financial capitalism (history)

 
[[ I don't know how this TEXT is related to cycles ]]
[[ this is in the wrong basket ]]
[[ this is not about cycles, not about delays, not about cost. ]]
[[ ...  ...  ... ]]

financial capitalism (history) 
[[ historical perspective on  financial capitalism ]]

Carroll Quigley, Tragedy and Hope: a history of the world in our time, publication date 1966, https://en.wikipedia.org/wiki/Tragedy_and_Hope

page 49 (pdf page 64)
  In this continuing process, Britain's early achievement of industrialism gave it such great profits that these, combined with the profits derived earlier from commercial capitalism and the simultaneous profits derived from the unearthed rise in land values from new cities and mines, made its early industrial enterprises largely self-financed or at least locally financed.  They were organized in proprietorships and partnerships, had contact with local deposit banks for short-term current loans, but had little to do with international bankers, investment banks, central governments, or corporative forms of business organization.

page 50 (pdf page 65)
This new stage of financial capitalism, which continued to dominate England, France, and the United States as late as 1930, was made necessary by the great mobilizations of capital needed for railroad building after 1830.  The capital needed for railroads, with their enormous expenditures on track and equipment, could not be raised form single proprietorships or partnerships or locally, but, instead, required a new form of enterprise ── the limited-liability stock corporation ── and a new source of funds ── the international investment banker who had, until then, concentrated his attention almost entirely on international flotation of government bonds.  The demands of railroads for equipment curried this same development, almost at once, into steel manufacturing and coal mining
─

page 50 (pdf page 65)
financial capitalism, 1850-1931

page 51 (pdf page 66)
The men who did this, looking backward toward the period of dynastic monarchy in which they had their own roots, aspired to establish dynasties of international bankers and were at least as successful at this as were many of the dynastic political rulers.

pages 51-52 (pdf pages 66-67)
  In concentrating, as we must, on the financial or economic activities of international bankers, we must not totally ignore their other attributes.  They were, especially in later generations, cosmopolitan rather than nationalistic; they were a constant, if weakening, influence for peace, a pattern established in 1830 and 1840 when the Rothschilds threw their whole tremendous influence successfully against European wars.  They were unsually highly civilized, cultured gentlemen, patrons of education and of the arts, libraries, and museum collections still reflect their munificence.  For these purposes they set a pattern of endowed  foundations which still surround us today.

page 52 (pdf page 67)
Even after these banking families became fully involved in domestic industry by the emergence of financial capitalism, they remained different from ordinary bankers in distinctive ways:
(1) they were cosmopolitan and international;
(2) they were close to governments and were particularly concerned with questions of government debts, including foreign government debts, even in areas which seemed, at first glance, poor risks, like Egypt, Persia, Ottoman Turkey, Imperial China, and Latin America;
(3) their interest were almost exclusively in bonds and very rarely in goods, since they admired "liquidity" and regarded commitments in commodities or even real estate as the first step toward bankruptcy;
(4) they were, accordingly, fanatical devotees of deflation (which they called "sound" money from its close associations with high interest rates and a high value of money) and of the gold standard, which, in their eyes, symbolized and ensured these values; and
(5) they were almost equally devoted to secrecy and the secret use of financial influence in political life.  These bankers came to be called "international bankers" and, more particularly, were known as "merchant bankers" in England, "private bankers" in France, and "investment bankers" in the United States.  In all countries they carried on various kinds of banking and exchange activities, but everywhere they were sharply distinguishable from other, more obvious, kinds of banks, such as savings banks or commercial banks.
 
page 52 (pdf page 67)
This risky status, which deprived them of limited liability, was retained, in most cases, until modern inheritance taxes made it essential to surround such family wealth with the immortality of corporate status for tax-avoidance purposes. 

page 52 (pdf page 67)
As a consequence, ordinary people had no way of knowing the wealth or areas of operation of such firms, and often were somewhat hazy as to their membership.

page 53 (pdf page 68)
This firm, like others of the international banking fraternity, constantly operated through corporations and governments, yet remained itself an obscure private partnership until international financial capitalism was passing from its deathbed to the grave.

page 53 (pdf page 68)
to be trusted with control of the money system; accordingly, the sanctity of all values and the soundness of money must be protected in two ways:  by basing the value of money on gold and by allowing bankers to control the supply the money.  To do this it was necessary to conceal, or even to mislead, both governments and people about the nature of money and its method of operation.

page 53 (pdf page 68)
As a consequence, many persons, including financiers and even economists, were astonished to discover, in the 20th century, that the gold standard gave stable exchanges and unstable prices. 

page 54 (pdf page 69)
If we regard the relationship between money and goods as a seesaw in which each of these was at opposite ends, so that the value of one rose just as much as the value of the other declined, then we must see gold as the fulcrum of the seesaw on which this relationship balances, but which does not itself go up or down.

page 54 (pdf page 69)
   Since it is quite impossible to understand the history of the 20th century without some understanding of the role played by money in domestic affair and in foreign affairs, as well as role played by bankers in economic life and in political life, we must take at least a glance at each of these four subjects.

Carroll Quigley, Tragedy and Hope: a history of the world in our time, publication date 1966, https://en.wikipedia.org/wiki/Tragedy_and_Hope
   ____________________________________

1997            Christmas 1997
                J.P. Morgan
                A broad index secured trust offering (BISTRO) is a proprietary name used by J.P. Morgan for creating collateralized debt obligations (CDOs) from credit derivatives.
                Initially created as a way for J.P. Morgan to hedge its credit risk
                BISTRO (1997) were the predecessor of the synthetic collateralized debt products that later grew in popularity.
                (BISTRO) was considered a landmark financial instrument at the time of its launch; it was believed to be one of the first synthetic collateralized debt obligation (CDO) instruments ever created.
                These debt products were credited with contributing to the 2007-2008 financial crisis.
                Consequences of Broad Index Secured Trust Offerings (BISTROs):: used credit derivatives to transfer credit risk in a portfolio.
                https://www.investopedia.com/terms/b/broad-index-synthetic-trust-offering.asp
               ([ you transfer the risk by finding a counter-party who will enter into a credit default risk contract - like a life insurance, a disaster insurance, or a health insurance - an insurance contract that protects you against a default in this particular situation ]) 
                ____________________________________

1997–2006       Lehman Brothers - rise of mortgage origination
                In 1997, Lehman bought Colorado-based lender Aurora Loan Services, an Alt-A lender.
                In 2000, to expand their mortgage origination pipeline, Lehman purchased West Coast subprime mortgage lender BNC Mortgage LLC.
                Lehman had morphed into a real estate hedge fund disguised as an investment bank.[2]
                From an equity position, its risky commercial real estate holdings were thirty times greater than capital.
                In such a highly leveraged structure, a three- to five-percent decline in real estate values would wipe out all capital.[citation needed]
                https://en.wikipedia.org/wiki/Bankruptcy_of_Lehman_Brothers
                ____________________________________

2000-2004       Faced with the bursting of the dot-com bubble, a series of corporate accounting scandals, and the September 11 terrorist attacks, the Federal Reserve lowered the federal funds rate from 6.5% in May 2001 to 1% in June 2003.2 
                 May 2001 [6.5% fed funds]- June 2003 [1% fed funds]
                https://www.investopedia.com/articles/economics/09/financial-crisis-review.asp


2000            Commodity Futures Modernization Act of 2000 (CFMA)
                The Commodity Futures Modernization Act of 2000 (CFMA) is United States federal legislation that ensured financial products known as over-the-counter (OTC) derivatives remained unregulated.


2000            Joseph Cassano sold hundreds of billions of credit protection in the form of CDSs without having to put up any real money as collateral as this form of insurance had been deregulated with the Phil Gramm-sponsored Commodity Futures Modernization Act of 2000, signed by Bill Clinton.[6]
                https://en.wikipedia.org/wiki/Joseph_Cassano
                ____________________________________

 2004            the Federal Reserve lowered the federal funds rate to 1 percent and kept it there until June 2004., p.82 (George Soros, The new paradigm for financial markets, 2008)

2004            FBI warning of a looming financial crisis
the warning from an assistant FBI director that the growing mortgage fraud caseload could signal a problem with potentially wide economic repercussions

2005            Bankruptcy Reform Act, aka Bankruptcy Prevention and Fraud on Consumers Bill
For eight years (1997), the credit card industry pushed for new bankruptcy laws, and thanks to their intense lobbying efforts and high political contributions, they succeeded.  The changes make it harder for consumers to file bankruptcy and have eliminated some of the benefits of prior law for consumers protection.

2005            Derivatives contracts are exempt from normal bankruptcy law derivatives and other financial contracts
                http://economicsofcontempt.blogspot.com/2009/03/special-treatment-of-derivatives-in.html
                http://economicsofcontempt.blogspot.com/2009/03/special-treatment-of-derivatives-in.html   

2005-2015       Afghanistan/ Iraq invasion (wars) (high intensity conflicts)
                (major operational tempo)

2006            In the summer of 2006, [Nouriel] Roubini wrote that the U.S. was headed into a long and "protracted" recession due to the "collapse" of house prices, which he noted were already in freefall.[23]
                https://en.wikipedia.org/wiki/Nouriel_Roubini#2006

2007            ‘On April 17, 2007, famed short-seller Jim Chanos and other hedge fund managers met under tight security at the World Bank in Washington for the G-8 meeting. Chanos and Paul Singer briefed prominent policy officials [including Gordon Brown] about the growing financial instability. They gave irrefutable evidence that a catastrophe was building. They told officials that banks were about to sink the global economy. They called for decisive action. And they were ignored.’

2007            June 15, 2007 :: The failure of the two Bear Stearns mortgage hedge funds in June badly rattled the markets, but U.S. Federal Reserve Chairman Ben Bernanke and other senior officials reassured the public that the subprime problem was an isolated phenomenon. (p.xxi, George Soros, The new paradigm for financial markets, 2008)

2007            Gramlich [ - Former Federal Reserve governor Edward M. Gramlich - ] went public with his worries in 2007 and published a book on the subprime bubble just before the crisis first broke.
                Edward M. Gramlich, Subprime Mortgages: America's Latest Boom and Bust, published 2007
                Charles Kindleberger
                Nouriel Roubini
(p.xix, George Soros, The new paradigm for financial markets, 2008)

2007            ‘August 9--BNP Paribas announces it is unable to value mortgage-related assets on the books of three funds it manages, sparking a freeze-up in money markets and a 95 billion EUROs intervention by the ECB (European Central Bank)’ (Irwin, Neil (2013), The Alchemists, the penguin press, new york, 2013 )
                [p.1, p.2, p.3]
                  [p.1]
                   Gigantic French bank BNP Paribas had announced that it was suspending withdrawls from three investment funds it managed.  The funds were invested heavily in U.S. home-mortgage-backed securities that had become nearly impossible to value ([fraud]).  Customers' money would be locked up until the bank could figure out exactly how much the investments were worth.
                  [p.2]
                   The three relatively obsure funds held only 1.6 billion EURO in assets.
                  [p.3]
                   By 10 a.m., the full Executive Board was on line.  [Jean-Claude] Trichet was emphatic: "There is only one thing we can do, which is to give liquidity."  The ECB, he insisted, must flood the banking system with euros.  He was proposing that the central bank fulfill its traditional role as "lender of last resort," stepping in when private banks were pulling back, ... .  The ECB would abandon its usual practice of pumping some fixed amount of money into the banking system and instead make an unlimited number of euros available to the banks that needed them.  The technical term for what Trichet and the Executive Board did at 12:30 p.m. central European time is to offer a "fixed-rate tender with full allotment."
                   Translation: Come and get it, guys.  We'll give you as many euros as you need at 4 percent.  Some forty-nine banks took 95 billion EUROs.
                  (Irwin, Neil (2013), The Alchemists, the penguin press, new york, 2013 ) (The Alchemists : three central bankers and a world on fire, Neil Irwin, p.1, p.2, p.3 )

2007            (Why no financial panic? M3?)       
(There should be a financial panic about now because of the huge spike in DJIA volume from 2001-2005.)
 (Nouriel Roubini forecasts that the panic should happened about now.)
   ____________________________________
    Charles Kindleberger's book with Robert Z. Aliber;
    Manias, Panics, and Crashes: A History of Financial Crises; 
    1978, 1989, 1996, 2000;
    published in 2005
   ____________________________________

2008 September  Fannie Mae and Freddie Mac is placed into custodianship
                September of 2008, Fannie Mae and Freddie Mac were both placed into conservatorship of the Federal Housing Finance Agency (FHFA), which put Fannie Mae and Freddie Mac under direct government control. Today, the role of Fannie Mae and Freddie Mac has not changed very much.

                https://en.wikipedia.org/wiki/Fannie_Mae
                The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, is a United States government-sponsored enterprise (GSE) (founded in 1938 during the Great Depression as part of the New Deal) - the corporation's purpose is to expand the secondary mortgage market by securitizing mortgage loans in the form of mortgage-backed securities (MBS)

                https://en.wikipedia.org/wiki/Freddie_Mac
                The Federal Home Loan Mortgage Corporation (FHLMC), known as Freddie Mac, is a public government-sponsored enterprise (GSE)
                The FHLMC was created in 1970 to expand the secondary market for mortgages in the US. Along with the Federal National Mortgage Association (Fannie Mae), Freddie Mac buys mortgages on the secondary market, pools them, and sells them as a mortgage-backed security to investors on the open market. This secondary mortgage market increases the supply of money available for mortgage lending and increases the money available for new home purchases. 
   ____________________________________

Simon Head, Mindless : why smarter machines are making dumber humans, 2014  [ ]

p.80
The US government──J. K. Galbraith's “countervailing power”──which might have set limits on the machine's operations, was in fact actively working on the machine's behalf.
p.80
mortgage-backed securities (MBSs)
underwrote the subprime mortgages, bundled them together, and passed them on to investment bankers as mortgage-backed securities (MBSs);
collateralized debt obligations (CDOs)
p.80
Simon Johnson and James Kwak, their book Thirteen Bankers
p.81
foundations, universities, pension funds, midwestern school districts, German regional banks, all very big losers once the MBSs and CDOs went bad.
p.82
Finally, the value-at-risk (VAR) indexes pioneered by Professor Philippe Jorion of the University of California were heavily relied on to assess the risk of CDOs.

   (Mindless : why smarter machines are making dumber humans / Simon Head., 1. technology──social aspects., 2. business──data processing──psychological aspects., 3. industries──technological innovations──psychological aspects., 4. ──Mental efficiency., 5. knowledge management., T14.5.H445  2013, 303.48'3──dc23, 2014, )
   ____________________________________

Simon Head, Mindless : why smarter machines are making dumber humans, 2014  [ ]

pp.82-83
Goldman's handling of the Wall Street crash during its critical, formative months between the middle of 2006 and the end of 2007 must be among the most heavily documented events in modern business history.
p.83
Pride of place in this bibliography goes to the Senate Permanent Subcommitee on Investigations' (the Levin Committee's) 266-page report on Goldman, “Failing to manage conflicts of interest: a case study of Goldman Sachs”, which is just one section within a 639-page report on the role of investment banks in crisis.4  
p.83
The report draws on tens of thousands of e-mails subpoenaed from Wall Street firms by the committee and provides a day-to-day, and sometimes hour-by-hour, account of what went on at Goldman during those months.
p.83
A companion volume to the report is the transcript and video footage of the hearings before the Levin Committee, which took place on October 27, 2010, when Goldman's crisis team, from CEO Lloyd Blankfein down to the humblest traders, gave their side of the story.5

pp.202-203
   Notes to chapter 5: the case of Goldman sachs
   1. Joseph Schumpeter, Capitalism, Socialism, and Democracy (New York and London: Routledge, 2010), 117-118.
   4. US Senate, Permanent subcommittee on investigations of the committee on homeland security and govermental affairs, “wall streets and the financial crisis: anatomy of a financial collapse”, sec. C, “Failing to manage conflicts of interest: case study of Goldman sachs”, www.hsgac.senate.gove/imo/media/doc/Financial_Crisis/FinancialCrisisReport.pdf?attempt=2, 376-639.
   5. US Senate, Permanent subcommittee on investigations, “wall street and the financial crisis: the role of the investment banks”, hearings, April 27, 2010, www.google.co.uk
   6. Basis Yield Alpha Fund, Plaintiff, v. Goldman Sachs Group, Inc.
      SEC press release, July 15, 2010, “Goldman Sachs to pay record $550 million to settle SEC charges related to subprime mortgaged CDO”,
      http://sec.gove/news/press/2010/2010-123.htm.
   7. Goldman Sachs, “Risk management and the residential mortgage market”, http://online.wsj.com/public/resources/documents/goldman0424.pdf.

p.83
Abacus CDO
pp.83-84
But the Levin Committee's report and hearing provide, I believe, strong evidence that the deception and manipulation of clients eventually became an integral part of Goldman's trading strategy.6  
p.84
By the early 2000s, Goldman's derivatives trading could no longer be called banking in any meaningful sense of the term, but had become an industrial activity, turning out virtual products whose fortunes depended on the efficient management and coordination of processes:  the accumulation of mortgages and other forms of debt from bankers and brokers, their transformation into financial derivatives, and their selling on to clients.
p.85
   But once the housing market turned, the system collapsed.  The difference between Goldman and other leading players on Wall Street was that Goldman saw it coming and was able to recalibrate its machine so that not only did it avoid the catastrophic losses that destroyed Lehman Brothers and crippled Citicorp, but it actually came out ahead.
p.85
But to achieve this Goldman behaved, I will argue, with ruthless cynicism, above all in deceiving and exploting its clients.
p.85
mortgage brokers as New Century, Long Beach, and Countrywide
p.86
mortgage-backed securities (MBSs): securities backed by housing mortgage, residential mortgage-backed securities,
collateralized debt obligations (CDOs): debt  

pp.87-88
   One way of cutting through this obfuscation is to imagine for a moment that Goldman was a real industrial company making and selling real products, rather than a virtual industrial company making and selling virtual products.

   (Mindless : why smarter machines are making dumber humans / Simon Head., 1. technology──social aspects., 2. business──data processing──psychological aspects., 3. industries──technological innovations──psychological aspects., 4. ──Mental efficiency., 5. knowledge management., T14.5.H445  2013, 303.48'3──dc23, 2014, )
   ____________________________________

Simon Head, Mindless : why smarter machines are making dumber humans, 2014  [ ]

p.91
   The problem that then arose for Goldman was that in marketing the three kinds of financial derivatives, the company was acting as underwriter and placement agent and not simply as market maker or trader on its own behalf.  As underwriter and placement agent, Goldman was subject to rules on fair disclosure that as market maker it was not.
p.92
The blurring of the distinction between market maker and underwriter was central to Blankfein's evasive strategy, as the following exchanges reveal:

p.94
To grasp the sheer chutzpah of Goldman's marketing, one needs to look at one of these deals in detail.
p.94
Timberwolf CDO between September 2006 and June 2007,
synthetic CDO
Basis Capital, an Australian hedge fund,
p.95
the pitch book
p.96
cash-flow analysis
p.96
p.97
“Goldman syndicate”, a subcommittee at New York headquarters responsible for coordinating sales efforts,
p.98
Meanwhile, the value of Timberwolf securities continued to fall.
p.98
Bank Hapoalim in Tel Avid, Israel, and a Korean insurance company call Hungkuk Life in Seoul.
p.99
Unbeknownst to Basis, 36 percent of the short interest on the Timberwolf CDSs was held by a single counterparty──Goldman.  As the CDO lost value, Goldman made money.26  
p.99
Timberwolf and Point Pleasant transactions.
p.99
extremely difficult to value.
p.99
residential mortgage-backed securities
p.100
overly negative and ahead of the market,
we could end up leaving some money on the table
p.101
According to a complaint filed against Goldman in New York courts by Basis in October 2011, Goldman consistently refused.31
“knowingly making materially false statements with the sale of Timberwolf” and Point Pleasant, another CDO.

   (Mindless : why smarter machines are making dumber humans / Simon Head., 1. technology──social aspects., 2. business──data processing──psychological aspects., 3. industries──technological innovations──psychological aspects., 4. ──Mental efficiency., 5. knowledge management., T14.5.H445  2013, 303.48'3──dc23, 2014, )
   ____________________________________

William Engdahl, A century of war: Anglo-American oil politics and the new world order, 1992, 2004

pdf page: 25/314 (filename: Engdahl_Century_of_War_book.pdf)
pp.14-15
p.14
In 1890, as a result of the near failure of the prestigious London merchant bank, Baring Brothers, arising from their huge losses in Argentine bond speculation and investment, and the ties of German banking to this Argentine speculation, a Berlin bank panic ensured, as the dominoes of an international financial pyramid began to topple.

p.14
   Berlin, and German investors generally, had been caught up in international railroad speculation mania in the 1880s.  With the crash of the elite Baring Bros., with some $75,000,000 invested in various Argentine bonds, down came the illusions of many Germans about the marvels of financial speculation.

pp.14-15
   In the wake of the financial collapse of Argentina, a large wheat exporter to Europe, Berlin grain traders Ritter & Blumenthal had foolishly attempted to ‘corner’ on the entire German wheat market, planning to capitalize on the consequences of the financial troubles in Argentina.  This only aggravated the financial panic in Germany as their scheme collapsed, bankrupting in its wake the esteemed private banking house of Hirschfeld & Wolf, and causing huge losses at the Rheinisch-Westphaelische Bank, further triggering a general run on German banks and a collapse of the Berlin stock market, lasting into the autumn of 1891.

p.15
   Responding to the crisis, the Chancellor named a Commission of Inquiry of 28 eminent persons, under the chairmanship of Reichsbank President Dr. Richard Koch, to look into the causes and to propose legislative measures to prevent further such panics from occurring.  The Koch Commission was composed of a broad and representatives cross-section of German economic society, including representatives from industry, agriculture, universities, political parties, as well as banking and finance.

p.15
   The result of the commission's work, most of it voted into law by the Reichstag in the Exchange Act in June 1896, and the Depotgesetz of that July, was the most severe legislation restricting financial speculation of any industrial country of the time.  Futures positions in grain were prohibited.  Stock market speculation possibilities were severely constrained, one result of which has been the relative absence of stock market speculation since then as a major factor affecting German economic life.

p.15
   The German Exchange Act of 1896 established definitively a different form of organization of finance and banking in Germany from that of Britain or America──Anglo-Saxon banking.  Not only this, but many London financial houses reduced their activity in the restrictive German financial market after the 1890s as a result of these restrictions, lessening the influence of City of London finance over German economic policy.  Significantly, to the present day, these fundamental differences between Anglo-Saxon banking and finance, and a ‘German model’ as largely practiced in Germany, Holland, Switzerland and Japan, are still somewhat visible.3

3. Friedrich List. The National System of Political Economy (1885 edition. London: Longman, Green). Reprinted New York: Augustus M. Kelley, 1966.  

William Engdahl, A century of war: Anglo-American oil politics and the new world order, 1992, 2004

https://drive.google.com/file/d/1e0PVSremXnuf4Nkn4cY0xW8hF8SaL72-/view
https://drive.google.com/drive/folders/1eon-LgnO0xBGwNocDzajA8hELTmWS1CR
   ____________________________________

William R. Clark, Petrodollar warfare, 2005                            [ ]

p.18 (pdf 39)
Bretton Wood Monetary Conferences of 1944-1945

A plaque erected at the original conference site in Carroll, New Hampshire, states:

In 1944 the United States government chose the Mount Washington HOtel as the site for a gathering of representatives of 44 countries.  This was to be the famed Bretton Wood Monetary Conference.  The Conference established the World Bank, set the gold standard at $35 an ounce, and chose the American dollar as the backbone of international exchange.  The meeting provided the world with badly needed post war currency stability.

p.18 (pdf 39)
Hence, it was the Bretton Woods Conferences that created the World Bank and the International Monetary Fund (IMF) to facilitate this noble goal.  These two organizations were later instrumental in rebuilding both the European and Japanese infrastructures.

   (Petrodollar warfare : oil, Iraq and the future of the dollar, William R. Clark, 2005, )
   ____________________________________

Howard W. French., Everything under the heavens : how the past help shape China's push for global power, 2017.

p.279
a German economist at Bretton Woods institution in Washington remarked to me,
p.279
to create a new global or regional economic and political institutional arrangements
United States, World Bank in 1944;
Japan, Asian Development Bank in 1966;
Germany, European Bank for Reconstruction and Development in 1991;
China, Asian Infrastructure Investment Bank [in 2015 - operational]

   (Everything under the heavens : how the past help shape China's push for global power / Howard W. French., first edition. | New York : Alfred A. Knopf, [2017] |
China──foreign relations──21st century.| China──foreign relations──Asia.|Asia──foreign relations──China.|strategic culture──China.|geopolitics──Asia., LCC JZ1734.F74  2017| DDC 327.51──dc23, https://lccn.loc.gov/2016021957, 2017, )
   ____________________________________

Ha-Joon Chang, Economics : the user's guide, 2014

first published 2014
this paperback edition published 2015

pp.222-223
   In 1982, Chile got into a major banking crisis, following the radical financial market liberalization in the mid-1970s under the Pinochet dictatorship
   late 1980s, the Saving and Loans (S&L) companies in the US got into massive troubles,
   the 1990s started with banking crisis in Sweden, Finland and Norway, following their financial deregulation in the late 1980s,
   Then there was the ‘tequila’ crisis in Mexico in 1994 and 1995.
   This was followed by crisises in the ‘miracle’ economies of Asia ─ Thailand, Indonesia, Malaysia and South Korea ─ in 1997, which had resulted from their financial opening up and deregulation in the late 1980 and the early 1990s.
   On the heels of the Asian crisis came the Russian crisis of 1998.
   The Brazilian crisis followed in 1999 and the Argentinian one in 2002, both in part the results of financial deregulation.

p.238
; this is known as the reference group.  We actually don't really care that much how well people who do not belong to our own reference groups are doing.*

p.39
The fact is that capitalism developed first in Western Europe.

p.41
this expansion involved expropriating land, resources and people for labour from the native populations through colonialism.

p.42
   Beginning with Portugal in Asia and Spain in the Americas from the late 15th century, the Western European nations ruthlessly move out.  By the middle of the 18th century, North America was divided up between Britain, France and Spain.  Most Latin American countries were ruled by Spain and Portugal until the 1810s and the 1820s.  Parts of India were ruled by the British (mainly Bengal and Bihar), the French (the south-eastern coast) and the Portuguese (various coastal areas, especially Goa).  

Ha-Joon Chang, Economics : the user's guide, 2014
    ____________________________________
    ____________________________________

https://www.rollingstone.com/politics/politics-news/elizabeth-warren-vs-wall-street-194416/
    ____________________________________

Bridgewater's Ray Dalio
 Vanguard Emerging Markets ETF (VWO)
 
([ the following URL - page not found ])
http://www.institutionalinvestor.com/blogarticle/3433519/blog/bridgewaters-ray-dalio-explains-the-power-of-not-knowing.html

Bridgewater’s Ray Dalio Explains the Power of Not Knowing
By Raymond Dalio March 06, 2015 at 1:00 PM EST

To make money in the markets, you have to think independently and be humble. You have to be an independent thinker because you can’t make money agreeing with the consensus view, which is already embedded in the price. Yet whenever you’re betting against the consensus, there’s a significant probability you’re going to be wrong, so you have to be humble.

Early in my career I learned this lesson the hard way — through some very painful bad bets. The biggest of these mistakes occurred in 1981–’82, when I became convinced that the U.S. economy was about to fall into a depression. My research had led me to believe that, with the Federal Reserve’s tight money policy and lots of debt outstanding, there would be a global wave of debt defaults, and if the Fed tried to handle it by printing money, inflation would accelerate. I was so certain that a depression was coming that I proclaimed it in newspaper columns, on TV, even in testimony to Congress. When Mexico defaulted on its debt in August 1982, I was sure I was right. Boy, was I wrong. What I’d considered improbable was exactly what happened: Fed chairman Paul Volcker’s move to lower interest rates and make money and credit available helped jump-start a bull market in stocks and the U.S. economy’s greatest ever noninflationary growth period.

This episode taught me the importance of always fearing being wrong, no matter how confident I am that I’m right. As a result, I began seeking out the smartest people I could find who disagreed with me so that I could understand their reasoning. Only after I fully grasped their points of view could I decide to reject or accept them. By doing this again and again over the years, not only have I increased my chances of being right, but I have also learned a huge amount.

There’s an art to this process of seeking out thoughtful disagreement. People who are successful at it realize that there is always some probability they might be wrong and that it’s worth the effort to consider what others are saying — not simply the others’ conclusions, but the reasoning behind them — to be assured that they aren’t making a mistake themselves. They approach disagreement with curiosity, not antagonism, and are what I call “open-minded and assertive at the same time.” This means that they possess the ability to calmly take in what other people are thinking rather than block it out, and to clearly lay out the reasons why they haven’t reached the same conclusion. They are able to listen carefully and objectively to the reasoning behind differing opinions.

When most people hear me describe this approach, they typically say, “No problem, I’m open-minded!” But what they really mean is that they’re open to being wrong. True open-mindedness is an entirely different mind-set. It is a process of being intensely worried about being wrong and asking questions instead of defending a position. It demands that you get over your ego-driven desire to have whatever answer you happen to have in your head be right. Instead, you need to actively question all of your opinions and seek out the reasoning behind alternative points of view.

This approach comes to life at Bridgewater in our weekly research meetings, in which our experts on various areas openly disagree with one another and explore the pros and cons of alternative views. This is the fastest way to get a good education and enhance decision-making. When everyone agrees and their reasoning makes sense to me, I’m usually in good shape to make a decision. When people continue to disagree and I can’t make sense of their reasoning, I know I need to ask more probing questions or get more triangulation from other experts before deciding.

I want to emphasize that following this process doesn’t mean blindly accepting the conclusions of others or adopting rule by referendum. Our CIOs are ultimately responsible for our investment decision-making. But we all make better decisions by maintaining an independent view and the conflicting possibilities in our minds simultaneously, and then trying to resolve the differences. We’re always in the place of holding an opinion and simultaneously stress-testing the hell out of it.

Operating this way just seems like common sense to me. After all, when two people disagree, logic demands that one of them must be wrong. Why wouldn’t you want to make sure that that person isn’t you?

Raymond Dalio is founder, chairman and co-CIO of Bridgewater Associates, the world’s largest hedge fund firm.
   ____________________________________

 GMO quarterly letter 
first quarter 2014
Looking for Bubbles

https://drive.google.com/file/d/1x4wDHj_Da46CQqMIGpde3x2LhzEcqtne/view?usp=sharing

https://drive.google.com/drive/folders/1IW9zNqBlhZxMkjb4r-pq-k0a83aFv4r7?usp=sharing
   ____________________________________
   ____________________________________

Beneficiary From Record Global Leverage
02/02/2012
http://www.zerohedge.com/news/presenting-only-beneficiary-record-global-leverage

Qui Bono

been saying this for three years, that the distinction in society is determined by those whose incomes increase with leverage, Vs those with real incomes, this is what causes the wealth inequality, which is promoted by the federal reserve. I even said it on this site two days ago with the papaer from the san fran fed on how it doesn't effect unemployment. tried to explain it to krugman so many times I can't count. this is why tax increases on this segment are deserved, because they benefit so much from this federal reserve tax payer subsidy.

Fix income inequality with $10 million loans for everyone!

Under my plan, each American household could borrow $10 million from the Fed at zero interest. The more conservative among us can take that money and buy 10-year Treasury bonds. At the current 2 percent annual interest rate, we can pocket a nice $200,000 a year to live on. The more adventuresome can buy 10-year Greek debt at 21 percent, for an annual income of $2.1 million. Or if Greece is a little too risky for you, go with Portugal, at about 12 percent, or $1.2 million dollars a year. (No sense in getting greedy.)
~ Sheila Bair, former chairman of the Federal Deposit Insurance Corp.

    “Under my plan, each American household could borrow
     $10 million from the Fed at zero interest.
     The more conservative among us can take that
     money and buy 10-year Treasury bonds.
     At the current 2 percent annual interest rate,
     we can pocket a nice $200,000 a year to live on.
     The more adventuresome can buy 10-year Greek debt at
     21 percent, for an annual income of $2.1 million.
     Or if Greece is a little too risky for you,
     go with Portugal, at about 12 percent, or
     $1.2 million dollars a year. (No sense in getting greedy.)”;
            ── Sheila Bair,
               former chairman of the Federal Deposit Insurance Corp.

Fix income inequality with $10 million loans for everyone!
By Sheila Bair
April 13, 2012

Are you concerned about growing income inequality in America? Are you resentful of all that wealth concentrated in the 1 percent? I’ve got the perfect solution, a modest proposal that involves just a small adjustment in the Federal Reserve’s easy monetary policy. Best of all, it will mean that none of us have to work for a living anymore.

For several years now, the Fed has been making money available to the financial sector at near-zero interest rates. Big banks and hedge funds, among others, have taken this cheap money and invested it in securities with high yields. This type of profit-making, called the “carry trade,” has been enormously profitable for them.

So why not let everyone participate?

Under my plan, each American household could borrow $10 million from the Fed at zero interest. The more conservative among us can take that money and buy 10-year Treasury bonds. At the current 2 percent annual interest rate, we can pocket a nice $200,000 a year to live on. The more adventuresome can buy 10-year Greek debt at 21 percent, for an annual income of $2.1 million. Or if Greece is a little too risky for you, go with Portugal, at about 12 percent, or $1.2 million dollars a year. (No sense in getting greedy.)

Think of what we can do with all that money. We can pay off our underwater mortgages and replenish our retirement accounts without spending one day schlepping into the office. With a few quick keystrokes, we’ll be golden for the next 10 years.

Of course, we will have to persuade Congress to pass a law authorizing all this Fed lending, but that shouldn’t be hard. Congress is really good at spending money, so long as lawmakers don’t have to come up with a way to pay for it. Just look at the way the Democrats agreed to extend the Bush tax cuts if the Republicans agreed to cut Social Security taxes and extend unemployment benefits. Who says bipartisanship is dead?

And while that deal blew bigger holes in the deficit, my proposal won’t cost taxpayers anything because the Fed is just going to print the money. All we need is about $1,200 trillion, or $10 million for 120 million households. We will all cross our hearts and promise to pay the money back in full after 10 years so the Fed won’t lose any dough. It can hold our Portuguese debt as collateral just to make sure.

Because we will be making money in basically the same way as hedge fund managers, we should have to pay only 15 percent in taxes, just like they do. And since we will be earning money through investments, not work, we won’t have to pay Social Security taxes or Medicare premiums. That means no more money will go into these programs, but so what? No one will need them anymore, with all the cash we’ll be raking in thanks to our cheap loans from the Fed.

Come to think of it, by getting rid of work, we can eliminate a lot of government programs. For instance, who needs unemployment benefits and job retraining when everyone has joined the investor class? And forget the trade deficit. Heck, we want those foreign workers to keep providing us with goods and services.

We can stop worrying about education, too. Who needs to understand the value of pi or the history of civilization when all you have to do to make a living is order up a few trades? Let the kids stay home with us. They can play video games while we pop bonbons and watch the soaps and talk shows. The liberals will love this plan because it reduces income inequality; the conservatives will love it because it promotes family time.

I’m really excited! This is the best American financial innovation since liar loans and pick-a-payment mortgages. I can’t wait to get my super PAC started to help candidates who support this important cause. I think I will call my proposal the “Get Rid of Employment and Education Directive.”

Some may worry about inflation and long-term stability under my proposal. I say they lack faith in our country. So what if it cost 50 billion marks to mail a letter when the German central bank tried printing money to pay idle workers in 1923?

That couldn’t happen here. This is America. Why should hedge funds and big financial institutions get all the goodies?

Look out 1 percent, here we come.

Sheila Bair is a former chairman of the Federal Deposit Insurance Corp. and a regular contributor to Fortune Magazine.

SOURCE:
https://www.textise.net/showText.aspx?strURL=http://www.washingtonpost.com/opinions/fix-income-inequality-with-10-million-loans-for-everyone/2012/04/13/gIQATUQAFT_story.html

Original story
http://www.rollingstone.com/politics/blogs/taibblog/free-10-million-loans-for-all-and-other-wall-street-notes-20120419
April 19, 2012

http://www.washingtonpost.com/opinions/fix-income-inequality-with-10-million-loans-for-everyone/2012/04/13/gIQATUQAFT_story.html
Published: April 13, 2012
By Sheila Bair
   ____________________________________
   ▄▀▄▀▄▀▄▀▄▀▄▀▄▀▄▀▄▀▄▀▄▀▄▀▄▀▄▀▄▀▄▀▄▀▄▀

McCusker, J. J. (1992).
How much is that in real money?: a historical price index for use as a deflator of money values in the economy of the United States

source:
       https://en.wikipedia.org/wiki/Rational_Software
   ____________________________________