile, We are the 99%, white flight, young professional

In 1970, the largest five U.S. banks held 17 percent of total industry assets; by 2010, the largest five U.S. banks held 52 percent of total industry assets, or three times the earlier level of concentration (Rosenblum 2011). The rapid consolidation of U.S. industry in general and especially the financial sector has led to increasing concerns that these corporate entities are “too big to fail.” That is, because of their sheer size and ripple effects if they should fail, they could drag the rest of the economy down with them and risk collapse of the economy as a whole, as was evident in the events leading to and precipitating the Great Recession. The Great Recession With rapidly mounting public and private debt, the paper tiger eventually became a house of cards.

Phillips, Joseph D. 1958. Little Business in the American Economy. Urbana: University of Illinois Press. Phillips, Kevin. 2008. Bad Money: Reckless, Finance, Failed Politics and the Global Crisis of American Capitalism. New York: Viking. Rosenblum, Harvey. 2011. Choosing the Road to Prosperity: Why We Must End Too Big to Fail Now. 2011 Annual Report of the Federal Reserve Bank of Dallas. Roy, William. 1997. Socializing Capital: The Rise of the Large Industrial Corporation in America. Princeton, NJ: Princeton University Press. Schlosser, Eric. 2003. Reefer Madness: Sex, Drugs, and Cheap Labor in the American Black Market.


pages: 376 words: 109,092

Paper Promises by Philip Coggan

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

The industry duly became more concentrated. According to Andrew Haldane, the share of total assets of the top four US banks rose from 10% in 1990 to 40% in 2007.10 At the global level, the share of assets of the five largest banks rose from 8 per cent in 1990 to 16 per cent in 2008. The banks became, in the phrase of the day, ‘too big to fail’. It is not clear that the economy gains much in efficiency from this concentration. Mr Haldane suggests that the optimal size of a bank is somewhere below $100 billion in assets. But in 2008, 145 global banks, controlling around 85 per cent of the industry, had assets greater than that level.

., Irrational Exuberance, Princeton, 2000. Skeel, David A. Jr, Debt’s Dominion: A History of Bankruptcy Law in America, Princeton, 2001. Skidelsky, Robert, John Maynard Keynes: Fighting for Freedom 1937 – 1946, London, 2001. —Keynes: The Return of the Master, London, 2009. Sorkin, Andrew Ross, Too Big to Fail: Inside the Battle to Save Wall Street, London, 2009. Stiglitz, Joseph, Freefall: Free Markets and the Sinking of the Global Economy , rev. edn, London, 2010. Taleb, Nassim Nicholas, The Black Swan: The Impact of the Highly Improbable , London, 2008. Warburton, Peter, Debt and Delusion: Central Bank Follies that Threaten Economic Disaster, London, 1999.


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The Reckoning: Financial Accountability and the Rise and Fall of Nations by Jacob Soll

accounting loophole / creative accounting, bank run, Bear Stearns, Bonfire of the Vanities, British Empire, collapse of Lehman Brothers, computer age, corporate governance, creative destruction, Credit Default Swap, delayed gratification, demand response, discounted cash flows, double entry bookkeeping, financial independence, Frederick Winslow Taylor, Glass-Steagall Act, God and Mammon, High speed trading, Honoré de Balzac, inventory management, invisible hand, Isaac Newton, James Watt: steam engine, joint-stock company, Joseph Schumpeter, new economy, New Urbanism, Nick Leeson, Plato's cave, Ponzi scheme, Ralph Waldo Emerson, scientific management, Scientific racism, South Sea Bubble, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, trade route

It could not have the same fate as the French Mississippi Company.21 Investors in the South Sea Company had hired Charles Snell, a well-respected accountant, to audit the company. Walpole understood the possible ramifications of such a public audit. He felt he needed to stop the audit and stabilize the financial system by restructuring the company. The South Sea Company was, as we say now, too big to fail. With the Act to Restore Publick Credit, Walpole’s first order of business was to make sure the company retained and continued to service about £33 million in government debt, while also saving investors and the banks that had lent them money to buy shares. To bail out the entire financial system, he first had the government lend money to the company to keep it afloat.

Indeed, regulators in Britain had begun to worry that the monopoly of the Big Four was itself a risk to the industry. Much like the investment banks, all firms’ large accounts have become interconnected through the complex tentacles of finance. The collapse of one of the Big Four firms could bring down the other three. It would seem, then, that the Big Four are too big to fail but too weak to effectively audit their corporate clients.29 Dickens would have appreciated the conundrum. To stop fraud at auditing companies, the U.S. and British governments worked to clip their wings, only to find that without effective auditors, it is impossible to oversee finance and industry, let alone government.


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Nomad Capitalist: How to Reclaim Your Freedom With Offshore Bank Accounts, Dual Citizenship, Foreign Companies, and Overseas Investments by Andrew Henderson

Affordable Care Act / Obamacare, Airbnb, airport security, Albert Einstein, Asian financial crisis, asset allocation, bank run, barriers to entry, birth tourism , bitcoin, blockchain, business process, call centre, capital controls, car-free, content marketing, cryptocurrency, currency risk, digital nomad, diversification, diversified portfolio, Donald Trump, Double Irish / Dutch Sandwich, Elon Musk, failed state, fiat currency, Fractional reserve banking, gentrification, intangible asset, land reform, low interest rates, medical malpractice, new economy, obamacare, offshore financial centre, passive income, peer-to-peer lending, Pepsi Challenge, place-making, risk tolerance, side hustle, Silicon Valley, Skype, too big to fail, white picket fence, work culture , working-age population

So, while I am not going to waste my time worrying about my financial ‘house’ burning down, I am going to look for a good way to insure it by turning to offshore banks. Many foreign banks and countries offer deposit insurance on their bank accounts. There are even a few places with unlimited deposit insurance. The most important thing to look for is bank stability, not which country the bank is in. Chances are, the next round of ‘Too Big to Fail’ will make your local bank account a target anyway. Better deposit insurance is just one piece of the larger benefit of having a better bank in general. Some of the world’s safest banks are in Germany, Singapore, and even Australia. Safe banks in the US and much of Europe are fewer and farther between than ever.

For example, a bank like Capital One that has a lot of money and wants to expand will simply take over and pay you in full, even if you had more than the limit in your account. If your offshore bank were to go under, the situation is generally resolved in much the same way. Do keep in mind that not all countries have deposit insurance, but even in countries that do not have insurance, many banks are still too big to fail. If a bank in Georgia were to go under, the potential damage to the economy would probably be enough to convince the Georgian government to step in. However, I have seen one or two instances in other countries where the banks say, “You’re a foreigner. Screw you.” The worst case is what happened in Cyprus where they just did a bail-in; but Cyprus was not a great place to bank to begin with.


pages: 367 words: 110,161

The Bond King: How One Man Made a Market, Built an Empire, and Lost It All by Mary Childs

Alan Greenspan, asset allocation, asset-backed security, bank run, Bear Stearns, beat the dealer, break the buck, buy and hold, Carl Icahn, collateralized debt obligation, commodity trading advisor, coronavirus, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, diversification, diversified portfolio, Edward Thorp, financial innovation, fixed income, global macro, high net worth, hiring and firing, housing crisis, Hyman Minsky, index card, index fund, interest rate swap, junk bonds, Kevin Roose, low interest rates, Marc Andreessen, Minsky moment, money market fund, mortgage debt, Myron Scholes, NetJets, Northern Rock, off-the-grid, pneumatic tube, Ponzi scheme, price mechanism, quantitative easing, Robert Shiller, Savings and loan crisis, skunkworks, sovereign wealth fund, stem cell, Steve Jobs, stocks for the long run, The Great Moderation, too big to fail, Vanguard fund, yield curve

Where banks had once ruled, BlackRock and Pimco’s representatives in the group that governed derivatives and swaps functionally set the terms in that world. They could no longer sidestep the question of how big was too big, with its vast and expensive potential repercussions. Regulators and politicians were still talking about who might be “too big to fail”: which firms were so important that, if they took too much risk and threatened the system (again), they’d have to be bailed out (again). The Financial Stability Oversight Council (FSOC), created in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, sought out these liabilities and had updated their canvass of inquiry from banks to add a broader category, “systemically important financial institutions,” or SIFIs.

Media skepticism existed at a simmer for a while, as in 2010, when The New York Times highlighted “the all-too-close relationships between our largest financial institutions and the people who acted as their regulators,” quoting Joshua Rosner, of research consultancy firm Graham, Fisher. “The ‘too big to fail’ concept is not just about assets. It’s also about relationships.” Three years later, those words seemed like a warning. Not only was Pimco’s relationship with its regulators not quite as close, but it was becoming adversarial, even dangerous. Profitability was on the line. * * * There was new hope.


pages: 357 words: 107,984

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

“When cash is dear, you sell what you can, which may not necessarily be what you want,” said Hammack, the Goldman Sachs treasurer.3 The 2008 crisis had brought a major regulatory overhaul from Congress—the Dodd-Frank bill that focused on reducing the risks posed by large, systemically important banks, often referred to as those “too big to fail.” But this crisis was one the architects of the bill hadn’t envisioned: all the banks were fundamentally sound, but a system-wide shock—the pandemic—led every bank dealer to make the same decision and say, “Conserve cash.” Economists and regulators referred to this as “the last-taxi problem.”

Fred Imbert, “Larry Kudlow says US has contained the coronavirus and the economy is holding up nicely,” CNBC, February 25, 2020. https://www.cnbc.com/2020/02/25/larry-kudlow-says-us-has-contained-the-coronavirus-and-the-economy-is-holding-up-nicely.html Chapter 1 1. Jerome H. Powell, “Ending ‘Too Big to Fail,’” speech at the Institute of International Bankers 2013 Washington Conference, Washington, DC, March 4, 2013. https://www.federalreserve.gov/newsevents/speech/powell20130304a.htm 2. Gutfreund later settled civil charges that he failed to supervise the firm’s top government-bond trader and paid a $100,000 fine.


pages: 356 words: 106,161

The Glass Half-Empty: Debunking the Myth of Progress in the Twenty-First Century by Rodrigo Aguilera

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Alan Greenspan, Anthropocene, availability heuristic, barriers to entry, basic income, benefit corporation, Berlin Wall, Bernie Madoff, Bernie Sanders, bitcoin, Boris Johnson, Branko Milanovic, Bretton Woods, Brexit referendum, Capital in the Twenty-First Century by Thomas Piketty, capitalist realism, carbon footprint, Carmen Reinhart, centre right, clean water, cognitive bias, collapse of Lehman Brothers, Colonization of Mars, computer age, Corn Laws, corporate governance, corporate raider, creative destruction, cryptocurrency, cuban missile crisis, David Graeber, David Ricardo: comparative advantage, death from overwork, decarbonisation, deindustrialization, Deng Xiaoping, Doha Development Round, don't be evil, Donald Trump, Doomsday Clock, Dunning–Kruger effect, Elon Musk, European colonialism, fake news, Fall of the Berlin Wall, first-past-the-post, Francis Fukuyama: the end of history, fundamental attribution error, gig economy, Gini coefficient, Glass-Steagall Act, Great Leap Forward, green new deal, Hans Rosling, housing crisis, income inequality, income per capita, index fund, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jean Tirole, Jeff Bezos, Jeremy Corbyn, Jevons paradox, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, karōshi / gwarosa / guolaosi, Kenneth Rogoff, Kickstarter, lake wobegon effect, land value tax, Landlord’s Game, late capitalism, liberal capitalism, long peace, loss aversion, low interest rates, Mark Zuckerberg, market fundamentalism, means of production, meta-analysis, military-industrial complex, Mont Pelerin Society, moral hazard, moral panic, neoliberal agenda, Network effects, North Sea oil, Northern Rock, offshore financial centre, opioid epidemic / opioid crisis, Overton Window, Pareto efficiency, passive investing, Peter Thiel, plutocrats, principal–agent problem, profit motive, public intellectual, purchasing power parity, race to the bottom, rent-seeking, risk tolerance, road to serfdom, Robert Shiller, Robert Solow, savings glut, Scientific racism, secular stagnation, Silicon Valley, Silicon Valley ideology, Slavoj Žižek, Social Justice Warrior, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, Stanislav Petrov, Steven Pinker, structural adjustment programs, surveillance capitalism, tail risk, tech bro, TED Talk, The Spirit Level, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transatlantic slave trade, trolley problem, unbiased observer, universal basic income, Vilfredo Pareto, Washington Consensus, Winter of Discontent, Y2K, young professional, zero-sum game

We will stick to this stance, even if it is criticized in the emotional debate over salaries.16 This was sent in June 2008, just a few months before the Lehman Brothers collapse in September of that year. In October 2008, UBS received $5.3 billion in government bailout funds as it teetered on the verge of bankruptcy, proving that being too big to fail has its benefits.17 The idea that companies can be named and shamed into paying their CEOs less and their employees more is also the logic behind legislation to disclose CEO-to-median worker pay ratios, which was implemented in the US from 2011 as part of the Dodd-Frank Act. Similar legislation was implemented in 2019 in the UK.

Unlike, say, investment bankers who must work under the oversight of public institutions (finance ministries, regulators, central banks), the world of technology is not nearly as saddled by government interference. Tellingly, the tech elite professes an aversion to regulation even greater than traditional conservatives, which is hardly a healthy economic position to hold particularly after the global financial crisis.22 And whereas banking increasingly appears more like a comfortable cartel of “too big to fail” institutions, competition in Silicon Valley can be more cutthroat, even though the consolidation of the tech markets into a few supersized firms like the “Big Four” (Amazon, Apple, Facebook, and Google) means that said competition is nowhere near as intense as during the glory days of the Dot Com boom of the 1990s.


pages: 651 words: 180,162

Antifragile: Things That Gain From Disorder by Nassim Nicholas Taleb

"World Economic Forum" Davos, Air France Flight 447, Alan Greenspan, Andrei Shleifer, anti-fragile, banking crisis, Benoit Mandelbrot, Berlin Wall, biodiversity loss, Black Swan, business cycle, caloric restriction, caloric restriction, Chuck Templeton: OpenTable:, commoditize, creative destruction, credit crunch, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, discrete time, double entry bookkeeping, Emanuel Derman, epigenetics, fail fast, financial engineering, financial independence, Flash crash, flying shuttle, Gary Taubes, George Santayana, Gini coefficient, Helicobacter pylori, Henri Poincaré, Higgs boson, high net worth, hygiene hypothesis, Ignaz Semmelweis: hand washing, informal economy, invention of the wheel, invisible hand, Isaac Newton, James Hargreaves, Jane Jacobs, Jim Simons, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Arrow, knowledge economy, language acquisition, Lao Tzu, Long Term Capital Management, loss aversion, Louis Pasteur, mandelbrot fractal, Marc Andreessen, Mark Spitznagel, meta-analysis, microbiome, money market fund, moral hazard, mouse model, Myron Scholes, Norbert Wiener, pattern recognition, Paul Samuelson, placebo effect, Ponzi scheme, Post-Keynesian economics, power law, principal–agent problem, purchasing power parity, quantitative trading / quantitative finance, Ralph Nader, random walk, Ray Kurzweil, rent control, Republic of Letters, Ronald Reagan, Rory Sutherland, Rupert Read, selection bias, Silicon Valley, six sigma, spinning jenny, statistical model, Steve Jobs, Steven Pinker, Stewart Brand, stochastic process, stochastic volatility, synthetic biology, tacit knowledge, tail risk, Thales and the olive presses, Thales of Miletus, The Great Moderation, the new new thing, The Wealth of Nations by Adam Smith, Thomas Bayes, Thomas Malthus, too big to fail, transaction costs, urban planning, Vilfredo Pareto, Yogi Berra, Zipf's Law

The list is depressingly long. Take rotten governments like the one in Egypt before the riots of 2011, supported by the United States for four decades in order “to avoid chaos,” with the side effect of a coterie of privileged pillagers using superpowers as a backstop—identical to bankers using their “too big to fail” status to scam taxpayers and pay themselves high bonuses. Saudi Arabia is the country that at present worries and offends me the most; it is a standard case of top-down stability enforced by a superpower at the expense of every single possible moral and ethical metric—and, of course, at the expense of stability itself.

Or how they use public office as a means to satisfy personal greed. 1 GSE is Fannie Mae and Freddie Mac—they both blew up. 2 I find it truly disgusting that one of the Orszag brothers, Peter, after the crisis got a job with the Obama administration—another rehiring of blindfolded bus drivers. Then he became vice chairman of Citibank, which explains why Citibank will blow up again (and we taxpayers will end up subsidizing his high salary). 3 My suggestion to deter “too big to fail” and prevent employers from taking advantage of the public is as follows. A company that is classified as potentially bailable out should it fail should not be able to pay anyone more than a corresponding civil servant. Otherwise people should be free to pay each other what they want since it does not affect the taxpayer.

., 1988, The Collapse of Complex Societies: New Studies in Archaeology. Cambridge: Cambridge University Press. Taleb, N. N., and M. Blyth, 2011, “The Black Swan of Cairo.” Foreign Affairs 90(3). Taleb, N. N., and A. Pilpel, 2007, “Epistemology and Risk Management.” Risk and Regulation 13, Summer. Taleb, N. N., and C. Tapiero, 2010, “The Risk Externalities of Too Big to Fail.” Physica A: Statistical Physics and Applications. Taleb, N. N., D. G. Goldstein, and M. Spitznagel, 2009, “The Six Mistakes Executives Make in Risk Management,” Harvard Business Review (October). Taleb, N. N., 2008, “Infinite Variance and the Problems of Practice.” Complexity 14(2). Taleb, N.


Engineering Security by Peter Gutmann

active measures, address space layout randomization, air gap, algorithmic trading, Amazon Web Services, Asperger Syndrome, bank run, barriers to entry, bitcoin, Brian Krebs, business process, call centre, card file, cloud computing, cognitive bias, cognitive dissonance, cognitive load, combinatorial explosion, Credit Default Swap, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, Debian, domain-specific language, Donald Davies, Donald Knuth, double helix, Dr. Strangelove, Dunning–Kruger effect, en.wikipedia.org, endowment effect, false flag, fault tolerance, Firefox, fundamental attribution error, George Akerlof, glass ceiling, GnuPG, Google Chrome, Hacker News, information security, iterative process, Jacob Appelbaum, Jane Jacobs, Jeff Bezos, John Conway, John Gilmore, John Markoff, John von Neumann, Ken Thompson, Kickstarter, lake wobegon effect, Laplace demon, linear programming, litecoin, load shedding, MITM: man-in-the-middle, Multics, Network effects, nocebo, operational security, Paradox of Choice, Parkinson's law, pattern recognition, peer-to-peer, Pierre-Simon Laplace, place-making, post-materialism, QR code, quantum cryptography, race to the bottom, random walk, recommendation engine, RFID, risk tolerance, Robert Metcalfe, rolling blackouts, Ruby on Rails, Sapir-Whorf hypothesis, Satoshi Nakamoto, security theater, semantic web, seminal paper, Skype, slashdot, smart meter, social intelligence, speech recognition, SQL injection, statistical model, Steve Jobs, Steven Pinker, Stuxnet, sunk-cost fallacy, supply-chain attack, telemarketer, text mining, the built environment, The Death and Life of Great American Cities, The Market for Lemons, the payments system, Therac-25, too big to fail, Tragedy of the Commons, Turing complete, Turing machine, Turing test, Wayback Machine, web application, web of trust, x509 certificate, Y2K, zero day, Zimmermann PGP

This won’t necessarily work on smaller CAs that have issued an insignificant number of certificates so that there are no good statistics available on how negligent (or diligent) they’ve been, but it doesn’t matter in their case because, as in the case of Diginotar, they’re not too big to fail. If a CA has been active enough, and issued a large enough number of certificates, to become too big to fail then they’ll also have a sufficiently visible track record that they can be rated on it. Another aspect of key continuity, already touched on in “Implementing Key Continuity” on page 380, is to use the user’s history of interaction with a site over time as a risk assessment measure.

In regulatory capture a government agency charged with regulating an industry ends up being captured by the group or groups that dominate that particular industry through techniques such as moving senior employees from large corporations into positions at government agencies charged with regulating the actions of their erstwhile employers (a manœuvre known as the revolving door), tempting the regulators with access to restricted knowledge that no-one else has (popular with oversight committees for intelligence agencies, who are captured as a matter of routine), or just good old-fashioned political lobbying. As with the case of lemon markets and PKI markets that’s covered in “X.509 in Practice” on page 694, what’s occurred with browsers is a somewhat special situation that’s more akin to the “too big to fail” (TB2F) problem that first gained widespread public attention during the 2008 financial crisis, rather than true regulatory capture [575]. If a browser were to remove the certificate of a CA that had acted negligently then large numbers of web sites would effectively lose their (expensive) certificates, requiring that they re-provision their servers with expensive certificates from another CA.

Further emphasising the depth of the TB2F problem for browser PKI, Mozilla then received a CA root certificate inclusion request from “Honest Achmed’s Used Cars and Certificates”, with Achmed listing his CA’s business plan as “to sell a sufficiently large number of certificates as quickly as possible in order to become too big to fail […] at which point most of the rest of this application will become irrelevant” [580]. User Conditioning 83 Two years later, the TB2F problem in browser PKI was again demonstrated when web analytics company Netcraft revealed that a number of CAs were violating their own requirements for issuing high-assurance EV certificates [581], and that some of the CAs had a history of doing this going back nearly three years [582][583].


pages: 124 words: 39,011

Beyond Outrage: Expanded Edition: What Has Gone Wrong With Our Economy and Our Democracy, and How to Fix It by Robert B. Reich

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, affirmative action, Alan Greenspan, banking crisis, benefit corporation, business cycle, carried interest, collateralized debt obligation, collective bargaining, Cornelius Vanderbilt, Credit Default Swap, credit default swaps / collateralized debt obligations, desegregation, electricity market, Ford Model T, full employment, Glass-Steagall Act, Home mortgage interest deduction, job automation, low interest rates, Mahatma Gandhi, minimum wage unemployment, money market fund, Nelson Mandela, new economy, Occupy movement, offshore financial centre, plutocrats, Ponzi scheme, race to the bottom, Ronald Reagan, Savings and loan crisis, single-payer health, special drawing rights, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, trickle-down economics, women in the workforce, working poor, zero-sum game

This is particularly notable in that the Dallas Fed is one of the most conservative of all Fed branches. But it knows from experience. Texas was ground zero in the savings and loan crisis that ripped through America in the 1980s, imposing huge losses on the state. The Wall Street banks were too big to fail before the bailout and are even bigger now. Twenty years ago, the ten largest banks on the Street held 10 percent of America’s total bank assets. Now the six largest hold over 70 percent. And the biggest four have a larger market share than ever. Their size gives them special privileges at the Fed—lower interest rate charges and special drawing rights—that provide them with a competitive advantage over their smaller rivals.


pages: 437 words: 113,173

Age of Discovery: Navigating the Risks and Rewards of Our New Renaissance by Ian Goldin, Chris Kutarna

"World Economic Forum" Davos, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, Airbnb, Albert Einstein, AltaVista, Asian financial crisis, asset-backed security, autonomous vehicles, banking crisis, barriers to entry, battle of ideas, Bear Stearns, Berlin Wall, bioinformatics, bitcoin, Boeing 747, Bonfire of the Vanities, bread and circuses, carbon tax, clean water, collective bargaining, Colonization of Mars, Credit Default Swap, CRISPR, crowdsourcing, cryptocurrency, Dava Sobel, demographic dividend, Deng Xiaoping, digital divide, Doha Development Round, double helix, driverless car, Edward Snowden, Elon Musk, en.wikipedia.org, epigenetics, experimental economics, Eyjafjallajökull, failed state, Fall of the Berlin Wall, financial innovation, full employment, Galaxy Zoo, general purpose technology, Glass-Steagall Act, global pandemic, global supply chain, Higgs boson, Hyperloop, immigration reform, income inequality, indoor plumbing, industrial cluster, industrial robot, information retrieval, information security, Intergovernmental Panel on Climate Change (IPCC), intermodal, Internet of things, invention of the printing press, Isaac Newton, Islamic Golden Age, Johannes Kepler, Khan Academy, Kickstarter, Large Hadron Collider, low cost airline, low skilled workers, Lyft, Mahbub ul Haq, Malacca Straits, mass immigration, Max Levchin, megacity, Mikhail Gorbachev, moral hazard, Nelson Mandela, Network effects, New Urbanism, non-tariff barriers, Occupy movement, On the Revolutions of the Heavenly Spheres, open economy, Panamax, Paris climate accords, Pearl River Delta, personalized medicine, Peter Thiel, post-Panamax, profit motive, public intellectual, quantum cryptography, rent-seeking, reshoring, Robert Gordon, Robert Metcalfe, Search for Extraterrestrial Intelligence, Second Machine Age, self-driving car, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Skype, smart grid, Snapchat, special economic zone, spice trade, statistical model, Stephen Hawking, Steve Jobs, Stuxnet, synthetic biology, TED Talk, The Future of Employment, too big to fail, trade liberalization, trade route, transaction costs, transatlantic slave trade, uber lyft, undersea cable, uranium enrichment, We are the 99%, We wanted flying cars, instead we got 140 characters, working poor, working-age population, zero day

Subprime mortgages were first.53 Industry concentration was also on the rise. In the United States between 1990 and 2008, the market share of the top three banks quadrupled from 10 percent to 40 percent. In the UK in 2008, the top three banks owned 80 percent of the market (up from 50 percent in 1997).54 The phrase “too big to fail” entered public discourse to describe these behemoths. Their executives knew their respective governments would never let them go bust—the ensuing chaos would be too great. Their investment discipline weakened—a phenomenon economists aptly call “moral hazard.” The biggest financial institutions began to take excessive risks, knowing that should things go seriously awry, taxpayers would bail them out.

. ** To be precise, the quota is 65,000 visas, plus another 20,000 reserved specifically for holders of advanced degrees awarded by US universities. *** The reforms are also incomplete. Global banking has become more concentrated, not less, since the crisis. Most countries’ big banks are still “too big to fail” and take risks they shouldn’t because they know from recent experience that their government (i.e., taxpayers) will bail them out if they bet wrongly. Notes Please note that some of the links referenced in this work are no longer active. Chapter 1: To Flounder or Flourish?


pages: 443 words: 112,800

The Third Industrial Revolution: How Lateral Power Is Transforming Energy, the Economy, and the World by Jeremy Rifkin

3D printing, additive manufacturing, Albert Einstein, American ideology, An Inconvenient Truth, barriers to entry, behavioural economics, bike sharing, borderless world, carbon footprint, centre right, clean tech, collaborative consumption, collaborative economy, Community Supported Agriculture, corporate governance, decarbonisation, deep learning, distributed generation, electricity market, en.wikipedia.org, energy security, energy transition, Ford Model T, global supply chain, Great Leap Forward, high-speed rail, hydrogen economy, income inequality, industrial cluster, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, job automation, knowledge economy, manufacturing employment, marginal employment, Martin Wolf, Masdar, megacity, Mikhail Gorbachev, new economy, off grid, off-the-grid, oil shale / tar sands, oil shock, open borders, peak oil, Ponzi scheme, post-oil, purchasing power parity, Ray Kurzweil, rewilding, Robert Solow, Ronald Reagan, scientific management, scientific worldview, Silicon Valley, Simon Kuznets, Skype, smart grid, smart meter, Spread Networks laid a new fibre optics cable between New York and Chicago, supply-chain management, systems thinking, tech billionaire, the market place, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, transaction costs, trickle-down economics, urban planning, urban renewal, Yom Kippur War, Zipcar

Then AIG—a company that held subprime mortgage bonds and loans totaling billions—was threatened with a meltdown; if this had occurred, it would have taken the rest of the American economy and much of the world economy down with it. Banks stopped lending. An economic collapse on the scale of the Great Depression loomed, forcing the United States to come to the rescue, bailing out Wall Street financial institutions to the tune of $700 billion. The rationale for the bailout was that these institutions were simply “too big to fail.” The so-called Great Recession began and real unemployment continued to rise month after month, reaching 10 percent of the workforce by the end of 2009 (17.6 percent of the workforce if we count the discouraged workers, who gave up looking for work and were no longer counted, and marginally attached workers, who were working only part time, but desired full-time employment).

Bankers and politicians would spend more than two years in endless peripheral discussions about the nature of the crisis, never seeming willing or quite able to peel open the sheath and see what was underneath. Had they done so, they would have seen a Second Industrial Revolution on life support. While it was becoming acceptable, even fashionable, to talk about giant financial institutions that were simply “too big to fail,” the idea of an economic era failing was too big to imagine—and so any such discussion was shelved indefinitely. Many of the global companies and policy people I was regularly in touch with were not yet ready to admit that the Second Industrial Revolution was on its deathbed, preferring instead to go with the conventional wisdom that the bad times were a result of failed regulatory, monetary, or fiscal policies.


pages: 379 words: 114,807

The Land Grabbers: The New Fight Over Who Owns the Earth by Fred Pearce

activist lawyer, Asian financial crisis, banking crisis, big-box store, Black Monday: stock market crash in 1987, blood diamond, British Empire, Buy land – they’re not making it any more, Cape to Cairo, carbon credits, carbon footprint, clean water, company town, corporate raider, credit crunch, Deng Xiaoping, Elliott wave, en.wikipedia.org, energy security, farmers can use mobile phones to check market prices, Garrett Hardin, Global Witness, index fund, Jeff Bezos, Kickstarter, Kondratiev cycle, land reform, land tenure, Mahatma Gandhi, market fundamentalism, megacity, megaproject, Mohammed Bouazizi, Nelson Mandela, Nikolai Kondratiev, offshore financial centre, out of africa, quantitative easing, race to the bottom, Ronald Reagan, smart cities, structural adjustment programs, too big to fail, Tragedy of the Commons, undersea cable, urban planning, urban sprawl, vertical integration, WikiLeaks

They had borrowed huge sums to set up the two Riau mills, and invested heavily in the logging to feed them. APP owed $14 billion. It was the largest corporate debtor in Asia. But, deemed too big to fail, the two companies were eventually bailed out by the Indonesian government. Where did the bailout money come from? On IMF advice, ministers in Jakarta auctioned off hundreds more logging concessions. The rate of deforestation across Indonesia doubled after 1998. While the loggers were too big to fail, the same was no longer true of Suharto. In a post–cold war world, the bulwark against communism was no longer needed, and he was becoming an embarrassment.


pages: 422 words: 113,830

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

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

“They should not be re-capitalizing firms that should be shut down. . . . Firms that made wrong decisions should fail.”32 Letting bad decision makers fail was how things worked in the old days when “creative destruction” kept capitalism on its toes. Now, of course, too many institutions in the United States were perceived as too big to fail, which made creative destruction unacceptable. And that inacceptability, in turn, denied U.S. capitalism some of its capacity for renewal. Had Paulson and Bernanke been willing to take a blowtorch to the Frankenstein firms and their practices and products back in late 2007 or early 2008, some six or eight might well have had to be broken up, taken over, or forced into bankruptcy or receivership—indeed nine more or less were anyway.

Even within the United States, market preferences are unlikely to block the emergence of some government-sanctioned energy strategy or hybrid of an energy and global-warming strategy, nor are they likely to block a considerable amount of financial reregulation, not least in the area of securities transparency and valuation. Other reregulation, as suggested by commentators like Martin Wolf and Henry Kaufman, could also include a rethinking of the legal status of megabanks. To Wolf, “What we have [in banking] is a risk-loving industry guaranteed as a public utility.” If banks are to be rescued because they are too big to fail, they must also become, in the manner of a regulated public utility, too suitably behaved and too responsible to fail.43 This chapter cannot turn away from the role of unstable and speculative finance in jeopardizing America’s position in the world of the early twenty-first century without considering two particular failures.


pages: 342 words: 114,118

After the Fall: Being American in the World We've Made by Ben Rhodes

Affordable Care Act / Obamacare, Alan Greenspan, Asian financial crisis, Berlin Wall, Bernie Sanders, Big Tech, British Empire, centre right, COVID-19, Deng Xiaoping, disinformation, Dissolution of the Soviet Union, Donald Trump, drone strike, Edward Snowden, fake news, Fall of the Berlin Wall, gentrification, geopolitical risk, George Floyd, Glass-Steagall Act, global pandemic, global supply chain, Great Leap Forward, illegal immigration, independent contractor, invisible hand, late capitalism, lockdown, Mark Zuckerberg, Mikhail Gorbachev, Nelson Mandela, new economy, obamacare, open economy, Ponzi scheme, profit motive, QAnon, quantitative easing, Ralph Waldo Emerson, Ronald Reagan, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, social distancing, South China Sea, the long tail, too big to fail, trade route, Washington Consensus, young professional, zero-sum game

But America has also offered ample evidence to support Putin’s message, even before we elected our own corrupt autocrat to the highest office in the land. I asked Navalny whether the 2008 financial crisis reinforced Putin’s message that there was no difference between Russian corruption and the corruption of the West. “Absolutely,” he replied. “The whole ‘too big to fail’ conception is a nice way to explain that there is no justice and there is the same corruption everywhere, including the U.S.A.” Think about it from a Russian perspective. You see your own billionaires and know they get rich because of their ties to Putin. Public resources like oil and gas handed off to a well-connected few.

Obama governed in line with this consensus, even if he was at the progressive end of it. He was consumed by the need to rescue the global economy and find some way to resume economic growth. Those priorities depended upon Chinese spending and stability, a machinery of economic growth that—like America’s sprawling banks—had become too big to fail. But over the thirty years since Tiananmen, the balance of influence between America and China has also shifted, almost imperceptibly, like a picture that changes as it comes into sharper focus. Now, as China surpasses the United States as a source of influence in an increasing number of sectors and regions, it is not surprising to see more aggressive efforts to shape the behaviors of U.S. companies and their employees.


Paint Your Town Red by Matthew Brown

banking crisis, Bernie Sanders, Black Lives Matter, Boris Johnson, call centre, capitalist realism, COVID-19, crowdsourcing, decarbonisation, deindustrialization, Donald Trump, fear of failure, financial exclusion, G4S, gentrification, gig economy, global supply chain, green new deal, housing crisis, hydroponic farming, lockdown, low interest rates, mittelstand, Murray Bookchin, new economy, Northern Rock, precariat, remote working, rewilding, too big to fail, wage slave, working-age population, zero-sum game

It follows similar principles in terms of its ownership structure and its focus on ensuring that money stays in the local economy, but in every other respect, it resembles a traditional high-street bank in terms of the range of services it offers to customers. What it doesn’t do, however, is engage in the kind of financial speculation that led to a run on Northern Rock in 2009 and created a series of “too-big-to-fail” banks that then needed to be bailed out by the taxpayer. Because they are so much bigger, and because they need to comply with sets of complex regulations, people’s banks or mutuals take longer than credit unions to set up, but their impact on the economy is also much greater. Mutuals are not a pie-in-the-sky idea, they are currently in development in the UK with the help of the Community Savings Bank Association (CBSA), and already form a highly significant sector of the German banking system.


pages: 476 words: 125,219

Digital Disconnect: How Capitalism Is Turning the Internet Against Democracy by Robert W. McChesney

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, access to a mobile phone, Alan Greenspan, Albert Einstein, American Legislative Exchange Council, American Society of Civil Engineers: Report Card, AOL-Time Warner, Automated Insights, barriers to entry, Berlin Wall, Big Tech, business cycle, Cass Sunstein, citizen journalism, classic study, cloud computing, collaborative consumption, collective bargaining, company town, creative destruction, crony capitalism, David Brooks, death of newspapers, declining real wages, digital capitalism, digital divide, disinformation, Double Irish / Dutch Sandwich, Dr. Strangelove, Erik Brynjolfsson, Evgeny Morozov, failed state, fake news, Filter Bubble, fulfillment center, full employment, future of journalism, George Gilder, Gini coefficient, Google Earth, income inequality, informal economy, intangible asset, invention of agriculture, invisible hand, Jaron Lanier, Jeff Bezos, jimmy wales, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Perry Barlow, Joseph Schumpeter, Julian Assange, Kickstarter, Mark Zuckerberg, Marshall McLuhan, means of production, Metcalfe’s law, military-industrial complex, mutually assured destruction, national security letter, Nelson Mandela, Network effects, new economy, New Journalism, Nicholas Carr, Occupy movement, ocean acidification, offshore financial centre, patent troll, Peter Thiel, plutocrats, post scarcity, Post-Keynesian economics, power law, price mechanism, profit maximization, profit motive, public intellectual, QWERTY keyboard, Ralph Nader, Richard Stallman, road to serfdom, Robert Metcalfe, Saturday Night Live, sentiment analysis, Silicon Valley, Silicon Valley billionaire, single-payer health, Skype, spectrum auction, Steve Jobs, Steve Wozniak, Steven Levy, Steven Pinker, Stewart Brand, technological determinism, Telecommunications Act of 1996, the long tail, the medium is the message, The Spirit Level, The Structural Transformation of the Public Sphere, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transfer pricing, Upton Sinclair, WikiLeaks, winner-take-all economy, yellow journalism, Yochai Benkler

“The future of the country,” David Brooks concluded in 2012, “will probably be determined by how well Americans can succeed at being monopolists.”52 “Don’t you see?” former U.S. Treasury secretary Robert Rubin answered when asked if the big banks, the most controversial of modern megacorporations, should be broken up. “Too big to fail isn’t a problem with the system. It is the system.”53 Advertising There is one important development for media, communication, and the Internet that is triggered to a significant extent by the growth of monopoly in the economy: advertising. Modern commercial advertising is not a function of competitive markets, profitable ones into which new businesses can easily enter, increase output, lower prices, and help the consumer live happily ever after.

If one goes down through the top thirty, the list then includes Verizon, Amazon, Comcast, and Disney, as well as the Internet giants that depend less directly on the consumer market: Intel, Cisco, Qualcomm, and Oracle. That is thirteen of the top thirty firms. In comparison, the top thirty firms include only two of the “too big to fail” banks that have earned so much notoriety for their dominance of the political economy.8 In short, the Internet monopolists sit at the commanding heights of U.S. and world capitalism. When Fortune magazine compiled its list of the top twelve entrepreneurs of the past generation, the founders of Internet giants Apple, Microsoft, Amazon, and Google occupied four of the top five slots.9 Why is monopoly so much more pronounced and so much more impervious to direct competitive challenge on the Internet than in the balance of the economy?


pages: 394 words: 124,743

Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry by Steven Rattner

activist fund / activist shareholder / activist investor, affirmative action, Alan Greenspan, bank run, banking crisis, Bear Stearns, business cycle, Carl Icahn, centre right, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, creative destruction, credit crunch, David Brooks, David Ricardo: comparative advantage, declining real wages, Ford Model T, friendly fire, hiring and firing, income inequality, Joseph Schumpeter, low skilled workers, McMansion, Mikhail Gorbachev, moral hazard, Ronald Reagan, Saturday Night Live, shareholder value, subprime mortgage crisis, supply-chain management, too big to fail

He accepted the necessity of bank rescues and of helping GM and Chrysler, but suspected that the liberal wing of our party wanted more intervention and more bailouts. Luminaries like George Soros and Joseph Stiglitz, for example, advocated nationalizing banks. Larry was determined to draw the line between the "too big to fail" interventions and the pressure to do more. He didn't want us crossing into Laos. Tim didn't voice an opinion, but we went away understanding that we would have to refine our thinking. A few days later, we got an unexpected intervention. As I would later witness firsthand, Barack Obama was remarkably well informed for a new President with so much on his plate.

Under this scenario, Chrysler Financial would go into "runoff mode," continuing to hold the loans that it had made but not making new ones. It wouldn't need new capital. Best of all, the fine print of its credit agreements would permit such a step—even if Chrysler itself went into Chapter 11. De Molina of course had his own agenda. The big, assertive Cuban-born banker envisioned that such a combination would cement GMAC as too big to fail and force the FDIC to help. A former Bank of America executive, de Molina made no secret of his ambition to make GMAC a banking giant. Almost from the start, he had clashed with the man who was effectively his boss—Cerberus's soft-spoken and seemingly tentative Steve Feinberg, who now sat fidgeting as de Molina made his case.


pages: 471 words: 124,585

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

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

An old question that has raised its head since August 2007 is how far implicit guarantees to bail out banks create a problem of moral hazard, encouraging excessive risk-taking on the assumption that the state will intervene to avert illiquidity and even insolvency if an institution is considered too big to fail - meaning too politically sensitive or too likely to bring a lot of other firms down with it. From an evolutionary perspective, however, the problem looks slightly different. It may, in fact, be undesirable to have any institutions in the category of ‘too big to fail’, because without occasional bouts of creative destruction the evolutionary process will be thwarted. The experience of Japan in the 1990s stands as a warning to legislators and regulators that an entire banking sector can become a kind of economic dead hand if institutions are propped up despite under-performance, and bad debts are not written off.


pages: 540 words: 119,731

Samsung Rising: The Inside Story of the South Korean Giant That Set Out to Beat Apple and Conquer Tech by Geoffrey Cain

Andy Rubin, Apple's 1984 Super Bowl advert, Asian financial crisis, autonomous vehicles, Berlin Wall, business intelligence, cloud computing, corporate governance, creative destruction, don't be evil, Donald Trump, double helix, Dynabook, Elon Musk, Fairchild Semiconductor, fake news, fear of failure, Hacker News, independent contractor, Internet of things, John Markoff, Jony Ive, Kickstarter, Mahatma Gandhi, Mark Zuckerberg, megacity, Mikhail Gorbachev, Nelson Mandela, patent troll, Pepsi Challenge, rolodex, Russell Brand, shareholder value, Sheryl Sandberg, Silicon Valley, Silicon Valley startup, Skype, Steve Jobs, Superbowl ad, Tim Cook: Apple, Tony Fadell, too big to fail, WikiLeaks, wikimedia commons

Or seasoned journalists turning their eyes away when confronted with Donald Trump’s conflicts of interest between his presidential duties and his businesses. Because of the outsized privileges of Samsung and the Lee family, South Koreans tell me Samsung has grown too big to fail. But Sangin Park, an economics professor at Seoul National University, puts that “too big to fail” label in perspective. The continued success of South Korea’s economy hinges not just on the Samsung Group as a whole but on a single company within the Samsung Group: According to crisis simulations I have carried out, if Electronics stocks fall by 70%, both Samsung Insurance and Samsung C&T will become bankrupt.


pages: 466 words: 116,165

American Kleptocracy: How the U.S. Created the World's Greatest Money Laundering Scheme in History by Casey Michel

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", Bellingcat, Berlin Wall, Bernie Sanders, bitcoin, clean water, coronavirus, corporate governance, cross-border payments, cryptocurrency, deindustrialization, Donald Trump, en.wikipedia.org, estate planning, Fall of the Berlin Wall, fixed income, forensic accounting, Global Witness, high net worth, hiring and firing, income inequality, Internet Archive, invention of the telegraph, Jeffrey Epstein, joint-stock company, Kickstarter, Maui Hawaii, McMansion, megaproject, Mikhail Gorbachev, New Journalism, offshore financial centre, opioid epidemic / opioid crisis, Ponzi scheme, race to the bottom, Ronald Reagan, Silicon Valley, Silicon Valley startup, Steve Jobs, too big to fail

The Obama administration, after all, had ridden to power on the back of a bruised, bleeding financial system, which exposed all the rot underpinning America’s supposed financial security. And stories of the illicit wealth tied to foreign oligarchs and megalomaniacal dictators—stories like those of the Obiangs and Riggs Bank, which in many ways set the precedent for the stories of negligence and deceit emanating from other “too big to fail” American banks—continued circling Washington. For an administration wedded to patching up a broken financial system, targeting the funds of the powerful and the corrupt still zooming into the country seemed like a natural fit. It didn’t take long for the Obama administration to redirect American anticorruption efforts from combating the likes of the Taliban and its terrorist allies to something far bigger: kleptocracy.

The government swiftly patched a $5.5 billion hole in the bank’s finances, if only to save the country’s entire banking sector from going belly-up.9 “Either PrivatBank was going down, and the whole banking system would die with it, or the government had to save it,” one Ukrainian journalist who’s covered Kolomoisky told me.10 Or as Daria Kalenyuk, the noted anticorruption activist, added, Kolomoisky “managed to create a bank that was too big to fail.”11 Instead of acting as a pillar of a new Ukraine, PrivatBank had punched a mile-wide hole into the bleeding Ukrainian budget. And as Gontareva soon discovered, instead of acting as a dependable partner of Ukrainians across the country, those behind PrivatBank had launched the greatest Ponzi scheme the country had ever seen.


pages: 453 words: 122,586

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

This stipulation demanded a radical change of thinking in Washington, D.C. With scant public debate, Bernanke agreed that the Fed should intervene directly in the market, arguing that if Bear Sterns demurred, its collapse would set off a chain of catastrophic bankruptcies. The phrase on everyone’s lips was: Bear Sterns is “too big to fail.” But what of other banks facing similar liquidity crises? Samuelson considered the continuing turmoil at Fannie and Freddie an omen, telling his nephew, Larry Summers—at the time president of Harvard, but before long to join the Obama administration as director of the National Economic Council—that, after accepting an emergency loan of $25 billion from the Treasury on July 22, 2008, the two great mortgage lenders were effectively owned by the government and that both were “toast.”

. … By the end they will eat up a lot of government money.12 The prospect of Fannie and Freddie going bankrupt was too much for Paulson, who on September 7, 2008—two weeks after Samuelson’s letter to Summers—took the mortgage giants into federal government ownership. “Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets,”13 Paulson declared. Again, the federal government stepped in to prevent a large financial company’s failure because it was too big to fail. How many more companies would end up in government hands? When, two weeks later, on September 15, Lehman Brothers filed for bankruptcy, there was a fair expectation that the Fed would step in to save the company, as it had done Bear Sterns and Fannie and Freddie. Like other financial companies, in recent years Lehman had made a decent profit flipping federal government money, borrowing it short-term and relending it to borrowers for higher returns.


Because We Say So by Noam Chomsky

Affordable Care Act / Obamacare, American Legislative Exchange Council, Anthropocene, Chelsea Manning, cuban missile crisis, David Brooks, drone strike, Edward Snowden, Garrett Hardin, gentrification, high-speed rail, Intergovernmental Panel on Climate Change (IPCC), Julian Assange, Malacca Straits, Martin Wolf, means of production, Monroe Doctrine, Nelson Mandela, no-fly zone, Occupy movement, oil shale / tar sands, Powell Memorandum, public intellectual, Ralph Waldo Emerson, RAND corporation, Slavoj Žižek, Stanislav Petrov, Strategic Defense Initiative, Thorstein Veblen, too big to fail, Tragedy of the Commons, uranium enrichment, WikiLeaks

Once we break out of the framework of national states as unified entities with no internal divisions within them, we can see that there is a global shift of power, but it’s from the global workforce to the owners of the world: transnational capital, global financial institutions. CAN CIVILIZATION SURVIVE CAPITALISM? March 4, 2013 There is “capitalism” and then there is “really existing capitalism.” The term “capitalism” is commonly used to refer to the U.S. economic system, with substantial state intervention ranging from subsidies for creative innovation to the “too-big-to-fail” government insurance policy for banks. The system is highly monopolized, further limiting reliance on the market, and increasingly so: In the past 20 years the share of profits of the 200 largest enterprises has risen sharply, reports scholar Robert W. McChesney in his new book, DIGITAL DISCONNECT.


pages: 419 words: 130,627

Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase by Duff McDonald

"World Economic Forum" Davos, Alan Greenspan, AOL-Time Warner, bank run, Bear Stearns, Blythe Masters, Bonfire of the Vanities, book value, business logic, centralized clearinghouse, collateralized debt obligation, conceptual framework, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Exxon Valdez, financial innovation, fixed income, G4S, Glass-Steagall Act, Greenspan put, housing crisis, interest rate swap, Jeff Bezos, John Meriwether, junk bonds, Kickstarter, laissez-faire capitalism, Long Term Capital Management, margin call, market bubble, Michael Milken, money market fund, moral hazard, negative equity, Nelson Mandela, Northern Rock, profit motive, proprietary trading, Renaissance Technologies, risk/return, Rod Stewart played at Stephen Schwarzman birthday party, Saturday Night Live, sovereign wealth fund, statistical model, Steve Ballmer, Steve Jobs, technology bubble, The Chicago School, too big to fail, Vanguard fund, zero-coupon bond, zero-sum game

It was under Greenspan’s auspices, then, that the Wall Street juggernaut, the creation of giant, financial supermarkets that offered every money-related product under the sun, began. The wholesale clearance of regulatory hurdles made it possible for firms to assemble themselves into conglomerates that were too big to fail, a paradoxical situation that led managers to ignore traditional risk controls and make audacious bets with their capital. Sandy Weill and Jamie Dimon were early and enthusiastic participants in this movement, a somewhat dubious legacy. On the one hand, banking CEOs can reasonably argue that they needed scale (and leverage) to squeeze sufficient profit from businesses that were largely based on low-margin commodity products.

• • • The question whether the mega-bank model pioneered by Weill and Dimon is viable has never been put to rest. That’s in part because the two prime examples—Citigroup and JPMorgan Chase—have seen such starkly differing results. At the same time as it became too big to manage, Citigroup became too big to fail, critics say, putting the entire financial system at risk. Defenders of the mega-bank concept, Dimon included, make an argument similar to the refrain of some people who defend the Second Amendment: “Guns don’t kill people; people kill people.” The model itself isn’t flawed, the proponents of the mega-bank say, though some of the people trying to implement it are.


pages: 483 words: 141,836

Red-Blooded Risk: The Secret History of Wall Street by Aaron Brown, Eric Kim

Abraham Wald, activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, Asian financial crisis, Atul Gawande, backtesting, Basel III, Bayesian statistics, Bear Stearns, beat the dealer, Benoit Mandelbrot, Bernie Madoff, Black Swan, book value, business cycle, capital asset pricing model, carbon tax, central bank independence, Checklist Manifesto, corporate governance, creative destruction, credit crunch, Credit Default Swap, currency risk, disintermediation, distributed generation, diversification, diversified portfolio, Edward Thorp, Emanuel Derman, Eugene Fama: efficient market hypothesis, experimental subject, fail fast, fear index, financial engineering, financial innovation, global macro, illegal immigration, implied volatility, independent contractor, index fund, John Bogle, junk bonds, Long Term Capital Management, loss aversion, low interest rates, managed futures, margin call, market clearing, market fundamentalism, market microstructure, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, natural language processing, open economy, Pierre-Simon Laplace, power law, pre–internet, proprietary trading, quantitative trading / quantitative finance, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, shareholder value, Sharpe ratio, special drawing rights, statistical arbitrage, stochastic volatility, stock buybacks, stocks for the long run, tail risk, The Myth of the Rational Market, Thomas Bayes, too big to fail, transaction costs, value at risk, yield curve

Where banks were not forbidden altogether, they were fenced in by rules limiting growth and types of lending, and mandating lots of gold and silver reserves—up to 100 percent reserves in some places, which destroys the whole idea. There was an obsession with preventing bank failures—which reached pathological extreme in the absurd idea of “too big to fail”—which led to regulations designed to suppress risk taking and punish risk takers. Of course some kind of license had to be bought from the government, and it was usually necessary to appoint people from the local elite to paid board positions. 1776 and All That That all changed in 1776.

And if selection pressure sweeps away the entire firm, it’s a favor to everyone to let it happen fast and during good times. That results in less waste, and means employees are looking for new jobs when there are jobs available. Throwing money down a black hole for years to buy the privilege of failing in a crisis instead hurts everyone. The problem in the financial crisis was not too big to fail, but that too many firms failed to fail in 2004 to 2007, and clogged up the drain in 2008. I’m not going to cover every aspect of customer-driven natural selection, but I’ll mention one more because it’s been in the news a lot: compensation. This was one of the first issues Wall Street quants tackled when we went into risk management.


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People, Power, and Profits: Progressive Capitalism for an Age of Discontent by Joseph E. Stiglitz

affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, AlphaGo, antiwork, barriers to entry, basic income, battle of ideas, behavioural economics, Berlin Wall, Bernie Madoff, Bernie Sanders, Big Tech, business cycle, Cambridge Analytica, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, carried interest, central bank independence, clean water, collective bargaining, company town, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, crony capitalism, DeepMind, deglobalization, deindustrialization, disinformation, disintermediation, diversified portfolio, Donald Trump, driverless car, Edward Snowden, Elon Musk, Erik Brynjolfsson, fake news, Fall of the Berlin Wall, financial deregulation, financial innovation, financial intermediation, Firefox, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, George Akerlof, gig economy, Glass-Steagall Act, global macro, global supply chain, greed is good, green new deal, income inequality, information asymmetry, invisible hand, Isaac Newton, Jean Tirole, Jeff Bezos, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John von Neumann, Joseph Schumpeter, labor-force participation, late fees, low interest rates, low skilled workers, Mark Zuckerberg, market fundamentalism, mass incarceration, meta-analysis, minimum wage unemployment, moral hazard, new economy, New Urbanism, obamacare, opioid epidemic / opioid crisis, patent troll, Paul Samuelson, pension reform, Peter Thiel, postindustrial economy, price discrimination, principal–agent problem, profit maximization, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, Richard Thaler, Robert Bork, Robert Gordon, Robert Mercer, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, search costs, secular stagnation, self-driving car, shareholder value, Shoshana Zuboff, Silicon Valley, Simon Kuznets, South China Sea, sovereign wealth fund, speech recognition, Steve Bannon, Steve Jobs, surveillance capitalism, TED Talk, The Chicago School, The Future of Employment, The Great Moderation, the market place, The Rise and Fall of American Growth, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, trickle-down economics, two-sided market, universal basic income, Unsafe at Any Speed, Upton Sinclair, uranium enrichment, War on Poverty, working-age population, Yochai Benkler

To see the benefits of this and other regulations, just go to any major city in a developing country, and observe the chaos that results in their absence. The set of regulations required for the functioning of a modern society are obviously complex. Banks know how to take advantage of others through predatory and deceptive lending. Large banks engage in excessive risk-taking, knowing that they are too big to fail, so that if they run into a problem, they will be rescued—2008 was only the latest instance in which government had to bail them out. It’s natural, then, to try to keep banks from undertaking excessive risk or from taking advantage of others. The banks argued for deregulation—stripping away the regulations that prevented them taking advantage of others and undertaking excessively risky actions.

For example, Bank of America’s quarterly earnings in the first three months of 2018 were nearly $7 billion, the highest ever. Even as profits surged, Bank of America’s tax bill decreased some 26 percent because of the new law. See Matt Egan, “Big Banks Are Minting Money Right Now,” CNN Money, Apr. 18, 2018. 25.In the 2016 Democratic primary, there was a foolish debate about whether the crucial issue was the too-big-to-fail banks and restoring some version of Glass-Steagall, which had separated commercial banking from investment banking, or the shadow banking system. The correct answer is that we needed reforms in both. See, e.g., Stiglitz, Freefall; Commission of Experts on Reforms of the International Monetary and Financial System appointed by the President of the United Nations General Assembly, The Stiglitz Report: Reforming the International Monetary and Financial Systems in the Wake of the Global Crisis (New York: The New Press, 2010); Simon Johnson and James Kwak, 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown (New York: Random House, 2010); and Rana Foroohar, Makers and Takers: How Wall Street Destroyed Main Street (New York: Crown, 2016).


Apocalypse Never: Why Environmental Alarmism Hurts Us All by Michael Shellenberger

"World Economic Forum" Davos, Albert Einstein, An Inconvenient Truth, Anthropocene, Asperger Syndrome, Bernie Sanders, Bob Geldof, Boeing 747, carbon footprint, carbon tax, Cesare Marchetti: Marchetti’s constant, clean tech, clean water, climate anxiety, Corn Laws, coronavirus, corporate social responsibility, correlation does not imply causation, cuban missile crisis, decarbonisation, deindustrialization, disinformation, Dissolution of the Soviet Union, Donald Trump, Dr. Strangelove, Elon Musk, energy transition, Extinction Rebellion, failed state, Garrett Hardin, Gary Taubes, gentleman farmer, global value chain, Google Earth, green new deal, Greta Thunberg, hydraulic fracturing, index fund, Indoor air pollution, indoor plumbing, Intergovernmental Panel on Climate Change (IPCC), Internet Archive, land tenure, Live Aid, LNG terminal, long peace, manufacturing employment, mass immigration, meta-analysis, Michael Shellenberger, microplastics / micro fibres, Murray Bookchin, ocean acidification, off grid, oil shale / tar sands, Potemkin village, precautionary principle, purchasing power parity, Ralph Nader, renewable energy transition, Rupert Read, School Strike for Climate, Solyndra, Stephen Fry, Steven Pinker, supervolcano, Ted Nordhaus, TED Talk, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, trade route, Tragedy of the Commons, union organizing, WikiLeaks, Y2K

Elizabeth Douglas, “Outage at San Onofre May Cost Hundreds of Millions,” San Diego Union-Tribune, June 14, 2012, https://www.sandiegouniontribune.com. Morgan Lee, “Nuclear settlement gets mixed reception,” San Diego Union-Tribune, June 16, 2014, https://www.sandiegouniontribune.com. 79. Liza Tucker, “Brown’s Dirty Hands.” Lucas Davis, “Too Big to Fail?,” Energy Institute at Haas, March 31, 2014, https://energyathaas.wordpress.com/2014/03/31/too-big-to-fail. 80. Jeff McDonald, “Aguirre Pushing for Brown’s Emails,” San Diego Union-Tribune, November 13, 2015, https://www.sandiegouniontribune.com. 81. Tony Kovaleski, Liz Wagner, and Felipe Escamilla, “Attorneys Suggest Evidence Isn’t Safe at CPUC amid Federal Investigation,” NBC Bay Area, October 16, 2014, https://www.nbcbayarea.com. 82.


pages: 505 words: 138,917

Open: The Story of Human Progress by Johan Norberg

Abraham Maslow, additive manufacturing, affirmative action, Albert Einstein, anti-globalists, basic income, Berlin Wall, Bernie Sanders, Bletchley Park, Brexit referendum, British Empire, business cycle, business process, California gold rush, carbon tax, citizen journalism, classic study, Clayton Christensen, clean water, cognitive dissonance, collective bargaining, Corn Laws, coronavirus, COVID-19, creative destruction, crony capitalism, decarbonisation, deindustrialization, Deng Xiaoping, digital map, Donald Trump, Edward Jenner, fake news, Fall of the Berlin Wall, falling living standards, Filter Bubble, financial innovation, flying shuttle, Flynn Effect, Francis Fukuyama: the end of history, future of work, Galaxy Zoo, George Gilder, Gini coefficient, global pandemic, global supply chain, global village, green new deal, humanitarian revolution, illegal immigration, income per capita, Indoor air pollution, indoor plumbing, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Islamic Golden Age, James Watt: steam engine, Jane Jacobs, Jeff Bezos, job automation, John von Neumann, joint-stock company, Joseph Schumpeter, Kickstarter, knowledge economy, labour mobility, Lao Tzu, liberal capitalism, manufacturing employment, mass immigration, negative emissions, Network effects, open borders, open economy, Pax Mongolica, place-making, profit motive, RAND corporation, regulatory arbitrage, rent control, Republic of Letters, road to serfdom, Ronald Reagan, Schrödinger's Cat, sharing economy, side project, Silicon Valley, Solyndra, spice trade, stem cell, Steve Bannon, Steve Jobs, Steve Wozniak, Steven Pinker, tacit knowledge, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, trade liberalization, trade route, transatlantic slave trade, Tyler Cowen, Uber for X, ultimatum game, universal basic income, World Values Survey, Xiaogang Anhui farmers, zero-sum game

Regulations and taxes become tailor-made for them, to the detriment of the overall economy. There are some prominent examples of this. Big financial companies have been allowed to reduce capital buffers to a pittance, with the knowledge that they have a government safety net. In good times they win; in bad times, the taxpayers lose. This system of ‘too big to fail’ corresponds to an ongoing, implicit subsidy of almost 100 million dollars every day to the top eighteen US banks.32 This has created an oversized banking system that increases risk, and many brilliant graduates who could have been innovative in other sectors go there to design new exotic securities that are little more than regulatory arbitrage.

(Fukuyama), 362–5 End of Work, The (Rifkin), 312 Engels, Friedrich, 33, 36, 162, 206, 247, 256 English Civil War (1642–1651), 148, 183, 184, 201 Enigma machine, 124–6 Enlightenment, 4, 5, 6, 13, 103, 154–60, 165–6, 195–6 Environmental Performance Index, 327 Ephesus, 45 Epic of Gilgamesh, The, 38 Epicurus, 134–5 Epstein, Richard, 320 equality matching, 262–6, 267 Erasmus, 152 Erdogan, Recep Tayyip, 354 Ethiopia, 72, 130 ethnocentrism, 219, 271 Etruscan civilization (c. 900–27 BC), 43 Eubulus, 47 eugenics, 109 Euphrates river, 37 Euripides, 132 European Organization for Nuclear Research, 306 European Parliament, 325 European Union (EU) Brexit (2016–), 9, 14, 118, 238, 240–41, 349, 354, 379 common currency, 280–81 freedom of movement, 118, 343 migration crisis (2015–), 10, 114, 115, 342–3, 358 subsidies in, 280 trade and, 272 United States, trade with, 19 Evans, Oliver, 203 Evolution of God, The (Wright), 249 evolutionary psychology, 14, 23, 225 exoticism, 84 Expressionism, 198 Facebook, 239, 309 Falwell, Jerry, 113–14 Farage, Nigel, 241 farming, see agriculture Fascist Italy (1922–1943), 105, 219 FedEx, 319 Feifer, Jason, 290–92 Fenway Park, Boston, 223 Ferdinand II, King of Aragon, 97, 98, 106 Ferguson, Charles, 314 Fermi, Enrico, 105 Ferney, France, 153 feudalism, 92, 194, 202, 208 fight-or-flight instinct, 15, 346, 348–9 filter bubbles, 239 financial crisis (2008), 10, 15, 62, 254, 333, 358, 359–60 fire, control of, 32–3, 76 Flanders, 208 fluyts, 100 Flynn effect, 109 Fogel, Robert, 276 folk economics, 258–62 football, 223–4, 245–6 Forbes, 274 Ford, Henry, 203 Fortune 500 companies, 82 Fox News, 82, 302, 354 France, 151 American Revolutionary War (1775–83), 201 automation in, 313 Cathars, 94, 142 Cobden–Chevalier Treaty (1860), 53–4 corruption in, 345 Dutch War (1672–8), 101 Encyclopédie, 154 free zones in, 180–81 Huguenots, persecution of, 97, 99, 101, 158, 193 immigration in, 115 Jews, persecution of, 96, 97, 254 languages in, 289 Minitel, 313 Revolution (1789–99), 201, 292 Royal Academy of Sciences, 156 ruin follies, 287 St Bartholomew’s Day massacre (1572), 97 Thököly Uprising (1678–85), 137 Uber in, 320 University of Paris, 140, 141–2, 143 Francis I, Emperor of Austria-Hungary, 178 Franciscans, 144 Franklin, Benjamin, 107 Franks, 92 free speech, 127, 131–2, 160, 163–5, 343 Chicago principles, 164–5 emigration for, 152–3 university campuses, 163–5 free trade, see under trade Fried, Dan, 289 Friedman, Benjamin, 253 Friedman, David, 284 Friedman, Thomas, 325 Friedrich Wilhelm I, King of Prussia, 153 Fukuyama, Francis, 362–5 Fulda, Germany, 179, 180 Future and Its Enemies, The (Postrel), 300 Future of Nostalgia, The (Boym), 288 Galatia, 90 Galaxy Zoo, 80 Galilei, Galileo, 146, 150 Gallup, 164 game theory, 26 Gandhi, Indira, 326 gas lighting, 297 Gates, William ‘Bill’, 274, 277, 309 Gauls, 90, 91, 92 gay rights, 113, 336 Geary, Patrick, 288–9 gender equality, 113, 114 General Motors, 64 generations baby-boom generation (1946–64), 294, 340 generation X (1965–80), 340 immigration and, 106, 110–11, 113–14 interwar generation (1928–45), 340 millennial generation (1981–96), 340 nostalgia and, 291, 293–4, 296 genetically modified organisms (GMO), 299, 301 Geneva, Switzerland, 152, 153 Genghis Khan, 94–5, 96, 174 Genoa, Republic of (1005–1797), 73, 178 George II, King of Great Britain and Ireland, 193 George III, King of Great Britain and Ireland, 103, 193 George Mason University, 257, 258 Georgia, 365 Georgia, United States, 349 German Conservative Party, 254 Germany automatic looms, 179 Berlin Wall, fall of (1989), 10, 340, 341, 363, 364 Bronze Age migration, 75 budget deficits, 60 COVID-19 pandemic (2019–20), 12 guilds in, 190 immigration in, 114, 115 Jews, persecution of, 99, 104–6, 109, 220, 233 migration crisis (2015–), 342–3 Nazi period (1933–45), 104–6, 109, 124, 220, 233, 353 Neolithic migration, 74 protectionism in, 314 Reichstag fire (1933), 353 Thirty Years War (1618–48), 150 United States, migration to, 104, 107–8, 111 Weimar period (1918–33), 353 al-Ghazali, 139 Gholia, 89 Gibbon, Edward, 90 Gilder, George, 314 Gilgamesh, 38 Gillis, John, 291 Gingrich, Newton, 313 Gini coefficient, 273 Gintis, Herbert, 36 global history, 13 global price crisis (2010–11), 11 global warming, 75, 323, 325, 326–34 globalization, 4, 55, 270 backlashes against, 9, 14, 54, 57 cities and, 35 classical world, 43–50 conspiracy theories on, 323 disease and, 11, 77–9 United States and, 19 Westernization, 4 Glorious Revolution (1688), 101, 185–8, 190, 193 Goa, India, 146–7 golden nugget theory, 5 Golden Rule, 251–2 Golding, William, 219, 243, 244 Goldstone, Jack, 5, 133, 353 Goodness Paradox, The (Wrangham), 227 Google, 309, 311 Gordon, Thomas, 201 Göring, Hermann, 106 gossip, 229 Goths, 92 Gottlieb, Anthony, 135 Great Awakening (1730–55), 102 Great Depression (1929–39), 54–5, 56, 254 Great Enrichment, 167, 204 Great Recession (2007–9), 254–5, 358, 359–60 Great Transformation, The (Polanyi), 37 Great Vanishing, 134–5 Great Wall of China, 178 Greece, ancient, 127–32, 169 Athens, 47, 53, 89, 90, 131–2, 134 Axial Age, 129 cosmopolitanism, 87–8 golden nugget theory, 5 Ionian enlightenment, 127–9 Mycenae, 88 philosophy, 13, 70, 127–32, 134–5, 136 Phoenicians, relations with, 43, 44, 45, 46 science, 127–32, 136 Sparta, 47, 54, 90, 132 trade, attitudes towards, 47, 54 xenophobia in, 90 Green New Deal, 302 Greene, Joshua, 216, 259 Greenland, 51 Gregorian calendar, 137, 152 Gregory IX, Pope, 142 Gregory XIII, Pope, 152 gross domestic product (GDP), 68–9, 257, 278–9 Grotius, Hugo, 147, 152–3 groupthink, 83 Guangzhou, Guangdong, 352 guilds, 190 Gutenberg, Johannes, 146 Haber, Fritz, 105 Habsburg Empire (1282–1918) anti-Semitism in, 254 Austria, 151, 179, 190 refugees, 99 Spain, 98–9, 208 Hadrian, Roman Emperor, 91 Hadrian’s Wall, 47 Hagley Park, West Midlands, 286–7 Haidt, Jonathan, 163, 229, 344, 348, 357 Haile Selassie, Emperor of Ethiopia, 72 Hamas, 365 Hangzhou, Zhejiang, 173 Hanseatic League (1358–1862), 53 Hanson, Robin, 282 Hanway, Jonas, 298 Happy Days, 294 Harari, Yuval Noah, 38 Harriot, Thomas, 150 Hartsoeker, Nicolaas, 159 Harvard Business Review, 313 Harvard University, 116, 122, 137, 253, 309, 313 Haskell, Thomas, 206 Hässelby, Stockholm, 217–18, 245 Hayashi, Stuart, 370 Hayek, Friedrich, 1, 7, 29, 300, 325 Hebrew Bible, 248–50 Hegel, Georg Wilhelm Friedrich, 288, 365 Helm, Dieter, 328, 331 Henrich, Joseph, 36 Hercules, 87 Herodotus, 132 Hewlett-Packard, 304 Higgs, Robert, 337 Hill, Christopher, 182 Hinduism, 136, 149, 354 von Hippel, William, 24, 25, 262, 284 Hippocrates, 128 Hispanic people, 110–11 Hitler, Adolf, 104–5, 353 Hobbes, Thomas, 9, 152, 226 Hofer, Johannes, 288 Holmgren, Pär, 325 Holocaust (1941–5), 109, 220 Holy Roman Empire (800–1806), 155, 181, 288 Homestead Acts, 171 Homo economicus, 34, 36 Homo erectus, 76, 267 Homo sapiens, 3, 21, 23, 30–33, 76, 259–62, 282, 371 homosexuality, 79, 113–14, 336 Homs, Syria, 82 Honeywell, 303 Hong Kong, 53, 235, 316 Hoover, Herbert, 55 horseshoes, 203 House of Wisdom, Baghdad, 136 Household Narrative, The, 297 housing, 375–6 Huguenots, 97, 99, 101, 158, 193 human rights, 87, 147, 213 humanitarianism, 204–7 Hume, David, 151, 154, 194 Hungary, 105, 190, 235, 237, 354, 357 hunkering down, 121, 165 Huns, 93 hunter-gatherer societies death rate, 9 disease and, 78 division of labour and, 29, 32, 40–41, 57 equality matching, 262–3, 265 inbreeding and, 78 isolation and, 52 migration, 73–4, 78–9 physical fallacy, 268 race and, 232 trade, 265 tyranny of cousins, 230 Huntington, Samuel, 110, 362–3, 365–6 Hussein, Saddam, 345 Hussey, Edward, 287 Hutchins, Robert Maynard, 165 Hutus, 230–31 Hypatia, 134 hyper-fast stars, 80 IBM, 305, 307, 319 Ibn al-Haytham, 156 Ibn Hayyan, Jabir, 156 Ibn Rushd, 137–8, 143, 144, 145 ice core drilling, 49 Identity & Violence (Sen), 231 identity politics, 241 al-Idrisi, Muhammad, 137 immigration birth rates and, 115 crime and, 110, 119 culture and, 69–73, 116, 119, 120–23 disgust and, 336, 371 division of labour and, 117 empires and, 84–106 European migration crisis (2015–), 10, 114, 115, 118, 342–3 exoticism, 84 GDP and, 68 innovation and, 81–4 Islam and, 112–14, 255 labour market and, 115, 116–19 opposition to, 69, 70, 114–23, 223, 254–5 productivity and, 68, 81, 117, 204 protectionism and, 66–7 self-selection and, 107, 112 skilled vs unskilled, 66, 82, 102, 116, 117 trade and, 35, 66–7, 234–5 tribalism and, 223, 235–6, 240, 243 urban vs rural areas, 114 welfare and, 118, 281 zero-sum thinking and, 254–5, 259 immigration in United States, 102–14 crime and, 110, 119 innovation and, 81–2, 202 overestimation of, 115, 223 tribalism and, 223, 240 zero-sum thinking and, 254–5, 259 In Defence of Global Capitalism (Norberg), 270 in vitro fertilization, 298–9 inbreeding, 78 India, 42, 45, 46, 56, 75, 129, 136, 140, 146, 270 Arabic numerals, 70, 137 engineering in, 269 Hindu nationalism, 354 industrialization, 207 Maurya Empire (323–184 BC), 53 Mughal Empire (1526–1857), 98, 148, 149, 215 national stereotypes, 235 Pakistan, relations with, 366 pollution in, 326 poverty in, 276, 326 Indo-European language, 75 Indonesia, 41 Industrial Revolution; industrialization, 5, 6, 13, 54, 132, 180, 339 in Britain, 182, 188–99, 202 in China, 169, 172–3, 207 climate change and, 326 in Dutch Republic, 101 in India, 207 in Japan, 71 in United States, 202, 291–2 in Vietnam, 207 inequality, 273, 349 Inglehart, Ronald, 339 ingroups and outgroups, 217–47 fluidity, 230–38 political, 224–5, 238–42 zero-sum relationships and, 252–5 Innocent III, Pope, 233 InnoCentive, 126–7 innovation, 4, 6, 10, 27, 80 ancient world, 32, 42, 44, 46 authoritarianism and, 318 bureaucratic inertia and, 318–21 canon and, 195 cities and, 40, 53, 79 creative destruction, 57, 179, 182, 190 cultural evolution, 28 immigration and 81–4 patent systems, 189–90 population and, 27, 51, 53 Schumpeterian profits, 273–5 resistance to, 10, 179–81 zero-sum thinking and, 266–9 Inquisition, 150 France, 94, 143 Portugal, 100 Spain, 97, 98 intellectual property, 58 Intergalactic Computer Network, 307 International Monetary Fund (IMF), 117 Internet, 57, 275, 278, 306–11, 312, 313 interwar generation (1928–45), 340 Inuit, 22, 51 Ionian enlightenment, 127–9 IQ (intelligence quotient), 109 Iran, 365 Ireland, 104, 108–9, 111, 112, 379 iron, 172 Isabella I, Queen of Castile, 97 Isaiah, 46 Isaura Palaia, Galatia, 90 Isenberg, Daniel, 296 Isis, 89 Islam; Islamic world Arab Spring (2011), 10, 342 clash of civilizations narrative, 237, 365 conflict within, 365 efflorescence, 6, 53, 136–41 fundamentalism, 112, 134, 139, 351 Koran, 137, 250–51 migration from, 112–14 orthodox backlash, 148–9 philosophy, 5, 13 science, 70, 132, 136–41 values in, 112, 113 Islamic State, 351, 365–6 Islamic world, 5, 6, 13, 53, 70 Israel, 111, 365 Italy, 6, 151, 169 anti-Semitism in, 254 Fascist period (1922–1943), 105 Genoa, Republic of (1005–1797), 73, 178 guilds in, 190 Lombard League (1167–1250), 181 Ötzi, 1–2, 8–9, 73, 74 Padua, 144, 146 Papacy in, 155, 181 Renaissance, 6, 150, 153, 169 United States, migration to, 104, 109 Venice, Republic of (697–1797), 53, 144, 152, 174, 181 Jacobs, Jane, 39–40, 79, 264 James II and VII, King of England, Scotland and Ireland, 185–6 Jamestown, Virginia, 200 Japan housing in, 376 kimonos, 73 Meiji Restoration (1868), 53, 70–71 protectionism, 314 Tokugawa Shogunate (1600–1868), 54 United States, migration to, 104, 236, 335 Japanning, 156 JavaScript, 310 jealous emulation, 154–7 jeans, 73 Jefferson, Thomas, 103, 184, 201, 205 Jenner, Edward, 296 Jerusalem, 87, 251 Jesus, 250 Jews in Abbasid Caliphate, 136 anti-Semitism, 254–5, 356 Ashkenazim, 99 Babylonian captivity, 87, 249 Bible, 46, 72, 248–50 Black Death and, 355–6 in Britain, 101, 193 in Dutch Republic, 99, 100, 150 in Germany, 99, 104–6, 109, 111, 254 Inquisition and, 97, 98 in Israel, 111 Mongol invasion and, 95 Muhammed and, 251 Nazirites, 72 in Ottoman Empire, 98 persecution of, 11, 95–7, 109, 220, 233, 251, 355–6 in Poland, 111, 220 in Roman Empire, 90, 93, 94 Sephardim, 99 in Song Empire, 170 in Spain, 97, 98, 99, 140 in United States, 102, 109 Jim Crow laws (1877–1965), 106, 254 Job Buddy, 375 Jobless Future, The (Aronowitz), 312 Jobs, Steven, 82, 304 John Chrysostom, 135 John III Sobieski, King of Poland, 237, 238 Johnson, Samuel, 191, 197 Johnson, Steven, 306 Jones, Rhys, 51 Joule, James Prescott, 196 Judaism, 46, 72, 93, 94, 96, 97 Jupiter, 145 Jurchen people, 172 Justinian I, Byzantine Emperor, 134, 224 Kahn, Robert, 307 Kandinsky, Wassily, 220–21, 289 Kant, Immanuel, 154 Karakorum, Mongol Empire, 96 al-Karaouine, Morocco, 137 Kearney, Denis, 109 keels, 44 Kenya, 21–2 Khayyam, Omar, 137 al-Khwarizmi, 137 Kiesling, Lynne, 328 Kim Jong-il, 314–15 kimonos, 73 King, Martin Luther, 19 King, Steven, 111 Kipling, Rudyard, 70 Klee, Paul, 220–21, 289 Know-Nothings, 108–9 Kodak, 319 Koran, 137, 250–51 Kramer, Samuel Noah, 37, 292 Krastev, Ivan, 342–3 Krugman, Paul, 309 Ku Klux Klan, 254 Kublai Khan, 174 Kurds, 136 Kushim, 37–8 labour mobility, 69, 374–7 lacquerware, 156 lactose, 75 Lao Tzu, 129 lapis lazuli, 70 Late Bronze-Age Collapse (1200–1150 BC), 44, 49, 54 Lebanon, 43, 236 Lee, William, 179 leisure, 199 Lenin, Vladimir, 256 Lesbos, 141 Levellers, 183–4, 186 Leviathan (Hobbes), 152 Levinovitz, Alan Jay, 290 Levy, David, 205 Lewis, David Levering, 140 Libanius, 49 liberalism, 14, 183, 334–40 colonialism and, 214 disgust and, 335, 336 dynamism and, 301 economic, 185, 336 Islam and, 112–14 security and, 334–40, 378 slave trade and, 205 universities and, 163 Libya, 48, 89, 366 Licklider, Joseph Carl Robnett, 307 life expectancy, 4, 169, 339 light bulbs, 297 Lilburne, John, 183 Lincoln, Abraham, 203 Lind, Amanda, 72 Lindsey, Brink, 301 literacy, 15, 57, 168 in Britain, 188, 198 in China, 148 in Dark Ages, 50 empathy and, 246–7 in Greece, 128–9 in Renaissance, 146, 148 Lithuania, 238 Little Ice Age, 148 lobbying, 280, 329 Locke, John, 100, 152, 185, 186, 201 Lombard League, 181 London, England, 190, 193–4, 197 7/7 bombings (2005), 341 London Bridge stabbings (2019), 120 Long Depression (1873–86), 253–4 Lord of the Flies (Golding), 219, 243, 244 Lord’s Resistance Army, 365 Louis IX, King of France, 96 Louis XIV, King of France, 237 Louis XVI, King of France, 201 love, 199 Lucas, Robert, 167 Lucy, 24–5 Lugh, 89 Lul, 111 Luther, Martin, 150, 356 Lutheranism, 99, 356 Lüthi, Max, 351 Lysenko, Trofim, 162 Lyttelton family, 286 Macartney Mission (1793), 176 Macedonian Empire (808–148 BC), 84, 87–9 Madison, James, 337 madrasas, 138 Madrid train bombings (2004), 341 Maduro, Nicolás, 354, 380 Magna Carta (1215), 5 Magris, Claudio, 219 Malacca, 100 Maltesholm School, Hässelby, 217–18, 245 mammoths, 76 Manchester United, 246 Manichaeism, 93 Mann, Thomas, 79 Mansfield, Edward, 271 Mao Zedong, 53, 162, 315, 316, 317, 355 Marcus Aurelius, Roman Emperor, 91 Marduk, 87 de Mariana, Juan, 147 markets, 37 humanitarianism and, 204, 206 immigration and, 68 tribalism, 247 ultimatum game, 34–5 Marley, Robert ‘Bob’, 72 marriage, 199 Marshall, Thurgood, 335 Marx, Karl, 33, 36, 162, 169, 247, 255–6 Marxism, 33, 36, 162, 182, 256, 268 Mary II, Queen of England, Scotland and Ireland, 186, 193 Maryland, United States, 349 Maslow, Abraham, 339, 341 al-Masudi, 136 mathematics, 70, 134, 135, 137, 156 Maurya Empire (323–184 BC), 53 Mauss, Marcel, 71 McCarthy, Joseph, 335 McCarthy, Kevin, 108 McCloskey, Deirdre, 167, 189, 191–2, 198 McConnell, Addison Mitchell ‘Mitch’, 108 McKinsey, 313 measles, 77 media, 346–9, 370 Medicaid, 119 Medina, 251 Medusa, 88 Meiji Restoration (1868), 53, 70–71 Mencken, Henry Louis, 325, 353 Mercury, 89 Merkel, Angela, 343 Mesopotamia, 37–43, 45, 70, 292–3 Metaphysics (Aristotle), 142 Mexico, 73, 77, 257 United States, migration to, 110, 122, 223, 240, 255 Miami, Florida, 120 Micro-80 computers, 304 Microsoft, 305–6, 309 middle class, 60–61 Migration Advisory Committee, UK, 118 Miletus, 127 militarism, 214 Mill, John Stuart, 124, 160, 164, 176, 319 millennial generation (1981–96), 340 Milton, John, 150 Ming Empire (1368–1644), 54, 148, 175, 177–8, 179, 215 minimal group paradigm, 220–22 Minitel, 313 Mobutu Sese Seko, 187 Mokyr, Joel, 157, 195, 196–7 Molyneux, Stefan, 84 Mongol Empire (1206–1368), 53, 84, 94–7, 138, 139, 173–4, 352–3 monopolies, 182, 189 Monte Testaccio, 48 Montesquieu, 89, 94 Moral Consequences of Growth, The (Friedman), 253 Moral Man and Immoral Society (Niebuhr), 253 Moriscos, 97 mortgages, 375 Moscow Institute of Electronic Engineering, 304 most-favoured-nations clause, 53–4 Mughal Empire (1526–1857), 98, 148, 149, 215 Muhammed, Prophet of Islam, 251 Murray, William Vans, 104 Muslims migration of, 112–14, 170, 255 persecution of, 97, 106, 233, 355 Mutz, Diana, 271 Mycenae, 88 Myth of Nations, The (Geary), 288–9 Myth of the Rational Voter, The (Caplan), 258 Naipaul, Vidiadhar Surajprasad, 167 Napoleonic Wars (1803–15), 288 National Aeronautics and Space Administration (NASA), 126, 127 National Library of Medicine, US, 12 National Science Foundation, US, 313 National Security Agency, US, 313 national stereotypes, 235 nationalism, 9, 11, 13, 16 civic nationalism, 377–8 clash of civilizations narrative, 237 cultural purity and, 69, 70, 71, 352 immigration and, 69, 70, 82 nostalgia and, 287–8, 351 World War I (1914–18), 214 zero-sum thinking, 253, 254, 259, 272 nativism, 14, 122, 176, 223, 254, 349–51, 358 Natural History Museum, London, 124, 125 Naturalism, 198 Nazi Germany (1933–45), 104–6, 109, 124, 220, 233, 353 Nazirites, 72 Neanderthals, 30–33, 75, 76 Nebuchadnezzar, Babylonian Emperor, 46 neckties, 72 negative income tax, 374–5 Neilson, James Beaumont, 194 Nemeth, Charlan, 83 Neo-Classicism, 198 Neolithic period (c. 10,000–4500 BC), 74 Netflix, 309, 310 Netherlands, 99 von Neumann, John, 105 neurasthenia, 291 New Atlantis (Bacon), 147 New Guinea, 41 New Testament, 250 New York, United States crime in, 246, 334 September 11 attacks (2001), 10, 114, 340–42 New York Times, 291, 297, 325 New York University, 223 New York Yankees, 223 Newcomen, Thomas, 196 Newton, Isaac, 158–9, 201 Nicomachean Ethics (Aristotle), 131 Niebuhr, Reinhold, 253 Nietzsche, Friedrich, 365 Nîmes, France, 73 Nineteen Eighty-Four (Orwell), 230, 368 Nineveh, Assyria, 248–9 Nixey, Catherine, 134 Nobel Prize, 82, 105, 276 non-market societies, 34, 35 Nordhaus, William, 273–4 North American Free Trade Agreement (NAFTA), 63, 64 North Carolina, United States, 102 North Korea, 54, 314–15, 366 North Star, 44 nostalgia, 14, 286–95, 313, 351 Not Fit for Our Society (Schrag), 107 novels, 188–9, 246–7 nuclear power, 301, 327, 328, 329, 332 nuclear weapons, 105, 290, 306 O’Rourke, Patrick Jake, 280 Oannes, 267 Obama, Barack, 66, 240, 329 obsidian, 22, 29 occupational licensing, 376–7 Ögedei Khan, 96 Ogilvie, Sheilagh, 179 Oklahoma, United States, 218–19 Old Testament, 46, 72, 248–50 olive oil, 48 Olorgesailie, 21–2 omnivores, 299 On Liberty (Mill), 160 one-year-old children, 26 open society, 6 open-mindedness, 35, 112 Opening of the mouth’ rite, 70 Orbán, Viktor, 354, 380 de Orta, Garcia, 146–7 Orwell, George, 230, 368 Osman II, Ottoman Sultan, 148 Ottoman Empire (1299–1923), 84, 94, 98, 148, 215, 220, 237, 353 Ötzi, 1–2, 8–9, 73, 74 overpopulation, 81, 160 Overton, Richard, 183 Pacific islands, 52 Paine, Thomas, 56, 158, 247 Pakistan, 70, 366 Pallas Athena, 89 Pallavicino, Ferrante, 150 Palmer, Tom Gordon, 15 Panthers and Pythons, 243–4 Papacy, 102, 142, 143, 152, 155, 178 Papin, Denis, 179, 180 Paris, France exiles in, 152, 153 University of Paris, 140, 141–2, 143 parochialism, 216 patent systems, 58, 82, 189–90, 203, 314 in Britain, 179, 189–90, 203, 314 in China, 58 in France, 189 immigrants and, 82 in Netherlands, 189 in United States, 203 PayPal, 310 Peasants’ Revolt (1381), 208 peer review, 127 Pence, Michael, 108 penny universities, 166 Pericles, 131 Permissionless Innovation (Thierer), 299 Perry, Gina, 243 Perseus, 87–8 Persia, ancient, 84, 86–7, 88, 95, 129, 215 Abbasid period (750–1258), 136 Achaemenid Empire (550–330 BC), 86–7, 88 Greeks, influence on, 129 Mongols, influence on, 95 Safavid Empire (1501–1736), 149 Sasanian Empire (224–651), 134 personality traits, 7 Pertinax, Roman Emperor, 91 Pessimists Archive, 290, 297, 298 Pessinuntia, 89 Peters, Margaret, 66 Peterson Institute for International Economics, 60 Petty, William, 296 Philip II King of Spain, 98 Phoenicia (2500–539 BC), 43–6, 49, 70, 128–9 Phoenicia dye, 44 Phrygians, 89 physical fallacy, 267–8 Physics (Aristotle), 142 Pietists, 153 Pinker, Steven, 23, 243, 266, 324 Plague of Justinian (541–750), 77 Plato, 130, 131, 132, 134, 352 pluralism, 85, 129, 357 Plutarch, 45–6 Poland Battle of Vienna (1683), 237, 238 Dutch Republic, migration to, 99 Holocaust (1941–5), 220 immigration, 116 Israel, migration to, 111 United Kingdom, migration to, 120 United States, migration to, 108, 109 Polanyi, Karl, 37 polio, 293 pollution, 326, 347 Polo, Marco, 174 Popper, Karl, 6, 26, 127, 129, 130, 182–3, 237, 362 population density, 28 populism, 9, 13, 14, 16, 324, 379–82 authoritarianism and, 325, 350–51 complexity and, 324 nostalgia and, 295, 324, 351 trade and, 19 zero-sum thinking and, 254, 259, 274 pornography, 113, 336 Portugal Empire (1415–1999), 100, 146–7, 178 guilds in, 190 Inquisition, 100 Postrel, Virginia, 300, 312, 326 pound locks, 172 poverty, 4, 168, 213, 270 in Britain, 256 in China, 4, 316 immigration and, 66, 69, 81, 121 in Japan, 71 Jeff Bezos test, 275–9 Preston, Lancashire, 190 priests, 41, 128 printing, 146, 153, 171 Pritchard, James Bennett, 43 productivity cities and, 40 foreign trade and, 57, 59, 63 free goods and, 278 immigration and, 68, 81, 117, 204 programming, 8 Progress (Norberg), 12–13 progressives, 286, 300–302 Proserpina, 89 protectionism, 13, 15, 16, 54–5 Great Depression (1929–39), 54–5 immigration and, 66–7 Internet and, 314 Trump administration (2017–), 19, 57–8 Protestantism, 99, 104, 148, 149, 153, 169, 178, 237 Prussia (1701–1918), 153, 288 Psychological Science, 335 Puerto Rico, 80 Pufendorf, Samuel, 147 purchasing power, 59, 61, 63, 66, 198 Puritanism, 99, 102 Putin, Vladimir, 14, 353–4 Putnam, Robert, 121, 165 Pythagoras, 137 Pythons and Panthers, 243–4 al-Qaeda, 351 Qianlong, Qing Emperor, 153 Qing Empire (1644–1912), 148, 149, 151, 153, 175–7, 179 Quakers, 99, 102, 206 Quarantelli, Enrico, 338 Quarterly Journal of Economics, The, 63 race; racism, 76–7, 206, 231–4, 358–9 railways, 53, 179, 202, 296, 297 Rammstein, 274 RAND Corporation, 307 Raphael, 137 Rastafari, 72 Rattlers and Eagles, 218–19, 236, 243, 252 reactive aggression, 227–8 Reagan, Ronald, 63, 111 Realism, 198 realistic conflict theory, 222 Reconquista (711–1492), 139 Red Genies, 236 Red Sea, 75 Reformation, 148, 155 refugees crime and, 119 European migration crisis (2015–), 10, 114, 115, 281, 342–3 integration of, 117–18 German Jews (1933–45), 104–6, 109 Rembrandt, 99 reminiscence bump, 294 Renaissance, 5, 6, 132, 143, 145–6, 149–50, 215 Republic of Letters, 157–9, 165, 195 Republic, The (Plato), 352 Republican Party, 164, 225, 238, 240, 301 Reynell, Carew, 184 Reynolds, Glenn, 308 Ridley, Matthew, 20–21, 80 right to work laws, 65 Rizzo, Frank, 334 Road to Serfdom, The (Hayek), 325 Robbers Cave experiment (1954), 218–19, 236, 243, 252, 371 Robbins, Caroline, 200–201 Robertson, Marion Gordon ‘Pat’, 114 Robinson, James, 185, 187, 200 rock paper scissors, 26 Rogers, Will, 282 Roman Law, 5 Romanticism, 198, 287, 296–7 Rome, ancient, 47–50, 89–94, 132 Antonine Plague (165–80), 77 assimilation, 91–2 chariot racing, 224 Christianity in, 90, 93–4, 133–4 citizenship, 91 cosmopolitanism, 89–91 fall of, 54, 94 gods in, 89–90 golden nugget theory, 5 globalization, 45–6, 47–50 haircuts, 72 Latin alphabet, 45 philosophy, 70, 136 Phoenicians, relations with, 43, 44 Sabines, relations with, 89 Social War (91–88 BC), 91 trousers, attitudes towards, 92 Romulus, 89, 90 Rotterdam, Holland, 158 Rousseau, Jean-Jacques, 226 Royal Navy, 205 Royal Society, 156, 157, 158, 196 Rubin, Paul, 258 ruin follies, 286–7 rule of law, 68, 189, 269, 334, 343, 358, 379 Rumbold, Richard, 183–4 Rushdie, Salman, 73 Ruskin, John, 206, 297 Russia Imperial period (1721–1917), 154, 289–90 Israel, migration to, 111 Mongol period (1237–1368), 95, 352 Orthodox Christianity, 155 Putin period (1999–), 14, 15, 347, 353–4, 365, 367 Soviet period (1917–91), 162, 302–5, 315, 317 United States, relations with, 236 Yamnaya people, 74–5 Rust Belt, 58, 62, 64–6, 349 Rwandan Genocide (1994), 230–31 Sabines, 89 Safavid Empire (1501–1736), 149 safety of wings, 374 Saint-Sever, France, 180 Salamanca school, 147, 150 Sanders, Bernard, 302 Santa Fe Institute, 216 SARS (severe acute respiratory syndrome), 3, 162 Saudi Arabia, 365 Scandinavia Bronze Age migration, 75 Neolithic migration, 74 United States, migration to, 104, 108 see also Sweden scapegoats, 11, 83, 253, 268, 349, 355–61 Black Death (1346–53), 352, 355–6 Great Recession (2007–9), 255 Mongol invasion (1241), 95 Schmandt-Besserat, Denise, 38 School of Athens, The (Raphael), 137 School of Salamanca, 147, 150 Schrag, Peter, 107 Schrödinger, Erwin, 105, 128, 129, 132 Schumpeter, Joseph, 277 Schumpeterian profits, 273–5 science, 127–66 in China, 4, 13, 70, 153, 156, 162–3, 169–73 Christianity and, 133–5, 141–6, 149–50 Enlightenment, 154–9 experiments, 156–7 Great Vanishing, 134–5 in Greece, 127–32 jealous emulation and, 154–7 in Islamic world, 70, 132, 136–41 Renaissance, 145–6 Republic of Letters, 157–9, 165, 195 sclera, 25 Scotland, 101, 194 Scotney Castle, Kent, 287 Sculley, John, 304 sea peoples, 43 sea snails, 44 Seinfeld, Jerry, 224 Seleucid Empire (312–63 BC), 88 self-esteem, 372, 379 Sen, Amartya, 231 Seneca, 49, 91 Sephardic Jews, 99 September 11 attacks (2001), 10, 114, 340–42, 363 Septimius Severus, Roman Emperor, 91 Servius, Publius, 90 Seven Wonders of the World, 45 Seville, Spain, 91, 139 sex bonobos and, 226 encoding and, 233 inbreeding, 78 views on, 113, 336 SGML (Standard Generalized Markup Language), 307 Shaftesbury, Lord, see Cooper, Anthony Ashley Sherif, Muzafer, 219, 220, 222, 243, 252 Shia Islam, 149 Shining, The, 335 shirts, 72 Siberia, 76 Sicily, 89 Sierra Leone, 365 Siger of Brabant, 143, 144 Sikhism, 149 Silicon Valley, 311 Silk Road, 171, 174, 352 silver processing, 49 Simler, Kevin, 282 Simmel, Georg, 266 Simon, Julian, 81 Simple Rules for a Complex World (Epstein), 320 Singapore, 53 skilled workers, 36, 45, 66, 95, 97, 101, 117 Slater, Samuel, 202 slavery, 86, 156, 205–6, 232 in British Empire, 182, 199, 200, 205 in Mesopotamia, 40, 41, 43 in Rome, 47, 48 in Sparta, 54 in United States, 103, 106, 205, 232 smallpox, 77, 197, 293, 296 Smith, Adam, 21, 59, 192, 194, 205, 280 Smith, Fred, 319 smoke detectors, 234 Smoot–Hawley Tariff Act (1930), 55 snack boxes, 20 Snow, Charles Percy, 105 social media, 239, 347, 370 social status, 281–5 Social War (91–88 BC), 91 Socrates, 130, 131–2, 330 solar power, 328, 329, 331, 332 Solomon, King of Israel, 38, 45 Solyndra, 329 Song Empire (960–1279), 53, 169–75 Sony, 319 Soros, George, 323 South Korea, 314, 366 South Sudan, 365 Soviet Union (1922–91), 162, 302–5, 315, 317 Sovu, Rwanda, 231 Sowell, Thomas, 267–8 Spain, 97–101, 184, 207 Almohad Caliphate (1121–1269), 137–8 amphorae production, 48 al-Andalus (711–1492), 97, 137–9, 140 Columbus’ voyages (1492–1503), 178 Dutch Revolt (1568–1648), 98–9, 101 Empire (1492–1976), 147, 178, 182 guilds in, 190 Inquisition (1478–1834), 97, 98 Jews, persecution of, 97–8, 106, 140 Madrid train bombings (2004), 341 Muslims, persecution of, 97, 106 Reconquista (711–1492), 97, 138–9, 140 regional authorities, 152 Roman period (c.218 BC–472 AD), 48, 91 Salamanca school, 147, 150 sombreros, 73 Uber in, 320 vaqueros, 73 Spanish flu (1918–19), 77 Sparta, 47, 54, 90, 132 Spencer, Herbert, 165, 214 Spinoza, Baruch, 100, 150, 153 Spitalfields, London, 190 sports, 199, 223–4, 232–3, 245–6 Sri Lanka, 100, 365 St Bartholomew’s Day massacre (1572), 97 St Louis, SS, 109 Standage, Tom, 166 Stanford University, 307, 311 Star Trek, 246, 259 stasists, 301–2 Statute of Labourers (1351), 208 steam engine, 179, 180, 189, 194, 203, 296 steamships, 53, 202 Stenner, Karen, 242, 343, 348, 350, 357 Stockholm, Sweden, 217–18 Stranger Things, 294 Strasbourg, France, 153 strategic tolerance, 86–96 Strindberg, August, 239 Suarez, Francisco, 147 suits, 72 Sumer (4500–1900 BC), 37–43, 45, 55, 292–3 Summers, Larry, 329 Sunni Islam, 148, 149, 238, 365 superpowers, 338–9 supply chains, 11, 62, 66 Sweden DNA in, 73 Green Party, 325 Lind dreadlocks affair (2019), 72 immigration in, 114, 115, 118, 281 manufacturing in, 65 Muslim community, 114 Neolithic migration, 74 refugees in, 118, 281, 342 United States, migration to, 107 Sweden Democrats, 281 swine flu, 3 Switzerland, 152, 153 Sylvester II, Pope, 137 Symbolism, 198 Syria, 42, 82, 342, 365, 366 tabula rasa, 225 Tacitus, 91 Taiwan, 316, 366 Taizu, Song Emperor, 170 Tajfel, Henri, 220, 221–2 Tandy, Geoffrey, 124–6 Tang Empire (618–907), 84, 170, 177, 352 Tanzania, 257 Taoism, 129, 149 tariffs, 15, 56, 373 Anglo–French Treaty (1860), 53–4 Great Depression (1929–39), 54–5 Obama’s tyre tariffs (2009), 66 Trump’s steel tariffs (2018), 272 Tasmania, 50–53, 54 Tatars, 238 taxation in Britain, 72, 187, 188, 189 carbon tax, 330–31 crony capitalism and, 279–80 immigration and, 69 negative income tax, 374–5 in Song Empire, 172 in Spanish Netherlands, 98 Taylor, Robert, 306 TCP/IP protocol, 307 technology, 296–9 automation, 63, 312–13 computers, 302–14 decline, 51–2 Internet, 57, 275, 278, 306–11, 312 nostalgia and, 296–9, 313 technocrats, 299–300, 312, 313–14, 326–9 technological decline, 51–2 telescopes, 145–6 Teller, Edward, 105 Temple of Artemis, Ephesus, 45 Temple of Serapis, Alexandria, 134 Tencent, 311 terrorism, 10, 114, 229, 340–41, 363 Tetlock, Philip, 160 textiles, 172–3 Thales, 127 Thierer, Adam, 299 third-party punishment game, 35 Thirty Years War (1618–48), 72, 97, 148, 150 Thomas Aquinas, Saint, 142–3, 144–5 Thoreau, Henry David, 203 Thracians, 130 Thucydides, 131, 132 Tiangong Kaiwu, 153 Tibetans, 85 Tierra del Fuego, 52–3 Tigris river, 37, 139 Timurid Empire (1370–1507), 139 tin, 42 Tokugawa Shogunate (1600–1868), 54 Toledo, Spain, 140 tolerance, 86–114, 129 Tomasello, Michael, 25 ‘too big to fail’, 280 Tower of Babel, 39 Toynbee, Arnold, 382 trade, 13, 19–23, 28–9, 129, 140, 363, 373 backlashes against, 19, 54–67, 254 benefit–cost ratio, 60, 61, 62 Britain, 181–99 competitive advantage, 28–9 division of labour and, 28, 31, 57 Great Depression (1929–39), 54–5 Greece, ancient, 47 humanitarianism and, 204–7 Mesopotania, 37–43 migration and, 35, 66–7, 234–5 morality of, 33–6 Phoenicia, 43–6 Rome, ancient, 47–50 snack boxes, 20 United States, 19, 57–8, 202–3 zero-sum thinking and, 248, 252–66, 270–72 trade unions, 64, 65, 272, 374 Trajan, Roman Emperor, 91 Trans-Pacific Partnership, 58 Transparency International, 381 Treaty of Trianon (1920), 354 Treaty of Versailles (1919), 353 Trenchard, John, 201 Treschow, Michael, 65 Trevor-Roper, Hugh, 215, 356 tribalism, 14, 217–47, 362, 368–72 fluid, 230–38 political, 224–5, 238–42, 378, 379 media and, 348, 370 threats and, 241, 350, 370 Trollboda School, Hässelby, 218 Trump, Donald, 9, 14, 240, 313, 321, 322, 354, 365, 367, 380 immigration, views on, 223 presidential election (2016), 238, 241, 242, 349, 350 stasism, 301, 302 steel tariffs (2018), 272 trade, views on, 19, 57–8 zero-sum attitude, 248 Tunisia, 45, 48 Turing, Alan, 124 Turkey; Turks, 70, 74, 136, 156, 354, 357, 365 turtle theory, 121–2 Tutsis, 230–31 Twilight Zone, The, 260–61 Twitter, 84, 239, 245 Two Treatises of Government (Locke), 186, 201 tyranny of cousins, 229, 230 tyre tariffs, 66 Tyre, 45 Uber, 319–20 Uganda, 365 Ukraine, 75, 116, 365 ultimatum game, 34–6 umbrellas, 298 uncertainty, 321–6 unemployment, 62, 373–4, 376, 377 ‘unicorns’, 82 United Auto Workers, 64 United Kingdom, see Britain United Nations, 327 United States, 199–203 Afghanistan War (2001–14), 345 America First, 19, 272 automation in, 313 Bureau of Labor Statistics, 65 California Gold Rush (1848–1855), 104 China, trade with, 19, 57, 58–9, 62–3, 64 Chinese Exclusion Act (1882), 254 citizenship, 103 Civil War (1861–5), 109 climate change polices in, 328 Constitution (1789), 102, 202 consumer price index, 277 COVID-19 pandemic (2019–20), 12 crime in, 110, 119, 120, 346 Declaration of Independence (1776), 103, 201, 202 dynamism in, 301–2 Federalist Party, 103 free trade gains, 60, 61 Great Depression (1929–39), 54–5, 254 gross domestic product (GDP), 257 Homestead Acts, 171 housing in, 376 immigration, see immigration in United States Industrial Revolution, 202, 291–2 innovation in, 53, 203, 298–9 intellectual property in, 58 Internet in, 306–14 Iraq War (2003–11), 345 Jim Crow laws (1877–1965), 106, 254 Know-Nothings, 108–9 Ku Klux Klan, 254 labour mobility in, 374, 376–7 lobbying in, 280, 329 Manhattan Project (1942–6), 105 manufacturing, 62–6 McCarthy era (1947–57), 335 Medicaid, 119 middle class, 60–61 NAFTA, 63, 64 National Library of Medicine, 12 national stereotypes, 235, 236 nostalgia in, 290–92, 294 open society, 169, 199–203 patent system, 203 political tribalism in, 224–5, 238, 240 populist movement, 254 presidential election (2016), 238, 241, 242, 349, 350 railways, 202 Revolutionary War (1775–83), 102–3, 200–201 Robbers Cave experiment (1954), 218–19, 236, 243, 252, 371 Rust Belt, 58, 62, 64–6, 349 Saudi Arabia, relations with, 365 Senate, 108 September 11 attacks (2001), 10, 114, 340–42, 363 slavery in, 103, 106, 205 Smoot–Hawley Tariff Act (1930), 55 Supreme Court, 108, 335 tariffs, 66, 272 trade deficits, 60, 270 Trump administration (2017–), see Trump, Donald unemployment in, 373, 376 universities, 163–5, 241 Vietnam War (1955–75), 345 Watergate scandal (1972–4), 345 World War II (1939–45), 56, 64, 335 Yankees, 58 United Steelworkers, 64, 272 universal basic income (UBI), 374, 375 universities, 140 University Bologna, 140 University of California, Berkeley, 311 University of Cambridge, 140 University of Chicago, 165 University of Leeds, 357 University of London, 201 University of Marburg, 153 University of Oxford, 140, 144, 145, 328 University of Padua, 144, 146 University of Paris, 140, 141–2, 143 University of Pennsylvania, 271 University of Salamanca, 140 University of Toulouse, 144 unskilled workers, 36, 66, 102, 117 untranslatable words, 288 Ur, 55 urbanization, see cities Uruk, Sumer, 39 US Steel, 64 Usher, Abbott Payson, 196 Uyghurs, 85, 174 vaccines, 12, 296, 299 Vandals, 92 Vanini, Lucilio, 150 vaqueros, 73 Vargas Llosa, Mario, 213, 261 Vatican Palace, 137 Vavilov, Nikolai, 162 Venezuela, 354 Venice, Republic of (697–1797), 53, 144, 152, 174, 181 Vermeer, Johannes, 99 Vespucci, Amerigo, 146 Vienna, Austria, 95, 237, 238 Vienna Congress (1815), 288 Vietnam, 171, 207, 270, 345 Virgil, 91 Virginia Company, 200 vitamin D, 74 de Vitoria, Francisco, 147 Vladimir’s choice, 221, 252, 271 Voltaire, 153, 193 Walton, Sam, 277 Wang, Nina, 315 War of the Polish Succession (1733–8), 289–90 Ward-Perkins, Bryan, 50 warfare, 216–17, 243 Warren, Elizabeth, 302 washing of hands, 10, 335 Washington, George, 103, 205 Washington, DC, United States, 280 Watergate scandal (1972–4), 345 Watson, John, 291 Watson, Peter, 79 Watt, James, 172, 189, 194, 274 Weatherford, Jack, 95 Web of Science, 159 Weber, Maximilian, 204 WeChat, 311 Weekly Standard, 312 welfare systems, 118, 281, 374 Wengrow, David, 42 West Africa Squadron, 205 Western Roman Empire (395–480), 94, 135 Westernization, 4–5 Wheelan, Charles, 20 Whig Party, 185, 201 White House Science Council, 313 white supremacists, 84, 351, 367 Whitechapel, London, 190 Who Are We?


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

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

It confirmed the basic insistence of the Green New Deal that if the will was there, democratic states did have the tools they needed to exercise control over the economy. This was, however, a double-edged realization, because if these interventions were an assertion of sovereign power, they were crisis driven.55 As in 2008, they served the interests of those who had the most to lose. This time, not just individual banks but entire markets were declared too big to fail.56 To break that cycle of crisis and stabilizing and to make economic policy into a true exercise in democratic sovereignty would require root and branch reform. That would require a real power shift, and the odds were stacked against that. The market revolution of the 1970s was no doubt a revolution in economic ideas, but it was far more than that.

Their practice is that of Bismarckian conservatives in the second half of the nineteenth century: “Everything must change so that everything remains the same.”14 In 2020, at least as far as the financial system is concerned, managerialism once again prevailed, but it was less an exercise in all-powerful technocratic manipulation than a scrambling effort to preserve a dangerous status quo. “Too big to fail” has become a total systemic imperative. The effect is to underwrite successive rounds of escalating debt-fueled speculation and growth. Can it go on? There is no fundamental macroeconomic limit that anyone can discern. The question rather is whether technocratic governance can keep up and whether society and politics can handle it.


pages: 170 words: 49,193

The People vs Tech: How the Internet Is Killing Democracy (And How We Save It) by Jamie Bartlett

Ada Lovelace, Airbnb, AlphaGo, Amazon Mechanical Turk, Andrew Keen, autonomous vehicles, barriers to entry, basic income, Bernie Sanders, Big Tech, bitcoin, Black Lives Matter, blockchain, Boris Johnson, Californian Ideology, Cambridge Analytica, central bank independence, Chelsea Manning, cloud computing, computer vision, creative destruction, cryptocurrency, Daniel Kahneman / Amos Tversky, data science, deep learning, DeepMind, disinformation, Dominic Cummings, Donald Trump, driverless car, Edward Snowden, Elon Musk, Evgeny Morozov, fake news, Filter Bubble, future of work, general purpose technology, gig economy, global village, Google bus, Hans Moravec, hive mind, Howard Rheingold, information retrieval, initial coin offering, Internet of things, Jeff Bezos, Jeremy Corbyn, job automation, John Gilmore, John Maynard Keynes: technological unemployment, John Perry Barlow, Julian Assange, manufacturing employment, Mark Zuckerberg, Marshall McLuhan, Menlo Park, meta-analysis, mittelstand, move fast and break things, Network effects, Nicholas Carr, Nick Bostrom, off grid, Panopticon Jeremy Bentham, payday loans, Peter Thiel, post-truth, prediction markets, QR code, ransomware, Ray Kurzweil, recommendation engine, Renaissance Technologies, ride hailing / ride sharing, Robert Mercer, Ross Ulbricht, Sam Altman, Satoshi Nakamoto, Second Machine Age, sharing economy, Silicon Valley, Silicon Valley billionaire, Silicon Valley ideology, Silicon Valley startup, smart cities, smart contracts, smart meter, Snapchat, Stanford prison experiment, Steve Bannon, Steve Jobs, Steven Levy, strong AI, surveillance capitalism, TaskRabbit, tech worker, technological singularity, technoutopianism, Ted Kaczynski, TED Talk, the long tail, the medium is the message, the scientific method, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, too big to fail, ultimatum game, universal basic income, WikiLeaks, World Values Survey, Y Combinator, you are the product

Here’s my prediction: in the next decade or so, a small number of tech firms will get an edge in AI and smart manufacturing and create the biggest cross-industry monopolies that have ever existed. At some terrible point, these tech giants could become so important to the health and well-being of the nation that they are, like large banks, too big to fail. Armed with the best tech and the most skilled engineers, maybe Google or Facebook could be the only ones who could solve sophisticated cybercrime (perhaps committed by a powerful AI from a hostile country?), fix computer bugs, predict and pre-empt economic shocks, run the National Grid or protect the cyber defences of the big banks – cyber security in the public sector is predictably understaffed and under-skilled.9 In the occasional discussions I have had with law makers on these subjects, I’ve sensed that they’d quite like to smash a tech monopoly or two, but realise it would be extremely damaging for the economy, and are therefore stuck.


Masters of Mankind by Noam Chomsky

affirmative action, Alan Greenspan, American Legislative Exchange Council, Berlin Wall, failed state, God and Mammon, high-speed rail, income inequality, Intergovernmental Panel on Climate Change (IPCC), land bank, land reform, Martin Wolf, means of production, military-industrial complex, Nelson Mandela, nuremberg principles, offshore financial centre, oil shale / tar sands, Paul Samuelson, plutocrats, profit maximization, Ralph Waldo Emerson, scientific management, Silicon Valley, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, union organizing, urban renewal, War on Poverty, Washington Consensus, Westphalian system

* In referring to “really existing capitalism,” I have in mind what really exists and what is called “capitalism.” The United States is the most important case, for obvious reasons. The term “capitalism” is vague enough to cover many possibilities. It is commonly used to refer to the US economic system, which receives substantial state intervention, ranging from creative innovation to the “too-big-to-fail” government insurance policy for banks, and which is highly monopolized, further limiting market reliance, increasingly so. It’s worth bearing in mind the scale of the departures of “really existing capitalism” from official “free-market capitalism.” To mention only a few examples, in the past twenty years, the share of profits of the two hundred largest enterprises has risen sharply, carrying forward the oligopolistic character of the US economy.1 This directly undermines markets, avoiding price wars through efforts at often-meaningless product differentiation through massive advertising, which is itself dedicated to undermining markets in the official sense, based on informed consumers making rational choices.


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Rendezvous With Oblivion: Reports From a Sinking Society by Thomas Frank

Affordable Care Act / Obamacare, Alan Greenspan, behavioural economics, Bernie Sanders, big-box store, business climate, business cycle, call centre, crowdsourcing, David Brooks, deindustrialization, deskilling, Donald Trump, edge city, fake news, Frank Gehry, high net worth, income inequality, Jane Jacobs, Jeff Bezos, McMansion, military-industrial complex, new economy, New Urbanism, obamacare, offshore financial centre, plutocrats, Ponzi scheme, profit maximization, prosperity theology / prosperity gospel / gospel of success, Ralph Nader, Richard Florida, Ronald Reagan, Silicon Valley, single-payer health, Steve Bannon, The Death and Life of Great American Cities, too big to fail, urban planning, Washington Consensus, Works Progress Administration

In her 1957 novel Atlas Shrugged, Rand also proposed a famous antidote to all this mawkish nonsense: a union of class-conscious plutocrats that would go on strike and bring the world to its knees. Atlas Shrugged is celebrated as a prophetic book, and in certain ways Ms. Rand’s imagined future has come to pass. After all, what is the phrase “too big to fail” but a standing threat to shut down the system unless the firm in question gets its way? In 2008, Wall Street essentially held the nation’s 401(k)s hostage until it was bailed out. And in 2011, the pet political party of business essentially held the legislative process itself hostage until its favorite tax cuts were extended.


pages: 190 words: 56,531

Where We Are: The State of Britain Now by Roger Scruton

bitcoin, blockchain, Brexit referendum, business cycle, Corn Laws, Donald Trump, Downton Abbey, Fellow of the Royal Society, fixed income, garden city movement, George Akerlof, housing crisis, invention of the printing press, invisible hand, Jeremy Corbyn, Khartoum Gordon, mass immigration, Naomi Klein, New Journalism, old-boy network, open borders, payday loans, Peace of Westphalia, sceptred isle, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, Tragedy of the Commons, web of trust

Moreover, it is young people especially who have been shocked by the volatility of the globalized economy and the ability of its denizens to escape all liability for their misuse of others’ funds. The financial crash of 2007–8 was in part caused by high-risk, high-yield loans, traded in financial markets around the world. National governments faced the collapse of key industries that had been ‘too big to fail’, and of banks whose liabilities were spread across the world and subject to forces over which the governments themselves had no control. Panic rescues and forced nationalizations led to a transfer of money from the innocent taxpayer to the guilty CEOs, who continued to collect their bonuses, and to sit at the top of their empires built of fictions.


pages: 173 words: 55,328

Last Best Hope: America in Crisis and Renewal by George Packer

affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, anti-bias training, anti-communist, Berlin Wall, Bernie Sanders, Big Tech, BIPOC, Black Lives Matter, blue-collar work, Branko Milanovic, British Empire, business cycle, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, coronavirus, COVID-19, crony capitalism, defund the police, deindustrialization, desegregation, disinformation, Donald Trump, failed state, fake news, Fall of the Berlin Wall, Ferguson, Missouri, fulfillment center, full employment, George Floyd, ghettoisation, gig economy, glass ceiling, informal economy, Jeff Bezos, knowledge economy, liberal capitalism, lockdown, Lyft, Mark Zuckerberg, mass immigration, meritocracy, minimum wage unemployment, new economy, Norman Mailer, obamacare, off-the-grid, postindustrial economy, prosperity theology / prosperity gospel / gospel of success, QAnon, ride hailing / ride sharing, road to serfdom, Ronald Reagan, school vouchers, self-driving car, Silicon Valley, social distancing, Social Justice Warrior, Steve Bannon, too big to fail, Triangle Shirtwaist Factory, Uber and Lyft, uber lyft, Upton Sinclair, white flight, working poor, young professional

In the new gig economy, industry concentration in two or three winning hands forces workers to remain contractors, denying them the barest protections such as health insurance. And yet the whole system depends on our acquiescence. If a ride-share app is quick and easy, if one-click shopping beats driving to the mall, if a too-big-to-fail bank has branches all over the city, it’s hard to see all the negative consequences of monopoly, or want to do much about them. So in 2020 voters in California, who gave Biden 5 million more votes than Trump, also passed a referendum to overturn a new state law that would have allowed drivers for Uber and Lyft the status and rights of employees.


pages: 467 words: 154,960

Trend Following: How Great Traders Make Millions in Up or Down Markets by Michael W. Covel

Albert Einstein, Alvin Toffler, Atul Gawande, backtesting, Bear Stearns, beat the dealer, Bernie Madoff, Black Swan, buy and hold, buy low sell high, California energy crisis, capital asset pricing model, Carl Icahn, Clayton Christensen, commodity trading advisor, computerized trading, correlation coefficient, Daniel Kahneman / Amos Tversky, delayed gratification, deliberate practice, diversification, diversified portfolio, Edward Thorp, Elliott wave, Emanuel Derman, Eugene Fama: efficient market hypothesis, Everything should be made as simple as possible, fiat currency, fixed income, Future Shock, game design, global macro, hindsight bias, housing crisis, index fund, Isaac Newton, Jim Simons, John Bogle, John Meriwether, John Nash: game theory, linear programming, Long Term Capital Management, managed futures, mandelbrot fractal, margin call, market bubble, market fundamentalism, market microstructure, Market Wizards by Jack D. Schwager, mental accounting, money market fund, Myron Scholes, Nash equilibrium, new economy, Nick Leeson, Ponzi scheme, prediction markets, random walk, Reminiscences of a Stock Operator, Renaissance Technologies, Richard Feynman, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, shareholder value, Sharpe ratio, short selling, South Sea Bubble, Stephen Hawking, survivorship bias, systematic trading, Teledyne, the scientific method, Thomas L Friedman, too big to fail, transaction costs, upwardly mobile, value at risk, Vanguard fund, William of Occam, zero-sum game

Money Management World (September 25, 2001). 24. Trillion Dollar Bet. Nova, No. 2075. Airdate: February 8, 2000. 25. Broadcast Transcript, Trillion Dollar Bet. Nova, No. 2075. Airdate: February 8, 2000. 409 410 Trend Following (Updated Edition): Learn to Make Millions in Up or Down Markets 26. Kevin Dowd, Too Big to Fail? Long-Term Capital Management and the Federal Reserve. Cato Institute Briefing Paper, No. 52 (September 23, 1999). 27. Roger Lowenstein, When Genius Failed. New York: Random House, 2000, 34. 28. Roger Lowenstein, When Genius Failed. New York: Random House, 2000, 69. 29. Roger Lowenstein, When Genius Failed.

Meriwether, Letter to Investors, September 1998. 39. Broadcast Transcript, Trillion Dollar Bet. Nova, No. 2075. Airdate: February 8, 2000. 40. Bruce Cleland, Campbell and Co., The State of the Industry. Managed Account Reports, Inc. (June 2000). 41. Robert Lenzner, Archimedes on Wall Street. Forbes (October 19, 1998). 42. Kevin Dowd, Too Big to Fail? Long-Term Capital Management and the Federal Reserve. Cato Institute Briefing Paper, No. 52 (September 23, 1999). 43. Malcolm Gladwell, The New Yorker, April 22 and 29, 2002. 44. G. K. Chesterton, “The Point of a Pin” in The Scandal of Father Brown. London, Cassell and Company, 1935. 45. Philip W.


pages: 486 words: 150,849

Evil Geniuses: The Unmaking of America: A Recent History by Kurt Andersen

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, affirmative action, Affordable Care Act / Obamacare, air traffic controllers' union, airline deregulation, airport security, Alan Greenspan, always be closing, American ideology, American Legislative Exchange Council, An Inconvenient Truth, anti-communist, Apple's 1984 Super Bowl advert, artificial general intelligence, autonomous vehicles, basic income, Bear Stearns, Bernie Sanders, blue-collar work, Bonfire of the Vanities, bonus culture, Burning Man, call centre, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Cass Sunstein, centre right, computer age, contact tracing, coronavirus, corporate governance, corporate raider, cotton gin, COVID-19, creative destruction, Credit Default Swap, cryptocurrency, deep learning, DeepMind, deindustrialization, Donald Trump, Dr. Strangelove, Elon Musk, ending welfare as we know it, Erik Brynjolfsson, feminist movement, financial deregulation, financial innovation, Francis Fukuyama: the end of history, future of work, Future Shock, game design, General Motors Futurama, George Floyd, George Gilder, Gordon Gekko, greed is good, Herbert Marcuse, Herman Kahn, High speed trading, hive mind, income inequality, industrial robot, interchangeable parts, invisible hand, Isaac Newton, It's morning again in America, James Watt: steam engine, Jane Jacobs, Jaron Lanier, Jeff Bezos, jitney, Joan Didion, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, junk bonds, Kevin Roose, knowledge worker, lockdown, low skilled workers, Lyft, Mark Zuckerberg, market bubble, mass immigration, mass incarceration, Menlo Park, Naomi Klein, new economy, Norbert Wiener, Norman Mailer, obamacare, Overton Window, Peter Thiel, Picturephone, plutocrats, post-industrial society, Powell Memorandum, pre–internet, public intellectual, Ralph Nader, Right to Buy, road to serfdom, Robert Bork, Robert Gordon, Robert Mercer, Ronald Reagan, Saturday Night Live, Seaside, Florida, Second Machine Age, shareholder value, Silicon Valley, social distancing, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, Stewart Brand, stock buybacks, strikebreaker, tech billionaire, The Death and Life of Great American Cities, The Future of Employment, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, trickle-down economics, Tyler Cowen, Tyler Cowen: Great Stagnation, Uber and Lyft, uber lyft, union organizing, universal basic income, Unsafe at Any Speed, urban planning, urban renewal, very high income, wage slave, Wall-E, War on Poverty, We are all Keynesians now, Whole Earth Catalog, winner-take-all economy, women in the workforce, working poor, young professional, éminence grise

Each is a good case study illustrating the breakneck remaking of our political economy, in response to both new technology and globalization, and by decisions that the bosses and financiers and political leaders chose to make. In the 1970s the U.S. auto industry had responded slowly to ramped-up foreign competition and higher oil prices. Chrysler did worst of all, continuing to manufacture nothing but hulking, unreliable gas-guzzlers on which it lost the equivalent of $1,000 per car. But the company was deemed too big to fail, the first, so Iacocca arranged for a nonbankruptcy bankruptcy, getting the federal government to cosign for billions in bank loans. Meanwhile, he made himself the star of Chrysler TV ads and even flirted with a presidential candidacy in 1988—his campaign slogan was to be “I Like I.” In a 1985 cover profile I wrote for Time, I said he was “overbearing,” had “a Daffy Duck lisp,” and went “hardly a half-minute without mentioning ‘guys’—specific guys or guys in the abstract, guys who build automobiles (‘car guys’) or sell automobiles or buy them.”

In the 1990s the six biggest banks held only one-sixth of all Americans’ financial assets, but by 2013, five years after the crash, that share had grown to 58 percent—the year the Democratic U.S. attorney general said that while he’d wanted to prosecute big banks for their role in the crash, he didn’t dare because, in addition to their being too big to fail, the legal trouble might have had “a negative impact on the national economy.” And so even if we’re still able to buy low-quality cosmetics and toys and frozen squid cheaply, we’re now definitely paying more than we should for more essential things. As a result of looser, lavishly big-business-friendly government policies, every piece of the U.S. medical-industrial complex became much more concentrated during the 1990s and 2000s—hospitals, health insurance companies, large physicians’ groups—and prices increased as a result of the greater market power.


pages: 195 words: 58,462

City Squares: Eighteen Writers on the Spirit and Significance of Squares Around the World by Catie Marron

Berlin Wall, carbon footprint, Day of the Dead, deindustrialization, do-ocracy, fixed-gear, gentrification, Jane Jacobs, late capitalism, Lewis Mumford, Mark Zuckerberg, megacity, Mikhail Gorbachev, Nelson Mandela, Occupy movement, plutocrats, the built environment, The Death and Life of Great American Cities, the High Line, too big to fail, Twitter Arab Spring, urban planning

The terror at the cashpoint, the anxiety in the supermarket, the argument at the bank teller’s desk, the family-five-alarm row because someone has left a light on, because someone thinks “we have shares in the electricity company”*—all of that, all of the daily battle with money, was over. When money’s scarce life is a daily emergency, everything is freighted with potential loss, you feel the smallest misstep will destroy you. When there’s money, it’s different, even a real emergency never quite touches you, you’re always shielded from risk. You are, in some sense, too big to fail. And when I looked at my life on fire, I had a thought I don’t believe any person in the history of my family—going back many generations on both sides—ever could have had or ever think of having: Everything lost can be replaced. Yes, in the history of my clan, it was an unprecedented thought.


pages: 164 words: 57,068

The Second Curve: Thoughts on Reinventing Society by Charles Handy

"Friedman doctrine" OR "shareholder theory", Abraham Maslow, Airbnb, Alan Greenspan, basic income, Bernie Madoff, bitcoin, bonus culture, British Empire, call centre, Clayton Christensen, corporate governance, delayed gratification, Diane Coyle, disruptive innovation, Edward Snowden, falling living standards, future of work, G4S, greed is good, independent contractor, informal economy, Internet of things, invisible hand, joint-stock company, joint-stock limited liability company, Kickstarter, Kodak vs Instagram, late capitalism, mass immigration, megacity, mittelstand, Occupy movement, payday loans, peer-to-peer lending, plutocrats, Ponzi scheme, Robert Solow, Ronald Coase, shareholder value, sharing economy, Skype, Social Responsibility of Business Is to Increase Its Profits, Stanford marshmallow experiment, Steve Jobs, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transaction costs, Veblen good, Walter Mischel

For starters, consider the following: The financial crisis of 2007–10 did more than disrupt economies around the world; it forced many to rethink their priorities in life, how they lived and why they lived. Organisations, particularly those in business, should start to re-examine their assumptions, questioning whether in an uncertain world it still makes sense to make the size of their enterprise so important. Can some businesses become too big to fail because of the damage to others that might result? Might it be wiser to aim to grow better without growing bigger? If economies of scale are crucial, is it necessary to own everything? Could the economies be achieved by non-competitive alliances instead? If so, how will these be managed and monitored?


Days of Fire: Bush and Cheney in the White House by Peter Baker

"Hurricane Katrina" Superdome, addicted to oil, Alan Greenspan, anti-communist, battle of ideas, Bear Stearns, Berlin Wall, Bernie Madoff, Bob Geldof, Boeing 747, buy low sell high, carbon tax, card file, clean water, collective bargaining, cuban missile crisis, desegregation, drone strike, energy security, facts on the ground, failed state, Fall of the Berlin Wall, friendly fire, Glass-Steagall Act, guest worker program, hiring and firing, housing crisis, illegal immigration, immigration reform, information security, Mikhail Gorbachev, MITM: man-in-the-middle, no-fly zone, operational security, Robert Bork, rolling blackouts, Ronald Reagan, Ronald Reagan: Tear down this wall, Saturday Night Live, South China Sea, stem cell, Ted Sorensen, too big to fail, uranium enrichment, War on Poverty, working poor, Yom Kippur War

Bush and John McCain, joint appearance, March 5, 2008, http://georgewbush-whitehouse.archives.gov/news/releases/2008/03/20080305-4.html. 16 “Tim, I have known mercy”: Tim Goeglein, author interview. 17 seemed to suggest to Esquire: Thomas M. Barnett, “The Man Between War and Peace,” Esquire, April 2008, http://www.esquire.com/features/fox-fallon. 18 “I’d fire him in a heartbeat”: Senior official, author interview. 19 “Don’t say that”: Sorkin, Too Big to Fail, 38–39. 20 “the fact is, the whole system”: Paulson, On the Brink, 92. 21 “This is the real thing”: Ibid., 96. 22 “you can take out that”: Ibid., 101–2. 23 “It seems like I showed up”: George W. Bush, speech to Economic Club of New York, March 14, 2008, http://georgewbush-whitehouse.archives.gov/news/releases/2008/03/20080314-5.html. 24 comparing the president: Senator Charles Schumer told a news conference, “The president is looking more and more like Herbert Hoover, sort of whistling a happy tune as the economy heads south.”

Bush, speech to Economic Club of New York, March 14, 2008, http://georgewbush-whitehouse.archives.gov/news/releases/2008/03/20080314-5.html. 24 comparing the president: Senator Charles Schumer told a news conference, “The president is looking more and more like Herbert Hoover, sort of whistling a happy tune as the economy heads south.” Federal News Service transcript, March 14, 2008. 25 “We’re going to get killed”: Sorkin, Too Big to Fail, 38–39. 26 “Two-thirds of Americans”: Martha Raddatz, interview with Dick Cheney, March 19, 2007. After a furor arose about his answer, Cheney tried to pass it off, saying Raddatz had simply made a statement and he was prompting her for a question. He gave another interview to Raddatz on March 24, 2007, and when she asked about it, he said, “Well, you didn’t really ask me a question, Martha, as I recall.”

See also Paulson, On the Brink, 295–300. 84 “We need to get there”: Kaplan interview. See also Paulson, On the Brink, 295–300. 85 “If money isn’t loosened up”: Several participants, author interviews. See also George W. Bush, Decision Points, 460–62; Dick Cheney, In My Time, 509; Paulson, On the Brink, 295–300; Sorkin, Too Big to Fail, 492–93; Heilemann and Halperin, Game Change, 387–89; and Balz and Johnson, Battle for America, 348. 86 “I told you you’d miss me”: Jonathan Alter, The Promise: President Obama, Year One (New York: Simon & Schuster, 2011), 12. Alter added this to the paperback edition. 87 “It was almost like children”: Eric Draper, author interview. 88 “Well, I’ve clearly lost control”: Several participants, author interviews. 89 “That was the most ridiculous”: White House official interview. 90 “Gee, Hank, I didn’t know”: Paulson, On the Brink, 295–300. 91 “They’re not going to get”: Fratto interview. 92 “Six hundred points!”


pages: 209 words: 63,649

The Purpose Economy: How Your Desire for Impact, Personal Growth and Community Is Changing the World by Aaron Hurst

Abraham Maslow, Airbnb, Alvin Toffler, Atul Gawande, barriers to entry, benefit corporation, big-box store, bike sharing, Bill Atkinson, business process, call centre, carbon footprint, citizen journalism, commoditize, corporate social responsibility, crowdsourcing, disintermediation, do well by doing good, Elon Musk, Firefox, General Magic , glass ceiling, greed is good, housing crisis, independent contractor, informal economy, Jane Jacobs, jimmy wales, Khan Academy, Kickstarter, Lean Startup, longitudinal study, Max Levchin, means of production, Mitch Kapor, new economy, pattern recognition, Peter Singer: altruism, Peter Thiel, QR code, Ray Oldenburg, remote working, Ronald Reagan, selection bias, sharing economy, Silicon Valley, Silicon Valley startup, Steve Jobs, TaskRabbit, TED Talk, Tony Hsieh, too big to fail, underbanked, women in the workforce, work culture , young professional, Zipcar

Fast forward to the 1990s, which brought the massive failure of savings and loan associations, with 747 out of 3,234 in the country going belly-up in a few short years. And less than two decades later, Wall Street fell on its face for being over-leveraged, and also for having consolidated banking to the extent that the big banks were deemed “too big to fail.” While technology and the ability to manage huge sets of data led to much of this hubris, it is also providing the likely solution. Entrepreneurs like Jeff Stewart saw an opportunity to return to the roots of finance and live up to the ideals of pioneers like J.P. Morgan. Online social networks, he figured, could enable people again to borrow money based on their character and standing in the community.


pages: 258 words: 63,367

Making the Future: The Unipolar Imperial Moment by Noam Chomsky

Alan Greenspan, Albert Einstein, Berlin Wall, Bretton Woods, British Empire, capital controls, collective bargaining, corporate governance, corporate personhood, creative destruction, deindustrialization, energy security, failed state, Fall of the Berlin Wall, financial deregulation, Frank Gehry, full employment, Glass-Steagall Act, Howard Zinn, Joseph Schumpeter, kremlinology, liberation theology, Long Term Capital Management, market fundamentalism, Mikhail Gorbachev, Nelson Mandela, no-fly zone, Occupy movement, oil shale / tar sands, precariat, public intellectual, RAND corporation, Robert Solow, Ronald Reagan, Seymour Hersh, structural adjustment programs, The Great Moderation, too big to fail, uranium enrichment, Washington Consensus, WikiLeaks, working poor

The new policies led very quickly to financial crises, unlike earlier years when New Deal legislation was in place and there were none. From the early Reagan years, each crisis has been more serious than the last, leading finally to the latest collapse in 2008. The government once again came to the rescue of Wall Street firms judged to be too big to fail—the implicit government insurance policy that ensures underpricing of risk—with leaders too big to jail. Today, for the one-tenth of 1 percent of the population who benefited most from these decades of greed and deceit, everything is fine, while for most of the population, real income has almost stagnated or sometimes declined for thirty years.


pages: 219 words: 61,720

American Made: Why Making Things Will Return Us to Greatness by Dan Dimicco

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, Alan Greenspan, American energy revolution, American Society of Civil Engineers: Report Card, Apollo 11, Bakken shale, barriers to entry, Bernie Madoff, California high-speed rail, carbon credits, carbon footprint, carbon tax, clean water, congestion pricing, crony capitalism, currency manipulation / currency intervention, David Ricardo: comparative advantage, decarbonisation, digital divide, driverless car, fear of failure, full employment, Google Glasses, high-speed rail, hydraulic fracturing, invisible hand, job automation, knowledge economy, laissez-faire capitalism, Loma Prieta earthquake, low earth orbit, manufacturing employment, Neil Armstrong, oil shale / tar sands, Ponzi scheme, profit motive, Report Card for America’s Infrastructure, rolling blackouts, Ronald Reagan, Savings and loan crisis, Silicon Valley, smart grid, smart meter, sovereign wealth fund, The Wealth of Nations by Adam Smith, too big to fail, uranium enrichment, Washington Consensus, Works Progress Administration

Job growth remains anemic, and wage growth for American workers remains low; in fact, wages are only up about 2 percent compared to a year ago, down from their 20-year prerecession average growth rate of 3.2 percent. Yet, at the same time, Wall Street—which helped precipitate the downturn—is doing quite well. Both the Dow Jones Industrial Average and the S&P 500 shattered prerecession record highs in early 2013 and have continued to rise. And the banks that were “too big to fail” just a few years ago are going strong once again. Something is broken in the economy. The United States lost 8.2 million jobs in the last recession. Since January 2010, when the economy gradually began to show renewed signs of life, we have only succeeded in gaining those initial lost jobs back.


pages: 231 words: 60,546

Big Bucks: The Explosion of the Art Market in the 21st Century by Adam, Georgina(Author)

BRICs, Frank Gehry, greed is good, high net worth, inventory management, Kickstarter, Mark Zuckerberg, new economy, offshore financial centre, plutocrats, Silicon Valley, too big to fail, upwardly mobile, vertical integration

Will state institutions want, or be able, to absorb all this work, which might start to look a bit old-hat – if they are offered it? And what happens if it all goes up for sale over a short period? That, even more than the economic environment, could depress prices and sap confidence. There is an argument that the market is now ‘too big to fail’, that the trade and collectors will be forced to prop it up in the case of a downturn, in order to protect their investments. And then there is the ‘this time it’s different’ position, as there are more and more emerging economies joining the party. In this scenario the growing and aspirational middle classes in these countries will enter the market 183 big bucks at the lower and mid-levels and gradually progress up to higher price levels.


pages: 195 words: 63,455

Damsel in Distressed: My Life in the Golden Age of Hedge Funds by Dominique Mielle

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", activist fund / activist shareholder / activist investor, airline deregulation, Alan Greenspan, banking crisis, Bear Stearns, Black Monday: stock market crash in 1987, blood diamond, Boris Johnson, British Empire, call centre, capital asset pricing model, Carl Icahn, centre right, collateralized debt obligation, Cornelius Vanderbilt, coronavirus, COVID-19, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, Elon Musk, Eugene Fama: efficient market hypothesis, family office, fear of failure, financial innovation, fixed income, full employment, glass ceiling, high net worth, hockey-stick growth, index fund, intangible asset, interest rate swap, John Meriwether, junk bonds, Larry Ellison, lateral thinking, Long Term Capital Management, low interest rates, managed futures, mega-rich, merger arbitrage, Michael Milken, Myron Scholes, Northpointe / Correctional Offender Management Profiling for Alternative Sanctions, offshore financial centre, Paul Samuelson, profit maximization, Reminiscences of a Stock Operator, risk free rate, risk tolerance, risk-adjusted returns, satellite internet, Savings and loan crisis, Sharpe ratio, Sheryl Sandberg, SoftBank, survivorship bias, Tesla Model S, too big to fail, tulip mania, union organizing

All federal rescue programs, most notably the Troubled Asset Relief Program (TARP), used to invest in financial institutions, and the loans to AIG turned out to be quite successful and profitable. The citizens were repaid with interest. There was no such intervention for hedge funds, I’m afraid. No taxpayer money was spent on hedge funds to shore them up or stabilize them. Of the roughly ten thousand in existence in 2008, about fifteen hundred closed. None was too big to fail, at least not at that time, unlike Long-Term Capital was deemed ten years before. The industry was decimated. Feeling bad for the guy who loses his house is easy. It is harder to summon sympathy for the hedge fund manager who loses his investment job or his entire fund, but only after he has raked in heaps of dollars for over a decade.


pages: 598 words: 169,194

Bernie Madoff, the Wizard of Lies: Inside the Infamous $65 Billion Swindle by Diana B. Henriques

accounting loophole / creative accounting, airport security, Albert Einstein, AOL-Time Warner, banking crisis, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, break the buck, British Empire, buy and hold, centralized clearinghouse, collapse of Lehman Brothers, computerized trading, corporate raider, diversified portfolio, Donald Trump, dumpster diving, Edward Thorp, financial deregulation, financial engineering, financial thriller, fixed income, forensic accounting, Gordon Gekko, index fund, locking in a profit, low interest rates, mail merge, merger arbitrage, messenger bag, money market fund, payment for order flow, plutocrats, Ponzi scheme, Potemkin village, proprietary trading, random walk, Renaissance Technologies, riskless arbitrage, Ronald Reagan, Savings and loan crisis, short selling, short squeeze, Small Order Execution System, source of truth, sovereign wealth fund, too big to fail, transaction costs, traveling salesman

There’s no way he can borrow enough money to cover those withdrawals. Banks aren’t lending to anyone now, certainly not to a midlevel wholesale outfit like his. His brokerage firm may still seem impressive to his trusting investors, but to nervous bankers and harried regulators today, Bernard L. Madoff Investment Securities is definitely not “too big to fail.” Last week he called a defence lawyer, Ike Sorkin. There’s probably not much that even a formidable attorney like Sorkin can do for him at this point, but he’s going to need a lawyer. He made an appointment for 11:30 AM on Friday, December 12. He’s still unsure of what to do first and when to do what, but a Friday appointment should give him enough time to sort things out.

“He was a very strange person. It was always a very tense relationship.” There was ample evidence that Madoff occasionally “fired” difficult clients. Why didn’t he politely tell Picower to take his money and go elsewhere? According to Madoff, Picower had simply become the Ponzi equivalent of a bank too big to fail: an investor too big to fire. Covering Picower’s annual withdrawals was difficult enough; coming up with the money to completely redeem his multibillion-dollar account would have been impossible. “I had to keep him attached to me,” Madoff admitted, offering a glimpse into the expediency that so often masqueraded for friendship in his life.


pages: 756 words: 167,393

The Tylenol Mafia by Scott Bartz

AOL-Time Warner, Donald Trump, en.wikipedia.org, independent contractor, intangible asset, inventory management, Just-in-time delivery, life extension, Oklahoma City bombing, Ronald Reagan, Ted Kaczynski, the scientific method, too big to fail

In the spring of 1984, the situation at Continental rapidly deteriorated, and bank regulators worried that the crisis at Continental might envelop the entire banking system. In July 1984, the FDIC bailed out Continental by purchasing $4.5 billion in bad loans from the bank. It was the largest bank resolution in U.S. history, the genesis of today’s often quoted term “too big to fail,” and the beginning of the Federal Reserve’s policy of bailing out large banks when they become insolvent through fraudulent lending practices. One of the Continental Bank directors who had fostered the bank’s irresponsible business practices was Paul J. Rizzo, the vice-chairman of IBM. Johnson & Johnson appointed Rizzo to its Board of Directors in October 1982.

“Examination Findings Regarding Continental National Bank’s Loan Management and Capital.” September 18, 1984. In July 1982, Penn Square: Subcommittee on Financial Institutions Supervision, Regulation, and Insurance Committee on Banking, Finance, and Urban Affairs. “Examination Findings Regarding Continental National Bank’s Loan Management and Capital.” September 18, 1984. “too big to fail”: History of the Eighties – “Volume 1: Lessons for the Future An Examination of the Banking Crises of the 1980s and Early 1990s.” Federal Deposit Insurance Corporation, 1997. Johnson & Johnson appointed Rizzo: “Letter to the Stockholders,” in Johnson & Johnson’s 1982 Annual Report, 1983. Rizzo was one of nine directors at Continental Bank that the Federal Deposit Insurance Corporation (FDIC) fired: “Rolling Heads.”


pages: 543 words: 157,991

All the Devils Are Here by Bethany McLean

Alan Greenspan, Asian financial crisis, asset-backed security, bank run, Bear Stearns, behavioural economics, Black-Scholes formula, Blythe Masters, break the buck, buy and hold, call centre, Carl Icahn, collateralized debt obligation, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, diversification, Dr. Strangelove, Exxon Valdez, fear of failure, financial innovation, fixed income, Glass-Steagall Act, high net worth, Home mortgage interest deduction, interest rate swap, junk bonds, Ken Thompson, laissez-faire capitalism, Long Term Capital Management, low interest rates, margin call, market bubble, market fundamentalism, Maui Hawaii, Michael Milken, money market fund, moral hazard, mortgage debt, Northern Rock, Own Your Own Home, Ponzi scheme, proprietary trading, quantitative trading / quantitative finance, race to the bottom, risk/return, Ronald Reagan, Rosa Parks, Savings and loan crisis, shareholder value, short selling, South Sea Bubble, statistical model, stock buybacks, tail risk, Tax Reform Act of 1986, telemarketer, the long tail, too big to fail, value at risk, zero-sum game

With his antennae so attuned to Wall Street, Paulson had long thought the next shoe could be Lehman Brothers, the second smallest of the big five. When Bear Stearns started its downward spiral, Paulson had called Lehman CEO Dick Fuld, who was on a business trip in India. “You better get back here,” Paulson told him, according to Too Big to Fail, Andrew Ross Sorkin’s book about Wall Street during the financial crisis. Fuld was an aloof, stubborn executive who had run Lehman since 1994 and had seen his firm through crises before. He felt certain he could do it again. But he was playing a dangerous game. Instead of getting “closer to home,” like Goldman Sachs, Lehman had decided to double down, in large part by financing and investing in big commercial real estate deals at the very height of the real estate bubble.

Gerry also assigned me a story on risk management for the magazine; that story became the basis for Chapter 4. Vera Titunik edited that story beautifully, as she always does. My colleagues Louise Story and Eric Dash helped me in numerous ways. Andrew Ross Sorkin was especially generous with insight and advice, especially once he’d finished his book about the financial crisis, Too Big to Fail. Books consume writers; inevitably, that obsession winds up roping in their friends and families. Among the friends I’d like to thank are Steve Klein, Ken Auletta and Amanda Urban, Sam Waksal and Andrea Rabney, Bill Burd and Jane Noble, Charlie Borgognoni, Adam Bryant, Tim and Jennifer Smith, Paul and Jennifer Argenti, Greg Frank and Lauren Foster, Jimmy Smyth, Meg Rhodus, Roger and Claudine Parloff, Dan and Becky Okrent, and David and Lyn Grogan.


pages: 526 words: 160,601

A Generation of Sociopaths: How the Baby Boomers Betrayed America by Bruce Cannon Gibney

1960s counterculture, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, AlphaGo, American Society of Civil Engineers: Report Card, Bear Stearns, Bernie Madoff, Bernie Sanders, Black Lives Matter, bond market vigilante , book value, Boston Dynamics, Bretton Woods, business cycle, buy and hold, carbon footprint, carbon tax, Charles Lindbergh, classic study, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, corporate personhood, Corrections Corporation of America, currency manipulation / currency intervention, Daniel Kahneman / Amos Tversky, dark matter, DeepMind, Deng Xiaoping, Donald Trump, Downton Abbey, Edward Snowden, Elon Musk, ending welfare as we know it, equal pay for equal work, failed state, financial deregulation, financial engineering, Francis Fukuyama: the end of history, future of work, gender pay gap, gig economy, Glass-Steagall Act, Haight Ashbury, Higgs boson, high-speed rail, Home mortgage interest deduction, Hyperloop, illegal immigration, impulse control, income inequality, Intergovernmental Panel on Climate Change (IPCC), invisible hand, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jane Jacobs, junk bonds, Kitchen Debate, labor-force participation, Long Term Capital Management, low interest rates, Lyft, Mark Zuckerberg, market bubble, mass immigration, mass incarceration, McMansion, medical bankruptcy, Menlo Park, Michael Milken, military-industrial complex, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, Neil Armstrong, neoliberal agenda, Network effects, Nixon triggered the end of the Bretton Woods system, obamacare, offshore financial centre, oil shock, operation paperclip, plutocrats, Ponzi scheme, price stability, prosperity theology / prosperity gospel / gospel of success, quantitative easing, Ralph Waldo Emerson, RAND corporation, rent control, ride hailing / ride sharing, risk tolerance, Robert Shiller, Ronald Reagan, Rubik’s Cube, Savings and loan crisis, school choice, secular stagnation, self-driving car, shareholder value, short selling, side project, Silicon Valley, smart grid, Snapchat, source of truth, stem cell, Steve Jobs, Stewart Brand, stock buybacks, survivorship bias, TaskRabbit, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, War on Poverty, warehouse robotics, We are all Keynesians now, white picket fence, Whole Earth Catalog, women in the workforce, Y2K, Yom Kippur War, zero-sum game

In 1994—a year before the S&L crisis was finally resolved—a Boomer Congress enacted the Riegle-Neal Interstate Banking and Branching Efficiency Act (RN), essentially abolishing restrictions on bank acquisitions across state lines. RN passed with broad bipartisan support, including from the White House, paving the way for financial industry consolidation over the next twenty years. Now, a bank could grow so long as it did not control more than 10 percent of the nation’s deposits—that would be the threshold for “too big to fail.”13 Maybe. Abstractly, RN was a fine idea; in practice, RN was fraught with moral hazard. Institutions below the 10 percent threshold had already been bailed out, like First Pennsylvania and Continental Illinois. The latter was, until the 2000s, one of the most spectacular and controversial bailouts, and Continental was just a baby bank compared to today’s monsters.

Taken alone, government intervention might have been fine. In light of the free market parade that had preceded, it was just another example of the heads-I-win-tails-you-lose thinking that has prevailed over the past three decades. The 2008 crisis had another odd outcome: Although the size of AIG, Citi, and their peers made them “too big to fail” (and thus the taxpayers’ problems), many surviving banks actually got bigger in the immediate aftermath, in part due to mergers that the government helped orchestrate, like BofA’s acquisition of Merrill Lynch and JP Morgan’s purchase of Washington Mutual (or its remains, anyway). A major problem during recent crises had been the absence of good data.


Likewar: The Weaponization of Social Media by Peter Warren Singer, Emerson T. Brooking

4chan, active measures, Airbnb, augmented reality, barriers to entry, battle of ideas, Bellingcat, Bernie Sanders, Black Lives Matter, British Empire, Cambridge Analytica, Cass Sunstein, citizen journalism, Citizen Lab, Comet Ping Pong, content marketing, crony capitalism, crowdsourcing, data science, deep learning, digital rights, disinformation, disintermediation, Donald Trump, drone strike, Edward Snowden, en.wikipedia.org, Erik Brynjolfsson, Evgeny Morozov, fake news, false flag, Filter Bubble, global reserve currency, Google Glasses, Hacker Conference 1984, Hacker News, illegal immigration, information security, Internet Archive, Internet of things, invention of movable type, it is difficult to get a man to understand something, when his salary depends on his not understanding it, Jacob Silverman, John Gilmore, John Markoff, Kevin Roose, Kickstarter, lateral thinking, lolcat, Mark Zuckerberg, megacity, Menlo Park, meta-analysis, MITM: man-in-the-middle, Mohammed Bouazizi, Moneyball by Michael Lewis explains big data, moral panic, new economy, offshore financial centre, packet switching, Panopticon Jeremy Bentham, Parag Khanna, pattern recognition, Plato's cave, post-materialism, Potemkin village, power law, pre–internet, profit motive, RAND corporation, reserve currency, sentiment analysis, side project, Silicon Valley, Silicon Valley startup, Snapchat, social web, South China Sea, Steve Bannon, Steve Jobs, Steven Levy, Stewart Brand, systems thinking, too big to fail, trade route, Twitter Arab Spring, UNCLOS, UNCLOS, Upton Sinclair, Valery Gerasimov, We are Anonymous. We are Legion, We are as Gods, Whole Earth Catalog, WikiLeaks, Y Combinator, yellow journalism, Yochai Benkler

If one counts all the pieces of content with a unique web address that have been created across all the various social networks, the number of internet nodes rises into the high trillions. In some ways, the internet has gone the way of all communications mediums past. After decades of unbridled expansion, the web has fallen under the control of a few giant corporations that are essentially too big to fail, or at least too big to fail without taking down vast portions of global business with them. But in other obvious ways, the internet is nothing like its precursors. A single online message can traverse the globe at the speed of light, leaving the likes of poor Pheidippides in the dust. It requires no cumbersome wires or operators.


pages: 233 words: 66,446

Bitcoin: The Future of Money? by Dominic Frisby

3D printing, Alan Greenspan, altcoin, bank run, banking crisis, banks create money, barriers to entry, bitcoin, Bitcoin Ponzi scheme, blockchain, capital controls, Chelsea Manning, cloud computing, computer age, cryptocurrency, disintermediation, Dogecoin, Ethereum, ethereum blockchain, fiat currency, financial engineering, fixed income, friendly fire, game design, Hacker News, hype cycle, Isaac Newton, John Gilmore, Julian Assange, land value tax, litecoin, low interest rates, M-Pesa, mobile money, Money creation, money: store of value / unit of account / medium of exchange, Occupy movement, Peter Thiel, Ponzi scheme, prediction markets, price stability, printed gun, QR code, quantitative easing, railway mania, Ronald Reagan, Ross Ulbricht, Satoshi Nakamoto, Silicon Valley, Skype, slashdot, smart contracts, Snapchat, Stephen Hawking, Steve Jobs, Ted Nelson, too big to fail, transaction costs, Turing complete, Twitter Arab Spring, Virgin Galactic, Vitalik Buterin, War on Poverty, web application, WikiLeaks

Electronic banking, which began in the 1980s and replaced the cash- and cheque-based economy, has made it possible for banks to do this – facilitated by the decision to ignore money-supply growth in measures of inflation. The social consequence of this has been for the financial sector to grow disproportionately large and influential – for banks to have become ‘too big to fail’. More and more people have been drawn to this sector where they can get some kind of exposure to new money creation. But elsewhere, perfectly innocent people lose out because of it. This is from Life After the State: Imagine a tiny economy. There are 20 people in it. Of these, ten each have $1 in cash, so there is $10 in the entire economy.


pages: 235 words: 65,885

Peak Everything: Waking Up to the Century of Declines by Richard Heinberg, James Howard (frw) Kunstler

Adam Curtis, addicted to oil, An Inconvenient Truth, anti-communist, Asilomar, back-to-the-land, carbon tax, classic study, clean water, Community Supported Agriculture, deindustrialization, delayed gratification, demographic transition, ending welfare as we know it, energy transition, Fractional reserve banking, greed is good, Haber-Bosch Process, happiness index / gross national happiness, income inequality, Intergovernmental Panel on Climate Change (IPCC), It's morning again in America, land reform, Lewis Mumford, means of production, oil shale / tar sands, peak oil, planned obsolescence, plutocrats, reserve currency, ride hailing / ride sharing, Ronald Reagan, the built environment, the scientific method, Thomas Malthus, too big to fail, urban planning

It was a spine-tingling show — and would have amounted to months of fine entertainment had it not been for the fact that millions of jobs, thousands of small businesses and the economies of several sovereign nations also came tumbling down, and there just weren’t enough trillions available to rescue all of them (it obviously pays to be “too big to fail” and to have friends in high places). The financial aspects of the crisis were so Byzantine, and the cast of players so opulently and impudently villainous, that it was easy to forget the simple truism that all money is, in the end, merely a claim on resources, energy and labor. A financial system built on staggering amounts of debt and the anticipation of both unending economic growth and absurdly high returns on investments can only work if labor is always getting cheaper and supplies of energy and resources are always growing — and even then, occasional hiccups are to be expected.


pages: 192 words: 72,822

Freedom Without Borders by Hoyt L. Barber

accounting loophole / creative accounting, Affordable Care Act / Obamacare, Albert Einstein, banking crisis, diversification, El Camino Real, estate planning, fiat currency, financial engineering, financial independence, fixed income, high net worth, illegal immigration, interest rate swap, money market fund, obamacare, offshore financial centre, passive income, quantitative easing, reserve currency, road to serfdom, selective serotonin reuptake inhibitor (SSRI), subprime mortgage crisis, too big to fail

In just 2010, several hundred banks failed in the United States. The amazing thing is that this is likely only the beginning of what will become a wave of bank failures, which will force the industry to consolidate. That means less competition, too, and that’s never good. And, as we’ve learned, some of these banks are too big to fail, but they may be forced to fail anyway, sending out financial shockwaves worldwide. You don’t want to be banking in the United States when that happens. The FDIC will be of no help. After 25 years of a long-term bull market, we are now in a bearish market. This may surprise many investors who have been optimistic about the economic recovery as exhibited by the buoyancy and the repeat rallies in the market that drove the Dow to 12,000, and maybe further.


pages: 305 words: 69,216

A Failure of Capitalism: The Crisis of '08 and the Descent Into Depression by Richard A. Posner

Alan Greenspan, Andrei Shleifer, banking crisis, Bear Stearns, Bernie Madoff, business cycle, collateralized debt obligation, collective bargaining, compensation consultant, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, debt deflation, diversified portfolio, equity premium, financial deregulation, financial intermediation, Glass-Steagall Act, Home mortgage interest deduction, illegal immigration, laissez-faire capitalism, Long Term Capital Management, low interest rates, market bubble, Money creation, money market fund, moral hazard, mortgage debt, Myron Scholes, oil shock, Ponzi scheme, price stability, profit maximization, proprietary trading, race to the bottom, reserve currency, risk tolerance, risk/return, Robert Shiller, savings glut, shareholder value, short selling, statistical model, subprime mortgage crisis, too big to fail, transaction costs, very high income

The responses also created "moral hazard" (the tendency to engage in risky behavior if one is insured against the consequences of the risks' materializing). They did this by eliminating the limits on federal deposit insurance of bank deposits and by extending that insurance to checkable accounts in money market funds, but more important by bailing out failing firms deemed "too big to fail"—an incentive for corporate giantism and financial irresponsibility (which go hand in hand because the difficulty of controlling subordinates grows with the size of an organization). The government gratuitously disrupted the operations of hedge funds by limiting short selling—at the height of the banking crisis the Securities and Exchange Commission forbade short selling of financial stocks.


Smart Cities, Digital Nations by Caspar Herzberg

Asian financial crisis, barriers to entry, business climate, business cycle, business process, carbon footprint, clean tech, clean water, cloud computing, corporate social responsibility, Dean Kamen, demographic dividend, Edward Glaeser, Edward Snowden, Hacker News, high-speed rail, hive mind, Internet of things, knowledge economy, Masdar, megacity, New Urbanism, operational security, packet switching, QR code, remote working, RFID, rising living standards, risk tolerance, Ronald Reagan, shareholder value, Silicon Valley, Silicon Valley startup, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, smart meter, social software, special economic zone, Stephen Hawking, telepresence, too big to fail, trade route, transcontinental railway, upwardly mobile, urban planning, urban sprawl, women in the workforce, working poor, X Prize

Melco Crown was crafting a new flagship for its enterprise, and it needed to stand out on the Cotai Strip against formidable rivals. To meet the prescribed schedules, a multifaceted approach was necessary. Cisco’s team needed to understand this project from the perspectives of operations, business strategies, client interface, suppliers, and partners. No casino is “too big to fail” in a dog-eat-dog ecosystem. What assured the Cisco team that it had an optimal partner was Melco Crown’s view of the IP network. “We believe technology is a major differentiator for a top-notch resort operator now, and that is why we chose to create the single largest converged infrastructure in Asia Pacific to support our business and development,” Melco Crown Entertainment’s senior vice president and chief information officer, Roger Seshadri, explained.


pages: 254 words: 68,133

The Age of Illusions: How America Squandered Its Cold War Victory by Andrew J. Bacevich

affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, anti-communist, Bear Stearns, Berlin Wall, Bernie Sanders, clean water, Columbian Exchange, Credit Default Swap, cuban missile crisis, David Brooks, deindustrialization, Donald Trump, Fall of the Berlin Wall, Francis Fukuyama: the end of history, friendly fire, gig economy, Glass-Steagall Act, global village, Gordon Gekko, greed is good, Greenspan put, illegal immigration, income inequality, Jeff Bezos, Kickstarter, Marshall McLuhan, mass incarceration, Mikhail Gorbachev, military-industrial complex, Monroe Doctrine, Norman Mailer, obamacare, Occupy movement, opioid epidemic / opioid crisis, planetary scale, plutocrats, Potemkin village, price stability, Project for a New American Century, Ronald Reagan, Ronald Reagan: Tear down this wall, Saturday Night Live, school choice, Seymour Hersh, Silicon Valley, Steve Bannon, Thomas L Friedman, too big to fail, traumatic brain injury, trickle-down economics, We are all Keynesians now, WikiLeaks

Sadly, the mendacity and malfeasance that had paved the way for the Great Recession went essentially unpunished. Through their marketing of complex financial instruments such as mortgage-backed securities and credit default swaps, investment banks had essentially perpetrated a gigantic swindle. Deeming these banks “too big to fail,” Obama let off the hook the very predators who had almost destroyed the system from which they handsomely profited. Not for the first time in American history, the malefactors of great wealth got away with their crimes. Given the havoc it wreaked, the Great Recession might have provided an occasion for critically reassessing the supposed imperatives of globalization.


pages: 199 words: 64,272

Money: The True Story of a Made-Up Thing by Jacob Goldstein

Alan Greenspan, Antoine Gombaud: Chevalier de Méré, back-to-the-land, bank run, banks create money, Bear Stearns, Berlin Wall, Bernie Sanders, bitcoin, blockchain, break the buck, card file, central bank independence, collective bargaining, coronavirus, COVID-19, cryptocurrency, David Graeber, Edmond Halley, Fall of the Berlin Wall, fiat currency, financial innovation, Fractional reserve banking, full employment, German hyperinflation, Glass-Steagall Act, index card, invention of movable type, invention of writing, Isaac Newton, life extension, M-Pesa, Marc Andreessen, Martin Wolf, Menlo Park, Mikhail Gorbachev, mobile money, Modern Monetary Theory, money market fund, probability theory / Blaise Pascal / Pierre de Fermat, Ronald Reagan, Ross Ulbricht, Satoshi Nakamoto, Second Machine Age, side hustle, Silicon Valley, software is eating the world, Steven Levy, the new new thing, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, transaction costs

Because money is so essential, the government offers a massive but piecemeal safety net for the banks. Central banks are lenders of last resort. Government insurance programs back deposits. Regulators from multiple agencies try to keep banks safe, but sometimes fail to do so. When banks were bailed out after the financial crisis of 2008, people raged against “too big to fail” banks. The anger is justifiable, but the problem isn’t that banks are too big or that bankers are too greedy; the problem is with the nature of banking. Banking is inherently prone to crises. And in any big financial crisis, the government has to choose between bailing out banks (whether they are big or small) or allowing failing banks to take down the whole economy.


pages: 242 words: 67,233

McMindfulness: How Mindfulness Became the New Capitalist Spirituality by Ronald Purser

"World Economic Forum" Davos, Abraham Maslow, Affordable Care Act / Obamacare, Bernie Sanders, biodiversity loss, British Empire, capitalist realism, commoditize, corporate governance, corporate social responsibility, digital capitalism, Donald Trump, Edward Snowden, fake news, Frederick Winslow Taylor, friendly fire, Goldman Sachs: Vampire Squid, housing crisis, Howard Zinn, impulse control, job satisfaction, liberation theology, Lyft, Marc Benioff, mass incarceration, meta-analysis, military-industrial complex, moral panic, Nelson Mandela, neoliberal agenda, Nicholas Carr, obamacare, placebo effect, precariat, prosperity theology / prosperity gospel / gospel of success, publication bias, Ralph Waldo Emerson, randomized controlled trial, Ronald Reagan, Salesforce, science of happiness, scientific management, shareholder value, Sheryl Sandberg, Silicon Valley, Slavoj Žižek, source of truth, stealth mode startup, TED Talk, The Spirit Level, Tony Hsieh, too big to fail, Torches of Freedom, trickle-down economics, uber lyft, work culture

Other social actors — including the state, voluntary associations, and the like — are just obstacles to the smooth operation of market logic, and they ought to be dismantled or disregarded. In theory, at least, neoliberalism promotes entrepreneurship by providing the defense of private property rights and upholding market freedoms. In practice, some economic actors — such as banks deemed “too big to fail” — get to game the system, while others — such as people on welfare — are demonized as scroungers. Let’s see how this plays out. Suppose your instincts lean vaguely leftwards, and that you therefore reject most neoliberal policies, but unwittingly share the basic outlook behind them. Suppose that at the same time you are firmly convinced of the value of mindfulness and making it widely available.


pages: 684 words: 188,584

The Age of Radiance: The Epic Rise and Dramatic Fall of the Atomic Era by Craig Nelson

Albert Einstein, Brownian motion, Charles Lindbergh, clean tech, cognitive dissonance, Columbine, continuation of politics by other means, corporate governance, cuban missile crisis, dark matter, Doomsday Clock, Dr. Strangelove, El Camino Real, Ernest Rutherford, failed state, Great Leap Forward, Henri Poincaré, Herman Kahn, hive mind, Isaac Newton, it's over 9,000, John von Neumann, Louis Pasteur, low earth orbit, Menlo Park, Mikhail Gorbachev, military-industrial complex, music of the spheres, mutually assured destruction, nuclear taboo, nuclear winter, oil shale / tar sands, Project Plowshare, Ralph Nader, Richard Feynman, Ronald Reagan, Skype, Strategic Defense Initiative, Stuxnet, technoutopianism, Ted Sorensen, TED Talk, too big to fail, uranium enrichment, William Langewiesche, éminence grise

Finally, as private US insurance companies would only cover nuclear plants to $65 million (about one-tenth of what a major accident would cost), in 1957 Washington created a special insurance pool. Such public largesse for private enterprise would apogee in 2012 when the Japanese government was forced to nationalize with taxpayer yen a “too big to fail” utility destroyed by corporate malfeasance and nuclear meltdown. In 1971 next to a popular surfing spot on the shores of Fukushima, Tokyo Electric Power Company (TEPCO) built a nuclear power-generating plant bigger than the Pentagon and staffed by six thousand—Daiichi (Dye-ee-chee). Fortunate Island was the first of many nuclear plants Japan built along its coastline, and hanging from the bridge over the main road’s entry into Futaba, Daiichi’s nearest town, was an exhortation to the plant’s neighbors: NUCLEAR ENERGY: A CORRECT UNDERSTANDING BRINGS A PROSPEROUS LIFESTYLE!

On May 9, 2012, the Japanese government announced it was ready to spend 2.4 trillion yen ($30.1 billion) to pay compensation to Fukushima victims and 1 trillion yen ($12.5 billion) on a bailout to temporarily nationalize TEPCO—supplier of all Tokyo’s electricity and one-third of the nation’s as a whole—a “too big to fail” move of public largesse. All of the company’s current directors would resign. Regarding the dark history of plant workers’ ties to criminal gangs, a Japanese senator explained, “Nuclear energy shouldn’t be in the hands of the yakuza. They’re gamblers, and an intelligent person doesn’t want them to have atomic dice to play with.”


pages: 733 words: 179,391

Adaptive Markets: Financial Evolution at the Speed of Thought by Andrew W. Lo

Alan Greenspan, Albert Einstein, Alfred Russel Wallace, algorithmic trading, Andrei Shleifer, Arthur Eddington, Asian financial crisis, asset allocation, asset-backed security, backtesting, bank run, barriers to entry, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, bitcoin, Bob Litterman, Bonfire of the Vanities, bonus culture, break the buck, Brexit referendum, Brownian motion, business cycle, business process, butterfly effect, buy and hold, capital asset pricing model, Captain Sullenberger Hudson, carbon tax, Carmen Reinhart, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computerized trading, confounding variable, corporate governance, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, Daniel Kahneman / Amos Tversky, delayed gratification, democratizing finance, Diane Coyle, diversification, diversified portfolio, do well by doing good, double helix, easy for humans, difficult for computers, equity risk premium, Ernest Rutherford, Eugene Fama: efficient market hypothesis, experimental economics, experimental subject, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, financial intermediation, fixed income, Flash crash, Fractional reserve banking, framing effect, Glass-Steagall Act, global macro, Gordon Gekko, greed is good, Hans Rosling, Henri Poincaré, high net worth, housing crisis, incomplete markets, index fund, information security, interest rate derivative, invention of the telegraph, Isaac Newton, it's over 9,000, James Watt: steam engine, Jeff Hawkins, Jim Simons, job satisfaction, John Bogle, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, Joseph Schumpeter, Kenneth Rogoff, language acquisition, London Interbank Offered Rate, Long Term Capital Management, longitudinal study, loss aversion, Louis Pasteur, mandelbrot fractal, margin call, Mark Zuckerberg, market fundamentalism, martingale, megaproject, merger arbitrage, meta-analysis, Milgram experiment, mirror neurons, money market fund, moral hazard, Myron Scholes, Neil Armstrong, Nick Leeson, old-boy network, One Laptop per Child (OLPC), out of africa, p-value, PalmPilot, paper trading, passive investing, Paul Lévy, Paul Samuelson, Paul Volcker talking about ATMs, Phillips curve, Ponzi scheme, predatory finance, prediction markets, price discovery process, profit maximization, profit motive, proprietary trading, public intellectual, quantitative hedge fund, quantitative trading / quantitative finance, RAND corporation, random walk, randomized controlled trial, Renaissance Technologies, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance, Robert Shiller, Robert Solow, Sam Peltzman, Savings and loan crisis, seminal paper, Shai Danziger, short selling, sovereign wealth fund, Stanford marshmallow experiment, Stanford prison experiment, statistical arbitrage, Steven Pinker, stochastic process, stocks for the long run, subprime mortgage crisis, survivorship bias, systematic bias, Thales and the olive presses, The Great Moderation, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Triangle Shirtwaist Factory, ultimatum game, uptick rule, Upton Sinclair, US Airways Flight 1549, Walter Mischel, Watson beat the top human players on Jeopardy!, WikiLeaks, Yogi Berra, zero-sum game

In ongoing research, Simon Levin and I are using several ideas from biological regulation—feedback control mechanisms, the immune response, and ecosystem management techniques—to propose improvements to financial regulation.6 For example, financial institutions that were “too big to fail” were an important driver of the recent financial crisis—letting insurance behemoth AIG go under was simply not an option, hence its rescue by the Fed. Both the ecological and the economic approach imply that the size of “too big to fail” institutions must give them an advantage within the financial system. However, ecology has a more practical theory for how and why size matters for the scale of organisms.7 As the biologist John Bonner points out, the top of the scale is always open for further evolutionary development.8 Barring other constraints, there’s no competition in this niche for a new entrant.


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

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

The public ended up footing the bill for a crisis that wasn’t its fault. Most gallingly, banks receiving government support continued to pay out for executive 319 M ac roe c onom ic s i n t h e C r a s h a n d A f t e r , 2 0 0 7 – bonuses, while the rest of the country put up with austerity in the name of fiscal prudence. ‘Too big to fail’ banks provide a textbook example of moral hazard, which arises when people take on excessive risk once they know they will not pay the price for their risk-taking if things go awry. If bankers know that the state will absorb their losses, they are free to gamble to their heart’s content and are rewarded for their efforts: ‘no industry has a comparable talent for privatising gains and socialising losses’. 29 3.

Using digital technology to hide the transactions of their users from regulatory scrutiny, they have so far mainly been useful for speculation and money laundering.) Functional Separation The earliest idea for reform was to break up big banks into smaller units – local, neighbourhood, regional. This would eliminate the ‘too big to fail’ problem, and reconnect banks with their depositors. In fact, the financial crisis has increased the concentration of the banking system, as such crises always do. The ten biggest banks in the US now control 75 per cent of American assets, as opposed to 10 per cent in 1990. So reformist ideas shifted to separating banks by function.


pages: 619 words: 177,548

Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity by Daron Acemoglu, Simon Johnson

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 4chan, agricultural Revolution, AI winter, Airbnb, airline deregulation, algorithmic bias, algorithmic management, Alignment Problem, AlphaGo, An Inconvenient Truth, artificial general intelligence, augmented reality, basic income, Bellingcat, Bernie Sanders, Big Tech, Bletchley Park, blue-collar work, British Empire, carbon footprint, carbon tax, carried interest, centre right, Charles Babbage, ChatGPT, Clayton Christensen, clean water, cloud computing, collapse of Lehman Brothers, collective bargaining, computer age, Computer Lib, Computing Machinery and Intelligence, conceptual framework, contact tracing, Corn Laws, Cornelius Vanderbilt, coronavirus, corporate social responsibility, correlation does not imply causation, cotton gin, COVID-19, creative destruction, declining real wages, deep learning, DeepMind, deindustrialization, Demis Hassabis, Deng Xiaoping, deskilling, discovery of the americas, disinformation, Donald Trump, Douglas Engelbart, Douglas Engelbart, Edward Snowden, Elon Musk, en.wikipedia.org, energy transition, Erik Brynjolfsson, European colonialism, everywhere but in the productivity statistics, factory automation, facts on the ground, fake news, Filter Bubble, financial innovation, Ford Model T, Ford paid five dollars a day, fulfillment center, full employment, future of work, gender pay gap, general purpose technology, Geoffrey Hinton, global supply chain, Gordon Gekko, GPT-3, Grace Hopper, Hacker Ethic, Ida Tarbell, illegal immigration, income inequality, indoor plumbing, industrial robot, interchangeable parts, invisible hand, Isaac Newton, Jacques de Vaucanson, James Watt: steam engine, Jaron Lanier, Jeff Bezos, job automation, Johannes Kepler, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph-Marie Jacquard, Kenneth Arrow, Kevin Roose, Kickstarter, knowledge economy, labor-force participation, land reform, land tenure, Les Trente Glorieuses, low skilled workers, low-wage service sector, M-Pesa, manufacturing employment, Marc Andreessen, Mark Zuckerberg, megacity, mobile money, Mother of all demos, move fast and break things, natural language processing, Neolithic agricultural revolution, Norbert Wiener, NSO Group, offshore financial centre, OpenAI, PageRank, Panopticon Jeremy Bentham, paperclip maximiser, pattern recognition, Paul Graham, Peter Thiel, Productivity paradox, profit maximization, profit motive, QAnon, Ralph Nader, Ray Kurzweil, recommendation engine, ride hailing / ride sharing, Robert Bork, Robert Gordon, Robert Solow, robotic process automation, Ronald Reagan, scientific management, Second Machine Age, self-driving car, seminal paper, shareholder value, Sheryl Sandberg, Shoshana Zuboff, Silicon Valley, social intelligence, Social Responsibility of Business Is to Increase Its Profits, social web, South Sea Bubble, speech recognition, spice trade, statistical model, stem cell, Steve Jobs, Steve Wozniak, strikebreaker, subscription business, Suez canal 1869, Suez crisis 1956, supply-chain management, surveillance capitalism, tacit knowledge, tech billionaire, technoutopianism, Ted Nelson, TED Talk, The Future of Employment, The Rise and Fall of American Growth, The Structural Transformation of the Public Sphere, The Wealth of Nations by Adam Smith, theory of mind, Thomas Malthus, too big to fail, total factor productivity, trade route, transatlantic slave trade, trickle-down economics, Turing machine, Turing test, Twitter Arab Spring, Two Sigma, Tyler Cowen, Tyler Cowen: Great Stagnation, union organizing, universal basic income, Unsafe at Any Speed, Upton Sinclair, upwardly mobile, W. E. B. Du Bois, War on Poverty, WikiLeaks, wikimedia commons, working poor, working-age population

According to top officials at the US Department of Justice, it was hard to bring criminal cases against the responsible parties, in effect making these banks “too big to jail.” This effective immunity from prosecution and eventual access to unprecedented levels of public financial support had nothing to do with bank executives’ ability to use force. Not just too big to jail, these banks were also “too big to fail.” Generous bailouts were provided because, amid the crisis, the banks and other large financial corporations convinced policy makers that what was good for these firms and their executives was good for the economy. After the collapse of Lehman Brothers in September 2008, the prevailing argument became that further failures among leading financial firms would translate into system-wide problems, harming the entire economy.

They were viewed as highly successful by an American culture that puts great weight on material wealth. As risk taking and profit margins in the industry grew, finance executives became wealthier, pushing up their prestige even higher. When things went badly, the same firms suffered losses that were so large that they would face bankruptcy. This is when the “too-big-to-fail” card was played. Policy makers, who were previously persuaded that big and highly leveraged was beautiful in finance, were now convinced that allowing these gargantuan firms to fail would cause an even greater economic disaster. When he was asked by a journalist why he robbed banks, Willie Sutton, an infamous criminal of the Great Depression era, is reputed to have said, “That’s where the money is.”


pages: 593 words: 183,240

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

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

The desire on the part of investors to dump risky assets—at any price—and buy safer ones—at any price—became an imperative. The desire on the part of the Fed and the Treasury to prevent Wall Street from profiting from the crisis drove their decisions in September 2008. Previously, equity shareholders had been severely punished when their firms were judged too big to fail—the shareholders of Bear Stearns, AIG, Fannie Mae, and Freddie Mac essentially had all their wealth confiscated. But this was not true of bondholders and counterparties, who were paid in full. The Fed and Treasury feared that a bad lesson was being taught. To unteach that lesson required, at some point, allowing a bank to fail.

These measures were successful in stemming the panic—by the early summer of 2009, most measures of financial stress had subsided to more or less normal levels, and the world economy ended its headlong plunge. But that was just the “lend freely” part. Governments neglected to implement the “good in normal times” part of the Bagehot-Minsky playbook. Not even too-big-to-fail Citigroup was put into receivership. Worse still, governments completely ignored the “penalty rate” part: bankers and investors, even or perhaps especially those whose actions had created the systemic risks that caused the crisis, profited handsomely. Financial bailouts are always unfair because they reward those who made bad bets on risky assets.


pages: 302 words: 73,581

Platform Scale: How an Emerging Business Model Helps Startups Build Large Empires With Minimum Investment by Sangeet Paul Choudary

3D printing, Airbnb, Amazon Web Services, barriers to entry, bitcoin, blockchain, business logic, business process, Chuck Templeton: OpenTable:, Clayton Christensen, collaborative economy, commoditize, crowdsourcing, cryptocurrency, data acquisition, data science, fake it until you make it, frictionless, game design, gamification, growth hacking, Hacker News, hive mind, hockey-stick growth, Internet of things, invisible hand, Kickstarter, Lean Startup, Lyft, M-Pesa, Marc Andreessen, Mark Zuckerberg, means of production, multi-sided market, Network effects, new economy, Paul Graham, recommendation engine, ride hailing / ride sharing, Salesforce, search costs, shareholder value, sharing economy, Silicon Valley, Skype, Snapchat, social bookmarking, social graph, social software, software as a service, software is eating the world, Spread Networks laid a new fibre optics cable between New York and Chicago, TaskRabbit, the long tail, the payments system, too big to fail, transport as a service, two-sided market, Uber and Lyft, Uber for X, uber lyft, vertical integration, Wave and Pay

The next two pages lay out the canvas for three case studies, discussed earlier in this section. The Viral Canvas Figure 19a Instagram Figure 19b Airbnb Figure 19c YouTube Figure 19d Section 6 REVERSE NETWORK EFFECTS The goal of platform scale is to ensure the simultaneous scaling of quantity and quality of interactions. INTRODUCTION Too Big To Fail? The era of big corporations may be drawing to a close, but much of this book makes the case for a new form of big: the era of big ecosystems, built around networked platforms. As the world gets more networked, harnessing the principles of platform scale to our advantage is going to present opportunities to transform entire industries and shape business models that would not have existed before.


pages: 252 words: 74,167

Thinking Machines: The Inside Story of Artificial Intelligence and Our Race to Build the Future by Luke Dormehl

"World Economic Forum" Davos, Ada Lovelace, agricultural Revolution, AI winter, Albert Einstein, Alexey Pajitnov wrote Tetris, algorithmic management, algorithmic trading, AlphaGo, Amazon Mechanical Turk, Apple II, artificial general intelligence, Automated Insights, autonomous vehicles, backpropagation, Bletchley Park, book scanning, borderless world, call centre, cellular automata, Charles Babbage, Claude Shannon: information theory, cloud computing, computer vision, Computing Machinery and Intelligence, correlation does not imply causation, crowdsourcing, deep learning, DeepMind, driverless car, drone strike, Elon Musk, Flash crash, Ford Model T, friendly AI, game design, Geoffrey Hinton, global village, Google X / Alphabet X, Hans Moravec, hive mind, industrial robot, information retrieval, Internet of things, iterative process, Jaron Lanier, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, John von Neumann, Kickstarter, Kodak vs Instagram, Law of Accelerating Returns, life extension, Loebner Prize, machine translation, Marc Andreessen, Mark Zuckerberg, Menlo Park, Mustafa Suleyman, natural language processing, Nick Bostrom, Norbert Wiener, out of africa, PageRank, paperclip maximiser, pattern recognition, radical life extension, Ray Kurzweil, recommendation engine, remote working, RFID, scientific management, self-driving car, Silicon Valley, Skype, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, social intelligence, speech recognition, Stephen Hawking, Steve Jobs, Steve Wozniak, Steven Pinker, strong AI, superintelligent machines, tech billionaire, technological singularity, The Coming Technological Singularity, The Future of Employment, Tim Cook: Apple, Tony Fadell, too big to fail, traumatic brain injury, Turing machine, Turing test, Vernor Vinge, warehouse robotics, Watson beat the top human players on Jeopardy!

For the first time in years, researchers in the field began to get excited. Not that things were necessarily easy. As we saw in chapter one, the early years of the 1980s were dominated by ‘expert systems’, now with more money than ever behind them. Although they would stumble later on, at the time they appeared to be too big to fail. ‘We felt like little furry mammals at the time of the dinosaurs,’ recalls Terry Sejnowski, now one of the world’s leading neural network experts, who was then Hopfield’s doctoral student at Princeton. ‘We were screwing around under the legs of these huge behemoths who were out there with multi-million dollar machines and enormous budgets.


pages: 267 words: 74,296

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

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

Brutally, no doubt, the hardest-hit economies have been forced into overdue reforms, for instance in Ireland and Spain. Nowadays it is Italy and France, less traumatised but also less reformed than other countries, which present some of the biggest dangers to the future of the euro. They are too big to fail, too big to save and too big to bully from Brussels. Europe’s real folly was not to look for the gains from a single currency in terms of trade, financial integration, exchange-rate stability and economic efficiency, even if they might have been overstated. The madness was to believe that these benefits could be obtained on the cheap, without the political constraints, economic flexibility, financial transfers and risk-sharing mechanisms of genuine federations.


pages: 252 words: 72,473

Weapons of Math Destruction: How Big Data Increases Inequality and Threatens Democracy by Cathy O'Neil

Affordable Care Act / Obamacare, Alan Greenspan, algorithmic bias, Bernie Madoff, big data - Walmart - Pop Tarts, call centre, Cambridge Analytica, carried interest, cloud computing, collateralized debt obligation, correlation does not imply causation, Credit Default Swap, credit default swaps / collateralized debt obligations, crowdsourcing, data science, disinformation, electronic logging device, Emanuel Derman, financial engineering, Financial Modelers Manifesto, Glass-Steagall Act, housing crisis, I will remember that I didn’t make the world, and it doesn’t satisfy my equations, Ida Tarbell, illegal immigration, Internet of things, late fees, low interest rates, machine readable, mass incarceration, medical bankruptcy, Moneyball by Michael Lewis explains big data, new economy, obamacare, Occupy movement, offshore financial centre, payday loans, peer-to-peer lending, Peter Thiel, Ponzi scheme, prediction markets, price discrimination, quantitative hedge fund, Ralph Nader, RAND corporation, real-name policy, recommendation engine, Rubik’s Cube, Salesforce, Sharpe ratio, statistical model, tech worker, Tim Cook: Apple, too big to fail, Unsafe at Any Speed, Upton Sinclair, Watson beat the top human players on Jeopardy!, working poor

Throughout my time at the hotline, I got the sense that the people warning about risk were viewed as party poopers or, worse, a threat to the bank’s bottom line. This was true even after the cataclysmic crash of 2008, and it’s not hard to understand why. If they survived that one—because they were too big to fail—why were they going to fret over risk in their portfolio now? The refusal to acknowledge risk runs deep in finance. The culture of Wall Street is defined by its traders, and risk is something they actively seek to underestimate. This is a result of the way we define a trader’s prowess, namely by his “Sharpe ratio,” which is calculated as the profits he generates divided by the risks in his portfolio.


pages: 251 words: 76,868

How to Run the World: Charting a Course to the Next Renaissance by Parag Khanna

"World Economic Forum" Davos, Albert Einstein, Asian financial crisis, back-to-the-land, bank run, blood diamond, Bob Geldof, borderless world, BRICs, British Empire, call centre, carbon footprint, carbon tax, charter city, clean tech, clean water, cloud computing, commoditize, congestion pricing, continuation of politics by other means, corporate governance, corporate social responsibility, Deng Xiaoping, Doha Development Round, don't be evil, double entry bookkeeping, energy security, European colonialism, export processing zone, facts on the ground, failed state, financial engineering, friendly fire, global village, Global Witness, Google Earth, high net worth, high-speed rail, index fund, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Kickstarter, Kiva Systems, laissez-faire capitalism, Live Aid, Masdar, mass immigration, megacity, Michael Shellenberger, microcredit, military-industrial complex, mutually assured destruction, Naomi Klein, Nelson Mandela, New Urbanism, no-fly zone, off grid, offshore financial centre, oil shock, One Laptop per Child (OLPC), open economy, out of africa, Parag Khanna, private military company, Productivity paradox, race to the bottom, RAND corporation, reserve currency, Salesforce, Silicon Valley, smart grid, South China Sea, sovereign wealth fund, special economic zone, sustainable-tourism, Ted Nordhaus, The Fortune at the Bottom of the Pyramid, The Wisdom of Crowds, too big to fail, trade liberalization, trickle-down economics, UNCLOS, uranium enrichment, Washington Consensus, X Prize

Rather than broaden and deepen their governance, the Kremlin and Duma have granted two giant utility companies, Gazprom and Transneft, the right to raise private armed security forces to protect their gas pipelines across Siberia, while largely abandoning much of the massive Far East to the whims of resource-hungry Chinese firms and shuttle traders. On a map, Russia is still the world’s largest country, but on the ground it is an archipelago of diffuse ethno-political experiments. Russia isn’t “too big to fail.” Our present cartography does not have to be destiny. The map of the world is in perpetual flux—its many lines, either straight or curved, rarely represent orderly calmness. Often the opposite is true. Some countries such as Lebanon and Afghanistan are too ethnically entangled to be separable, so they exist in a state of perpetual negotiation with warlords or ethnic minority groups to maintain tenuous, always costly, and ultimately dubious stability.


pages: 266 words: 77,045

The Bend of the World: A Novel by Jacob Bacharach

Burning Man, disinformation, haute couture, helicopter parent, Isaac Newton, medical residency, messenger bag, phenotype, quantitative easing, too big to fail, trade route, young professional

Oh, hey, Morrison, Johnny said, can you lend me a few bucks? I need to have a beer with these guys and my sovereign debt sitch is a little precarious at the moment. Quantitatively ease a brother’s burden. I’m not a bank, I said, but I handed him one of the twenties Mark had handed to me the night before. Maybe so, but I’m too big to fail, Johnny said, and he cackled on his way down the stairs. I texted Lauren Sara and asked her if she was letting someone else drive my car. She responded immediately; lied: no. then who almost just killed me?? I asked. me, she wrote; then, a few seconds later: only almost. Then I texted Johnny: maybe theyre magic beans.


pages: 281 words: 78,317

But What if We're Wrong? Thinking About the Present as if It Were the Past by Chuck Klosterman

a long time ago in a galaxy far, far away, Affordable Care Act / Obamacare, British Empire, citizen journalism, cosmological constant, dark matter, data science, Easter island, Edward Snowden, Elon Musk, Francis Fukuyama: the end of history, Frank Gehry, George Santayana, Gerolamo Cardano, ghettoisation, Golden age of television, Hans Moravec, Higgs boson, Howard Zinn, Isaac Newton, Joan Didion, Large Hadron Collider, Nick Bostrom, non-fiction novel, obamacare, pre–internet, public intellectual, Ralph Nader, Ray Kurzweil, Ronald Reagan, Seymour Hersh, Silicon Valley, Stephen Hawking, TED Talk, the medium is the message, the scientific method, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Y2K

It becomes a regional sport, primarily confined to places where football is ingrained in the day-to-day culture (Florida, Texas, etc.). Its fanbase resembles that of contemporary boxing—rich people watching poor people play a game they would never play themselves. The NFL persists through sheer social pervasiveness—a system that’s too big to fail and too economically essential to too many microeconomies. The game itself is altered for safety. “As a natural optimist who loves football, I can only really give one answer to this question, and the answer is yes. I believe that football can and will still have a significant place in American culture in a hundred years,” says Michael MacCambridge, author of the comprehensive NFL history America’s Game.


pages: 236 words: 77,735

Rigged Money: Beating Wall Street at Its Own Game by Lee Munson

affirmative action, Alan Greenspan, asset allocation, backtesting, barriers to entry, Bear Stearns, Bernie Madoff, Bretton Woods, business cycle, buy and hold, buy low sell high, California gold rush, call centre, Credit Default Swap, diversification, diversified portfolio, estate planning, fear index, fiat currency, financial engineering, financial innovation, fixed income, Flash crash, follow your passion, German hyperinflation, Glass-Steagall Act, global macro, High speed trading, housing crisis, index fund, joint-stock company, junk bonds, managed futures, Market Wizards by Jack D. Schwager, Michael Milken, military-industrial complex, money market fund, moral hazard, Myron Scholes, National best bid and offer, off-the-grid, passive investing, Ponzi scheme, power law, price discovery process, proprietary trading, random walk, Reminiscences of a Stock Operator, risk tolerance, risk-adjusted returns, risk/return, Savings and loan crisis, short squeeze, stocks for the long run, stocks for the long term, too big to fail, trade route, Vanguard fund, walking around money

You choose who to do your banking with. At the end of this chapter we will take a look at an alternative, but for right now it is important to fully understand why the repeal was a disaster. Of course, no one would exactly want to pitch the repeal of bank regulation with the argument that they would become too big to fail. So instead, banks told the government they were low-risk, would never do anything that would harm the system, and made the case that other countries do it, so why can’t we? In addition they argued that it is not fair that investment banks can make mortgage-backed securities but banks can’t. The late 1990s was all about deregulation as the key to economic success, and the stock market was not arguing the point.


pages: 258 words: 74,942

Company of One: Why Staying Small Is the Next Big Thing for Business by Paul Jarvis

Abraham Maslow, Airbnb, big-box store, Boeing 747, Cal Newport, call centre, content marketing, corporate social responsibility, David Heinemeier Hansson, digital nomad, drop ship, effective altruism, Elon Musk, en.wikipedia.org, endowment effect, follow your passion, fulfillment center, gender pay gap, glass ceiling, growth hacking, Inbox Zero, independent contractor, index fund, job automation, Kickstarter, Lyft, Mark Zuckerberg, Naomi Klein, passive investing, Paul Graham, pets.com, remote work: asynchronous communication, remote working, Results Only Work Environment, ride hailing / ride sharing, Ruby on Rails, Salesforce, Sheryl Sandberg, side project, Silicon Valley, Skype, Snapchat, social bookmarking, software as a service, Steve Jobs, supply-chain management, TED Talk, Tim Cook: Apple, too big to fail, uber lyft, web application, William MacAskill, Y Combinator, Y2K

Becoming Too Small to Fail The ideas, research cited, and lessons in this book point to a broader philosophy of business achievement: business success does not lie in growing something quickly and massively, but rather in building something that’s both remarkable and resilient over the long term. This isn’t to say that success happens only after the first millennium has passed, but that success is about finding a way to sustain a business as long as it needs to be sustained. As we’ve seen time and time again, nothing is too big to fail. With bigger scale come bigger dangers, bigger risks, and much work to become and remain profitable. Instead, you can focus on building something that, in effect, is too small to fail. You can adapt a small company of one to ride out recessions, adjust to changing customer motivations, and ignore competition by being smaller, more focused, and in need of much less to turn a profit.


pages: 283 words: 73,093

Social Democratic America by Lane Kenworthy

affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, barriers to entry, basic income, benefit corporation, business cycle, carbon tax, Celtic Tiger, centre right, clean water, collective bargaining, corporate governance, David Brooks, desegregation, Edward Glaeser, endogenous growth, full employment, Gini coefficient, hiring and firing, Home mortgage interest deduction, illegal immigration, income inequality, invisible hand, Kenneth Arrow, labor-force participation, manufacturing employment, market bubble, minimum wage unemployment, new economy, off-the-grid, postindustrial economy, purchasing power parity, race to the bottom, rent-seeking, rising living standards, Robert Gordon, Robert Shiller, Ronald Reagan, school choice, shareholder value, sharing economy, Skype, Steve Jobs, too big to fail, Tyler Cowen, Tyler Cowen: Great Stagnation, union organizing, universal basic income, War on Poverty, working poor, zero day

Patents limit competition in pharmaceuticals, computer software, entertainment, and a slew of other product markets.57 Licensing, credentialing, and certification requirements for occupations or particular types of businesses dampen competition in product markets ranging from medical care to legal services to education to taxi transportation to hairdressing and beyond.58 Zoning restrictions and historic preservation designations limit the expansion of housing units in large cities by imposing building height restrictions and preventing new construction on much of the land.59 The federal government’s practice of treating large banks as “too big to fail” allows those banks to engage in riskier strategies, with potentially higher profit margins, and encourages investors to choose those banks over competitors. Both investors and management know that they are likely to be rescued by taxpayers if their bets go sour.60 Our federal tax code is chock-full of exemptions, loopholes, and benefits for particular firms and sectors.


pages: 300 words: 77,787

Investing Demystified: How to Invest Without Speculation and Sleepless Nights by Lars Kroijer

Andrei Shleifer, asset allocation, asset-backed security, Bernie Madoff, bitcoin, Black Swan, BRICs, Carmen Reinhart, clean tech, compound rate of return, credit crunch, currency risk, diversification, diversified portfolio, equity premium, equity risk premium, estate planning, fixed income, high net worth, implied volatility, index fund, intangible asset, invisible hand, John Bogle, Kenneth Rogoff, low interest rates, market bubble, money market fund, passive investing, pattern recognition, prediction markets, risk tolerance, risk/return, Robert Shiller, selection bias, sovereign wealth fund, too big to fail, transaction costs, Vanguard fund, yield curve, zero-coupon bond

The guarantees are in place to lend confidence to the financial system and avoid runs on the banks. Without a bank guarantee we would be general creditors to the bank and have to gauge bank credit risk, something most depositors are not equipped to do. (Of course, if you have your money with a bank deemed ‘too big to fail’ the bank won’t fail without the government also failing.) If you hold cash deposits with one or more financial institutions in excess of the deposit insurance then you are a general creditor of that institution in the event that it fails. This means that if you have £200,000 in deposits with a bank and the credit insurance is only for £85,000, the last £115,000 is not covered.


pages: 318 words: 77,223

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

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

Forced not just by regulatory actions but also by market pressures, banks have built considerable capital cushions to offset the impact of possible future mistakes and adverse exogenous shocks; these cushions will be further enhanced in the years ahead as additional capital requirements (“surcharges”) kick in for what are now known as the “GSIBs,” or the “global systemically important banks”1—including those banks that are still viewed as too big to manage and/or too big to fail. At the same time, considerable efforts have been devoted to cleaning up balance sheets, be it through the disposal of shady assets or better pricing and risk assessments. There have even been efforts to better align internal incentives and try to reduce classic principal/agent problems that result in excessive short-termism and irresponsible risk taking.


pages: 253 words: 79,214

The Money Machine: How the City Works by Philip Coggan

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

It was significant in March 2008 that the US Federal Reserve felt obliged to help with the rescue of Bear Stearns, an investment bank. The bank had no retail depositors. There would have been no queues of worried consumers, as there were at the British bank Northern Rock. Neverthless, Bear Stearns was deemed too big to fail (TBTF in the jargon), or even TCTF (too complex to fail). Bear Stearns was a participant in a multitude of complex deals, in which investors and companies took positions on everything from exchange-rate movements through commodity prices to the possibility of corporate failure. Had it defaulted, it could have taken ages to sort out the mess because markets are so interconnected.


pages: 292 words: 76,185

Pivot: The Only Move That Matters Is Your Next One by Jenny Blake

Airbnb, Albert Einstein, Cal Newport, cloud computing, content marketing, data is the new oil, diversified portfolio, do what you love, East Village, en.wikipedia.org, Erik Brynjolfsson, fear of failure, future of work, high net worth, Jeff Bezos, job-hopping, Kevin Kelly, Khan Academy, knowledge worker, Lao Tzu, Lean Startup, minimum viable product, Nate Silver, passive income, Ralph Waldo Emerson, risk tolerance, Second Machine Age, sharing economy, side hustle, side project, Silicon Valley, Silicon Valley startup, Skype, Snapchat, software as a service, solopreneur, Startup school, stem cell, TED Talk, too big to fail, Tyler Cowen, white picket fence, young professional, zero-sum game

Every day, breakthroughs in technology generate greater automation in the workplace, threatening positions held by hardworking people and the stability of companies large and small. Job security has become an antiquated idea, a luxury most people today do not enjoy, whether they are aware of it or not. Corporate loyalty has given way to uncertainty; companies that seem too big to fail have collapsed, along with many smaller ones. New ones take their place. With the advent of app marketplaces, crowdfunding, the maker revolution, and sharing economies, we now see billion-dollar valuations for companies that would not have existed ten years ago, and many smaller businesses cropping up in parallel.


pages: 272 words: 76,154

How Boards Work: And How They Can Work Better in a Chaotic World by Dambisa Moyo

"Friedman doctrine" OR "shareholder theory", activist fund / activist shareholder / activist investor, Airbnb, algorithmic trading, Amazon Web Services, AOL-Time Warner, asset allocation, barriers to entry, Ben Horowitz, Big Tech, bitcoin, Black Lives Matter, blockchain, Boeing 737 MAX, Bretton Woods, business cycle, business process, buy and hold, call centre, capital controls, carbon footprint, collapse of Lehman Brothers, coronavirus, corporate governance, corporate social responsibility, COVID-19, creative destruction, cryptocurrency, deglobalization, don't be evil, Donald Trump, fake news, financial engineering, gender pay gap, geopolitical risk, George Floyd, gig economy, glass ceiling, global pandemic, global supply chain, hiring and firing, income inequality, index fund, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Jeff Bezos, knowledge economy, labor-force participation, long term incentive plan, low interest rates, Lyft, money: store of value / unit of account / medium of exchange, multilevel marketing, Network effects, new economy, old-boy network, Pareto efficiency, passive investing, Pershing Square Capital Management, proprietary trading, remote working, Ronald Coase, Savings and loan crisis, search costs, shareholder value, Shoshana Zuboff, Silicon Valley, social distancing, Social Responsibility of Business Is to Increase Its Profits, SoftBank, sovereign wealth fund, surveillance capitalism, The Nature of the Firm, Tim Cook: Apple, too big to fail, trade route, Travis Kalanick, uber lyft, Vanguard fund, Washington Consensus, WeWork, women in the workforce, work culture

As John Elkann of Fiat remarked, “If you look at companies that have lasted more than one hundred years, it is forty-five companies for one million.” Perhaps more pointedly, Amazon founder Jeff Bezos made the sobering prediction that his company will not make it to one hundred: “Amazon is not too big to fail,” he declared. “In fact, I predict one day Amazon will fail. Amazon will go bankrupt. If you look at large companies, their life spans tend to be thirty-plus years, not a hundred-plus years.” This trend in large part reflects growing consolidation. The result is an oligopoly, where a handful of companies (for example, airlines, banks, energy companies, pharmaceuticals, mining conglomerates) dominate their sectors on either a national or global scale.


pages: 239 words: 74,845

The Antisocial Network: The GameStop Short Squeeze and the Ragtag Group of Amateur Traders That Brought Wall Street to Its Knees by Ben Mezrich

4chan, Asperger Syndrome, Bayesian statistics, bitcoin, Carl Icahn, contact tracing, data science, democratizing finance, Dogecoin, Donald Trump, Elon Musk, fake news, gamification, global pandemic, Google Hangouts, Hyperloop, meme stock, Menlo Park, payment for order flow, Pershing Square Capital Management, Robinhood: mobile stock trading app, security theater, short selling, short squeeze, Silicon Valley, Silicon Valley startup, social distancing, Tesla Model S, too big to fail, Two Sigma, value at risk, wealth creators

But the maneuver had allowed Citadel to continue serving its clients without so much as a hiccup through the entire pandemic; and continuity was important when you were at the center of the largest financial system in the history of the world. In 2008, it had often been said that a handful of investment banks were too big to fail, because they serviced the American economy to such an extent that if they went under, it would threaten to bring down the system. With Citadel, sometimes it felt like the opposite was true; the American economy existed to service Citadel. Ken’s path to world domination had started in Boca Raton, Florida, not far from where his company was currently waiting out the pandemic.


pages: 250 words: 79,360

Escape From Model Land: How Mathematical Models Can Lead Us Astray and What We Can Do About It by Erica Thompson

Alan Greenspan, Bayesian statistics, behavioural economics, Big Tech, Black Swan, butterfly effect, carbon tax, coronavirus, correlation does not imply causation, COVID-19, data is the new oil, data science, decarbonisation, DeepMind, Donald Trump, Drosophila, Emanuel Derman, Financial Modelers Manifesto, fudge factor, germ theory of disease, global pandemic, hindcast, I will remember that I didn’t make the world, and it doesn’t satisfy my equations, implied volatility, Intergovernmental Panel on Climate Change (IPCC), John von Neumann, junk bonds, Kim Stanley Robinson, lockdown, Long Term Capital Management, moral hazard, mouse model, Myron Scholes, Nate Silver, Neal Stephenson, negative emissions, paperclip maximiser, precautionary principle, RAND corporation, random walk, risk tolerance, selection bias, self-driving car, social distancing, Stanford marshmallow experiment, statistical model, systematic bias, tacit knowledge, tail risk, TED Talk, The Great Moderation, The Great Resignation, the scientific method, too big to fail, trolley problem, value at risk, volatility smile, Y2K

A more pedestrian but effective way of dealing with risk is by engineering the system for redundancy and reducing connectedness so that shocks, when they occur, cannot propagate through the whole system and bring all of it down. This, however, is very much counter to the actual direction of travel of the financial system in recent decades, and it introduces ‘inefficiencies’ that are anathema to the principles of modern finance. There has been some talk about splitting up banks so that none is ‘too big to fail’, but the list of Systemically Important Banks stands at thirty institutions in 2021, up from twenty-nine when the list was first published in 2011. We are still living in Model Land and trying to optimise. As such, we are systemically unable to anticipate shocks, because the act of truly contemplating one might be enough to precipitate it.


pages: 829 words: 186,976

The Signal and the Noise: Why So Many Predictions Fail-But Some Don't by Nate Silver

airport security, Alan Greenspan, Alvin Toffler, An Inconvenient Truth, availability heuristic, Bayesian statistics, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, big-box store, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, book value, Broken windows theory, business cycle, buy and hold, Carmen Reinhart, Charles Babbage, classic study, Claude Shannon: information theory, Climategate, Climatic Research Unit, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, computer age, correlation does not imply causation, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, Daniel Kahneman / Amos Tversky, disinformation, diversification, Donald Trump, Edmond Halley, Edward Lorenz: Chaos theory, en.wikipedia.org, equity premium, Eugene Fama: efficient market hypothesis, everywhere but in the productivity statistics, fear of failure, Fellow of the Royal Society, Ford Model T, Freestyle chess, fudge factor, Future Shock, George Akerlof, global pandemic, Goodhart's law, haute cuisine, Henri Poincaré, high batting average, housing crisis, income per capita, index fund, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Internet Archive, invention of the printing press, invisible hand, Isaac Newton, James Watt: steam engine, Japanese asset price bubble, John Bogle, John Nash: game theory, John von Neumann, Kenneth Rogoff, knowledge economy, Laplace demon, locking in a profit, Loma Prieta earthquake, market bubble, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, Monroe Doctrine, mortgage debt, Nate Silver, negative equity, new economy, Norbert Wiener, Oklahoma City bombing, PageRank, pattern recognition, pets.com, Phillips curve, Pierre-Simon Laplace, Plato's cave, power law, prediction markets, Productivity paradox, proprietary trading, public intellectual, random walk, Richard Thaler, Robert Shiller, Robert Solow, Rodney Brooks, Ronald Reagan, Saturday Night Live, savings glut, security theater, short selling, SimCity, Skype, statistical model, Steven Pinker, The Great Moderation, The Market for Lemons, the scientific method, The Signal and the Noise by Nate Silver, The Wisdom of Crowds, Thomas Bayes, Thomas Kuhn: the structure of scientific revolutions, Timothy McVeigh, too big to fail, transaction costs, transfer pricing, University of East Anglia, Watson beat the top human players on Jeopardy!, Wayback Machine, wikimedia commons

But with the skyrocketing premiums that investors were demanding for credit default swaps—investments that pay you out in the event of a default and which therefore provide the primary means of insurance against one—they were only able to reduce their exposure by about 20 percent.80 It was too little and too late, and Lehman went bankrupt on September 14, 2008. Intermission: Fear Is the New Greed The precise sequence of events that followed the Lehman bankruptcy could fill its own book (and has been described in some excellent ones, like Too Big to Fail). It should suffice to remember that when a financial company dies, it can continue to haunt the economy through an afterlife of unmet obligations. If Lehman Brothers was no longer able to pay out on the losing bets that it had made, this meant that somebody else suddenly had a huge hole in his portfolio.

., 11, 51, 52–53, 56–57, 64, 67, 100, 157, 183, 443, 450, 452, 467 Texas, 464 Texas hold ’em, 298–302, 464 limit, 311, 322, 322, 324n no-limit, 300–308, 309–11, 315–16, 316, 318, 324n, 495 Texas Rangers, 89 Thailand, 209 Thaler, Richard, 361–62 theory, necessity of, 9, 197, 372-73 Thirty Years’ War, 4 This Time Is Different: Eight Centuries of Financial Folly (Reinhart and Rogoff), 39–40, 43 Thomas Aquinas, Saint, 112 Thomas J. Watson Center, 283–84 3Com, 362 tilt, in poker, 309, 310, 324–26 Times (London), 212 Times Square, 433, 438 toads, 148, 253, 255, 476 Toffler, Alvin, 12, 13 , Japan, 155, 156, 169, 170–71, 172 Tolstoy, Leo, 53 Too Big to Fail (Sorkin), 37 Tornado Alley, 138 tornadoes, 145, 195 Toronto Blue Jays, 76, 87 Torres y Quevedo, Leonardo, 265 Tragedy of Julius Caesar, The (Shakespeare), 4–5, 9, 418, 460 transaction costs, 342–43, 344–45, 345 Treasury bonds, U.S., 20 trial and error, 289, 290–92 Tropical Depression Twelve, 108 Truman, Harry, 56 Trump, Donald, 55 Tulowitzki, Troy, 89 turn, in poker, 299, 306 Tuvalu, 378 Tversky, Amos, 64 24, 435 24/7 Media, 353 Two Plus Two, 308 2001: A Space Odyssey, 264 Tyndall, John, 375 Ulan Bator, Mongolia, 374 uncertainty, 15, 64, 444, 448, 450 of CDOs, 29–30 in chess, 264 in climate forecasts, 382, 389–93, 390, 406–8 communication of, 177–79 definition of, 29 as enemy of forecasting, 177 in frequentism, 253 metaphysical vs. epistemological, 249 in poker, 297 quantification of, 73 risk vs., 26, 29, 36 scenario, 392–93 structural, 393 uncertainty principle, 113–14, 118, 188, 472 underfitting, 163 unemployment, 14, 19, 39–41, 176–77, 184, 187, 198, 200, 202, 482 unfamiliar, improbable vs., 419–20 United Kingdom, 210, 394, 416 United Nations, 213, 410 United States: characteristics of, 10 flu in, 210, 211, 215–16 founding of, 2 houses as poor investments in, 30 late-twentieth century recessions in, 7 as results-oriented society, 326–27 United States Geological Survey (USGS), 146, 148–49, 152–53, 158, 159, 160, 476 unknown unknowns, 11, 26, 420–21, 424, 443, 444, 511 Unlawful Internet Gambling Enforcement Act (UIGEA), 319–20 updating predictions, see Bayesian reasoning Urbahn, Keith, 415, 424, 509 usefulness, calculation of in forecasting, 290–91 Utah Jazz, 238 vaccines, 206–8, 224, 227–28, 229, 230, 484 values voters, 319 Van Poppel, Todd, 92 Varian, Hal, 200, 290 variance, 326 Venus, 374 Veracruz, Mexico, 210, 216 Vidro, Jose, 85 Vietnam, 209 vigorish, 256 vision, 123, 124 Vladimir, 78, 83 volcanoes, 146, 392, 393 von Neumann, John, 116, 167 Voulgaris, Haralabos “Bob,” 232–40, 238, 246, 256–58, 489 walks, in baseball, 79–80, 471 Wall Street Journal, 33, 377, 466–67 War of 1812, 419 War of the Holy League, 4 wars, cause of, 259 Washington, D.C., 395–96, 432 Wasserman, David, 70, 71–72 water vapor, 374, 375–76 Watts Up With That, 409 weak efficient-market hypothesis, 341 wealth effect, 34 weapons of mass destruction, 420, 432, 442, 443 see also nuclear weapons Weather Channel, 128–30, 131, 132, 133, 135–36, 136 Weather.com, 128 weather forecasting, 10, 16, 21–22, 108–12, 115, 126, 162, 473 algorithms for, 128–29 by climatology, 131, 153 competition in, 127–28, 131–37, 132 by computer, 116–18, 123–25, 289 death by lightning and, 125–26 eight to ten days in advance, 132 eyesight in, 123, 124 failures of, 21–22, 114–18 feedback on, 134–35, 387 for-profit, 128–29, 131–32, 133–34, 135–36 human element in, 123–25 of hurricanes, 126–27, 127 matrices in, 114–18 models for, 114–18, 119, 120, 121, 122, 123–25, 225, 226 probability and, 195 recent improvements in, 125–26, 225, 386 as sensitive to initial conditions, 119, 121 as theoretically solvable, 267 three definitions of quality of, 129–30 uncertain initial conditions in, 195 Weather.gov, 128 Weather Service, 473 Weber, Max, 5 Weekly Leading Index, 196 wet bias, 134–38, 474 WFG, 88 wheat, 466 White House economic projection, 40–42, 41 “Why Most Published Research Findings Are False” (Ioannidis), 11, 249 Wicked Bible, 3, 13 Wilson, James Q., 439 wine, 466 win-loss record, 77, 79–80, 103, 106 winner’s curse, 359–60 wins above replacement player (WARP), 90 Winter Meetings, 86 Wired, 9 Wirth, Tim, 370n wisdom-of-crowds principle, 335, 358 see also consensus Wohlstetter, Roberta, 415, 416, 418, 419 Wolfers, Justin, 333–34, 335–36, 497 Wood, Brandon, 89 work ethic, 5, 97 World Health Organization (WHO), 206, 211 World Series of Poker, 294–95, 296 World Trade Center, 422 see also September 11, 2001, terrorist attacks World War I, 205, 453 World War II, 31, 412–13, 414, 432, 464, 470 World Weather Building, 122–25, 473 World Wide Web, 448, 514 Wunderground.com, 131 Yahoo!


pages: 812 words: 205,147

The Anarchy: The Relentless Rise of the East India Company by William Dalrymple

British Empire, colonial rule, company town, crony capitalism, Dava Sobel, deindustrialization, European colonialism, fake news, Fellow of the Royal Society, global reserve currency, John Harrison: Longitude, joint-stock company, land reform, lone genius, megacity, offshore financial centre, reserve currency, spice trade, surveillance capitalism, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile

The official report the following year, written by Edmund Burke, foresaw that the EIC’s financial problems could, potentially, ‘like a mill-stone, drag [the government] down into an unfathomable abyss … This cursed Company would, at last, like a viper, be the destruction of the country which fostered it at its bosom.’ But the East India Company really was too big to fail. So it was that the following year, in 1773, the world’s first aggressive multinational corporation was saved by one of history’s first mega-bailouts – the first example of a nation state extracting, as its price for saving a failing corporation, the right to regulate and severely rein it in.

Moreover, too many MPs owned EIC stock, and the EIC’s taxes contributed too much to the economy – customs duties alone generated £886,922* annually – for it to be possible for any government to even consider letting the Company sink. Ultimately, it was saved by its size: the Company now came close to generating nearly half of Britain’s trade and was, genuinely, too big to fail. In these circumstances, the outlines of the deal between the Company and Parliament soon became clear, and with it the new partnership with the state that would result. The colossal loan of £1.4 million* that the Company needed in order to stave off its looming bankruptcy would be agreed to.


pages: 270 words: 79,180

The Middleman Economy: How Brokers, Agents, Dealers, and Everyday Matchmakers Create Value and Profit by Marina Krakovsky

Affordable Care Act / Obamacare, Airbnb, Al Roth, Ben Horowitz, Benchmark Capital, Black Swan, buy low sell high, Chuck Templeton: OpenTable:, Credit Default Swap, cross-subsidies, crowdsourcing, deal flow, disintermediation, diversified portfolio, experimental economics, George Akerlof, Goldman Sachs: Vampire Squid, income inequality, index fund, information asymmetry, Jean Tirole, Joan Didion, John Zimmer (Lyft cofounder), Kenneth Arrow, Lean Startup, Lyft, Marc Andreessen, Mark Zuckerberg, market microstructure, Martin Wolf, McMansion, Menlo Park, Metcalfe’s law, moral hazard, multi-sided market, Network effects, patent troll, Paul Graham, Peter Thiel, pez dispenser, power law, real-name policy, ride hailing / ride sharing, Robert Metcalfe, Sand Hill Road, search costs, seminal paper, sharing economy, Silicon Valley, social graph, supply-chain management, TaskRabbit, the long tail, The Market for Lemons, the strength of weak ties, too big to fail, trade route, transaction costs, two-sided market, Uber for X, uber lyft, ultimatum game, Y Combinator

When we put middlemen and profiting from risk in the same sentence, you may picture the sort of middleman who enjoys all the gains from taking risks without any of the losses—the sort of “heads I win, tails you lose” risk taker who, of course, isn’t taking any risk at all. An egregious example of this parasitic type is AIG, the insurance giant that, deemed “too big to fail,” got an $85 billion bailout from US taxpayers after the company’s financial products unit, which had sold highly risky credit-default swap contracts, lost billions of dollars when the subprime mortgages crumbled.1 The company proved unable to pay all the highly speculative securities that it had insured.2 (You might recall from the Introduction that a study of the warmth and competence of famous brands found AIG to be among the most contemptible, perceived as both incompetent and not having other people’s interests at heart.)


pages: 275 words: 84,980

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

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

It was caused (and here’s a surprise) by the banking sector, but in that case it was because they had been lending money to railway companies who couldn’t pay it back rather than to American homeowners who couldn’t pay it back. The British government then, as in 2008, had to respond. It suspended the Bank Act of 1844 to allow banks to pay out in paper money rather than gold, which kept them going, but they were not too big to fail and the famous Overend & Gurney went down. When it suspended payments after a run on 10 May 1866 (the last run on a British bank until the Northern Rock debacle) it not only ruined its own shareholders but caused the collapse of about 200 other companies (including other banks). The directors were, incidentally, charged with fraud, but they got off as the judge said that they were merely idiots, not criminals.


pages: 394 words: 85,734

The Global Minotaur by Yanis Varoufakis, Paul Mason

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

The Crash of 2008 has knocked so much of the financial stuffing out of the American economy, as well as depleting New York-based financialisation of its overall energy, that the Minotaur’s magnetic power over foreign capital cannot recover. Wall Street may have been fully resurrected, reporting profits that would not look out of sorts back in the heady days of 2006; the US government is attracting more foreign capital than ever before; the banks that were too big to fail have grown even bigger (at least in relative terms). Yet the capitalisation of Wall Street is now too thin to attract the tsunami of foreign capital that kept the Minotaur in rude health. Indeed, in 2012 bankers were complaining loudly that, despite a return to obscene levels of profit-taking, they were failing to provide their investors with ‘sufficiently’ high returns due to the new regulations introduced by government.


pages: 261 words: 81,802

The Trouble With Billionaires by Linda McQuaig

"World Economic Forum" Davos, battle of ideas, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, British Empire, Build a better mousetrap, carried interest, Charles Babbage, collateralized debt obligation, computer age, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, Douglas Engelbart, Douglas Engelbart, employer provided health coverage, financial deregulation, fixed income, full employment, Gary Kildall, George Akerlof, Gini coefficient, Glass-Steagall Act, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of the telephone, invention of the wheel, invisible hand, Isaac Newton, Jacquard loom, John Bogle, Joseph-Marie Jacquard, laissez-faire capitalism, land tenure, lateral thinking, low interest rates, Mark Zuckerberg, market bubble, Martin Wolf, mega-rich, minimum wage unemployment, Mont Pelerin Society, Naomi Klein, neoliberal agenda, Northern Rock, offshore financial centre, Paul Samuelson, plutocrats, Ponzi scheme, pre–internet, price mechanism, proprietary trading, purchasing power parity, RAND corporation, rent-seeking, rising living standards, road to serfdom, Robert Solow, Ronald Reagan, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, trickle-down economics, Vanguard fund, very high income, wealth creators, women in the workforce

Now bankers could use other people’s money, gamble recklessly, and siphon massive pay packages for themselves out of the profits, with little on the line. Indeed, as a result of the bigger size of the banks and the fact that they were raising money from the public, government now regarded the banks as ‘too big to fail’. If their irresponsible behaviour risked undermining the stability of the entire financial system, government would have to step in and bail them out. For bankers, it was a dream world: they could take enormous risks, knowing that whatever gains they made would be theirs alone, while losses would be covered by the taxpayers.


pages: 282 words: 81,873

Live Work Work Work Die: A Journey Into the Savage Heart of Silicon Valley by Corey Pein

"World Economic Forum" Davos, 23andMe, 4chan, affirmative action, Affordable Care Act / Obamacare, Airbnb, Amazon Mechanical Turk, Anne Wojcicki, artificial general intelligence, bank run, barriers to entry, Benevolent Dictator For Life (BDFL), Bernie Sanders, Big Tech, bitcoin, Bitcoin Ponzi scheme, Build a better mousetrap, California gold rush, cashless society, colonial rule, computer age, cryptocurrency, data is the new oil, deep learning, digital nomad, disruptive innovation, Donald Trump, Douglas Hofstadter, driverless car, Elon Musk, Evgeny Morozov, Extropian, fail fast, fake it until you make it, fake news, gamification, gentrification, gig economy, Google bus, Google Glasses, Google X / Alphabet X, Greyball, growth hacking, hacker house, Hacker News, hive mind, illegal immigration, immigration reform, independent contractor, intentional community, Internet of things, invisible hand, Isaac Newton, Jeff Bezos, job automation, Kevin Kelly, Khan Academy, Larry Ellison, Law of Accelerating Returns, Lean Startup, life extension, Lyft, Mahatma Gandhi, Marc Andreessen, Mark Zuckerberg, Menlo Park, minimum viable product, move fast and break things, mutually assured destruction, Neal Stephenson, obamacare, Parker Conrad, passive income, patent troll, Patri Friedman, Paul Graham, peer-to-peer lending, Peter H. Diamandis: Planetary Resources, Peter Thiel, platform as a service, plutocrats, Ponzi scheme, post-work, public intellectual, Ray Kurzweil, regulatory arbitrage, rent control, RFID, Robert Mercer, rolodex, Ronald Reagan, Ross Ulbricht, Ruby on Rails, Sam Altman, Sand Hill Road, Scientific racism, self-driving car, selling pickaxes during a gold rush, sharing economy, side project, Silicon Valley, Silicon Valley billionaire, Silicon Valley startup, Singularitarianism, Skype, Snapchat, Social Justice Warrior, social software, software as a service, source of truth, South of Market, San Francisco, Startup school, stealth mode startup, Steve Bannon, Steve Jobs, Steve Wozniak, TaskRabbit, tech billionaire, tech bro, tech worker, TechCrunch disrupt, technological singularity, technoutopianism, telepresence, too big to fail, Travis Kalanick, tulip mania, Tyler Cowen, Uber for X, uber lyft, ubercab, unit 8200, upwardly mobile, Vernor Vinge, vertical integration, Virgin Galactic, X Prize, Y Combinator, Zenefits

Anyone who’s been online in recent years will recognize the ubiquitous block of faux news headlines and prurient trompe l’oeils from companies like Outbrain and Taboola, which promise celebrity peep shows and offer “one weird trick” to solve just about any problem. Such lowest-common-denominator marketing props up the whole of the internet. And no one has any incentive to improve the quality, trustworthiness, or fairness of the new media ecosystem. The online ad monopolists, Google and Facebook, have grown too big to fail. They are so important to the fortunes of every other media business that no one wants to scream too loudly about the fraud problem lest they trigger a landslide that wipes out their own fragile patch of turf. The same applies to the ad monopolists’ business partners in the wider economy. Thus, various industries with little in common apart from their reliance on online advertising have become complicit in an almost pyramid-scheme-like system.


pages: 290 words: 84,375

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

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

Even Liu from Yooli felt it was necessary to insure lenders against default, by getting third-party financial institutions to guarantee every loan that sought funding on his platform. People assume that their investments are safe. Financial institutions typically cover any losses in order to preserve the public’s trust in their products. If the underlying problem of the U.S. financial system is that some banks are too big to fail, in China it’s that the public believes that no investment is too small to be bailed out. Still, that doesn’t explain why banks and shadow banks continue lending more and more, particularly when they’re on the hook for any investments sold to the public that go bad. The reason they continue to lend is that they believe that their loans are safe.


pages: 304 words: 85,291

Cities: The First 6,000 Years by Monica L. Smith

Anthropocene, bread and circuses, classic study, clean water, diversified portfolio, failed state, financial innovation, gentrification, hiring and firing, invention of writing, Jane Jacobs, New Urbanism, payday loans, place-making, Ponzi scheme, SimCity, South China Sea, telemarketer, the built environment, The Fortune at the Bottom of the Pyramid, the strength of weak ties, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, trade route, urban planning, urban renewal, wikimedia commons

Political pundits suggested that the comparatively limited attention was due to factors of disaster fatigue or racism; although those elements might have played a role, the fact is that the population of Puerto Rico was much more dispersed, and the main city of San Juan was considerably smaller than the affected metropolitan areas of Houston, Tampa, and Miami. Large cities draw in nationalized resources because, having been integrated into the national fabric, they are “too big to fail.” In fact, there seems to be only one way to kill off a modern metropolis, and that’s through a nuclear catastrophe: Chernobyl in Ukraine is the only city in the past thousand years that has come to a complete stop. A Full Circle to the Past A few years ago while doing archaeological fieldwork in Bangladesh, I spent some time in a little administrative town on the banks of the great river that bisects the country.


pages: 324 words: 86,056

The Socialist Manifesto: The Case for Radical Politics in an Era of Extreme Inequality by Bhaskar Sunkara

Affordable Care Act / Obamacare, agricultural Revolution, Bernie Sanders, British Empire, business climate, business cycle, capital controls, centre right, Charles Lindbergh, collective bargaining, Deng Xiaoping, deskilling, Donald Trump, equal pay for equal work, fake news, false flag, feminist movement, Ferguson, Missouri, Francis Fukuyama: the end of history, full employment, gig economy, Great Leap Forward, Gunnar Myrdal, happiness index / gross national happiness, high-speed rail, Honoré de Balzac, income inequality, inventory management, Jeremy Corbyn, labor-force participation, land reform, land value tax, Mark Zuckerberg, means of production, Meghnad Desai, Mikhail Gorbachev, Neil Kinnock, new economy, Occupy movement, postindustrial economy, precariat, race to the bottom, Ralph Waldo Emerson, self-driving car, Silicon Valley, SimCity, single-payer health, Steve Bannon, telemarketer, The Wealth of Nations by Adam Smith, too big to fail, union organizing, Upton Sinclair, urban renewal, We are all Keynesians now, We are the 99%

Seattle’s Washington Mutual, worth more than $300 billion at the time, collapsed entirely, just two years after executives had kicked off a morale exercise by rapping, “I like big bucks and I cannot lie,” at a luxurious company retreat in Hawaii. Washington Mutual ended up getting absorbed by JPMorgan, and its president got an $11 million payout. Big bucks indeed! This pattern was repeated across the financial sector, as banks deemed “too big to fail” received life-saving injections of public dollars from the federal government.4 Ordinary Americans, including those who had fallen victim to predatory lenders, got no such bailout. Soon the banks went about rebuilding their portfolios by ejecting indebted homeowners from their houses—foreclosure rates spiked by more than 81 percent in 2008, with 3.2 million foreclosure notices served that year.


pages: 297 words: 84,009

Big Business: A Love Letter to an American Anti-Hero by Tyler Cowen

"Friedman doctrine" OR "shareholder theory", 23andMe, Affordable Care Act / Obamacare, augmented reality, barriers to entry, Bernie Sanders, Big Tech, bitcoin, blockchain, Bretton Woods, cloud computing, cognitive dissonance, company town, compensation consultant, corporate governance, corporate social responsibility, correlation coefficient, creative destruction, crony capitalism, cryptocurrency, dark matter, David Brooks, David Graeber, don't be evil, Donald Trump, driverless car, Elon Musk, employer provided health coverage, experimental economics, Fairchild Semiconductor, fake news, Filter Bubble, financial innovation, financial intermediation, gentrification, Glass-Steagall Act, global reserve currency, global supply chain, Google Glasses, income inequality, Internet of things, invisible hand, Jeff Bezos, junk bonds, late fees, Mark Zuckerberg, mobile money, money market fund, mortgage debt, Network effects, new economy, Nicholas Carr, obamacare, offshore financial centre, passive investing, payday loans, peer-to-peer lending, Peter Thiel, pre–internet, price discrimination, profit maximization, profit motive, RAND corporation, rent-seeking, reserve currency, ride hailing / ride sharing, risk tolerance, Ronald Coase, shareholder value, Silicon Valley, Silicon Valley startup, Skype, Snapchat, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, The Nature of the Firm, Tim Cook: Apple, too big to fail, transaction costs, Tyler Cowen, Tyler Cowen: Great Stagnation, ultimatum game, WikiLeaks, women in the workforce, World Values Survey, Y Combinator

Neel Kashkari, who ran the TARP bailout program for President Bush during the financial crisis, has called for bank breakups more directly. Some other conservative and libertarian voices, including Thomas Koenig and Arnold Kling, have wondered whether America shouldn’t apply antitrust law radically and move to a greater number of much smaller banks. In particular, if a bank is “too big to fail,” doesn’t that mean the bank is too big, period? On top of that, there are so many (true) stories about the financial sector ripping off customers and clients. In 2007, the five biggest Wall Street firms paid executives $39 billion in bonuses, even though shareholders lost over $80 billion in value.


pages: 309 words: 81,975

Brave New Work: Are You Ready to Reinvent Your Organization? by Aaron Dignan

"Friedman doctrine" OR "shareholder theory", Abraham Maslow, activist fund / activist shareholder / activist investor, adjacent possible, Airbnb, Albert Einstein, autonomous vehicles, basic income, benefit corporation, Bertrand Russell: In Praise of Idleness, bitcoin, Black Lives Matter, Black Swan, blockchain, Buckminster Fuller, Burning Man, butterfly effect, cashless society, Clayton Christensen, clean water, cognitive bias, cognitive dissonance, content marketing, corporate governance, corporate social responsibility, correlation does not imply causation, creative destruction, crony capitalism, crowdsourcing, cryptocurrency, David Heinemeier Hansson, deliberate practice, DevOps, disruptive innovation, don't be evil, Elon Musk, endowment effect, Ethereum, ethereum blockchain, financial engineering, Frederick Winslow Taylor, fulfillment center, future of work, gender pay gap, Geoffrey West, Santa Fe Institute, gig economy, Goodhart's law, Google X / Alphabet X, hiring and firing, hive mind, holacracy, impact investing, income inequality, information asymmetry, Internet of things, Jeff Bezos, job satisfaction, Kanban, Kevin Kelly, Kickstarter, Lean Startup, loose coupling, loss aversion, Lyft, Marc Andreessen, Mark Zuckerberg, minimum viable product, mirror neurons, new economy, Paul Graham, Quicken Loans, race to the bottom, reality distortion field, remote working, Richard Thaler, Rochdale Principles, Salesforce, scientific management, shareholder value, side hustle, Silicon Valley, single source of truth, six sigma, smart contracts, Social Responsibility of Business Is to Increase Its Profits, software is eating the world, source of truth, Stanford marshmallow experiment, Steve Jobs, subprime mortgage crisis, systems thinking, TaskRabbit, TED Talk, The future is already here, the High Line, too big to fail, Toyota Production System, Tragedy of the Commons, uber lyft, universal basic income, WeWork, Y Combinator, zero-sum game

Five major health insurance companies. And in technology it’s even worse. Two mobile platforms. One big search engine. One dominant social network. And one “everything store” that recently bought a $13.7 billion organic grocery chain with share price gains from the mere announcement of the deal. “Too big to fail” and “too few to choose” are the new normal. In order to keep these established companies growing in perpetuity, we need a steady stream of startups for them to acquire someday. Which is why it’s distressing to learn that the firm entry rate—the number of startups less than one year old as a share of all firms—was cut in half between 1978 and 2011 in the United States.


pages: 310 words: 85,995

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

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

They transpire to have the intelligent, asocial, greedy malevolence that economists have wrongly attributed to humans. * Bear Stearns itself was rescued by JP Morgan at the behest of the US Treasury, but the knowledge that it was bankrupt triggered a run on a far larger bank, Lehman Brothers, which was seen to be too-big-to-bail, but turned out to be too-big-to-fail without consequences that proved to be disastrous. * Contrast this action by the junior management of GM with that of the junior management of Johnson & Johnson during the Tylenol crisis and what lay behind that difference. * John Kay has pointed out to me that the detailed language of the Act encourages boards to take a larger perspective, but when I mentioned this to the Chairman of a major company he shook his head, assuring me that he was legally required to attend only to the interests of shareholders.


pages: 281 words: 86,657

The Great Inversion and the Future of the American City by Alan Ehrenhalt

anti-communist, back-to-the-city movement, big-box store, British Empire, crack epidemic, David Brooks, deindustrialization, Edward Glaeser, Frank Gehry, gentrification, haute cuisine, Honoré de Balzac, housing crisis, illegal immigration, Jane Jacobs, land bank, Lewis Mumford, manufacturing employment, mass immigration, McMansion, megaproject, messenger bag, New Urbanism, Norman Mailer, Peter Calthorpe, postindustrial economy, Richard Florida, streetcar suburb, The Chicago School, The Death and Life of Great American Cities, too big to fail, transit-oriented development, upwardly mobile, urban decay, urban planning, urban renewal, walkable city, white flight, working poor, young professional

The small size and sheer proximity of the living quarters—sixteen families each joined to one another by a common set of walls—made an undeniable contribution to community and solidarity. But when jobs disappeared and families began to leave, each block was left with a special set of vulnerabilities. An apartment building with thirty-six units is, in a certain sense, too big to fail. A landlord nearly always has an interest in keeping it in operation, even if at a low level of maintenance. A fifteen-by-forty-foot row house is an easy thing to abandon when all of one’s friends are leaving the area and the resale value is next to nothing. In the words of Alan Greenberger, the city’s economic development commissioner, “Lots of individual houses fail because the occupant is unable to deal with it.


pages: 285 words: 86,174

Twilight of the Elites: America After Meritocracy by Chris Hayes

"Hurricane Katrina" Superdome, "World Economic Forum" Davos, affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, barriers to entry, Bear Stearns, Berlin Wall, Bernie Madoff, carried interest, circulation of elites, Climategate, Climatic Research Unit, collapse of Lehman Brothers, collective bargaining, creative destruction, Credit Default Swap, dark matter, David Brooks, David Graeber, deindustrialization, Fall of the Berlin Wall, financial deregulation, fixed income, full employment, George Akerlof, Gunnar Myrdal, hiring and firing, income inequality, Jane Jacobs, jimmy wales, Julian Assange, Kenneth Arrow, Mark Zuckerberg, mass affluent, mass incarceration, means of production, meritocracy, meta-analysis, military-industrial complex, money market fund, moral hazard, Naomi Klein, Nate Silver, peak oil, plutocrats, Ponzi scheme, post-truth, radical decentralization, Ralph Waldo Emerson, rolodex, Savings and loan crisis, The Spirit Level, too big to fail, University of East Anglia, Vilfredo Pareto, We are the 99%, WikiLeaks, women in the workforce

Our elites and institutions have proven themselves entirely incapable of addressing and forestalling the immiseration and destruction that now approach like a meteor. Our financial system has grown only more concentrated in the wake of the financial crisis; the biggest banks have gotten bigger, the logic of too big to fail even more deeply embedded. Inequality has gotten worse in the wake of the crisis, and we remain wildly overextended in our military commitments, chained to eighteenth-century technology to power our way of life. There is, I fear, more crisis to come. The imbalances of our society make it unavoidable.


pages: 263 words: 80,594

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

"Friedman doctrine" OR "shareholder theory", activist fund / activist shareholder / activist investor, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, basic income, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Big Tech, bitcoin, bond market vigilante , Bretton Woods, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, capitalist realism, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, credit crunch, Credit Default Swap, cryptocurrency, currency peg, David Graeber, debt deflation, decarbonisation, democratizing finance, Donald Trump, emotional labour, eurozone crisis, Extinction Rebellion, extractivism, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, fixed income, full employment, G4S, gender pay gap, gig economy, Gini coefficient, global reserve currency, global supply chain, green new deal, Greenspan put, housing crisis, Hyman Minsky, impact investing, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), Jeremy Corbyn, job polarisation, junk bonds, Kenneth Rogoff, Kickstarter, land value tax, light touch regulation, low interest rates, low skilled workers, market clearing, means of production, Modern Monetary Theory, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, paradox of thrift, payday loans, pensions crisis, Phillips curve, Ponzi scheme, Post-Keynesian economics, post-war consensus, price mechanism, principal–agent problem, profit motive, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Right to Buy, rising living standards, risk-adjusted returns, road to serfdom, Robert Solow, savings glut, secular stagnation, shareholder value, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, the built environment, The Great Moderation, too big to fail, transfer pricing, universal basic income, Winter of Discontent, working-age population, yield curve, zero-sum game

, British Politics, vol. 7 Chapter Five The Crash 1 This account draws on: Tooze, A. (2018) Crashed: How a Decade of Financial Crises Changed the World, London: Allen Lane; Pym (2014); Fraser, I. (2014) Shredded: Inside RBS, the Bank That Broke Britain, Edinburgh: Birlinn; Sorkin, A.R. (2010) Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System — and Themselves, London: Penguin; Blinder, A.S. (2013) After the Music Stopped: The Financial Crisis, the Response, and the 2 This account draws on: Palley, T. (2009) “The Limits of Minsky’s Financial Instability Hypothesis as an Explanation of the Crisis”, Macroeconomic Policy Institute Working Paper 11; Foster (2009); Panitch and Gindin (2009); Gowan (2009); Arestis (2011); Crotty (2008); Duménil and Levy (2011); Lysandrou (2011); Stockhammer (2010). 3 Barwell, R. and Burrows, O. (2010), “Growing Fragilities?


pages: 328 words: 84,682

The Business of Platforms: Strategy in the Age of Digital Competition, Innovation, and Power by Michael A. Cusumano, Annabelle Gawer, David B. Yoffie

activist fund / activist shareholder / activist investor, Airbnb, AltaVista, Amazon Web Services, AOL-Time Warner, asset light, augmented reality, autonomous vehicles, barriers to entry, bitcoin, blockchain, business logic, Cambridge Analytica, Chuck Templeton: OpenTable:, cloud computing, collective bargaining, commoditize, CRISPR, crowdsourcing, cryptocurrency, deep learning, Didi Chuxing, distributed ledger, Donald Trump, driverless car, en.wikipedia.org, fake news, Firefox, general purpose technology, gig economy, Google Chrome, GPS: selective availability, Greyball, independent contractor, Internet of things, Jeff Bezos, Jeff Hawkins, John Zimmer (Lyft cofounder), Kevin Roose, Lean Startup, Lyft, machine translation, Mark Zuckerberg, market fundamentalism, Metcalfe’s law, move fast and break things, multi-sided market, Network effects, pattern recognition, platform as a service, Ponzi scheme, recommendation engine, Richard Feynman, ride hailing / ride sharing, Robert Metcalfe, Salesforce, self-driving car, sharing economy, Silicon Valley, Skype, Snapchat, SoftBank, software as a service, sovereign wealth fund, speech recognition, stealth mode startup, Steve Ballmer, Steve Jobs, Steven Levy, subscription business, Susan Wojcicki, TaskRabbit, too big to fail, transaction costs, transport as a service, Travis Kalanick, two-sided market, Uber and Lyft, Uber for X, uber lyft, vertical integration, Vision Fund, web application, zero-sum game

Intel still provides some 80 percent of the microprocessors for personal computers and more than 90 percent of the microprocessors for Internet servers. Facebook accounts for perhaps two-thirds of social media activity. The most powerful platform companies have started to look a bit like the big banks in the 2008–2009 financial crisis: too big to fail? Consider as well how platforms recently enabled the dissemination of fake news, Russian manipulation of social media, and electoral tampering, and clearly we have reached an inflection point. We now must view the most powerful platform companies as doubled-edged swords, capable of both good and evil.


pages: 291 words: 80,068

Framers: Human Advantage in an Age of Technology and Turmoil by Kenneth Cukier, Viktor Mayer-Schönberger, Francis de Véricourt

Albert Einstein, Andrew Wiles, Apollo 11, autonomous vehicles, Ben Bernanke: helicopter money, Berlin Wall, bitcoin, Black Lives Matter, blockchain, Blue Ocean Strategy, circular economy, Claude Shannon: information theory, cognitive dissonance, cognitive load, contact tracing, coronavirus, correlation does not imply causation, COVID-19, credit crunch, CRISPR, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, deep learning, DeepMind, defund the police, Demis Hassabis, discovery of DNA, Donald Trump, double helix, Douglas Hofstadter, Elon Musk, en.wikipedia.org, fake news, fiat currency, framing effect, Francis Fukuyama: the end of history, Frank Gehry, game design, George Floyd, George Gilder, global pandemic, global village, Gödel, Escher, Bach, Higgs boson, Ignaz Semmelweis: hand washing, informal economy, Isaac Newton, Jaron Lanier, Jeff Bezos, job-hopping, knowledge economy, Large Hadron Collider, lockdown, Louis Pasteur, Mark Zuckerberg, Mercator projection, meta-analysis, microaggression, Mustafa Suleyman, Neil Armstrong, nudge unit, OpenAI, packet switching, pattern recognition, Peter Thiel, public intellectual, quantitative easing, Ray Kurzweil, Richard Florida, Schrödinger's Cat, scientific management, self-driving car, Silicon Valley, Steve Jobs, Steven Pinker, TED Talk, The Structural Transformation of the Public Sphere, Thomas Kuhn: the structure of scientific revolutions, TikTok, Tim Cook: Apple, too big to fail, transaction costs, Tyler Cowen

The nickname “Helicopter Ben”: Ben Bernanke, “Deflation: Making Sure ‘It’ Doesn’t Happen Here,” speech to the National Economists Club, Washington, DC, November 21, 2002, transcript, https://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm. Sequence of financial-institution collapses: For an authoritative account, see: Andrew Ross Sorkin, Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves (New York: Viking, 2009). On McDonald’s franchise uncertain of making payroll: Andrew Ross Sorkin interviewed by Robert Smith, “Inside the Minds of Wall Street Execs,” NPR Weekend Edition, September 18, 2010, transcript and audio, https://www.npr.org/templates/story/story.php?


pages: 300 words: 87,374

The Light That Failed: A Reckoning by Ivan Krastev, Stephen Holmes

active measures, Affordable Care Act / Obamacare, Andrei Shleifer, anti-communist, anti-globalists, bank run, Berlin Wall, Black Lives Matter, borderless world, Brexit referendum, corporate governance, David Brooks, deglobalization, deindustrialization, Deng Xiaoping, disinformation, Dissolution of the Soviet Union, Donald Trump, failed state, fake news, Fall of the Berlin Wall, Francis Fukuyama: the end of history, illegal immigration, Kickstarter, knowledge economy, kremlinology, liberal world order, mass immigration, Mikhail Gorbachev, Neil Armstrong, nuclear winter, obamacare, offshore financial centre, open borders, post-truth, postnationalism / post nation state, reserve currency, Ronald Reagan, shared worldview, South China Sea, Steve Bannon, the market place, Thorstein Veblen, too big to fail, Twitter Arab Spring, WikiLeaks

La Rochefoucauld1 On 1 January 1992 the world awoke to discover that the Soviet Union had vanished from the map. Without military defeat or foreign invasion, one of the world’s two superpowers had crumbled into dust. How can such an extraordinary turn of events be explained? The break-up happened contrary to all expectations that the Soviet empire was too big to fail, too rock-solid to disintegrate, and too nuked-up to be bullied by the West. The USSR had survived many decades of turbulence substantially intact. How could it implode essentially without warning at a moment when the majority of the people ‘didn’t even have the feeling that the country was falling apart’?


pages: 291 words: 85,822

The Truth About Lies: The Illusion of Honesty and the Evolution of Deceit by Aja Raden

air gap, Ayatollah Khomeini, bank run, banking crisis, Bernie Madoff, bitcoin, blockchain, California gold rush, carbon footprint, carbon-based life, cognitive bias, cognitive dissonance, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, data science, disinformation, Donald Trump, fake news, intentional community, iterative process, low interest rates, Milgram experiment, mirror neurons, multilevel marketing, offshore financial centre, opioid epidemic / opioid crisis, placebo effect, Ponzi scheme, prosperity theology / prosperity gospel / gospel of success, Ronald Reagan, Ronald Reagan: Tear down this wall, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, Steve Bannon, sugar pill, survivorship bias, theory of mind, too big to fail, transcontinental railway, Vincenzo Peruggia: Mona Lisa

Diamonds are truth made manifest through mass consensus and recursive reality on such a scale that it includes the whole world. Their mythology is so fully hardened into stone that it doesn’t matter that you know it’s a lie—you’ll still agree to believe it. Because at this point the lie has become so foundational to everyone else’s truth that diamonds can’t disappear—no one will let them. Too-Big-to-Fail Frauds While the slickest Long Con in modern history may be the value of diamonds, the most recent can be found in banking.* The 2008 global financial meltdown perfectly captures the kind of expansive, cross-con, multioperator subversion of reality that is the basis of the Long Con. It is the epitome of grifting, not just for the many tricks of the trade it employs, but because the scale of the deliberate, coordinated undermining of your sense of truth and trust in fact surpasses mere lying.


pages: 620 words: 214,639

House of Cards: A Tale of Hubris and Wretched Excess on Wall Street by William D. Cohan

Alan Greenspan, asset-backed security, Bear Stearns, book value, call centre, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, deal flow, Deng Xiaoping, diversification, Financial Instability Hypothesis, fixed income, Glass-Steagall Act, Hyman Minsky, Irwin Jacobs, Jim Simons, John Meriwether, junk bonds, Long Term Capital Management, low interest rates, margin call, merger arbitrage, Michael Milken, money market fund, moral hazard, mortgage debt, mutually assured destruction, Myron Scholes, New Journalism, Northern Rock, proprietary trading, Renaissance Technologies, Rod Stewart played at Stephen Schwarzman birthday party, Savings and loan crisis, savings glut, shareholder value, sovereign wealth fund, stock buybacks, too big to fail, traveling salesman, uptick rule, vertical integration, Y2K, yield curve

If Bear Stearns had gone under, virtually all of these securities would become available for sale and be pushed into the market”—at prices that would have forced all securities firms to mark their own assets down in what surely might have led to the financial equivalent of mutually assured destruction—“and the result would have been a fairly significant financial collapse. So the Fed had no choice but to bail out Bear Stearns. This is a too-big-to-fail situation.” Inside Bear, the news about the Fed facility was announced around the firm. “We went out and we announced it to the trading floor,” Friedman said. “I got high-fives. Oh, man, we were doing a victory lap. One of the salespeople made the comment, ‘We're now a sovereign credit. All those people who wouldn't deal with us, we're now a sovereign credit.'

The rest of us get to bail out the creditors, to the tune of $29 billion in public funds. Why not just skip all the window-dressing and open up a Fed booth on the sidewalk in lower Manhattan to hand out public cash to finance types who happen by? They could add one in Connecticut to make sure all the hedge fund folks get theirs as well (too big to fail, you know).” But the new agreement seemed to solve many of the problems found in the first deal. There was a slow but steady increase in the number of customers and counterparties willing to do business with Bear Stearns because there was no longer nearly as much confusion about how the guarantee would work.


pages: 355 words: 92,571

Capitalism: Money, Morals and Markets by John Plender

activist fund / activist shareholder / activist investor, Alan Greenspan, Andrei Shleifer, asset-backed security, bank run, Berlin Wall, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Black Swan, bond market vigilante , bonus culture, Bretton Woods, business climate, business cycle, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, computer age, Corn Laws, Cornelius Vanderbilt, corporate governance, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, discovery of the americas, diversification, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, Fall of the Berlin Wall, fiat currency, financial engineering, financial innovation, financial intermediation, Fractional reserve banking, full employment, Glass-Steagall Act, God and Mammon, Golden arches theory, Gordon Gekko, greed is good, Hyman Minsky, income inequality, industrial research laboratory, inflation targeting, information asymmetry, invention of the wheel, invisible hand, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, labour market flexibility, liberal capitalism, light touch regulation, London Interbank Offered Rate, London Whale, Long Term Capital Management, manufacturing employment, Mark Zuckerberg, market bubble, market fundamentalism, mass immigration, means of production, Menlo Park, money market fund, moral hazard, moveable type in China, Myron Scholes, Nick Leeson, Northern Rock, Occupy movement, offshore financial centre, paradox of thrift, Paul Samuelson, plutocrats, price stability, principal–agent problem, profit motive, proprietary trading, quantitative easing, railway mania, regulatory arbitrage, Richard Thaler, rising living standards, risk-adjusted returns, Robert Gordon, Robert Shiller, Ronald Reagan, savings glut, shareholder value, short selling, Silicon Valley, South Sea Bubble, spice trade, Steve Jobs, technology bubble, The Chicago School, The Great Moderation, the map is not the territory, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, tulip mania, Upton Sinclair, Veblen good, We are the 99%, Wolfgang Streeck, zero-sum game

So attempts, misconceived or otherwise, to impose structural solutions such as the Volcker rule are being unpicked thanks to the efforts of the banks’ lobbyists. Meantime, concentration in the financial system has increased as a result of mergers and acquisitions during the crisis. So a smaller number of bigger banks are perceived to be too big to fail and enjoy lower borrowing costs than other banks. They thus still benefit from a de facto subsidy from the taxpayer that runs into billions of dollars a year. And while significant efforts have been made to make it easier to unwind insolvent banks in an orderly way, the failure of a big, complex international bank could still be chaotic in the absence of a global regulator and watertight international agreements on how to wind it down and distribute the losses across national boundaries.


pages: 322 words: 87,181

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

3D printing, airline deregulation, Asian financial crisis, bank run, barriers to entry, 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

The good news is that the intellectual vacuum on the left is being filled, and there is no longer any reason to believe in the tyranny of “no alternatives.” Politicians on the left have less and less reason not to draw on “respectable” academic firepower in economics. Consider just a few examples: Anat Admati and Simon Johnson have advocated radical banking reforms that would prevent the problem of “too big to fail.” Thomas Piketty and Tony Atkinson have proposed a rich menu of policies to deal with inequality at the national level, including the taxation of wealth and rules that would make technological innovation more worker friendly. Mariana Mazzucato and Ha-Joon Chang have written insightfully on how to deploy the public sector to foster inclusive innovation.


pages: 302 words: 90,215

Experience on Demand: What Virtual Reality Is, How It Works, and What It Can Do by Jeremy Bailenson

Apollo 11, Apple II, augmented reality, computer vision, deliberate practice, experimental subject, fake news, game design, Google Glasses, income inequality, Intergovernmental Panel on Climate Change (IPCC), iterative process, Ivan Sutherland, Jaron Lanier, low earth orbit, Mark Zuckerberg, Marshall McLuhan, meta-analysis, Milgram experiment, Neal Stephenson, nuclear winter, ocean acidification, Oculus Rift, opioid epidemic / opioid crisis, overview effect, pill mill, randomized controlled trial, Silicon Valley, SimCity, Skinner box, Skype, Snapchat, Steve Jobs, Steve Wozniak, Steven Pinker, TED Talk, telepresence, too big to fail, traumatic brain injury

All these early experiments in virtual journalism raise the urgent question: If media organizations build VR, will the audience come? Will VR stick or will it go the way of 3D TV? They share some of the same issues—expensive technology and goofy, uncomfortable, wrap-around glasses. But there is too much investment and development going on in the space—it is already likely too big to fail. How is VR different from 3D TV? There was never a clear content reason to invest in 3D TV. No “killer” experience emerged, so content producers never reached the critical mass of the market. With the exciting content that has been produced so far, the trajectory for quality content in the VR space already has a foundation.


pages: 324 words: 90,253

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

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

– subsequent retroactive financial punishment may be needed for those found guilty of financial malfeasance, including bonus clawbacks, reduced pension entitlements and fines. And those who misbehave should also be struck off and, in severe cases, be sent to prison. Such an approach would, at the very least, instil greater confidence that financial quacks – as with medical quacks – would slowly be eliminated. As for the banks themselves, are they too big to fail, too big to save or even too big to manage? Yes and no. The financial crisis ended up with bailouts of some big institutions, costing taxpayers a great deal of money. Other big institutions, however, survived the financial crisis, in the process saving taxpayers a sizeable chunk of money. HSBC's ill-advised acquisition of Household, a major US subprime lender, may not have worked out well for HSBC's shareholders but it certainly saved American taxpayers more than a few dollars.


pages: 398 words: 86,855

Bad Data Handbook by Q. Ethan McCallum

Amazon Mechanical Turk, asset allocation, barriers to entry, Benoit Mandelbrot, business intelligence, cellular automata, chief data officer, Chuck Templeton: OpenTable:, cloud computing, cognitive dissonance, combinatorial explosion, commoditize, conceptual framework, data science, database schema, DevOps, en.wikipedia.org, Firefox, Flash crash, functional programming, Gini coefficient, hype cycle, illegal immigration, iterative process, labor-force participation, loose coupling, machine readable, natural language processing, Netflix Prize, One Laptop per Child (OLPC), power law, quantitative trading / quantitative finance, recommendation engine, selection bias, sentiment analysis, SQL injection, statistical model, supply-chain management, survivorship bias, text mining, too big to fail, web application

Most stock data sources have already had the canceled trades removed, so it is difficult to even see the evidence of the flash crash in the historic record. In that sense, the flash crash contained bad data, not bad reality. Yet, the only difference between the flash crash and the United Airlines example is that human intervention undid the flash crash after it happened; it was “too big to fail.” To further cloud the issue, people believed that those trades were real when they happened. Stock trading is state-dependent; how you behave depends on the previous trades that happened. To properly model trading during the flash crash, you would have to simulate making trades, updating your portfolio, and then having them canceled afterwards.


pages: 293 words: 88,490

The End of Theory: Financial Crises, the Failure of Economics, and the Sweep of Human Interaction by Richard Bookstaber

asset allocation, bank run, Bear Stearns, behavioural economics, bitcoin, business cycle, butterfly effect, buy and hold, capital asset pricing model, cellular automata, collateralized debt obligation, conceptual framework, constrained optimization, Craig Reynolds: boids flock, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, dark matter, data science, disintermediation, Edward Lorenz: Chaos theory, epigenetics, feminist movement, financial engineering, financial innovation, fixed income, Flash crash, geopolitical risk, Henri Poincaré, impact investing, information asymmetry, invisible hand, Isaac Newton, John Conway, John Meriwether, John von Neumann, Joseph Schumpeter, Long Term Capital Management, margin call, market clearing, market microstructure, money market fund, Paul Samuelson, Pierre-Simon Laplace, Piper Alpha, Ponzi scheme, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, Richard Feynman, risk/return, Robert Solow, Saturday Night Live, self-driving car, seminal paper, sovereign wealth fund, the map is not the territory, The Predators' Ball, the scientific method, Thomas Kuhn: the structure of scientific revolutions, too big to fail, transaction costs, tulip mania, Turing machine, Turing test, yield curve

That is, the vulnerability was acute because of the interdependence of two distinct networks: the communication network depended on the electric network for power, and the power network depended on the communication network for its instructions and coordination. Making matters worse, the two networks matched up hand-in-glove in their topology and geography: the servers were geographically and structurally similar to their power counterparts.9 They were perfectly paired for maximum calamity. AN ENVIRONMENT THAT IS TOO BIG TO FAIL There is a lesson in the Italian blackout if we want to understand financial crises. The Italian blackout is one of the first examples of a large-scale failure of a multilayer network. In the Italian blackout, networks designed to work separately interrelated: the electrical network that powered other systems, and the communication system that harbored the controllers of the electrical system.


pages: 265 words: 93,354

Please Don't Sit on My Bed in Your Outside Clothes: Essays by Phoebe Robinson

Affordable Care Act / Obamacare, Airbnb, An Inconvenient Truth, anti-bias training, Black Lives Matter, butterfly effect, coronavirus, COVID-19, David Attenborough, defund the police, desegregation, different worldview, disinformation, Donald Trump, Downton Abbey, emotional labour, financial independence, gentrification, George Floyd, gig economy, global pandemic, green new deal, Greta Thunberg, hiring and firing, imposter syndrome, independent contractor, Intergovernmental Panel on Climate Change (IPCC), Joan Didion, Lyft, mass incarceration, microaggression, off-the-grid, Phoebe Waller-Bridge, Ralph Waldo Emerson, rolodex, Rosa Parks, Sheryl Sandberg, social distancing, Social Justice Warrior, Steve Bannon, Steve Jobs, TED Talk, too big to fail, uber lyft, unpaid internship, W. E. B. Du Bois

When we witness CEO after CEO and corporation after corporation indulging their worst capitalistic and law-breaking impulses and not settling for stealing a little (which is still absolutely reprehensible behavior, by the way), but embezzling funds to such a comical degree that it’s impossible to ignore, the idea that they operated as though “they were too big to fail” gets thrown around. Hmm, maybe. No doubt that some of these folks’ reckless behavior was the direct result of unchecked arrogance, but I suspect that a good number of them subconsciously wanted to fail precisely because the crimes had gotten so unmanageably big. Because they couldn’t envision a way to get off the hamster wheel of corruption, being found guilty either in the court of law and/or the court of public opinion could, in its own bizarre way, be a salve when carrying the secret of misdeeds proved too mentally and emotionally taxing.


pages: 335 words: 89,924

A History of the World in Seven Cheap Things: A Guide to Capitalism, Nature, and the Future of the Planet by Raj Patel, Jason W. Moore

"World Economic Forum" Davos, agricultural Revolution, Anthropocene, Bartolomé de las Casas, biodiversity loss, British Empire, business cycle, call centre, Capital in the Twenty-First Century by Thomas Piketty, carbon credits, carbon footprint, classic study, clean water, collateralized debt obligation, colonial exploitation, colonial rule, company town, complexity theory, creative destruction, credit crunch, Donald Trump, double entry bookkeeping, energy transition, European colonialism, feminist movement, financial engineering, Food sovereignty, Ford Model T, Frederick Winslow Taylor, full employment, future of work, Glass-Steagall Act, global supply chain, Haber-Bosch Process, interchangeable parts, Intergovernmental Panel on Climate Change (IPCC), Joseph Schumpeter, land reform, Lewis Mumford, liberal capitalism, low interest rates, means of production, Medieval Warm Period, megacity, Mercator projection, meta-analysis, microcredit, Naomi Klein, Nixon shock, Occupy movement, peak oil, precariat, scientific management, Scientific racism, seminal paper, sexual politics, sharing economy, source of truth, South Sea Bubble, spinning jenny, strikebreaker, surplus humans, The Theory of the Leisure Class by Thorstein Veblen, too big to fail, trade route, transatlantic slave trade, union organizing, Upton Sinclair, wages for housework, World Values Survey, Yom Kippur War

Because of reasons well documented elsewhere, the country was compelled in 2015 to adopt a series of measures on terms that systematically siphoned away its wealth and guaranteed that it would never repay its debt.93 This was not a neoliberal policy in the conventional sense.94 Indeed, the IMF recommended debt relief “far beyond what Europe [had] been willing to consider so far” in the name of extracting money from Greece at a rate that wouldn’t entirely destroy its economy.95 The IMF had pointed out that systemically big banks—ones “too big to fail”—already had governments in their pockets. It also reported that the public was being made to pay for lax regulation, which allowed banks to find new ways to sell the credit they created and rely on central government insurance when those bets caused systemic crashes.96 Yet the imperative for Germany to secure fiscal hegemony over Europe was more important than the economics lesson offered by the IMF.


pages: 788 words: 223,004

Merchants of Truth: The Business of News and the Fight for Facts by Jill Abramson

"World Economic Forum" Davos, 23andMe, 4chan, Affordable Care Act / Obamacare, Alexander Shulgin, Apple's 1984 Super Bowl advert, barriers to entry, Bernie Madoff, Bernie Sanders, Big Tech, Black Lives Matter, Cambridge Analytica, Charles Lindbergh, Charlie Hebdo massacre, Chelsea Manning, citizen journalism, cloud computing, commoditize, content marketing, corporate governance, creative destruction, crowdsourcing, data science, death of newspapers, digital twin, diversified portfolio, Donald Trump, East Village, Edward Snowden, fake news, Ferguson, Missouri, Filter Bubble, future of journalism, glass ceiling, Google Glasses, haute couture, hive mind, income inequality, information asymmetry, invisible hand, Jeff Bezos, Joseph Schumpeter, Khyber Pass, late capitalism, Laura Poitras, Marc Andreessen, Mark Zuckerberg, move fast and break things, Nate Silver, new economy, obamacare, Occupy movement, Paris climate accords, performance metric, Peter Thiel, phenotype, pre–internet, race to the bottom, recommendation engine, Robert Mercer, Ronald Reagan, Saturday Night Live, self-driving car, sentiment analysis, Sheryl Sandberg, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, skunkworks, Snapchat, social contagion, social intelligence, social web, SoftBank, Steve Bannon, Steve Jobs, Steven Levy, tech billionaire, technoutopianism, telemarketer, the scientific method, The Wisdom of Crowds, Tim Cook: Apple, too big to fail, vertical integration, WeWork, WikiLeaks, work culture , Yochai Benkler, you are the product

It would be the first of what Sulzberger envisioned as a group of premium products both in print and on the web. The face of DealBook was Andrew Ross Sorkin, who at 30 was already an established star. He had been writing for the Times since high school, and later worked the mergers and acquisition beat, had a column, and wrote a best-selling book about the financial crisis, Too Big to Fail, which was made into an HBO movie. He was a frequent guest on business shows on cable TV. His new venture would carry up-to-the-minute news on Wall Street produced by a team he was assembling. Few of the reporters he hired had much experience. The more seasoned business reporters, who mostly came from smaller papers and magazines and worked their way up to the Times over decades, resented the parallel operation.

., 133 Thompson, Marilyn, 417 and gutting of McConnell story, 236 as Lexington Herald-Leader editor, 235–36 long-form journalism as strength of, 233–37 peripatetic career of, 235–37 as Post reporter and editor, 233–35 Strom Thurmond exposé by, 234–35 Thompson, Mark, 215, 389–90, 395, 398 Abramson’s relationship with, 212–14, 215 and blurring of line between news and business departments, 218 digital innovation pushed by, 398 Gibson’s hiring encouraged by, 220–21 named Times CEO, 203, 212 native advertising embraced by, 214 office downsized by, 397 paid products developed by, 213, 214, 215, 218 Savile scandal and, 214 “Times Innovation Report” and, 400 Times websites’ international reach expanded by, 398 Thune, John, 293 Thurmond, Strom, 234–35 Time, 30 Time.com, 245 Time Inc., 3–4 “Times Innovation Report,” 218–20, 394, 400 Times Insider, 250 Times Journeys, 401 Times Mirror, 67, 71 Times Select, 68, 74, 191–92, 193 Time Warner, 348 Title IV student loans, 91 Today (TV show), 146 Todd, Chuck, 339 Too Big to Fail (Sorkin), 190 Tozzi, Lisa, 141, 315 Tracy, Marc, 135 “traffic farms,” 282–83 Tremaine, Jeff, 51 Trend-Detector, 34, 38 Tribune Company, 71, 88, 182 Tronc, 414, 425 Trump, Donald: Access Hollywood tape and, 370, 377 Bezos and Amazon attacked by, 418–19, 426 border wall and, 293 on BuzzFeed’s publication of Steele dossier, 324 charitable giving claims of, 408–11 and Charlottesville violence, 354–55 election of, 224, 370–71 entertainment value of, 288 “fake news” term co-opted by, 340 Haberman’s relationship with, 388–89 as media creature, 6–7 Muslim country travel ban of, 326–27 political rise of, 288–89, 305 Post investigations of, 407–8, 426 Russian business connections of, 383–84 sexual harassment charges against, 370 Steele dossier on, 323–24 Times coverage originally craved by, 388 Times investigations of, 376, 382, 426 tweets by, 386, 387–88, 405, 418 in 2014 BuzzFeed interview, 305–6 in war on news media, 2, 7, 9, 376, 387–89, 426–27 in withdrawal from Paris climate accord, 351 Trump, Donald, in 2016 election campaign, 279 Bannon and, 298 Breitbart News and, 289–90 BuzzFeed’s coverage of, 302, 305–6, 313–14 “crooked” Hillary rants of, 377, 379 Facebook psychographic data used by, 298 Facebook’s Dark Post tool used by, 299 fake news in support of, 277, 296, 297, 299–300, 315 journalists banned from rallies of, 307–8 media coverage monopolized by, 290, 308 voter suppression operations of, 299 Trump administration: “alternative facts” and, 339–40 Post investigations of, 416 Trump Foundation: New York State lawsuit against, 411 supposed charitable giving by, 408–11, 419 Try Guys videos, 335 Tumblr, 145 Tumulty, Karen, 249, 406 Turner, Ted, 125 Twitter, 53, 130, 237, 288, 418 BuzzFeed’s morning news show on, 343, 345 #dressgate on, 145 launch of, 32 as news platform, 291 political conversation on, 126–27, 131 Tyrangiel, Josh, 350–51, 366–67 Upshot (Times blog), 248, 290 Upworthy, 414, 415 VandeHei, Jim, 97–99 Vanity Fair, 99, 187, 223 Variety, 176 Varney, Stuart, 420 Vea snacks, 393 Veles, Macedonia, 297 Veltroni, Martina, 359–61, 362 verticals, content organized by: at BuzzFeed, 123, 132, 342–43 at Vice, 161–62, 164, 167–68 Viacom, 57, 153, 154 Vice (HBO weekly show), 167, 178–80, 347, 350, 355, 366, 426 Emmy and Peabody awards won by, 179 Mojica as overseer of, 357 Vice (magazine), 147 advertisers’ wariness of, 47, 49–50 circulation growth of, 48, 56, 150 founded as Voice of Montreal, 43–45 Morton’s first articles for, 150 Morton’s immersion stories for, 151–52 9/11 attack and, 49 “Racist Issue” of, 46 in relocation to New York, 45 transgressive ethos of, 46, 47, 48–49, 148 Vice Broadcasting System (VBS.tv), 56–57, 154 see also Vice Media, video unit of Vice Canada, 358–59, 365 Vice Guide to Travel, The (video series), 57–58, 152 Viceland, 355, 359, 364, 365, 366, 367 Vice Media, 4, 8 ad agency of, see Virtue advertising revenues of, 177, 178, 347 blurring of line between advertising and news at, 158–66, 367 clients’ censorship of stories at, 164–65 coming-of-age of, 150–51 content creation as focus of, 154 Creators Project of, 162–63, 347 ethical standards as lacking at, 147, 171–72 extravagant spending on events and drugs by, 175 as failing to make lasting impact on visual journalism, 426 financial problems of, 349–50, 365 Fred Stanton Award won by, 180 Freston as full-time advisor to, 154–55 Gross Jar at, 149–50 institutionalized sexism at, 176–77, 348–49, 362, 363–64 internal disarray of, 348 investments in, 154, 177, 349 investor and advertiser defections from, 365–66 Jonze’s repositioning of, as video brand, 50 as lacking legitimacy as news brand, 158 licensing fees charged by, 177, 178, 180, 347, 367 low wages paid by, 175, 348, 357 McInnes’s exit from, 58, 181, 369 Morton hired by, 147–48 Morton named website editor of, 150 need for continuing growth at, 169, 180 new business model of, 160 nondisclosure agreements demanded by, 177, 349, 360, 361, 368–69 out-of-court settlements paid by, 361, 363 overseas revenues of, 178, 347, 367 prized youth demographic of, 347 quality news and, 10 record label of, see Vice Records reporters’ safety training ignored by, 172–73 retail stores of, 46, 150 sexist culture of, 59 sexual harassment at, 349, 361–65, 368, 426 steep learning curve of, 5 Szalwinski and, 45–46, 47 tension between transgressive ethos and corporate goals of, 59 traditional news media challenged by, 2, 4, 6 unionization of, 349 valuation of, 177, 329, 349, 365 Veltroni’s lawsuit against, 361, 362 verticals of, 161–62, 164, 167–68 Vice Media, video unit of, 329 “Chicago Interrupted” documentary of, 166 controversial Liberia documentary of, 169–70 “cool” as operative word at, 147 enormous output of, 346–47, 367 growing audience of, 59 “Heavy Metal in Baghdad” documentary of, 166, 173 as immersive journalism, 155–58, 174 “Islamic State” documentary of, 174–75 Jonze in creation of, 56–58, 152 North Korean documentaries of, 166–67 risks taken by reporters of, 172–75 Times profile of, 60–61 Vice Guide to Travel series of, 152 YouTube as platform for, 153–54, 158, 178, 368 see also Vice News Vice News, 178, 350 alt-right investigations of, 346 awards won by, 356 Charlottesville violence covered by, 353–55 Emmys won by, 355 HBO shows of, see Vice (HBO weekly show); Vice News Tonight as lacking connection to Washington insiders, 352 lack of security training at, 357–58 as loss leader, 357 Mojica replaced by Tyrangiel as head of, 350, 352, 356, 360 overtaking CNN as goal of, 346, 348, 369 Shane Smith’s vision for, 346, 369 and Trump’s election, 353 Vice News Tonight (HBO nightly show), 350–55, 366 Vice Records, 46, 56, 150, 155 video, pivot to, 328–29, 347 BuzzFeed and, 332, 336 Facebook and, 332 Vice and, 50 Vietnam Moratorium, 84 Vietnam War, 4 Village Voice, 130, 141 Vine, 332 virality, 76 as BuzzFeed’s organizing logic, 35–36, 111–12, 113–19 cats and, 36 evangelism and, 115 Marlow and, 16 native advertising and, 122–23 news media transformed by, 13 Nguyen and, 113–14 Peretti’s early experiments with, 8, 16–19 political dimension of, 18 relatability and, 115–16 Watts and, 15–16 see also contagious media Viral Rank, 35 Virtue (advertising agency), 158, 160–61, 165, 347, 369 Vladeck, Anne C., 217 Voice of Montreal, 43–45 in relocation to New York, see Vice (magazine) Volvo, 161 Vox, 239, 248, 266, 275, 405 Wallace, David Foster, 57, 168 Wall Street Journal, 64, 70, 159, 160, 189, 228, 349–50, 365, 375, 391 Abramson at, 195–96 as Chartbeat client, 245 expanded coverage of, 183 Facebook Instant Articles program eschewed by, 281 international reach of, 83 Murdoch’s acquisition of, 67, 183, 226, 229 paying digital readers of, 183, 192 Times’s rivalry with, 183 Wang, Peggy, 15, 37, 121 Warren, Denise, 215 Warrick, Joby, 92 Warzel, Charlie, 312–13, 320, 321, 338 Washington Post, 3–4, 66, 208, 220, 377, 381, 389, 391 Arc technology of, 267, 414 banned from Trump rallies, 308 Bezos’s expansion of news staff of, 404 Bezos’s purchase of, 1–2, 5, 257–61 blogs of, 23 broken business model of, 226 Buffett and, 83, 88 building scale emphasized by, 412 Chartbeat metrics used by, 245 classified advertising in, 83 Coll’s exit from, 88, 90 declining advertising revenues of, 8, 89, 254 declining reputation of, 251–52, 255–56 “Democracy Dies in Darkness” slogan of, 421 Don Graham era at, see Graham, Donald E.


pages: 357 words: 94,852

No Is Not Enough: Resisting Trump’s Shock Politics and Winning the World We Need by Naomi Klein

"Hurricane Katrina" Superdome, "World Economic Forum" Davos, Airbnb, antiwork, basic income, battle of ideas, Berlin Wall, Bernie Sanders, Black Lives Matter, Brewster Kahle, carbon tax, Carl Icahn, Celebration, Florida, clean water, collective bargaining, Corrections Corporation of America, data science, desegregation, Donald Trump, drone strike, Edward Snowden, Elon Musk, end-to-end encryption, energy transition, extractivism, fake news, financial deregulation, gentrification, Global Witness, greed is good, green transition, high net worth, high-speed rail, Howard Zinn, illegal immigration, impact investing, income inequality, Internet Archive, Kickstarter, late capitalism, Mark Zuckerberg, market bubble, market fundamentalism, mass incarceration, megaproject, Mikhail Gorbachev, military-industrial complex, moral panic, Naomi Klein, Nate Silver, new economy, Occupy movement, ocean acidification, offshore financial centre, oil shale / tar sands, open borders, Paris climate accords, Patri Friedman, Peter Thiel, plutocrats, private military company, profit motive, race to the bottom, Ralph Nader, Ronald Reagan, Saturday Night Live, sexual politics, sharing economy, Silicon Valley, Steve Bannon, subprime mortgage crisis, tech billionaire, too big to fail, trade liberalization, transatlantic slave trade, Triangle Shirtwaist Factory, trickle-down economics, Upton Sinclair, urban decay, W. E. B. Du Bois, women in the workforce, working poor

Dodd–Frank wasn’t tough enough, but its absence will liberate Wall Street to go wild blowing new bubbles, which will inevitably burst, creating new economic shocks. Trump’s team are not unaware of this, they are simply unconcerned—the profits from those market bubbles are too tantalizing. Besides, they know that since the banks were never broken up, they are still too big to fail, which means that if it all comes crashing down, they will be bailed out again, just like in 2008. (In fact, Trump issued an executive order calling for a review of the specific part of Dodd–Frank designed to prevent taxpayers from being stuck with the bill for another such bailout—an ominous sign, especially with so many former Goldman executives making White House policy.)


pages: 326 words: 103,170

The Seventh Sense: Power, Fortune, and Survival in the Age of Networks by Joshua Cooper Ramo

air gap, Airbnb, Alan Greenspan, Albert Einstein, algorithmic trading, barriers to entry, Berlin Wall, bitcoin, Bletchley Park, British Empire, cloud computing, Computing Machinery and Intelligence, crowdsourcing, Danny Hillis, data science, deep learning, defense in depth, Deng Xiaoping, drone strike, Edward Snowden, Fairchild Semiconductor, Fall of the Berlin Wall, financial engineering, Firefox, Google Chrome, growth hacking, Herman Kahn, income inequality, information security, Isaac Newton, Jeff Bezos, job automation, Joi Ito, Laura Poitras, machine translation, market bubble, Menlo Park, Metcalfe’s law, Mitch Kapor, Morris worm, natural language processing, Neal Stephenson, Network effects, Nick Bostrom, Norbert Wiener, Oculus Rift, off-the-grid, packet switching, paperclip maximiser, Paul Graham, power law, price stability, quantitative easing, RAND corporation, reality distortion field, Recombinant DNA, recommendation engine, Republic of Letters, Richard Feynman, road to serfdom, Robert Metcalfe, Sand Hill Road, secular stagnation, self-driving car, Silicon Valley, Skype, Snapchat, Snow Crash, social web, sovereign wealth fund, Steve Jobs, Steve Wozniak, Stewart Brand, Stuxnet, superintelligent machines, systems thinking, technological singularity, The Coming Technological Singularity, The Wealth of Nations by Adam Smith, too big to fail, Vernor Vinge, zero day

“Macro models failed to predict the crisis and seemed incapable of explaining what was happening to the economy in a convincing manner,” former president of the European Central Bank Jean-Claude Trichet lamented in the aftermath of the cascading financial crises that hit in 2008. Markets and officials discovered that their system was not merely “too big to fail” but also that it was too connected to manage—and possibly too complex to comprehend. Trichet sounded a little shell-shocked. “As a policy maker during the crisis I found the available models of limited help. In fact, I would go further: In the face of the crisis, we felt abandoned by conventional tools.”


Who Rules the World? by Noam Chomsky

Able Archer 83, Alan Greenspan, Albert Einstein, anti-communist, Ayatollah Khomeini, Berlin Wall, Bretton Woods, British Empire, capital controls, classic study, corporate governance, corporate personhood, cuban missile crisis, deindustrialization, Donald Trump, Doomsday Clock, Edward Snowden, en.wikipedia.org, facts on the ground, failed state, Fall of the Berlin Wall, Garrett Hardin, high-speed rail, Howard Zinn, illegal immigration, Intergovernmental Panel on Climate Change (IPCC), invisible hand, liberation theology, Malacca Straits, Martin Wolf, Mikhail Gorbachev, Monroe Doctrine, Nelson Mandela, nuclear winter, Occupy movement, oil shale / tar sands, one-state solution, Plutonomy: Buying Luxury, Explaining Global Imbalances, precariat, public intellectual, Ralph Waldo Emerson, Robert Solow, Ronald Reagan, South China Sea, Stanislav Petrov, Strategic Defense Initiative, structural adjustment programs, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, trade route, Tragedy of the Commons, union organizing, uranium enrichment, wage slave, WikiLeaks, working-age population

While wealth and power have narrowly concentrated, for most of the population real incomes have stagnated and people have been getting by with increased work hours, debt, and asset inflation, regularly destroyed by the financial crises that began as the regulatory apparatus was dismantled starting in the 1980s. None of this is problematic for the very wealthy, who benefit from the “too big to fail” government insurance policy. That government insurance is no small matter. Considering just the ability of banks to borrow at lower rates, thanks to the implicit taxpayer subsidy, Bloomberg News, citing an International Monetary Fund working paper, estimates that “taxpayers give big banks $83 billion a year”—virtually their entire profit, a matter that is “crucial to understanding why the big banks present such a threat to the global economy.”24 Furthermore, the banks and investment firms can make risky transactions, with rich rewards, and when the system inevitably crashes, they can run to the nanny state for a taxpayer bailout, clutching their copies of F.


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

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

The benchmark Russian bond was now at $43. His positions were underwater, but he increased his stakes. By now he was down $30 million for the year. His bosses were starting to become nervous, but he kept telling them that, after all, Russia would not go under. He repeated the cliché that it was too big to fail. He estimated that bailing them out would cost so little and would benefit the world economy so much that it did not make sense to liquidate his inventory now. “This is the time to buy, not to sell,” he said repeatedly. “These bonds are trading very close to their possible default value.” In other words, should Russia go into default, and run out of dollars to pay the interest on its debt, these bonds would hardly budge.


pages: 296 words: 98,018

Winners Take All: The Elite Charade of Changing the World by Anand Giridharadas

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, activist lawyer, affirmative action, Airbnb, benefit corporation, Bernie Sanders, bitcoin, Black Lives Matter, Boeing 747, Brexit referendum, Burning Man, Capital in the Twenty-First Century by Thomas Piketty, carried interest, cognitive dissonance, collective bargaining, corporate raider, corporate social responsibility, critical race theory, crowdsourcing, David Brooks, David Heinemeier Hansson, deindustrialization, disintermediation, do well by doing good, Donald Trump, Edward Snowden, Elon Musk, fake it until you make it, fake news, food desert, friendly fire, gentrification, global pandemic, high net worth, hiring and firing, housing crisis, Hyperloop, impact investing, income inequality, independent contractor, invisible hand, Jeff Bezos, Kevin Roose, Kibera, Kickstarter, land reform, Larry Ellison, Lyft, Marc Andreessen, Mark Zuckerberg, microaggression, new economy, Occupy movement, offshore financial centre, opioid epidemic / opioid crisis, Panopticon Jeremy Bentham, Parag Khanna, Paul Graham, Peter Thiel, plutocrats, profit maximization, public intellectual, risk tolerance, rolodex, Ronald Reagan, shareholder value, sharing economy, Sheryl Sandberg, side hustle, side project, Silicon Valley, Silicon Valley billionaire, Silicon Valley startup, Skype, social distancing, Social Responsibility of Business Is to Increase Its Profits, Steven Pinker, systems thinking, tech baron, TechCrunch disrupt, technoutopianism, TED Talk, The Chicago School, The Fortune at the Bottom of the Pyramid, the High Line, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, Travis Kalanick, trickle-down economics, Two Sigma, Uber and Lyft, uber lyft, Upton Sinclair, Vilfredo Pareto, Virgin Galactic, work culture , working poor, zero-sum game

Weill had, after all, been named by Time one of “25 People to Blame for the Financial Crisis,” because of his relentless push for a vision of banks as “all things to all customers,” and his “persistent lobbying,” ultimately successful, for the repeal of Glass-Steagall, a law dating back to the Great Depression that restricted investors’ risk-taking. He had advocated for too-big-to-fail banks, and he had gotten his way, which had helped to bring about the largest financial crisis in decades, which had caused the government to spend tens of billions of dollars bailing Citi out. And now Sanford Weill bemoaned that the government had no money, and thus he had to chip in and help out.


pages: 359 words: 96,019

How to Turn Down a Billion Dollars: The Snapchat Story by Billy Gallagher

Airbnb, Albert Einstein, Amazon Web Services, AOL-Time Warner, Apple's 1984 Super Bowl advert, augmented reality, Bernie Sanders, Big Tech, Black Swan, citizen journalism, Clayton Christensen, computer vision, data science, disruptive innovation, Donald Trump, El Camino Real, Elon Musk, fail fast, Fairchild Semiconductor, Frank Gehry, gamification, gentrification, Google Glasses, Hyperloop, information asymmetry, Jeff Bezos, Justin.tv, Kevin Roose, Lean Startup, Long Term Capital Management, Mark Zuckerberg, Menlo Park, minimum viable product, Nelson Mandela, Oculus Rift, paypal mafia, Peter Thiel, power law, QR code, Robinhood: mobile stock trading app, Salesforce, Sand Hill Road, Saturday Night Live, Sheryl Sandberg, side project, Silicon Valley, Silicon Valley startup, skeuomorphism, Snapchat, social graph, SoftBank, sorting algorithm, speech recognition, stealth mode startup, Steve Jobs, TechCrunch disrupt, too big to fail, value engineering, Y Combinator, young professional

Young Money: Inside the Hidden World of Wall Street’s Post-Crash Recruits. New York: Grand Central Publishing, 2014. Rose, Todd. The End of Average: How We Succeed in a World That Values Sameness. New York: HarperOne, 2016. Schlender, Brent, and Rick Tetzeli. Becoming Steve Jobs. New York: Crown Business, 2015. Sorkin, Andrew Ross. Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves. New York: Viking, 2009. Stone, Brad. The Everything Store: Jeff Bezos and the Age of Amazon. New York: Little, Brown and Company, 2013. ________. The Upstarts: How Uber, Airbnb, and the Killer Companies of the New Silicon Valley Are Changing the World.


pages: 343 words: 101,563

The Uninhabitable Earth: Life After Warming by David Wallace-Wells

agricultural Revolution, Albert Einstein, anthropic principle, Anthropocene, Asian financial crisis, augmented reality, autism spectrum disorder, basic income, behavioural economics, Berlin Wall, bitcoin, Blockadia, British Empire, Buckminster Fuller, Burning Man, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, carbon tax, carbon-based life, Chekhov's gun, climate anxiety, cognitive bias, computer age, correlation does not imply causation, cryptocurrency, cuban missile crisis, decarbonisation, disinformation, Donald Trump, Dr. Strangelove, effective altruism, Elon Musk, endowment effect, energy transition, everywhere but in the productivity statistics, failed state, fiat currency, global pandemic, global supply chain, Great Leap Forward, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of agriculture, it's over 9,000, Joan Didion, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kevin Roose, Kim Stanley Robinson, labor-force participation, life extension, longitudinal study, Mark Zuckerberg, mass immigration, megacity, megastructure, Michael Shellenberger, microdosing, microplastics / micro fibres, mutually assured destruction, Naomi Klein, negative emissions, Nick Bostrom, nuclear winter, ocean acidification, off-the-grid, Paris climate accords, Pearl River Delta, Peter Thiel, plutocrats, postindustrial economy, quantitative easing, Ray Kurzweil, rent-seeking, ride hailing / ride sharing, Robert Solow, Sam Altman, Silicon Valley, Skype, South China Sea, South Sea Bubble, Steven Pinker, Stewart Brand, Ted Nordhaus, TED Talk, the built environment, The future is already here, the scientific method, Thomas Malthus, too big to fail, universal basic income, University of East Anglia, Whole Earth Catalog, William Langewiesche, Y Combinator

We feel less that way about the internet, which seems beyond our control though we designed and built it, and quite recently; still less about global warming, which we extend each day, each minute, by our actions. And the perceptual size of market capitalism has been a kind of obstacle to its critics for at least a generation, when it came to seem even to those attuned to its failings to be perhaps too big to fail. It does not quite seem that way now, standing in the long shadow of the financial crisis and watching global warming beginning to darken the horizon. And yet, perhaps in part because we see the way that perspectives on climate change map neatly onto existing and familiar perspectives on capitalism—from burn-it-all-down leftists to naively optimistic and blinkered technocrats to rent-seeking, kleptocratic, growth-is-the-only-value conservatives—we tend to think of climate as somehow being contained within, or governed by, capitalism.


pages: 471 words: 97,152

Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism by George A. Akerlof, Robert J. Shiller

affirmative action, Andrei Shleifer, asset-backed security, bank run, banking crisis, Bear Stearns, behavioural economics, business cycle, buy and hold, collateralized debt obligation, conceptual framework, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, Deng Xiaoping, Donald Trump, Edward Glaeser, en.wikipedia.org, experimental subject, financial innovation, full employment, Future Shock, George Akerlof, George Santayana, housing crisis, Hyman Minsky, income per capita, inflation targeting, invisible hand, Isaac Newton, Jane Jacobs, Jean Tirole, job satisfaction, Joseph Schumpeter, junk bonds, Long Term Capital Management, loss aversion, market bubble, market clearing, mental accounting, Michael Milken, Mikhail Gorbachev, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Myron Scholes, new economy, New Urbanism, Paul Samuelson, Phillips curve, plutocrats, Post-Keynesian economics, price stability, profit maximization, public intellectual, purchasing power parity, random walk, Richard Thaler, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, seminal paper, South Sea Bubble, The Chicago School, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, W. E. B. Du Bois, We are all Keynesians now, working-age population, Y2K, Yom Kippur War

Humpty Dumpty is broken and cannot be put back together again. We need a new egg. We have to reinvent our capitalist economy, reestablish a genuine creative business spirit in people’s minds, and support their attitudes via institutions that really work and satisfy their definition of justice. Instead, today we have, in their eyes, institutions “too big to fail,” which are on life support from the government and our central banks, operating as money-printing machines, and a general feeling that business is corrupt and that the government support these institutions receive has been arranged by evil lobbyists. We are facing the same problem today that we faced in the later years of the Great Depression (described in Chapter 6)—business today is inhibited by uncertainty about the future, about the tolerance of an angry public, about a disaffected labor force, and about what further government actions may be coming.


pages: 317 words: 101,475

Chavs: The Demonization of the Working Class by Owen Jones

Asperger Syndrome, banking crisis, Berlin Wall, Boris Johnson, British Empire, Bullingdon Club, call centre, collapse of Lehman Brothers, credit crunch, deindustrialization, Etonian, facts on the ground, falling living standards, first-past-the-post, ghettoisation, Gini coefficient, green new deal, hiring and firing, housing crisis, illegal immigration, income inequality, informal economy, low skilled workers, low-wage service sector, mass immigration, meritocracy, Neil Kinnock, Occupy movement, pension reform, place-making, plutocrats, post-war consensus, race to the bottom, Right to Buy, rising living standards, social distancing, The Bell Curve by Richard Herrnstein and Charles Murray, The Spirit Level, too big to fail, unpaid internship, upwardly mobile, We are the 99%, wealth creators, Winter of Discontent, women in the workforce, working-age population

While Thatcherism left manufacturing to bleed to death in the 1980s, the New Labour government pumped billions of pounds of taxpayers' money into banks whose greed and stupidity had left them teetering on the edge of collapse. The reason? The banks could say the same about manufacturing,' were too big to fail. 'You says Graham Turner. 'The world eventually recovered, and had you supported manufacturing more, we might not have lost so many manufacturing jobs.' All of this prompts the question: did the Tories have any interest in saving manufacturing, crocodile tears or nor As far as Thatcher and her acolytes were concerned, finance and services were the future; making things belonged to the past.


pages: 311 words: 99,699

Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe by Gillian Tett

"World Economic Forum" Davos, accounting loophole / creative accounting, Alan Greenspan, asset-backed security, bank run, banking crisis, Bear Stearns, Black-Scholes formula, Blythe Masters, book value, break the buck, Bretton Woods, business climate, business cycle, buy and hold, collateralized debt obligation, commoditize, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, easy for humans, difficult for computers, financial engineering, financial innovation, fixed income, Glass-Steagall Act, housing crisis, interest rate derivative, interest rate swap, inverted yield curve, junk bonds, Kickstarter, locking in a profit, Long Term Capital Management, low interest rates, McMansion, Michael Milken, money market fund, mortgage debt, North Sea oil, Northern Rock, Plato's cave, proprietary trading, Renaissance Technologies, risk free rate, risk tolerance, Robert Shiller, Satyajit Das, Savings and loan crisis, short selling, sovereign wealth fund, statistical model, tail risk, The Great Moderation, too big to fail, value at risk, yield curve

The five commercial bank holding companies—the piece of the system that Geithner oversaw—held just $6 trillion total, while banks as a whole had $10 trillion in assets. More important than mere size, though, was that the shadow banks and brokers were so deeply interconnected with commercial banks through a fiendishly complex web of trades. Quite apart from whether they were “too big to fail,” they were too interconnected to ignore. One source of the interlinkages was the repo world. Another came from credit derivatives. The credit derivatives sector had exploded at such a pace that there was more than $60 trillion in outstanding CDS trades sitting in the market as a whole. In a strict economic sense, the risk embodied in those contracts was much smaller, at “just” $14 trillion, since many of the deals offset each other.


Free Money for All: A Basic Income Guarantee Solution for the Twenty-First Century by Mark Walker

3D printing, 8-hour work day, additive manufacturing, Affordable Care Act / Obamacare, basic income, Baxter: Rethink Robotics, behavioural economics, Capital in the Twenty-First Century by Thomas Piketty, commoditize, confounding variable, driverless car, financial independence, full employment, guns versus butter model, happiness index / gross national happiness, industrial robot, intangible asset, invisible hand, Jeff Bezos, job automation, job satisfaction, John Markoff, Kevin Kelly, laissez-faire capitalism, late capitalism, longitudinal study, market clearing, means of production, military-industrial complex, new economy, obamacare, off grid, off-the-grid, plutocrats, precariat, printed gun, profit motive, Ray Kurzweil, rent control, RFID, Rodney Brooks, Rosa Parks, science of happiness, Silicon Valley, surplus humans, The Future of Employment, the market place, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, universal basic income, warehouse robotics, working poor

How can this be a proposal for full-time capitalism if it goes against the interest of the capitalist class? The answer is that it is not always to the benefit of the rich for capitalism to hold sway. Consider that in the Great Recession (2007–2009) governments bailed out many large corporations. The rhetoric used to support this was that some companies are “too big to fail.” Critics complained that big companies take advantage of this in that they privatize profits and FULLTIME CAPITALISM 55 socialize the risk. Specifically, in the good times, private individuals took profits from these companies, and in the bad times, public money was used to bail out these same corporations.


pages: 411 words: 98,128

Bezonomics: How Amazon Is Changing Our Lives and What the World's Best Companies Are Learning From It by Brian Dumaine

activist fund / activist shareholder / activist investor, AI winter, Airbnb, Amazon Robotics, Amazon Web Services, Atul Gawande, autonomous vehicles, basic income, Bernie Sanders, Big Tech, Black Swan, call centre, Cambridge Analytica, carbon tax, Carl Icahn, Chris Urmson, cloud computing, corporate raider, creative destruction, Danny Hillis, data science, deep learning, Donald Trump, Elon Musk, Erik Brynjolfsson, Fairchild Semiconductor, fake news, fulfillment center, future of work, gig economy, Glass-Steagall Act, Google Glasses, Google X / Alphabet X, income inequality, independent contractor, industrial robot, Internet of things, Jeff Bezos, job automation, Joseph Schumpeter, Kevin Kelly, Kevin Roose, Lyft, Marc Andreessen, Mark Zuckerberg, military-industrial complex, money market fund, natural language processing, no-fly zone, Ocado, pets.com, plutocrats, race to the bottom, ride hailing / ride sharing, Salesforce, Sand Hill Road, self-driving car, shareholder value, Sheryl Sandberg, Silicon Valley, Silicon Valley startup, Snapchat, speech recognition, Steve Jobs, Stewart Brand, supply-chain management, TED Talk, Tim Cook: Apple, too big to fail, Travis Kalanick, two-pizza team, Uber and Lyft, uber lyft, universal basic income, warehouse automation, warehouse robotics, wealth creators, web application, Whole Earth Catalog, work culture

Despite his massive success so far, Bezos really does run his corporation, which was worth $1 trillion as of 2018 (at the time more than any other company in the world), as if it were a small business whose very existence is threatened daily. At another all-hands meeting in November of 2018, in response to an employee question about big companies like Sears going bankrupt, Bezos rattled the crowd by saying: “Amazon is not too big to fail. In fact, I predict one day Amazon will fail. Amazon will go bankrupt. If you look at large companies, their life spans tend to be thirty-plus years, not a hundred-plus years.” At the time he made that comment, Amazon was twenty-four years old. Why would Bezos talk to his troops about the demise of Amazon?


pages: 349 words: 102,827

The Infinite Machine: How an Army of Crypto-Hackers Is Building the Next Internet With Ethereum by Camila Russo

4chan, Airbnb, Alan Greenspan, algorithmic trading, altcoin, always be closing, Any sufficiently advanced technology is indistinguishable from magic, Asian financial crisis, Benchmark Capital, Big Tech, bitcoin, blockchain, Burning Man, Cambridge Analytica, Cody Wilson, crowdsourcing, cryptocurrency, distributed ledger, diversification, Dogecoin, Donald Trump, East Village, Ethereum, ethereum blockchain, Flash crash, Free Software Foundation, Google Glasses, Google Hangouts, hacker house, information security, initial coin offering, Internet of things, Mark Zuckerberg, Maui Hawaii, mobile money, new economy, non-fungible token, off-the-grid, peer-to-peer, Peter Thiel, pets.com, Ponzi scheme, prediction markets, QR code, reserve currency, RFC: Request For Comment, Richard Stallman, Robert Shiller, Sand Hill Road, Satoshi Nakamoto, semantic web, sharing economy, side project, Silicon Valley, Skype, slashdot, smart contracts, South of Market, San Francisco, the Cathedral and the Bazaar, the payments system, too big to fail, tulip mania, Turing complete, Two Sigma, Uber for X, Vitalik Buterin

“Let’s reconvene tomorrow.” In the meantime, more and more people had piled on to argue about whether to soft-fork, hard-fork, or just accept that The DAO had been hacked and let it die. To many, Ethereum would have failed in its core values if they did anything about it, as it would signal some projects are too big to fail and deserve a bailout, just like big Wall Street banks in 2008. What was the point of cryptocurrency if they went down the same paths they were trying to escape in the first place? It didn’t take long for the cypherpunk term of “code is law” to emerge as a fundamental principle that shouldn’t be broken.


pages: 304 words: 99,836

Why I Left Goldman Sachs: A Wall Street Story by Greg Smith

Alan Greenspan, always be closing, asset allocation, Bear Stearns, Black Swan, bonus culture, break the buck, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, delayed gratification, East Village, fear index, financial engineering, fixed income, Flash crash, glass ceiling, Glass-Steagall Act, Goldman Sachs: Vampire Squid, high net worth, information asymmetry, London Interbank Offered Rate, mega-rich, money market fund, new economy, Nick Leeson, proprietary trading, quantitative hedge fund, Renaissance Technologies, short selling, short squeeze, Silicon Valley, Skype, sovereign wealth fund, Stanford marshmallow experiment, statistical model, technology bubble, too big to fail

If I had nothing else, I thought, I would still have friends and family. ——— In mid-October, Hank Paulson summoned to Washington the heads of the nine biggest banks and told them that, whether they liked it or not, the government was going to give them a lot of money: more than $100 billion on that day alone. The banks were, in the phrase that became famous, “too big to fail.” Some of them—including Goldman Sachs, in the person of Lloyd Blankfein—told Paulson they didn’t need the cash. Paulson told Lloyd and the others that whether they thought they needed it or not, they were going to take it. And take it they did—all of them. The rationale was that if some banks took the money and others didn’t, the TARP funds could be seen as a stigma for those that accepted them: This bank is in such deep trouble that it needs a bailout, the world could think.


pages: 320 words: 95,629

Decoding the World: A Roadmap for the Questioner by Po Bronson

23andMe, 3D printing, 4chan, Abraham Maslow, Affordable Care Act / Obamacare, altcoin, Apple's 1984 Super Bowl advert, Asilomar, autonomous vehicles, basic income, Big Tech, bitcoin, blockchain, Burning Man, call centre, carbon credits, carbon tax, cognitive bias, cognitive dissonance, coronavirus, COVID-19, CRISPR, cryptocurrency, decarbonisation, deep learning, deepfake, DeepMind, dematerialisation, Donald Trump, driverless car, dumpster diving, edge city, Ethereum, ethereum blockchain, Eyjafjallajökull, factory automation, fake news, financial independence, Google X / Alphabet X, green new deal, income inequality, industrial robot, Isaac Newton, Jeff Bezos, Kevin Kelly, Kickstarter, Mars Rover, mass immigration, McMansion, means of production, microbiome, microplastics / micro fibres, oil shale / tar sands, opioid epidemic / opioid crisis, Paul Graham, paypal mafia, phenotype, Ponzi scheme, power law, quantum entanglement, Ronald Reagan, Sand Hill Road, sharing economy, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, smart contracts, source of truth, stem cell, Steve Jobs, Steve Jurvetson, sustainable-tourism, synthetic biology, Tesla Model S, too big to fail, trade route, universal basic income, Watson beat the top human players on Jeopardy!, women in the workforce

The whales were honest with us—the likeliest scenario is that the U.S. government declares crypto illegal, because it can’t do enough to satisfy the regulations against money laundering in the post-9/11 era. Nobody wants to make it easy for terrorists and crime networks to operate. So the hope is that it gets too widespread for the government to shut it down. Sort of a “too big to fail” argument. The more that wealthy, well-connected institutions hold crypto, the less likely the U.S. Treasury Department is to do something harsh that wipes out those holdings’ value. One of the whales described the key problem the Feds have. “If North Korea hits my node for a transaction, I have no idea it’s them.


pages: 329 words: 99,504

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

Some may even have seen kind of an ironic or folk quality in Mashinsky, a Ukrainian-Israeli who spoke mostly in exclamation marks, liked to mix it up with customers at conferences, and made a lot of bad jokes. He was goofy but he was also making it rain. “TradFi has been socializing losses by using too big to fail to force bailouts and have the little guy pay for it via Taxes,” Mashinsky tweeted in December 2021, weeks after the crypto market peaked. “CeFi @CelsiusNetwork is socializing #Crypto profits to the little guy by charging institutions fees to borrow Crypto while helping millions Unbank.” Mashinsky encouraged his customers to HODL—hold on for dear life—through the bad times, saving their crypto for the long term and buying every dip.


The Metropolitan Revolution: How Cities and Metros Are Fixing Our Broken Politics and Fragile Economy by Bruce Katz, Jennifer Bradley

"World Economic Forum" Davos, 3D printing, additive manufacturing, Affordable Care Act / Obamacare, benefit corporation, British Empire, business climate, carbon footprint, clean tech, clean water, collapse of Lehman Brothers, company town, congestion pricing, data science, deindustrialization, demographic transition, desegregation, Donald Shoup, double entry bookkeeping, edge city, Edward Glaeser, financial engineering, global supply chain, immigration reform, income inequality, industrial cluster, intermodal, Jane Jacobs, jitney, Kickstarter, knowledge economy, Lewis Mumford, lone genius, longitudinal study, Mark Zuckerberg, Masdar, megacity, megaproject, Menlo Park, Moneyball by Michael Lewis explains big data, Network effects, new economy, New Urbanism, Occupy movement, place-making, postindustrial economy, purchasing power parity, Quicken Loans, race to the bottom, Richard Florida, Shenzhen was a fishing village, Silicon Valley, smart cities, smart grid, sovereign wealth fund, tech worker, TechCrunch disrupt, TED Talk, the built environment, The Death and Life of Great American Cities, the market place, The Spirit Level, Tony Hsieh, too big to fail, trade route, transit-oriented development, urban planning, white flight, Yochai Benkler

Yale University Press, 2012. 11-2151-2 biblio.indd 248 5/20/13 7:00 PM SELECTED BIBLIOGRAPHY 249 Sørensen, Eva, and Jacob Torfing. “The Democratic Anchorage of Governance Networks.” Scandinavian Political Studies 28, no. 3 (2005): 195–218. ———. “Making Governance Networks Effective and Democratic through Metagovernance.” Public Administration 87, no. 2 (2009): 234–58. Sorkin, Andrew Ross. Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System from Crisis—and Themselves. New York: Viking, 2009. Sthanumoorthy, R. “Rate War, Race to the Bottom, and Uniform State VAT Rates: An Empirical Foundation for a Difficult Policy Issue.” Economic and Political Weekly 41, no. 24 (2006): 2460–69.


pages: 484 words: 104,873

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

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

If you make a bad investment or get ripped off by a Bernie Madoff type, then the error might well be unrecoverable. If individuals are ultimately given control over their capital, then it’s inevitable that this scenario would play out for some unlucky people. What would we do for individuals and families who found themselves in this kind of situation? Would they be “too big to fail”? If so, there would be a clear moral hazard problem: people might see little downside in taking excessive risks. If not, we’d have people in genuinely dire situations with little or no hope of escape. The vast majority of people would, of course, act responsibly in the face of this kind of risk.


pages: 431 words: 107,868

The Great Race: The Global Quest for the Car of the Future by Levi Tillemann

Affordable Care Act / Obamacare, An Inconvenient Truth, Any sufficiently advanced technology is indistinguishable from magic, autonomous vehicles, banking crisis, Bear Stearns, car-free, carbon footprint, clean tech, creative destruction, decarbonisation, deindustrialization, demand response, Deng Xiaoping, Donald Trump, driverless car, electricity market, Elon Musk, en.wikipedia.org, energy security, factory automation, Fairchild Semiconductor, Ford Model T, foreign exchange controls, gigafactory, global value chain, high-speed rail, hydrogen economy, index card, Intergovernmental Panel on Climate Change (IPCC), joint-stock company, Joseph Schumpeter, Kanban, Kickstarter, manufacturing employment, market design, megacity, Nixon shock, obamacare, off-the-grid, oil shock, planned obsolescence, Ralph Nader, RFID, rolodex, Ronald Reagan, Rubik’s Cube, self-driving car, shareholder value, Shenzhen special economic zone , short squeeze, Silicon Valley, Silicon Valley startup, skunkworks, smart cities, Solyndra, sovereign wealth fund, special economic zone, Steve Jobs, Tesla Model S, too big to fail, Unsafe at Any Speed, zero-sum game, Zipcar

Furthermore, its investment in EV technology would translate into increased competitive pressure for players like Toyota and Honda, as well as Korean, American, and European companies. One other thing Nissan’s involvement would do is up the ante for METI. This was an enormous company. Many people felt that in the eyes of METI, Nissan really was too big to fail. 11 I’ll Be Back California Returns ONCE AGAIN Japan was winning both the race for technology and for public opinion. Over the early 2000s, oil prices shot through the roof, and more and more Americans started worrying about climate change—their angst fueled by hot weather and later Al Gore’s global warming documentary, An Inconvenient Truth.


pages: 471 words: 109,267

The Verdict: Did Labour Change Britain? by Polly Toynbee, David Walker

Alan Greenspan, An Inconvenient Truth, banking crisis, Big bang: deregulation of the City of London, blood diamond, Bob Geldof, Boris Johnson, call centre, central bank independence, congestion charging, Corn Laws, Credit Default Swap, Crossrail, decarbonisation, deglobalization, deindustrialization, Etonian, failed state, first-past-the-post, Frank Gehry, gender pay gap, Gini coefficient, high net worth, hiring and firing, illegal immigration, income inequality, Intergovernmental Panel on Climate Change (IPCC), knowledge economy, labour market flexibility, market bubble, mass immigration, military-industrial complex, millennium bug, moral panic, North Sea oil, Northern Rock, offshore financial centre, pension reform, plutocrats, Ponzi scheme, profit maximization, purchasing power parity, Right to Buy, shareholder value, Skype, smart meter, social distancing, stem cell, The Spirit Level, too big to fail, University of East Anglia, working-age population, Y2K

In 2007, the crash imminent, the credit default swap market was ‘revealing’ that the risk of a major bank defaulting had hit its lowest ever level, a message backed up by banks’ share price. Labour never got it, nor the point made by American economist Joseph Stiglitz. He argued that the banks practised ersatz capitalism: when they had become ‘too big to fail’ they had stopped being genuine commercial entities. Labour had divided supervision between the Bank of England and the new Financial Services Authority, with the Treasury hovering in the background. But this triple overview was irrelevant when the government decreed ‘see no evil’ in the City; the problems were political, not regulatory.


pages: 411 words: 108,119

The Irrational Economist: Making Decisions in a Dangerous World by Erwann Michel-Kerjan, Paul Slovic

"World Economic Forum" Davos, Alan Greenspan, An Inconvenient Truth, Andrei Shleifer, availability heuristic, bank run, behavioural economics, Black Swan, business cycle, Cass Sunstein, classic study, clean water, cognitive dissonance, collateralized debt obligation, complexity theory, conceptual framework, corporate social responsibility, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-subsidies, Daniel Kahneman / Amos Tversky, endowment effect, experimental economics, financial innovation, Fractional reserve banking, George Akerlof, hindsight bias, incomplete markets, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, iterative process, Kenneth Arrow, Loma Prieta earthquake, London Interbank Offered Rate, market bubble, market clearing, money market fund, moral hazard, mortgage debt, Oklahoma City bombing, Pareto efficiency, Paul Samuelson, placebo effect, precautionary principle, price discrimination, price stability, RAND corporation, Richard Thaler, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, social discount rate, source of truth, statistical model, stochastic process, subprime mortgage crisis, The Wealth of Nations by Adam Smith, Thomas Bayes, Thomas Kuhn: the structure of scientific revolutions, too big to fail, transaction costs, ultimatum game, University of East Anglia, urban planning, Vilfredo Pareto

In reinsurance, traditional reinsurers are slowly being replaced by a diffuse set of agents who manage dedicated but reinsurance exposures for many investors—hedge funds, mutual funds, and so forth. Reinsurance can be, and increasingly is being, written in small pieces by many portfolio managers acting as agents for their beneficial investors. This allows for far wider sharing of reinsurance risk and less concern with “too big to fail.” The financial crisis has been made worse by the mistake of allowing intermediaries to accumulate large portfolios of securities whose markets the dealers were supposed to support. When those security values fell, intermediaries’ stressed capital levels made it impossible for them to support these markets.


pages: 367 words: 108,689

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

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

Three decades after Howe, Lawson and their colleagues changed the financial architecture of the world, after a generation when the middle classes had smiled on the financial markets, King was in a very different frame of mind: If it’s possible [for financial services firms] to make money out of gullible or unsuspecting customers, particularly institutional customers, [they think] that is perfectly acceptable … Why do banks in general want to pay bonuses? It’s because they live in a ‘too big to fail’ world in which the state will bail them out on the downside profits. Had any Bank of England governor ever attacked the values of the City of London before? The City’s historian David Kynaston suggests not, and it was the long list of failings which were listed in his speech that was so dramatic.


pages: 571 words: 106,255

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

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

In a society of sound money, there are no liquidity concerns over the failure of a bank, as all banks hold all their deposits on hand, and have investments of matched maturity. In other words, there is no distinction between illiquidity and insolvency, and there is no systemic risk that could make any bank “too big to fail.” A bank that fails is the problem of its shareholders and lenders, and nobody else. Unsound money allows the possibility of mismatching maturity, of which fractional reserve banking is but a subset, and this leaves banks always liable to a liquidity crisis, or a bank run. Maturity mismatching, or fractional reserve banking as a special case of it, is always liable to a liquidity crisis if lenders and depositors were to demand their deposits at the same time.


pages: 375 words: 105,067

Pound Foolish: Exposing the Dark Side of the Personal Finance Industry by Helaine Olen

Alan Greenspan, American ideology, asset allocation, Bear Stearns, behavioural economics, Bernie Madoff, buy and hold, Cass Sunstein, Credit Default Swap, David Brooks, delayed gratification, diversification, diversified portfolio, Donald Trump, Elliott wave, en.wikipedia.org, estate planning, financial engineering, financial innovation, Flash crash, game design, greed is good, high net worth, impulse control, income inequality, index fund, John Bogle, Kevin Roose, London Whale, longitudinal study, low interest rates, Mark Zuckerberg, Mary Meeker, money market fund, mortgage debt, multilevel marketing, oil shock, payday loans, pension reform, Ponzi scheme, post-work, prosperity theology / prosperity gospel / gospel of success, quantitative easing, Ralph Nader, RAND corporation, random walk, Richard Thaler, Ronald Reagan, Saturday Night Live, Stanford marshmallow experiment, stocks for the long run, The 4% rule, too big to fail, transaction costs, Unsafe at Any Speed, upwardly mobile, Vanguard fund, wage slave, women in the workforce, working poor, éminence grise

But there were more differences between the two investments than the simple separation by a decade, and it was this: by the mid-2000s Dent had turned to doom. He predicted a borderline economic depression by 2010. His take was based not on a deep knowledge of the mortgage market or the consequences of overleveraged, too-big-to-fail banks, but instead on the last of the baby boomers passing out of their free-spending forties and into their more frugal fifties. The generation that gave us the summer of love would now give us the winter of restraint, as they pulled back on their spending, sending the Dow as low as 3,500. When I caught up with Dent in a coffee shop located around the corner from Bloomberg’s New York headquarters in the fall of 2011, he was juggling multiple promotional appearances tied to his just-published book The Great Crash Ahead.


pages: 389 words: 108,344

Kill Chain: The Rise of the High-Tech Assassins by Andrew Cockburn

airport security, anti-communist, Bletchley Park, drone strike, Edward Snowden, friendly fire, Google Earth, license plate recognition, military-industrial complex, no-fly zone, RAND corporation, risk/return, Ronald Reagan, Seymour Hersh, Silicon Valley, South China Sea, Suez crisis 1956, TED Talk, Teledyne, too big to fail, vertical integration, WikiLeaks

Sheepishly, Hagel conceded that the decision was a “close call,” given previous strenuous efforts to kill the huge drone. His feeble justification was that with its “greater range and endurance,” the Global Hawk makes a better high-altitude reconnaissance platform “for the future.” Northrop Grumman is one of the “primes,” the too-big-to-fail contractors formed by merger and acquisition under Defense Secretary William Perry’s auspices in the 1990s. Thanks to its deep coffers and a manufacturing base spread across many states and congressional districts along with those of its suppliers, the corporation’s programs were always likely to survive the harshest budget cuts or the most damning evidence of technical incompetence.


pages: 335 words: 104,850

Conscious Capitalism, With a New Preface by the Authors: Liberating the Heroic Spirit of Business by John Mackey, Rajendra Sisodia, Bill George

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, Abraham Maslow, Bear Stearns, benefit corporation, Berlin Wall, Buckminster Fuller, business process, carbon footprint, collective bargaining, corporate governance, corporate social responsibility, creative destruction, crony capitalism, cross-subsidies, do well by doing good, en.wikipedia.org, Everything should be made as simple as possible, Fall of the Berlin Wall, fear of failure, Flynn Effect, income per capita, invisible hand, Jeff Bezos, job satisfaction, John Elkington, lone genius, low interest rates, Mahatma Gandhi, microcredit, Nelson Mandela, Occupy movement, profit maximization, Ralph Waldo Emerson, shareholder value, six sigma, social intelligence, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, Steven Pinker, systems thinking, The Fortune at the Bottom of the Pyramid, The Wealth of Nations by Adam Smith, too big to fail, union organizing, wealth creators, women in the workforce, zero-sum game

Regrettably, this has tainted people’s views of all of business and all of capitalism. It sometimes seems that the values and philosophy of Wall Street has become a type of cancer that is corrupting the healthier parts of the larger business system. The economic meltdown in 2008 resulted in unprecedented governmental bailouts of those in the financial sector deemed “too big to fail.” Not only did hundreds of billions of tax-payer dollars go to bail out profligate Wall Street banks and government-sponsored enterprises such as Fannie Mae and Freddie Mac, but the Federal Reserve has maintained artificially low interest rates for several years now that enable these same financial institutions to make very high and virtually risk-free profits on the interest rate spreads—a prime example of crony capitalism run amok.1 Treating Investors Responsibly and Consciously Having been entrusted with the capital of investors, businesses have an ethical and fiduciary responsibility to make money for them.


pages: 385 words: 101,761

Creative Intelligence: Harnessing the Power to Create, Connect, and Inspire by Bruce Nussbaum

"World Economic Forum" Davos, 3D printing, Airbnb, Albert Einstein, Berlin Wall, Black Swan, Chuck Templeton: OpenTable:, clean water, collapse of Lehman Brothers, creative destruction, Credit Default Swap, crony capitalism, crowdsourcing, Danny Hillis, declining real wages, demographic dividend, disruptive innovation, Elon Musk, en.wikipedia.org, Eugene Fama: efficient market hypothesis, fail fast, Fall of the Berlin Wall, follow your passion, game design, gamification, gentrification, housing crisis, Hyman Minsky, industrial robot, invisible hand, James Dyson, Jane Jacobs, Jeff Bezos, jimmy wales, John Gruber, John Markoff, Joseph Schumpeter, Kevin Roose, Kickstarter, Larry Ellison, lone genius, longitudinal study, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Martin Wolf, Max Levchin, Minsky moment, new economy, Paul Graham, Peter Thiel, QR code, race to the bottom, reality distortion field, reshoring, Richard Florida, Ronald Reagan, shareholder value, Sheryl Sandberg, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, SimCity, six sigma, Skype, SoftBank, Steve Ballmer, Steve Jobs, Steve Wozniak, supply-chain management, Tesla Model S, The Chicago School, The Design of Experiments, the High Line, The Myth of the Rational Market, thinkpad, TikTok, Tim Cook: Apple, too big to fail, tulip mania, Tyler Cowen, We are the 99%, Y Combinator, young professional, Zipcar

On July 25, 2012, Weill said on CNBC that regulation was needed again for banking and that Glass-Steagall should be put back into place. “What we should probably do is go and split up investment banking from banking,” he said. “Have banks do something that’s not going to risk the taxpayer dollars, that’s not going to be too big to fail.” Not only was the outcome bad for Citi’s shareholders, it was bad for the entire nation. While economists and policy makers engage in discussions about the failure of the efficient market theory in finance, little is being said about the impact the model continues to have on the business world.


Discover Greece Travel Guide by Lonely Planet

car-free, carbon footprint, credit crunch, G4S, haute couture, haute cuisine, low cost airline, pension reform, sensible shoes, too big to fail, trade route, urban renewal

Panellinion’s varied choices include a world of ouzos and cheeses to delicious seafood mezedhes; only organic vegetables are used. Drinking SPITI MOU Bar Offline map Google map (cnr Egnatia & Leontos Sofou 26; 1pm-late; ) A new bar upstairs in a lofty old building in the Syngrou/Valaoritou district, ‘My House’ (as the name means in Greek) was opened after its young owners realised their parties were becoming too big to fail. The ambient music, well-worn decor and big couches spread across a chequered floor all add character. There’s live music on Sundays, occasional costume parties, and yes, even wi-fi. The entrance is unmarked, but is the doorway closest to Egnatia on Leontos Sofou. BEERSTORE Bar Offline map Google map ( 2310 233 438; www.beer.gr; Kalapothaki 6; noon-2am) A spiffy corner shop that doubles as a well-lit, stand-up bar for beer connoisseurs, the Beerstore sells brews from everywhere from Crete to California (with Belgium and Central Europe especially well represented).


pages: 344 words: 104,522

Woke, Inc: Inside Corporate America's Social Justice Scam by Vivek Ramaswamy

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 2021 United States Capitol attack, activist fund / activist shareholder / activist investor, affirmative action, Airbnb, Amazon Web Services, An Inconvenient Truth, anti-bias training, Bernie Sanders, Big Tech, BIPOC, Black Lives Matter, carbon footprint, clean tech, cloud computing, contact tracing, coronavirus, corporate governance, corporate social responsibility, COVID-19, critical race theory, crony capitalism, cryptocurrency, defund the police, deplatforming, desegregation, disinformation, don't be evil, Donald Trump, en.wikipedia.org, Eugene Fama: efficient market hypothesis, fudge factor, full employment, George Floyd, glass ceiling, global pandemic, green new deal, hiring and firing, Hyperloop, impact investing, independent contractor, index fund, Jeff Bezos, lockdown, Marc Benioff, Mark Zuckerberg, microaggression, military-industrial complex, Network effects, Parler "social media", plant based meat, Ponzi scheme, profit maximization, random walk, ride hailing / ride sharing, risk-adjusted returns, Robert Bork, Robinhood: mobile stock trading app, Ronald Reagan, Salesforce, self-driving car, shareholder value, short selling, short squeeze, Silicon Valley, Silicon Valley billionaire, Silicon Valley ideology, single source of truth, Snapchat, social distancing, Social Responsibility of Business Is to Increase Its Profits, source of truth, sovereign wealth fund, Susan Wojcicki, the scientific method, Tim Cook: Apple, too big to fail, trade route, transcontinental railway, traveling salesman, trickle-down economics, Vanguard fund, Virgin Galactic, WeWork, zero-sum game

No one in America really debated finding a suitable partner for capitalism; part of the whole point of shareholder capitalism was that it was meant to exist on its own, with its own goals. American capitalism was independent. It didn’t need a spouse. But the 2008 financial crisis marked a critical turning point in public attitudes toward classical capitalism. The big banks controlled so much power in the financial market that they were deemed by the US government “too big to fail”—requiring a taxpayer-funded bailout of Wall Street itself. US Treasury Secretary Hank Paulson, who was CEO of Goldman Sachs before assuming his cabinet post, picked favorites. Shamefully, he chose to bail out Goldman Sachs, his alma mater, while letting certain of his less favorite rivals like Lehman Brothers go bankrupt without any assistance.


pages: 382 words: 105,657

Flying Blind: The 737 MAX Tragedy and the Fall of Boeing by Peter Robison

"Friedman doctrine" OR "shareholder theory", air traffic controllers' union, Airbnb, Airbus A320, airline deregulation, airport security, Alvin Toffler, Boeing 737 MAX, Boeing 747, call centre, chief data officer, contact tracing, coronavirus, corporate governance, COVID-19, Donald Trump, flag carrier, Future Shock, interest rate swap, Internet Archive, knowledge worker, lockdown, low cost airline, low interest rates, medical residency, Neil Armstrong, performance metric, Ralph Nader, RAND corporation, Robert Mercer, Ronald Reagan, shareholder value, Silicon Valley, Silicon Valley startup, single-payer health, Social Responsibility of Business Is to Increase Its Profits, stock buybacks, too big to fail, Unsafe at Any Speed, vertical integration, éminence grise

Boeing was no longer a corporate pariah whose mismanagement had contributed to a catastrophic loss of life; it was an endangered American manufacturer working to secure the livelihoods of tens of thousands of employees in the midst of a national emergency. “We can’t lose Boeing,” President Trump said. The company ultimately managed to avoid a bailout by raising $25 billion in debt in April from private lenders, who clearly viewed the last U.S. builder of commercial jets and number two defense contractor the same way as the president did: too big to fail. At the same time, Boeing benefited from the tens of billions of dollars in aid that Congress authorized to fund the payrolls of some of its largest customers, the U.S. airlines. The air force, Boeing’s ever-loyal supporter, quietly found another way to assist: in April, it agreed to release $882 million in funds that had been withheld for technical deficiencies on thirty-three KC-46 tanker planes, problems severe enough that software, cameras, and computers needed to be completely redesigned.


pages: 729 words: 111,640

The Lighthouse of Stalingrad: The Hidden Truth at the Centre of WWII's Greatest Battle by Iain MacGregor

Berlin Wall, Bletchley Park, centre right, clean water, Fall of the Berlin Wall, friendly fire, too big to fail

For me, Pavlov’s House represents a moment where the imagined storyline was deemed more important than the actual truth, in order to shore up a nation and a battered army’s morale at a critical time in the Second World War on the Eastern Front. It served a purpose, but then in the Communist era became a story too big to fail. One cannot simply construct a legend to then tear it down. All the men who fought there and those who served with the 42nd Regiment, 13th Guards, who populate this story, are heroes. Junior Sergeant Pavlov included. But he is not the only hero. There is now even a campaign underway to have the building renamed to “Afanasiev’s House.”


pages: 1,042 words: 273,092

The Silk Roads: A New History of the World by Peter Frankopan

access to a mobile phone, Admiral Zheng, anti-communist, Ayatollah Khomeini, banking crisis, Bartolomé de las Casas, Berlin Wall, bread and circuses, British Empire, clean water, Columbian Exchange, credit crunch, cuban missile crisis, Deng Xiaoping, discovery of the americas, disinformation, drone strike, dual-use technology, energy security, European colonialism, failed state, financial innovation, Isaac Newton, land reform, Mahatma Gandhi, Malacca Straits, mass immigration, Mikhail Gorbachev, Murano, Venice glass, New Urbanism, no-fly zone, Ronald Reagan, sexual politics, South China Sea, spice trade, statistical model, Stuxnet, Suez crisis 1956, the built environment, the market place, The Wealth of Nations by Adam Smith, too big to fail, trade route, transcontinental railway, uranium enrichment, wealth creators, WikiLeaks, yield management, Yom Kippur War

This prompted a run on the shares of the EIC and pushed the Company to the brink of bankruptcy.60 Far from its directors being superhuman administrators and wealth-creators, it turned out that the practices and culture of the Company had brought the intercontinental financial system to its knees. * * * After desperate consultation, the government in London concluded that the EIC was too big to fail and agreed a bail-out. To fund this, however, cash had to be raised. Eyes turned to the colonies in North America, where taxes were substantially lower than in Britain itself. When Lord North’s government passed the Tea Act in 1773, it thought it had found an elegant solution to pay for the EIC rescue, while also bringing at least part of the tax regime of the American colonies closer into line with Britain’s.

It was true that considerable financial risks had been taken to open up the oil business in the first place, and that it had required hefty investment to create an infrastructure that enabled resources to be exploited. Nevertheless, the riches that were unlocked as a result were huge. The clamour to share these more evenly was simply ignored; in the manner of the great banking scandals of the early twenty-first century, Anglo-Persian and the interests that sat behind it were too big to fail. In this case, however, the process of equalising the situation and putting things right was a quick one – largely because Persia had the potent negotiating tool of being able to harass, prevent and hinder production to force a renegotiation. In the spring of 1933, a new deal was hammered out.


pages: 403 words: 111,119

Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist by Kate Raworth

"Friedman doctrine" OR "shareholder theory", 3D printing, Alan Greenspan, Alvin Toffler, Anthropocene, Asian financial crisis, bank run, basic income, battle of ideas, behavioural economics, benefit corporation, Berlin Wall, biodiversity loss, bitcoin, blockchain, Branko Milanovic, Bretton Woods, Buckminster Fuller, business cycle, call centre, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Cass Sunstein, choice architecture, circular economy, clean water, cognitive bias, collapse of Lehman Brothers, complexity theory, creative destruction, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, degrowth, dematerialisation, disruptive innovation, Douglas Engelbart, Douglas Engelbart, Easter island, en.wikipedia.org, energy transition, Erik Brynjolfsson, Ethereum, ethereum blockchain, Eugene Fama: efficient market hypothesis, experimental economics, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, Financial Instability Hypothesis, full employment, Future Shock, Garrett Hardin, Glass-Steagall Act, global supply chain, global village, Henri Poincaré, hiring and firing, Howard Zinn, Hyman Minsky, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of writing, invisible hand, Isaac Newton, it is difficult to get a man to understand something, when his salary depends on his not understanding it, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kickstarter, land reform, land value tax, Landlord’s Game, loss aversion, low interest rates, low skilled workers, M-Pesa, Mahatma Gandhi, market fundamentalism, Martin Wolf, means of production, megacity, Minsky moment, mobile money, Money creation, Mont Pelerin Society, Myron Scholes, neoliberal agenda, Network effects, Occupy movement, ocean acidification, off grid, offshore financial centre, oil shale / tar sands, out of africa, Paul Samuelson, peer-to-peer, planetary scale, price mechanism, quantitative easing, randomized controlled trial, retail therapy, Richard Thaler, Robert Solow, Ronald Reagan, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Simon Kuznets, smart cities, smart meter, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, statistical model, Steve Ballmer, systems thinking, TED Talk, The Chicago School, The Great Moderation, the map is not the territory, the market place, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, Torches of Freedom, Tragedy of the Commons, trickle-down economics, ultimatum game, universal basic income, Upton Sinclair, Vilfredo Pareto, wikimedia commons

If large-scale actors dominate an economic network by squeezing out the number and diversity of small and medium players, the result will be a highly unequal and brittle economy. This certainly sounds familiar, given the current scale of corporate concentration across many industrial sectors, from agribusiness, pharmaceuticals and the media to the banks that are deemed too big to fail. As Goerner and colleagues point out, the fragility generated by such concentration is reviving appreciation for the small, diverse enterprises that make up the bulk of an economy’s network. ‘Because we have over-emphasized large-scale organisations, the best way to restore robustness today would be to revitalize our small-scale fair-enterprise root system,’ they conclude.


pages: 367 words: 117,340

America, You Sexy Bitch: A Love Letter to Freedom by Meghan McCain, Michael Black

"Hurricane Katrina" Superdome, Affordable Care Act / Obamacare, An Inconvenient Truth, carbon footprint, Columbine, fear of failure, feminist movement, gentrification, glass ceiling, Glass-Steagall Act, income inequality, independent contractor, obamacare, Ronald Reagan, Silicon Valley, Timothy McVeigh, Tony Hsieh, too big to fail, white picket fence

When small companies and businesses in America fail, they go bankrupt. Sometimes they reemerge as leaner and more capable companies. Sometimes they do not, but that’s capitalism: what this country is founded on. I believe in capitalism. I believe in a free market system. Things in America should never be too big to fail. We should not be afraid of letting bad products fail, in order to let companies come back stronger and more innovative as a result. The argument President Obama and liberal Democrats give for the bailouts is that if we had let the auto companies go bankrupt, we would have lost that industry.


pages: 374 words: 114,600

The Quants by Scott Patterson

Alan Greenspan, Albert Einstein, AOL-Time Warner, asset allocation, automated trading system, Bear Stearns, beat the dealer, Benoit Mandelbrot, Bernie Madoff, Bernie Sanders, Black Monday: stock market crash in 1987, Black Swan, Black-Scholes formula, Blythe Masters, Bonfire of the Vanities, book value, Brownian motion, buttonwood tree, buy and hold, buy low sell high, capital asset pricing model, Carl Icahn, centralized clearinghouse, Claude Shannon: information theory, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computerized trading, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, Doomsday Clock, Dr. Strangelove, Edward Thorp, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial engineering, Financial Modelers Manifesto, fixed income, Glass-Steagall Act, global macro, Gordon Gekko, greed is good, Haight Ashbury, I will remember that I didn’t make the world, and it doesn’t satisfy my equations, index fund, invention of the telegraph, invisible hand, Isaac Newton, Jim Simons, job automation, John Meriwether, John Nash: game theory, junk bonds, Kickstarter, law of one price, Long Term Capital Management, Louis Bachelier, low interest rates, mandelbrot fractal, margin call, Mark Spitznagel, merger arbitrage, Michael Milken, military-industrial complex, money market fund, Myron Scholes, NetJets, new economy, offshore financial centre, old-boy network, Paul Lévy, Paul Samuelson, Ponzi scheme, proprietary trading, quantitative hedge fund, quantitative trading / quantitative finance, race to the bottom, random walk, Renaissance Technologies, risk-adjusted returns, Robert Mercer, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Savings and loan crisis, Sergey Aleynikov, short selling, short squeeze, South Sea Bubble, speech recognition, statistical arbitrage, The Chicago School, The Great Moderation, The Predators' Ball, too big to fail, transaction costs, value at risk, volatility smile, yield curve, éminence grise

“To ask us to disclose our positions to the open market would parallel asking Coca-Cola to disclose their secret formula to the world.” Despite Griffin’s warnings, Congress seemed to be heading toward greater oversight of hedge funds, which it saw as part of a shadow banking system that had caused the financial collapse. “When hedge funds become too big to fail, that poses a problem for the financial system,” MIT’s Andrew Lo, he of the Doomsday Clock, told the Wall Street Journal. Citadel didn’t fail, though it came dangerously close. Griffin, who’d once nurtured grand ambitions of a financial empire that could match the mightiest powerhouses of Wall Street, had been humbled.


pages: 390 words: 119,527

Armed Humanitarians by Nathan Hodge

Andrei Shleifer, anti-communist, Berlin Wall, British Empire, clean water, colonial rule, European colonialism, failed state, friendly fire, Golden arches theory, IFF: identification friend or foe, jobless men, Khyber Pass, kremlinology, land reform, Mikhail Gorbachev, no-fly zone, off-the-grid, old-boy network, operational security, Potemkin village, private military company, profit motive, RAND corporation, Ronald Reagan, satellite internet, Silicon Valley, South China Sea, Suez crisis 1956, The Wealth of Nations by Adam Smith, too big to fail, walking around money

This relentless focus on fixing two failed states also meant we were less prepared to handle another foreign policy crisis elsewhere on the globe: an outbreak of war on the Korean peninsula, a nuclear confrontation between India and Pakistan, a localized conflict in Central Asia that threatens to become a regional conflagration. That was the fatal flaw in the whole enterprise. The nation-building missions in Iraq and Afghanistan were too big to fail. Both involvements became so large and so costly that they edged out all other priorities in national security. The cost of keeping a large troop contingent in Afghanistan was the perfect case in point: The mountainous, landlocked country is at the end of a long and difficult supply route. It has no ports, abysmal infrastructure, and difficult neighbors.


pages: 457 words: 112,439

Zero History by William Gibson

augmented reality, business intelligence, dark matter, edge city, hive mind, invisible hand, messenger bag, new economy, pattern recognition, Pepto Bismol, placebo effect, Ponzi scheme, RFID, too big to fail

Huge ones, I hope. I’m more worried about your Big End in the long run, myself.” “Why?” “Something’s happening there. Too big to get a handle on. But the old man says that that’s it exactly: Big End, somehow, is now too big to get a handle on. Which may be what they mean when they say something’s too big to fail.” “He’s found Meredith’s last season of shoes. Tacoma. Bought them, given them to her. Via some weird new entity of his that targets and assists creatives.” “I’d watch the ‘targets,’ myself.” “And he’s paid me. My accountant phoned this morning. I’m worried about that.” “Why?” “Hubertus paid me exactly the amount I received for my share of licensing a Curfew song to a Chinese car company.


pages: 453 words: 117,893

What Would the Great Economists Do?: How Twelve Brilliant Minds Would Solve Today's Biggest Problems by Linda Yueh

3D printing, additive manufacturing, Asian financial crisis, augmented reality, bank run, banking crisis, basic income, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bike sharing, bitcoin, Branko Milanovic, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, clean water, collective bargaining, computer age, Corn Laws, creative destruction, credit crunch, Credit Default Swap, cryptocurrency, currency peg, dark matter, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, endogenous growth, everywhere but in the productivity statistics, export processing zone, Fall of the Berlin Wall, fear of failure, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, fixed income, forward guidance, full employment, general purpose technology, Gini coefficient, Glass-Steagall Act, global supply chain, Great Leap Forward, Gunnar Myrdal, Hyman Minsky, income inequality, index card, indoor plumbing, industrial robot, information asymmetry, intangible asset, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, laissez-faire capitalism, land reform, lateral thinking, life extension, low interest rates, low-wage service sector, manufacturing employment, market bubble, means of production, middle-income trap, mittelstand, Money creation, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, Nelson Mandela, non-tariff barriers, Northern Rock, Occupy movement, oil shale / tar sands, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, Productivity paradox, purchasing power parity, quantitative easing, RAND corporation, rent control, rent-seeking, reserve currency, reshoring, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, school vouchers, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, special economic zone, Steve Jobs, technological determinism, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, total factor productivity, trade liberalization, universal basic income, unorthodox policies, Washington Consensus, We are the 99%, women in the workforce, working-age population

He might have viewed the targeted interventions made by the Fed, i.e. to save Bear Stearns and AIG but allow Lehman Brothers to go under, as undermining its independence and credibility and getting involved in specific cases. However, the world in 2008 was different from 1929. There were now players in the financial sector that were literally too big to fail, in the sense that they might bring down the entire system with them. This was not such a problem in the Great Depression, when the systemic risks of any specific bank failure were quite low. With this in mind, Friedman might have grudgingly accepted Bernanke’s approach as the best way forward.


pages: 374 words: 113,126

The Great Economists: How Their Ideas Can Help Us Today by Linda Yueh

3D printing, additive manufacturing, Asian financial crisis, augmented reality, bank run, banking crisis, basic income, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bike sharing, bitcoin, Branko Milanovic, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, clean water, collective bargaining, computer age, Corn Laws, creative destruction, credit crunch, Credit Default Swap, cryptocurrency, currency peg, dark matter, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, endogenous growth, everywhere but in the productivity statistics, export processing zone, Fall of the Berlin Wall, fear of failure, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, fixed income, forward guidance, full employment, general purpose technology, Gini coefficient, Glass-Steagall Act, global supply chain, Great Leap Forward, Gunnar Myrdal, Hyman Minsky, income inequality, index card, indoor plumbing, industrial robot, information asymmetry, intangible asset, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, laissez-faire capitalism, land reform, lateral thinking, life extension, low interest rates, manufacturing employment, market bubble, means of production, middle-income trap, mittelstand, Money creation, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, Nelson Mandela, non-tariff barriers, Northern Rock, Occupy movement, oil shale / tar sands, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, Productivity paradox, purchasing power parity, quantitative easing, RAND corporation, rent control, rent-seeking, reserve currency, reshoring, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, school vouchers, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, special economic zone, Steve Jobs, technological determinism, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, total factor productivity, trade liberalization, universal basic income, unorthodox policies, Washington Consensus, We are the 99%, women in the workforce, working-age population

He might have viewed the targeted interventions made by the Fed, i.e. to save Bear Stearns and AIG but allow Lehman Brothers to go under, as undermining its independence and credibility and getting involved in specific cases. However, the world in 2008 was different from 1929. There were now players in the financial sector that were literally too big to fail, in the sense that they might bring down the entire system with them. This was not such a problem in the Great Depression, when the systemic risks of any specific bank failure were quite low. With this in mind, Friedman might have grudgingly accepted Bernanke’s approach as the best way forward.


pages: 394 words: 117,982

The Perfect Weapon: War, Sabotage, and Fear in the Cyber Age by David E. Sanger

active measures, air gap, autonomous vehicles, Bernie Sanders, Big Tech, bitcoin, Black Lives Matter, Bletchley Park, British Empire, call centre, Cambridge Analytica, Cass Sunstein, Chelsea Manning, computer age, cryptocurrency, cuban missile crisis, disinformation, Donald Trump, drone strike, Edward Snowden, fake news, Google Chrome, Google Earth, information security, Jacob Appelbaum, John Markoff, Kevin Roose, Laura Poitras, Mark Zuckerberg, MITM: man-in-the-middle, mutually assured destruction, off-the-grid, RAND corporation, ransomware, Sand Hill Road, Sheryl Sandberg, Silicon Valley, Silicon Valley ideology, Skype, South China Sea, Steve Bannon, Steve Jobs, Steven Levy, Stuxnet, Tim Cook: Apple, too big to fail, Twitter Arab Spring, undersea cable, unit 8200, uranium enrichment, Valery Gerasimov, WikiLeaks, zero day

With the subsequent arrest of another of his employees, the company’s stock took a brief plunge on the expectation that the firm was in trouble. Then the stock bounced back to all-time highs as investors poured their money into a sure bet to profit from the newest arms race. Just as some companies in America proved too big to fail, some contractors were simply too important to ditch. * * * — For months, Snowden’s disclosures roiled Washington. Unlike the CIA, the NSA had never been plagued with insiders or double agents. There was both real outrage and faux outrage about the kind of data the NSA was retaining—but insisted it was rarely looking at—about American citizens.


pages: 374 words: 114,660

The Great Escape: Health, Wealth, and the Origins of Inequality by Angus Deaton

Admiral Zheng, agricultural Revolution, Branko Milanovic, BRICs, British Empire, call centre, carbon tax, clean water, colonial exploitation, Columbian Exchange, compensation consultant, creative destruction, declining real wages, Downton Abbey, Easter island, Edward Jenner, end world poverty, financial engineering, financial innovation, Ford Model T, germ theory of disease, Gini coefficient, Glass-Steagall Act, Great Leap Forward, illegal immigration, income inequality, invention of agriculture, invisible hand, John Snow's cholera map, knowledge economy, Louis Pasteur, low skilled workers, new economy, off-the-grid, Paul Volcker talking about ATMs, purchasing power parity, randomized controlled trial, rent-seeking, rising living standards, Robert Solow, Ronald Reagan, Simon Kuznets, Steve Jobs, Steven Pinker, structural adjustment programs, The Spirit Level, too big to fail, trade route, Tragedy of the Commons, very high income, War on Poverty, zoonotic diseases

At the same time, the social norms that led to sharply progressive taxation and equalization after World War II had largely been eroded by the end of the century, and very large incomes have become more socially acceptable than would have been the case fifty years ago. Government has also helped in promoting the rapid increases in top incomes. The “too big to fail” promise and the hundreds of millions in earnings that it allowed was a failure of government regulation. The economists Thomas Philippon and Ariell Reshef have shown how compensation in the financial sector, which was high in the 1920s, fell in the wake of post–Depression era regulation, and then rose again, especially after 1980.31 They show that changes in four kinds of financial regulation and deregulation—allowing banks to have multiple branches, the separation of commercial and investment banks, interest rate ceilings, and the separation of banks and insurance companies—can together match the patterns of compensation in the financial sector.


pages: 410 words: 114,005

Black Box Thinking: Why Most People Never Learn From Their Mistakes--But Some Do by Matthew Syed

Abraham Wald, Airbus A320, Alfred Russel Wallace, Arthur Eddington, Atul Gawande, Black Swan, Boeing 747, British Empire, call centre, Captain Sullenberger Hudson, Checklist Manifesto, cognitive bias, cognitive dissonance, conceptual framework, corporate governance, creative destruction, credit crunch, crew resource management, deliberate practice, double helix, epigenetics, fail fast, fear of failure, flying shuttle, fundamental attribution error, Great Leap Forward, Gregor Mendel, Henri Poincaré, hindsight bias, Isaac Newton, iterative process, James Dyson, James Hargreaves, James Watt: steam engine, Johannes Kepler, Joseph Schumpeter, Kickstarter, Lean Startup, luminiferous ether, mandatory minimum, meta-analysis, minimum viable product, publication bias, quantitative easing, randomized controlled trial, selection bias, seminal paper, Shai Danziger, Silicon Valley, six sigma, spinning jenny, Steve Jobs, the scientific method, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Toyota Production System, US Airways Flight 1549, Wall-E, Yom Kippur War

In a roughly similar way, accidents in aviation, while tragic for the passengers on the fatal flights, bolster the safety of future flights. The failure sets the stage for meaningful change. That is not to say that markets are perfect. There are problems of monopoly, collusion, inequality, price-fixing, and companies that are too big to fail and therefore protected by a taxpayer guarantee. All these things militate against the adaptive process. But the underlying point remains: markets work not in spite of the many business failures that occur, but because of them. It is not just systems that can benefit from a process of testing and learning; so, too, can organizations.


pages: 399 words: 114,787

Dark Towers: Deutsche Bank, Donald Trump, and an Epic Trail of Destruction by David Enrich

"World Economic Forum" Davos, Affordable Care Act / Obamacare, Alan Greenspan, anti-globalists, Asian financial crisis, banking crisis, Bear Stearns, Berlin Wall, buy low sell high, collateralized debt obligation, commoditize, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, Donald Trump, East Village, estate planning, Fall of the Berlin Wall, financial innovation, forensic accounting, high net worth, housing crisis, interest rate derivative, interest rate swap, Jeffrey Epstein, junk bonds, London Interbank Offered Rate, low interest rates, Lyft, Mikhail Gorbachev, NetJets, obamacare, offshore financial centre, post-materialism, proprietary trading, Quicken Loans, Ralph Waldo Emerson, Renaissance Technologies, risk tolerance, Robert Mercer, rolodex, SoftBank, sovereign wealth fund, Steve Bannon, too big to fail, transcontinental railway, Vision Fund, yield curve

That strategy worked for a year or two, and then in 1997 a crisis emanating from Asia bulldozed the markets that Bankers Trust had just entered. By the fall of 1998, Bankers Trust was the eighth-largest U.S. bank, with $133 billion in assets and more than 20,000 employees in dozens of countries, and it was falling apart. Bankers Trust was the very embodiment of a “too big to fail” institution. Worried officials at the Federal Reserve, charged with safeguarding the American financial system, knew that Deutsche had been sniffing around for a big U.S. acquisition. If the Fed could get the Germans to take Bankers Trust off their hands, well, it wouldn’t be an American problem anymore—or so the central bankers figured.


pages: 450 words: 113,173

The Age of Entitlement: America Since the Sixties by Christopher Caldwell

1960s counterculture, affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, Alvin Toffler, anti-communist, behavioural economics, Bernie Sanders, big data - Walmart - Pop Tarts, Black Lives Matter, blue-collar work, Cass Sunstein, choice architecture, classic study, computer age, crack epidemic, critical race theory, crony capitalism, Daniel Kahneman / Amos Tversky, David Attenborough, desegregation, disintermediation, disruptive innovation, Edward Snowden, Erik Brynjolfsson, Ferguson, Missouri, financial deregulation, financial innovation, Firefox, full employment, Future Shock, George Gilder, global value chain, Home mortgage interest deduction, illegal immigration, immigration reform, informal economy, James Bridle, Jeff Bezos, John Markoff, junk bonds, Kevin Kelly, Lewis Mumford, libertarian paternalism, Mark Zuckerberg, Martin Wolf, mass immigration, mass incarceration, messenger bag, mortgage tax deduction, Nate Silver, new economy, Norman Mailer, Northpointe / Correctional Offender Management Profiling for Alternative Sanctions, open immigration, opioid epidemic / opioid crisis, post-industrial society, pre–internet, profit motive, public intellectual, reserve currency, Richard Thaler, Robert Bork, Robert Gordon, Robert Metcalfe, Ronald Reagan, Rosa Parks, Silicon Valley, Skype, South China Sea, Steve Jobs, tech billionaire, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, too big to fail, transatlantic slave trade, transcontinental railway, W. E. B. Du Bois, War on Poverty, Whole Earth Catalog, zero-sum game

With the impeachment of Nixon, promoters of the Great Society had bought the time necessary to defend it against “backlash,” as democratic opposition to social change was coming to be called. In the near-decade that elapsed between Nixon and Reagan, entire subpopulations had become dependent on the Great Society. Those programs were now too big to fail. They were, as we have said, gigantic. Once debt was used as a means to keep the social peace, it would quickly run into the trillions. One of Johnson’s lower-profile initiatives from 1965, the Higher Education Act, created the so-called Pell Grants to help “underprivileged” youth go to college.


pages: 386 words: 113,709

Why We Drive: Toward a Philosophy of the Open Road by Matthew B. Crawford

1960s counterculture, Airbus A320, airport security, augmented reality, autonomous vehicles, behavioural economics, Bernie Sanders, Big Tech, Boeing 737 MAX, British Empire, Burning Man, business logic, call centre, classic study, collective bargaining, confounding variable, congestion pricing, crony capitalism, data science, David Sedaris, deskilling, digital map, don't be evil, Donald Trump, driverless car, Elon Musk, emotional labour, en.wikipedia.org, Fellow of the Royal Society, Ford Model T, gamification, gentrification, gig economy, Google Earth, Great Leap Forward, Herbert Marcuse, hive mind, Ian Bogost, income inequality, informal economy, Internet of things, Jane Jacobs, labour mobility, Lyft, mirror neurons, Network effects, New Journalism, New Urbanism, Nicholas Carr, planned obsolescence, Ponzi scheme, precautionary principle, Ralph Nader, ride hailing / ride sharing, Ronald Reagan, Sam Peltzman, security theater, self-driving car, sharing economy, Shoshana Zuboff, Silicon Valley, smart cities, social graph, social intelligence, Stephen Hawking, surveillance capitalism, tacit knowledge, tech worker, technoutopianism, the built environment, The Death and Life of Great American Cities, the High Line, time dilation, too big to fail, traffic fines, Travis Kalanick, trolley problem, Uber and Lyft, Uber for X, uber lyft, Unsafe at Any Speed, urban planning, Wall-E, Works Progress Administration

The statistic that came to be repeated was that 50 percent of automotive emissions could be attributed to the oldest 10 percent of cars on the road. This would later be characterized as an “urban legend” by an official of the California Air Resources Board. But by then it was one of those fact-like things, with a successful career and a constituency, that was too big to fail.11 It is true that by 1980, when the mobile-source provisions of the original 1970 Clean Air Act came into full effect, brand-new cars in the American market had greatly reduced emissions. But those same cars, tested at random roadside checks a few years later, were often found to be badly out of adjustment (or they had damaged catalytic converters), with correspondingly high emissions, while well-maintained older cars could be impressively clean-burning.


pages: 1,172 words: 114,305

New Laws of Robotics: Defending Human Expertise in the Age of AI by Frank Pasquale

affirmative action, Affordable Care Act / Obamacare, Airbnb, algorithmic bias, Amazon Mechanical Turk, Anthropocene, augmented reality, Automated Insights, autonomous vehicles, basic income, battle of ideas, Bernie Sanders, Big Tech, Bill Joy: nanobots, bitcoin, blockchain, Brexit referendum, call centre, Cambridge Analytica, carbon tax, citizen journalism, Clayton Christensen, collective bargaining, commoditize, computer vision, conceptual framework, contact tracing, coronavirus, corporate social responsibility, correlation does not imply causation, COVID-19, critical race theory, cryptocurrency, data is the new oil, data science, decarbonisation, deep learning, deepfake, deskilling, digital divide, digital twin, disinformation, disruptive innovation, don't be evil, Donald Trump, Douglas Engelbart, driverless car, effective altruism, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Evgeny Morozov, fake news, Filter Bubble, finite state, Flash crash, future of work, gamification, general purpose technology, Google Chrome, Google Glasses, Great Leap Forward, green new deal, guns versus butter model, Hans Moravec, high net worth, hiring and firing, holacracy, Ian Bogost, independent contractor, informal economy, information asymmetry, information retrieval, interchangeable parts, invisible hand, James Bridle, Jaron Lanier, job automation, John Markoff, Joi Ito, Khan Academy, knowledge economy, late capitalism, lockdown, machine readable, Marc Andreessen, Mark Zuckerberg, means of production, medical malpractice, megaproject, meta-analysis, military-industrial complex, Modern Monetary Theory, Money creation, move fast and break things, mutually assured destruction, natural language processing, new economy, Nicholas Carr, Nick Bostrom, Norbert Wiener, nuclear winter, obamacare, One Laptop per Child (OLPC), open immigration, OpenAI, opioid epidemic / opioid crisis, paperclip maximiser, paradox of thrift, pattern recognition, payday loans, personalized medicine, Peter Singer: altruism, Philip Mirowski, pink-collar, plutocrats, post-truth, pre–internet, profit motive, public intellectual, QR code, quantitative easing, race to the bottom, RAND corporation, Ray Kurzweil, recommendation engine, regulatory arbitrage, Robert Shiller, Rodney Brooks, Ronald Reagan, self-driving car, sentiment analysis, Shoshana Zuboff, Silicon Valley, Singularitarianism, smart cities, smart contracts, software is eating the world, South China Sea, Steve Bannon, Strategic Defense Initiative, surveillance capitalism, Susan Wojcicki, tacit knowledge, TaskRabbit, technological solutionism, technoutopianism, TED Talk, telepresence, telerobotics, The Future of Employment, The Turner Diaries, Therac-25, Thorstein Veblen, too big to fail, Turing test, universal basic income, unorthodox policies, wage slave, Watson beat the top human players on Jeopardy!, working poor, workplace surveillance , Works Progress Administration, zero day

As Evan Osnos observed in a revealing profile of Mark Zuckerberg, “Between scale and safety, he chose scale.”31 Children, dissidents, content moderators, hacked account holders, and other victims bear the brunt of that decision daily, as they endure the predictable externalities of social network gigantism. While behemoth banks have grown too big to fail, massive technology firms are simply too big to care. The television was once known as the electronic babysitter, entertaining children whose parents were too busy or disadvantaged to provide them with more enriching activities. YouTube serves up millions of variations of cartoons to help a parent or babysitter find, with clinical precision, exactly what will best mesmerize a screaming toddler or bored child.


pages: 573 words: 115,489

Prosperity Without Growth: Foundations for the Economy of Tomorrow by Tim Jackson

"World Economic Forum" Davos, Alan Greenspan, bank run, banking crisis, banks create money, Basel III, basic income, biodiversity loss, bonus culture, Boris Johnson, business cycle, carbon footprint, Carmen Reinhart, Cass Sunstein, choice architecture, circular economy, collapse of Lehman Brothers, creative destruction, credit crunch, Credit Default Swap, critique of consumerism, David Graeber, decarbonisation, degrowth, dematerialisation, en.wikipedia.org, energy security, financial deregulation, Financial Instability Hypothesis, financial intermediation, full employment, Garrett Hardin, Glass-Steagall Act, green new deal, Growth in a Time of Debt, Hans Rosling, Hyman Minsky, impact investing, income inequality, income per capita, intentional community, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invisible hand, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, liberal capitalism, low interest rates, Mahatma Gandhi, mass immigration, means of production, meta-analysis, Money creation, moral hazard, mortgage debt, Murray Bookchin, Naomi Klein, negative emissions, new economy, ocean acidification, offshore financial centre, oil shale / tar sands, open economy, paradox of thrift, peak oil, peer-to-peer lending, Philip Mirowski, Post-Keynesian economics, profit motive, purchasing power parity, quantitative easing, retail therapy, Richard Thaler, road to serfdom, Robert Gordon, Robert Solow, Ronald Reagan, science of happiness, secular stagnation, short selling, Simon Kuznets, Skype, smart grid, sovereign wealth fund, Steve Jobs, TED Talk, The Chicago School, The Great Moderation, The Rise and Fall of American Growth, 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, Tragedy of the Commons, universal basic income, Works Progress Administration, World Values Survey, zero-sum game

As we saw in previous chapters, handing over control of the money supply to private interests has destabilised financial markets and distorted investment markets. But it has also disadvantaged the state in two additional ways. First, ideologically, by forcing them to protect financial institutions that are ‘too big to fail’; and second, financially, by severely curtailing the potential for social investment, in particular when it is most needed, at times of crisis. These critiques of government are potentially paralysing. It’s almost as though the state can do nothing right, when the very idea of governance comes under attack from every side.


pages: 495 words: 114,451

Life on the Rocks: Building a Future for Coral Reefs by Juli Berwald

23andMe, 3D printing, Alfred Russel Wallace, Anthropocene, Black Lives Matter, carbon footprint, Charles Lindbergh, circular economy, clean water, coronavirus, COVID-19, en.wikipedia.org, Fellow of the Royal Society, financial innovation, Garrett Hardin, George Floyd, Google Earth, Gregor Mendel, Greta Thunberg, Intergovernmental Panel on Climate Change (IPCC), lateral thinking, Maui Hawaii, microbiome, mouse model, ocean acidification, Panamax, Paris climate accords, Skype, social distancing, sovereign wealth fund, stem cell, TED Talk, the scientific method, too big to fail, Tragedy of the Commons

Didn’t we realize we could overexploit the oceans? The answer is no. For most of human history, the seas weren’t viewed in the same category as a Hardin-like commons. A long Western cultural tradition held by both the scientific and the fishing communities saw the seas as so rich and boundless they could never be depleted. The seas were too big to fail. But, of course, they did. In the 1930s and 1940s, California’s sardines were the largest fishery in North America, as John Steinbeck documented in the bestseller Cannery Row. But in the 1950s, the sardine catch numbers started dropping. By the 1970s, sardines were so scarce that a moratorium was placed on the fishery.


pages: 356 words: 116,083

For Profit: A History of Corporations by William Magnuson

"Friedman doctrine" OR "shareholder theory", activist fund / activist shareholder / activist investor, Airbnb, bank run, banks create money, barriers to entry, Bear Stearns, Big Tech, Black Lives Matter, blockchain, Bonfire of the Vanities, bread and circuses, buy low sell high, carbon tax, carried interest, collective bargaining, Cornelius Vanderbilt, corporate raider, creative destruction, disinformation, Donald Trump, double entry bookkeeping, Exxon Valdez, fake news, financial engineering, financial innovation, Ford Model T, Ford paid five dollars a day, Frederick Winslow Taylor, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Ida Tarbell, Intergovernmental Panel on Climate Change (IPCC), invisible hand, joint-stock company, joint-stock limited liability company, junk bonds, Mark Zuckerberg, Menlo Park, Michael Milken, move fast and break things, Peter Thiel, power law, price discrimination, profit maximization, profit motive, race to the bottom, Ralph Waldo Emerson, randomized controlled trial, ride hailing / ride sharing, scientific management, Sheryl Sandberg, Silicon Valley, Silicon Valley startup, slashdot, Snapchat, South Sea Bubble, spice trade, Steven Levy, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tim Cook: Apple, too big to fail, trade route, transcontinental railway, union organizing, work culture , Y Combinator, Yom Kippur War, zero-sum game

As Harvard classicist Ernst Badian put it, the companies “were the curse and the scourge of the conquered nations, largely responsible for the detestation of the Roman name among the subjects of Rome, and perhaps even for the downfall of the Roman Republic.” The companies encouraged Rome to launch aggressive wars to conquer new territory (which they could then exploit for profit). They made speculative bets on future prospects that threatened to draw in the fortunes of the republic itself. They grew “too big to fail” and demanded bailouts from the government. They favored the rise of the Triumvirate of Caesar, Pompey, and Crassus that would soon spell the end of the republic and the transition of Rome to an empire. The ancient Roman corporation represented the world’s first attempt to craft a vessel purpose-built for business and commerce, and it worked quite well.


pages: 472 words: 117,093

Machine, Platform, Crowd: Harnessing Our Digital Future by Andrew McAfee, Erik Brynjolfsson

"World Economic Forum" Davos, 3D printing, additive manufacturing, AI winter, Airbnb, airline deregulation, airport security, Albert Einstein, algorithmic bias, AlphaGo, Amazon Mechanical Turk, Amazon Web Services, Andy Rubin, AOL-Time Warner, artificial general intelligence, asset light, augmented reality, autism spectrum disorder, autonomous vehicles, backpropagation, backtesting, barriers to entry, behavioural economics, bitcoin, blockchain, blood diamond, British Empire, business cycle, business process, carbon footprint, Cass Sunstein, centralized clearinghouse, Chris Urmson, cloud computing, cognitive bias, commoditize, complexity theory, computer age, creative destruction, CRISPR, crony capitalism, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, data science, Dean Kamen, deep learning, DeepMind, Demis Hassabis, discovery of DNA, disintermediation, disruptive innovation, distributed ledger, double helix, driverless car, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Ethereum, ethereum blockchain, everywhere but in the productivity statistics, Evgeny Morozov, fake news, family office, fiat currency, financial innovation, general purpose technology, Geoffrey Hinton, George Akerlof, global supply chain, Great Leap Forward, Gregor Mendel, Hernando de Soto, hive mind, independent contractor, information asymmetry, Internet of things, inventory management, iterative process, Jean Tirole, Jeff Bezos, Jim Simons, jimmy wales, John Markoff, joint-stock company, Joseph Schumpeter, Kickstarter, Kiva Systems, law of one price, longitudinal study, low interest rates, Lyft, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, Marc Andreessen, Marc Benioff, Mark Zuckerberg, meta-analysis, Mitch Kapor, moral hazard, multi-sided market, Mustafa Suleyman, Myron Scholes, natural language processing, Network effects, new economy, Norbert Wiener, Oculus Rift, PageRank, pattern recognition, peer-to-peer lending, performance metric, plutocrats, precision agriculture, prediction markets, pre–internet, price stability, principal–agent problem, Project Xanadu, radical decentralization, Ray Kurzweil, Renaissance Technologies, Richard Stallman, ride hailing / ride sharing, risk tolerance, Robert Solow, Ronald Coase, Salesforce, Satoshi Nakamoto, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, slashdot, smart contracts, Snapchat, speech recognition, statistical model, Steve Ballmer, Steve Jobs, Steven Pinker, supply-chain management, synthetic biology, tacit knowledge, TaskRabbit, Ted Nelson, TED Talk, the Cathedral and the Bazaar, The Market for Lemons, The Nature of the Firm, the strength of weak ties, Thomas Davenport, Thomas L Friedman, too big to fail, transaction costs, transportation-network company, traveling salesman, Travis Kalanick, Two Sigma, two-sided market, Tyler Cowen, Uber and Lyft, Uber for X, uber lyft, ubercab, Vitalik Buterin, warehouse robotics, Watson beat the top human players on Jeopardy!, winner-take-all economy, yield management, zero day

And the failure occurred not because of intractable problems with mining or newly discovered vulnerabilities of the cryptocurrency itself, but instead for organizational reasons. As Hearn wrote, It has failed because the community has failed. What was meant to be a new, decentralized form of money that lacked “systemically important institutions” and “too big to fail” has become something even worse: a system completely controlled by just a handful of people. Worse still, the network is on the brink of technical collapse. The mechanisms that should have prevented this outcome have broken down, and as a result there’s no longer much reason to think Bitcoin can actually be better than the existing financial system.


pages: 481 words: 125,946

What to Think About Machines That Think: Today's Leading Thinkers on the Age of Machine Intelligence by John Brockman

Adam Curtis, agricultural Revolution, AI winter, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, algorithmic trading, Anthropocene, artificial general intelligence, augmented reality, autism spectrum disorder, autonomous vehicles, backpropagation, basic income, behavioural economics, bitcoin, blockchain, bread and circuses, Charles Babbage, clean water, cognitive dissonance, Colonization of Mars, complexity theory, computer age, computer vision, constrained optimization, corporate personhood, cosmological principle, cryptocurrency, cuban missile crisis, Danny Hillis, dark matter, data science, deep learning, DeepMind, Demis Hassabis, digital capitalism, digital divide, digital rights, discrete time, Douglas Engelbart, driverless car, Elon Musk, Emanuel Derman, endowment effect, epigenetics, Ernest Rutherford, experimental economics, financial engineering, Flash crash, friendly AI, functional fixedness, global pandemic, Google Glasses, Great Leap Forward, Hans Moravec, hive mind, Ian Bogost, income inequality, information trail, Internet of things, invention of writing, iterative process, James Webb Space Telescope, Jaron Lanier, job automation, Johannes Kepler, John Markoff, John von Neumann, Kevin Kelly, knowledge worker, Large Hadron Collider, lolcat, loose coupling, machine translation, microbiome, mirror neurons, Moneyball by Michael Lewis explains big data, Mustafa Suleyman, natural language processing, Network effects, Nick Bostrom, Norbert Wiener, paperclip maximiser, pattern recognition, Peter Singer: altruism, phenotype, planetary scale, Ray Kurzweil, Recombinant DNA, recommendation engine, Republic of Letters, RFID, Richard Thaler, Rory Sutherland, Satyajit Das, Search for Extraterrestrial Intelligence, self-driving car, sharing economy, Silicon Valley, Skype, smart contracts, social intelligence, speech recognition, statistical model, stem cell, Stephen Hawking, Steve Jobs, Steven Pinker, Stewart Brand, strong AI, Stuxnet, superintelligent machines, supervolcano, synthetic biology, systems thinking, tacit knowledge, TED Talk, the scientific method, The Wisdom of Crowds, theory of mind, Thorstein Veblen, too big to fail, Turing machine, Turing test, Von Neumann architecture, Watson beat the top human players on Jeopardy!, We are as Gods, Y2K

An artificial intelligence is coordinating the efforts of a sort of collective intelligence, operating thousands of times faster than human brains, with many consequences for human life. The first signs of the latest crisis occurred in the United States in August 2007 and has had a terrible effect on the lives of people in Europe and elsewhere. Real people suffered immensely because of those decisions. Andrew Ross Sorkin, in his book Too Big to Fail, shows how even the most powerful bankers had no power in the midst of the crisis. No human brain seemed able to control the course of events and prevent the crash. Can this example teach us how to think about machines that think? Such machines are actually autonomous in understanding their context and making decisions.


pages: 504 words: 126,835

The Innovation Illusion: How So Little Is Created by So Many Working So Hard by Fredrik Erixon, Bjorn Weigel

Airbnb, Alan Greenspan, Albert Einstein, American ideology, asset allocation, autonomous vehicles, barriers to entry, Basel III, Bernie Madoff, bitcoin, Black Swan, blockchain, Blue Ocean Strategy, BRICs, Burning Man, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, classic study, Clayton Christensen, Colonization of Mars, commoditize, commodity super cycle, corporate governance, corporate social responsibility, creative destruction, crony capitalism, dark matter, David Graeber, David Ricardo: comparative advantage, discounted cash flows, distributed ledger, Donald Trump, Dr. Strangelove, driverless car, Elon Musk, Erik Brynjolfsson, Fairchild Semiconductor, fear of failure, financial engineering, first square of the chessboard / second half of the chessboard, Francis Fukuyama: the end of history, general purpose technology, George Gilder, global supply chain, global value chain, Google Glasses, Google X / Alphabet X, Gordon Gekko, Greenspan put, Herman Kahn, high net worth, hiring and firing, hockey-stick growth, Hyman Minsky, income inequality, income per capita, index fund, industrial robot, Internet of things, Jeff Bezos, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, Joseph Schumpeter, Just-in-time delivery, Kevin Kelly, knowledge economy, laissez-faire capitalism, low interest rates, Lyft, manufacturing employment, Mark Zuckerberg, market design, Martin Wolf, mass affluent, means of production, middle-income trap, Mont Pelerin Society, Network effects, new economy, offshore financial centre, pensions crisis, Peter Thiel, Potemkin village, precautionary principle, price mechanism, principal–agent problem, Productivity paradox, QWERTY keyboard, RAND corporation, Ray Kurzweil, rent-seeking, risk tolerance, risk/return, Robert Gordon, Robert Solow, Ronald Coase, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, Silicon Valley, Silicon Valley startup, Skype, sovereign wealth fund, Steve Ballmer, Steve Jobs, Steve Wozniak, subprime mortgage crisis, technological determinism, technological singularity, TED Talk, telemarketer, The Chicago School, The Future of Employment, The Nature of the Firm, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, transaction costs, transportation-network company, tulip mania, Tyler Cowen, Tyler Cowen: Great Stagnation, uber lyft, University of East Anglia, unpaid internship, Vanguard fund, vertical integration, Yogi Berra

They typically defend a product stock rather than competing with new innovations. Big, complex, and slow-moving entities, the planning machines are fearful of competition and convinced that they deserve market (and political) privileges because of their past successes, but most of all because of their size. They tend to think of themselves as simply too big to fail. However, the typical planning machine generates productivity and growth for economies, and is therefore seen somewhat paradoxically as an engine of capitalism, competition, and innovation. Corporate titan Pehr G. Gyllenhammar revealingly expressed this ideology and drew attention to the paradox of planning when he noted in the late 1980s: today we talk about entrepreneurship versus bureaucracy.


pages: 482 words: 122,497

The Wrecking Crew: How Conservatives Rule by Thomas Frank

"Hurricane Katrina" Superdome, affirmative action, Alan Greenspan, anti-communist, barriers to entry, Berlin Wall, Bernie Madoff, British Empire, business cycle, classic study, collective bargaining, corporate governance, Credit Default Swap, David Brooks, disinformation, edge city, financial deregulation, full employment, George Gilder, guest worker program, Ida Tarbell, income inequality, invisible hand, job satisfaction, Michael Milken, Mikhail Gorbachev, Mont Pelerin Society, mortgage debt, Naomi Klein, Nelson Mandela, new economy, P = NP, plutocrats, Ponzi scheme, Ralph Nader, rent control, Richard Florida, road to serfdom, rolodex, Ronald Reagan, school vouchers, shareholder value, Silicon Valley, stem cell, stock buybacks, Strategic Defense Initiative, Telecommunications Act of 1996, the scientific method, too big to fail, Triangle Shirtwaist Factory, union organizing, War on Poverty

The disaster was, in this sense, a perfect test of the conservative state, in which its trademark features were each tried and found to be as worthless as the mortgage-backed securities moldering in Citibank’s basement. The landmark deregulations that made the whole mess possible to begin with were tributes to lobbyist power and the allure of the revolving door. Securing the great financial deregulation act of 1999, which permitted the megabanks that would be judged “too big to fail” nine years later, had been the object of decades of bank industry lobbying. When the man who finally got the bill passed, Texas senator Phil Gramm, left Congress, he promptly got a job as an investment banker. Gramm also co-sponsored the great financial deregulation act of 2000, which closed off the possibility of regulating futures and derivatives—the instruments that brought down Enron shortly thereafter and just about everybody else later on—although according to one knowledgeable account it was largely written by a financial industry lobbyist.2 Phil Gramm’s wife, incidentally, had been an ardent foe of futures regulation in her own right when she worked in the Reagan administration; she went on to serve as an Enron board member and then as a professor at the Mercatus Center, the Northern Virginia think tank dedicated to assailing regulation by whatever weapon presents itself.


pages: 448 words: 117,325

Click Here to Kill Everybody: Security and Survival in a Hyper-Connected World by Bruce Schneier

23andMe, 3D printing, air gap, algorithmic bias, autonomous vehicles, barriers to entry, Big Tech, bitcoin, blockchain, Brian Krebs, business process, Citizen Lab, cloud computing, cognitive bias, computer vision, connected car, corporate governance, crowdsourcing, cryptocurrency, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Heinemeier Hansson, disinformation, Donald Trump, driverless car, drone strike, Edward Snowden, Elon Musk, end-to-end encryption, fault tolerance, Firefox, Flash crash, George Akerlof, incognito mode, industrial robot, information asymmetry, information security, Internet of things, invention of radio, job automation, job satisfaction, John Gilmore, John Markoff, Kevin Kelly, license plate recognition, loose coupling, market design, medical malpractice, Minecraft, MITM: man-in-the-middle, move fast and break things, national security letter, Network effects, Nick Bostrom, NSO Group, pattern recognition, precautionary principle, printed gun, profit maximization, Ralph Nader, RAND corporation, ransomware, real-name policy, Rodney Brooks, Ross Ulbricht, security theater, self-driving car, Seymour Hersh, Shoshana Zuboff, Silicon Valley, smart cities, smart transportation, Snapchat, sparse data, Stanislav Petrov, Stephen Hawking, Stuxnet, supply-chain attack, surveillance capitalism, The Market for Lemons, Timothy McVeigh, too big to fail, Uber for X, Unsafe at Any Speed, uranium enrichment, Valery Gerasimov, Wayback Machine, web application, WikiLeaks, Yochai Benkler, zero day

Some of these new risks have nothing to do with attacks by hostile nations or terrorists. Rather, they arise from the very nature of the Internet+, which encompasses and connects almost everything, making it all vulnerable at the same time. Like large utilities and financial systems, the Internet+ is a system that’s too big to fail. Or, at least, the security is too important to fail because the attackers are too powerful to succeed and their results would be too catastrophic to consider. These failures could come from smaller attacks, or even accidents, that cascade badly. I have long thought that the 2003 blackout that covered most of the northeastern US and southeastern Canada was the result of a cyberattack.


pages: 385 words: 123,168

Bullshit Jobs: A Theory by David Graeber

1960s counterculture, active measures, antiwork, basic income, Berlin Wall, Bernie Sanders, Bertrand Russell: In Praise of Idleness, Black Lives Matter, Bretton Woods, Buckminster Fuller, business logic, call centre, classic study, cognitive dissonance, collateralized debt obligation, data science, David Graeber, do what you love, Donald Trump, emotional labour, equal pay for equal work, full employment, functional programming, global supply chain, High speed trading, hiring and firing, imposter syndrome, independent contractor, informal economy, Jarndyce and Jarndyce, Jarndyce and Jarndyce, job automation, John Maynard Keynes: technological unemployment, knowledge worker, moral panic, Post-Keynesian economics, post-work, precariat, Rutger Bregman, scientific management, Silicon Valley, Silicon Valley startup, single-payer health, software as a service, telemarketer, The Future of Employment, Thorstein Veblen, too big to fail, Travis Kalanick, universal basic income, unpaid internship, wage slave, wages for housework, women in the workforce, working poor, Works Progress Administration, young professional, éminence grise

If all of this very much resembles the inner workings of a large corporation, I would suggest that this is no coincidence: such corporations are less and less about making, building, fixing, or maintaining things and more and more about political processes of appropriating, distributing, and allocating money and resources. This means that, once again, it’s increasingly difficult to distinguish politics and economics, as we have seen with the advent of “too-big-to-fail” banks, whose lobbyists typically write the very laws by which government supposedly regulates them, but even more, by the fact that financial profits themselves are gathered largely through direct juro-political means. JPMorgan Chase & Co., for example, the largest bank in America, reported in 2006 that roughly two-thirds of its profits were derived from “fees and penalties,” and “finance” in general really refers to trading in other people’s debts—debts which, of course, are enforceable in courts of law.26 It’s almost impossible to get accurate figures about exactly what proportion of a typical family’s income in, say, America, or Denmark, or Japan, is extracted each month by the FIRE sector, but there is every reason to believe it is not only a very substantial chunk but also is now a distinctly greater chunk of total profits than those the corporate sector derives directly from making or selling goods and services in those same countries.


pages: 550 words: 124,073

Democracy and Prosperity: Reinventing Capitalism Through a Turbulent Century by Torben Iversen, David Soskice

Andrei Shleifer, assortative mating, augmented reality, barriers to entry, Big Tech, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, centre right, clean tech, cloud computing, collateralized debt obligation, collective bargaining, colonial rule, confounding variable, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, deskilling, Donald Trump, first-past-the-post, full employment, general purpose technology, gentrification, Gini coefficient, hiring and firing, implied volatility, income inequality, industrial cluster, inflation targeting, invisible hand, knowledge economy, labor-force participation, liberal capitalism, low skilled workers, low-wage service sector, means of production, middle-income trap, mirror neurons, mittelstand, Network effects, New Economic Geography, new economy, New Urbanism, non-tariff barriers, Occupy movement, offshore financial centre, open borders, open economy, passive investing, precariat, race to the bottom, radical decentralization, rent-seeking, RFID, road to serfdom, Robert Bork, Robert Gordon, Silicon Valley, smart cities, speech recognition, tacit knowledge, The Future of Employment, The Great Moderation, The Rise and Fall of American Growth, the strength of weak ties, too big to fail, trade liberalization, union organizing, urban decay, vertical integration, Washington Consensus, winner-take-all economy, working-age population, World Values Survey, young professional, zero-sum game

And this led to an effective freezing of the market for short-term borrowing, as no financial institution was prepared to lend overnight without exceptionally high interest. This situation was unsustainable without the government support then forthcoming. In this sense, all the major HLFIs were probably too big to fail. Key to understand, however, is that global imbalances hugely magnified this process. The external surpluses of the net exporters played a dual role. On the one hand, they allowed U.S. consumers to spend above U.S. GDP, and U.S. consumers had to dissave to finance this deficit. On the other hand, the external surpluses provided short-term loans to the HLFIs to cover the acquisition of a large proportion of the risky assets—that is, securitized loans—that financed the consumption.


pages: 481 words: 120,693

Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland

"World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Alan Greenspan, Albert Einstein, algorithmic trading, assortative mating, banking crisis, barriers to entry, Basel III, battle of ideas, Bear Stearns, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Black Swan, Boris Johnson, Branko Milanovic, Bretton Woods, BRICs, Bullingdon Club, business climate, call centre, carried interest, Cass Sunstein, Clayton Christensen, collapse of Lehman Brothers, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Deng Xiaoping, disruptive innovation, don't be evil, double helix, energy security, estate planning, experimental subject, financial deregulation, financial engineering, financial innovation, Flash crash, Ford Model T, Frank Gehry, Gini coefficient, Glass-Steagall Act, global village, Goldman Sachs: Vampire Squid, Gordon Gekko, Guggenheim Bilbao, haute couture, high net worth, income inequality, invention of the steam engine, job automation, John Markoff, joint-stock company, Joseph Schumpeter, knowledge economy, knowledge worker, liberation theology, light touch regulation, linear programming, London Whale, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Max Levchin, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, NetJets, new economy, Occupy movement, open economy, Peter Thiel, place-making, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, postindustrial economy, Potemkin village, profit motive, public intellectual, purchasing power parity, race to the bottom, rent-seeking, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, self-driving car, seminal paper, Sheryl Sandberg, short selling, Silicon Valley, Silicon Valley billionaire, Silicon Valley startup, Simon Kuznets, sovereign wealth fund, starchitect, stem cell, Steve Jobs, TED Talk, the long tail, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tony Hsieh, too big to fail, trade route, trickle-down economics, Tyler Cowen: Great Stagnation, wage slave, Washington Consensus, winner-take-all economy, zero-sum game

March 2, 2012. Skocpol, Theda. Diminished Democracy: From Membership to Management in American Civic Life. University of Oklahoma Press, 2003. Sloan, Alfred P., Jr. My Years with General Motors. Doubleday, 1964. Smith, Adam. The Wealth of Nations. Bantam Classics, 2003. Sorkin, Andrew Ross. Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves. Viking, 2009. Soros, George. The Crisis of Global Capitalism: Open Society Endangered. Public Affairs, 1998. Spence, A. Michael. “The Impact of Globalization on Income and Employment: The Downside of Integrating Markets.”


pages: 497 words: 123,718

A Game as Old as Empire: The Secret World of Economic Hit Men and the Web of Global Corruption by Steven Hiatt; John Perkins

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", "World Economic Forum" Davos, accelerated depreciation, addicted to oil, airline deregulation, Andrei Shleifer, Asian financial crisis, Berlin Wall, big-box store, Bob Geldof, book value, Bretton Woods, British Empire, capital controls, centre right, clean water, colonial rule, corporate governance, corporate personhood, deglobalization, deindustrialization, disinformation, Doha Development Round, energy security, European colonialism, export processing zone, financial deregulation, financial independence, full employment, global village, high net worth, land bank, land reform, large denomination, liberal capitalism, Long Term Capital Management, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, military-industrial complex, moral hazard, Naomi Klein, new economy, North Sea oil, offshore financial centre, oil shock, Ponzi scheme, race to the bottom, reserve currency, Ronald Reagan, Scramble for Africa, Seymour Hersh, statistical model, structural adjustment programs, Suez crisis 1956, Tax Reform Act of 1986, too big to fail, trade liberalization, transatlantic slave trade, transfer pricing, union organizing, Washington Consensus, working-age population, Yom Kippur War

Congress unilaterally abrogated the “gold clause” for all corporate bonds listed on the New York Stock Exchange. This move slashed the real value of all U.S. corporate debts by 31 percent overnight. • Since the 1970s, there have been many state and federal bailouts of U.S. corporations that were considered “too big to fail,” including Conrail, Chrysler, Continental Illinois, Citibank in the late 1980s, and Long-Term Capital Management in 1998. On the horizon, we should anticipate a similar “non-free market” response if Ford or General Motors are threatened with bankruptcy. • As for sovereign country borrowers, in 1953, under the impact of the Cold War and the desire to see Western Europe recover, the U.S. helped to arrange a generous debt restructuring for West Germany, including a 50-percent debt write-off and a thirty-year repayment schedule for the balance owed.


pages: 316 words: 117,228

The Code of Capital: How the Law Creates Wealth and Inequality by Katharina Pistor

Andrei Shleifer, Asian financial crisis, asset-backed security, barriers to entry, Bear Stearns, Bernie Madoff, Big Tech, bilateral investment treaty, bitcoin, blockchain, Bretton Woods, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collateralized debt obligation, colonial rule, conceptual framework, Corn Laws, corporate governance, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, digital rights, Donald Trump, double helix, driverless car, Edward Glaeser, Ethereum, ethereum blockchain, facts on the ground, financial innovation, financial intermediation, fixed income, Francis Fukuyama: the end of history, full employment, global reserve currency, Gregor Mendel, Hernando de Soto, income inequality, initial coin offering, intangible asset, investor state dispute settlement, invisible hand, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, land reform, land tenure, London Interbank Offered Rate, Long Term Capital Management, means of production, money market fund, moral hazard, offshore financial centre, phenotype, Ponzi scheme, power law, price mechanism, price stability, profit maximization, railway mania, regulatory arbitrage, reserve currency, Robert Solow, Ronald Coase, Satoshi Nakamoto, secular stagnation, self-driving car, seminal paper, shareholder value, Silicon Valley, smart contracts, software patent, sovereign wealth fund, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, trade route, Tragedy of the Commons, transaction costs, Wolfgang Streeck

Braithwaite, “Standard Form Contracts,” p. 789. 51. CPSS, “OTC Derivatives: Settlement Procedures and Counterparty Risk Management,” BIS Report (1998). 52. A brief history of the Financial Stability Board can be found online at http://www.fsb.org/about/. 53. David Geen et al., “A Step Closer to Ending Too-Big-to Fail: The ISDA Resolution-Stay Protocol and Contractual Recognition of Cross-Border Resolution,” Futures and Derivatives Law Report 35, no. 3 (2015):1–17, p. 7. 54. The original protocol from November 2014 was relaunched in November 2015. The latest text can be found online at http://assets.isda.org/media /ac6b533f-3/5a7c32f8-pdf/. 55.


pages: 444 words: 124,631

Buy Now, Pay Later: The Extraordinary Story of Afterpay by Jonathan Shapiro, James Eyers

Airbnb, Alan Greenspan, Apple Newton, bank run, barriers to entry, Big Tech, Black Lives Matter, blockchain, book value, British Empire, clockwatching, cloud computing, collapse of Lehman Brothers, computer age, coronavirus, corporate governance, corporate raider, COVID-19, cryptocurrency, delayed gratification, diversification, Dogecoin, Donald Trump, Elon Musk, financial deregulation, George Floyd, greed is good, growth hacking, index fund, Jones Act, Kickstarter, late fees, light touch regulation, lockdown, low interest rates, managed futures, Max Levchin, meme stock, Mount Scopus, Network effects, new economy, passive investing, payday loans, paypal mafia, Peter Thiel, pre–internet, Rainbow capitalism, regulatory arbitrage, retail therapy, ride hailing / ride sharing, Robinhood: mobile stock trading app, rolodex, Salesforce, short selling, short squeeze, side hustle, Silicon Valley, Snapchat, SoftBank, sovereign wealth fund, tech bro, technology bubble, the payments system, TikTok, too big to fail, transaction costs, Vanguard fund

It also blocked investors from buying more GameStop shares. To ease its cash requirements, Robinhood halted buying of GameStop shares on its platform. The buying halt then caused a rapid crash in the GameStop share price. And the Reddit army cried conspiracy. The suits had rigged the system in their favour. The digital mob got angry. ‘Too big to fail, too small to win,’ read one protest placard. Dave Portnoy lost $700,000 and called for Robinhood’s founders to be jailed. Democrat politicians Elizabeth Warren and Alexandria Ocasio-Cortez leapt to the defence of the day traders and demanded Wall Street be called to account for rigging the system against the little guy.


pages: 1,073 words: 302,361

Money and Power: How Goldman Sachs Came to Rule the World by William D. Cohan

"Friedman doctrine" OR "shareholder theory", "RICO laws" OR "Racketeer Influenced and Corrupt Organizations", Alan Greenspan, asset-backed security, Bear Stearns, Bernie Madoff, Bob Litterman, book value, business cycle, buttonwood tree, buy and hold, collateralized debt obligation, Cornelius Vanderbilt, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, deal flow, diversified portfolio, do well by doing good, fear of failure, financial engineering, financial innovation, fixed income, Ford paid five dollars a day, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Gordon Gekko, high net worth, hiring and firing, hive mind, Hyman Minsky, interest rate swap, John Meriwether, junk bonds, Kenneth Arrow, London Interbank Offered Rate, Long Term Capital Management, managed futures, margin call, market bubble, mega-rich, merger arbitrage, Michael Milken, moral hazard, mortgage debt, Myron Scholes, paper trading, passive investing, Paul Samuelson, Ponzi scheme, price stability, profit maximization, proprietary trading, risk tolerance, Ronald Reagan, Saturday Night Live, short squeeze, South Sea Bubble, tail risk, time value of money, too big to fail, traveling salesman, two and twenty, value at risk, work culture , yield curve, Yogi Berra, zero-sum game

It is little wonder that the possibility of financial crisis with major economic consequences has again emerged as a major cause for concern.” In this remarkably prescient essay, Summers wrote about the need for a “lender-of-last resort”—the Federal Reserve—to step in during a financial crisis but warned that such non-market-based financial support could lead to “moral hazard” and a too-big-to-fail mentality. “In the presence of a Federal safety net, depositors will not scrutinize the loan portfolios of financial institutions,” he wrote. “This will encourage excess risk taking. The problem is magnified because a few aggressive institutions can put pressure on the rest by offering premium interest rates.

Thompson, Julian Thornton, John, 15.1, 15.2, 17.1, 17.2, 17.3, 17.4 background of on Goldman Sachs board and move to go public, 16.1, 16.2, 16.3, 16.4, 17.1 in “palace coup” against Corzine, 16.1, 17.1, 17.2 retirement of September 11 attacks and stock of Thornton, Margaret Tilden Park Capital Management Timberwolf, prl.1, 21.1, 21.2, 21.3, 22.1 Time, 2.1, 3.1 Tisch, Laurence Tonka Coporation too-big-to-fail mentality Tourre, Fabrice, 7.1, 20.1, 20.2, 20.3, 20.4, 20.5, 20.6, 20.7, 21.1, 21.2, 21.3, 22.1 affair of, prl.1 SEC’s accusations against, prl.1, prl.2, prl.3, prl.4, 23.1 Trading Places, 19.1 Trading with the Enemy, 17.1 Travelers Insurance, 16.1, 16.2, 16.3 Treasuries, Italian Treasury, U.S., 4.1, 13.1, 14.1, 17.1 preferred stock of Wall Street firms purchased by, prl.1 Trott, Byron Troubled Asset Relief Program (TARP), Goldman Sachs funded by, prl.1, 24.1 Truman, Harry S., 3.1, 3.2, 3.3, 6.1 Trust Company of America Tsinghua University Tulane University, 5.1, 5.2 Tung Chee Hwa Turner, Stansfield ’21’ Club, 3.1, 5.1, 6.1, 7.1 Tyco Tyson, Laura D’Andrea, 13.1, 13.2, 13.3 UBS Underwood Corporation underwriting banking vs.


pages: 518 words: 128,324

Destined for War: America, China, and Thucydides's Trap by Graham Allison

9 dash line, anti-communist, Berlin Wall, borderless world, Bretton Woods, British Empire, capital controls, Carmen Reinhart, conceptual framework, cuban missile crisis, currency manipulation / currency intervention, Deng Xiaoping, disruptive innovation, Donald Trump, Dr. Strangelove, escalation ladder, facts on the ground, false flag, Flash crash, Francis Fukuyama: the end of history, game design, George Santayana, Great Leap Forward, guns versus butter model, Haber-Bosch Process, Herman Kahn, high-speed rail, industrial robot, Internet of things, Kenneth Rogoff, liberal world order, long peace, Mark Zuckerberg, megacity, megaproject, middle-income trap, Mikhail Gorbachev, Monroe Doctrine, mutually assured destruction, Nelson Mandela, one-China policy, Paul Samuelson, Peace of Westphalia, public intellectual, purchasing power parity, RAND corporation, Ronald Reagan, Scramble for Africa, selection bias, Silicon Valley, Silicon Valley startup, South China Sea, special economic zone, spice trade, Suez canal 1869, synthetic biology, TED Talk, the rule of 72, The Wealth of Nations by Adam Smith, too big to fail, trade route, UNCLOS, Washington Consensus, zero-sum game

Eli Lake, “Preparing for North Korea’s Inevitable Collapse,” Bloomberg, September 20, 2016, https://www.bloomberg.com/view/articles/2016-09-20/preparing-for-north-korea-s-inevitable-collapse. [back] 34. “Trade in Goods with China,” US Census, http://www.census.gov/foreign-trade/balance/c5700.html. [back] 35. Michael Lewis, Flash Boys: A Wall Street Revolt (New York: W. W. Norton, 2014), 56–88. [back] 36. Andrew Ross Sorkin, Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves, updated ed. (New York: Penguin Books, 2011), 59. [back] 37. Andrew Ross Sorkin et al., “As Credit Crisis Spiraled, Alarm Led to Action,” New York Times, October 1, 2008, http://www.nytimes.com/2008/10/02/business/02crisis.html.


pages: 385 words: 128,358

Inside the House of Money: Top Hedge Fund Traders on Profiting in a Global Market by Steven Drobny

Abraham Maslow, Alan Greenspan, Albert Einstein, asset allocation, Berlin Wall, Bonfire of the Vanities, Bretton Woods, business cycle, buy and hold, buy low sell high, capital controls, central bank independence, commoditize, commodity trading advisor, corporate governance, correlation coefficient, Credit Default Swap, currency risk, diversification, diversified portfolio, family office, financial engineering, fixed income, glass ceiling, Glass-Steagall Act, global macro, Greenspan put, high batting average, implied volatility, index fund, inflation targeting, interest rate derivative, inventory management, inverted yield curve, John Meriwether, junk bonds, land bank, Long Term Capital Management, low interest rates, managed futures, margin call, market bubble, Market Wizards by Jack D. Schwager, Maui Hawaii, Mexican peso crisis / tequila crisis, moral hazard, Myron Scholes, new economy, Nick Leeson, Nixon triggered the end of the Bretton Woods system, oil shale / tar sands, oil shock, out of africa, panic early, paper trading, Paul Samuelson, Peter Thiel, price anchoring, proprietary trading, purchasing power parity, Reminiscences of a Stock Operator, reserve currency, risk free rate, risk tolerance, risk-adjusted returns, risk/return, rolodex, Sharpe ratio, short selling, Silicon Valley, tail risk, The Wisdom of Crowds, too big to fail, transaction costs, value at risk, Vision Fund, yield curve, zero-coupon bond, zero-sum game

For them, it’s just a question of in or out, then a push of the button. The real question is what banks actually do in the world today—finance hedge funds? If that is indeed the answer, it means that you and I, the taxpayers, will bear the brunt of any fallout. Every one of these institutions is too big to fail, as we saw with Long Term Capital.And LTCM was a drop in the bucket compared to some of the positions that exist out there today. When hedge funds start fighting each other for returns, I get scared. Global risk is way out of line right now.There are people biting off some things that they’re not going to be able to extricate themselves from when it goes south.


pages: 433 words: 127,171

The Grid: The Fraying Wires Between Americans and Our Energy Future by Gretchen Bakke

addicted to oil, Any sufficiently advanced technology is indistinguishable from magic, autonomous vehicles, back-to-the-land, big-box store, Buckminster Fuller, demand response, dematerialisation, distributed generation, electricity market, energy security, energy transition, full employment, Gabriella Coleman, illegal immigration, indoor plumbing, Internet of things, Kickstarter, laissez-faire capitalism, Menlo Park, Neal Stephenson, Negawatt, new economy, Northpointe / Correctional Offender Management Profiling for Alternative Sanctions, off grid, off-the-grid, post-oil, profit motive, rolling blackouts, Ronald Reagan, self-driving car, Silicon Valley, smart grid, smart meter, the built environment, too big to fail, Twitter Arab Spring, vertical integration, washing machines reduced drudgery, Whole Earth Catalog

The grid isn’t just some contraption wired together out of various bits of this century and bits of the last (plus a substantial shake of nineteenth-century ways of doing and building as well). It’s also a massive cultural system. And the stakeholders—the utilities, investment firms, power plant owners, mining firms, and “too-big-to-fail” multinational conglomerates—will not go gently into the future’s bright night. An abundance of carbon-free energy is a nice idea, but fossil fuel companies are still responsible for the vast majority (66.5 percent) of the power on our grid. Coal may be on the way out; the Energy Information Administration (EIA) predicts that roughly a fifth of total coal capacity will be retired between 2012 and 2020, and even the chief executive of the American Coal Council admits that the industry has abandoned any plans to replace the retiring fleet.


The Trade Lifecycle: Behind the Scenes of the Trading Process (The Wiley Finance Series) by Robert P. Baker

asset-backed security, bank run, banking crisis, Basel III, Black-Scholes formula, book value, Brownian motion, business continuity plan, business logic, business process, collapse of Lehman Brothers, corporate governance, credit crunch, Credit Default Swap, diversification, financial engineering, fixed income, functional programming, global macro, hiring and firing, implied volatility, interest rate derivative, interest rate swap, locking in a profit, London Interbank Offered Rate, low interest rates, margin call, market clearing, millennium bug, place-making, prediction markets, proprietary trading, short selling, statistical model, stochastic process, the market place, the payments system, time value of money, too big to fail, transaction costs, value at risk, Wiener process, yield curve, zero-coupon bond

The problem is compounded by the annual bonus structure and the high turnover of staff – employees are not concerned about a future that does not involve them. 19.5 ORGANISATIONAL BLOCKERS The poor use of IT is also down to the way firms are organised. No incentive is given to share IT resources and systems. IT managers tend to be rewarded by the number of people working for them. This encourages them to hire more staff and go for bigger projects which are more costly and risky to the bank. Furthermore, a large project may become too big to fail, because so many people have staked their reputation on its success. If the project gets into trouble these people would rather continue with it, even though it may make better business sense to abandon it before more money is wasted. The threat to their reputation impedes their ability to make the best decisions.


pages: 441 words: 136,954

That Used to Be Us by Thomas L. Friedman, Michael Mandelbaum

addicted to oil, Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, Amazon Web Services, American Society of Civil Engineers: Report Card, Andy Kessler, Ayatollah Khomeini, bank run, barriers to entry, Bear Stearns, Berlin Wall, blue-collar work, Bretton Woods, business process, call centre, carbon footprint, carbon tax, Carmen Reinhart, Cass Sunstein, centre right, Climatic Research Unit, cloud computing, collective bargaining, corporate social responsibility, cotton gin, creative destruction, Credit Default Swap, crowdsourcing, delayed gratification, drop ship, energy security, Fall of the Berlin Wall, fear of failure, full employment, Google Earth, illegal immigration, immigration reform, income inequality, Intergovernmental Panel on Climate Change (IPCC), job automation, Kenneth Rogoff, knowledge economy, Lean Startup, low interest rates, low skilled workers, Mark Zuckerberg, market design, mass immigration, more computing power than Apollo, Network effects, Nixon triggered the end of the Bretton Woods system, obamacare, oil shock, PalmPilot, pension reform, precautionary principle, proprietary trading, Report Card for America’s Infrastructure, rising living standards, Ronald Reagan, Rosa Parks, Saturday Night Live, shareholder value, Silicon Valley, Silicon Valley startup, Skype, Steve Jobs, the long tail, the scientific method, Thomas L Friedman, too big to fail, University of East Anglia, vertical integration, WikiLeaks

As such, they literally sustain relationships over the long term. Sustainable values, according to Seidman, are the “values that connect us deeply as humans, such as transparency, integrity, honesty, truth, shared responsibility, and hope.” They are therefore “all about how—not how much … Situational values push us toward the strategy of becoming ‘too big to fail.’ Sustainable values inspire us to pursue the strategy of becoming ‘too sustainable to fail,’” by building enduring relationships. As the collapse of major Wall Street banks such as Bear Stearns and Lehman Brothers has demonstrated, Seidman explains, “What makes an institution sustainable is not the scale and size it reaches but how it does its business—how it relates to its employees, shareholders, customers, suppliers, the environment, society, and future generations.”


pages: 460 words: 131,579

Masters of Management: How the Business Gurus and Their Ideas Have Changed the World—for Better and for Worse by Adrian Wooldridge

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, affirmative action, Alan Greenspan, barriers to entry, behavioural economics, Black Swan, blood diamond, borderless world, business climate, business cycle, business intelligence, business process, carbon footprint, Cass Sunstein, Clayton Christensen, clean tech, cloud computing, collaborative consumption, collapse of Lehman Brothers, collateralized debt obligation, commoditize, company town, corporate governance, corporate social responsibility, creative destruction, credit crunch, crowdsourcing, David Brooks, David Ricardo: comparative advantage, disintermediation, disruptive innovation, do well by doing good, don't be evil, Donald Trump, Edward Glaeser, Exxon Valdez, financial deregulation, Ford Model T, Frederick Winslow Taylor, future of work, George Gilder, global supply chain, Golden arches theory, hobby farmer, industrial cluster, intangible asset, It's morning again in America, job satisfaction, job-hopping, joint-stock company, Joseph Schumpeter, junk bonds, Just-in-time delivery, Kickstarter, knowledge economy, knowledge worker, lake wobegon effect, Long Term Capital Management, low skilled workers, Mark Zuckerberg, McMansion, means of production, Menlo Park, meritocracy, Michael Milken, military-industrial complex, mobile money, Naomi Klein, Netflix Prize, Network effects, new economy, Nick Leeson, Norman Macrae, open immigration, patent troll, Ponzi scheme, popular capitalism, post-industrial society, profit motive, purchasing power parity, radical decentralization, Ralph Nader, recommendation engine, Richard Florida, Richard Thaler, risk tolerance, Ronald Reagan, science of happiness, scientific management, shareholder value, Silicon Valley, Silicon Valley startup, Skype, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, Steven Levy, supply-chain management, tacit knowledge, technoutopianism, the long tail, The Soul of a New Machine, The Wealth of Nations by Adam Smith, Thomas Davenport, Tony Hsieh, too big to fail, vertical integration, wealth creators, women in the workforce, young professional, Zipcar

Walmart has more employees than Iceland has citizens.10 Mega-churches are driving mom-and-pop churches out of business. Successful new-economy startups such as Microsoft and Google have done what all successful startups throughout history have done and grown into giants. The financial crisis has been good for big companies. The government has intervened to rescue too-big-to-fail companies such as General Motors and Citibank (the financial services sector is now more concentrated than ever). And the rise of the emerging world has projected a new set of giant conglomerates onto the global stage. In many ways the argument about size depends on a false antithesis: big and small companies are potentially allies rather than alternatives.


pages: 448 words: 142,946

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

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

By ensuring the solvency of risk-taking financial institutions and the liquidity of their financial offerings, the government has effectively increased the risk-free rewards of owning money and accelerated the concentration of wealth. No longer is the Fed Funds rate or T-bill rate the benchmark of risk-free interest. The concept of moral hazard that has come up in the context of “too big to fail” financial institutions isn’t just a moral issue. When risky, high-interest bets are not actually risky, then those with the money to make such bets will increase their wealth far faster than (and at the expense of) everyone else. Moral hazard is a shortcut to extreme concentration of wealth. 7.


pages: 418 words: 128,965

The Master Switch: The Rise and Fall of Information Empires by Tim Wu

accounting loophole / creative accounting, Alfred Russel Wallace, Andy Rubin, AOL-Time Warner, Apple II, barriers to entry, British Empire, Burning Man, business cycle, Cass Sunstein, Clayton Christensen, commoditize, corporate raider, creative destruction, disinformation, disruptive innovation, don't be evil, Douglas Engelbart, Douglas Engelbart, Eben Moglen, Ford Model T, Howard Rheingold, Hush-A-Phone, informal economy, intermodal, Internet Archive, invention of movable type, invention of the telephone, invisible hand, Jane Jacobs, John Markoff, Joseph Schumpeter, Menlo Park, open economy, packet switching, PageRank, profit motive, radical decentralization, road to serfdom, Robert Bork, Robert Metcalfe, Ronald Coase, scientific management, search costs, seminal paper, sexual politics, shareholder value, Silicon Valley, Skype, Steve Jobs, Steve Wozniak, Telecommunications Act of 1996, The Chicago School, The Death and Life of Great American Cities, the long tail, the market place, The Wisdom of Crowds, too big to fail, Upton Sinclair, urban planning, vertical integration, Yochai Benkler, zero-sum game

At the same time, the Separations Principle stipulates one other necessity: that the government also keep its distance and not intervene in the market to favor any technology, network monopoly, or integration of the major functions of an information industry. Such interference—often to preserve an industry that figures mightily in the national economy (in a sense, too big to fail)—is ultimately destructive of both a free society and the healthy growth of an information economy or any other kind. Like the separation of church and state, the Separations Principle means to preempt politics; it is a refusal to take sides between institutions that are historically, even naturally, bound to come into conflict, a refusal born of society’s interest in preserving both.


How I Became a Quant: Insights From 25 of Wall Street's Elite by Richard R. Lindsey, Barry Schachter

Albert Einstein, algorithmic trading, Andrew Wiles, Antoine Gombaud: Chevalier de Méré, asset allocation, asset-backed security, backtesting, bank run, banking crisis, Bear Stearns, Black-Scholes formula, Bob Litterman, Bonfire of the Vanities, book value, Bretton Woods, Brownian motion, business cycle, business process, butter production in bangladesh, buy and hold, buy low sell high, capital asset pricing model, centre right, collateralized debt obligation, commoditize, computerized markets, corporate governance, correlation coefficient, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency risk, discounted cash flows, disintermediation, diversification, Donald Knuth, Edward Thorp, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, financial engineering, financial innovation, fixed income, full employment, George Akerlof, global macro, Gordon Gekko, hiring and firing, implied volatility, index fund, interest rate derivative, interest rate swap, Ivan Sutherland, John Bogle, John von Neumann, junk bonds, linear programming, Loma Prieta earthquake, Long Term Capital Management, machine readable, margin call, market friction, market microstructure, martingale, merger arbitrage, Michael Milken, Myron Scholes, Nick Leeson, P = NP, pattern recognition, Paul Samuelson, pensions crisis, performance metric, prediction markets, profit maximization, proprietary trading, purchasing power parity, quantitative trading / quantitative finance, QWERTY keyboard, RAND corporation, random walk, Ray Kurzweil, Reminiscences of a Stock Operator, Richard Feynman, Richard Stallman, risk free rate, risk-adjusted returns, risk/return, seminal paper, shareholder value, Sharpe ratio, short selling, Silicon Valley, six sigma, sorting algorithm, statistical arbitrage, statistical model, stem cell, Steven Levy, stochastic process, subscription business, systematic trading, technology bubble, The Great Moderation, the scientific method, too big to fail, trade route, transaction costs, transfer pricing, value at risk, volatility smile, Wiener process, yield curve, young professional

By the time these crises had passed, banks had turned themselves from lenders into packagers of loans, investors, and providers of services. Regulators shifted the focus of regulation from static rules and solvency tests to capital adequacy, and eventually, to capital tests based on risk measurement. If we’re going to protect banks with deposit insurance and an implicit too-big-to-fail guarantee, they said, let the banks run themselves so as to minimize the likelihood that their equity disappears and the taxpayer steps in. From RiskMetrics’ point of view, it was easier to sell risk analytics to satisfy a regulatory requirement than purely on the strength of the information.


pages: 464 words: 127,283

Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia by Anthony M. Townsend

1960s counterculture, 4chan, A Pattern Language, Adam Curtis, air gap, Airbnb, Amazon Web Services, anti-communist, Apple II, Bay Area Rapid Transit, Big Tech, bike sharing, Boeing 747, Burning Man, business process, call centre, carbon footprint, charter city, chief data officer, clean tech, clean water, cloud computing, company town, computer age, congestion charging, congestion pricing, connected car, crack epidemic, crowdsourcing, DARPA: Urban Challenge, data acquisition, Deng Xiaoping, digital divide, digital map, Donald Davies, East Village, Edward Glaeser, Evgeny Morozov, food desert, game design, garden city movement, General Motors Futurama, gentrification, Geoffrey West, Santa Fe Institute, George Gilder, ghettoisation, global supply chain, Grace Hopper, Haight Ashbury, Hedy Lamarr / George Antheil, Herman Kahn, hive mind, Howard Rheingold, interchangeable parts, Internet Archive, Internet of things, Jacquard loom, Jane Jacobs, Jevons paradox, jitney, John Snow's cholera map, Joi Ito, Khan Academy, Kibera, Kickstarter, knowledge worker, Lewis Mumford, load shedding, lolcat, M-Pesa, machine readable, Mark Zuckerberg, megacity, megaproject, messenger bag, mobile money, mutually assured destruction, new economy, New Urbanism, Norbert Wiener, Occupy movement, off grid, One Laptop per Child (OLPC), openstreetmap, packet switching, PalmPilot, Panopticon Jeremy Bentham, Parag Khanna, patent troll, Pearl River Delta, place-making, planetary scale, popular electronics, power law, RFC: Request For Comment, RFID, ride hailing / ride sharing, Robert Gordon, scientific management, self-driving car, sharing economy, Shenzhen special economic zone , Silicon Valley, SimCity, Skype, smart cities, smart grid, smart meter, social graph, social software, social web, SpaceShipOne, special economic zone, Steve Jobs, Steve Wozniak, Stuxnet, supply-chain management, technoutopianism, Ted Kaczynski, telepresence, The Death and Life of Great American Cities, too big to fail, trade route, Twitter Arab Spring, Tyler Cowen, Tyler Cowen: Great Stagnation, undersea cable, Upton Sinclair, uranium enrichment, urban decay, urban planning, urban renewal, Vannevar Bush, working poor, working-age population, X Prize, Y2K, zero day, Zipcar

Pressure was mounting on Cisco and Gale International, the real estate development firm behind Songdo, to fulfill the project’s lofty ambitions. In 2011, in a calculated effort to save face, Cisco published a thinly researched white paper frantically touting the social, economic, and environment benefits of smart cities.21 As Lindsay later explained to me, Songdo had become too big to fail. From my perch, the “smart” face of Songdo was just as invisible as it was on the ground. A few years later, in 2012, Starbucks and start-up firm Square would announce a retail payment technology that tracks you by smartphone as you enter a shop and lets you pay simply by saying your name. Building a city around RFID cards seems, by comparison, sadly anachronistic.


pages: 431 words: 132,416

No One Would Listen: A True Financial Thriller by Harry Markopolos

Alan Greenspan, backtesting, barriers to entry, Bernie Madoff, buy and hold, call centre, centralized clearinghouse, correlation coefficient, diversified portfolio, Edward Thorp, Emanuel Derman, Eugene Fama: efficient market hypothesis, family office, financial engineering, financial thriller, fixed income, forensic accounting, high net worth, index card, Long Term Capital Management, Louis Bachelier, low interest rates, Market Wizards by Jack D. Schwager, offshore financial centre, payment for order flow, Ponzi scheme, price mechanism, proprietary trading, quantitative trading / quantitative finance, regulatory arbitrage, Renaissance Technologies, risk-adjusted returns, risk/return, rolodex, Sharpe ratio, statistical arbitrage, too big to fail, transaction costs, two and twenty, your tax dollars at work

Our current regulatory system was cobbled together in the 1930s, and the financial industry of that period had absolutely no resemblance to what exists today. But regulators in many cases are still bound by the basic structure created at that time and just don’t have the tools to deal with financial institutions magnitudes larger than those that existed decades ago. Unfortunately, these agencies have to confront gigantic “too big to fail—too big to succeed—too big to regulate” multinational corporations like Citigroup, Bank of America, American International Group, and all the others. While these companies once were vertically oriented (they operated within a certain narrow field), now they may have subsidiaries operating banks, insurance companies, mortgage lenders, credit card companies, money management arms, investment banks, and securities broker-dealers, and they’re operating both domestically and internationally.


pages: 349 words: 134,041

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

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

Traders risk the bank’s capital: they literally bet the bank, at least up to their limits. If they win then they get a share of the winnings. If they lose, then the bank picks up the loss. Traders might lose their jobs but the money at risk is not their own, it’s all OPM – other people’s money. What if the losses threaten the bank’s survival? Most banks are now ‘too big to fail’ and they can count on government support. Regulators are wary about ‘systemic risk’, and no regulator with an eye to their place in history wants the banking system to be flushed down the toilet on their watch. Traders can always play the systemic risk trump card. It is the ultimate in capitalism – the privatization of gains, the socialization of losses.


pages: 422 words: 131,666

Life Inc.: How the World Became a Corporation and How to Take It Back by Douglas Rushkoff

Abraham Maslow, Adam Curtis, addicted to oil, affirmative action, Alan Greenspan, Amazon Mechanical Turk, An Inconvenient Truth, anti-globalists, AOL-Time Warner, banks create money, Bear Stearns, benefit corporation, big-box store, Bretton Woods, car-free, Charles Lindbergh, colonial exploitation, Community Supported Agriculture, complexity theory, computer age, congestion pricing, corporate governance, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, death of newspapers, digital divide, don't be evil, Donald Trump, double entry bookkeeping, easy for humans, difficult for computers, financial innovation, Firefox, full employment, General Motors Futurama, gentrification, Glass-Steagall Act, global village, Google Earth, greed is good, Herbert Marcuse, Howard Rheingold, income per capita, invention of the printing press, invisible hand, Jane Jacobs, John Nash: game theory, joint-stock company, Kevin Kelly, Kickstarter, laissez-faire capitalism, loss aversion, market bubble, market design, Marshall McLuhan, Milgram experiment, military-industrial complex, moral hazard, multilevel marketing, mutually assured destruction, Naomi Klein, negative equity, new economy, New Urbanism, Norbert Wiener, peak oil, peer-to-peer, place-making, placebo effect, planned obsolescence, Ponzi scheme, price mechanism, price stability, principal–agent problem, private military company, profit maximization, profit motive, prosperity theology / prosperity gospel / gospel of success, public intellectual, race to the bottom, RAND corporation, rent-seeking, RFID, road to serfdom, Ronald Reagan, scientific management, short selling, Silicon Valley, Simon Kuznets, social software, Steve Jobs, Telecommunications Act of 1996, telemarketer, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, trade route, trickle-down economics, union organizing, urban decay, urban planning, urban renewal, Vannevar Bush, vertical integration, Victor Gruen, white flight, working poor, Works Progress Administration, Y2K, young professional, zero-sum game

Actually, we thought we’d have dozens of protests all across the country. And we thought we’d see if we could keep the protests focused on super-wonky economic policy in order to get our point across that the public was going to wage a real battle against the collusion of the banks and the government—specifically, that all “too big to fail” banks should be resolved through normative bankruptcy procedures, divided up, and then sold back to the private market with new rules in place that keep them from getting huge again. For two months straight, co-founder Donny Shaw and I did almost nothing other than send emails, blog, talk to people, learn the ins and outs of protest planning, and work out logistics.


Virtual Competition by Ariel Ezrachi, Maurice E. Stucke

"World Economic Forum" Davos, Airbnb, Alan Greenspan, Albert Einstein, algorithmic management, algorithmic trading, Arthur D. Levinson, barriers to entry, behavioural economics, cloud computing, collaborative economy, commoditize, confounding variable, corporate governance, crony capitalism, crowdsourcing, Daniel Kahneman / Amos Tversky, David Graeber, deep learning, demand response, Didi Chuxing, digital capitalism, disintermediation, disruptive innovation, double helix, Downton Abbey, driverless car, electricity market, Erik Brynjolfsson, Evgeny Morozov, experimental economics, Firefox, framing effect, Google Chrome, independent contractor, index arbitrage, information asymmetry, interest rate derivative, Internet of things, invisible hand, Jean Tirole, John Markoff, Joseph Schumpeter, Kenneth Arrow, light touch regulation, linked data, loss aversion, Lyft, Mark Zuckerberg, market clearing, market friction, Milgram experiment, multi-sided market, natural language processing, Network effects, new economy, nowcasting, offshore financial centre, pattern recognition, power law, prediction markets, price discrimination, price elasticity of demand, price stability, profit maximization, profit motive, race to the bottom, rent-seeking, Richard Thaler, ride hailing / ride sharing, road to serfdom, Robert Bork, Ronald Reagan, search costs, self-driving car, sharing economy, Silicon Valley, Skype, smart cities, smart meter, Snapchat, social graph, Steve Jobs, sunk-cost fallacy, supply-chain management, telemarketer, The Chicago School, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, Travis Kalanick, turn-by-turn navigation, two-sided market, Uber and Lyft, Uber for X, uber lyft, vertical integration, Watson beat the top human players on Jeopardy!, women in the workforce, yield management

More recently, limited avenues for antitrust policy are perceived by policymakers to enhance market efficiencies.1 Many antitrust enforcers in 1998 would have agreed. Remarkably, some antitrust scholars and enforcers would agree even today—despite the economic crisis and the U.S. government bailing out financial institutions that, as a result of the mergers, were deemed too big to fail. While jurisdictions around the world exhibit varying levels of intervention, the dominant voices in competition policy over the past thirty-five years, as this chapter explores, have advocated lighter intervention, if any, in many mergers and monopolies. One exception is the prosecution of cartels that fi x prices, allocate markets or bids, or reduce output.2 Seemingly, from the discussion in Chapters 1 and 2, a light touch approach would appear justified.


pages: 504 words: 129,087

The Ones We've Been Waiting For: How a New Generation of Leaders Will Transform America by Charlotte Alter

"Hurricane Katrina" Superdome, "World Economic Forum" Davos, 4chan, affirmative action, Affordable Care Act / Obamacare, basic income, Berlin Wall, Bernie Sanders, Big Tech, Black Lives Matter, carbon footprint, carbon tax, clean water, collective bargaining, Columbine, corporate personhood, correlation does not imply causation, Credit Default Swap, crowdsourcing, data science, David Brooks, deepfake, deplatforming, disinformation, Donald Trump, double helix, East Village, ending welfare as we know it, fake news, Fall of the Berlin Wall, feminist movement, Ferguson, Missouri, financial deregulation, Francis Fukuyama: the end of history, gentrification, gig economy, glass ceiling, Glass-Steagall Act, Google Hangouts, green new deal, Greta Thunberg, housing crisis, illegal immigration, immigration reform, income inequality, Intergovernmental Panel on Climate Change (IPCC), job-hopping, Kevin Kelly, knowledge economy, Lyft, mandatory minimum, Marc Andreessen, Mark Zuckerberg, mass incarceration, McMansion, medical bankruptcy, microaggression, move fast and break things, Nate Silver, obamacare, Occupy movement, opioid epidemic / opioid crisis, passive income, pre–internet, race to the bottom, RAND corporation, Ronald Reagan, sexual politics, Sheryl Sandberg, side hustle, Silicon Valley, single-payer health, Snapchat, Social Justice Warrior, Steve Bannon, TaskRabbit, tech bro, too big to fail, Uber and Lyft, uber lyft, universal basic income, unpaid internship, We are the 99%, white picket fence, working poor, Works Progress Administration

Bush didn’t want to be the president who let the auto industry fail and put thousands of people out of work, so in 2008 he signed off on $17.4 billion in bailout money to help tide over Chrysler and GM until after the election. In 2009, it became Obama’s problem. Obama’s economists agreed that GM was too big to fail—with 225,000 current employees, 500,000 retirees, and almost 18,000 suppliers and dealers, letting GM liquidate would trigger a colossal economic disaster. Chrysler was significantly smaller but just as endangered, and the Auto Task Force was torn about whether to let it go under. Some warned that Chrysler couldn’t be saved, and that letting it fail would mean less competition for GM and Ford.


pages: 511 words: 132,682

Competition Overdose: How Free Market Mythology Transformed Us From Citizen Kings to Market Servants by Maurice E. Stucke, Ariel Ezrachi

"Friedman doctrine" OR "shareholder theory", affirmative action, Airbnb, Alan Greenspan, Albert Einstein, Andrei Shleifer, behavioural economics, Bernie Sanders, Boeing 737 MAX, Cambridge Analytica, Cass Sunstein, choice architecture, cloud computing, commoditize, corporate governance, Corrections Corporation of America, Credit Default Swap, crony capitalism, delayed gratification, disinformation, Donald Trump, en.wikipedia.org, fake news, Garrett Hardin, George Akerlof, gig economy, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Google Chrome, greed is good, hedonic treadmill, incognito mode, income inequality, income per capita, independent contractor, information asymmetry, invisible hand, job satisfaction, labor-force participation, late fees, loss aversion, low skilled workers, Lyft, mandatory minimum, Mark Zuckerberg, market fundamentalism, mass incarceration, Menlo Park, meta-analysis, Milgram experiment, military-industrial complex, mortgage debt, Network effects, out of africa, Paradox of Choice, payday loans, Ponzi scheme, precariat, price anchoring, price discrimination, profit maximization, profit motive, race to the bottom, Richard Thaler, ride hailing / ride sharing, Robert Bork, Robert Shiller, Ronald Reagan, search costs, shareholder value, Sheryl Sandberg, Shoshana Zuboff, Silicon Valley, Snapchat, Social Responsibility of Business Is to Increase Its Profits, Stanford prison experiment, Stephen Hawking, sunk-cost fallacy, surveillance capitalism, techlash, The Chicago School, The Market for Lemons, The Myth of the Rational Market, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Davenport, Thorstein Veblen, Tim Cook: Apple, too big to fail, Tragedy of the Commons, transaction costs, Uber and Lyft, uber lyft, ultimatum game, Vanguard fund, vertical integration, winner-take-all economy, Yochai Benkler

This quote is telling: It is bizarre that (President) Obama and (Secretary) Geithner are channeling President Reagan and claiming the government can’t do anything and the market is all knowing. We have learned that the market is not all knowing, especially when it is distorted by greed and avarice and government complicity. We have learned the hard way the costs of “too big to fail.” We have learned not to trust the right-wing ideologues who peddled a devil’s brew of deregulated and free market fundamentalism. We have learned a hard lesson about free market fundamentalism. Just as we have learned a hard lesson about free trade fundamentalism. This snake oil was peddled by the big banks and the big corporations.


pages: 491 words: 141,690

The Controlled Demolition of the American Empire by Jeff Berwick, Charlie Robinson

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, airport security, Alan Greenspan, American Legislative Exchange Council, American Society of Civil Engineers: Report Card, bank run, barriers to entry, Berlin Wall, Bernie Sanders, Big Tech, big-box store, bitcoin, Black Lives Matter, bread and circuses, Bretton Woods, British Empire, call centre, carbon credits, carbon footprint, carbon tax, Cass Sunstein, Chelsea Manning, clean water, cloud computing, cognitive dissonance, Comet Ping Pong, coronavirus, Corrections Corporation of America, COVID-19, crack epidemic, crisis actor, crony capitalism, cryptocurrency, dark matter, deplatforming, disinformation, Donald Trump, drone strike, Edward Snowden, Elon Musk, energy transition, epigenetics, failed state, fake news, false flag, Ferguson, Missouri, fiat currency, financial independence, George Floyd, global pandemic, global supply chain, Goldman Sachs: Vampire Squid, illegal immigration, Indoor air pollution, information security, interest rate swap, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jeff Bezos, Jeffrey Epstein, Julian Assange, Kickstarter, lockdown, Mahatma Gandhi, mandatory minimum, margin call, Mark Zuckerberg, mass immigration, megacity, microapartment, Mikhail Gorbachev, military-industrial complex, new economy, no-fly zone, offshore financial centre, Oklahoma City bombing, open borders, opioid epidemic / opioid crisis, pill mill, planetary scale, plutocrats, Ponzi scheme, power law, pre–internet, private military company, Project for a New American Century, quantitative easing, RAND corporation, reserve currency, RFID, ride hailing / ride sharing, Saturday Night Live, security theater, self-driving car, Seymour Hersh, Silicon Valley, smart cities, smart grid, smart meter, Snapchat, social distancing, Social Justice Warrior, South China Sea, stock buybacks, surveillance capitalism, too big to fail, unpaid internship, urban decay, WikiLeaks, working poor

Holder even said that he was concerned that the size of some of these banking institutions had become so large that it would be difficult for him to prosecute them because it would have a negative impact on the national economy, and perhaps even the world economy. He called this “collateral consequences” and it allowed him to give the impression that he was doing something about the criminality on Wall Street when that was all just for show.86 This was the era of “too big to fail”, and it goes against everything capitalism stands for. In fact, it is a form of fascism, pure and simple, when the state is blended with big business and the two work in concert with one another. It was the reason for the economic crash of 2008, and nothing systemically has changed to prevent it from happening again.


pages: 689 words: 134,457

When McKinsey Comes to Town: The Hidden Influence of the World's Most Powerful Consulting Firm by Walt Bogdanich, Michael Forsythe

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", "World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Alistair Cooke, Amazon Web Services, An Inconvenient Truth, asset light, asset-backed security, Atul Gawande, Bear Stearns, Boris Johnson, British Empire, call centre, Cambridge Analytica, carbon footprint, Citizen Lab, cognitive dissonance, collective bargaining, compensation consultant, coronavirus, corporate governance, corporate social responsibility, Corrections Corporation of America, COVID-19, creative destruction, Credit Default Swap, crony capitalism, data science, David Attenborough, decarbonisation, deindustrialization, disinformation, disruptive innovation, do well by doing good, don't be evil, Donald Trump, double entry bookkeeping, facts on the ground, failed state, financial engineering, full employment, future of work, George Floyd, Gini coefficient, Glass-Steagall Act, global pandemic, illegal immigration, income inequality, information security, interchangeable parts, Intergovernmental Panel on Climate Change (IPCC), invisible hand, job satisfaction, job-hopping, junk bonds, Kenneth Arrow, Kickstarter, load shedding, Mark Zuckerberg, megaproject, Moneyball by Michael Lewis explains big data, mortgage debt, Multics, Nelson Mandela, obamacare, offshore financial centre, old-boy network, opioid epidemic / opioid crisis, profit maximization, public intellectual, RAND corporation, Rutger Bregman, scientific management, sentiment analysis, shareholder value, Sheryl Sandberg, Silicon Valley, smart cities, smart meter, South China Sea, sovereign wealth fund, tech worker, The future is already here, The Nature of the Firm, too big to fail, urban planning, WikiLeaks, working poor, Yogi Berra, zero-sum game

Then, in the spring of 1984, Reuters published rumors that Continental faced bankruptcy. The rumors became a self-fulfilling prophecy as many of Continental’s big corporate customers pulled their deposits. By July, the federal government bailed out Continental by taking a majority stake. It was the biggest bank failure in American history until 2008. It also gave rise to the “too big to fail” doctrine, which guided financial regulators in the recession that would come later. Lytle got three and a half years in prison for defrauding Continental of $2.25 million. The judge said that Lytle was “someone in way over his head.” Chase would spend years trying to extricate itself from millions in bad Penn Square loans.


pages: 535 words: 158,863

Superclass: The Global Power Elite and the World They Are Making by David Rothkopf

"World Economic Forum" Davos, airport security, Alan Greenspan, anti-communist, asset allocation, Ayatollah Khomeini, bank run, barriers to entry, Bear Stearns, Berlin Wall, Big Tech, Bob Geldof, Branko Milanovic, Bretton Woods, BRICs, business cycle, carried interest, clean water, compensation consultant, corporate governance, creative destruction, crony capitalism, David Brooks, Doha Development Round, Donald Trump, fake news, financial innovation, fixed income, Francis Fukuyama: the end of history, Gini coefficient, global village, high net worth, income inequality, industrial cluster, informal economy, Internet Archive, Jeff Bezos, jimmy wales, John Elkington, joint-stock company, knowledge economy, Larry Ellison, liberal capitalism, Live Aid, Long Term Capital Management, Mahatma Gandhi, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, Martin Wolf, mass immigration, means of production, Mexican peso crisis / tequila crisis, Michael Milken, Mikhail Gorbachev, military-industrial complex, Nelson Mandela, old-boy network, open borders, plutocrats, Ponzi scheme, price mechanism, proprietary trading, Savings and loan crisis, shareholder value, Skype, special economic zone, Steve Jobs, Thorstein Veblen, too big to fail, trade liberalization, trickle-down economics, upwardly mobile, vertical integration, Vilfredo Pareto, Washington Consensus, William Langewiesche

However, the stark power of the group is even better illustrated by the fact that when markets did come up on the shoals of greed, mismanagement, and minimization and misunderstanding of complex new risks, these same financial titans who told government to stay out were able to persuade government in many cases to step in and pull their fat out of the fire…or at least what remained of it. That’s really stunning. The same people who gave you Too Global to Regulate gave you Too Big to Fail, and both times the political class, many of whom came from the financial superclass or saw their political fortunes buoyed by its donations, said, “Sign us up.” That’s raw power at work. The crises have also revealed the public’s attitude toward many in the superclass, highlighting resentment at what is seen as a pattern of gaming the system, of getting rich on the way up and on the way down, of making the taxpayer pay for their errors while being the primary beneficiaries of their gains.


India's Long Road by Vijay Joshi

Affordable Care Act / Obamacare, barriers to entry, Basel III, basic income, blue-collar work, book value, Bretton Woods, business climate, capital controls, carbon tax, central bank independence, clean water, collapse of Lehman Brothers, collective bargaining, colonial rule, congestion charging, Cornelius Vanderbilt, corporate governance, creative destruction, crony capitalism, decarbonisation, deindustrialization, demographic dividend, demographic transition, Doha Development Round, eurozone crisis, facts on the ground, failed state, financial intermediation, financial repression, first-past-the-post, floating exchange rates, foreign exchange controls, full employment, germ theory of disease, Gini coefficient, global supply chain, global value chain, hiring and firing, income inequality, Indoor air pollution, Induced demand, inflation targeting, invisible hand, land reform, low interest rates, Mahatma Gandhi, manufacturing employment, Martin Wolf, means of production, microcredit, moral hazard, obamacare, Pareto efficiency, price elasticity of demand, price mechanism, price stability, principal–agent problem, profit maximization, profit motive, purchasing power parity, quantitative easing, race to the bottom, randomized controlled trial, rent-seeking, reserve currency, rising living standards, school choice, school vouchers, secular stagnation, Silicon Valley, smart cities, South China Sea, special drawing rights, The Future of Employment, The Market for Lemons, too big to fail, total factor productivity, trade liberalization, Tragedy of the Commons, transaction costs, universal basic income, urban sprawl, vertical integration, working-age population

In addition, the Basel Committee has announced its intention to lay down minimum levels of liquidity and ‘stable funding’ for banks, to ensure that they can withstand short-​term funding stress and longer-​term liquidity mismatches. Regulations are also being contemplated in several other areas such as ‘shadow banks’, derivatives, bank resolution, and banks that are ‘too big to fail’. India has adopted the Basel III capital adequacy and leverage standards, indeed slightly tougher ones, to err on the side of safety.21 The RBI has also issued guidelines on liquidity management, and the expectation is that it will go along with the Basel Committee’s liquidity ratios, and its regulations on shadow banking, derivatives trading etc., as and when they arrive.


pages: 497 words: 153,755

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

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

Admittedly, the early 1890s were rough in Europe as well, but it was clear that the Bank of England, the Bank of France, and their counterparts across the Continent were not about to soil their coveted gold bricks by offering them in the form of credits to the untrustworthy Treasury of the United States. Did the Europeans fail to recognize that perhaps the United States had become "too big to fail"? Indeed, the linkages between the two sides of the Atlantic were developing so rapidly, both financially and in terms of trade, that economic chaos in the United States could only have made matters in Europe far more dangerous than they already were. Or was it the opposite-were the Europeans too focused on the competitive threat from America's looming transformation into the major industrial power of the age?


pages: 514 words: 152,903

The Best Business Writing 2013 by Dean Starkman

Alvin Toffler, Asperger Syndrome, bank run, Basel III, Bear Stearns, call centre, carbon tax, clean water, cloud computing, collateralized debt obligation, Columbine, computer vision, Credit Default Swap, credit default swaps / collateralized debt obligations, crowdsourcing, Erik Brynjolfsson, eurozone crisis, Evgeny Morozov, Exxon Valdez, Eyjafjallajökull, factory automation, fixed income, fulfillment center, full employment, Future Shock, gamification, Goldman Sachs: Vampire Squid, hiring and firing, hydraulic fracturing, Ida Tarbell, income inequality, jimmy wales, job automation, John Markoff, junk bonds, Kickstarter, late fees, London Whale, low interest rates, low skilled workers, Mahatma Gandhi, market clearing, Maui Hawaii, Menlo Park, Occupy movement, oil shale / tar sands, One Laptop per Child (OLPC), Parag Khanna, Pareto efficiency, price stability, proprietary trading, Ray Kurzweil, San Francisco homelessness, Silicon Valley, Skype, sovereign wealth fund, stakhanovite, Stanford prison experiment, Steve Jobs, Stuxnet, synthetic biology, tail risk, technological determinism, the payments system, too big to fail, Vanguard fund, wage slave, warehouse automation, warehouse robotics, Y2K, zero-sum game

They might very well have other debts slashed, such as home-equity loans and credit-card debt. The cumulative effect could devastate the banks, plunging the nation back into a financial crisis. Cramdown’s Democratic supporters needed the president’s vigorous support because the measure faced powerful opponents: not just the too-big-to-fail banks but small banks and credit unions. “The community banks went bonkers on this issue,” says former senator Chris Dodd (D-Conn.), then head of the Senate banking committee. Democratic leaders offered to exempt smaller banks from the legislation but couldn’t reach a deal. After narrowly passing the Democrat-controlled House, cramdown was defeated in the Senate when twelve Democrats joined Republicans to vote against it.


pages: 479 words: 144,453

Homo Deus: A Brief History of Tomorrow by Yuval Noah Harari

23andMe, Aaron Swartz, agricultural Revolution, algorithmic trading, Anne Wojcicki, Anthropocene, anti-communist, Anton Chekhov, autonomous vehicles, behavioural economics, Berlin Wall, call centre, Chekhov's gun, Chris Urmson, cognitive dissonance, Columbian Exchange, computer age, DeepMind, Demis Hassabis, Deng Xiaoping, don't be evil, driverless car, drone strike, European colonialism, experimental subject, falling living standards, Flash crash, Frank Levy and Richard Murnane: The New Division of Labor, glass ceiling, global village, Great Leap Forward, Intergovernmental Panel on Climate Change (IPCC), invention of writing, invisible hand, Isaac Newton, job automation, John Markoff, Kevin Kelly, lifelogging, low interest rates, means of production, Mikhail Gorbachev, Minecraft, Moneyball by Michael Lewis explains big data, Monkeys Reject Unequal Pay, mutually assured destruction, new economy, Nick Bostrom, pattern recognition, peak-end rule, Peter Thiel, placebo effect, Ray Kurzweil, self-driving car, Silicon Valley, Silicon Valley ideology, stem cell, Steven Pinker, telemarketer, The future is already here, The Future of Employment, too big to fail, trade route, Turing machine, Turing test, ultimatum game, Watson beat the top human players on Jeopardy!, zero-sum game

The social protests that swept the Western world in 2011 – such as Occupy Wall Street and the Spanish 15-M movement – have absolutely nothing against democracy, individualism and human rights, or even against the basic principles of free-market economics. Just the opposite – they take governments to task for not living up to these liberal ideals. They demand that the market be really free, instead of being controlled and manipulated by corporations and banks ‘too big to fail’. They call for truly representative democratic institutions, which will serve the interests of ordinary citizens rather than of moneyed lobbyists and powerful interest groups. Even those blasting stock exchanges and parliaments with the harshest criticism don’t have a viable alternative model for running the world.


pages: 468 words: 145,998

On the Brink: Inside the Race to Stop the Collapse of the Global Financial System by Henry M. Paulson

Alan Greenspan, asset-backed security, bank run, banking crisis, Bear Stearns, break the buck, Bretton Woods, buy and hold, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, Doha Development Round, fear of failure, financial engineering, financial innovation, fixed income, housing crisis, income inequality, junk bonds, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, money market fund, moral hazard, Northern Rock, price discovery process, price mechanism, regulatory arbitrage, Ronald Reagan, Saturday Night Live, Savings and loan crisis, short selling, sovereign wealth fund, technology bubble, too big to fail, trade liberalization, young professional

Today the top 10 financial institutions in the U.S. hold close to 60 percent of financial assets, up from 10 percent in 1990. This dramatic concentration, coupled with much greater interconnectedness, means that the failure of any of a few very large institutions can take down a big part of the system, and, in domino fashion, topple the rest. The concept of “too big to fail” has moved from the academic literature to reality and must be addressed. There are a number of steps we should take to deal with these issues. To start, we should adjust U.S. policies to reduce the global imbalances that have been decried for years by many prominent economists. If, as a consequence of our current economic problems, American citizens begin to save more and spend less, we ought to welcome and encourage this change.


pages: 585 words: 151,239

Capitalism in America: A History by Adrian Wooldridge, Alan Greenspan

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, agricultural Revolution, air freight, Airbnb, airline deregulation, Alan Greenspan, American Society of Civil Engineers: Report Card, Asian financial crisis, bank run, barriers to entry, Bear Stearns, Berlin Wall, Blitzscaling, Bonfire of the Vanities, book value, Bretton Woods, British Empire, business climate, business cycle, business process, California gold rush, Charles Lindbergh, cloud computing, collateralized debt obligation, collective bargaining, Corn Laws, Cornelius Vanderbilt, corporate governance, corporate raider, cotton gin, creative destruction, credit crunch, debt deflation, Deng Xiaoping, disruptive innovation, Donald Trump, driverless car, edge city, Elon Musk, equal pay for equal work, Everybody Ought to Be Rich, Fairchild Semiconductor, Fall of the Berlin Wall, fiat currency, financial deregulation, financial engineering, financial innovation, fixed income, Ford Model T, full employment, general purpose technology, George Gilder, germ theory of disease, Glass-Steagall Act, global supply chain, Great Leap Forward, guns versus butter model, hiring and firing, Ida Tarbell, income per capita, indoor plumbing, informal economy, interchangeable parts, invention of the telegraph, invention of the telephone, Isaac Newton, Jeff Bezos, jimmy wales, John Maynard Keynes: technological unemployment, Joseph Schumpeter, junk bonds, Kenneth Rogoff, Kitchen Debate, knowledge economy, knowledge worker, labor-force participation, land bank, Lewis Mumford, Louis Pasteur, low interest rates, low skilled workers, manufacturing employment, market bubble, Mason jar, mass immigration, McDonald's hot coffee lawsuit, means of production, Menlo Park, Mexican peso crisis / tequila crisis, Michael Milken, military-industrial complex, minimum wage unemployment, mortgage debt, Myron Scholes, Network effects, new economy, New Urbanism, Northern Rock, oil rush, oil shale / tar sands, oil shock, Peter Thiel, Phillips curve, plutocrats, pneumatic tube, popular capitalism, post-industrial society, postindustrial economy, price stability, Productivity paradox, public intellectual, purchasing power parity, Ralph Nader, Ralph Waldo Emerson, RAND corporation, refrigerator car, reserve currency, rising living standards, road to serfdom, Robert Gordon, Robert Solow, Ronald Reagan, Sand Hill Road, savings glut, scientific management, secular stagnation, Silicon Valley, Silicon Valley startup, Simon Kuznets, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, stem cell, Steve Jobs, Steve Wozniak, strikebreaker, supply-chain management, The Great Moderation, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, total factor productivity, trade route, transcontinental railway, tulip mania, Tyler Cowen, Tyler Cowen: Great Stagnation, union organizing, Unsafe at Any Speed, Upton Sinclair, urban sprawl, Vannevar Bush, vertical integration, War on Poverty, washing machines reduced drudgery, Washington Consensus, white flight, wikimedia commons, William Shockley: the traitorous eight, women in the workforce, Works Progress Administration, Yom Kippur War, young professional

In 1999, the Clinton administration finally passed a comprehensive financial reform that made it easier for Main Street banks to compete with their rivals at home and abroad. The end result was not entirely happy: worried about a world in which America’s banks were too small to compete, policy makers unwittingly ushered in a world in which they were too big to fail. GLOBALIZATION The United States has long been a battleground for isolationists and globalizers. The isolationists point out that, as a continent-size power with a vast economy and wide oceans on either side, America can remain aloof from a messy world. The globalizers retort that, as the world’s biggest economy, America’s prosperity depends on the prosperity of the rest of the world.


pages: 523 words: 159,884

The Great Railroad Revolution by Christian Wolmar

"Hurricane Katrina" Superdome, 1919 Motor Transport Corps convoy, accounting loophole / creative accounting, banking crisis, Bay Area Rapid Transit, big-box store, California high-speed rail, Charles Lindbergh, collective bargaining, company town, Cornelius Vanderbilt, cross-subsidies, Ford Model T, high-speed rail, intermodal, James Watt: steam engine, junk bonds, Kickstarter, Ponzi scheme, quantitative easing, railway mania, Ralph Waldo Emerson, refrigerator car, Silicon Valley, streetcar suburb, strikebreaker, Suez canal 1869, too big to fail, trade route, transcontinental railway, traveling salesman, union organizing, urban sprawl, vertical integration

The railroads had indeed misbehaved and were guilty of all sorts of calumnies, but the level of antagonism they engendered was undoubtedly way beyond what they deserved, given the positive changes they had inspired and the economic wealth they had created. They were the bankers of their day, widely distrusted and too big to fail. Their achievements are, though, worth spelling out in some detail. It is, indeed, difficult to discern much in the lives of late-nineteenth-century Americans that had not been affected by the iron horse, and mostly for the good. America’s industrial takeoff was stimulated by the spread of the railroads in a synergic relationship where cause and effect are difficult to disentangle.


pages: 565 words: 151,129

The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism by Jeremy Rifkin

3D printing, active measures, additive manufacturing, Airbnb, autonomous vehicles, back-to-the-land, benefit corporation, big-box store, bike sharing, bioinformatics, bitcoin, business logic, business process, Chris Urmson, circular economy, clean tech, clean water, cloud computing, collaborative consumption, collaborative economy, commons-based peer production, Community Supported Agriculture, Computer Numeric Control, computer vision, crowdsourcing, demographic transition, distributed generation, DIY culture, driverless car, Eben Moglen, electricity market, en.wikipedia.org, Frederick Winslow Taylor, Free Software Foundation, Garrett Hardin, general purpose technology, global supply chain, global village, Hacker Conference 1984, Hacker Ethic, industrial robot, informal economy, information security, Intergovernmental Panel on Climate Change (IPCC), intermodal, Internet of things, invisible hand, Isaac Newton, James Watt: steam engine, job automation, John Elkington, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Julian Assange, Kickstarter, knowledge worker, longitudinal study, low interest rates, machine translation, Mahatma Gandhi, manufacturing employment, Mark Zuckerberg, market design, mass immigration, means of production, meta-analysis, Michael Milken, mirror neurons, natural language processing, new economy, New Urbanism, nuclear winter, Occupy movement, off grid, off-the-grid, oil shale / tar sands, pattern recognition, peer-to-peer, peer-to-peer lending, personalized medicine, phenotype, planetary scale, price discrimination, profit motive, QR code, RAND corporation, randomized controlled trial, Ray Kurzweil, rewilding, RFID, Richard Stallman, risk/return, Robert Solow, Rochdale Principles, Ronald Coase, scientific management, search inside the book, self-driving car, shareholder value, sharing economy, Silicon Valley, Skype, smart cities, smart grid, smart meter, social web, software as a service, spectrum auction, Steve Jobs, Stewart Brand, the built environment, the Cathedral and the Bazaar, the long tail, The Nature of the Firm, The Structural Transformation of the Public Sphere, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, too big to fail, Tragedy of the Commons, transaction costs, urban planning, vertical integration, warehouse automation, Watson beat the top human players on Jeopardy!, web application, Whole Earth Catalog, Whole Earth Review, WikiLeaks, working poor, Yochai Benkler, zero-sum game, Zipcar

Chapter Fourteen Crowdfunding Social Capital, Democratizing Currency, Humanizing Entrepreneurship, and Rethinking Work The near collapse of the global banking system in 2008 terrified millions of people. Lending froze and the U.S. government was forced to bail out the biggest financial institutions in the country with the rationale that they were just “too big to fail.” The American public was enraged that $700 billion in tax revenue was handed over to banks, rewarding them for financial recklessness, while millions of Americans were losing their homes because they couldn’t pay off their mortgages. In other words, they were “too small to matter.”1 Peer-to-Peer Social Lending In the aftermath of the banking debacle, a new kind of lending institution emerged on the Internet.


pages: 538 words: 147,612

All the Money in the World by Peter W. Bernstein

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

As Forbes senior editor Alan Farnham put it in Forbes Great Success Stories: Twelve Tales of Victory Wrested from Defeat, recounting Trump’s near-death experience with debt, “In effect, money center banks47 like Citibank had to stand by Trump, because if they pulled the rug out from under him, they themselves stood to tumble. Like the Chrysler Corporation of the late 1970s, Trump had grown almost ‘too big to fail.’ And acting as his own Lee Iacocca, he argued that point persuasively. ‘Listen fellows,’ Trump recalls saying, ‘if I have a problem, then you have a problem. We have to find a way out or it’s going to be a difficult time for both of us.’” Hundreds of millions of dollars48 of Trump’s debts were written off or put off for a later date.


pages: 497 words: 150,205

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

3D printing, Airbnb, 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

Behind the scenes, though, the Deauville-amplified doom loop was destabilising government bond yields, inflicting bigger losses on the eurozone’s often-distressed banks. Suddenly, in July, the crisis took a virulent new turn as Italian yields soared, sparking a wider sell-off. Italy’s near-€2-trillion bond market – the eurozone’s largest and the world’s third-biggest – was too big to fail, but also too big for even Germany to bail out. Thus Plan A – try to contain the crisis to Greece, Ireland and Portugal, and muddle through until 2013 in the hope that things would improve by then – had clearly failed. It was no longer a crisis in specific euro member states; it was a systemic crisis that threatened the eurozone – and the global financial system – as a whole.


pages: 665 words: 146,542

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

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

This includes a counter-cyclical regulation of the capital and liquidity ratios of financial institutions of systemic influence, whether banks or otherwise. Systemic risk boards should be set up in all international financial centres, tasked with blocking any build-up of speculation on credit and asset prices. The ‘too big to fail’ syndrome must be eradicated through predefined compulsory restructuring procedures for fragile financial bodies, and there should be an absorption of any eventual losses by their creditors. The third element is a transformation of central banks’ monetary doctrine, which must put financial stability on the same footing as price stability in the conduct of monetary policy.


pages: 477 words: 144,329

How Money Became Dangerous by Christopher Varelas

activist fund / activist shareholder / activist investor, Airbnb, airport security, barriers to entry, basic income, Bear Stearns, Big Tech, bitcoin, blockchain, Bonfire of the Vanities, California gold rush, cashless society, corporate raider, crack epidemic, cryptocurrency, discounted cash flows, disintermediation, diversification, diversified portfolio, do well by doing good, Donald Trump, driverless car, dumpster diving, eat what you kill, fiat currency, financial engineering, fixed income, friendly fire, full employment, Gordon Gekko, greed is good, initial coin offering, interest rate derivative, John Meriwether, junk bonds, Kickstarter, Long Term Capital Management, low interest rates, mandatory minimum, Mary Meeker, Max Levchin, Michael Milken, mobile money, Modern Monetary Theory, mortgage debt, Neil Armstrong, pensions crisis, pets.com, pre–internet, profit motive, proprietary trading, risk tolerance, Saturday Night Live, selling pickaxes during a gold rush, shareholder value, side project, Silicon Valley, Steve Jobs, technology bubble, The Predators' Ball, too big to fail, universal basic income, zero day

Was it any surprise that Citi—the largest, blandest elephant in the herd, with the mission of hunting other elephants—was at the center of the 2008 financial crisis, even more so than the other major firms, given Citi’s size, its global reach, and its lack of centralized risk management? It’s not easy to tame or kill these beasts once you’ve created them. Although many people are concerned that the financial supermarket firms may be too big to fail, they may also be too big to succeed. 7 Reach Out and Touch Someone Technology is the knack of so arranging the world that we don’t have to experience it. —MAX FRISCH, FROM HOMO FABER In the mid-1980s, making withdrawals and deposits via ATM was the hot new thing in the world of money.


How to Be a Liberal: The Story of Liberalism and the Fight for Its Life by Ian Dunt

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

But as the Greek delegation left, Barroso quietly drew the Greek finance minister Evangelos Venizelos aside, and told him: ‘We have to kill this referendum.’ The referendum idea was discarded and Papandreou was removed. Barroso’s favourite, Papademos, was installed in his place. European leaders then turned their attention to Italy. This was always the greatest threat of contagion. It was simply too big to fail without bringing down the eurozone. Lagarde had a plan for a €80 billion credit lifeline alongside a monitoring programme. But the trouble was no-one trusted Berlusconi. So behind the scenes, Merkel and Sarkozy tried to get rid of him. ‘The Europeans actually approached us softly, indirectly, saying: “We basically want you to join us in forcing Berlusconi out,”’ Treasury secretary Timothy Geithner said.


pages: 511 words: 151,359

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

Alan Greenspan, Asian financial crisis, asset allocation, bank run, banking crisis, banks create money, Berlin Wall, book value, Bretton Woods, business cycle, Buy land – they’re not making it any more, capital controls, central bank independence, colonial rule, corporate governance, COVID-19, creative destruction, credit crunch, crony capitalism, currency manipulation / currency intervention, currency peg, currency risk, debt deflation, Deng Xiaoping, desegregation, discounted cash flows, diversification, Donald Trump, equity risk premium, financial engineering, financial innovation, floating exchange rates, Fractional reserve banking, full employment, Glass-Steagall Act, hindsight bias, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, if you build it, they will come, impact investing, inflation targeting, interest rate swap, invisible hand, Japanese asset price bubble, Jeff Bezos, junk bonds, Kickstarter, laissez-faire capitalism, lateral thinking, Long Term Capital Management, low interest rates, market bubble, mass immigration, means of production, megaproject, Mexican peso crisis / tequila crisis, Michael Milken, Money creation, moral hazard, Myron Scholes, negative equity, offshore financial centre, open borders, open economy, Pearl River Delta, price mechanism, profit motive, quantitative easing, Ralph Waldo Emerson, regulatory arbitrage, rent-seeking, reserve currency, risk free rate, risk-adjusted returns, Ronald Reagan, Savings and loan crisis, savings glut, Scramble for Africa, short selling, social distancing, South China Sea, The Wealth of Nations by Adam Smith, too big to fail, yield curve

On the night of 21 September 1998, a cross-section of US commercial banks had been called into the offices of the New York Federal Reserve and told that they need to work out a rescue plan for a company called Long-Term Capital Management. The tale of the collapse of this investment company has been well told elsewhere, but it had become simply too big to fail given the likely consequences had it been forced to unwind its highly leveraged positions in financial markets quickly. The bailout allowed an orderly unwinding of the company’s positions, but even more importantly there followed, in quick succession, three cuts in US interest rates. To most financial market participants it had become clear, rightly or wrongly, that the monetary policy of the world’s reserve currency would react to bail out those investors who had made bad bets – if they had made them in sufficient scale to threaten the stability of the financial system.


pages: 569 words: 156,139

Amazon Unbound: Jeff Bezos and the Invention of a Global Empire by Brad Stone

activist fund / activist shareholder / activist investor, air freight, Airbnb, Amazon Picking Challenge, Amazon Robotics, Amazon Web Services, autonomous vehicles, Bernie Sanders, big data - Walmart - Pop Tarts, Big Tech, Black Lives Matter, business climate, call centre, carbon footprint, Clayton Christensen, cloud computing, Colonization of Mars, commoditize, company town, computer vision, contact tracing, coronavirus, corporate governance, COVID-19, crowdsourcing, data science, deep learning, disinformation, disintermediation, Donald Trump, Downton Abbey, Elon Musk, fake news, fulfillment center, future of work, gentrification, George Floyd, gigafactory, global pandemic, Greta Thunberg, income inequality, independent contractor, invisible hand, Jeff Bezos, John Markoff, Kiva Systems, Larry Ellison, lockdown, Mahatma Gandhi, Mark Zuckerberg, Masayoshi Son, mass immigration, minimum viable product, move fast and break things, Neal Stephenson, NSO Group, Paris climate accords, Peter Thiel, Ponzi scheme, Potemkin village, private spaceflight, quantitative hedge fund, remote working, rent stabilization, RFID, Robert Bork, Ronald Reagan, search inside the book, Sheryl Sandberg, Silicon Valley, Silicon Valley startup, Snapchat, social distancing, SoftBank, SpaceX Starlink, speech recognition, Steve Ballmer, Steve Jobs, Steven Levy, tech billionaire, tech bro, techlash, TED Talk, Tim Cook: Apple, Tony Hsieh, too big to fail, Tragedy of the Commons, two-pizza team, Uber for X, union organizing, warehouse robotics, WeWork

“As Exec Chair, I will stay engaged in important Amazon initiatives but also have the time and energy I need to focus on the Day 1 Fund, the Bezos Earth Fund, Blue Origin, the Washington Post, and my other passions. I’ve never had more energy, and this isn’t about retiring.” Jeff Bezos’s mission had been to stave off stasis and to keep Amazon a “Day 1” company with an inventive culture and durable customs that would outlast him. “Amazon is not too big to fail,” he once warned employees at an all-hands meeting. “In fact, I predict one day Amazon will fail. Amazon will go bankrupt. If you look at large companies, their lifespans tend to be thirty-plus years, not a hundred-plus years.” It would now largely fall to Andy Jassy to prevent that dark possibility.


pages: 1,544 words: 391,691

Corporate Finance: Theory and Practice by Pierre Vernimmen, Pascal Quiry, Maurizio Dallocchio, Yann le Fur, Antonio Salvi

"Friedman doctrine" OR "shareholder theory", accelerated depreciation, accounting loophole / creative accounting, active measures, activist fund / activist shareholder / activist investor, AOL-Time Warner, ASML, asset light, bank run, barriers to entry, Basel III, Bear Stearns, Benoit Mandelbrot, bitcoin, Black Swan, Black-Scholes formula, blockchain, book value, business climate, business cycle, buy and hold, buy low sell high, capital asset pricing model, carried interest, collective bargaining, conceptual framework, corporate governance, correlation coefficient, credit crunch, Credit Default Swap, currency risk, delta neutral, dematerialisation, discounted cash flows, discrete time, disintermediation, diversification, diversified portfolio, Dutch auction, electricity market, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, eurozone crisis, financial engineering, financial innovation, fixed income, Flash crash, foreign exchange controls, German hyperinflation, Glass-Steagall Act, high net worth, impact investing, implied volatility, information asymmetry, intangible asset, interest rate swap, Internet of things, inventory management, invisible hand, joint-stock company, joint-stock limited liability company, junk bonds, Kickstarter, lateral thinking, London Interbank Offered Rate, low interest rates, mandelbrot fractal, margin call, means of production, money market fund, moral hazard, Myron Scholes, new economy, New Journalism, Northern Rock, performance metric, Potemkin village, quantitative trading / quantitative finance, random walk, Right to Buy, risk free rate, risk/return, shareholder value, short selling, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, Steve Jobs, stocks for the long run, supply-chain management, survivorship bias, The Myth of the Rational Market, time value of money, too big to fail, transaction costs, value at risk, vertical integration, volatility arbitrage, volatility smile, yield curve, zero-coupon bond, zero-sum game

However, the use of debt has its limits. When a group’s corporate structure becomes totally unbalanced, debt no longer acts as an incentive for management. On the contrary, the corporate manager will be tempted to continue expanding via debt until his group has become too big to fail, like RBS, Fortis, AIG, Citi, etc., until the concept of too big to fail is tested (Lehman). This risk is called “moral hazard”. 2. LBOs, this logic’s pushed to the limits Some sectors are being restructured through LBO transactions, which we will look at in further detail in Chapter 46. An LBO is the acquisition, generally by management (MBO), of all of a company’s shares using borrowed funds.


pages: 586 words: 160,321

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

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

Because of interlinkages between the financial industry and the real economy and between the financial industry and the state, a crisis can soon spread through the entire system. Economic linkages between member states in a currency union have a similar effect. This potential for negative contagion within and across sectors lies at the heart of the current macroprudential policy discussion about institutions that are too big to fail, too interconnected to fail, or too big to save. The French and German views, of course, come down on different sides of this debate. The French philosophy takes the adverse loops just described very seriously and so calls for aggressive intervention in times of crisis to stop amplification and contagion and to ensure coordination on the “good equilibrium.”


pages: 578 words: 168,350

Scale: The Universal Laws of Growth, Innovation, Sustainability, and the Pace of Life in Organisms, Cities, Economies, and Companies by Geoffrey West

"World Economic Forum" Davos, Alfred Russel Wallace, Anthropocene, Anton Chekhov, Benoit Mandelbrot, Black Swan, British Empire, butterfly effect, caloric restriction, caloric restriction, carbon footprint, Cesare Marchetti: Marchetti’s constant, clean water, coastline paradox / Richardson effect, complexity theory, computer age, conceptual framework, continuous integration, corporate social responsibility, correlation does not imply causation, cotton gin, creative destruction, dark matter, Deng Xiaoping, double helix, driverless car, Dunbar number, Edward Glaeser, endogenous growth, Ernest Rutherford, first square of the chessboard, first square of the chessboard / second half of the chessboard, Frank Gehry, Geoffrey West, Santa Fe Institute, Great Leap Forward, Guggenheim Bilbao, housing crisis, Index librorum prohibitorum, invention of agriculture, invention of the telephone, Isaac Newton, Jane Jacobs, Jeff Bezos, Johann Wolfgang von Goethe, John von Neumann, Kenneth Arrow, laissez-faire capitalism, Large Hadron Collider, Larry Ellison, Lewis Mumford, life extension, Mahatma Gandhi, mandelbrot fractal, Marc Benioff, Marchetti’s constant, Masdar, megacity, Murano, Venice glass, Murray Gell-Mann, New Urbanism, Oklahoma City bombing, Peter Thiel, power law, profit motive, publish or perish, Ray Kurzweil, Richard Feynman, Richard Florida, Salesforce, seminal paper, Silicon Valley, smart cities, Stephen Hawking, Steve Jobs, Stewart Brand, Suez canal 1869, systematic bias, systems thinking, technological singularity, The Coming Technological Singularity, The Death and Life of Great American Cities, the scientific method, the strength of weak ties, time dilation, too big to fail, transaction costs, urban planning, urban renewal, Vernor Vinge, Vilfredo Pareto, Von Neumann architecture, Whole Earth Catalog, Whole Earth Review, wikimedia commons, working poor

If only we could tame the potential brutality and greed of the survival of the fittest and soften some its more egregious consequences by formulating a magic algorithm for how to balance the classic tension between regulation, government intervention, and uncontrolled rampant capitalism. This struggle painfully played itself out as we witnessed the struggle between the death throes of corporations that probably should have died and the desire to save jobs and protect the lives of workers because certain incompetent if not duplicitous corporations were deemed “too big to fail” during the 2008 financial crisis. It may be a platitude, but it’s nevertheless true that nothing stays the same. Both Standard & Poor’s and the business magazine Fortune construct ongoing lists of the five hundred most successful companies, and there is a certain prestige associated with being named on both of these lists.


Alpha Trader by Brent Donnelly

Abraham Wald, algorithmic trading, Asian financial crisis, Atul Gawande, autonomous vehicles, backtesting, barriers to entry, beat the dealer, behavioural economics, bitcoin, Boeing 747, buy low sell high, Checklist Manifesto, commodity trading advisor, coronavirus, correlation does not imply causation, COVID-19, crowdsourcing, cryptocurrency, currency manipulation / currency intervention, currency risk, deep learning, diversification, Edward Thorp, Elliott wave, Elon Musk, endowment effect, eurozone crisis, fail fast, financial engineering, fixed income, Flash crash, full employment, global macro, global pandemic, Gordon Gekko, hedonic treadmill, helicopter parent, high net worth, hindsight bias, implied volatility, impulse control, Inbox Zero, index fund, inflation targeting, information asymmetry, invisible hand, iterative process, junk bonds, Kaizen: continuous improvement, law of one price, loss aversion, low interest rates, margin call, market bubble, market microstructure, Market Wizards by Jack D. Schwager, McMansion, Monty Hall problem, Network effects, nowcasting, PalmPilot, paper trading, pattern recognition, Peter Thiel, prediction markets, price anchoring, price discovery process, price stability, quantitative easing, quantitative trading / quantitative finance, random walk, Reminiscences of a Stock Operator, reserve currency, risk tolerance, Robert Shiller, secular stagnation, Sharpe ratio, short selling, side project, Stanford marshmallow experiment, Stanford prison experiment, survivorship bias, tail risk, TED Talk, the scientific method, The Wisdom of Crowds, theory of mind, time dilation, too big to fail, transaction costs, value at risk, very high income, yield curve, you are the product, zero-sum game

It is impossible to succeed without the right attitude Conclusion One last story Coda Acknowledgements Appendix A: Further Reading Appendix B: 21 ways to succeed at trading and 13 ways to fail Index FOREWORD If you’re reading this foreword, you’re probably considering whether or not to buy this book. You also probably have a professional or semi-professional connection to financial markets. Maybe you already work on a trading desk. Maybe you work in sales at one of those too-big-to-fail outfits and trade in your personal account. Maybe you don’t currently work in the financial industry at all, but you’ve been spending a lot of hours on Robinhood and you’re thinking about taking your involvement “to the next level”, whatever that means to you. In any event, you’re reading this foreword for clues as to whether this book will make you a better trader.


pages: 541 words: 173,676

Generations: the Real Differences Between Gen Z, Millennials, Gen X, Boomers, and Silents—and What They Mean for America's Future: The Real Differences between Gen Z, Millennials, Gen X, Boomers, and Silents—and What They Mean for America's Future by Jean M. Twenge

1960s counterculture, 2021 United States Capitol attack, affirmative action, airport security, An Inconvenient Truth, Bear Stearns, Bernie Sanders, Black Lives Matter, book scanning, coronavirus, COVID-19, crack epidemic, critical race theory, David Brooks, delayed gratification, desegregation, Donald Trump, Edward Snowden, Elon Musk, fake news, feminist movement, Ferguson, Missouri, Ford Model T, future of work, gender pay gap, George Floyd, global pandemic, Gordon Gekko, green new deal, income inequality, Jeff Bezos, Joan Didion, job automation, Kitchen Debate, knowledge economy, labor-force participation, light touch regulation, lockdown, Marc Andreessen, Mark Zuckerberg, McJob, meta-analysis, microaggression, Neil Armstrong, new economy, opioid epidemic / opioid crisis, Peter Thiel, QAnon, Ralph Nader, remote working, ride hailing / ride sharing, rolodex, Ronald Reagan, Saturday Night Live, Sheryl Sandberg, side hustle, Snapchat, Steve Jobs, Steve Wozniak, superstar cities, tech baron, TED Talk, The Great Resignation, TikTok, too big to fail, Travis Kalanick, War on Poverty, We are the 99%, women in the workforce, World Values Survey, zero-sum game

A Morgan Stanley bond trader lost $9 billion betting on subprime mortgages in 2007. The investment bank Bear Stearns failed in March 2008. Then it came as a rush: The investment firm Lehman Brothers failed on September 15, 2008, and the next day the Federal Reserve was forced to buy out insurance firm AIG when it was deemed “too big to fail.” The financial system was on the verge of collapse and the stock market crashed. On October 3, Congress funded a $700 billion bailout, and in November the “Big Three” automakers asked for a $50 billion bailout. Like a slow-motion train wreck, the impact of the recession on Main Street unfolded over the next few years.


pages: 708 words: 176,708

The WikiLeaks Files: The World According to US Empire by Wikileaks

affirmative action, anti-communist, banking crisis, battle of ideas, Boycotts of Israel, Bretton Woods, British Empire, capital controls, central bank independence, Chelsea Manning, colonial exploitation, colonial rule, corporate social responsibility, credit crunch, cuban missile crisis, Deng Xiaoping, drone strike, Edward Snowden, energy security, energy transition, European colonialism, eurozone crisis, experimental subject, F. W. de Klerk, facts on the ground, failed state, financial innovation, Food sovereignty, Francis Fukuyama: the end of history, full employment, future of journalism, high net worth, invisible hand, Julian Assange, Kickstarter, liberal world order, Mikhail Gorbachev, millennium bug, Mohammed Bouazizi, Monroe Doctrine, Nelson Mandela, no-fly zone, Northern Rock, nuclear ambiguity, Philip Mirowski, post-war consensus, RAND corporation, Ronald Reagan, Seymour Hersh, Silicon Valley, South China Sea, statistical model, Strategic Defense Initiative, structural adjustment programs, too big to fail, trade liberalization, trade route, UNCLOS, UNCLOS, uranium enrichment, vertical integration, Washington Consensus, WikiLeaks, zero-sum game, éminence grise

As the general secretary of the International Trade Union Confederation lamented: “Governments are negotiating away financial regulation in secret, instead of tackling the unfinished regulation task that triggered the current global economic crisis in 2007. It defies belief that they are actually planning to help the already ‘too big to fail’ banks and other financial conglomerates to expand.”58 In TISA, the US and its allies are attempting to build an agreement on the model that had earlier been enshrined in the annex to the 1994 General Agreement on Tariffs and Services in 1994, and in the 1999 Financial Services Agreement: the GATS model of financial regulation.


pages: 603 words: 182,826

Owning the Earth: The Transforming History of Land Ownership by Andro Linklater

agricultural Revolution, Alan Greenspan, anti-communist, Anton Chekhov, Ayatollah Khomeini, Bear Stearns, Big bang: deregulation of the City of London, British Empire, business cycle, colonial rule, Corn Laws, Cornelius Vanderbilt, corporate governance, creative destruction, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, electricity market, facts on the ground, flying shuttle, Ford Model T, Francis Fukuyama: the end of history, full employment, Gini coefficient, Glass-Steagall Act, Google Earth, Great Leap Forward, income inequality, invisible hand, James Hargreaves, James Watt: steam engine, John Perry Barlow, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kibera, Kickstarter, land reform, land tenure, light touch regulation, market clearing, means of production, megacity, Mikhail Gorbachev, Mohammed Bouazizi, Monkeys Reject Unequal Pay, mortgage debt, Northern Rock, Peace of Westphalia, Pearl River Delta, plutocrats, Ponzi scheme, profit motive, quantitative easing, Ralph Waldo Emerson, refrigerator car, Right to Buy, road to serfdom, Robert Shiller, Ronald Reagan, spinning jenny, Suez canal 1869, The Chicago School, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, three-masted sailing ship, too big to fail, trade route, transatlantic slave trade, transcontinental railway, ultimatum game, wage slave, WikiLeaks, wikimedia commons, working poor

Russian government bonds and Argentine railway shares were issued there, and across the newly settled empire, investment in colonial land, railways, and construction came from the capital. By 1872 more than half of all the national debt in the world was quoted on the London Stock Exchange. Backed by resources on this scale, the railroads, big steel plants, and chemical companies of the second Industrial Revolution were almost too big to fail. So much money was invested in them, it made more sense to continue trading at a loss rather than wipe out their entire capital worth by closing down. The result was uneconomic overproduction and a waste of both capital and labor. This was the crisis that bedevilled capitalism in the wake of the 1873 crash.


pages: 579 words: 183,063

Tribe of Mentors: Short Life Advice From the Best in the World by Timothy Ferriss

"World Economic Forum" Davos, 23andMe, A Pattern Language, agricultural Revolution, Airbnb, Albert Einstein, Alvin Toffler, Bayesian statistics, bitcoin, Black Lives Matter, Black Swan, blockchain, Brownian motion, Buckminster Fuller, Clayton Christensen, cloud computing, cognitive dissonance, Colonization of Mars, corporate social responsibility, cryptocurrency, David Heinemeier Hansson, decentralized internet, dematerialisation, do well by doing good, do what you love, don't be evil, double helix, driverless car, effective altruism, Elon Musk, Ethereum, ethereum blockchain, family office, fear of failure, Gary Taubes, Geoffrey West, Santa Fe Institute, global macro, Google Hangouts, Gödel, Escher, Bach, haute couture, helicopter parent, high net worth, In Cold Blood by Truman Capote, income inequality, index fund, information security, Jeff Bezos, job satisfaction, Johann Wolfgang von Goethe, Kevin Kelly, Lao Tzu, Larry Ellison, Law of Accelerating Returns, Lyft, Mahatma Gandhi, Marc Andreessen, Marc Benioff, Marshall McLuhan, Max Levchin, Mikhail Gorbachev, minimum viable product, move fast and break things, Mr. Money Mustache, Naomi Klein, Neal Stephenson, Nick Bostrom, non-fiction novel, Peter Thiel, power law, profit motive, public intellectual, Ralph Waldo Emerson, Ray Kurzweil, Salesforce, Saturday Night Live, Sheryl Sandberg, side project, Silicon Valley, Skype, smart cities, smart contracts, Snapchat, Snow Crash, Steve Jobs, Steve Jurvetson, Steven Pinker, Stewart Brand, sunk-cost fallacy, TaskRabbit, tech billionaire, TED Talk, Tesla Model S, too big to fail, Turing machine, uber lyft, Vitalik Buterin, W. E. B. Du Bois, web application, Whole Earth Catalog, Y Combinator

Andrew Ross Sorkin TW: @andrewrsorkin andrewrosssorkin.com ANDREW ROSS SORKIN is a financial columnist for The New York Times and the founder and editor-at-large of DealBook, an online daily financial report published by the same. Andrew is also an assistant editor of business and finance news at the NYT, helping guide and shape the paper’s coverage. He is a co-anchor of Squawk Box, CNBC’s signature morning program, and he is the author of the New York Times best-selling book Too Big to Fail: How Wall Street and Washington Fought to Save the Financial System—and Themselves, which chronicled the events of the 2008 financial crisis. The book won the 2010 Gerald Loeb Award for Best Business Book and was shortlisted for the 2010 Samuel Johnson Prize and the 2010 Financial Times Business Book of the Year Award.


pages: 829 words: 187,394

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

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

Credit conditions had been more extreme in the island nation perched on the edge of the Arctic Circle than anywhere else in the world. The country’s three large banks – Glitnir, Landsbanki and Kaupthing – accumulated assets close to ten times Iceland’s national output. Their foreign liabilities were off the charts. Cut off from the capital markets after Lehman’s bankruptcy the Icelandic banks were not too big to fail. They were too big to bail. Unlike several other central banks, the Icelandic Central Bank (ICB) didn’t receive dollar swaps from the Federal Reserve. There was no quantitative easing or interest-rate cuts. Instead, after the krona collapsed on the foreign exchanges (losing around half its value relative to the dollar), inflation took off.


pages: 1,336 words: 415,037

The Snowball: Warren Buffett and the Business of Life by Alice Schroeder

affirmative action, Alan Greenspan, Albert Einstein, anti-communist, AOL-Time Warner, Ayatollah Khomeini, barriers to entry, Bear Stearns, Black Monday: stock market crash in 1987, Bob Noyce, Bonfire of the Vanities, book value, Brownian motion, capital asset pricing model, card file, centralized clearinghouse, Charles Lindbergh, collateralized debt obligation, computerized trading, Cornelius Vanderbilt, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, desegregation, do what you love, Donald Trump, Eugene Fama: efficient market hypothesis, Everybody Ought to Be Rich, Fairchild Semiconductor, Fillmore Auditorium, San Francisco, financial engineering, Ford Model T, Garrett Hardin, Glass-Steagall Act, global village, Golden Gate Park, Greenspan put, Haight Ashbury, haute cuisine, Honoré de Balzac, If something cannot go on forever, it will stop - Herbert Stein's Law, In Cold Blood by Truman Capote, index fund, indoor plumbing, intangible asset, interest rate swap, invisible hand, Isaac Newton, it's over 9,000, Jeff Bezos, John Bogle, John Meriwether, joint-stock company, joint-stock limited liability company, junk bonds, Larry Ellison, Long Term Capital Management, Louis Bachelier, low interest rates, margin call, market bubble, Marshall McLuhan, medical malpractice, merger arbitrage, Michael Milken, Mikhail Gorbachev, military-industrial complex, money market fund, moral hazard, NetJets, new economy, New Journalism, North Sea oil, paper trading, passive investing, Paul Samuelson, pets.com, Plato's cave, plutocrats, Ponzi scheme, proprietary trading, Ralph Nader, random walk, Ronald Reagan, Salesforce, Scientific racism, shareholder value, short selling, side project, Silicon Valley, Steve Ballmer, Steve Jobs, supply-chain management, telemarketer, The Predators' Ball, The Wealth of Nations by Adam Smith, Thomas Malthus, tontine, too big to fail, Tragedy of the Commons, transcontinental railway, two and twenty, Upton Sinclair, War on Poverty, Works Progress Administration, Y2K, yellow journalism, zero-coupon bond

Salomon also had many hundreds of billions of derivative obligations not recorded anywhere on its balance sheet—interest-rate swaps, foreign-exchange swaps, futures contracts—a massive and intricate daisy chain of obligations with counterparties all over the world, many of whom in turn had other interrelated contracts outstanding, all part of a vast entangled global financial web. If the funding disappeared, Salomon’s assets had to be sold—but while the funding could disappear in a few days, the assets would take time to liquidate. The government had no national policy to provide loans to teetering investment banks because they were “too big to fail.” The firm could melt into a puddle overnight.25 Corrigan sat back in his chair, confident that once Salomon received Sternlight’s letter, management would understand the loaded gun cocked at its head, and would respond accordingly. Within Salomon, after the press release and the Wall Street Journal story, rumors were running wild.

To think otherwise was unrealistic—that somehow risk could be laid off to someone else without also giving up the rewards. But that point of view was growing and beginning to dominate the financial markets of the late 1990s. It would have profound consequences over time. It is hard to overstate the significance of a central-bank-led rescue of a private money manager. If a hedge fund, however large, was too big to fail, then what large financial institution would ever be allowed to collapse? The government risked becoming the margin of safety.41 No serious consequences had come about in the end from the derivatives near-meltdown. The market afterward seemed to behave as if no serious consequences ever could.


pages: 693 words: 204,042

New York 2140 by Kim Stanley Robinson

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

He enjoyed taking risks. So here was a big risk, a political risk. So for the most part he looked pleased. His worried expression was a put-on, or so it seemed to her. Hedging was gambling on volatility. So he was enjoying this. “There’ll always be a bailout,” she said. “The speculators are too big to fail, too interconnected to fail. So the people in Central Park tonight are fucked, no matter how it plays out.” He nodded. “So you’re saying we’ll get paid one way or another.” “Or we won’t get paid no matter what. Unless we change things.” He sighed. “I don’t know how I got caught up helping you.


pages: 695 words: 194,693

Money Changes Everything: How Finance Made Civilization Possible by William N. Goetzmann

Albert Einstein, Andrei Shleifer, asset allocation, asset-backed security, banking crisis, Benoit Mandelbrot, Black Swan, Black-Scholes formula, book value, Bretton Woods, Brownian motion, business cycle, capital asset pricing model, Cass Sunstein, classic study, collective bargaining, colonial exploitation, compound rate of return, conceptual framework, Cornelius Vanderbilt, corporate governance, Credit Default Swap, David Ricardo: comparative advantage, debt deflation, delayed gratification, Detroit bankruptcy, disintermediation, diversified portfolio, double entry bookkeeping, Edmond Halley, en.wikipedia.org, equity premium, equity risk premium, financial engineering, financial independence, financial innovation, financial intermediation, fixed income, frictionless, frictionless market, full employment, high net worth, income inequality, index fund, invention of the steam engine, invention of writing, invisible hand, James Watt: steam engine, joint-stock company, joint-stock limited liability company, laissez-faire capitalism, land bank, Louis Bachelier, low interest rates, mandelbrot fractal, market bubble, means of production, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, new economy, passive investing, Paul Lévy, Ponzi scheme, price stability, principal–agent problem, profit maximization, profit motive, public intellectual, quantitative trading / quantitative finance, random walk, Richard Thaler, Robert Shiller, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, spice trade, stochastic process, subprime mortgage crisis, Suez canal 1869, Suez crisis 1956, the scientific method, The Wealth of Nations by Adam Smith, Thomas Malthus, time value of money, tontine, too big to fail, trade liberalization, trade route, transatlantic slave trade, tulip mania, wage slave

They became essential financial intermediaries, despite being sworn to a vow of poverty and to an entirely religious mission. The story of how the Templars became repurposed to serve Europe’s financial as opposed to its spiritual needs is instructive. Their downfall and persecution demonstrates the limits of the modern theory of a financial institution being “too big to fail.” LONDON’S FIRST BANK Getting to Temple Church always feels like a holy quest; a walk through a series of mazelike courtyards; a passage that takes you from the bustle of Fleet Street progressively deeper into London history until you reach the quiet heart of the Inns of Court. There stands a column topped by two Templars astride a single horse.


pages: 725 words: 221,514

Debt: The First 5,000 Years by David Graeber

Admiral Zheng, Alan Greenspan, anti-communist, back-to-the-land, banks create money, behavioural economics, bread and circuses, Bretton Woods, British Empire, carried interest, cashless society, central bank independence, classic study, colonial rule, commoditize, corporate governance, David Graeber, delayed gratification, dematerialisation, double entry bookkeeping, financial innovation, fixed income, full employment, George Gilder, informal economy, invention of writing, invisible hand, Isaac Newton, joint-stock company, means of production, microcredit, Money creation, money: store of value / unit of account / medium of exchange, moral hazard, oil shock, Panopticon Jeremy Bentham, Paul Samuelson, payday loans, place-making, Ponzi scheme, Post-Keynesian economics, price stability, profit motive, reserve currency, Right to Buy, Ronald Reagan, scientific management, seigniorage, sexual politics, short selling, Silicon Valley, South Sea Bubble, subprime mortgage crisis, Thales of Miletus, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transatlantic slave trade, tulip mania, upwardly mobile, urban decay, working poor, zero-sum game

Charles MacKay has left us some immortal descriptions of the first of these, the famous “South Sea Bubble” of 1710. Actually, the South Sea Company itself (which grew so large that at one point it bought up most of the national debt) was just the anchor for what happened, a giant corporation, its stock constantly ballooning in value, that seemed, to put it in contemporary terms, “too big to fail.” It soon became the model for hundreds of new start-up offerings: Innumerable joint-stock companies started up everywhere. They soon received the name Bubbles, the most appropriate imagination could devise … Some of them lasted a week or a fortnight, and were no more heard of, while others could not even live out that span of existence.


pages: 767 words: 208,933

Liberalism at Large: The World According to the Economist by Alex Zevin

"there is no alternative" (TINA), activist fund / activist shareholder / activist investor, affirmative action, Alan Greenspan, anti-communist, Asian financial crisis, bank run, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, business cycle, capital controls, carbon tax, centre right, Chelsea Manning, collective bargaining, Columbine, Corn Laws, corporate governance, corporate social responsibility, creative destruction, credit crunch, David Ricardo: comparative advantage, debt deflation, desegregation, disinformation, disruptive innovation, do well by doing good, Donald Trump, driverless car, Edward Snowden, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Francis Fukuyama: the end of history, full employment, Gini coefficient, Glass-Steagall Act, global supply chain, guns versus butter model, hiring and firing, imperial preference, income inequality, interest rate derivative, invisible hand, It's morning again in America, Jeremy Corbyn, John von Neumann, Joseph Schumpeter, Julian Assange, junk bonds, Khartoum Gordon, land reform, liberal capitalism, liberal world order, light touch regulation, Long Term Capital Management, low interest rates, market bubble, Martin Wolf, means of production, Michael Milken, Mikhail Gorbachev, Monroe Doctrine, Mont Pelerin Society, moral hazard, Naomi Klein, new economy, New Journalism, Nixon triggered the end of the Bretton Woods system, no-fly zone, Norman Macrae, Northern Rock, Occupy movement, Philip Mirowski, plutocrats, post-war consensus, price stability, quantitative easing, race to the bottom, railway mania, rent control, rent-seeking, road to serfdom, Ronald Reagan, Rosa Parks, Seymour Hersh, Snapchat, Socratic dialogue, Steve Bannon, subprime mortgage crisis, Suez canal 1869, Suez crisis 1956, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, trade liberalization, trade route, unbanked and underbanked, underbanked, unorthodox policies, upwardly mobile, War on Poverty, WikiLeaks, Winter of Discontent, Yom Kippur War, young professional

And that trend towards greater inequality was not confined to America; measured by Gini coefficients it had risen in China, India, Russia, Sweden and almost everywhere else that had chosen ‘openness’ and ‘reform’ in the last three decades. In addition to the populist dangers this bred, a growing body of literature suggested too large an underclass ‘slows growth, causes financial crises and weakens demand’.133 Up top, financiers should pay their share of income tax, and the ‘implicit subsidy’ to banks too big to fail (around $30 billion in lower borrowing costs) should end; ditto cronyism, in communist China as in the capitalist US, where private money flowed without legal limit into politics. Moving towards the middle, the state should stop subsidizing mortgages in the form of interest deductions. At the bottom, better access to health care and education was essential.


Principles of Corporate Finance by Richard A. Brealey, Stewart C. Myers, Franklin Allen

3Com Palm IPO, accelerated depreciation, accounting loophole / creative accounting, Airbus A320, Alan Greenspan, AOL-Time Warner, Asian financial crisis, asset allocation, asset-backed security, banking crisis, Bear Stearns, Bernie Madoff, big-box store, Black Monday: stock market crash in 1987, Black-Scholes formula, Boeing 747, book value, break the buck, Brownian motion, business cycle, buy and hold, buy low sell high, California energy crisis, capital asset pricing model, capital controls, Carl Icahn, Carmen Reinhart, carried interest, collateralized debt obligation, compound rate of return, computerized trading, conceptual framework, corporate governance, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-border payments, cross-subsidies, currency risk, discounted cash flows, disintermediation, diversified portfolio, Dutch auction, equity premium, equity risk premium, eurozone crisis, fear index, financial engineering, financial innovation, financial intermediation, fixed income, frictionless, fudge factor, German hyperinflation, implied volatility, index fund, information asymmetry, intangible asset, interest rate swap, inventory management, Iridium satellite, James Webb Space Telescope, junk bonds, Kenneth Rogoff, Larry Ellison, law of one price, linear programming, Livingstone, I presume, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, low interest rates, market bubble, market friction, money market fund, moral hazard, Myron Scholes, new economy, Nick Leeson, Northern Rock, offshore financial centre, PalmPilot, Ponzi scheme, prediction markets, price discrimination, principal–agent problem, profit maximization, purchasing power parity, QR code, quantitative trading / quantitative finance, random walk, Real Time Gross Settlement, risk free rate, risk tolerance, risk/return, Robert Shiller, Scaled Composites, shareholder value, Sharpe ratio, short selling, short squeeze, Silicon Valley, Skype, SpaceShipOne, Steve Jobs, subprime mortgage crisis, sunk-cost fallacy, systematic bias, Tax Reform Act of 1986, The Nature of the Firm, the payments system, the rule of 72, time value of money, too big to fail, transaction costs, University of East Anglia, urban renewal, VA Linux, value at risk, Vanguard fund, vertical integration, yield curve, zero-coupon bond, zero-sum game, Zipcar

(The backup was implicit, but quickly became explicit when Fannie and Freddie got into trouble in 2008. The U.S. Treasury had to take them over.) Thus these companies were able to borrow at artificially low rates, channeling money into the mortgage market. The government was also on the hook because large banks that held subprime MBSs were “too big to fail” in a financial crisis. So the original incentive problem—the temptation of home buyers to take out a large mortgage and hope for higher real estate prices—was never corrected. The government could have cut its exposure by reining in Fannie and Freddie before the crisis but did not do so. Agency and incentive problems are widespread in the financial services industry.

., 830, 857 Thornburg, Karin, 458n 3Com, 843 3G, 837 Three-factor model, 206–208 Tiffany, 778 Tightwad Bank, 363 Time deposits, 794–796 Times-interest-earned ratio, 733–734 Time value of money, 107–108 Time Warner, 341, 727, 808. See also AOL Timing option, 144–145, 261–262, 565–568 Timmerman, A., 327n, 881n TIPS (Treasury Inflation-Protected Securities), 61–62 Titman, S., 443, 820n T-Mobile, 820 Tokyo Financial Futures Exchange (TFX), 668 Tokyo Gas, 809 Tokyo Stock Exchange (TSE), 76, 668 Tomkins, 837 “Too big to fail” mentality, 336 Torous, W. N., 854n Total capitalization, 726 Total expected profit, 785 Total return swaps, 676–677 Towers Perrin, 300n Toyota, 302, 781 TPG Capital, 837 Trade acceptances, 782 Trade credit, 781 Trade-off theory of capital structure, 455, 465–467, 470–471 Trade sales, 847 Tranches, 610 Transaction exposure, 705–706 Transfer of value, 409–411 Transparency, 875–876 Transportation costs, in leasing, 641 TransUnion, 597n Trans World Airlines, 641–642 Travlos, N., 820n Treasury bills, 47–49, 160–162, 794, 795 Treasury bonds.


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

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

After days of increasingly tense negotiations, the bankers came up with an infusion of $3.5 billion for LTCM. That bought the firm the time it needed to dissolve in an orderly way. No taxpayer money was spent (except perhaps for some sandwiches and coffee), but the Fed's intervention touched a populist raw nerve. "Seeing a Fund as Too Big to Fail, New York Fed Assists Its Bailout," trumpeted the New York Times on its front page. A few days later, on October 1, McDonough and I were called before the House Banking Committee to explain why, as USA Today put it, "a private firm designed for millionaires [should] be saved by a plan that was brokered and supported by a federal government organization."


pages: 920 words: 233,102

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

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

If that were so, the president would have a tax lever. 3 Trichet, “Building Europe.” 4 Some of this amounted to rethinking central banking’s place in the services state but without an articulated framework. 5 Bourdieu, “Social Space,” and Bourdieu, Wacquant, and Farage, “Rethinking the State.” 6 My thanks to Luis Urritia Corral at the Banco de Mexico. 7 Disclosure: In the aftermath of the crisis, I chaired one of the Basel standard-setting bodies and also one of the FSB groups working on “too big to fail” financial intermediaries. 8 Tucker, “Regulatory Reform.” These issues do not just fall to central banks and banking supervisors but must involve securities regulators too, as evidenced by White, “Enhancing Risk Monitoring.” 9 Schoenmaker, Governance of International Banking. 10 My thanks for comments on part IV to Bill English at Yale, former director for monetary affairs at the Fed Board. 17 Central Banking and the Politics of Monetary Policy Time is getting short.


pages: 1,088 words: 228,743

Expected Returns: An Investor's Guide to Harvesting Market Rewards by Antti Ilmanen

Alan Greenspan, Andrei Shleifer, asset allocation, asset-backed security, availability heuristic, backtesting, balance sheet recession, bank run, banking crisis, barriers to entry, behavioural economics, Bernie Madoff, Black Swan, Bob Litterman, bond market vigilante , book value, Bretton Woods, business cycle, buy and hold, buy low sell high, capital asset pricing model, capital controls, carbon credits, Carmen Reinhart, central bank independence, classic study, collateralized debt obligation, commoditize, commodity trading advisor, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, deal flow, debt deflation, deglobalization, delta neutral, demand response, discounted cash flows, disintermediation, diversification, diversified portfolio, dividend-yielding stocks, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, fiat currency, financial deregulation, financial innovation, financial intermediation, fixed income, Flash crash, framing effect, frictionless, frictionless market, G4S, George Akerlof, global macro, global reserve currency, Google Earth, high net worth, hindsight bias, Hyman Minsky, implied volatility, income inequality, incomplete markets, index fund, inflation targeting, information asymmetry, interest rate swap, inverted yield curve, invisible hand, John Bogle, junk bonds, Kenneth Rogoff, laissez-faire capitalism, law of one price, London Interbank Offered Rate, Long Term Capital Management, loss aversion, low interest rates, managed futures, margin call, market bubble, market clearing, market friction, market fundamentalism, market microstructure, mental accounting, merger arbitrage, mittelstand, moral hazard, Myron Scholes, negative equity, New Journalism, oil shock, p-value, passive investing, Paul Samuelson, pension time bomb, performance metric, Phillips curve, Ponzi scheme, prediction markets, price anchoring, price stability, principal–agent problem, private sector deleveraging, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, random walk, reserve currency, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, riskless arbitrage, Robert Shiller, savings glut, search costs, selection bias, seminal paper, Sharpe ratio, short selling, sovereign wealth fund, statistical arbitrage, statistical model, stochastic volatility, stock buybacks, stocks for the long run, survivorship bias, systematic trading, tail risk, The Great Moderation, The Myth of the Rational Market, too big to fail, transaction costs, tulip mania, value at risk, volatility arbitrage, volatility smile, working-age population, Y2K, yield curve, zero-coupon bond, zero-sum game

(For the more benign 1990–2006 period, over which the corporate spread narrowed slightly, the spread capture was a still modest 44 bp of the 104 bp average spread.) In contrast, U.S. agencies’ fixed rate debt delivered even more than their 33 bp average spread; their spread capture exceeded 100%. There were no credit losses because, in the end, it was decided that Fannie Mae and Freddie Mac were too big to fail. Mortgages captured only 40% of their 69 bp average spread. This may appear surprising because the spread over Treasuries narrowed during our sample, but the short embedded option in MBS really hurt when prepayment speeds and interest rate volatility rose. Finally, the spread capture was much better at short maturities: 64% for 1-to-3-year corporates compared with 33% for 1-to-10-year corporates and 15% for long-dated issues.


pages: 976 words: 235,576

The Meritocracy Trap: How America's Foundational Myth Feeds Inequality, Dismantles the Middle Class, and Devours the Elite by Daniel Markovits

8-hour work day, activist fund / activist shareholder / activist investor, affirmative action, algorithmic management, Amazon Robotics, Anton Chekhov, asset-backed security, assortative mating, basic income, Bernie Sanders, big-box store, business cycle, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, Carl Icahn, carried interest, collateralized debt obligation, collective bargaining, compensation consultant, computer age, corporate governance, corporate raider, crony capitalism, David Brooks, deskilling, Detroit bankruptcy, disruptive innovation, Donald Trump, Edward Glaeser, Emanuel Derman, equity premium, European colonialism, everywhere but in the productivity statistics, fear of failure, financial engineering, financial innovation, financial intermediation, fixed income, Ford paid five dollars a day, Frederick Winslow Taylor, fulfillment center, full employment, future of work, gender pay gap, gentrification, George Akerlof, Gini coefficient, glass ceiling, Glass-Steagall Act, Greenspan put, helicopter parent, Herbert Marcuse, high net worth, hiring and firing, income inequality, industrial robot, interchangeable parts, invention of agriculture, Jaron Lanier, Jeff Bezos, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, junk bonds, Kevin Roose, Kiva Systems, knowledge economy, knowledge worker, Kodak vs Instagram, labor-force participation, Larry Ellison, longitudinal study, low interest rates, low skilled workers, machine readable, manufacturing employment, Mark Zuckerberg, Martin Wolf, mass incarceration, medical residency, meritocracy, minimum wage unemployment, Myron Scholes, Nate Silver, New Economic Geography, new economy, offshore financial centre, opioid epidemic / opioid crisis, Paul Samuelson, payday loans, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, precariat, purchasing power parity, rent-seeking, Richard Florida, Robert Gordon, Robert Shiller, Robert Solow, Ronald Reagan, Rutger Bregman, savings glut, school choice, shareholder value, Silicon Valley, Simon Kuznets, six sigma, Skype, stakhanovite, stem cell, Stephen Fry, Steve Jobs, stock buybacks, supply-chain management, telemarketer, The Bell Curve by Richard Herrnstein and Charles Murray, The Theory of the Leisure Class by Thorstein Veblen, Thomas Davenport, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, traveling salesman, universal basic income, unpaid internship, Vanguard fund, War on Poverty, warehouse robotics, Winter of Discontent, women in the workforce, work culture , working poor, Yochai Benkler, young professional, zero-sum game

Private investors have taken substantial stakes in distressed housing—in April 2013, for example, 68 percent of sales of distressed homes involved investor buyers (the private equity firm Blackstone, for example, owns twenty-six thousand homes in nine states) and only 19 percent involved first-time buyers seeking to occupy their own homes. For conservative commentators’ condemnations of the bailouts, see generally Posner and Weyl, “Against Casino Finance,” 68 (bailout arbitrage), 76 (implicit tax), and John O. McGinnis, “Innovation and Inequality,” National Affairs, no. 14 (Winter 2003): 135–48, 147 (“The too-big-to-fail regime that shields the financial sector has unfairly increased the incomes of some Americans by allowing them to ride to riches on a federal guarantee.”). For investor purchases of distressed homes, see Nathaniel Popper, “Behind the Rise in House Prices, Wall Street Buyers,” New York Times, June 3, 2013, accessed November 19, 2018, https://dealbook.nytimes.com/2013/06/03/behind-the-rise-in-house-prices-wall-street-buyers/.


EuroTragedy: A Drama in Nine Acts by Ashoka Mody

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

The density of bank branches in the largest euro-​area economies—​Germany, France, Italy, and Spain—​was also much higher than in the United States or Japan.36 And the overbanked euro area faced slowing productivity growth, which could deliver only meager returns on traditional lending activities. Moreover, the rush to merge had made some banks too big to fail.37 As early as 2001, the IMF cautioned that systemic financial risks were brewing in the euro-​area member states. If a large bank became insolvent and was unable therefore to repay its creditors, cascading effects through the financial system would inflict significant costs on the government and eventually on the entire economy.38 The IMF grimly warned that some banks were so large that rescue efforts would strain the financial resources of the government.39 To make matters worse, since the mergers had not made the banks more efficient, these outsize banks began taking greater risks in the hope of making easy money.40 Instead of relying mainly on their depositors for a stable source of funding, banks increasingly raised funds in temperamental “wholesale” money markets.


pages: 956 words: 267,746

Command and Control: Nuclear Weapons, the Damascus Accident, and the Illusion ofSafety by Eric Schlosser

Able Archer 83, Albert Einstein, anti-communist, Berlin Wall, Boeing 747, cuban missile crisis, Dr. Strangelove, Fall of the Berlin Wall, Haight Ashbury, Herman Kahn, impulse control, interchangeable parts, Isaac Newton, launch on warning, life extension, Mikhail Gorbachev, military-industrial complex, mutually assured destruction, nuclear taboo, nuclear winter, packet switching, prompt engineering, RAND corporation, Ronald Reagan, Stanislav Petrov, Stewart Brand, Strategic Defense Initiative, tacit knowledge, technological determinism, too big to fail, two and twenty, uranium enrichment, William Langewiesche

A few years later, Anderson was forced to leave Continental Illinois, and the Federal Deposit Insurance Corporation subsequently took it over—at the time, the largest bank bailout in American history. For Anderson’s salary, see L. Michael Cacage, “Who Earned the Most?,” American Banker (May 29, 1981). The story of how Anderson’s bank collapsed remains sadly relevant. See “Continental Illinois and ‘Too Big to Fail,’” in History of the Eighties: Lessons for the Future, Volume 1 (Washington, D.C.: Federal Deposit Insurance Corporation, Division of Research and Statistics, 1997), pp. 235–57. “There is a tidal wave coming”: Quoted in Ernest B. Furgurson, “Carter as Hoover, Reagan as F.D.R.? Socko!,” Los Angeles Times, July 22, 1980.


pages: 864 words: 272,918

Palo Alto: A History of California, Capitalism, and the World by Malcolm Harris

2021 United States Capitol attack, Aaron Swartz, affirmative action, air traffic controllers' union, Airbnb, Alan Greenspan, Alvin Toffler, Amazon Mechanical Turk, Amazon Web Services, Apple II, Apple's 1984 Super Bowl advert, back-to-the-land, bank run, Bear Stearns, Big Tech, Bill Gates: Altair 8800, Black Lives Matter, Bob Noyce, book scanning, British Empire, business climate, California gold rush, Cambridge Analytica, capital controls, Charles Lindbergh, classic study, cloud computing, collective bargaining, colonial exploitation, colonial rule, Colonization of Mars, commoditize, company town, computer age, conceptual framework, coronavirus, corporate personhood, COVID-19, cuban missile crisis, deindustrialization, Deng Xiaoping, desegregation, deskilling, digital map, double helix, Douglas Engelbart, Edward Snowden, Elon Musk, Erlich Bachman, estate planning, European colonialism, Fairchild Semiconductor, financial engineering, financial innovation, fixed income, Frederick Winslow Taylor, fulfillment center, future of work, Garrett Hardin, gentrification, George Floyd, ghettoisation, global value chain, Golden Gate Park, Google bus, Google Glasses, greed is good, hiring and firing, housing crisis, hydraulic fracturing, if you build it, they will come, illegal immigration, immigration reform, invisible hand, It's morning again in America, iterative process, Jeff Bezos, Joan Didion, John Markoff, joint-stock company, Jony Ive, Kevin Kelly, Kickstarter, knowledge worker, land reform, Larry Ellison, Lean Startup, legacy carrier, life extension, longitudinal study, low-wage service sector, Lyft, manufacturing employment, Marc Andreessen, Marc Benioff, Mark Zuckerberg, Marshall McLuhan, Max Levchin, means of production, Menlo Park, Metcalfe’s law, microdosing, Mikhail Gorbachev, military-industrial complex, Monroe Doctrine, Mont Pelerin Society, moral panic, mortgage tax deduction, Mother of all demos, move fast and break things, mutually assured destruction, new economy, Oculus Rift, off grid, oil shale / tar sands, PageRank, PalmPilot, passive income, Paul Graham, paypal mafia, Peter Thiel, pets.com, phenotype, pill mill, platform as a service, Ponzi scheme, popular electronics, power law, profit motive, race to the bottom, radical life extension, RAND corporation, Recombinant DNA, refrigerator car, Richard Florida, ride hailing / ride sharing, rising living standards, risk tolerance, Robert Bork, Robert Mercer, Robert Metcalfe, Ronald Reagan, Salesforce, San Francisco homelessness, Sand Hill Road, scientific management, semantic web, sexual politics, Sheryl Sandberg, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, social web, SoftBank, software as a service, sovereign wealth fund, special economic zone, Stanford marshmallow experiment, Stanford prison experiment, stem cell, Steve Bannon, Steve Jobs, Steve Wozniak, Steven Levy, Stewart Brand, stock buybacks, strikebreaker, Suez canal 1869, super pumped, TaskRabbit, tech worker, Teledyne, telemarketer, the long tail, the new new thing, thinkpad, Thorstein Veblen, Tim Cook: Apple, Tony Fadell, too big to fail, Toyota Production System, Tragedy of the Commons, transcontinental railway, traumatic brain injury, Travis Kalanick, TSMC, Uber and Lyft, Uber for X, uber lyft, ubercab, union organizing, Upton Sinclair, upwardly mobile, urban decay, urban renewal, value engineering, Vannevar Bush, vertical integration, Vision Fund, W. E. B. Du Bois, War on Poverty, warehouse robotics, Wargames Reagan, Washington Consensus, white picket fence, William Shockley: the traitorous eight, women in the workforce, Y Combinator, Y2K, Yogi Berra, éminence grise

But the authorities played for only one team, and both the sheriff and the district attorney in the Fresno heart of raisin country openly supported the association. A Department of Justice investigator found ample evidence of what one independent grower described as a “reign of terror” by the “Raisin Ku Klux Klan,” but Sun-Maid was too big to fail.39 Expanded and more resilient with the inclusion of dark-featured immigrants, whiteness endured as California’s core organizing principle. Not everyone was thrilled with the idea of expanding the definition of whiteness, including those scientists who staked their reputations on the immigrant groups’ insolubility.


pages: 892 words: 91,000

Valuation: Measuring and Managing the Value of Companies by Tim Koller, McKinsey, Company Inc., Marc Goedhart, David Wessels, Barbara Schwimmer, Franziska Manoury

accelerated depreciation, activist fund / activist shareholder / activist investor, air freight, ASML, barriers to entry, Basel III, Black Monday: stock market crash in 1987, book value, BRICs, business climate, business cycle, business process, capital asset pricing model, capital controls, Chuck Templeton: OpenTable:, cloud computing, commoditize, compound rate of return, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, currency risk, discounted cash flows, distributed generation, diversified portfolio, Dutch auction, energy security, equity premium, equity risk premium, financial engineering, fixed income, index fund, intangible asset, iterative process, Long Term Capital Management, low interest rates, market bubble, market friction, Myron Scholes, negative equity, new economy, p-value, performance metric, Ponzi scheme, price anchoring, proprietary trading, purchasing power parity, quantitative easing, risk free rate, risk/return, Robert Shiller, Savings and loan crisis, shareholder value, six sigma, sovereign wealth fund, speech recognition, stocks for the long run, survivorship bias, technology bubble, time value of money, too big to fail, transaction costs, transfer pricing, two and twenty, value at risk, yield curve, zero-coupon bond

So-called universal banks today engage in a wide range of businesses, including retail and wholesale banking, investment banking, and asset management. In the view of some academics, managers, and regulators, the size, complexity, and lack of transparency of universal banks in the United States and Europe has led to undesirable systemic risks, among them that some banks have become “too big to fail.”1 During the 2008 credit crisis, the threat of collapse by some large universal banks led governments to bail out these institutions, triggering an ongoing debate about whether such institutions should be split into smaller and separate investment and commercial banks.2 This chapter provides a general overview of how to value banks, and highlights some of the most common valuation challenges peculiar to the 1 See, for example, “Universal Banking: Together, Forever?”


pages: 1,335 words: 336,772

The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance by Ron Chernow

Alan Greenspan, always be closing, bank run, banking crisis, Bear Stearns, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Bolshevik threat, book value, Boycotts of Israel, Bretton Woods, British Empire, buy and hold, California gold rush, capital controls, Carl Icahn, Charles Lindbergh, collective bargaining, Cornelius Vanderbilt, corporate raider, death from overwork, Dutch auction, Etonian, financial deregulation, financial engineering, fixed income, German hyperinflation, Glass-Steagall Act, index arbitrage, interest rate swap, junk bonds, low interest rates, margin call, Michael Milken, military-industrial complex, money market fund, Monroe Doctrine, North Sea oil, oil shale / tar sands, old-boy network, paper trading, plutocrats, Robert Gordon, Ronald Reagan, short selling, stock buybacks, strikebreaker, Suez canal 1869, Suez crisis 1956, the market place, the payments system, too big to fail, transcontinental railway, undersea cable, Yom Kippur War, young professional

William Isaac of the FDIC has said flatly: “The bankers lost no money, and in hindsight their participation was unnecessary.”17 In the end, the FDIC effectively nationalized Continental, taking an 80-percent ownership stake. Setting a breathtaking precedent, it decreed that all depositors were insured; it had never before given such a blanket insurance for small bank failures. Washington was now saying that some banks were too big to fail. Yet even the full faith and credit of the U.S. government couldn’t immediately stem the bank run. “Bankers around the world said, ‘So what?’ “ recalled Preston. “They weren’t impressed that the deposits were guaranteed by the U.S. government. That surprised me.”18 Continental Illinois’s aftermath was ironic: although the affair exposed the unacceptable peril of large bank failures in modern financial markets, the government had created new incentives to bypass small banks and keep deposits at large ones.


pages: 1,797 words: 390,698

Power at Ground Zero: Politics, Money, and the Remaking of Lower Manhattan by Lynne B. Sagalyn

affirmative action, airport security, Bear Stearns, Bonfire of the Vanities, clean water, conceptual framework, congestion pricing, corporate governance, deindustrialization, Donald Trump, Edward Glaeser, estate planning, financial engineering, Frank Gehry, Guggenheim Bilbao, high net worth, high-speed rail, informal economy, intermodal, iterative process, Jane Jacobs, megaproject, mortgage debt, New Urbanism, place-making, rent control, Rosa Parks, Rubik’s Cube, Silicon Valley, sovereign wealth fund, the built environment, the High Line, time value of money, too big to fail, Torches of Freedom, urban decay, urban planning, urban renewal, value engineering, white flight, young professional

See the virtual exhibit of the Skyscraper Museum, Big Buildings, http://www.skyscraper.org/EXHIBITIONS/BIG_BUILDINGS/bb.htm. 28 O&Y carried their success at Battery Park City across the Atlantic Ocean to Canary Wharf, where the firm became overextended and eventually filed for bankruptcy in 1992. See Walter Stewart, Too Big to Fail: Olympia & York: The Story behind the Headlines (Toronto: McClelland & Stewart, 1993). 29 Mark McCain, “Commercial Property: The Downtown ‘Empty States’; Two Behemoths with 3 Million Square Feet to Let,” NYT, March 22, 1987. 30 Eric Lipton and Michael Cooper, “City Faces Challenge to Close Widest Budget Gap since 70’s,” NYT, January 4, 2002. 31 Bloomberg, inaugural address. 32 Jennifer Steinhauer, “City Agencies Are Struggling with Cutbacks,” NYT, November 23, 2001. 33 The city’s economy was in virtual shutdown for days after the attack.


pages: 1,202 words: 424,886

Stigum's Money Market, 4E by Marcia Stigum, Anthony Crescenzi

accounting loophole / creative accounting, Alan Greenspan, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Bear Stearns, Black-Scholes formula, book value, Brownian motion, business climate, buy and hold, capital controls, central bank independence, centralized clearinghouse, corporate governance, credit crunch, Credit Default Swap, cross-border payments, currency manipulation / currency intervention, currency risk, David Ricardo: comparative advantage, disintermediation, distributed generation, diversification, diversified portfolio, Dutch auction, financial innovation, financial intermediation, fixed income, flag carrier, foreign exchange controls, full employment, Glass-Steagall Act, Goodhart's law, Greenspan put, guns versus butter model, high net worth, implied volatility, income per capita, intangible asset, interest rate derivative, interest rate swap, inverted yield curve, junk bonds, land bank, large denomination, locking in a profit, London Interbank Offered Rate, low interest rates, margin call, market bubble, market clearing, market fundamentalism, Money creation, money market fund, mortgage debt, Myron Scholes, offshore financial centre, paper trading, pension reform, Phillips curve, Ponzi scheme, price mechanism, price stability, profit motive, proprietary trading, prudent man rule, Real Time Gross Settlement, reserve currency, risk free rate, risk tolerance, risk/return, Savings and loan crisis, seigniorage, shareholder value, short selling, short squeeze, tail risk, technology bubble, the payments system, too big to fail, transaction costs, two-sided market, value at risk, volatility smile, yield curve, zero-coupon bond, zero-sum game

• Provides that bank holding companies organized as mutual holding companies will be regulated on terms comparable to other bank holding companies. • Lifts some restrictions governing nonbank banks. • Provides for a study of the use of subordinated debt to protect the financial system and deposit funds from “too big to fail” institutions and a study on the effect of financial modernization on the accessibility of small business and farm loans. • Streamlines bank holding company supervision by clarifying the regulatory roles of the Federal Reserve as the umbrella holding company supervisor, and the state and other federal financial regulators which “functionally” regulate various affiliates


Greece by Korina Miller

car-free, carbon footprint, credit crunch, flag carrier, Google Earth, haute cuisine, illegal immigration, informal economy, invention of the printing press, pension reform, period drama, restrictive zoning, sensible shoes, Suez canal 1869, too big to fail, trade route, upwardly mobile, urban renewal, urban sprawl, women in the workforce

For speciality beer bars see Beer Essentials, above. BARS Spiti Mou (cnr Egnatia & Leontos Sofou 26; 1pm-late; ) A new bar upstairs in a lofty old building in the Syngrou district, ‘My House’ (as the name means in Greek) was opened after its young owners realised their parties were becoming too big to fail. The relaxed feel is enhanced by eclectic music, well-worn decor and big couches spread out on a chequered floor. There’s live music on Sundays, occasional costume parties and yes, even wi-fi. The entrance is unmarked, but is the doorway closest to Egnatia on Leontos Sofou. Partizan Bar ( 2310 543 461; Valaoritou 29; 8am-3am Mon-Thu, 8am-5am Fri & Sat, noon-3am Sun) Another Syngrou hotspot, this popular place has bohemian flair and gets packed with late-night revellers, from students to older folks.