bank run

The Lost Bank: The Story of Washington Mutual-The Biggest Bank Failure in American History
by Kirsten Grind
Published 11 Jun 2012

In just three days, customers pulled out a collective $1.5 billion, surpassing IndyMac’s giant deposit loss. “We had never seen anything like it,” said one of the deposit team managers later. WaMu’s own bank run was now, officially, under way. On the fourth day, a Tuesday, customers withdrew $1.8 billion. Together those two numbers represented about 2 percent of WaMu’s retail deposit base of $148.2 billion.* The last time WaMu had suffered through a bank run of this magnitude was in midst of the Great Depression.23 On a cold February morning in the winter of 1931, Seattle residents woke up to a banner headline in the local paper: the troubled Puget Sound Savings and Loan Association would not open the next day.

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To keep from further spooking customers, WaMu held off on closing about a hundred branches across the country that hadn’t been making money, and that had been scheduled to close before the run started. No one wanted to give the public any reason to think WaMu was shutting down. On the Tuesday when WaMu customers withdrew $1.8 billion, the bank run peaked. Then it began to subside. Bank runs, while they are sparked by unknown events, generally play out like a bubble, with a run-up, a climax, and a fall. WaMu’s run was no different. Soon deposit outflows fell back into the range of hundreds of millions of dollars. Two weeks after IndyMac’s failure, the WaMu panic ended.

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WaMu had called the meeting as a way to update the regulators on the bank’s financial condition following the bank run. They had no idea that their bank had fueled such a battle between the two agencies. In Reich’s conference room at the OTS’s frayed headquarters, Killinger and WaMu’s treasurer, Robert Williams, ran through WaMu’s capital and liquidity positions. WaMu was considered well capitalized, even though it had just posted a stunning $3.3 billion loss in the second quarter because of its bad loans—its highest quarterly loss ever. As a result of the bank run, the bank’s liquidity had drained to about $50 billion. The government agencies still deemed that amount healthy.

Crisis Economics: A Crash Course in the Future of Finance
by Nouriel Roubini and Stephen Mihm
Published 10 May 2010

The first was available during the Great Depression, but the Federal Reserve failed to use it effectively; the second came into being when New Deal banking legislation created the Federal Deposit Insurance Corporation (FDIC). These two antidotes to bank runs are slightly different. Lender-of-last-resort support stops a bank run by giving banks ready access to cash so they can pay off their depositors, thus sparing them having to liquidate assets at fire-sale prices. Deposit insurance, by contrast, prevents bank runs from occurring in the first place: it reassures depositors that they will get their money back if the bank becomes illiquid or even insolvent. In the postwar era, both lender-of-last-resort support and deposit insurance became the norm, not only in the United States but in most capitalist nations.

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Building & Loan, but they suffered from the same vulnerability to a bank run. This would not have been a problem had the shadow banks made the same bargain as regular banks, submitting to increased regulation in exchange for access to lender-of-last-resort support and the equivalent of deposit insurance. But they did not. Even worse, these institutions grew to rival the conventional banking system, lending comparable amounts of money. It’s little wonder that the shadow banking system was at the heart of what would become the mother of all bank runs. A World Awash in Cash All of these factors—financial innovation, failures of corporate governance, easy monetary policy, failures of government, and the shadow banking system—contributed to the onset of the crisis.

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As the run continued, fears mounted that other well-regulated banks with deposit insurance might suffer runs as well, then spiral from illiquidity to insolvency. As irrational as these bank runs may have seemed, depositors actually did have reason to worry. Like Countrywide, Northern Rock offered deposit insurance only up to a certain point: $100,000 in the case of Countrywide, and £30,000 in the case of Northern Rock. Plenty of depositors had sums well in excess of these amounts, and should the bank become insolvent—with or without the support of a lender of last resort—they would lose their savings. In fact, in the United States in 2007, some 40 percent of conventional deposits were uninsured. Bank runs, in other words, were rather rational.

Money: The True Story of a Made-Up Thing
by Jacob Goldstein
Published 14 Aug 2020

Today, when everybody with money in the bank comes and asks for it at the same time, we call it a bank run. And the banks and the people who want their money back—which is to say, basically, everybody—are still screwed. While paper money was new to Europe, banking and bank runs were not. In Venice, money changers had started storing gold for people in the fourteenth century—and lending that gold out to other people. The money changers sat on benches on a busy bridge over the Grand Canal, so they were called banchieri, which translates as “bench-sitters,” and which is the root of our words banker and bank. To reduce the risk of bank runs, the Venetians required the bench-sitters to keep a certain percentage of gold in reserve.

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A boxing promoter at Madison Square Garden bartered tickets for “hats, shoes, cigars, combs, soap, chisels, kettles, sacks of potatoes, and foot balm.” The most famous line Roosevelt delivered the day he was inaugurated was perhaps the perfect response to the biggest bank run in American history: “The only thing we have to fear is fear itself.” In the middle of a gargantuan bank run—the canonical self-fulfilling prophecy—fear itself is the essential problem. Warren got in to see Roosevelt at the White House at 10:30 p.m. the next night. A few hours later, sitting in his study, smoking a cigarette in an ivory holder, in his second act as president, Roosevelt signed a proclamation that temporarily closed every bank in America.

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And the depositors in the shadow banks—the corporate treasurers and money-market funds and pension funds that had trillions of dollars of cash—were starting to demand their money back. It was the start of the biggest bank run in history. The run hit Bear Stearns first. Bear was a small, risk-loving investment bank that borrowed tons of money from money-market funds and used it to buy mortgage-backed bonds. In March 2008, the funds decided the risk of lending to Bear was no longer worth it. Fidelity, the biggest money-market fund manager in America, had been lending Bear nearly $10 billion. In a single week, they demanded every penny of it back. This is the moment in the bank run when all the depositors line up outside the bank to withdraw their money.

Global Governance and Financial Crises
by Meghnad Desai and Yahia Said
Published 12 Nov 2003

First, because a bank run exhausts the bank’s assets at date 1, a late consumer who waits until date 2 to withdraw will be left with nothing, so whenever there is a bank run, it will involve all the late consumers and not just some of them. Second, if the market for the risky asset is illiquid, the sale of the representative bank’s holding of the risky asset will drive down the price, thus making it harder to meet the depositors’ demands. The all-or-nothing character of bank runs is, of course, familiar from the work of Diamond and Dybvig (1983). The difference is that in the present model bank runs are not “sunspot” phenomena: they occur only when there is no other equilibrium outcome possible.

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The total illiquidity of the risky asset plays an important equilibrating role in this version of the model. Because the risky asset cannot be liquidated at date 1, there is always something left to pay the late withdrawers at date 2. For this reason, bank runs are typically partial, that is, they involve only a fraction of the late consumers, unlike the Diamond–Dybvig (1983) model in which a bank run involves all the late consumers. As long as there is a positive value of the risky asset RX  0, there must be a positive fraction 1  ␣(R)  0 of late consumers who wait until the last period to withdraw. Otherwise the consumption of the late withdrawers c22(R)RX/(1␣(R)) would be infinite.

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The graphs in this figure represent the equilibrium consumption levels of early and late consumers, respectively, as a function of the risky asset return R. For high values of R (i.e. R R*), there is no possibility of a bank run. The consumption of early consumers is fixed by the standard deposit contract at c1(R)  c and the consumption of late consumers is given by the budget constraint c2(R)  L  RX  c. For lower values of R(R R*), it is impossible to pay the early consumers the fixed amount c promised by the standard deposit contract without violating the late consumers’ incentive constraint and a bank run inevitably ensues. However, there cannot be a partial run. The terms of the standard deposit contract require the bank to liquidate all of its assets at the second date if it cannot pay c to every depositor who demands it.

The Bankers' New Clothes: What's Wrong With Banking and What to Do About It
by Anat Admati and Martin Hellwig
Published 15 Feb 2013

Problems arise, however, if many depositors demand their money at the same time. This could happen if depositors become worried about the bank’s solvency and try to get their money out before it is too late. As we know from the fate of the Bailey Building and Loan Association in the movie, this can give rise to a bank run. Bank runs are sometimes discussed as examples of self-fulfilling expectations; that is, events that become reality just because people expect them and act on the basis of these expectations. If investors fear that other investors are about to run and withdraw their money from the bank, it may make sense for them to run themselves and try to withdraw their money.

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See mortgage default Delaware, bankruptcy in, 247n19 deleveraging, through asset sales, 64, 175, 257n19, 306n30 demand deposits: availability of, as benefit to economy, 49, 148; in balance sheets, 48, 248n4; in bank runs, 51–52, 150–53; as form of money, 294n10; in payment system, 49. See also deposit(s) Demirguç-Kunt, Asli, 251n24, 315n74 Demyanyk, Yuliya, 254nn43–44, 297n33 De Nicolò, Gianni, 249n12 Denmark, costs of bailouts in, 292n39 deposit(s): in balance sheets, 48–49; bank loans funded by, 48–49, 51–52; banknotes and, 149–50; in bank runs, 51–52; beneficial to economy, in payment system, 49, 148, 152–53; versus cash, 153, 154, 294n10; cost of, for banks, 111; as form of money, 150, 293n10; as funding sources of banks, 48–49, 51–52, 111, 150, 278n21; insurance on (See deposit insurance); in liquidity transformation, 155–56, 250n17; in maturity transformation, 51; as money-like debt, 154–56; in savings and loans institutions, 248n2; in solvency risks from maturity transformation, 51; as unique service of banks, 148; and vulnerability to runs, 150–53 deposit insurance: creditors protected by, 62, 163; in Europe, 242n25; as explicit guarantee, 129, 136–37, 139; functions of, 62; money market funds as lacking, 67, 93, 309n47; premium charged for, 111, 136–37; runs in absence of, 93, 273n46; in United States (See Federal Deposit Insurance Corporation; Federal Savings and Loan Insurance Corporation) Depository Institutions Deregulation and Monetary Control Act (DIDMCA) of 1980 (U.S.), 251n28 deregulation: and concentration in financial sector, 89, 269n27; of interest rates, 54, 251n28; of mergers, 251n28; in savings and loan crisis of 1980s, 55, 252n35; of savings banks, 54–55, 94, 251n28 derivatives, 69–74; accounting rules for treatment of, 71, 85–86, 260n42, 266n11, 266n13; in bankruptcy, exceptions for, 164, 227, 236n35, 301n55, 336n57; clearinghouses for, 334n46; complexity of, 71–72; credit insurance as, 73–74; definition of, 69; forward contracts as, 69–70; gambling with, 70–71, 73, 123; history of, 70; in LTCM crisis of 1998, 72; netting of, 85–86, 267nn15–17; regulatory capture and, 204; rise of, 70; risks from, 70–73; scandals involving, 70–71, 328n6; transparency in, lack of, 71–72, 261n43; transparency in, proposal to increase, 204, 325n51; types of, 69–70, 260n37.

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After the collapse in 1878 of the City of Glasgow Bank, in which depositors did not lose anything but 80 percent of the shareholders were personally bankrupted, the trend toward limiting bank owners’ liability accelerated. Still, well into the twentieth century, banks’ shareholders frequently had extended liability that required them to cover losses beyond the amount of their original investment.23 Extended liability was ineffective in preventing bank runs and losses to depositors during the Great Depression because of many personal bank-ruptcies.24 Following that experience, the United States established explicit deposit insurance by creating the Federal Deposit Insurance Corporation (FDIC). Banks that are FDIC members pay a premium, and their deposits are then guaranteed by the FDIC up to a maximum amount, currently $250,000.

End This Depression Now!
by Paul Krugman
Published 30 Apr 2012

So banking carries with it, as an inevitable feature, the possibility of bank runs—sudden losses of confidence that cause panics, which end up becoming self-fulfilling prophecies. Furthermore, bank runs can be contagious, both because panic may spread to other banks and because one bank’s fire sales, by driving down the value of other banks’ assets, can push those other banks into the same kind of financial distress. As some readers may already have noticed, there’s a clear family resemblance between the logic of bank runs—­especially contagious bank runs—and that of the Minsky moment, in which everyone simultaneously tries to pay down debt.

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The main difference is that high levels of debt and leverage in the economy as a whole, making a Minsky moment possible, happen only occasionally, whereas banks are normally leveraged enough that a sudden loss of confidence can become a self-fulfilling prophecy. The possibility of bank runs is more or less inherent in the nature of banking. Before the 1930s there were two main answers to the problem of bank runs. First, banks themselves tried to seem as solid as possible, both through appearances—that’s why bank buildings were so often massive marble structures—and by actually being very cautious. In the nineteenth century banks often had “capital ratios” of 20 or 25 percent—that is, the value of their deposits was only 75 or 80 percent of the value of their assets.

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On one side, Glass-Steagall established the Federal Deposit Insurance Corporation (FDIC), which guaranteed (and still guarantees) depositors against loss if their bank should happen to fail. If you’ve ever seen the movie It’s a Wonderful Life, which features a run on Jimmy Stewart’s bank, you might be interested to know that the scene is completely anachronistic: by the time the supposed bank run takes place, that is, just after World War II, deposits were already insured, and old-fashioned bank runs were things of the past. On the other side, Glass-Steagall limited the amount of risk banks could take. This was especially necessary given the establishment of deposit insurance, which could have created enormous “moral hazard.” That is, it could have created a situation in which bankers could raise lots of money, no questions asked—hey, it’s all government-insured—then put that money into high-risk, high-stakes investments, figuring that it was heads they win, tails taxpayers lose.

The Default Line: The Inside Story of People, Banks and Entire Nations on the Edge
by Faisal Islam
Published 28 Aug 2013

Staff worked through the night to ensure that bank branches across Greece had sufficient notes to meet depositor demand, and so contain any incipient physical bank run. Incredibly, this operation proceeded without anyone noticing. The Bank of Greece tracked a demand for paper currency through bank branch orders for currency. Large withdrawals were normally granted with notice of a day or two. The Bank also noticed a spike in purchases of gold sovereigns. It did not have to deploy teams of ‘bank-run spotters’ as the Bank of England had done in the crisis of 2008. As far as ordinary Greeks were concerned, the cash machines continued to function.

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I wondered if the Eurogroup geniuses who had set the Cypriot bank run in motion had ever read Roosevelt’s ‘fireside chat’, delivered on the radio in similar circumstances exactly eighty years previously: ‘It needs no prophet to tell you that when the people find that they can get their money – that they can get it when they want it for all legitimate purposes – the phantom of fear will soon be laid.’ Thus, in a statesmanlike way, Roosevelt used the broadcast media to boost confidence and douse the flames of financial panic. Sadly, no statesman of similar stature emerged in Europe during the Eurozone crisis. In 1933 Roosevelt stopped bank runs by creating deposit insurance.

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Soon there would be not enough euro notes in the country to cope with the number of Greeks trying to get their hands on their money from cash machines and bank branches. A secret plan was activated. A senior official overseeing Greece’s bailout told me that when it became known that the IMF were considering not paying out the final tranche, there was the beginning of a bank run. ‘We’re talking about June 2011,’ he told me, ‘when Greeks were taking about one to two billion euros a day from the banking system. And the Greeks had to send military planes to Italy to get banknotes. It got to that point.’ A decade after it gave up the drachma, the world’s oldest existing currency, Greece faced the crushing reality that it did not have the sovereign authority to meet the demand for paper currency from its own citizens.

Narrative Economics: How Stories Go Viral and Drive Major Economic Events
by Robert J. Shiller
Published 14 Oct 2019

Consider a narrative-based chronology of the 2007–9 world financial crisis, which taps into stories about nineteenth-century bank runs that were virtually synonymous with financial crises. After the Great Depression, bank runs were thought to be cured. The Northern Rock bank run in 2007, the first UK bank run since 1866, brought back the old narratives of panicked depositors and angry crowds outside closed banks. The story led to an international skittishness, to the Washington Mutual (WaMu) bank run a year later in the United States, and to the Reserve Prime Fund run a few days after that in 2008. These events then led to the very unconventional US government guarantee of US money market funds for a year.

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The answer was “general prosperity,” referring to McKinley’s words during the campaign. The joke faded in 1897 around a year after the election; it lost its effect when the economy began showing signs of improvement.13 Narratives Trigger the 1893 Bank Runs The 1893–99 depression in the United States started quite suddenly in the spring of 1893 with a string of bank runs. Depositors rushed to pull their money out of banks, thereby fueling the bank failures that they feared. But what triggered the bank run? One trigger was a rumor that began on April 17, 1893: the US subtreasury offices would no longer redeem Treasury notes in gold but would provide only silver, in amounts worth about half as much as the notes.

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Days after his inauguration in 1933, he took the unusual step of addressing the nation by radio during a massive national bank run that had necessitated shutting down all the banks. In this “fireside chat,” he explained the banking crisis and asked people not to continue their demands on banks. He spoke to the nation as a military commander would speak to his troops before a battle, asking for their courage and selflessness. Roosevelt asserted, “You people must have faith. You must not be stampeded by rumors or guesses. Let us unite in banishing fear.”25 The public honored Roosevelt’s personal request. The bank run ended, and money flowed into, not out of, the banks when they reopened.

Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown
by Detlev S. Schlichter
Published 21 Sep 2011

The only constraining factor is the overall level of reserves and the risk of a bank run. If too many people ask to exchange their fiduciary media for money proper, any bank will face the risk of running out of reserves. Naturally, this risk increases if the bank is perceived to be in trouble, maybe as a result of problems in its loan portfolio. Once the soundness of a bank is questioned, outflows are likely to accelerate. In a fractional-reserve banking system, and that means today practically every banking system, every bank is potentially at risk of a bank run. A paper money system and a fractional-reserve banking system are confidence-based.

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They can increase borrowing and therefore overall levels of debt. Today extensive measures have been taken and an elaborate regulatory infrastructure has been erected to reduce the risk of bank runs and to increase the confidence of the public in the soundness of the fractional-reserve banking industry. More importantly, the abandonment of a metallic standard and the adoption of a full paper money system have removed the inelasticity of bank reserves. When banks run low on reserves and face increased outflows (naturally redemptions are no longer in gold but in physical paper money or in the form of transfers to other banks), they can get new reserves from the central bank, which has a lender-of-last-resort function and, under a paper money standard, can create as much reserve money as it wishes “at essentially no cost” (Bernanke).

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In the 10 years to the start of the most recent crisis in 2007, bank balance sheets in the United States more than doubled, from $4.7 trillion to $10.2 trillion.3 The Fed’s M2 measure of total money supply rose over the same period from less than $4 trillion to more than $7 trillion.4 From 1996 to 2006, total mortgage debt outstanding in the United States almost tripled, from $4.8 trillion to $13.5 trillion,5 as house prices appreciated, in inflation-adjusted terms, three times faster as over the preceding 100 years.6 Why I Wrote This Book It seems undeniable that elastic money has not brought greater stability. Regarding the stability of money’s purchasing power, the historical record of paper money systems has always been exceptionally poor. But it is now becoming increasingly obvious that the global conversion to paper money has also failed to put an end to bank runs, financial crises, and economic depressions. Quite to the contrary, those crises appear to become more frequent and more severe the longer we use fully elastic money and the more the supply of immaterial money expands. Astonishingly, there is an established body of economic theory that explains with great clarity and precision why this must be the case: the Currency School of the British Classical economists and, in particular, the Austrian School of Economics.

Money Free and Unfree
by George A. Selgin
Published 14 Jun 2017

As we’ve seen, Fed sources routinely overlook the role that misguided regulations played in causing or at least aggravating pre-Fed crises, blaming them instead on random outbreaks of unwarranted fear. “Occasionally,” the Dallas Fed says (FRBD 2006: 8), the public feared that banks would not or could not honor the promise to redeem [their] notes, which led to bank runs. Believing that a particular bank’s ability to pay was questionable, a large number of people in a single day would demand to have their banknotes exchanged for gold or silver. These bank runs created fear that often spread, causing runs on other banks and general financial panic. . . . Financial panics such as these occurred frequently during the 1800s and early 1900s. In his opening George Washington University lecture, Ben Bernanke (2012a) likewise speaks of panic spreading, like a cold, from one bank to the rest.

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In his opening George Washington University lecture, Ben Bernanke (2012a) likewise speaks of panic spreading, like a cold, from one bank to the rest. “[I]f one bank is having problems,” he says, people “might begin to worry about problems in their bank. And so, a bank run can lead to widespread bank runs or a banking panic, more broadly.” To illustrate the point, Bernanke refers to the run on Jimmy Stewart’s (that is, George Bailey’s) perfectly solvent bank in It’s a Wonderful Life. Had the Federal Reserve been on the job, he says, Bailey wouldn’t have had to depend on the generosity of the good citizens of Bedford Falls.15 But the sort of financial panic that Bernanke’s “Frank Capra” theory describes happens only on TV (where, admittedly, it happens with alarming regularity, every December).

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Only if panic becomes general—if depositors lose confidence in the entire banking system—will depositors switch to holding high-powered money, weakening all depository institutions in the process.8 Thus, a crucial (though often implicit) assumption in the pro-lender-of-last-resort literature is, to quote Robert Solow (1982: 238), that “any bank failure diminishes confidence in the whole system,” leaving no private banks in a position to stem a panic. This is a very strong assumption, especially in view of the paucity of support one finds for it in history. In U.S. experience, Arthur Rolnick and Warren Weber (1986) found no evidence of any contagion effects from bank runs during the free-banking era (1837–60). Reviewing the national banking era (1863–1913), George Kaufman (1988: 16) found only limited evidence of contagions in the panics of 1878, 1893, and 1908; and the evidence is weak except for 1893. Even during the “Great Contraction” of 1930–33—the episode from which contemporary authorities still seem to draw all of their conclusions—contagion effects appear to have been limited regionally until late 1932; prior to 1932, moreover, runs were confined for the most part to banks suffering from prerun insolvency or to banks affiliated with insolvent firms (Wicker 1980).

Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud
by Ben McKenzie and Jacob Silverman
Published 17 Jul 2023

With leverage, rigidity, and complexity galore, all crypto needed to set itself on fire was a match—a bank run. As you’ll recall, a bank run can occur in a regulated marketplace, but the existence of a trusted third party backstopping said banks is a mitigating factor. Since the FDIC was created in the 1930s, not a penny of FDIC-insured money in licensed US banks has been lost. But again, the lack of a trusted third party is the entire idea of crypto, so when the proverbial shit hits the proverbial fan there is no off switch to make the fan stop spinning. As my toddler might say, poopie go everywhere. The causes of the 2022 crypto bank run—or bank runs, if we’re being more accurate—are still highly contested, but they may not matter.

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The bank’s financial position is in fact healthy and hedged against such a possibility, but these rumors gather steam, and an economic narrative forms that the bank itself may become insolvent. As more and more depositors attempt to take their money out, a bank run ensues, resulting in its financial collapse. The economic event, a drought, didn’t directly produce the bank run—the bank was healthy. It was the rapid spread of a distorted economic narrative that led to its downfall. Narrative Economics was published in 2019, prior to both the current viral spread of cryptocurrency and the COVID-19 pandemic. Given that, it is remarkable to observe how intertwined these two viruses would become in the following years.

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Slightly adjusting for the layman what Professor Allen describes so well in her paper, there are three broad similarities between the systemic weaknesses revealed in the subprime crisis and the current construction of the crypto markets: leverage, rigidity, and complexity. They make the system very fragile, so that if a bank run occurs, it can trigger a crash. Leverage + Rigidity + Complexity + Bank Run = Crash Leverage is pretty simple: You borrow money to buy something. The more you borrow in relation to your actual money (equity), the more the upside, but there’s also the downside. If what you are investing in (or gambling on) goes up in value, you can make a lot of money.

The End of Alchemy: Money, Banking and the Future of the Global Economy
by Mervyn King
Published 3 Mar 2016

First, banks might suspend withdrawal of deposits in the face of a potential bank run. Banks could just shut their doors for a few days until the crisis has subsided. Of course, for a bank to close its doors, even if only because of a temporary shortage of liquidity, would send a signal that might lead to a loss of confidence on the part of depositors. It might only encourage a run to start sooner than would otherwise be the case, and if suspensions were regarded as potentially likely, then bank deposits would no longer function effectively as money. Second, governments could guarantee bank deposits to remove the incentive to join a bank run. Deposit insurance is now a common feature of most advanced economies’ banking systems.

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When the western banking system teetered on the verge of collapse, only drastic intervention, including partial nationalisation, saved it from going over the edge. The potential catastrophe of a collapse finally provoked action to recapitalise the banking system, using public money if necessary; the UK was first to respond, followed by the United States and then continental Europe. That action ended the bank run. The problem was that governments ended up guaranteeing all private creditors of the banks, imposing on future taxpayers a burden of unknown magnitude. Between the autumn of 2008 and the summer of 2009, there was a collapse of confidence and output around the world. World trade fell more rapidly than during the Great Depression of the 1930s.

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As Macheath pointed out in Brecht’s Threepenny Opera, why rob a bank and risk imprisonment when you could start a bank and create money? Both robbers and founders are attracted to banks because that is usually where the money is. But in September 2008 the money wasn’t there. Banks were losing money hand over fist as people who had been willing to lend them large sums suddenly refused to make new loans. Unlike the frequent bank runs in the nineteenth century, when individual depositors occasionally panicked and withdrew their funds, the change of heart had come from other financial institutions, wholesale investors such as money market and hedge funds. Unable to replace these sources of funding, banks had to call in loans, sell assets, and, in some cases, seek funding from their central bank.

How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy
by Mehrsa Baradaran
Published 5 Oct 2015

“The mechanic or day laborer who would have a feeling of timidity about entering a big banking house to deposit a small share of his earnings, would gladly avail himself of an opportunity to make the deposit with the local post-master, for the reason that he feels that he has as much right to be there as any other man, for the post-office is a part of the Governmental structure he helps support, and he reckons justly that he is entitled to share in its benefits.”39 The second purpose of general reform was also present from the beginning. Creswell reasoned that the postal banks would cure the bank runs that were endemic to the banking system in the nineteenth century: “The financial difficulties in which the country has been … involved … have demonstrated the necessity for some means of maintaining confidence in times of threatened disaster, and of gathering and wisely employing the immense wealth scattered among the people, to prevent panic and escape the ruin which inevitably follows in its track.”40 Indeed, many bank runs occurred between 1880 and 1910, afflicting both national and state banks and causing nationwide distrust.41 A government-supported bank would go a long way toward infusing trust back into the system.

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Even though total deposits didn’t rise during this time, most of the bank failures happened in those midregions, where the deposits did rise the most. When more banks started to fail nationwide, postal savings increased correspondingly. 115. Ibid., 718. 116. Ibid., 710. 117. David Hu, “The Influence of the U.S. Postal Savings System on Bank Runs,” Yale Journal of Economics 2, iss. 1 (2013), accessed March 12, 2015, econjournal.sites.yale.edu/articles/2/influence-us-postal-savings-system-bank-runs. 118. Sissman, “Development of the Postal,” 710. 119. United States Post Office, Annual Report of the Postmaster General, 1935 (Washington, DC: Government Printing Office, 1935), 28. 120. United States Post Office, Annual Report of the Postmaster General, 1941 (Washington, DC: Government Printing Office, 1941), 35. 121.

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A bank only keeps a small reserve to pay out the occasional depositor. This is how banking works but only when people trust banks and allow them to hold on to their money. The only historically proven antidote to fear-induced runs is a government willing to insure bank deposits. Since the inception of deposit insurance, bank runs have been a rare historical phenomenon—so rare that you and I are willing to put all our money in a bank and forget about it. We don’t worry about who manages the bank or what they do with our money. Even if we hear on the news that our bank has started to lend large sums of money to piano-playing cats, which we think is a bad idea, we would not feel the need to show up at the bank the next morning to ask for all of our money back.

Number Go Up: Inside Crypto's Wild Rise and Staggering Fall
by Zeke Faux
Published 11 Sep 2023

To me it seemed like a playground snowball fight had gotten so out of hand that the Joint Chiefs of Staff were being called in to avert a nuclear war. The regulators wanted to know where Tether’s billions were too. But they also believed that even if Tether was real, and it did have something like $55 billion somewhere, it had gotten so large that it put the entire U.S. financial system at risk. Their fear was that Tether would suffer a bank run. If the people who owned Tether coins started worrying about whether Tether really had those billions of dollars, they might start cashing them in. Fear would grow that Tether would run out of money. A stampede could start. No one would want to be among the last ones stuck holding Tethers when it did.

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But Betts objected. Tether’s website had long pledged that every Tether was fully backed by traditional currency. Investing the money wouldn’t be consistent with that. And even relatively safe investments went sour sometimes, which could have left Tether with less than complete backing, and vulnerable to a bank run. When Betts refused, Devasini accused him of stealing. Betts urged Devasini to hire an accounting firm to produce a full audit to reassure the public, but Devasini said Tether didn’t need to go that far to respond to critics. “Giancarlo wanted a higher rate of return,” Betts said. “I repeatedly implored him to be patient and do the work with auditors.”

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“Under normal circumstances I wouldn’t bother you (I never did so far) but this is quite a special situation and I need your help.” Yosef made a bunch of excuses to Devasini: corruption, bank compliance, tax issues, typos, bankers on vacation. It was a dangerous situation—if the public found out the withdrawal delay was more than a temporary glitch, it could set off a bank run. But the situation only worsened. In October, with many customers waiting on withdrawals for weeks, rumors began to circulate that Bitfinex itself was insolvent. The company had never officially acknowledged its relationship with Noble Bank, but that month, it was reported that the companies had cut ties.

Making It Happen: Fred Goodwin, RBS and the Men Who Blew Up the British Economy
by Iain Martin
Published 11 Sep 2013

Simon & Schuster UK Ltd 1st Floor 222 Gray’s Inn Road London WC1X 8HB www.simonandschuster.co.uk Simon & Schuster Australia, Sydney Simon & Schuster India, New Delhi A CIP catalogue record for this book is available from the British Library ISBN: 978-1-47111-354-3 eBook ISBN: 978-1-47111-356-7 Typeset in the UK by M Rules Printed and bound by CPI Group (UK) Ltd, Croydon, CR0 4YY For Fiona Contents Prologue 1 Tuesday, 7 October 2008 2 Company of Scotland 3 New World 4 Paisley Pattern 5 Battle of the Banks 6 The End of Boom and Bust 7 Fred the Shred 8 Sir Fred 9 Canny Scottish Bankers 10 Safe as Houses 11 Light Touch 12 Double Dutch 13 Bank Run 14 Boom Goes Bust 15 Five Years On Afterword Sources and Acknowledgements Notes Index List of Illustrations Prologue ‘You have a long time to regret it if you don’t get it right.’ Fred Goodwin, 7 June 2004, Businessweek During the boom years, at the beginning of the century, the Royal Bank of Scotland chose an advertising slogan.

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Rivalry between the pair had been a significant factor when both charged ahead in 2007 trying to buy the sub-prime-riddled Dutch bank ABN Amro, a race which Goodwin won with disastrous consequences. Now, on the call, Varley and the others turn on Goodwin and start pushing. It is RBS that is the issue; you are the biggest problem. Another old rival is in trouble and is in the middle of being taken over after experiencing its own bank run. Andy Hornby’s crippled HBOS, which contains the old Bank of Scotland, RBS’s Edinburgh rival for almost three centuries, is being bought by the hitherto cautious and conservative Lloyds, run by Eric Daniels. ‘Fred hated the HBOS guys,’ says a friend. ‘He really enjoyed when they had to be taken over by Lloyds and were humiliated.

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Rival outfits opened in Dundee, Ayr, Aberdeen and Perth and banks such as the Bank of Scotland started to develop national networks of branches – another innovation well ahead of England. There were more periodic panics, as there usually are. In 1857 the Western Bank in Glasgow failed spectacularly in the middle of a bank-run. It went down with liabilities of almost £9m. Its shareholders were wiped out. In 1878 there was an even worse disaster when the City of Glasgow Bank folded, following its botched investment in the Racine and Mississippi railroad in America. A difficult situation was exacerbated by extensive fraud on the part of the bank’s management.

A First-Class Catastrophe: The Road to Black Monday, the Worst Day in Wall Street History
by Diana B. Henriques
Published 18 Sep 2017

PART THREE CONTAGION 12 MERGERS AND MUTATIONS The frantic and fragile rescue of Continental Illinois early in the summer of 1984 had shown bank regulators just how quickly a crisis could erupt and how tough it was to stop one once it got rolling. However, the regulators who coped with that crisis at least recognized what they were dealing with: a bank run, albeit an especially fast and persistent one. Bank runs were a familiar species of trouble that had been around for about as long as there had been banks. But when Jerry Corrigan looked at the rest of the financial landscape from his post as president of the Federal Reserve Bank of Minneapolis, he saw new hazards that regulators had never dealt with before, things that could blow up without warning almost anywhere in the financial system.

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By the following Wednesday, long lines were forming outside other thrifts insured by the private insurance fund, even though they had no exposure to the failed firm in Florida. News coverage about the bank runs was starting to attract notice far outside Ohio. That’s why the thrift executives had flown to Washington that morning and gathered in Volcker’s office. The towering central banker had done everything he could to show his concern, but the tools Volcker had available were limited. He could extend emergency loans to help with the bank runs, but what these thrifts really needed was federal deposit insurance, and the Fed didn’t sell that—the thrifts had to get it from the FSLIC.

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In 2008, a run on money market funds—triggered by the Lehman bankruptcy, which caused a giant money market fund to lose money on Lehman’s commercial paper—nearly disabled the commercial paper market. Several had already had to jack up the rates they paid: Robert A. Bennett, “$4.5 Billion Credit for Chicago Bank Set by 16 Others,” New York Times, May 15, 1984, p. 1. the mighty Federal Reserve also stood ready to lend: Carlson and Rose, “Can a Bank Run Be Stopped?” p. 3. the worst bank runs that would occur in the aftermath of the 2008 financial crisis: Ibid., p. 1. Carlson and Rose note that “Washington Mutual lost 10 percent of its deposits and IndyMac lost about 8 percent, each in about two weeks. Thus, even in a more digital, seemingly faster moving era, these runs were less dramatic than the one on Continental, while still severe enough to lead to the seizure of both institutions by the FDIC.”

The Bitcoin Standard: The Decentralized Alternative to Central Banking
by Saifedean Ammous
Published 23 Mar 2018

The central contention of the book is that recessions are the result of the government not responding quickly enough to a financial crisis, bank run, and deflationary collapse by increasing the money supply to re‐inflate the banking sector. It is typical of the Milton Friedman band of libertarianism in that it blames the government for an economic problem, but the flawed reasoning leads to suggesting even more government intervention as the solution. The glaring error in the book is that the authors never once discuss what causes these financial crises, bank runs, and deflationary collapses of the money supply. As we saw from the discussion of the Austrian business cycle theory, the only cause of an economy‐wide recession is the inflation of the money supply in the first place.

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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. The only way to make maturity mismatching safe is with the presence of a lender of last resort standing ready to lend to banks in case of a bank run.26 In a society with sound money, a central bank would have to tax everyone not involved in the bank in order to bail out the bank.

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Unsound money thus creates a distinction between liquidity and solvency: a bank could be solvent in terms of the net present value of its assets but face a liquidity problem that prevents it from meeting its financial obligations within a certain period of time. But the lack of liquidity itself could trigger a bank run as depositors and lenders seek to get their deposits out of the bank. Worse, the lack of liquidity in one bank could lead to a lack of liquidity in other banks dealing with this bank, creating systemic risk problems. If the central bank credibly commits to providing liquidity in such cases, however, there will be no fear of a liquidity crisis, which in turn averts the scenario of a bank run and leaves the banking system safe. Fractional reserve banking, or maturity mismatching more generally, is likely to continue to cause financial crises without a central bank using an elastic money supply to bail out these banks.

Profiting Without Producing: How Finance Exploits Us All
by Costas Lapavitsas
Published 14 Aug 2013

Carlo Panico, for instance, partly in debate with Ben Fine, treats bank costs as a necessary input that must earn profits. This is an erroneous approach to the intermediary role of banks. 47 Lapavitsas, Social Foundations of Markets, Money and Credit, ch. 4. 48 Bank runs are fairly rare events in the history of mature capitalism, though the crisis of the 2000s has lent renewed relevance to this phenomenon. Mainstream theory is fully aware of the ineluctable risk of bank runs given the normal practices of commercial banking; see Douglas Diamond and Philip Dybvig, ‘Bank Runs, Deposit Insurance and Liquidity’, Journal of Political Economy 91, 1983. 49 The idea of 100% reserves for banks, or ‘narrow banking’, is associated with the Chicago tradition in economics.

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Traditional banking stands in contrast to securitized banking; the former is the business of making and holding loans, with insured demand deposits as the main source of funds; the latter is the business of packaging and reselling loans, with repurchase agreements as the main source of funds. In this light, the financial crisis of 2007–2008 was a system-wide bank run which, however, did not occur in the traditional but in the securitized banking sector. While a traditional bank run amounts to the mass withdrawal of deposits, a securitized bank run amounts to the mass withdrawal of repurchase agreements (repos). 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.

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Townsend, ‘Optimal Contracts and Competitive Markets with Costly State Verification’, Journal of Economic Theory 22, 1979. 9 See, for instance, Joseph Stiglitz and Andrew Weiss, ‘Credit Rationing in Markets with Imperfect Information’, American Economic Review 71:3, 1981, pp. 393–410; Nobuhiro Kiyotaki and John Moore, ‘Credit Cycles’, Journal of Political Economy 105:2, 1997. 10 Once again, the literature is very broad; see, very selectively, Hayne Leland and David H. Pyle, ‘Informational Asymmetries, Financial Structure and Financial Intermediation’, The Journal of Finance 32, 1977; John Bryant, ‘A Model of Reserves, Bank Runs, and Deposit Insurance’, Journal of Banking and Finance 4, 1980; Douglas Diamond and Philip Dybvig, ‘Bank Runs, Deposit Insurance and Liquidity’, Journal of Political Economy 91, 1983; Douglas Diamond, ‘Financial Intermediation and Delegated Monitoring’, Review of Economic Studies 51, 1984; John H. Boyd and Edward C. Prescott, ‘Financial Intermediary-Coalitions’, Journal of Economic Theory 38, 1986; Douglas Diamond and Raghuram Rajan, ‘Liquidity Risk, Liquidity Creation, and Financial Fragility: A Theory of Banking’, Journal of Political Economy 109:2, 2001; Franklin Allen and Anthony M.

Financial Fiasco: How America's Infatuation With Homeownership and Easy Money Created the Economic Crisis
by Johan Norberg
Published 14 Sep 2009

And now it turned out that most of them had been mislabeled. As if on command, investors stopped buying mortgage-backed securities. All the financial institutions and special companies whose business model was to take out short-term credit to keep their trade in securities going discovered that they could no longer renew their loans. It was a bank run. As it concerned the shadow banking sector, it did not involve actual crowds of depositors rushing to the bank to get their savings out before everybody else did, but the mechanism and the effect of causing the bank to go belly-up in the process were the same. All the special companies, conduits, and structured investment vehicles filled to the brim with mortgage-backed securities that the banks had placed off their balance sheets depended on regularly being able to renew short-term loans of maybe $1 billion, $10 billion, or $30 billion for maturities ranging from as much as nine months to as little as 24 hours.

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In just a few moments, a stable bank could seem to be teetering on the brink of insolvency. Citigroup saw its balance sheet grow by $49 billion in a single day in December 2007. There was no other way out for the banks but to pull the emergency brake so that they could build up more capital, and several of them also started borrowing directly from the Fed. The drawn-out bank run can be said to have begun on August 9, 2007. That was when the French bank BNP Paribas took the unusual step of preventing investors from withdrawing money from three money-market funds invested in U.S. mortgagebacked securities. Only one week earlier, its head had made assurances that the bank's exposure to the subprime crisis was absolutely negligible, but now BNP explained that the collapse in prices made it impossible to assess the value of the funds.

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He asked the person responsible whether this was a problem and was told that no major losses could be expected. Only two months later, however, the bank estimated its subprime losses at $10 billion. Prince chose to step down-taking $38 million in bonuses, stocks, and options with him. In September 2007, the United Kingdom was hit by a classic bank run taking place on real streets and squares. In scenes that the country had not witnessed for over 140 years, long lines of worried depositors wanting to withdraw their money were forming outside the branch offices of Northern Rock. This Newcastle bank had derived two-thirds of its financing from money-market loans, capable of being canceled at any time, and used the money for decadelong securitized mortgages whose value exceeded that of the actual homes.16 As Martin Wolf has concluded, government guarantees for the banking system meant that savers saw only the high rates of interest paid by Northern Rock, not the risks it was taking.

Modernising Money: Why Our Monetary System Is Broken and How It Can Be Fixed
by Andrew Jackson (economist) and Ben Dyson (economist)
Published 15 Nov 2012

(Davidson, 2008) The ability to securitise loans means banks can make profits not by the quality of the loans they make, but by their quantity. The willingness of banks to lend to the subprime market was partially (and possibly predominantly) attributable to securitisation. Government guarantees & ‘too big to fail’ “Bank runs are a common feature of the extreme crises that have played a prominent role in monetary history. During a bank run, depositors rush to withdraw their deposits because they expect the bank to fail. In fact, the sudden withdrawals can force the bank to liquidate many of its assets at a loss and to fail. During a panic with many bank failures, there is a disruption of the monetary system and a reduction in production.”

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In accounting terms, this is known as cashflow insolvency. In banking jargon it is reffered to as a ‘liquidity crisis’. A liquidity crisis can happen if there is a significant outflow of funds (central bank reserves) from a bank to other banks or to customers who are withdrawing cash. This process can happen very quickly, as in a bank run, or slowly if its liabilities are withdrawn slightly faster than its loan assets are repaid. If a bank becomes unable to settle its liabilities to either customers or to other banks, then it is again declared insolvent and will need to cease trading. Avoiding a liquidity crisis relies on a process known as ‘asset liability management’, which involves managing and predicting inflows and outflows to ensure that a bank is always able to make its payments as and when it needs to.

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A liquidity ratio is similar, but allows banks to hold highly-liquid assets such as government bonds in place of cash and central bank reserves, with the idea being that bonds can easily be exchanged for cash and central bank reserves if customers are making higher than usual withdrawals from their accounts. In short, liquidity ratios and reserve ratios say, “What percentage of customers could withdraw their deposits simultaneously before the bank runs out of base money?” A reserve ratio or liquidity ratio of 10% would imply that the bank could suffer a withdrawal of up to 10% of its deposits before it would become illiquid and have to close its doors. In contrast, the capital or ‘capital reserves’ that are required by the Basel Capital Accords relate to the assets side of the balance sheet.

House of Debt: How They (And You) Caused the Great Recession, and How We Can Prevent It From Happening Again
by Atif Mian and Amir Sufi
Published 11 May 2014

Deposits are not just a bank liability; they are the means of settling transactions in the economy. Further, depositors can pull out their money at any time they want. If the value of banking assets falls, spooked depositors may all demand their money when they sense the bank is in trouble—a bank run. Bank runs can lead to even healthy banks going under. For example, even a depositor in a healthy bank will “run” if he believes that other depositors are withdrawing their funds in a panic. The run dynamic is dangerous. It forces banks to sell assets at prices below market value. It can also damage the payment system of a country, which relies on bank deposits: when someone writes a check, it is cleared by shifting deposits from one bank to another.

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If a bank’s short-term liabilities were all demanded at once, it would not be able call back the money it has lent out on a long-term basis. In other words, the mismatch in maturity makes banks vulnerable to a run. Even if a bank is fundamentally solvent, a run can make its failure self-fulfilling. A central bank can prevent self-fulfilling banking crises by providing liquidity (i.e., cash) to a bank to protect it from bank runs. Just the ability of a central bank to flood banks with cash may be sufficient to prevent runs from happening in the first place, because depositors then have faith that their money is protected. In the East Asian crisis, however, central banks couldn’t flood the banks with cash because it needed to be in U.S. dollars.

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It can also damage the payment system of a country, which relies on bank deposits: when someone writes a check, it is cleared by shifting deposits from one bank to another. Businesses often pay their workers from deposit accounts. If the value of bank deposits is called into question, the entire payment system of a country may break down. It is a well-accepted axiom of banking regulation that the central bank must act as a “lender of last resort” to prevent bank runs. It can do so by explicitly insuring bank deposits, as the Federal Deposit Insurance Corporation (FDIC) does, or by lending freely to liquidity-constrained banks. The so-called Bagehot Rule, named after the famous British journalist Walter Bagehot, calls for central banks to lend without limit at a penalty rate, to solvent firms, against good collateral.

Eat People: And Other Unapologetic Rules for Game-Changing Entrepreneurs
by Andy Kessler
Published 1 Feb 2011

One of the roles of the Federal Reserve is the lender of last resort, which they unfortunately learned after the stock market crash of 1929 and the bank runs that followed. Ten thousand banks failed, roughly 40 percent, and $2 billion in deposits were wiped out—30 percent of the money supply disappeared. So did a similar percentage of GDP, and unemployment hit 25 percent. You can see that lost money supply is not a good thing. So the other big change happened twenty years later, in 1933. The Federal Deposit Insurance Corporation (FDIC) was set up to insure depositors’ money, negating the desire for people to line up to get their money out at the first sign of a bank’s weakness. No more bank runs. Not many, anyway. (We can argue about whether the FDIC is really an insurance policy, as they undercharge banks for the privilege of insuring against bank runs, and you and I, the taxpayers, make up the difference.

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(We can argue about whether the FDIC is really an insurance policy, as they undercharge banks for the privilege of insuring against bank runs, and you and I, the taxpayers, make up the difference. Still, the FDIC is a decent bargain. It’s a backstop to panics—bank run panics anyway!) As long as banks make prudent loans, which, as we’ve seen in 2008, is not the greatest assumption. Twin bargains. Twin safety nets for fractional reserve banking so we don’t have to go back to the stifling days of gold. The Federal Reserve allows banks to post assets in exchange for loans to redeem depositors, in effect making the Fed the lender of last resort to banks.

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Money from nothing (and your checks for free). Sort of, anyway. This sleight of hand is called fractional reserve banking, and was an easy (if not a little sleazy, no?) way to increase money supply to, again, make room for productivity and wealth creation. But how much money? No one knows, which is why there were occasionally bank runs and panics and depressions that followed easy credit, one of the hazards of this flimsy system. Sixteen panics since 1812—it’s as American as apple pie! But banking did increase money supply beyond just how much gold could be extracted. In fact, since Adam and Eve, 160,000 tons of gold have been panned and mined from Mother Earth, enough to fill two Olympic-sized swimming pools.

The Upside of Inequality
by Edward Conard
Published 1 Sep 2016

.* It briefly guaranteed $15 trillion of deposits, loaned the banks $2 trillion to fund withdrawals, and made a profit.8 The Fed made a profit acting as the lender of last resort in the worst financial crisis in nearly a millennium. The Fed took surprisingly little risk despite an avalanche of reckless claims to the contrary. Rather than strengthening the Fed’s ability to act more effectively as the lender of last resort in a bank run, policy makers have done the opposite. They have held banks more responsible for bank runs by intentionally weakening the Fed’s ability to act in a panic. Banks pulled back lending by raising credit standards. Risk-averse savings have subsequently sat unused, and the recovery has been anemic. Other well-intentioned policies would have the same effect.

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More valuable on-the-job training, large synergistic communities of experts, highly motivated and trained talent, and equity in the hands of eager risk-takers had compounding effects on the value of successful risk-taking. I recommended lower marginal tax rates to maintain higher payoffs in the face of slower growth in the aftermath of the financial crisis. The Obama administration did the opposite. I cautioned that holding the banks responsible for bank runs, instead of just loan losses, at a time when they were already reluctant to lend, would slow growth. I recommended strengthening government guarantees of banks and the Fed’s ability to function as the lender of last resort but charging banks and borrowers for these guarantees. The Obama administration did the opposite.

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That might be the case if risk underwriters had let equity sit idle to compensate for the risk of government guarantees of banks that lure risk-averse savings from their mattresses. After all, taxpayers bear those risks. But why would equity dial back risk-taking in the face of government guarantees of banks? The government made a profit loaning banks $2 trillion to fund withdrawals and making $15 trillion of guarantees (to stop further withdrawals) during the worst bank run since the 1930s.30 How concerned should risk-bearing taxpayers be about the risk of government guarantees? While it is true that, to a certain extent, bank guarantees also guarantee loan losses, one way or another the economy already bears that risk. Government guarantees of banks don’t change that.

The End of Wall Street
by Roger Lowenstein
Published 15 Jan 2010

Even in financial markets, some slackening of the rules was appropriate—as in, for instance, the liberalization that permitted interstate banking. But deregulators made two mistakes. One was failing to recognize that financial markets were more fragile than others, more vulnerable to panics and, indeed, more vital to the economy overall. Airline failures are rarely front-page news; bank runs are. The other mistake was failing to see that the relative financial stability of the postwar era was largely a result of the regulation put in place during the New Deal and after. With the turn toward market-driven economies in the 1980s, it was thought that markets had outgrown the ancient perils that arise from speculative frenzy, excessive borrowing, and greed—when in fact, Washington had been holding them in check.

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As Fannie’s and Freddie’s stocks were being battered, trouble was flaring at IndyMac, the Pasadena bank spun off from Countrywide. IndyMac, which had specialized in Alt-A loans, had been left holding thousands of shaky mortgages when the securitization market shut down. From late June to early July, Indy was hit with a bank run. Depositors withdrew $1.3 billion, about $100 million a day. On July 11, two months after the bank’s chairman, Michael Perry, had assured investors that his company was well capitalized, the Office of Thrift Supervision seized Indy—the second biggest bank to fail in U.S. history, trailing only Continental Illinois in 1984.

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But credit was effectively being rationed by rank speculators. Worse, some of those purchasing “insurance” were short-sellers with an interest in seeing insurance prices soar. Because rising prices in the swap market were contagious, they contributed to fears of systemic weakness. They were not unlike the bank runs that fed the gloom of the 1930s. A junior Lehman executive, reflecting on rising swap rates, the pressure from short-sellers, and tightening credit conditions in general, sensed “the world falling apart.” The deepening woes of Fannie and Freddie further darkened the mood at Lehman—as did the nonstop articles speculating on the firm’s demise, which felt to AIG’s Willumstad like a tourniquet suffocating his company, too.

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
Published 11 May 2009

The next morning, Northern Rock savers flocked to the bank’s branch offices, and pictures of terrified savers in a long line in front of the bank beamed onto computers, television screens, BlackBerries, and mobile phones around the world. By midmorning, a full-scale bank run was under way. Never before had so many terrified consumers and investors seen a bank run in action, in real time. Technology was helping to spread the panic. What brought Northern Rock down was another variant of the woes that had beset IKB and Cairn. At the turn of the century, the bank had embraced securitization with a vengeance, raising funds by selling masses of mortgage-backed bonds to investors all over the world.

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HG6024.U6T48 2009 332.660973—dc22 2009005127 ISBN-13: 978-1-4391-0075-2 ISBN-10: 1-4391-0075-6 Visit us on the Web: http://www.SimonandSchuster.com For Helen and Analiese CONTENTS PREFACE PART 1: INNOVATION 1 THE DERIVATIVES DREAM 2 DANCING AROUND THE REGULATORS 3 THE DREAM TEAM 4 THE CUFFS COME OFF 5 MERGER MANIA PART 2: PERVERSION 6 INNOVATION UNLEASHED 7 MR. DIMON TAKES CHARGE 8 RISKY BUSINESS 9 LEVERAGING LUNACY 10 TREMORS PART 3: DISASTER 11 FIRST FAILURES 12 PANIC TAKES HOLD 13 BANK RUN 14 BEAR BLOWS UP 15 FREE FALL EPILOGUE NOTES GLOSSARY ACKNOWLEDGMENTS ABOUT THE AUTHOR PREFACE Were the bankers mad? Were they evil? Or were they simply grotesquely greedy? To be sure, there have been plenty of booms and busts in history; market crashes are almost as old as the invention of money itself.

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At the ESF conference in Barcelona, for example, American brokers and City bankers swarmed around the Germans, in the hope of selling them more bonds. However, as Winters stood in Geneva International in July, it was clear that something had gone badly wrong with the IKB funds. He called his traders in London. “What’s going on?” he asked. “There’s something like a bank run starting in the commercial paper markets,” a trader replied. That news was alarming. Until that point, the commercial paper market had been deemed one of the safest, and dullest, corners of the financial world. It was where General Electric and other blue-chip giants raised the short-term funds that they needed for day-to-day operations.

13 Bankers: The Wall Street Takeover and the Next Financial Meltdown
by Simon Johnson and James Kwak
Published 29 Mar 2010

If some creditors thought that this might happen, they would try to get their money out first, which would provoke other creditors to do the same, triggering a bank run as everyone scrambled to avoid being last in line. All banks have this potential weakness, since they borrow short and lend long—they borrow money that they promise to return on short notice (deposits), and lend it out for long periods of time (mortgages). The rush by creditors to get their money out first is a classic feature of financial crises around the world, particularly in emerging markets. In the United States since the 1930s, deposit insurance has generally prevented bank runs by depositors—but that insurance did not cover the institutions lending money overnight to Bear Stearns and the hedge funds who parked their securities at Bear.

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(One theory at the time—since largely discredited—was that this infection had weakened commercial banks and helped cause the Depression.)100 As a result, J.P. Morgan was forced to spin off its investment banking operations, which became Morgan Stanley. Commercial banks were protected from panic-induced bank runs by the Federal Deposit Insurance Corporation (FDIC), but had to accept tight federal regulation in return. The governance of the Federal Reserve was also reformed in the 1930s, strengthening the hand of presidential appointees and weakening the relative power of banks. The system that took form after 1933, in which banks gained government protection in exchange for accepting strict regulation, was the basis for half a century of financial stability—the longest in American history.

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As the long boom of the 1990s continued and the stock market continued to go up, LTCM soon faded into memory. U.S. policymakers did draw a number of important lessons from the emerging market crises, outlined by Treasury Secretary Larry Summers in a major lecture at the 2000 conference of the American Economics Association.51 Financial crises were the result of fundamental policy weaknesses: “Bank runs or their international analogues are not driven by sunspots: their likelihood is driven and determined by the extent of fundamental weaknesses.” It was more important to look at the soundness of the financial system than to simply count the total amount of debt: “When well-capitalized and supervised banks, effective corporate governance and bankruptcy codes, and credible means of contract enforcement, along with other elements of a strong financial system, are present, significant amounts of debt will be sustainable.

The Quiet Coup: Neoliberalism and the Looting of America
by Mehrsa Baradaran
Published 7 May 2024

Confidence and courage are the essentials of success in carrying out our plan.” Banks operate in a web of connection to other banks where a ripple or a failure in one bank affects all other banks. Banks run on trust and they fall on fear. Or as Roosevelt summarized the situation of the banks: “the only thing to fear is fear itself.” Fear, like a contagious virus, would infect and destroy the healthiest banks. This contagionlike susceptibility to failure is called systemic risk in the modern world. The only antidote to fear-induced bank runs is a credible promise of liquidity by a money issuer strong enough to keep funds flowing in crisis. Since the beginning of modern banking, the only entity capable of restoring trust has been a sovereign state because only a sovereign state has the power to create enough money to restore confidence.

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As Walter Bagehot, the first chronicler of the modern state’s complex banking system amid a crisis, wrote in his 1873 classic Lombard Street: A Description of the Money Market, all the nation’s banks and “all our credit system depends on the Bank [of England] for its security.” He emphasized the point to ensure understanding: “This may seem too strong, but it’s not. All banks depend on the Bank of England, and all Merchants depend on some banker.”7 Then and now, banks run on trust, meaning that credit markets operate well when they are trusted. And alternatively, a bank run is a panic induced by a lack of trust, which only a central bank can remedy. As Bagehot then observed, “credit is an opinion generated by circumstances and varying with those circumstances,” so democratic legitimacy and social policy were required in order to uphold it; “no abstract argument and no mathematical computation will teach it to us.”

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Of course, the bank does not keep everyone’s deposits on hand, relying on the probability that only a fraction of customers will demand them at any time. But probabilities are not certainties. Banks work if most bank depositors keep most of their money at the bank most of the time, but sometimes things can go very wrong. If enough depositors are worried, a proper bank run occurs and it will not be long before the bank has run out of reserves (i.e., money in the vault to give to depositors). The fictional George Bailey in It’s a Wonderful Life explained the very real risks of banking to the large group of depositors demanding their money from his building and loan: “You’re thinking of this place all wrong.

Crashed: How a Decade of Financial Crises Changed the World
by Adam Tooze
Published 31 Jul 2018

After that, the main damage to Northern Rock’s balance sheet was done by online withdrawals. The elderly savers queuing in the streets made for alarming TV footage. But it was not their panic that was bringing down the bank. It was a bank run operating on an altogether different scale at the speed of computer terminals in money markets across the world. It was a bank run without deposit withdrawals. There had been no deposits. There was nothing to withdraw. For banks to find themselves a trillion dollars short, all that needed to happen was for major providers of funding to withdraw from the money markets.

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As Hyun Song Shin, chief economist at the Bank for International Settlements and one of the foremost thinkers of the new breed of “macrofinance,” has put it, we need to analyze the global economy not in terms of an “island model” of international economic interaction—national economy to national economy—but through the “interlocking matrix” of corporate balance sheets—bank to bank.22 As both the global financial crisis of 2007–2009 and the crisis in the eurozone after 2010 would demonstrate, government deficits and current account imbalances are poor predictors of the force and speed with which modern financial crises can strike.23 This can be grasped only if we focus on the shocking adjustments that can take place within this interlocking matrix of financial accounts. For all the pressure that classic “macroeconomic imbalances”—in budgets and trade—can exert, a modern global bank run moves far more money far more abruptly.24 What the Europeans, the Americans, the Russians and the South Koreans were experiencing in 2008 and the Europeans would experience again after 2010 was an implosion in interbank credit. As long as your financial sector was modestly proportioned, big national currency reserves could see you through.

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But the really decisive break in market confidence came on the morning of August 9, 2007, when BNP Paribas, France’s most prominent bank, announced that it was freezing three of its funds.5 The explanation Paribas offered marked a decisive moment in the opening of the crisis: “The complete evaporation of liquidity in certain market segments of the U.S. securitisation market has made it impossible to value certain assets fairly regardless of their quality or credit rating.”6 Without valuation the assets could not be used as collateral. Without collateral there was no funding. And if there was no funding all the banks were in trouble, no matter how large their exposure to real estate. In a general liquidity freeze, the equivalent of a giant bank run, no bank was safe. As the implications of the announcement from Paris sank in, around noon Central European Time on August 9, 2007, the cost of borrowing on European interbank markets surged.7 As one senior bank executive commented, the event was disorientating: “It was something none of us had experienced.

The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crisis
by Tim Lee , Jamie Lee and Kevin Coldiron
Published 13 Dec 2019

The Federal Reserve was created in the years following the Panic of 1907 in an effort to bring stability to a domestic banking system that was beset with recurring financial panics and bank runs. The international monetary system—the use of gold as a single global currency—was also changed around the same time by political choices made in response to the economic necessities of World War I. Neither the domestic banking system nor the gold standard worked for society, and so they were themselves changed. This process of change was neither discrete, nor uncontroversial, nor even initially successful. The Federal Reserve System did not end bank runs; that required more political decisions, specifically the establishment of deposit insurance and effective bank supervision in 1933.

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Index Page numbers followed by f indicate figures; t indicate tables. anti-carry crashes, 170 anti-carry regimes, 165, 171–172, 210, 212 carry regime similarities to, 173–175 monetary perspective on, 168–170 signs of end of, 215 AQR Capital, 79 arbitrage, covered interest parity principle and, 21 Asian financial crisis, 23–25 global financial crisis compared with, 30 asset prices business cycle and, 126 carry regime and, 204 distortion of, 7 inflation of, 113–114 options and, 147 recessions and declines in, 6 assets under management (AUM), 74 by sovereign wealth funds, 75 Australia capital inflows, 40, 40f, 42 credit and net claims, 40, 40f credit growth, 40f, 41 interest rate spreads and, 41–42, 60–61 Australian dollar, 30 capital flows into, 62 returns on, 97, 97f bailouts, 197–199, 203 Bain and Company, 80 balance of payments, Turkey, 45 Bank for International Settlements (BIS), 15, 17, 22 carry portfolio position comparison with, 63, 63t on corporate use of carry strategies, 80 currency liquidity data, 62 net claims data, 41 Bank of Japan (BOJ), 26, 216 quantitative easing policies by, 31 Bank of Korea, 197 bank runs, 218 banking system, money creation by, 109 bank-run dynamics, 65 Bhattacharya, Utpal, 142 bid-ask spread, 158–159, 167 big breaks, 184 BIS. See Bank for International Settlements BOJ. See Bank of Japan Brazil, 19, 39, 55n6, 65–66 current account, 31 Brazilian real, 11, 30, 66 Bretton Woods system, 218 Brownian noise, 97, 97f Bruno, Valentina, 80–81 bubble-boom economies, carry bubble conditions and, 39 business cycle carry and global, 2 carry bubbles and, 127–134 carry crashes and, 127–134 carry influence on, 57, 69 carry regime and, 125–127 money supply and, 125–126 Caballero, Ricardo, 59 call options, 146–147 Cambridge Associates, 79 capital asset pricing model, 99 Capital in the Twenty-First Century (Piketty), 219 221 222 capital inflows, Australia, 40, 40f, 42 capitalism, 195, 219, 220 carry central banks’ role in, 5–8 compensation incentives for, 70–72 corporate use of, 80–83 as cumulative advantage, 181–184 defining, 2 as flow from weak to strong, 179–181 global business cycle and, 2 hedge funds as agents of, 72–73 insidious structural aspects of, 200–205 leverage importance to, 70–72 lost opportunity to lean against, 220 as luck compounded, 184–186 monetary policy and, 3 as naturally occurring phenomenon, 88 necessary amounts of, 174 omnipresence of, 190–191 as power, 191–192 as rent-seeking, 175–177 rise of, 1 volatility, 86 carry bubbles, 6, 7 business cycle and, 127–134 credit bubbles and, 37–38, 41 credit demand and, 114 disguised, 134–140 economic indicators distorted by, 44–45 economic problems obscured by, 44 inflation and, 39 monetary conditions and, 39 nonmonetary assets and, 169 Ponzi schemes and, 140–143 as risk mispricing, 142 Turkey, 42–46 carry crashes, 6 Asian financial crisis and, 23–25 bailouts limiting losses from, 203 business cycle and, 127–134 carry trade returns and, 36 deflation and, 7, 170 deflation shock and, 121–124 in emerging economies, 201 incentive changes and, 84 inevitability of, 34–35, 108 leverage and, 96–98 liquidity and, 128 money supply and, 122–123 INDEX of 1998, 25–26 Turkey, 42–46 Turkish lira, of 2018, 45 of 2008, 30, 31 Volmageddon, 98, 161 yen melt-up and, 23–24 carry portfolios backtesting, 65–67 BIS data comparison with, 63, 63t constructing, 49–50 lessons from historical study of, 64–65 losses in, 51–56, 54f carry regime, 2 anti-carry regime similarity to, 173–175 asset prices and, 204 business cycle and, 125–127 central bank policies and, 86–89, 107, 208, 210 central bank power and, 123 central banks and collapses of, 215–216 central banks weakened by, 7 debt levels and, 168 defining, 107–108 deflation and, 113–121, 203, 210, 213 development of, 127, 134 economic growth and, 209 economic imbalances from, 201 financial market structure and, 7 fragility of, 201 monetary equilibrium and, 169 monetary growth and, 169 monetary perspective on, 168–170 money in, 108–113 nonmonetary assets and, 112, 114, 122 resource allocation and, 114–115 risk mispricing and, 134–140 S&P 500 importance to, 86–87, 87f theoretical alternative to, 166–168 vanishing point and, 116, 195, 209–210 volatility signs of ending, 214–218 carry trade.

…

In particular, since the use of leverage means that even modest changes in position value can translate into a total loss of capital, risk controls will force trades to be closed when certain thresholds are hit. Risk controls can come from internal limits and can also be forced upon managers by lenders who require additional collateral to be posted to cover losses. In either case it is very easy for a “bank-run” dynamic to take place—losses lead to position reduction, forcing managers to trade into markets that are moving against them and, in the case of many emerging currencies, are illiquid. This activity triggers further losses, which require even more position reduction, and the cycle continues until moves in the exchange rate are so extreme that unlevered traders are induced to enter the market or central banks are forced to intervene to stabilize conditions.

Lords of Finance: The Bankers Who Broke the World
by Liaquat Ahamed
Published 22 Jan 2009

But for all of this armory of instruments, ultimately the goal of a central bank in a financial crisis was both very simple and very elusive—to reestablish trust in banks. Such breakdowns are not some historical curiosity. As I write this in October 2008, the world is in the middle of one such panic—the most severe for seventy-five years, since the bank runs of 1931-1933 that feature so prominently in the last few chapters of this book. The credit markets are frozen, financial institutions are hoarding cash, banks are going under or being taken over by the week, stock markets are crumbling. Nothing brings home the fragility of the banking system or the potency of a financial crisis more vividly than writing about these issues from the eye of the storm.

…

No doubt irritated at this obvious attempt to renege on a clear promise, he stormed out and began reporting that the bank was in trouble. By the afternoon, a small horde of depositors had begun lining up outside the branch’s tiny neoclassical limestone building to withdraw their savings before closing time. Until now, despite the Depression, there had been no bank runs in New York, and soon a crowd of twenty thousand curious bystanders had gathered to watch. As the anxious depositors became restless, a squad of mounted police had to be sent in to control them and several customers were arrested; and when the mob became frantic, the police charged the crowd with their horses.

…

He would testify later that “I told them that the Bank of United States occupied a rather unique position in New York City, that in point of people served it was probably the largest bank in the city and that its closing might affect a large number of smaller banks and that I was afraid that it would be the spark that would ignite the whole city.” Broderick reminded the grandees that only two or three weeks before “they had rescued two of the largest private bankers in the city.” One of them was Kidder Peabody, an investment bank run by Boston Brahmins, founded in 1865, which as result of the crash and of subsequent withdrawals of deposits by, among others, the government of Italy, had had to be bailed out in 1930 with $15 million from J. P. Morgan and Chase. Though the meeting continued into the early hours of the morning, he was unable to persuade the few recalcitrants to change their mind.

Currency Wars: The Making of the Next Gobal Crisis
by James Rickards
Published 10 Nov 2011

If the Knickerbocker revelations had occurred in calmer markets, they might not have triggered such a panicked response, but the market was already nervous and volatile after massive losses caused by the 1906 San Francisco earthquake. The failure of the Knickerbocker Trust was just the beginning of a more general loss of confidence, which led to another stock market crash, even further bank runs, and finally a full-scale liquidity crisis and threat to the stability of the financial system as a whole. This threat was stemmed only by collective action of the leading bankers of the day in the form of a private financial rescue organized by J. P. Morgan. In one of the most famous episodes in U.S. financial history, Morgan summoned the financiers to his town house in the Murray Hill neighborhood of Manhattan and would not allow them to leave until they had hammered out a rescue plan involving specific financial commitments by each one intended to calm the markets.

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Leading English banks had made leveraged investments in illiquid assets funded with short-term liabilities, exactly the type of investing that destroyed Lehman Brothers in 2008. As those liabilities came due, foreign creditors converted their sterling claims into gold that soon left England headed for the United States or France or some other gold power not yet feeling the full impact of the crisis. With the outflow of gold becoming acute and the pressures of the bank run threatening to destroy major banks in the City of London, England went off the gold standard on September 21, 1931. Almost immediately sterling fell sharply against the dollar and continued dropping, falling 30 percent in a matter of months. Many other countries, including Japan, the Scandinavian nations and members of the British Commonwealth, also left the gold standard and received the short-run benefits of devaluation.

…

Roosevelt was elected president to replace Herbert Hoover, whose entire term had been consumed by a stock bubble, a crash and then the Great Depression itself. However, Roosevelt would not be sworn in as president until March 1933, and in the four months between election and inauguration the situation deteriorated precipitously, with widespread U.S. bank failures and bank runs. Millions of Americans withdrew cash from the banks and stuffed it in drawers or mattresses, while others lost their entire life savings because they did not act in time. By Roosevelt’s inauguration, Americans had lost faith in so many institutions that what little hope remained seemed embodied in Roosevelt himself.

Why Aren't They Shouting?: A Banker’s Tale of Change, Computers and Perpetual Crisis
by Kevin Rodgers
Published 13 Jul 2016

If Greg’s views were right, David said, more and more funds would hit the rocks. But if Greg’s bet really paid off and the mortgage market collapsed, the effects could be utterly catastrophic because banks had a colossal amount of mortgage risk on the books. The money markets could seize up and there could even be bank runs. Bank runs! This was a frightening, archaic threat, redolent of panic and of grainy, sepia photos of long uneven lines outside banks with now-forgotten names. His parting recommendation that night was both chilling and prescient: ‘Sell any stocks you own and don’t buy anything expensive.’ Disastrously for people the world over, both Greg and David were soon proved completely correct.

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In part, that is because the money the bank itself has borrowed in order to lend it to you might have a different maturity to your loan, or it might have a floating interest rate versus your fixed one (or vice versa). This is ‘market risk’. But primarily, the risk comes from the fact you might not pay back the loan. This is ‘credit risk’. Away from the aeons-old business of lending money at interest, many large banks run various trading businesses, most of which use the principal model. Merrill Lynch was no exception. Merrill’s bankers traded bonds; they traded interest rate swaps; they traded loans; they traded short-dated deposits. Loic would take me around the cavernous trading floor during quieter moments and point out where all these businesses were located, their staff hunched over tightly packed rows of desks.

…

Shortly afterwards, both entities were declared bankrupt. On 6 August, the American Home Mortgage Investment Corporation (a retail mortgage lender) also went bankrupt. Ameriquest went on 31 August. By mid-September, on my side of the Atlantic and with money markets now in meltdown, the mortgage lender Northern Rock was the scene of the first bank run in the UK for 150 years. By now, volatility and fear had returned with a vengeance to equity, bond and FX markets after years of gradually increasing calm. It was clear that the previous period of unusual stability was just the water rushing from the beach before a tsunami. From late 2007 onwards, until the end of 2008, the succession of failures and forced takeovers of financial firms reads like the familiar but dolorous list of battles in a terrible, lost war: Countrywide, Bear Stearns, Indy-Mac, Fannie Mae, Freddie Mac, Lehman Brothers, Merrill Lynch, AIG, and on, and on.

The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance
by Eswar S. Prasad
Published 27 Sep 2021

There are circumstances in which the very existence of an account-based CBDC could trigger a flight of deposits out of the banking system. Flight Risk A bank run occurs when depositors lose confidence in a bank and rush to withdraw their deposits. When a commercial bank faces such a “run” on its deposits, it quickly depletes its reserves and has to close its doors. The loss of confidence in a bank might be precipitated by new information about a bank’s financial position or, in some cases, by misinformation. There are historical examples of bank runs being precipitated by unfounded rumors about a bank’s solvency. Since a bank has reserves that cover only a portion of its deposits, while its assets are loans that cannot be called back or liquidated at short notice, a loss of confidence can become a self-fulfilling prophecy of failure.

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4    Bitcoin Sets Off a Revolution, Then Falters   5    Crypto Mania III    Central Bank Money   6    The Case for Central Bank Digital Currencies   7    Getting Central Bank Digital Currencies Off the Ground IV    Ramifications   8    Consequences for the International Monetary System   9    Central Banks Run the Gauntlet 10    A Glorious Future Beckons, Perhaps Notes References Acknowledgments Credits Index PART I Laying the Bedrock CHAPTER 1 Racing to the Future A book is written when there is something specific that has to be discovered. The writer doesn’t know what it is, nor where it is, but knows it has to be found.

…

This is why banks are valuable to an economy. And this is also why they are subject to failure. Concerns about a bank’s financial solvency could lead to a panic-driven frenzy of deposit withdrawals. This sort of panic, which was quite common in the first half of the twentieth century, is described as a bank run. That ominous phrase literally conjures images of depositors running to a bank to be first in line in the belief that, depending on how much cash it has, the bank can afford to pay only a certain number of depositors before running out of money and shutting its doors. Unless there is a backstop, such as a government that can credibly commit to returning money to a failed bank’s depositors, such crises of confidence can spread quickly to other banks, bringing both the banking system and the economy to their knees.

China's Great Wall of Debt: Shadow Banks, Ghost Cities, Massive Loans, and the End of the Chinese Miracle
by Dinny McMahon
Published 13 Mar 2018

But what if, suddenly, there weren’t? Financial crises aren’t caused by bad loans. Much like a conventional bank run, crises occur when people, en masse, no longer believe that their money is safe, and so they rush to pull it out of wherever it’s invested. The reason they lose faith might be that they’re worried that a bank has too many bad loans, but it’s the act of withdrawing the funds that undermines the viability of a bank, or the entire financial system. In its simplest form, such a loss of faith manifests itself as a bank run, as in the Jimmy Stewart movie It’s a Wonderful Life, where the sight of people queuing up outside a bank branch leads others to do the same, draining the bank of its cash reserves until it can no longer satisfy depositors’ demands for their money back.

…

But China has grown quite adept at dealing with conventional runs. In 2014, two rural banks in Jiangsu Province experienced a bank run that lasted for three days after a number of local underground financiers and unregulated loan shops collapsed, making people jittery about whether the local banks were exposed to the same problems. The People’s Bank of China rushed money to the branches. The bricks of freshly delivered cash were stacked up behind the tellers in order to calm nerves. The modern, more dangerous version of the bank run happens when the trust between banks themselves breaks down and they decline to continue lending to each other.

…

wealth-management products: Ambrose Evans-Pitchard, “China Losing Control as Stocks Crash Despite Emergency Measures,” The Telegraph, July 27, 2015, http://www.telegraph.co.uk/finance/china-business/11766449/China-losing-control-as-stocks-crash-despite-emergency-measures.html. to calm nerves: John Ruwitch, “How Rumor Sparked Panic and Three-Day Bank Run in Chinese City,” Reuters, March 26, 2014, http://www.reuters.com/article/us-china-banking-idUSBREA2P02H20140326. falling any further: Gabriel Wildau, “China’s ‘National Team’ Owns 6% of Stock Market,” Financial Times, November 25, 2015, https://www.ft.com/content/7515f06c-939d-11e5-9e3e-eb48769cecab.

Austerity: The History of a Dangerous Idea
by Mark Blyth
Published 24 Apr 2013

So companies borrow and lend money to each other over very short periods at very low interest rates, typically swapping assets for cash and then repurchasing those assets the next day for a fee—hence “sale” and “repurchase”—or “repo.” It is cheaper than borrowing from the local bank and doesn’t involve fleets of armored trucks. What happened in 2007 and 2008 was a bank run through this repo market.5 A bank run occurs when all the depositors in a bank want their cash back at the same time and the bank doesn’t have enough cash on hand to give it to them. When this happens, banks either borrow money to stay liquid and halt the panic or they go under. The repo market emerged in the 1980s when traditional banks lost market share because of a process called “disintermediation.”6 Banks, as intermediaries, traditionally sit in the middle of someone else’s prospective business, connecting borrowers and lenders, for example, and charging fees for doing so.

…

I do this so that I can ask one more question as a setup. If all the trouble was generated in the private sector, why do so many people blame the state for the crisis and see cuts to state spending as the way out of a private-sector mess? Answering that question is what concerns us in the rest of this chapter. The Generator: Repo Markets and Bank Runs The repo market is a part of what is called the “shadow banking” system: “shadow,” since its activities support and often replicate those of the normal banks, and “banking” in that it provides financial services to both the normal (regulated) banks and the real economy. Take paychecks, for example.

…

This had the effect of reversing the flow of capital to Europe as US capital came home to take advantage of these higher interest rates, which unexpectedly further stoked the stock market boom.15 After all, why put your money in Germany when you can make 15 percent buying shares in an investment trust and 7 percent in a bank deposit in the USA? The resulting capital flight placed enormous pressure on the German economy, which responded with ever-stricter austerity policies, especially, as we shall see, under Chancellor Brüning in 1930–1931. Deprived of external liquidity—all the money had gone back to the United States—bank runs in Austria and Germany were met with ever-tighter austerity policies in exchange for more loans (that failed to materialize) to stave off the inevitable default. Eventually, and tragically, as loans dried up tariffs rose, currencies were devalued, and the postwar recession became the Great Depression.

Limitless: The Federal Reserve Takes on a New Age of Crisis
by Jeanna Smialek
Published 27 Feb 2023

For instance, George Selgin at the Cato Institute has written that in England, it was common to have “sealed deposits” in which gold was kept entirely on hand in a vault. Other, unsealed deposits were available for lending. BACK TO NOTE REFERENCE 9 Bank runs were a problem in England at the time. The first true bank wasn’t established in America until 1782 (Hammond 1957, 10). There had been a painful British bank run in 1772–1773. BACK TO NOTE REFERENCE 10 Hammond 1957, 11. “As fast as specie was received, it was exported to pay for goods that could not be produced at home,” Hammond writes of the colonial years.

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If the bank was unable to meet the redemptions, it would be broken. As financial systems grew larger and more interconnected, broken banks could damage entire economies. As financial markets developed and became more complex, dash-for-cash runs in the face of trouble would remain a constant feature and threat. Bank runs were far from the only problem that dogged the financial system by the late 1700s, when America won its independence from England.[10] The foreign currencies and precious metals that the North American banking system had revolved around in colonial times were often available in finite quantities and served as a rigid superstructure for the nation’s fledgling commercial system.[11] The supply of money could struggle to expand to keep pace with rising demand for cash during wars, harvests, or economic boom times.

…

Clearinghouses could help to funnel cash out of big banking centers and into rural areas where it was needed, but the system did not always work quickly or efficiently.[35] Often, dollars became concentrated in places where they were less necessary, causing a rush for cash in places with high demand for money but an insufficient supply, which set off cascading bank runs. Financial panics struck the rickety system not only in 1873 but also in 1884, 1890, and 1893.[36] The underdeveloped banking and currency system also held back the United States’ money market, preventing it from expanding to a point where it would rival England’s. In financial journalist Walter Bagehot’s seminal 1873 book, Lombard Street: A Description of the Money Market, the author recounts that London banks held 120 million pounds of deposits around the time of publication; New York’s, just 40 million.[37] Bagehot explained in detail why that mattered: If a merchant were to use 50,000 pounds of his own money to earn 5,000 pounds over a year, he would make a 10 percent return.

Street Fighters: The Last 72 Hours of Bear Stearns, the Toughest Firm on Wall Street
by Kate Kelly
Published 14 Apr 2009

The day’s presentations included a talk by the trader who handled Bear’s commercial mortgage-backed securities. But in order to address “the environment,” as the e-mailed update had put it, Schwartz was added to the speaking roster at the last minute. No one paid much attention to the presentations until it was Schwartz’s turn to talk. Despite the looming bank run, the CEO appeared uncannily relaxed. Leaning back in his chair, he dismissed the chatter around Bear’s cash position, reasoning that companies like General Motors had faced similar rumor-mongering in the past that had turned out to be nothing but “noise.” Bear would come out all right, he told the group, and the key was to stay focused on the day-to-day business.

…

Bernanke addressed the subject of bankruptcy. “Can they open for business if they file?” he asked. Not in New York State, was the answer. The implications of Bear’s travails were hitting the Fed chairman hard. It was possible, he thought, to be adequately capitalized under securities laws and still face a bank run. Even if federal regulators thought you looked okay, in other words, you could still be out of business overnight. A scholar of the Great Depression, Bernanke’s thoughts turned to Credit-Anstalt, the Austrian bank that had gone bankrupt in 1931. Hoping to stabilize their teetering economy by giving confidence to bank customers, the country’s central bankers had guaranteed Credit-Anstalt’s deposits—assuring the public that even if the bank went out of business, the government would ensure that they didn’t lose their savings.

…

Morgan? If it’s like that for them, what is it like for Merrill Lynch or for Thornburg Mortgage?” By then the Federal Reserve Board had gathered in its headquarters in the Foggy Bottom section of Washington and approved the emergency loan. Bernanke and his colleagues hated the thought of financing a bank run with government dollars, but they knew that helping Bear survive the day would be better than allowing it to collapse. The vote was unanimous. LATER FRIDAY March 14, 2008 10:00 A.M. Calls were pouring in to Bear’s investor-relations and financial divisions. Sequestered in his office on the sixth floor, Molinaro could hardly keep up with his phone messages.

Economists and the Powerful
by Norbert Haring , Norbert H. Ring and Niall Douglas
Published 30 Sep 2012

In the euro area, the minimum reserve requirement was cut from an already ridiculous rate of 2 percent to 1 percent in January 2012, and in the UK it has long been abolished altogether such that British banks can decide for themselves how much cash and central bank reserves they want to keep as a safety margin to satisfy customers’ demand for cash. The reserve requirement determines how much the banks can expose themselves – or in practice, the public purse – to the risk of a bank run. The lower the reserves in proportion to the money that customers could withdraw at any time, the higher the risk of a bank run. This does not only affect the banks with the lowest reserves. If the reserve requirement is low, the banking system as a whole has low reserves in relation to potential withdrawals of cash. This is why the problems of any significant bank routinely threaten to put the entire financial system at risk.

…

The government rescued it, at great cost to taxpayers, based on the argument that a bank failure would damage the public’s trust in the banking system. As government-sponsored depositor insurance systems, central banks and the prospect of bailout packages in times of need insure the banks against a bank run, a low reserve requirement is a superb MONEY IS POWER 83 deal for private banks. Using their influence, they made sure that in Europe minimum reserve requirements were continuously reduced in the last decades of the twentieth century. In the US, they engineered policies so that the reserve requirement would cover less and less of the financial sector’s money creation activities.

…

Chase’s successor Hugh McCulloch extended Cooke’s monopoly. He was a close friend of Cooke’s. When McCulloch left the Treasury, he became head of Cooke’s London office. The result of the new system was a great expansion of the number of banks and of deposits but also, in short order, a series of financial crises. There were panics and bank runs in 1873, 1884, 1893 and 1907 (Rothbard 1985/2008). As a reaction to these crises, the Federal Reserve System was created in 1913 upon bankers’ initiative. At a secret meeting at Jekyll Island, Georgia in December 1910, they hammered out the essential features of the new Federal Reserve System. Bankers representing the interests of Rockefeller, J.P.

Firefighting
by Ben S. Bernanke , Timothy F. Geithner and Henry M. Paulson, Jr.
Published 16 Apr 2019

It’s why traditional bank architecture relied so heavily on imposing granite facades and pillars to project an aura of stability and permanence in front of the fragility of finance. No financial institution can function without confidence, and confidence is evanescent. It can go at any time, for rational or irrational reasons. When it goes, it usually goes quickly, and it’s hard to get back. A financial crisis is a bank run writ large, a crisis of confidence throughout the system. People get scared and want their money back, which makes the money remaining in the system less safe, which makes more people want their money back, a self-reinforcing doom loop of fear, fire sales, capital shortfalls, margin calls, and credit contractions that can produce a stampede for the exits.

…

You might have to sell the asset immediately to avoid default, and if others with similar assets hold similar fire sales, the price of the assets will drop further, triggering more fire sales and margin calls and defaults, and so on down the drain. If you happen to be a financial firm, your creditors might sour on your commercial paper, stop renewing your overnight repo loans, or force you to post more collateral, the modern equivalents of bank runs. That’s how panic spread after the housing bubble popped. Before the crisis of 2008, many large financial institutions were increasingly leveraged, in some cases borrowing more than $30 for every dollar of shareholder capital, affording very limited protection against losses. Increasing amounts of that leverage were in short-term debt that resembled uninsured bank deposits, the kind of runnable debt that uneasy creditors can withdraw at the first hint of danger.

…

The Fed poured in a further $62 billion by buying Treasuries and issued a statement encouraging banks to borrow from the discount window. Even those textbook initial steps were criticized as too much too soon. Bank of England governor Mervyn King called out the ECB and the Fed for overreacting to blips in the markets. A month later, the Bank of England would provide similar liquidity after his country’s first bank run in 150 years. Inside the Fed, several Federal Open Market Committee (FOMC) members wanted to attach harsh conditions to discount window loans to avoid moral hazard. But Ben and Tim didn’t want to add to the stigma the banks already associated with Fed loans. We didn’t want banks to stay away from the discount window; we wanted them to take the Fed’s money and lend it out.

The Shifts and the Shocks: What We've Learned--And Have Still to Learn--From the Financial Crisis
by Martin Wolf
Published 24 Nov 2015

In either case, a big challenge would be to manage the contagion. An exit, particularly a disorderly one, would surely trigger bank runs and capital flight from other members. It could also cause collapses in the prices of financial and other assets. A flight to safety, to Germany or beyond the Eurozone, would occur. A decisive response from the Eurozone would be required to halt the contagion. The ECB would need to act as a lender of last resort on an unlimited scale, replacing money taken out in bank runs. Interest rates on sovereign debt would need to be capped. Above all, the commitment to keep the rest of the Eurozone together would have to be reinforced.

…

The programme for Cyprus had two significant features: for the first time, it imposed losses on bank creditors, notably including depositors (100 per cent losses on amounts above €100,000 in the now closed Laiki Bank and 60 per cent losses on amounts over €100,000 in the larger Bank of Cyprus), many of whom were, not coincidentally, foreign, particularly Russian; and, no less important, it inflicted controls on transfers of euros outside the country. It became even clearer than before that some euros were more equal than others. A euro deposited in a dodgy bank backed by a weak sovereign was and is not the same as a euro deposited in a solid bank supported by a strong sovereign.18 This makes the Eurozone structurally vulnerable to bank runs, since it obviously makes sense to move accounts from banks backed by weak sovereigns to banks backed by creditworthy ones, particularly at a time of crisis. It is also why informed observers concluded that some kind of banking union was essential if the Eurozone was to survive in the long run. In 2011 a far more significant event occurred than this set of crises in small countries.

…

If the required net inflow of foreign financing is too large, financing will become increasingly expensive and may stop altogether, possibly suddenly. That is what happened to Greece in 2010, as was noted in Chapter Two above. A ‘sudden stop’ is the consequence of a collective decision by investors that deficits are indeed unsustainable: a stop has the characteristics of a bank run, since the decision by individual investors to withdraw funding is triggered by the perception that others are doing so. ‘Sustainability’ is, therefore, ultimately a subjective, not an objective, phenomenon. As Hamlet tells us, ‘There is nothing either good or bad, but thinking makes it so.’ Unfortunately and crucially, external sustainability is asymmetrical.

Them And Us: Politics, Greed And Inequality - Why We Need A Fair Society
by Will Hutton
Published 30 Sep 2010

An IMF paper reports that young people growing up in recessions are much more fatalistic than others, believing that effort and work are far less important in generating results than having the luck to live in good times.7 Bank crashes can even damage health directly. A study at Cambridge University found that they increase the risk of death from stress and worry.8 The customers who tried to withdraw cash from Northern Rock, Britain’s first bank run for more than a century, experienced a similar level of stress to victims of an earthquake. The capitalism that Britain developed and which crashed so spectacularly has a lot to answer for. To date, though, it has hardly even been asked any questions, let alone provided any answers. A wounded society The unbalanced structure of economic growth over the last decade has fed straight through to a disastrous social geography, bypassing the least advantaged and rewarding the wealthy.

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In reality, though, all depositors will not ask for their money back simultaneously, because they will not all need it at once. This assumption is the foundation of banking. However, should depositors lose confidence in a bank’s capacity to meet their demands, they may well all try to withdraw their money at the same time. This is what happens in a bank run. Banks are therefore pulled two ways: to be ultra-conservative in order to maintain depositors’ confidence, and the tremendous financial temptation, and commercial pressure, to be less conservative. If they can build up a position of leveraged lending to a portfolio of borrowers, especially in a class of assets that are appreciating in value, there are fortunes to be made for both financiers and their shareholders.

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At the same time, transient, footloose shareholders demanded higher and quicker profits. Caught in this pincer, even the most conservative banks started to consider higher leverage or investing in riskier assets as the only means to survive.20 Unregulated nineteenth-century banking witnessed Northern Rock-type bank runs aplenty. Famously, Overend, Gurney and Co. went belly up in 1866, prompting the great economic and political commentator Walter Bagehot to describe its senior executives as ‘sapient nincompoops’. ‘These losses’, he wrote, ‘were made in a manner so reckless and so foolish that one would think a child who had lent money in the City of London would have lent it better.’21 The bank had borrowed short, made terrible long-term lending decisions and suffered the consequences.

The Crisis of Crowding: Quant Copycats, Ugly Models, and the New Crash Normal
by Ludwig B. Chincarini
Published 29 Jul 2012

—Richard Fuld, CEO of Lehman Brothers, April 24, 2008 (in The Economist) In the 1930s, when the financial system collapsed, many people went to the bank to withdraw their money because they were scared that banks would go bankrupt and they would lose all their savings if they didn’t get there before other depositors. Banks keep a fraction of their deposits and lend the rest out, so they don’t have enough liquidity to give everyone their money on the same day. If depositors incorrectly think that a bank is in trouble, their deposit withdrawals will create a bank run and push even a very healthy bank toward failure.45 On March 6, 1933, U.S. President Franklin D. Roosevelt called for a “bank holiday” and closed every bank in the country. They remained closed until Department of the Treasury officials could inspect each institution’s ledgers. Banks in viable financial condition were primed with Treasury money and permitted to do business again.

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Those in marginal condition were kept closed until they could be restored to soundness. Numerous banks that had been poorly run remained closed forever. This was one way to stop the endless cycle of banking system destruction. The Federal Deposit Insurance Corporation (FDIC) was one regulatory response to the bank runs of the 1930s. Established in the Banking Act of 1933, it insured bank deposits so that depositors would not worry about losing their savings to bank failures.46 Investment banks do not have this guarantee on their customer deposits. Bear Stearns and Lehman Brothers both failed after classic runs on the bank.

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This deal, and perhaps a deal with another suitor, would have been much more likely had the U.S. guaranteed it. 45. Mozilo, Countrywide’s CEO, pointed to a Los Angeles Times article that caused depositor panic. The next day depositors withdrew $8 billion from the bank. In nine days, depositors withdrew $16.7 billion, forcing the bank out of business. 46. This didn’t prevent bank runs in 2008, partly because many depositors had more than the $100,000 account limit and partly because, even with the guarantee, people were nervous or didn’t understand the rules. The FDIC subsequently raised the account limit to $250,000. 47. Transparent, stress-tested financial statements detailing Lehman’s exposure would have helped a great deal in the weeks leading up to Lehman’s collapse.

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis
by Anatole Kaletsky
Published 22 Jun 2010

With each passing day, the panic spread to new countries and new institutions, but there was nothing irrational about it. The series of bank runs that almost destroyed the world economy were perfectly reasonable responses to the self-destructive actions of the U.S. Treasury, followed by other governments around the world. As Mervyn King noted six months earlier, commenting on the Northern Rock run:39 “Once a run gets started, it is rational for other people to join in.”40 Bank runs are rational because no bank has enough ready cash to repay all its deposits. Therefore, the survival of any nation’s banking system depends ultimately on a belief that government or some other unimpeachable credit will stand behind the banks.

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First and foremost, he or she would realize that at a time of crisis all banks depend on some kind of implicit guarantee, from the government or from a quasi-public institution. Because no bank has enough ready cash to repay its depositors if they all decide simultaneously to withdraw their funds, there are only two ways to restore confidence among depositors once they start worrying about the loss of their money in a bank run. Either the bank must be able to raise a large amount of capital quickly to prove to its depositors that it remains solvent, or the depositors must be offered an unconditional guarantee from another institution whose solvency is beyond question. When an individual bank suffers, takeover by a bigger institution is often enough.

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Then, partly through ideological dogmatism and partly political timidity, he ruled out the only viable alternative, which was temporarily to offer all American banks unlimited government guarantees. The almost inevitable result was a run on every major bank and financial institution, first in America and then around the world. And after this generalized bank run had started, the only possible outcome was the ideological U-turn that occurred in the week of October 6, 2008, when the Irish, Greek, and Danish governments, followed by the British government, then the French and German governments, and finally the U.S. Treasury, gave the temporary guarantees that they could and should have offered on September 15.

Big Debt Crises
by Ray Dalio
Published 9 Sep 2018

In an effort to weaken those countries, the French government encouraged the Bank of France and other French banks to withdraw the short-term credit they had provided to Austria.103 Viewing the interconnectedness of global financial institutions and the weakness of Europe as potential threats to its domestic recovery, the United States began to study methods of relieving the pressure on the German economy. On May 11, President Hoover asked Treasury Secretary Mellon and Secretary of State Henry Stimson to look into relaxing Germany’s significant payments for war debts and reparations. A proposal was not put forth until early the next month.104 In the interim, bank runs spread throughout Europe. Hungary reported bank runs starting in May, leading to the imposition of a bank holiday.105 The German government nationalized Dresdner Bank, the nation’s second largest bank, by buying its preferred shares.106 Major financial institutions failed across Romania, Latvia, and Poland.107 Germany was facing capital flight.

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This foreshadowed FDR’s win in the presidential election two years later.90 First Quarter, 1931: Optimism Gives Way to Gloom as Economy Continues to Deteriorate At the start of 1931, economists, politicians, and other experts in both the US and Europe still retained hope that there would be an imminent return to normalcy because the problems still seemed manageable. The bank failures of the previous quarter were thought to be inconsequential, and not damaging to the overall financial system. By March, all business indexes were pointing to a rise in employment, wages, and industrial production. Bank runs led to a less than 10 percent drop in deposits.91 The news reflected growing economic confidence: on March 23, the New York Times declared that the depression had bottomed, and the U.S. economy was on its way back up.92 New investment trusts were being formed to profit from the expected “long recovery.”93 Optimism was also bolstered by the recovery of the stock market.

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This was no exception, so a week later, the New York Fed again raised its interest rate to 3.5 percent.129 Rumors flew that the head of the New York Fed, George Harrison, had asked the French not to withdraw any more gold from the United States.130 Given the domestic difficulties, investors in the US had taken to hoarding gold and cash. This led to a series of bank runs in late 1931 that caused many banks to close and resulted in a big contraction in deposits for those remaining open. As banks’ deposits fell, they began to call their loans in order to build up their cash reserves. Homes and farms were forced into foreclosure, and several companies went bankrupt as investors did not roll loans they had previously extended.131 As money and credit contracted, the economy started to fall off a cliff.

The Blockchain Alternative: Rethinking Macroeconomic Policy and Economic Theory
by Kariappa Bheemaiah
Published 26 Feb 2017

In the speech, Kashkari questioned the usefulness and effectiveness of the measures and tools currently at our disposal and enquired if they were sufficient to deal with a future crisis, especially since we have no idea about what form it could take. In this public discussion, he presented two scenarios: Scenario One: Individual large bank runs into trouble while the rest of the economy is sound and strong. Scenario Two: One or more banks run into trouble while there is broader weakness and risk in the global economy. In Scenario One, as per Kashkari, the aforementioned measures would allow us to deal with the failure of an individual large bank without requiring a bailout, but we don’t know that for certain as the work on these measures is far from complete (refer Table 2-1).

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As such, they are responsible for ensuring how much debt is issued by commercial banks, without which they would not be able to control the supply of money. This lever of control exists in the form of capital requirements . Capital requirements play an important role in the production of debt-based money as they offer, among other things, a safeguard to a bank run. Since a bank creates money as it makes out loans, they are at risk of running out of physical currency in the case that a large number of the depositors decide to withdraw their deposits. To address this risk, commercial banks are obliged to hold some amount of currency to meet deposit withdrawals and other outflows, but using physical banknotes to carry out these large volume transactions would be extremely cumbersome.

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While all the services they provide can be grouped under the umbrellas of financing and risk mitigation, the fact that regulations can vary from geography to geography (and the lack of interoperability) means that there is always a dependence on intermediaries and repetition of processes. As stated by Lamar Wilson, CEO of Fluent, a Blockchain network for financial institutions and global enterprises, “Currently, bank-run trade finance programs require a tremendous amount of resource-intensive due diligence, document collection, and processing, including coordination of remittance information. Financing rates are high for the businesses despite the low and shrinking margins for the financing provider. This is especially true at smaller banks who lack this infrastructure and must outsource these services for their larger clients," (Harris, 2016).

Fed Up: An Insider's Take on Why the Federal Reserve Is Bad for America
by Danielle Dimartino Booth
Published 14 Feb 2017

He advised the company on structured credit, credit derivatives, and commodity futures. So he had theory and practice to give him insight. Gorton pointed out that the collapse of numerous hedge funds in the summer of 2007 had been triggered by “wholesale” panics, not “retail” panics like the bank runs of the 1880s, 1907, and the 1930s. Those bank runs ended when the Federal Deposit Insurance Corporation was created in 1934, insuring bank accounts up to one hundred thousand dollars. During the American banking world’s so-called Quiet Period—from 1934 to 2007—some banks failed and thrifts went under, but those did not contaminate the broader banking system.

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So much was taking place in world financial markets while I sat tight, safeguarding the growth of my double cargo until my December due date. The rolling disaster rippled around the world. Insomnia kept me up late. Instead of I Love Lucy reruns, I watched the BBC as thousands of Brits queued to withdraw one billion pounds from Northern Rock, the biggest UK bank run in over a century. Markets sniff out the weakest links in the system. The cost of protecting the debt of big U.S. investment banks became the train wreck I couldn’t stop watching. I began following bank credit default swaps. These insurance securities could be used to bet for or against the survival of any financial entity—for example, the sovereign debt of Iceland or the corporate bonds of General Motors.

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I’d take that back to my traders to finagle a better deal for my client. The DLJ bond desk didn’t need to pad its sizable commission at my clients’ expense. That brand of greed was one of my pet peeves about Wall Street. Dudley would later call the Bear Stearns debacle in March 2008 an old-fashioned bank run, just like that depicted in the 1946 movie It’s a Wonderful Life, played out in real time on CNBC. But it had really started in 2007, during the ten-day crisis as its hedge funds crumbled. Cayne, age seventy-three, had come under attack for being AWOL, playing a bridge tournament in Nashville instead of tending to agitated investors.

The Financial Crisis and the Free Market Cure: Why Pure Capitalism Is the World Economy's Only Hope
by John A. Allison
Published 20 Sep 2012

In Chapter 18, on solutions to the financial crisis, I will share with you some ideas for dealing with this issue without losing the benefits of magnifying the economic efficiency of intermediate-size investments and small savings that banks provide. The Federal Reserve and FDIC insurance were both created to deal with the issues associated with the nature of fractional reserve banking. In the short term, these “solutions” help; in the long term, they make the problem far, far worse. FDIC insurance primarily reduces the short-term risk of bank runs because depositors perceive their deposits to be insured by the federal government. However, I previously described the fact that FDIC insurance substantially increases the credit and liquidity risk that banks take by eliminating market discipline. Based on my long-term observation of the behavior of bank executives (human nature), the existence of FDIC insurance changes the risk/return trade-offs so significantly that in the good times (when bad loans are made), bankers take risks that they would never take in a free market.

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Uninsured depositors do get paid in full on the portion of their deposits that is insured (theoretically, $100,000 is insured, but often much more is insured, as discussed previously). Until the WaMu failure, the idea had been that uninsured depositors would impose discipline on a reckless bank, knowing in advance that they could lose money in the event of a bankruptcy. The reason the FDIC and the other regulators decided to pay uninsured depositors was to avoid creating a bank run. When IndyMac had failed, the FDIC had not paid uninsured depositors in full. This created lines of depositors waiting to get their money, which were broadcast endlessly by the media. The regulators were concerned that a similar display might cause the general public to panic and demand their money out of healthy banks (remember the fractional reserve issue we discussed before).

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Even though it was sold to Wells Fargo (with the shareholders getting a small amount) and the FDIC did not suffer a loss, its sale was mandated by the FDIC and the Fed. If the government forces the sale of a company, that company has failed (fairly or not). The interesting aspect of this situation is that the negative consequences for the bond market could have been avoided and the risk of retail bank runs controlled. The FDIC could have simply absorbed the extra losses paid to the uninsured depositors. The FDIC’s mission is to protect the safety and soundness of the banking system. If covering uninsured depositors is necessary, it can do so, but it should let the losses fall on the insurance fund, not on innocent bondholders.

How We Got Here: A Slightly Irreverent History of Technology and Markets
by Andy Kessler
Published 13 Jun 2005

The fractional reserve banking system was anything but stable, all because too much gold was in the British banking system. England had become Spain, laden with gold and not enough to spend it on. So England devised a way to get rid of gold. It turned out, at least in my opinion, to be the wrong way. *** Bank runs and financial crises from too much gold became common: They occurred in 1825, 1847, 1857 and 1866. Think about it. In periods of inflation, money loses its value relative to the goods it is buying. This lack of faith in money causes people to move into real assets, including gold. Even though money was exchanged into gold at a fixed rate, the fear that the rate would change when the money lost value, caused depositors to ask for real gold from banks.

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And, in general, we may observe, that the dearness of every thing, from plenty of money, is a disadvantage, which attends an established commerce, and sets bounds to it in every country, by enabling the poorer states to undersell the richer in all foreign markets.” The best and brightest economists of the time met in Paris in 1867, to discuss a way to have both sound money and increased international trade. They came up with a system known as the “Price specie flow.” Sounds like a case of the runs, rather than a cure for bank runs. In 1870, even though England’s economic power had already peaked (but who knew?), the bankers and government officials agreed to this system - better known as the classical gold standard - since the economists were promising them a system that would naturally balance trade and keep governments from screwing up by issuing too much or too little money.

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Herbert Hoover vacuumed up whatever capital was left by increasing the top tax rate from 25 to 60 percent. In response, Franklin Roosevelt campaigned with "I pledge you, I pledge myself, to a new deal for the American people." In March 1933, just after FDR’s inauguration, unemployment hit 25 percent. After yet another bank run Roosevelt declared an 8-day banking holiday after which confidence in banks returned and deposits flowed back in. Later in 1933, the U.S. dropped the gold standard, following England, which dropped it in 1931. Unshackled, money supply could now increase and replenish banks. After a yearlong recession in 1938, New Deal spending kick-started the economy.

Stress Test: Reflections on Financial Crises
by Timothy F. Geithner
Published 11 May 2014

The result was a run on the bank, like the famous scene in It’s a Wonderful Life when depositors rush to pull their money out of a Depression-era savings and loan. Confidence is a fragile thing. When it evaporates, it usually evaporates quickly. And it’s hard to get back once it’s lost. A financial crisis is a bank run writ large, a run on an entire financial system. People lose confidence that their money is safe—whether they’re stockholders or bondholders, institutional investors or elderly widows—so they rush to pull it out of the system, which makes the money remaining in the system even less safe, which makes everyone even less confident.

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Banks under siege used to stack money in their windows to reassure depositors there was no need to run; when governments put enough “money in the window,” they can reduce the danger they’ll have to use it. The classic example is deposit insurance, Franklin Delano Roosevelt’s response to Depression-era bank runs. Since 1934, the government has guaranteed deposits at banks, so insured depositors who get worried that their bank has problems no longer have an incentive to yank out their money and make the problems worse. Of course, the banking system that FDR inherited didn’t have “collateralized debt obligations,” “asset-backed commercial paper,” or other complexities of twenty-first-century finance.

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The classic example is a bank that borrows short from its depositors, who can demand their money back at any time, and lends long to businesses and homeowners. This kind of “maturity mismatch”—the use of short-term funding to finance long-term investments—is how George Bailey got into trouble in It’s a Wonderful Life, and it’s why we now have deposit insurance to avoid bank runs. But a lot of short-term loans to financial institutions can look a lot like uninsured bank deposits, and they can run when confidence goes. When creditors call in the loans and the institutions can’t recover the money they had lent to finance longer-term investments, they can fail in a hurry. This is unfortunate if it happens to a single bank, but devastating if it happens to the banking system as a whole.

The Curse of Cash
by Kenneth S Rogoff
Published 29 Aug 2016

In the extreme case, the government could adopt a version of the 1930s “Chicago plan,” which would essentially allow banks to issue money-like instruments only if they were 100% backed by government debt, which presumably can include central bank reserves.10 The name relates to Chicago economists Henry Simon, Frank Knight, Milton Friedman, and Irving Fisher (the last actually a Yale professor), who advocated the idea of “narrow banking” to mitigate moral hazard problems and eliminate bank runs (assuming that the government itself is fully solvent). A Chicago-type plan would mark a quantum change in the financial system and would radically reroute the way capital flows in the economy. By expanding the scope of the government’s monopoly on all retail transaction media, the government would be able to raise vast amounts of capital, essentially usurping one of the private banking system’s main funding mechanisms.

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Another common practice, even more directly analogous to a Gesell tax, was to force people to hand in coins and then give them back a smaller number of coins similar in weight and content, for example, handing in four coins and getting back three.13 Many other ways can be used to implement a crude Gesell tax. At the improbable (but instructive) end of the spectrum is the idea of creating short-stick lotteries advanced by my Harvard colleague N. Gregory Mankiw, who attributes the idea to a graduate student. Mankiw proposed that the central bank run regular lotteries based on the serial numbers of currency in circulation. Notes with the losing numbers become completely worthless. The problem is that after a couple dozen lotteries, it would be pretty difficult to identify worthless notes without a tedious serial number cross-check against the official list.

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Indeed, the idea that the gold standard produced spectacular stability is a fantasy and a false image of what the gold standard was really like. The gold standard era was punctuated by deep recessions (the recession of 1893 was in some ways almost as profound as the Great Depression of the 1930s). There were bank runs and long bouts of deflation. Nothing stopped governments from abandoning the gold standard when they desperately needed funding to pay for World War I. Once citizens realized that the gold standard might not go on forever, it proved extremely fragile. There is little reason to believe that a modern-day gold standard would fare any better.

Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism
by George A. Akerlof and Robert J. Shiller
Published 1 Jan 2009

The Overheated Economy of the 1920s Leads to the Depression of the 1930s After the depression of the 1890s there was much discussion of what had happened, and eventually corrections were made that were supposed to prevent a recurrence. Notably the Federal Reserve System was created by an act of Congress in 1913 to prevent the kind of bank run that had started the depression. The act was hailed as a “fireproof credit structure”15 and a “safeguard against business depressions.” President Woodrow Wilson, upon signing the Federal Reserve Act on December 14, 1913, was almost euphoric about its ability to stabilize the economy, and he even called the act “the constitution of peace.”16 But in fact the new system did not function as well as had been hoped.

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Confidence—and the economy itself—was not restored until World War II completely changed the dominant story of people’s lives, transforming the economy.39 Summing Up Depression History We have seen that the two most significant depressions in U.S. history were characterized by fundamental changes in confidence in the economy, in the willingness to press pursuit of profit to antisocial limits, in money illusion, and in changes in the perception of economic fairness. The depressions were intimately linked with these hard-to-measure variables. These two epochs may seem remote in history, and we may think that our economic institutions have improved enough to prevent such events from ever being repeated. Both depressions involved bank runs, and such runs now appear to be a thing of a past because of the establishment, in the 1930s, of comprehensive deposit insurance. The first of these depressions also preceded the founding of the U.S. central bank, the Federal Reserve System; and there has been considerable development in the theory of central banking since the second depression.

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A shadow banking sector, unprotected by deposit insurance, grew up after the early 1990s in the United States, in the form of subprime lenders who supported their lending activities by issuing short-term commercial paper. Moreover, even the Federal Reserve System as it existed at the beginning of 2007 was apparently not up to the task of preventing behavior that looked very much like bank runs, as one financial institution after another failed. In response the Fed had to reinvent itself, with new lending facilities that went far beyond its original turf of depository institutions. The increasing complexity of our financial system makes it hard for economic institutions like deposit insurers or central banks to stay ahead of financial innovation.

Financial Market Meltdown: Everything You Need to Know to Understand and Survive the Global Credit Crisis
by Kevin Mellyn
Published 30 Sep 2009

People prefer to put their money in a bank that isn’t losing money. In fact, banks that lose big sums of money, especially when it is unexpected, can be quickly brought down by a ‘‘run on the bank.’’ Depositors in these dramas rush to remove their money before the banks go bust, something that is sure to make it go bust. Bank runs brought down thousands of U.S. banks in the 1920s and 1930s, which is why the Federal Deposit Insurance Corporation (FDIC) was put in place to provide both oversight and deposit insurance to prevent them. But it’s not enough for banks to just avoid the rare disaster. Banks need to make enough money out of OPM to pay for the cost of running the payments system and other expenses.

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However, the simple fact is that no private clearing house has ever collapsed during a financial crisis. The history of formal regulation is less stellar. The United States has experienced two devastating structural financial crises and several lesser ones since the Federal Reserve was set up. The Northern Rock bank run in England (the first since 1866) happened after the U.K. abolished the old clearing house ‘‘club’’ and took up formal regulation. LONDON BECOMES MONEY MARKET TO THE WORLD The result of all these accidents of history was that England became the first national economy based on credit. Nothing really new in finance has been invented since.

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Borrowers walk away, leaving the bank with trash stocks. With their paper wealth wiped out, these same borrowers began defaulting on mortgages and other loans. Banks began to call in loans to raise cash, sending more customers into the tank. Soon, banks began to fail in large numbers, triggering more bank runs. Between the end of 1920 and FDR’s famous Bank Holiday of 1933, about 5,000 of America’s roughly 30,000 banks failed. Essentially, Ben Strong and the Federal Reserve Board let them fail, judging it irresponsible to bail out banks that made themselves insolvent. However, in banking, timing is everything.

Smart Money: How High-Stakes Financial Innovation Is Reshaping Our WorldÑFor the Better
by Andrew Palmer
Published 13 Apr 2015

Society benefits, too: long-term investments can be financed far more easily because they do not require creditors to sacrifice liquidity. The downside of maturity transformation is that a lot of creditors do sometimes want their money back at the same time. The most visible manifestation of this is the bank run, with people lining up outside branches to retrieve their cash. A bank run is the moment when the magic of maturity transformation is revealed as a cheap trick. The bank doesn’t have deposits on hand to meet demand, so the customers who turn up first are the ones who get their money back. Everyone has an interest in joining the run.

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Something unexpected was happening to the moneymaking machine. My very first week in the job coincided with a deposit run at Northern Rock, a British lender that came unstuck when it could no longer fund itself in the markets. Some of my earliest interviews on the beat were with people dusting off the manual on how to deal with bank runs. Organizing guide ropes inside bank branches was one tactic: better that than have people spill out onto the street, signaling to others that they should join the line. One HSBC veteran happily recounted stories of the financial crisis that gripped Asia in the late 1990s, when tellers were instructed to bring piles of cash into view to reassure people that banks were overflowing with money.

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The aim of these rules is twofold: first, to make sure that banks do not get into such terrible trouble again and, second, to ensure that when there is another crisis, the bill is not passed to the taxpayer. A lot of different weapons are being deployed in the service of these objectives, and despite the cries of those who say nothing has been done to hurt the banks, they are having a powerful effect. The two most important levers that regulators have to pull are liquidity and equity. Bank runs are not the only way that creditors can bring banks to their knees. Banks borrow short term in a lot of different markets and from a lot of different sources of capital. They borrow in repurchase, or “repo,” markets, pledging securities as collateral in return for cash; they borrow from money-market funds; they use commercial paper, a short-term capital-market instrument, to raise money; and so forth.

America's Bank: The Epic Struggle to Create the Federal Reserve
by Roger Lowenstein
Published 19 Oct 2015

As Paul Warburg, one of the heroes of this story, was to observe with his trademark acuity, America’s banks resembled less an army commanded by a central staff than they did an inchoate legion of disjointed and disunited infantry. It was hardly surprising that throughout the latter half of the nineteenth century and into the early twentieth, the United States—alone among the industrial powers—suffered a continual spate of financial panics, bank runs, money shortages, and, indeed, full-blown depressions. This book tells the story of how, culminating in the days before Christmas 1913, the Federal Reserve came to be. It was not a gentle or an easy birth, nor was it swift. To Americans of the early twentieth century, especially farmers, the prospect of a central bank threatened the comfortable Jeffersonian principle of small government.

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A great orator though a twice-failed candidate, Bryan had no use for a commission run by Aldrich. At any rate, the Democrats backed a very different banking reform—deposit insurance. Oklahoma, a newly admitted state, had enacted deposit insurance the previous December, with the aim of discouraging bank runs. This solution dismayed orthodox bankers, who feared that insurance would serve as an invitation to reckless banking. If depositors had no reason to seek out well-managed banks, what would motivate bankers to discipline their lending? James Laughlin, author of the 1897 Indianapolis report, reacted as did many experts—with haughty disapproval.

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For instance, at Warburg’s urging, the Senate cut reserve requirements below those in the House, enabling banks to issue more loans and, again, create more money. The most controversial feature in the Senate bill was a provision for a deposit guarantee. The notion of insuring deposits as a means of forestalling bank runs had been on the margins of the debate since 1907 and, of course, was favored by Bryan. It was considered a radical step—one that would encourage imprudent banking. Nonetheless, Wall Street, which had visions of a muscular Federal Reserve that would pump up credit and arm American banks to do business overseas, preferred the Senate’s version of Glass-Owen to the House’s.

Manias, Panics and Crashes: A History of Financial Crises, Sixth Edition
by Kindleberger, Charles P. and Robert Z., Aliber
Published 9 Aug 2011

Moreover it encouraged banks to make riskier loans since they were confident that they were protected against runs by the owners of the larger deposits – if these riskier loans proved profitable, the owners of the banks would benefit and if the loans went into default, the owners would not have to worry about bank runs (although the market value of their own shares might decline and even become worthless). The implosion of the bubble in Japan in the 1990s caused the value of the loans of the banks headquartered in Tokyo and Osaka and various regional centers to decline sharply below the value of their liabilities. Nevertheless, there were no bank runs; the depositors were confident that they would be made whole by the government if any of the banks were closed. Deposit insurance has limited both bank runs and contagion in the runs from one troubled bank to other banks in a neighborhood.

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A guarantee fund of 20 million gulden was put together by the Austrian National Bank and the solid commercial banks; these imitations of earlier measures were of little assistance.37 Another moratorium was noted in Paris after the July Monarchy when the municipal council decreed that all bills payable in Paris between 25 July and 15 August should be extended by ten days. This moratorium sterilized the commercial paper in banking portfolios and did nothing to discourage a run by holders of notes.38 Clearing-house certificates The major device used in the United States to cope with bank runs prior to the establishment of the Federal Reserve System was the clearing-house certificate, which is a near-money substitute that was the liability of a group of large local banks. A bank subject to a run could pay the departing depositors with these certificates rather than with coin. The New York clearing-house was established in 1853 and the one in Philadelphia in 1858 after the panic of 1857.

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Morgan, Chase Manhattan Bank, and the Union Bank of Switzerland to provide $3.6 billion of capital to prevent the collapse of LTCM; in exchange they acquired 90 percent of LTCM’s equity.58 These firms were large creditors of LTCM so the ‘bailout’ involved a change in the legal nature of their claim on LTCM. The Federal Reserve was concerned that if LTCM failed the markets would be paralyzed by the need to unwind its massive position in futures and options contracts and other types of derivatives. Deposit insurance Since 1934, federal deposit insurance in the United States has prevented bank runs by providing an ex ante guarantee of deposits. Initially the deposits were guaranteed up to $10,000 but gradually the ceiling on deposits was raised in stages and eventually reached $100,000 – and then $250,000 during the 2008 crisis. When large banks got into trouble, the FDIC deliberately removed all limits on the amounts of deposits covered by the guarantee to halt imminent runs and in practice it established that banks with significant deposits over $100,000 were ‘too big to fail’ (although the shareholders of these banks would probably lose all of their money).

In FED We Trust: Ben Bernanke's War on the Great Panic
by David Wessel
Published 3 Aug 2009

Instead, trust companies had to rely on clearinghouse banks to process checks written by their customers. Knickerbocker Trust Company, the Bear Stearns of its day, had lent heavily to the copper speculators. When word of that circulated, scores of depositors descended on its offices to withdraw money, the sort of bank run that was frighteningly frequent before government deposit insurance arrived. Never mind that just two weeks before, the state banking examiner had found the institution had funds sufficient to pay its depositors. On October 18, the National Bank of Commerce said it would no longer act as the intermediary between Knickerbocker and the clearinghouse, a move as devastating to Knickerbocker as JPMorgan Chase’s decision to stop “clearing” — or processing payments — for Lehman Brothers in September 2008, contributing to that venerable firm’s bankruptcy.

…

The institution was still in its adolescence when it confronted and failed its biggest test: misstep after misstep on the Fed’s part turned a bad late-1920s recession into the Great Depression, an indictment made by Nobel laureate Milton Friedman and collaborator Anna Schwartz, and later expanded by Ben Bernanke in his years as an academic. In the preface to a collection of his essays on the Depression, Bernanke described those years as “an incredibly dramatic episode — an era of stock market crashes, bread lines, bank runs, and wild currency speculation, with the storm clouds of war gathering ominously in the background all the while. Fascinating, and often tragic, characters abound during this period, from hapless policy makers trying to make sense of events for which their experience had not prepared them to ordinary people coping heroically with the effects of the economic catastrophe.”

…

“In August, it crossed into the banking system. That’s when things got really complicated,” said Donald Kohn, the Fed’s vice chairman, who had long taken comfort from what Greenspan once dubbed — in another automotive metaphor — the “spare tire” theory of finance. The spare tire theory holds that when the banks run into trouble, companies and consumers can borrow directly or indirectly in credit markets where money market funds, insurance companies, pension funds, and others lend cash. Likewise, when credit markets are tight, companies and consumers can borrow from banks. Problems in one sector are offset by the other, in short, and the economy keeps right on rolling.

Stolen: How to Save the World From Financialisation
by Grace Blakeley
Published 9 Sep 2019

When financial markets started to seize up in 2007, banks stopped lending to one another, and “the Rock” found itself unable to access international capital markets, meaning it couldn’t pay its debts. On 13 September 2007, the news broke that Northern Rock was seeking emergency support from the Bank of England: the first UK bank run since Overend. Both bank runs resulted from an asset bubble — one in railways, the other in housing. Both Northern Rock and Overend relied on borrowing from financial markets to finance their day-to-day liabilities. Both were eventually forced to appeal to the Bank of England for help. But there were also some critical differences between the two institutions.

…

Adam Tooze puts it succinctly: “Without valuation these assets could not be used as collateral. Without collateral there was no funding. And if there was no funding all the banks were in trouble, no matter how large their exposure to real estate”. Retail bank runs had been a thing of the past since the introduction of deposit insurance, but what happened in 2007 was essentially a giant bank run, led by other banks, which created a liquidity crisis – the banks didn’t have enough cash to meet their current liabilities. But the fire selling that resulted rapidly turned this liquidity crisis into a solvency crisis – the banks’ debts grew larger than their assets.

Cloudmoney: Cash, Cards, Crypto, and the War for Our Wallets
by Brett Scott
Published 4 Jul 2022

Not only is this an administrative nightmare, but it might also induce people into fleeing from commercial banks, reducing those banks’ profitability through a ‘digital bank run’. A normal bank run occurs when people panic and rapidly convert their bank chips into state cash at an ATM or branch. A digital run would entail people instructing their existing commercial banks to transfer digital state money into their newly opened central bank accounts, draining the reserves of those banks. One major central bank think-tank surveyed twenty-three central banks, nineteen of which expressed concern about CBDCs causing digital bank runs. In the same survey, some poorer countries suggested a need for a CBDC to compete with private sector US-dollar-heavy challengers like Libra, which are already threatening to attack their monetary sovereignty and domestic banking systems.

…

They are imagining a world in which there is no such thing as ‘money outside the bank’. This will have serious political, economic and psychological consequences. For example, when a bank looks as though it could fail, people – historically – panic and rush to redeem its chips for state money in what is known as a ‘bank run’: they queue up at ATMs and branches trying to ‘get their money out’. But what happens if there are no ATMs or branches? Well, you are going to have to log onto your account and try to flee your bank by making transfers to another bank, perhaps by asking your friend if you can temporarily transfer to their account.

What Would the Great Economists Do?: How Twelve Brilliant Minds Would Solve Today's Biggest Problems
by Linda Yueh
Published 4 Jun 2018

Fisher identified all great depressions as starting from a point of overindebtedness: The public psychology of going into debt for gain passes through several more or less distinct phases: (a) the lure of big prospective dividends or gains in income in the remote future; (b) the hope of selling at a profit, and realizing a capital gain in the immediate future; (c) the vogue of reckless promotions, taking advantage of the habituation of the public to great expectations; (d) the development of downright fraud, imposing on a public which had grown credulous and gullible.15 In the case of the Great Depression, the overindebtedness originated in reckless borrowing by corporations who had been encouraged by high-pressure salesmanship of investment bankers. The collapse of the debt bubble then led to a self-perpetuating vicious circle of falling asset prices, which, as Fisher knew from experience, made it hard to repay one’s debt. It led to further distressed selling, rising bankruptcies and even bank runs as loans went bad on banks’ balance sheets. He then described the process of debt-deflation, where attempts to liquidate assets in order to reduce debts become self-defeating, as the ensuing fall in prices raises the real value of debts even more. In other words, the real cost of borrowing is the nominal interest rate minus inflation, so deflation increases the cost of debt while inflation would reduce it.

…

He proposed that the central bank should simply increase the price level to near its 1926 level by expanding the money supply in line with his formulation of the Quantity Theory of Money. He also suggested stabilizing the financial system by providing a government guarantee of bank deposits to curb harmful and destructive bank runs. He believed that membership of the gold standard prevented the necessary monetary expansion since the dollars in circulation were constrained by the amount of gold. Dropping the gold standard would free the dollar and allow it to fall in value during a depression, which could boost exports and therefore the economy.

…

However, the Fed believed that further loosening of monetary policy might pump up the stock market bubble and lead to inflation. Between 1930 and 1933 the US money supply contracted by over a third, coinciding with a raft of bank failures. Between October 1930 and March 1933 there were four major bank runs. Most of these occurred between August 1931 and January 1932, when there were 1,860 bank failures and the money supply fell at an annual rate of 31 per cent. As deposits were withdrawn for fear of failure, banks had less money to lend, so the supply of credit to the economy evaporated, which led to downward pressure on output and prices.

The Great Economists: How Their Ideas Can Help Us Today
by Linda Yueh
Published 15 Mar 2018

Fisher identified all great depressions as starting from a point of overindebtedness: The public psychology of going into debt for gain passes through several more or less distinct phases: (a) the lure of big prospective dividends or gains in income in the remote future; (b) the hope of selling at a profit, and realizing a capital gain in the immediate future; (c) the vogue of reckless promotions, taking advantage of the habituation of the public to great expectations; (d) the development of downright fraud, imposing on a public which had grown credulous and gullible.15 In the case of the Great Depression, the overindebtedness originated in reckless borrowing by corporations who had been encouraged by high-pressure salesmanship of investment bankers. The collapse of the debt bubble then led to a self-perpetuating vicious circle of falling asset prices, which, as Fisher knew from experience, made it hard to repay one’s debt. It led to further distressed selling, rising bankruptcies and even bank runs as loans went bad on banks’ balance sheets. He then described the process of debt-deflation, where attempts to liquidate assets in order to reduce debts become self-defeating, as the ensuing fall in prices raises the real value of debts even more. In other words, the real cost of borrowing is the nominal interest rate minus inflation, so deflation increases the cost of debt while inflation would reduce it.

…

He proposed that the central bank should simply increase the price level to near its 1926 level by expanding the money supply in line with his formulation of the Quantity Theory of Money. He also suggested stabilizing the financial system by providing a government guarantee of bank deposits to curb harmful and destructive bank runs. He believed that membership of the gold standard prevented the necessary monetary expansion since the dollars in circulation were constrained by the amount of gold. Dropping the gold standard would free the dollar and allow it to fall in value during a depression, which could boost exports and therefore the economy.

…

However, the Fed believed that further loosening of monetary policy might pump up the stock market bubble and lead to inflation. Between 1930 and 1933 the US money supply contracted by over a third, coinciding with a raft of bank failures. Between October 1930 and March 1933 there were four major bank runs. Most of these occurred between August 1931 and January 1932, when there were 1,860 bank failures and the money supply fell at an annual rate of 31 per cent. As deposits were withdrawn for fear of failure, banks had less money to lend, so the supply of credit to the economy evaporated, which led to downward pressure on output and prices.

Cryptoeconomics: Fundamental Principles of Bitcoin
by Eric Voskuil , James Chiang and Amir Taaki
Published 28 Feb 2020

While the fund attempts to maintain sufficient net asset value [538] (NAV) to allow exchange a unit of the fund for one of the money, a sufficient drop in NAV will be reflected in unit price. In the case of a MMA, such losses are absorbed by money reserves. If there is insufficient reserve, either because of an unexpected level of withdrawal, or because of investment losses, the MMA fails. Failure of a MMA manifests as a bank run [539] , where some people are repaid and others not. Insufficient NAV of a MMF manifests as a uniform drop in unit price. The advantage of the MMA is that its units are more fungible [540] , though still discounted against money. The advantage of the MMF is that losses are evenly spread. It is not surprising therefore that MMAs are typically insured by the taxpayer, more tightly regulated by the state, and accounted for as bank credit.

…

Bank similarly did not create the offsetting credit and debt entries to obscure fraudulent money creation. Bank created these accounts for two reasons: Preclude physical transfer just to redeposit the money into Bank. Encourage redeposit into Bank as opposed to a competitor (or Borrower hoard). When Bank has insufficient reserve to satisfy withdrawals, either due to loans in default or a bank run [886] , it has only two options, default or borrow. To prevent the former, central banking [887] exists to provide the latter. This is the meaning of the term “lender of last resort ” [888] . State Banking Principle [889] provides a detailed explanation of this actual source of monetary inflation [890] .

…

* * * [10] https://libbitcoin.info [11] https://bitcoincore.org [12] Chapter: Dedicated Cost Principle [13] https://www.dtu.dk/english [14] https://twitter.com [15] https://libbitcoin.info [16] https://github.com/libbitcoin/libbitcoin-system/wiki/Cryptoeconomics [17] Chapter: Inflation Principle [18] Chapter: Savings Relation [19] https://en.wikipedia.org/wiki/Amir_Taaki [20] Chapter: Foreword [25] https://libbitcoininstitute.org [26] https://en.wikipedia.org/wiki/Free_Software_Foundation [27] https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-501c3-organizations [28] Chapter: Value Proposition [51] https://en.wikipedia.org/wiki/Ludwig_von_Mises [52] https://en.wikipedia.org/wiki/Murray_Rothbard [53] Chapter: Inflation Principle [54] Chapter: Money Taxonomy [55] Chapter: Full Reserve Fallacy [56] Chapter: Censorship Resistance Property [57] Chapter: Depreciation Principle [83] https://en.wikipedia.org/wiki/Spherical_geometry [84] Chapter: Permissionless Principle [85] Chapter: Censorship Resistance Property [86] Chapter: Hearn Error [87] https://en.wikipedia.org/wiki/Confinity [88] Chapter: Value Proposition [89] https://en.wikipedia.org/wiki/PayPal [90] Chapter: Risk Sharing Principle [91] Chapter: Proof of Work Fallacy [92] Chapter: Side Fee Fallacy [93] Chapter: Axiom of Resistance [94] Chapter: Qualitative Security Model [95] Chapter: Pooling Pressure Risk [96] Chapter: Risk Sharing Principle [98] Chapter: Threat Level Paradox [99] https://en.wikipedia.org/wiki/Foreign_exchange_controls [100] Chapter: Risk Sharing Principle [101] Chapter: Threat Level Paradox [102] Chapter: Balance of Power Fallacy [103] Chapter: Pooling Pressure Risk [104] http://www.imf.org/external/index.htm [105] https://en.wikipedia.org/wiki/Seigniorage [106] Chapter: Threat Level Paradox [107] https://www.theatlantic.com/magazine/archive/2017/09/big-in-venezuela/534177/ [110] Chapter: Fragmentation Principle [111] Chapter: Consolidation Principle [112] Chapter: Risk Sharing Principle [115] Chapter: Risk Sharing Principle [116] Chapter: Proof of Stake Fallacy [117] Chapter: Censorship Resistance Property [118] Chapter: Axiom of Resistance [119] Chapter: Money Taxonomy [120] Chapter: Reservation Principle [121] Chapter: Blockchain Fallacy [122] Chapter: Axiom of Resistance [123] https://en.wikipedia.org/wiki/Cognitive_dissonance [124] https://en.wikipedia.org/wiki/Wikipedia:Rage_quit [125] Chapter: Dumping Fallacy [126] Chapter: Qualitative Security Model [127] Chapter: Inflation Principle [128] Chapter: Lunar Fallacy [131] Chapter: Hearn Error [132] Chapter: Value Proposition [134] Chapter: Other Means Principle [135] https://en.m.wikipedia.org/wiki/Seigniorage [136] https://www.imf.org [137] Chapter: Pooling Pressure Risk [138] Chapter: Axiom of Resistance [139] Chapter: Risk Sharing Principle [140] https://en.wikipedia.org/wiki/Seigniorage [141] Chapter: Money Taxonomy [142] Chapter: Qualitative Security Model [143] https://en.wikipedia.org/wiki/Seigniorage [144] Chapter: Hearn Error [145] Chapter: Fedcoin Objectives [146] Chapter: Public Data Principle [147] Chapter: Proof of Work Fallacy [148] Chapter: Other Means Principle [149] Chapter: Censorship Resistance Property [150] https://en.wikiquote.org/wiki/Carl_von_Clausewitz [151] Chapter: Threat Level Paradox [152] https://mises.org/library/man-economy-and-state-power-and-market/html/p/1075 [153] Chapter: Pooling Pressure Risk [154] https://www.asicboost.com/patent [155] Chapter: Axiom of Resistance [156] Chapter: Risk Sharing Principle [157] Chapter: Public Data Principle [158] Chapter: Qualitative Security Model [159] Chapter: Threat Level Paradox [160] Chapter: Cryptodynamic Principles [161] Chapter: Value Proposition [162] Chapter: Other Means Principle [174] https://coinweek.com/bullion-report/bitcoin-vs-gold-10-crystal-clear-comparisons [175] Chapter: Stability Property [176] Chapter: Proximity Premium Flaw [177] Chapter: Risk Sharing Principle [178] Chapter: Balance of Power Fallacy [181] Chapter: Threat Level Paradox [182] https://en.wikipedia.org/wiki/Anonymizer [183] Chapter: Side Fee Fallacy [184] Chapter: Social Network Principle [185] https://en.wikipedia.org/wiki/Graph_(discrete_mathematics)#Directed_graph [186] https://en.wikipedia.org/wiki/Goodwill_(accounting) [189] Chapter: Axiom of Resistance [190] Chapter: Public Data Principle [191] Chapter: Balance of Power Fallacy [192] Chapter: Cockroach Fallacy [193] https://en.wikipedia.org/wiki/Blockchain [194] https://en.wikipedia.org/wiki/Cryptography [195] https://en.wikipedia.org/wiki/Free_and_open-source_software [196] Chapter: Prisoner’s Dilemma Fallacy [201] Chapter: Axiom of Resistance [203] Chapter: Money Taxonomy [204] Chapter: Risk Sharing Principle [205] Chapter: Axiom of Resistance [206] Chapter: Zero Sum Property [207] https://en.wikipedia.org/wiki/Subsidy [208] https://en.wikipedia.org/wiki/Black_market [209] https://www.theatlantic.com/magazine/archive/2017/09/big-in-venezuela/534177 [210] Chapter: Axiom of Resistance [211] Chapter: Pooling Pressure Risk [212] Chapter: Risk Sharing Principle [213] https://en.wikipedia.org/wiki/Attack_surface [214] https://en.wikipedia.org/wiki/Foreign_exchange_controls [215] Chapter: Centralization Risk [216] https://en.m.wikipedia.org/wiki/Seigniorage [217] https://en.m.wikipedia.org/wiki/Foreign_exchange_controls [218] https://en.m.wikipedia.org/wiki/Know_your_customer [220] Chapter: Money Taxonomy [221] Chapter: Scalability Principle [222] Chapter: Risk Sharing Principle [223] Chapter: Axiom of Resistance [224] Chapter: Value Proposition [225] Chapter: Other Means Principle [226] Chapter: Money Taxonomy [227] Chapter: Axiom of Resistance [229] Chapter: Risk Sharing Principle [230] https://en.m.wikipedia.org/wiki/Inflation [231] https://en.m.wikipedia.org/wiki/Seigniorage [232] Chapter: Depreciation Principle [233] Chapter: Money Taxonomy [234] https://en.m.wikipedia.org/wiki/Subjective_theory_of_value [235] Chapter: Time Preference Fallacy [236] https://en.m.wikipedia.org/wiki/Marginal_utility [237] https://en.m.wikipedia.org/wiki/Murray_Rothbard [238] https://mises.org/library/what-has-government-done-our-money/html/p/81 [246] Chapter: Money Taxonomy [247] https://en.wikipedia.org/wiki/Foreign_exchange_controls [248] https://en.wikipedia.org/wiki/Seigniorage [249] https://www.investopedia.com/articles/personal-finance/081616/understanding-taxes-physical-goldsilver-investments.asp [250] https://en.wikipedia.org/wiki/Inflation [251] https://en.wikipedia.org/wiki/Monetary_inflation [252] https://en.wikipedia.org/wiki/Exchange_rate#Parallel_exchange_rate [261] Chapter: Reserve Currency Fallacy [262] https://wiki.mises.org/wiki/Money_substitutes [263] Chapter: Reservation Principle [264] Chapter: Money Taxonomy [265] https://en.wikipedia.org/wiki/Monetary_inflation [266] https://en.wikipedia.org/wiki/Promissory_note [273] Chapter: Fedcoin Objectives [274] Chapter: Censorship Resistance Property [275] Chapter: Axiom of Resistance [276] Chapter: Cryptodynamic Principles [277] https://en.wikipedia.org/wiki/Lender_of_last_resort [278] https://en.wikipedia.org/wiki/Free_banking [279] Chapter: Thin Air Fallacy [280] https://en.wikipedia.org/wiki/Central_bank [281] https://en.wikipedia.org/wiki/Discount_window [282] https://en.wikipedia.org/wiki/Structure_of_the_Federal_Reserve_System [283] https://www.frbdiscountwindow.org/pages/discount-rates/current-discount-rates [309] Chapter: Money Taxonomy [310] https://www.washingtonpost.com/news/wonk/wp/2013/12/16/how-tight-jeans-almost-ruined-americas-money [311] https://www.nytimes.com/2018/11/21/business/sweden-cashless-society.html [312] Chapter: Fedcoin Objectives [313] https://www.riksbank.se/en-gb/payments--cash/e-krona [314] Chapter: Reserve Currency Fallacy [315] https://en.wikipedia.org/wiki/Gold_standard [316] Chapter: Value Proposition [320] https://en.wikipedia.org/wiki/Rate_of_return [324] Chapter: Pooling Pressure Risk [328] Chapter: Risk Sharing Principle [329] https://www.federalreserve.gov/aboutthefed/bios/board/default.htm [330] Chapter: Axiom of Resistance [331] https://www.coindesk.com/uasf-revisited-will-bitcoins-user-revolt-leave-lasting-legacy [332] Chapter: Proof of Work Fallacy [337] Chapter: Efficiency Paradox [338] Chapter: Stability Property [339] Chapter: Qualitative Security Model [340] Chapter: Variance Discount Flaw [341] Chapter: Censorship Resistance Property [342] Chapter: Axiom of Resistance [343] Chapter: Pooling Pressure Risk [344] Chapter: Relay Fallacy [345] Chapter: Censorship Resistance Property [346] Chapter: Efficiency Paradox [347] http://primecoin.io [349] https://en.wikipedia.org/wiki/Paradox [351] Chapter: Zero Sum Property [352] Chapter: Pooling Pressure Risk [355] https://en.wikipedia.org/wiki/Monotonic_function [356] Chapter: Money Taxonomy [357] https://en.m.wikipedia.org/wiki/Store_of_value [358] https://en.wikipedia.org/wiki/Subjective_theory_of_value [359] https://en.wikipedia.org/wiki/Proof-of-stake [360] Chapter: Proof of Stake Fallacy [361] Chapter: Utility Threshold Property [362] Chapter: Money Taxonomy [364] Chapter: Side Fee Fallacy [365] https://en.wikipedia.org/wiki/Step_function [366] http://www.investopedia.com/terms/e/economicprofit.asp [367] Chapter: Pooling Pressure Risk [368] https://en.wikipedia.org/wiki/Time_preference [369] Chapter: Proof of Work Fallacy [370] Chapter: Balance of Power Fallacy [371] https://en.wikipedia.org/wiki/Red_herring [372] Chapter: Risk Sharing Principle [375] https://en.wikipedia.org/wiki/Zero-sum_game [376] https://en.wikipedia.org/wiki/Win-win_game [377] https://en.wikipedia.org/wiki/Chaos_theory [379] Chapter: Side Fee Fallacy [380] Chapter: Pooling Pressure Risk [381] Chapter: Zero Sum Property [382] Chapter: Threat Level Paradox [385] Chapter: Balance of Power Fallacy [386] Chapter: Proximity Premium Flaw [387] Chapter: Variance Discount Flaw [388] https://en.wikipedia.org/wiki/Economies_of_scale [389] Chapter: Axiom of Resistance [390] https://www.theatlantic.com/magazine/archive/2017/09/big-in-venezuela/534177/ [391] Chapter: Relay Fallacy [392] Chapter: Risk Sharing Principle [393] Chapter: Balance of Power Fallacy [394] https://www.federalreserve.gov [395] Chapter: State Banking Principle [396] https://en.wikipedia.org/wiki/Debasement [397] https://en.wikipedia.org/wiki/Legal_tender [398] https://en.wikipedia.org/wiki/Federal_Reserve_Note [399] Chapter: Money Taxonomy [400] https://en.wikipedia.org/wiki/Executive_Order_6102 [401] https://en.wikipedia.org/wiki/International_Monetary_Fund [404] https://en.wikipedia.org/wiki/Opportunity_cost [405] Chapter: Pooling Pressure Risk [406] Chapter: Variance Discount Flaw [407] Chapter: Axiom of Resistance [410] Chapter: Zero Sum Property [411] https://www.cs.cornell.edu/~ie53/publications/btcProcFC.pdf [413] Chapter: Pooling Pressure Risk [414] Chapter: Proximity Premium Flaw [416] https://en.wikipedia.org/wiki/Incentive_compatibility [418] Chapter: Pooling Pressure Risk [419] https://en.m.wikipedia.org/wiki/History_of_email_spam [420] Chapter: Risk Sharing Principle [423] Chapter: Pooling Pressure Risk [424] Chapter: Proximity Premium Flaw [425] Chapter: Axiom of Resistance [426] https://en.wikipedia.org/wiki/Zero-sum_game [427] Chapter: Pooling Pressure Risk [428] https://en.wikipedia.org/wiki/Closed_system [429] Chapter: Proximity Premium Flaw [430] Chapter: Variance Discount Flaw [431] https://en.wikipedia.org/wiki/Economies_of_scale [432] https://en.wikipedia.org/wiki/Subsidy [433] Chapter: Threat Level Paradox [434] http://gavinandresen.ninja/a-definition-of-bitcoin [435] https://bitcoin.org/bitcoin.pdf [436] Chapter: Cryptodynamic Principles [437] Chapter: Brand Arrogation [438] https://bitcoin.org/en/bitcoin-core [439] https://libbitcoin.info [440] Chapter: Maximalism Definition [441] Chapter: Custodial Risk Principle [443] https://en.wikipedia.org/wiki/Cryptographic_hash_function [444] Chapter: Risk Sharing Principle [446] Chapter: Money Taxonomy [447] Chapter: Cryptodynamic Principles [448] Chapter: Money Taxonomy [450] Chapter: Utility Threshold Property [451] Chapter: Money Taxonomy [452] https://en.wikipedia.org/wiki/Gresham%27s_law#Reverse_of_Gresham's_law_(Thiers'_law) [453] Chapter: Fragmentation Principle [460] Chapter: Money Taxonomy [461] https://en.wikipedia.org/wiki/Barter [462] https://en.wikipedia.org/wiki/Goods_and_services [463] Chapter: Consolidation Principle [464] Chapter: Network Effect Fallacy [465] Chapter: Dumping Fallacy [466] Chapter: Replay Protection Fallacy [467] https://en.m.wikipedia.org/wiki/Net_present_value [474] Chapter: Proof of Stake Fallacy [475] Chapter: Censorship Resistance Property [476] Chapter: Substitution Principle [478] Chapter: Consolidation Principle [479] Chapter: Side Fee Fallacy [482] Chapter: Money Taxonomy [483] Chapter: Censorship Resistance Property [484] Chapter: Axiom of Resistance [485] https://eprint.iacr.org/2017/893.pdf [486] Chapter: Energy Waste Fallacy [487] Chapter: Pooling Pressure Risk [488] Chapter: Proof of Memory Façade [489] Chapter: Energy Waste Fallacy [490] Chapter: Censorship Resistance Property [491] Chapter: Other Means Principle [495] Chapter: Cryptodynamic Principles [496] Chapter: Value Proposition [497] Chapter: Proof of Stake Fallacy [498] Chapter: Axiom of Resistance [499] Chapter: Proof of Memory Façade [500] Chapter: Credit Expansion Fallacy [501] Chapter: Money Taxonomy [502] https://en.wikipedia.org/wiki/Seigniorage [503] Chapter: State Banking Principle [504] https://www.frbdiscountwindow.org [505] https://www.fdic.gov/resources/deposit-insurance [507] Chapter: Dumping Fallacy [508] https://en.m.wikipedia.org/wiki/Hoarding_(economics) [509] Chapter: Replay Protection Fallacy [510] https://en.m.wikipedia.org/wiki/Net_present_value [511] Chapter: Consolidation Principle [515] Chapter: Depreciation Principle [516] https://mises.org/library/man-economy-and-state-power-and-market/html/p/996 [517] Chapter: Reserve Currency Fallacy [518] https://en.wikipedia.org/wiki/Foreign-exchange_reserves [519] https://en.wikipedia.org/wiki/Money_supply#United_States [520] https://en.wikipedia.org/wiki/Money_supply#Money_creation_by_commercial_banks [521] Chapter: State Banking Principle [522] https://www.federalreserve.gov/releases/h3/current/default.htm [543] Chapter: Savings Relation [544] https://en.wikipedia.org/wiki/Time_preference [545] Chapter: Unlendable Money Fallacy [548] Chapter: Production and Consumption [561] https://en.wikipedia.org/wiki/Monetary_inflation [562] Chapter: Unlendable Money Fallacy [563] https://en.m.wikipedia.org/wiki/Labor_theory_of_value [564] https://en.m.wikipedia.org/wiki/Catallactics [565] Chapter: Production and Consumption [566] Chapter: Depreciation Principle [569] Chapter: Time Preference Fallacy [570] Chapter: Labor and Leisure [571] https://en.wikipedia.org/wiki/Fractional-reserve_banking [572] Chapter: Money Taxonomy [573] Chapter: Thin Air Fallacy [574] https://en.wikipedia.org/wiki/Full-reserve_banking [602] https://en.wikipedia.org/wiki/Inflation [603] Chapter: Credit Expansion Fallacy [604] https://en.wikipedia.org/wiki/Gold_mining [605] Chapter: Time Preference Fallacy [607] Chapter: Risk Free Return Fallacy [635] https://en.wikipedia.org/wiki/Tautology_(logic) [636] Chapter: Production and Consumption [637] Chapter: Labor and Leisure [639] Chapter: Regression Fallacy [640] https://en.wikipedia.org/wiki/Seigniorage [641] https://en.wikipedia.org/wiki/Catallactics [642] Chapter: Speculative Consumption [643] https://en.wikipedia.org/wiki/Pump_and_dump [644] Chapter: Time Preference Fallacy [645] Chapter: Savings Relation [646] https://en.wikipedia.org/wiki/Use_value [647] https://en.m.wikipedia.org/wiki/Fungibility [648] Chapter: Dumping Fallacy [649] https://en.wikipedia.org/wiki/Action_axiom [650] Chapter: Production and Consumption [651] https://en.m.wikipedia.org/wiki/Goods_and_services [652] https://en.wikipedia.org/wiki/Waste [653] https://en.wikipedia.org/wiki/Murray_Rothbard [654] https://mises.org/library/man-economy-and-state-power-and-market/html/p/926 [655] Chapter: Expression Principle [656] Chapter: Time Preference Fallacy [657] Chapter: Pure Bank [658] Chapter: Reservation Principle [659] Chapter: Depreciation Principle [661] https://en.wikipedia.org/wiki/Action_axiom [662] https://en.m.wikipedia.org/wiki/Goods_and_services [663] Chapter: Depreciation Principle [664] Chapter: Labor and Leisure [665] https://en.wikipedia.org/wiki/Waste [666] Chapter: Pure Bank [667] Chapter: Reserve Definition [668] https://en.m.wikipedia.org/wiki/Dividend [677] https://en.wikipedia.org/wiki/Free_banking [678] https://en.wikipedia.org/wiki/Federal_Reserve [679] https://www.fdic.gov [680] https://en.wikipedia.org/wiki/Discount_window [681] https://en.wikipedia.org/wiki/Seigniorage [682] Chapter: Money Taxonomy [683] Chapter: Inflation Principle [684] https://en.wikipedia.org/wiki/Inflation [685] https://en.wikipedia.org/wiki/Deflation [686] Chapter: Time Preference Fallacy [687] https://en.m.wikipedia.org/wiki/Arbitrage [688] https://en.wikipedia.org/wiki/Demurrage_(currency) [689] https://en.wikipedia.org/wiki/Settlement_(finance) [690] https://en.wikipedia.org/wiki/Maturity_(finance) [691] Chapter: Depreciation Principle [692] https://en.wikipedia.org/wiki/Opportunity_cost [693] https://en.wikipedia.org/wiki/Compound_interest [699] Chapter: Savings Relation [700] Chapter: Inflation Principle [704] Chapter: Time Preference Fallacy [705] https://en.wikipedia.org/wiki/Catallactics [706] https://en.wikipedia.org/wiki/Murray_Rothbard [707] https://mises.org/library/man-economy-and-state-power-and-market/html/p/989 [708] https://en.wikipedia.org/wiki/Capital_requirement [709] Chapter: Expression Principle [715] Chapter: Depreciation Principle [726] Chapter: Savings Relation [727] Chapter: Time Preference Fallacy [732] Chapter: Depreciation Principle [733] Chapter: Full Reserve Fallacy [734] Chapter: Credit Expansion Fallacy [735] Chapter: Money Taxonomy [739] Chapter: Credit Expansion Fallacy [740] Chapter: Time Preference Fallacy [741] Chapter: Money Taxonomy [742] Chapter: Inflation Principle [756] Chapter: Speculative Consumption [757] Chapter: Regression Fallacy [758] https://en.m.wikipedia.org/wiki/Use_value [759] https://en.m.wikipedia.org/wiki/Barter [760] https://en.m.wikipedia.org/wiki/Medium_of_exchange [761] https://mises.org/library/human-action-0/html/pp/778 [762] Chapter: Money Taxonomy [763] https://en.m.wikipedia.org/wiki/Commodity [764] https://en.m.wikipedia.org/wiki/Tautology_(logic) [765] Chapter: Money Taxonomy [766] https://en.wikipedia.org/wiki/Currency [767] https://wiki.mises.org/wiki/Money_substitutes [779] Chapter: Credit Expansion Fallacy [780] https://en.wikipedia.org/wiki/Promissory_note [788] https://en.wikipedia.org/wiki/Legal_tender [789] https://en.wikipedia.org/wiki/Seigniorage [790] Chapter: Stability Property [791] https://en.wikipedia.org/wiki/Fiat_money [797] https://en.wikipedia.org/wiki/Monetary_inflation [798] https://en.wikipedia.org/wiki/Purchasing_power [799] Chapter: Inflation Principle [803] https://en.wikipedia.org/wiki/Commodity_money [808] https://wiki.mises.org/wiki/Money_substitutes [809] https://financial-dictionary.thefreedictionary.com/Contractual+Claim [810] Chapter: Debt Loop Fallacy [811] https://en.wikipedia.org/wiki/Securitization [812] https://en.wikipedia.org/wiki/Banknote [813] https://en.wikipedia.org/wiki/Gold_certificate [814] https://en.wikipedia.org/wiki/Representative_money [815] https://www.investopedia.com/terms/e/electronic-money.asp [816] Chapter: Regression Fallacy [819] https://en.wikipedia.org/wiki/Counterfeit_money [823] Chapter: Cryptodynamic Principles [824] https://en.wikipedia.org/wiki/Currency [825] Chapter: Credit Expansion Fallacy [826] Chapter: Reserve Definition [827] https://wiki.mises.org/wiki/Regression_theorem [828] Chapter: Money Taxonomy [829] https://en.m.wikipedia.org/wiki/Use_value [830] https://en.m.wikipedia.org/wiki/Barter [831] https://mises.org/library/human-action-0/html/pp/778 [833] Chapter: Collectible Tautology [837] Chapter: Depreciation Principle [838] Chapter: Savings Relation [843] https://en.wikipedia.org/wiki/Risk-free_interest_rate [844] Chapter: Credit Expansion Fallacy [855] Chapter: Full Reserve Fallacy [856] https://en.wikipedia.org/wiki/Representative_money [857] Chapter: Credit Expansion Fallacy [858] https://en.wikipedia.org/wiki/Inflation [860] https://wiki.mises.org/wiki/Money_substitutes [861] Chapter: Money Taxonomy [874] https://en.m.wikipedia.org/wiki/Talking_past_each_other [875] https://en.m.wikipedia.org/wiki/Use_value [876] Chapter: Value Proposition [877] https://en.m.wikipedia.org/wiki/Metallism [878] Chapter: Regression Fallacy [879] https://en.m.wikipedia.org/wiki/Chartalism [880] Chapter: Debt Loop Fallacy [886] https://en.wikipedia.org/wiki/Bank_run [887] https://en.wikipedia.org/wiki/Central_bank [888] https://en.wikipedia.org/wiki/Lender_of_last_resort [889] Chapter: State Banking Principle [890] https://en.wikipedia.org/wiki/Monetary_inflation [891] https://en.wikipedia.org/wiki/Fisher_equation [892] https://en.wikipedia.org/wiki/Monetary_inflation [893] Chapter: Depreciation Principle [894] Chapter: Money Taxonomy [895] https://en.wikipedia.org/wiki/Seigniorage [897] Chapter: Inflation Principle [898] https://en.wikipedia.org/wiki/Inflation [899] Chapter: Time Preference Fallacy [901] Chapter: Speculative Consumption [905] https://medium.com/@paulbars/magic-internet-money-how-a-reddit-ad-made-bitcoin-hit-1000-and-inspired-south-parks-art-b414ec7a5598 [906] Chapter: Money Taxonomy [907] Chapter: Depreciation Principle [908] Chapter: Stability Property [909] https://www.fool.com/investing/2017/05/25/could-the-price-of-bitcoin-go-to-1-million.aspx [910] https://en.wikipedia.org/wiki/Gross_world_product [911] https://medium.com/@100trillionUSD/modeling-bitcoins-value-with-scarcity-91fa0fc03e25 [912] Chapter: Stock to Flow Fallacy [913] Chapter: Reservation Principle [914] Chapter: Reserve Currency Fallacy [915] https://en.wikipedia.org/wiki/Catallactics [916] https://mises.org/library/man-economy-and-state-power-and-market/html/p/949 [917] Chapter: Money Taxonomy [918] Chapter: Credit Expansion Fallacy [919] Chapter: Time Preference Fallacy [920] https://en.wikipedia.org/wiki/Central_bank [921] Chapter: State Banking Principle [922] https://en.wikipedia.org/wiki/Settlement_(finance) [923] Chapter: Debt Loop Fallacy [924] https://en.wikipedia.org/wiki/Money_supply#United_States [931] Chapter: Permissionless Principle [932] https://en.wikipedia.org/wiki/Seigniorage [933] https://voxeu.org/index.php?

Inflated: How Money and Debt Built the American Dream
by R. Christopher Whalen
Published 7 Dec 2010

Indeed, my recent book, Crisis Economics: A Crash Course in the Future of Finance (The Penguin Press HC, 2010) shows that financial crises and economic crises driven by irrational exuberance of the financial system and the private sector—unrelated to public policies—existed for centuries before fiscal deviant sovereign and central banks distorted private-sector incentives. Markets do fail, and they do fail regularly in irrationally exuberant market economies; that is the source of the role of central banks and governments in preventing self-fulfilling and destructive bank runs and collapses of economic activity via Keynesian fiscal stimulus in response to collapse in private demand. The fact that these monetary policies and fiscal policies may eventually become misguided—creating moral hazard and creating large fiscal deficits and debt—does not deny the fact that private market failures—independent of misguided policies—triggered asset and credit bubbles that triggered a public rescue response.

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Rothbard described the scene facing Cleveland in that terrible year: Poor Grover Cleveland, a hard money Democrat, assumed the presidency in the middle of this monetary crisis. Two months later, the stock market collapsed, and a month afterward, in June 1893, distrust of the fraction reserve banks led to massive bank runs and failures throughout the country. Once again, however, many banks, national and state, especially in the West and South, were allowed to suspend specie payments. The panic of 1893 was on.13 Despite long speeches by Bryan and other pro-silver members of the House, on August 28, 1893, the lower chamber voted 239–108 to repeal the Sherman Act.

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“It was this interpretation of the episode that provided the prime impetus for the monetary reform movement that culminated in the Federal Reserve Act.”19 The Crisis of 1907 One of the key events that drove the mounting public demand for monetary reform was the Crisis of 1907, an event that was a century in the making but was also the result of a growing economy that had far outgrown its financial system. Unlike previous panics, the troubles started in March, not during the autumn farm harvest season, and would last the entire year and beyond. The New York Stock Exchange went into a drastic decline, leading to public panic and depositor runs on banks. These bank runs, in turn, led to large-scale liquidations of “call loans,” short-term loans used to finance stock market purchases, causing further declines in stock prices and widespread insolvency for businesses and individuals. Because the reaction to crisis by banks and the entire financial system was to limit the availability of deposits when a liquidity run occurred, the flow of payments through the U.S. economy slowed, causing personal and commercial insolvencies to soar.

War and Gold: A Five-Hundred-Year History of Empires, Adventures, and Debt
by Kwasi Kwarteng
Published 12 May 2014

The panic created more panic in a process Krugman said was similar to a microphone in an auditorium generating a ‘feedback loop’: ‘sounds picked up by the microphone are amplified by the loudspeakers’.22 These sounds are then amplified and increased until a deafening noise is created. The idea that a panic creates its own momentum is implicit in the phenomenon of a ‘bank run’, in which the prospect of a bank collapse actually causes this to happen, as depositors, doubtful of a bank’s solvency, remove their deposits, thereby damaging the bank. The feedback loop or bank run is essentially a circular process: it might be called a vicious circle. In the case of Thailand, the loss of investor confidence and the ensuing collapse in the value of the baht forced the central bank of Thailand to increase interest rates to defend the currency.

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Richards, the Deputy Governor of the Bank, remembered that ‘on Monday morning [12 December] the storm began, and till Saturday night it raged with an intensity that it is impossible for me to describe’.14 During that month, sixty county banks failed, more than half of them collapsing as a consequence of the failures of the London bank Pole & Co. and of Wentworth & Co., a leading Yorkshire bank. On 14 December, Pole & Co. stopped payment, which put forty of its correspondent county banks out of business.15 Pole & Co. had been put under pressure by an old-fashioned bank run, when depositors simply withdrew their money from the bank. The bank failures were only the last development of what had been a tumultuous year. The South American mining stocks also collapsed in dramatic fashion. One man caught up in the excitement of the stock market bubble was the young Benjamin Disraeli, a twenty-year-old Jewish adventurer, determined to make a name for himself in literature.

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The panic had seen banks, fearful for their own solvency, cashing in their banknotes for gold at the Bank of England and then, notoriously, refusing to supply their own customers with gold. This double standard aroused the ire of the young Cambridge economist. ‘Our system’, he wrote, ‘was endangered, not by the public running on the banks, but by the banks running on the Bank of England.’ As a result of this ‘internal run’, the central bank’s gold reserves had fallen from £17.5 million to £11 million in three days.41 The predicament of the banks, as described by Patrick Shaw Stewart, was acute. The ‘main difficulty in two words’, as this clever young banker saw it, was ‘to prop up those big houses who have debts owing from Germany which will never be paid, and, if they go under, to prevent the whole City coming down like a pack of cards’.42 The public, once the banks had suspended gold payments for customers, received paper money, notes issued by the British Treasury for everyday purposes, with denominations of £1 and 10 shillings (50p in modern terms).

The Asian Financial Crisis 1995–98: Birth of the Age of Debt
by Russell Napier
Published 19 Jul 2021

One day in that period someone came to see me in the glass koala to tell me that there were queues at the banks, bank runs had begun and the markets had concluded that it was the end for the Hong Kong dollar’s link to the US dollar. Well, if the end had come, I thought I had better go and see it. I went downstairs and walked through Admiralty and stopped at every bank I could find. What I saw were indeed the large queues of people that I had been told about. However, it was not a bank run. Yes, there were people withdrawing their Hong Kong dollar deposits and switching to US dollar deposits. However, there were also plenty of local people who were switching from US dollars to Hong Kong dollars given the very attractive interest rates then on offer.

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It was not disclosed whether the owner had been receiving a monetary yield on the dress over the course of their ownership. Part Three: Devaluation and crisis The Timeless Explosion of Fantasy’s Dream 3 July 1997, Thailand When the controlling shareholder of the largest commercial bank in Thailand publicly forecasts bank runs, times are not normal. This is exactly what Chatri Sophapanich did on Wednesday, 18 June. This was the clearest possible indication that the financial system could not survive a deflation and thus the authorities would have to opt for the only other alternative – a devaluation. The tumble in the market up to that date had been caused by a growing belief that the Thai government was prepared to follow the deflationary option.

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A portfolio investor who did not expect those short-term loans to be rolled over could expect very large capital outflows to be driven by bankers, and who really knew when that might end. There was a clear incentive for portfolio investors to use the liquidity available in the financial markets to exit their exposure to Asia before the bankers were able to do so. What was happening in Asia was in effect a modern form of a bank run involving foreign bankers and portfolio investors instead of bank depositors. It had been a similar problem that had impacted Mexico in 1995 and Newt Gingrich, then speaker of the US House of Representatives, had described as “the first crisis of the 21st century”. It was indeed true that the role of portfolio investors, in a new era of free movement of capital, made this crisis very different from the others that the IMF had dealt with since its inception in 1945.

The New Depression: The Breakdown of the Paper Money Economy
by Richard Duncan
Published 2 Apr 2012

Contents Preface Chapter 1: How Credit Slipped Its Leash Opening Pandora’s Box Constraints on the Fed and on Paper Money Creation Fractional Reserve Banking Run Amok Fractional Reserve Banking Commercial Banks The Broader Credit Market: Too Many Lenders, Not Enough Reserves Credit without Reserves The Flow of Funds The Rest of the World Notes Chapter 2: The Global Money Glut The Financial Account How It Works What Percentage of Total Foreign Exchange Reserves Are Dollars? What to Do with So Many Dollars? What about the Remaining $2.8 Trillion?

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EXHIBIT 1.3 Currency Outside Banks Source: Federal Reserve, Flow of Funds Although this new paper money was no longer backed by gold (or by anything at all), it still served as the foundation upon which new credit could be created by the banking system. Fifty trillion dollars worth of credit could not have been erected on the 1968 base of 44 billion gold-backed dollars. Fractional Reserve Banking Run Amok The other constraint on credit creation at the time the Federal Reserve was established was the requirement that banks hold reserves to ensure they would have sufficient liquidity to repay their customers’ deposits on demand. The Federal Reserve Act specified that banks must hold such reserves either in their own vaults or else as deposits at the Federal Reserve.

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In order to understand how reserve requirements limited credit creation, it is first necessary to understand how credit is created through Fractional Reserve Banking. Fractional Reserve Banking Most banks around the world accept deposits, set aside a part of those deposits as reserves, and lend out the rest. Banks hold reserves to ensure they have sufficient funds available to repay their customers’ deposits upon demand. To fail to do so could result in a bank run and possibly the failure of the bank. In some countries, banks are legally bound to hold such reserves, while in others they are not. A banking system in which banks do not maintain 100 percent reserves for their deposits is known as a system of fractional reserve banking. In such a system, by lending a multiple of the reserves they keep on hand, banks are said to create deposits.

The Currency Cold War: Cash and Cryptography, Hash Rates and Hegemony
by David G. W. Birch
Published 14 Apr 2020

Bearing in mind that ‘local’ means something different in the virtual and mundane cases: in the physical world, community is rooted in geography, but in the virtual world we each belong to many communities Technology is not a barrier to any of these options, to central banks or to anyone else. The idea of a central bank running something like M-Pesa but for citizens is hardly far-fetched. There are tens of millions of M-Pesa users in Kenya, and Facebook can manage well over a couple of billion accounts, so I am sure the Bank of England could download an app from somewhere to run a few million accounts for post-Brexit Britain.

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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. Incidentally, Dyson and Hodgson (2016) remark that the existence of digital fiat (as we will see in chapter 6) might well exacerbate bank runs, as people, for whatever reason, retreat from other forms of liquidity to risk-free central bank money. The existence of risk-free digital currency in the United Kingdom could plausibly lead to an inflow of funds from foreign banks in sterling digital cash, and that, in turn, could push up exchange rates.

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Design features such as size limits on payments in and holdings of CBDC would reduce but not eliminate these concerns. An account-based CBDC – with payments through the transfer of claims recorded on an account – could increase risks to financial intermediation. It would raise funding costs for deposit-taking institutions and facilitate bank runs during periods of distress. Again, careful design and accompanying policies should limit these risks, but they will not completely erase them. The ECB reckon that introducing this type of CBDC to the eurosystem would mean going from the 10,000 accounts it has now to perhaps half a billion.36 This speech caught my attention because, as you will have deduced from part 1 of this book, I think Lagarde is right to mention state-backed tokens as an option.

The Alchemists: Three Central Bankers and a World on Fire
by Neil Irwin
Published 4 Apr 2013

President Woodrow Wilson, by contrast, wanted clearer political control and more centralization—he figured the institution would have democratic legitimacy only if political appointees in Washington were put in charge. The Senate, meanwhile, dabbled with approaches that would put the Federal Reserve even more directly under the thumb of political authorities, with the regional banks run by political appointees as well. But for all the apparent disagreement in 1913, there were some basic things that most lawmakers seemed to be in harmony about: There needed to be a central bank to backstop the banking system. It would consist of decentralized regional banks. And its governance would be shared—among politicians, bankers, and agricultural and commercial interests.

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The banking crisis spread to Europe when Credit-Anstalt, one of Vienna’s largest and most important banks, failed spectacularly in May 1931, as years of lending for questionable projects caught up with it. The Austrian government guaranteed the bank’s deposits—and suddenly found its own creditworthiness in question. The global bank run was on. If Credit-Anstalt could collapse, what about similarly overextended banks in Amsterdam and Warsaw? Or in Frankfurt and Munich? When large-scale withdrawals began at the major German banks, the Reichsbank was in an impossible position. A collapse of the German banking system would be a catastrophe for the economy.

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For the past several weeks, Northern Rock PLC, a bank based in the North East of England with £100 billion in assets, had been in crisis. Its business was to issue mortgages, which would then be packaged and sold on financial markets—and since August, mortgage securities had been toxic to global investors. Northern Rock faced a cash crunch, as depositors discovered just how bad its situation was, a classic bank run. Television news programs showed ominously long lines of Northern Rock customers waiting to pull their deposits. “You don’t want to be the ones in the end of the queue that the money’s run out,” an uncertain customer said to the cameras outside a branch in Reading. In a palatial Moorish hall, the governor of the Bank of England and the chancellor of the exchequer watched from afar—on TV, just like many of those Northern Rock customers determined not to be in the end of the queue when the money ran out.

The Myth of Capitalism: Monopolies and the Death of Competition
by Jonathan Tepper
Published 20 Nov 2018

In the summer of 2007, long lines of depositors started forming outside the bank Northern Rock in London. It was the first bank run in Britain since 1866. Ironically, the panic started when the Bank of England said Northern Rock was in fine shape and that it would stand by the bank. Problems can only be believed when they are officially denied. Immediately customers were alerted to problems and demanded the return of their deposits.34 Every depositor was behaving in a perfectly rational way, yet when all of them showed up to get their cash at the same time, they were causing the very bankruptcy they sought to avoid. (A bank run happens when customers try to withdraw more money from the bank than the bank can provide.

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(A bank run happens when customers try to withdraw more money from the bank than the bank can provide. Banks do not keep all customer deposits available in cash for immediate withdrawal, and instead the money is lent out.) Mervyn King, governor of the Bank of England, once noted that it may not be rational to start a bank run, but it is rational to participate in one once it has started. It is illogical for you not to pull your money out of a bank when you're worried about the bank's solvency, but it is also illogical for everyone to pull their money at the same time, as that itself brings the bank down. The idea of the fallacy of composition applies in the field of energy as well.

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When Morgan died, the New York Stock Exchange closed until noon in his honor; it had previously only been closed to honor the passing of kings and presidents.1 He was the “boss of bosses” during the Gilded Age, and he singlehandedly saved the nation from economic collapse during the Panic of 1907. The Panic arose when the New York Stock Exchange fell 50% and bank runs ensued across the country. Morgan devised a plan to shore up the banking system with his personal money, and cash from wealthy friends and institutions. He provided liquidity to the country when America's own treasury failed. This outraged the nation – how could one man have gained such immense power and control?

MegaThreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them
by Nouriel Roubini
Published 17 Oct 2022

After three years of legislative wrangling, in 1913, the 63d Congress passed Public Law 63-43, “An Act to Provide for the Establishment of Federal Reserve Banks, to Furnish an Elastic Currency, to Afford Means of Rediscounting Commercial Paper, to Establish a More Effective Supervision of Banking in the United States, and for Other Purposes.”6 President Wilson signed the Act in December 1913, making the United States the last major economy to create a central bank. It replaced financier J. P. Morgan as the nation’s pillar of economic strength and financial stability after another bank run, in 1908, revealed the weakness and instability of a system without a central bank. The initial mandate of the Fed was only to maintain the stability of the American banking system. There were two ways to guard against repeated and destructive bank runs: first, to provide deposit insurance to every bank customer, and second, to create a lender of last resort that could help maintain the money supply and stable prices. Initially, the Fed was supposed to perform both functions; but later, in 1933, Congress created the Federal Deposit Insurance Corporation, or FDIC, to take over the former.

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Yet that narrative actually feeds a mega debt supercycle that will pummel all our assumptions about wealth preservation and growth. When recessions or financial crises occur, macroeconomists always try to guide economies clear of a Great Depression. No one wants a repeat of the 1930s. Countless movies and books have documented that terrible time, from breadlines and bank runs to ruined investors leaping from window ledges on Wall Street. In an economist’s lexicon, the Depression saw deflation at its ugliest. Although markets were already unsettled, the stock market crash on October 24, 1929, dubbed Black Thursday, marked the start of the Great Depression. In an instant, fortunes vanished.

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If central banks alter the role of banks, investors in the financial sector will pay a stiff price, never mind the consequences for industries built up to service banks. The second systemic risk: for banks that hold on to deposits in normal times, a financial panic could trigger catastrophe. Depositors seeking safety would race to move their bank deposits into their central bank accounts, triggering bank runs. Less obvious pitfalls lurk. They sound arcane but the consequences could produce convulsive financial results. Suppose a severe recession drives real interest rates below zero. If a bank charges interest on deposits, instead of paying interest, consumers can say thanks very much, we’ll store the cash in mattresses and skip the interest payment.

After Europe
by Ivan Krastev
Published 7 May 2017

What is necessary is that five years from now Europeans are capable of traveling freely in Europe, the euro is on track to survive as the common currency of at least some of the member states, and citizens are able both to elect their governments freely and to sue them in Strasbourg’s European Court of Human Rights. “Who speaks of victory?” asks the great German poet Rainer Maria Rilke. “To endure is all.” But even enduring will not be easy. If the union collapses, the logic of its fragmentation will be that of a bank run and not of a revolution. The EU’s implosion does not have to result from a victory of “exiters” over “remainers” in state referenda; it will more likely be an unintended consequence of the union’s long-term dysfunction (or perceived dysfunction), compounded by a misreading by elites of national political dynamics.

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What I argue, instead, is that in a political construction like the EU, where you have a lot of common policies, you have far fewer common politics. Where nobody can prevent member states voting on issues that can dramatically affect other states in the union, an explosion of national referendums is the fastest way to make the union ungovernable. Such an explosion could even trigger a “bank run” that could catalyze the breakup of the union. Europe can’t exist as a union of referendums because the EU is a space for negotiation while referendums are the final word of the people that preclude further negotiations. Referendums are therefore political instruments that can be easily misused by both Euroskeptical minorities and euro-pessimistic governments to block the work of the union.

European Spring: Why Our Economies and Politics Are in a Mess - and How to Put Them Right
by Philippe Legrain
Published 22 Apr 2014

But a bond-market panic is particularly pernicious because it can force even a solvent government to default, because it may not be able to raise funds quickly enough to meet its obligations. In that respect, a bond-market panic is like a bank run, where a dash for cash by depositors (or a refusal of other lenders to refinance its debts) can force even a solvent bank that can’t raise funds fast enough to fail. Bank runs used to be common and crippling until the central bank began stepping in as a “lender of last resort”, providing solvent banks with liquidity (cash loans secured against their assets). This not only ensured that solvent banks wouldn’t be felled by a liquidity crisis; it also stopped most bank runs from happening altogether, since depositors knew that the central bank stood ready to lend if necessary.

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After inconclusive elections in May, Greece was due to hold a re-run on 17 June. Syriza, a far-left party that wanted to renegotiate the country’s EU-IMF programme while remaining in the euro, looked set to win, with eurozone policymakers threatening to force Greece out if it did. That prospect was accelerating the slow-motion bank run across southern Europe, threatening a full-on stampede. Such was the fragmentation of eurozone financial markets that a creditworthy hotel in South Tirol (Italy) had to pay three percentage points more for a bank loan than its equivalent in North Tirol (Austria) – if it could borrow at all. In effect, the single market had shattered.

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Some believe the panacea is for southern European countries to reintroduce their own currencies. These would promptly depreciate, forcing them to default: a 25-per-cent depreciation would swell their euro-denominated debt burden by a third in their new currency; redenominating it would constitute a default too. Reintroducing a currency in the midst of a crisis would also provoke chaos: bank runs, lost savings, mass bankruptcies. But in any case, is devaluation really the solution? It hasn’t worked for Britain. Another solution, suggested by George Soros as a fallback option, is for Germany (or all the creditor countries) to leave the euro.316 The beauty of his proposal is that since southern Europe would keep the euro, it would not be forced to default, but that as the euro depreciated against the new Deutsche Mark, its debt burden in D-Mark terms would fall, imposing losses on Germany.

Where Does Money Come From?: A Guide to the UK Monetary & Banking System
by Josh Ryan-Collins , Tony Greenham , Richard Werner and Andrew Jackson
Published 14 Apr 2012

A bank can charge compound interest, for example, on its loan, whereby interest incurred is added to the principal loan and further interest charged upon both the principal and the additional interest on an ongoing basis.72 The bank has not paid any equivalent interest to any saver in order to create the loan – it has simply created a highly profitable stream of income backed by nothing more than the perceived ability of the borrower to repay the loan or the collateral owned by the borrower (for example their home).* This is not to say that the bank has not provided a valuable service to the borrower by extending credit, and so therefore some profit is justified by the increased liquidity risk that the bank runs as a result of the additional credit. If the bank needs to obtain additional central bank reserves to maintain liquidity it will incur additional funding costs. However, it should be noted that such liquidity risk may in the end be directly or indirectly underwritten by the community. 3.4.3.

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Typically, a bank will have many long-term and thus illiquid assets (e.g. 25 year-mortgage loans) whilst at the same time having many short-term liquid liabilities (i.e. customer deposits) which can be drawn down on demand. If confidence in a bank falls, this mismatch can become a problem. Customers may decide to rapidly withdraw their deposits en masse (a ‘bank run’), either by withdrawing cash, or by requesting electronic transfers across to accounts at other banks. In this situation, the bank can rapidly run out of both cash and central bank reserves. The bank can try to quickly sell off its loans in order to bring in the central bank reserves it needs to pay other banks, but if investors have concerns about the quality of the loans they are likely to force down the price of the loans and pay below the ‘book’ value of those loans.

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* Balances up to £85,000 per person per banking group are guaranteed by the Government under the Financial Services Compensation Scheme. Prior to October 2007 only the first £2,000 was fully covered, with 90 per cent of the next £33,000 covered. The guarantee was progressively raised during the financial crisis to try to maintain depositors’ confidence and prevent any further bank runs after the run on Northern Rock. * For a classic account of the money multiplier, see Phillips (1920)19. For an explanation of how the system used to work in the United States, see: Nicols. (1992/1961)20 * The Financial Services Authority is currently bringing in legislation that will require Banks to hold an amount determined by ‘stress testing’ the potential for 100 per cent outflows of liabilities over a two-week period.24 † In the United States, for example, there is still a 10 per cent liquidity reserve ratio on certain deposits and in China the Government actively changes its liquidity reserve ratio in an attempt to restrain credit creation in order to fight inflation – at the time of writing it stood at 20.5 per cent (having been raised for the fourth time in 2011.

Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions
by Joshua Rosenbaum , Joshua Pearl and Joseph R. Perella
Published 18 May 2009

While the data room is continuously updated and refreshed with new information throughout the auction, the aim is to have a basic data foundation in place by the start of the second round. Access to the data room is typically granted to those buyers that move forward after first round bids, prior to, or coinciding with, their attendance at the management presentation. Prepare Stapled Financing Package The investment bank running the auction process (or sometimes a “partner” bank) may prepare a “pre-packaged” financing structure in support of the target being sold. The staple, which is targeted toward sponsors, was a mainstay in auction processes during the LBO boom of the mid-2000s. Although prospective buyers are not required to use the staple, historically it has positioned the sell-side advisor to play a role in the deal’s financing.

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Although prospective buyers are not required to use the staple, historically it has positioned the sell-side advisor to play a role in the deal’s financing. Often, however, buyers seek their own financing sources to match or “beat” the staple. Alternatively, certain buyers may choose to use less leverage than provided by the staple. EXHIBIT 6.7 General Data Room Index To avoid a potential conflict of interest, the investment bank running the M&A sell-side sets up a separate financing team distinct from the sell-side advisory team to run the staple process. This financing team is tasked with providing an objective assessment of the target’s leverage capacity. They conduct due diligence and financial analysis separately from (but often in parallel with) the M&A team and craft a viable financing structure that is presented to the bank’s internal credit committee for approval.

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In addition, once the LPs have received the return of every dollar of committed capital plus the required investment return threshold, the sponsor typically receives a 20% “carry” on every dollar of investment profit. 116 LPs generally hold the capital they invest in a given fund until it is called by the GP in connection with a specific investment. 117 The investment bank running an auction process (or sometimes a “partner” bank) may offer a pre-packaged financing structure, typically for prospective financial buyers, in support of the target being sold. This is commonly referred to as stapled financing (“staple”). See Chapter 6: M&A Sale Process for additional information. 118 Alternatively, the banks may be asked to commit to a financing structure already developed by the sponsor. 119 The financing commitment includes: a commitment letter for the bank debt and a bridge facility (to be provided by the lender in lieu of a bond financing if the capital markets are not available at the time the acquisition is consummated); an engagement letter, in which the sponsor engages the investment banks to underwrite the bonds on behalf of the issuer; and a fee letter, which sets forth the various fees to be paid to the investment banks in connection with the financing.

The Ascent of Money: A Financial History of the World
by Niall Ferguson
Published 13 Nov 2007

One of the most experienced investors there went so far as to suggest to the organizers that they ‘dispense altogether with an outside speaker next year, and instead offer a screening of Mary Poppins’.6 Yet the mention of Mary Poppins stirred a childhood memory in me. Julie Andrews fans may recall that the plot of the evergreen musical revolves around a financial event which, when the film was made in the 1960s, already seemed quaint: a bank run - that is, a rush by depositors to withdraw their money - something not seen in London since 1866. The family that employs Mary Poppins is, not accidentally, named Banks. Mr Banks is indeed a banker, a senior employee of the Dawes, Tomes Mousley, Grubbs, Fidelity Fiduciary Bank. At his insistence, the Banks children are one day taken by their new nanny to visit his bank, where Mr Dawes Sr. recommends that Mr Banks’s son Michael deposit his pocket-money (tuppence).

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Between 1343 and 1360 no fewer than five Medici were sentenced to death for capital crimes.31 Then came Giovanni di Bicci de’ Medici. It was his aim to make the Medici legitimate. And through hard work, sober living and careful calculation, he succeeded. In 1385 Giovanni became manager of the Roman branch of the bank run by his relation Vieri di Cambio de’ Medici, a moneylender in Florence. In Rome, Giovanni built up his reputation as a currency trader. The papacy was in many ways the ideal client, given the number of different currencies flowing in and out of the Vatican’s coffers. As we have seen, this was an age of multiple systems of coinage, some gold, some silver, some base metal, so that any long-distance trade or tax payment was complicated by the need to convert from one currency to another.

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By the time money has been deposited at three different student banks, M0 is equal to $100 but M1 is equal to $271 ($100 + $90 + $81), neatly illustrating, albeit in a highly simplified way, how modern fractional reserve banking allows the creation of credit and hence of money. The professor then springs a surprise on the first student by asking for his $100 back. The student has to draw on his reserves and call in his loan to the second student, setting off a domino effect that causes M1 to contract as swiftly as it expanded. This illustrates the danger of a bank run. Since the first bank had only one depositor, his attempted withdrawal constituted a call ten times larger than its reserves. The survival of the first banker clearly depended on his being able to call in the loan he had made to his client, who in turn had to withdraw all of his deposit from the second bank, and so on.

Finance and the Good Society
by Robert J. Shiller
Published 1 Jan 2012

This system usually works as intended, though it is vulnerable to sudden panic or bank runs: if people begin to distrust the bank, too many of them may ask to withdraw their money at one time and they will exhaust the bank’s supply of liquid funds.1 Even then, and even if there is no deposit insurance, if the government allows the bank to suspend liquidity temporarily, then depositors will still in all likelihood eventually get paid most of what they were owed, as the bank converts some of its illiquid holdings into cash. Bank regulators in modern times attempt to further reduce the problem of bank runs by demanding that banks maintain an adequate amount of reserves (cash in the vault or deposits at other banks, to make good immediately on any sudden withdrawals by depositors) and of capital (the total cushion of assets, after subtracting liabilities, available to make good on promises to depositors), so that they will not put the government in the position of having to bail out the banks.

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Berk and Green (2004). 13. Bogle (2009): 47. 14. Levine (1997). 15. French (2008). 16. Goetzmann et al. (2002). 17. Dugan et al. (2002). 18. Dugan (2005). 19. Acharya et al. (2010). 20. Kaufman (2005): 313. 21. Bernasek (2010): 48. Chapter 3. Bankers 1. Diamond and Dybvig (1983) lay out the issue of bank runs as a problem of multiple equilibria in a model of banks as creators of liquidity, thereby providing both a clear rationale for the existence of banks and an understanding of their vulnerabilities. 2. http://fraser.stlouisfed.org/publications/bms/issue/61/download/130/section10.p Table 130. 3. There were some forms of capital requirements before 1982, but no national systematic and regular enforcement of them for banks until then.

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List, and Ulrike Malmendier. 2011. “Testing for Altruism and Social Pressure.” Unpublished paper, Department of Economics, University of California at Berkeley. De Waal, Frans. 1990. Peacemaking among Primates. Cambridge, MA: Harvard University Press. Diamond, Douglas, and Philip Dybvig. 1983. “Bank Runs, Deposit Insurance, and Liquidity.” Journal of Political Economy 91(3):401–19. Dixit, Avinash K., and Robert S. Pindyck. 1994. Investment under Uncertainty. Princeton, NJ: Princeton University Press. Djilas, Milovan. 1982 [1957]. The New Class: An Analysis of the Communist System. New York: Harcourt Brace Jovanovich.

The Euro and the Battle of Ideas
by Markus K. Brunnermeier , Harold James and Jean-Pierre Landau
Published 3 Aug 2016

For Berlin, there was little that constituted systemic risk in the Cyprus situation, and German officials complained that “if Cyprus is systemic, then everything is systemic.” By contrast, many policy makers in France, but also in Italy and Spain, feared that penalization of Cypriot depositors might lead to a bank run in other countries (including their own). The Cyprus crisis changed Europeans’ attitude toward bailouts. The new chair of the Eurogroup, the Netherlands finance minister Jeroen Dijss-elbloem, spoke of the Cyprus approach as offering a “template.” Even outside Europe, it looked like an attractive solution to the problems created in the wake of the financial crisis.

…

Because of this funding structure, capital flows into the periphery could dry up and reverse quickly. Still, this is not a feature unique to international capital flows, as much within-country funding is also interbank and wholesale. Just consider, for example, Northern Rock, a UK bank that suffered a bank run in 2007. It was reliant on wholesale funding, and it was precisely this reliance that made Northern Rock so vulnerable to a run. Other UK banks also relied on wholesale funding, but the larger banks had European subsidiaries that had access to ECB liquidity at a time when the Bank of England was reluctant to provide liquidity out of moral hazard concerns.

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Government Guarantees Governments may decide to issue blanket guarantees for domestic bank assets. If this guarantee is credible, then any liquidity-related problems will immediately dissipate. Government guarantees of this sort are generally not viewed as a crisis measure; basic kinds of deposit insurance are in place in many advanced economies, motivated as a means of staving off bank-run dynamics and so ensuring coordination on the good equilibrium. The Irish crisis experience, however, shows that extended government guarantees may also function as a crisis response tool that goes beyond fixing a liquidity problem and the taxpayer eventually may have to foot the bill. At the height of the financial crisis in 2008, the Irish government extended existing deposit insurance schemes to a two-year blanket guarantee for the liabilities of all Irish banks, including all sorts of deposits, senior unsecured debt, subordinated debt, and asset-covered securities.

The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good
by William Easterly
Published 1 Mar 2006

In 1995, in return for support of the “pro-market reformer” Boris Yeltsin, for example, Russian tycoons snatched up the valuable firms at bargain-basement prices. At the auction of the prize oil company Yukos, the Yeltsin government excluded bids from foreign buyers, eliminating most deep-pocket competitors. The Yeltsin government also allowed the banks running the auction to bid on the properties they themselves were auctioning. So Mikhail Khodorkovsky could bid on the auction of Yukos, even though he owned the bank running the auction, Menatep. Russian privatization chief Alfred Kokh alleged that Khodorkovsky used the money of Yukos itself to bid for Yukos, perhaps by pledging future oil deliveries in return for loans. He managed to buy 77 percent of Yukos shares for $309 million in December 1995.8 This was a pretty good deal for a company that by 2003 reached a market valuation of $30 billion.9 Khodorkovsky joined the top ranks on Forbes ’s annual billionaires list.

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The IMF’s approach is simple. A poor country runs out of money when its central bank runs out of dollars. The central bank needs an adequate supply of dollars for two reasons. First, so that residents of the poor country who want to buy foreign goods can change their domestic money (let’s call it pesos) into dollars. Second, so those poor-country residents, firms, or governments who owe money to foreigners can change their pesos into dollars with which to make debt repayments to their foreign creditors. What makes the central bank run out of dollars? The central bank not only holds the nation’s official supply of dollars (foreign exchange reserves), it also makes loans to the government and supplies the domestic currency for the nation’s economy.

The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order
by Paul Vigna and Michael J. Casey
Published 27 Jan 2015

The Chinese government might bar its banks from handling bitcoin-related transaction services or declare that only the yuan be used within the nation’s borders, but it can’t shut down bitcoin, which resides nowhere and everywhere. The same challenge faces any government. This was appealing to a marginal but not insignificant subculture of passionate, highly motivated activists who are skeptical of central-bank-run fiat money. More broadly, it was consistent with a trend toward decentralization and individual empowerment in the broader economy, a world in which people are renting out their sofas to paying guests, selling solar-generated power back to the grid, and drawing their news from decentralized forums such as Twitter.

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The EU did this to ensure that private-sector investors who’d made risky bets on Greece shouldered some of the burden of the bailout that German and other euro-zone taxpayers were bearing. Cyprus’s overleveraged banks were an unintended casualty of that and were now faced with the terrifying threat of a bank run by their large Russian depositors. The dramatic solution, one endorsed by Germany and its EU partners, who were equally reluctant to bail out Russian oligarchs, was that the government in Nicosia would freeze deposits and confiscate 10 percent of them to pay for a bank bailout. This unprecedented step sent shock waves around the world.

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He told his online correspondents to keep their eyes on two particular bitcoin addresses via a live, online blockchain monitor and that he would transfer 424,242.424242* bitcoins between them. It was the cryptocurrency equivalent of the old “wall of money” that bank managers of years past would put behind their tellers to dissuade panicked depositors from engaging in a bank run. After he moved such a large amount of coins, the maneuver had its desired effect. Such a massive handover of bitcoins suggested Mt. Gox was more flush than everyone feared. Three years later the blockchain-embedded history of this exercise, in which Karpelès effectively identified those addresses as belonging to Mt.

The Full Catastrophe: Travels Among the New Greek Ruins
by James Angelos
Published 1 Jun 2015

German politicians renewed public deliberations over whether it would be best to eject Greece from the eurozone. “Grexit” became a frequently used word. Greeks started removing cash from their bank accounts over fears that ATM machines would soon start spitting out worthless drachmas. The severe bank run that resulted and the deepening cycle of doubt did not create an environment conducive to economic recovery, which of course made Greece’s problems even worse. In the next election, New Democracy, which depicted itself as the safe choice for voters wishing to remain in the euro, eked out a narrow victory, and on account of a parliamentary seat bonus afforded to the party with the plurality of votes, was able to form a coalition government that included its former rival, PASOK.

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Given the discordant impasse between the two sides, doubts over Greece’s future in the eurozone once again intensified. “Grexit” reemerged in the lexicon, and even as many Greeks heralded Syriza’s bold stance toward the Troika, concerned Greek depositors began transferring their euros out of the country, stoking fears of another crippling bank run. Meanwhile, the state’s income rapidly eroded as many Greek taxpayers, anticipating Syriza would ease their burden, simply stopped paying, leaving the new government, just weeks in office, struggling desperately to make its debt payments and avoid default. Running out of time and money, Syriza’s leaders—like their predecessors—were compelled to yield to the creditors.

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In one of the pictures, a young Mavrommatis in an embroidered dress and white shoes stood next to the restaurant entrance looking happily at the camera while her handsome, grinning father embraced her. The restaurant had been in the family for four generations, and despite Greece’s economic problems, business still seemed to be going okay. The instability of the previous few months—two parliamentary elections within a month, massive protests, a bank run over fears the country would exit the euro—were developments that tended to discourage foreign visitors, and Greece that year suffered the consequences with regard to tourism. Still, the island received a loyal mix of affluent Athenians and foreign returnees. When Ilias joined me at the table, he told me he didn’t know why the police wrote them up for what he said were eleven violations.

Capitalism: Money, Morals and Markets
by John Plender
Published 27 Jul 2015

If depositors lose confidence in the bank and demand their money back all at once, the bank will be unable to meet its obligations. A run on deposits will follow. Such crises of confidence started in northern Italy in the late Middle Ages when this so-called fractional reserve banking became the norm. A vivid description of how bank runs arose comes from a contemporary Venetian account in the sixteenth century: The following year, 1584, I heard of the failure of the Pisani and Tiepolo bank for a very large sum of money. This was caused chiefly by the bankruptcy of one Andrea da l’Osta, a Tuscan, a Pisan, and a very rich merchant, who had lived in our city for many years.

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The bank kept going for a few days, paying them off as best it could, but in the end the crowd of creditors increased and the bank collapsed and failed, to the detriment of numberless people and great damage to this market, which was without a bank for four years, so that business shrank to an unbelievable extent. The Republic felt the effects of this, and took very extensive measures, but to no avail.36 Today, bank runs usually take a different form. Big depositors such as companies, pension funds and other financial institutions simply decide not to renew lending lines or certificates of deposit, so an ailing bank finds that its sources of funds dry up. Notwithstanding that, the British bank Northern Rock actually experienced in 2007 an old-style run in which worried retail depositors queued up outside branches to withdraw their money.

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Wilson) 1, 2 Alberti, Leon Battista 1 Alessandri, Piergiorgio 1 Allen, Maurice 1 Ambassadors, The (Henry James) 1 Americans for Tax Reform 1 Anatomy of Change-Alley (Daniel Defoe) 1 Angell, Norman 1 Anglosphere 1, 2 Arab Spring 1 Aramaic 1 arbitrage 1 Argentina 1 Aristotle 1, 2, 3, 4, 5, 6, 7, 8, 9 art 1 Asian Tiger economies 1 Atlas Shrugged (Ayn Rand) 1 Austen, Jane 1 Austrian school 1 aviation 1 Babbitt (Sinclair Lewis) 1 Bair, Sheila 1 Balloon Dog (Orange) (sculpture) 1 Balzac 1 Bank for International Settlements 1, 2, 3, 4, 5, 6 Bank of England 1, 2, 3, 4, 5 bank runs 1 bankers 1, 2 bankruptcy laws 1, 2 Banks, Joseph 1 Banksy 1 Barbon, Nicholas 1, 2, 3 Bardi family 1 Barings 1 Baruch, Bernard 1, 2 base metal, transmutation into gold 1 Basel regulatory regime 1, 2, 3 Baudelaire, Charles 1 Baum, Frank 1 behavioural finance 1 Belgium 1, 2 Bell, Alexander Graham 1 Benjamin, Walter 1 Bernanke, Ben 1, 2, 3 Bi Sheng 1 Bible 1 bimetallism 1 Bismarck, Otto von 1 Black Monday (1987) 1 black swans 1 Blake William 1, 2, 3 Bloch, Marcel 1 Bloomsbury group 1, 2 Boccaccio 1 bond market 1 bonus culture 1 Bootle, Roger 1 Boston Tea Party 1 Boswell, James 1 Boulton, Matthew 1 Bowra, Maurice 1 Brandeis, Louis 1 Bretton Woods conference 1 British Land (property company) 1 British Rail pension fund 1 Brookhart, Smith 1, 2 Brunner, Karl 1 Bryan, William Jennings 1 Bubble Act (Britain 1720) 1 bubbles 1, 2, 3 Buchanan, James 1 Buffett, Warren 1, 2, 3 Buiter, Willem 1 Burdett, Francis 1 van Buren, Martin 1 Burke, Edmund 1, 2 Burns, Robert 1 Bush, George W. 1, 2 Butler, Samuel 1 Candide (Voltaire) 1 Carlyle, Thomas 1, 2, 3 Carnegie, Andrew 1 Carville, James 1 cash nexus 1 Cash Nexus, The (Niall Ferguson) 1 Cassel, Ernest 1, 2 Catholic Church 1, 2, 3 Cecchetti, Stephen 1 Centre for the Study of Capital Market Dysfunctionality, (London School of Economics) 1 central bankers 1 Cervantes 1 Chamberlain, Joseph 1 Chancellor, Edward 1 Chapter 11 bankruptcy 1 Charles I of England 1, 2 Charles II of England 1 Chaucer 1 Cheney, Dick 1 Chernow, Ron 1 Chicago school 1, 2 Child & Co. 1 China 1, 2 American dependence on 1, 2 industrialisation 1, 2, 3 manufacturing 1 paper currency 1 Christianity 1, 2, 3, 4, 5 Churchill, Winston 1 Cicero 1, 2 Citizens United case 1 Cleveland, Grover 1 Clyde, Lord (British judge) 1 Cobden, Richard 1, 2, 3, 4 Coggan, Philip 1 Cohen, Steven 1 Colbert, Jean-Baptiste 1, 2 Cold War 1 Columbus, Christopher 1 commodity futures 1 Companies Act (Britain 1862) 1 Condition of the Working Class in England (Engels) 1 Confucianism 1, 2, 3 conquistadores 1 Constitution of Liberty, The (Friedrich Hayek) 1 Coolidge, Calvin 1, 2, 3 Cooper, Robert 1 copyright 1 Cort, Cornelis 1 Cosimo the Elder 1 crash of 1907 1 crash of 1929 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 creative destruction 1, 2 credit crunch (2007) 1, 2, 3 cum privilegio 1 Cyprus 1, 2 Dale, Richard 1, 2 Dante 1 Darwin, Erasmus 1 Das Kapital (Karl Marx) 1 Dassault, Marcel 1 Daunton, Martin 1 Davenant, Charles 1, 2, 3 Davies, Howard 1 debt 1 debt slavery 1 Decameron (Boccaccio) 1 Defoe, Daniel 1, 2, 3, 4, 5, 6, 7, 8 Dell, Michael 1 Deng Xiaoping 1, 2 derivatives 1 Deserted Village, The (Oliver Goldsmith) 1, 2, 3 Devil Take the Hindmost (Edward Chancellor) 1 Dickens, Charles 1, 2, 3, 4, 5, 6, 7, 8, 9 portentously named companies 1 Die Juden und das Wirtschaftsleben (Werner Sombart) 1 A Discourse of Trade (Nicholas Barbon) 1 Ding Gang 1 direct taxes 1, 2 Discorsi (Machiavelli) 1 diversification 1 Dodd–Frank Act (US 2010) 1, 2, 3 ‘dog and frisbee’ speech 1 dot.com bubble 1, 2, 3, 4 Drayton, Harley 1 Dumas, Charles 1, 2 Dürer, Albrecht 1 Duret, Théodore 1, 2 Dutch East India Company 1 Duttweiler, Gottlieb 1 Dye, Tony 1 East of Eden (film version) 1 Economic Consequences of the Peace (Keynes) 1, 2 Edison, Thomas 1, 2 efficient market hypothesis 1 electricity 1 Eliot, T.

Barometer of Fear: An Insider's Account of Rogue Trading and the Greatest Banking Scandal in History
by Alexis Stenfors
Published 14 May 2017

By doing so, it is possible to reveal not only how and why LIBOR became so important in the first place, but also how and why it came to be perceived as an objective number that was impossible to manipulate. In short, how LIBOR became an illusion.3 *** A financial crisis tends to be associated with fears of a bank run. If customers desperately begin to withdraw their deposits from a bank, it can quickly turn into a self-fulfilling prophecy. Because if you think that others will become afraid that the bank will run out of cash, it might be rational to empty your own savings account first. The typical illustration of a bank run is a picture of a very long queue outside a bank branch or an ATM. The images look similar, whether they are black and white and taken in New York or Berlin during the 1930s, outside Northern Rock in Newcastle in 2007, or somewhere in Greece during the summer of 2015.

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The individual LIBOR quotes, by contrast, were announced daily and therefore served as snapshots of the perceived creditworthiness of the banks. A unique thing with banks is that they inherently always have a desire to appear ‘good and sound’. If depositors lose confidence in the ability of the bank to meet its obligations, there could be a bank run around the corner and the bank could face the risk of being wiped out altogether. Even the slightest of suspicions could cause a sharp decline in the stock price. The problem with the LIBOR fixing mechanism resulted from the individual LIBOR rates being public knowledge (i.e. fully transparent) at the same time as the actual funding rate was private knowledge (i.e. secret).

Bitcoin Billionaires: A True Story of Genius, Betrayal, and Redemption
by Ben Mezrich
Published 20 May 2019

Most of the storefront was brick, with large glass windows, a double wooden door, and three ATM machines perched on the stone sidewalk out front. Marina counted at least thirty people lined up at the machines, not pushing and shoving yet but clearly restless. “What is this?” Marina said. “It’s the bank run before the bank run.” Marina realized she probably should have been paying more attention during the protracted conversation the night before. She knew that things were bad, that Cyprus, like many of the more economically challenged nations of the EU, was in major debt—and that the continent’s financial leaders had been meeting in Brussels to figure out how to handle the situation.

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“More than twenty thousand account holders at Laika, the second largest bank in Cyprus, are going to have half of their savings taken away,” Tyler said. “The Bank of Cyprus, the largest bank, is going to take almost fifty percent of all deposits over a hundred thousand.” “They’re calling it a tax, or levy,” Cameron said. “They’re closing all the banks to keep it from turning into a bank run.” “Look at this picture,” Tyler said. “This is a mob outside one of the banks. A bunch of people got hold of a bulldozer. It looks like they’re going to try to get inside.” “Nobody is going to feel safe keeping their money in an EU bank after this. No one is going to feel safe keeping money in any bank, period.”

Lying for Money: How Fraud Makes the World Go Round
by Daniel Davies
Published 14 Jul 2018

Having bought time, Ponzi was as industrious as he was unscrupulous in using it. He set out to try to use his lies and fake assets to take control of some real wealth. Those who live by the sword tend to die by it. Ponzi’s scheme was fated to collapse in the equivalent of a bank run, but while he was operating it he was not averse to using threats of bank runs as a weapon of his own. At the height of his scheme, the Securities Exchange Corporation’s cash balances (which were held on hand as short-term bank deposits, ostensibly to keep them ready to pay cash for postal coupons) were a significant percentage of the local money supply in Boston and its surrounding area.

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Either point of view is defensible, because the S&L crisis was, in reality, at least two crises, and the policy measures which, partly successfully, aimed to solve the first arguably helped to bring about the second. The crisis had its roots in the 1970s and the attempt to tame inflation by raising interest rates. Savings and Loans (also known as ‘thrifts’) were a kind of small bank which had grown up in the pioneer era, taking deposits and making loans in a small local area. The legacy of bank runs and instability in the early days of the USA had, before the 1980s, left a legacy of mistrust of large or multi-branch operations, but the S&Ls had strict limits on what they could do and tended to operate in uncompetitive local markets. For this reason, it was felt that they didn’t need much scrutiny from bank examiners.

After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead
by Alan S. Blinder
Published 24 Jan 2013

Loose translation: Dear Customer, you can’t get access to the money you thought was yours, and we have no idea how much money that is. To people acquainted with American history, Paribas’ announcement brought to mind the periodic “suspensions of specie payments” in the nineteenth century—times when some prominent bank precipitated bank runs by refusing to exchange its notes for gold or silver. The big French bank had just refused to exchange its fund shares for cash. Whether you were French or American, the signal was clear: It was time to panic. And markets dutifully did so, all over the world. At some point, and in this case it didn’t take long, the interplay of falling asset values with high leverage starts calling into question the solvency of heavily exposed financial firms like Bear and Paribas.

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Back in 1873, Walter Bagehot, the sage of central banking, had instructed central banks on what to do in a liquidity crisis. His triad was lend freely, against good collateral, but at a penalty rate. Why? Because the acute shortage of liquidity in a panic can push even solvent institutions over the edge. Customers come in demanding their money. If the banks don’t have enough cash on hand, word gets around, and bank runs start sprouting up everywhere. The disease is highly contagious. By serving as the lender of last resort, the central bank is supposed to stop all that from happening. And every central banker in the world knew Bagehot’s catechism. So that’s basically what most of them did in August 2007. In fact, one can argue that the ECB stuck with the Bagehot script until late 2011.

…

At its September 18 meeting, the FOMC qualified its view that “the tightening of credit conditions has the potential to . . . restrain economic growth” by adding that “some inflation risks remain.” It was a finely balanced assessment of risks—far too balanced, given the emerging realities. Just five days earlier, the Bank of England had intervened massively to save Northern Rock, a huge savings institution, from the first bank run in Britain since 1866.* Things were coming unglued in England. Our problems here were strikingly similar. Could we be far behind? While the Fed’s speed made the ECB look like the proverbial tortoise watching the hare, this particular hare wasn’t actually running that fast. After its 50-basis-point rate cut on September 18, 2007, the Fed waited another six weeks—until its next regularly scheduled meeting—to move again.

Capitalism in America: A History
by Adrian Wooldridge and Alan Greenspan
Published 15 Oct 2018

As of the close of business on March 4, 1933, the banks in thirty-five of the forty-eight states had declared bank holidays, according to an estimate by Allan Meltzer of Carnegie Mellon University. On March 5, FDR, as his first order of business, closed all banks under an obscure federal mandate. Closing banks was easier than reopening them again without triggering a resumption of bank runs. FDR discovered that his incoming administration didn’t have the capability to pull off this complicated task. Fortunately, Hoover’s team, led by the treasury secretary, Ogden Mills, and including Eugene Meyer, the chairman of the Federal Reserve, had devised a clever plan during its last year in office to reopen the banks without creating disruption: divide the banks into three classes according to their financial health; screen them thoroughly; and then restore them to regular operations in stages.

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The act gave FDR the power to offer 100 percent guarantees for bank deposits, a point that the president hammered home in his first Fireside Chat, on March 12, a tour de force in which he explained the financial situation so well, Will Rogers quipped, that even a banker could understand it.26 Over the next few months, savers transferred billions of dollars of cash and gold from under their “mattresses” back into banks. FDR then created a Federal Bank Deposit Corporation (FIDC, later FDIC) that guaranteed individual bank deposits up to five thousand dollars (a figure that has subsequently been raised many times). The bank runs that had once been such a conspicuous feature of capitalism now became a rarity. He also reformed the securities industry by creating the Securities and Exchange Commission and forcing companies to publish detailed information, such as their balance sheets, profit and loss statements, and the names of their directors.

…

The financial crisis had been gathering strength long before Lehman’s collapse. In August 2007, BNP Paribas, a French bank, blocked withdrawals from its subprime mortgage funds. In September 2007, Britons lined up to take their money out of Northern Rock, a Newcastle-based bank, in the country’s first bank run since the collapse of Overend, Gurney and Company in 1866, a collapse that had inspired Walter Bagehot to write his great book on central banking, Lombard Street (1873). The Bank of England was eventually forced to take the bank into public ownership. On October 24, 2007, Merrill Lynch reported its biggest quarterly loss, $2.3 billion, in its ninety-three-year history.

Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present
by Jeff Madrick
Published 11 Jun 2012

If investors in other money market funds followed, the consequences were unimaginable. Money market funds would sell their commercial paper willy-nilly. No Wall Street firm might survive. By the end of the week, the Treasury decided to guarantee the funds in all money market funds and stemmed the tide—what could have been a true bank run every bit as frightening as the bank runs of the early 1930s. Geithner and Paulson tried to get the stronger banks to merge with weaker ones, in particular, Goldman with Citigroup and JPMorgan Chase with Morgan Stanley, but the deals did not work out. To shore up its capital, Goldman separately lined up a $5 billion investment for preferred stock and warrants (rights to buy common stock in the future) from Warren Buffett.

…

By then, banks were not only making business and consumer loans in excess, but also selling stocks and bonds, running investment management companies, and creating new and highly speculative investment vehicles for individuals—as well as promoting their own stock prices. Such a credit boom and bust alone may not have resulted in the Depression but it contributed substantially to its severity. Thousands of banks failed in the early 1930s as savers withdrew their funds, fearing that the banks had no assets with which to pay them—a classic bank run. By 1932, one fourth of all U.S. banks had failed, and state after state imposed a moratorium on banking. Franklin Roosevelt, on taking office as president in 1933, declared a bank holiday, closing the deposit and withdrawal windows around the country temporarily. Roosevelt resisted pleas to nationalize the banks, but he and his advisers established comprehensive new regulations.

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Under Glass-Steagall, National City, like other major banks, was required to divest itself of its brokerage and underwriting arms, and do business only as a commercial bank, accepting deposits and making conservative purchases of government securities or cautious loans to business. The prestigious J.P. Morgan bank, run by the most influential financier of the age, was also separated from its investment banking arm, which took the name Morgan Stanley. The investment banks and brokerage firms were now regulated by the newly created Securities and Exchange Commission, whose first chairman was Joseph P. Kennedy, an aggressive financier himself and the father of a future president.

Economics Rules: The Rights and Wrongs of the Dismal Science
by Dani Rodrik
Published 12 Oct 2015

They were the object of study in models of varying complexity, including models based on perfectly rational, forward-looking investors (so-called rational bubbles). The financial crisis of 2008 had all the features of a bank run, and that, too, was a staple of economics. Models of self-fulfilling panic—a coordination failure in which individually rational withdrawals of credit lines produce collective irrationality in the form of a systemic drying up of liquidity—were well known to every student of economics, as were the conditions that facilitate such panics. The need for deposit insurance (coupled with regulation) to prevent bank runs was featured in all finance textbooks. A key pattern in the run up to the crisis was excessive risk taking by managers of financial institutions.

The Road to Ruin: The Global Elites' Secret Plan for the Next Financial Crisis
by James Rickards
Published 15 Nov 2016

In December 1930, the Bank of United States (a private bank despite its official sounding name), which catered to immigrants and small savers, suffered a bank run and closed its doors. The bank may have been solvent. Prejudice against Jewish and immigrant customers of the bank played a role in the refusal of the large New York Clearing House banks to rescue it. The clearinghouse believed the damage could be contained to the Bank of United States. They were wrong. Bank runs spread like an out-of-control prairie fire. Parts of the United States literally ran out of money. Communities resorted to barter and use of “wooden nickels” to buy food.

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In the United States, stocks and industrial output plunged and unemployment soared beginning in 1929. The most acute phase of the depression, including a global banking panic, was concentrated in the years 1931–33. The European bank panic started in Austria with the failure of Creditanstalt on May 11, 1931. This led quickly to bank runs throughout Europe and the evaporation of commercial credit in London in a dynamic similar to the Panic of 1914. City bankers informed the Bank of England and the U.K. Treasury they would be insolvent in a matter of days if a rescue was not organized by the government. Unlike 1914 when gold convertibility was nominally maintained, this time the U.K.

Paper Promises
by Philip Coggan
Published 1 Dec 2011

Your debtor or customer offers to pay you back, not in pounds or dollars, but in Monopoly money. You might not regard this as payment at all. The fundamental worry of creditors is that governments can issue as much money as they like. Indeed, the concept is built into the rules of the Monopoly board game. The rules state that, ‘The Bank never goes broke. If the Bank runs out of money it may issue as much more as may be needed by merely writing on any ordinary paper.’ And in a sense, monopoly money is what we are all using. The monopolists in this case are governments, which permit the issue of notes and coins and give such currency their seal of approval in the form of seals, mottoes, or the queen’s head.

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The nineteenth century had suffered a series of panics as individual banks had gone bust. It was a time of rudimentary accounting standards, lax financial regulation and no deposit insurance; all this gave too much scope to bank executives and too little comfort to bank depositors. At the slightest sign of trouble, there would be bank runs as depositors queued to get their money out. Such runs were quite rational. As seen in Chapter 2, banks lent out a lot more money than they had cash-in-hand; they relied on the fact that only a small number of depositors would want to withdraw cash at the same time. Their depositors had instant access to their money while the banks made loans which would only be repaid over time; in the jargon, they borrowed short and lent long.

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Index AAA Status of US Adams, Douglas Adams, John Addison, Lord Adenauer, Konrad adjustable rate mortgages adulterating coins affluent society Afghanistan ageing populations agrarian revolution Ahamed, Liaquat AIG air miles Alaska Amazon.com Angell, Norman Anglo Irish Bank annuities Argentina Aristophanes Arkansas Asian crisis of 1997 – 8 asset prices assignats Athens Austen, Jane austerity Austria Austrian school Austro-Hungarian empire Aztecs B&Q baby boomers Babylon Bagehot, Walter bailouts balanced budget Baldwin II, King of Jerusalem Balfour, Arthur Bancor Bank for International Settlements bank notes Bank of England bank reserves bank runs bankruptcy codes Banque Generale Barclays Capital Baring, Peter Baring Brothers Barnes & Noble barter Basle Accords Bastiat, Frederic BCA Research BCCI bear markets Bear Stearns Beaverbrook, Lord Belgium Belloc, Hillaire Benn, Tony Benn, William Wedgwood Bernanke, Ben Bernholz, Peter bezant Big Bang Big Mac index bills of exchange bimetallism biofuels Bismarck, Otto von Black Death Black Monday black swan Blackstone Blair, Tony Blum, Léon BMW Bodencreditanstalt Bohemia Bolsheviks Bonnet, Georges Bootle, Roger Brady, Nicholas Brady bonds Brazil Bretton Woods system Brodsky, Paul Brooke, Rupert Brown, Gordon Bruning, Heinrich Brutus Bryan, William Jennings bubbles budget deficits budget surplus building societies Buiter, Willem Bundesbank Burns, Arthur Bush, George W.

Liberalism at Large: The World According to the Economist
by Alex Zevin
Published 12 Nov 2019

At home, the panic of 1866 was among the most spectacular, dominating Economist coverage of the money market long afterwards. In that year one of the City’s great wholesale banking houses, Overend, Gurney & Co., failed soon after it had raised large sums by incorporating as a company with limited liability. After the stock market crashed, a bank run ensued. For Bagehot, the episode demonstrated beyond a doubt that the Bank of England, which at first refused to intervene, was unlike all other banks and discount houses, and Bagehot told Gladstone as much during the crisis, over breakfast on 31 May.50 Bagehot also developed this argument in countless Economist leaders, distilled into a standalone book in 1873, Lombard Street.

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Popular opinion not only grasped how important it was to secure the route to India: ‘No anxiety is shown to reduce the numbers of the Army; strong measures, like the dispatch of a fleet to Smyrna, to secure the surrender of Thessaly to the Greeks, are not resisted; and in recent Egyptian difficulties the country has been, on the whole, in favour of high-handed action.’91 Ireland was the pivot on which both sides of this New Radical realignment – social reform at home, imperial unity abroad – hinged: it was thus significant for both the Economist and for liberalism that Asquith grew so exasperated with the place, backing a wave of repression that set the tone at the paper long after he departed. The Land League, which began to urge Irishmen on to economic disobedience in 1880, calling for rent strikes, boycotts and bank runs, was the object of his special hatred. To eradicate these ‘terrorists’ posing as ‘public benefactors’, responsible for all kinds of ‘agrarian outrages’, no measures were too harsh: indefinite suspension of habeas corpus and jury trials, curfews, round-the-clock police and army patrols, deportations, collective punishment.

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Liberty, humanity, justice, the mitigation of suffering, fostering civilization – all these might justify a call to arms; a ‘sordid squabble, a scramble for concessions and commercial monopolies’ on behalf of France did not.85 The Economist saw another way out of the bitter rivalry between France and Germany, which linked its attack on the two imperialisms, protectionist and free trade. Given the financial panic that gripped Berlin that summer, attributed to French bank withdrawals – a stock market crash, bank runs, a drain of gold abroad – all but forcing the Kaiser to back down in North Africa,86 it was a remarkable suggestion: categorically rejecting the idea that Paris was intentionally turning a ‘financial screw’ on its German neighbour, the paper argued for more French capital to cross the Rhine.87 Throw open the Paris Bourse to German industrial listings, spinning ties of mutual interest not unlike those the City wove with the British Empire.88 As tensions over Agadir eased – France ceding patches of West Africa for effective control in Morocco – Hirst was emboldened, sensing radicals had drawn a line in the sand.

Not Working: Where Have All the Good Jobs Gone?
by David G. Blanchflower
Published 12 Apr 2021

We didn’t know where we had been, and we didn’t know where we were going. Same as now. Northern Rock It is not as if there weren’t adequate warnings. During my time on the MPC I watched as thousands of people lined up outside Northern Rock when its website failed. The world was treated to the scenes of a good old bank run. Depositors waiting in line around the country to withdraw their cash. Shin (2009) has noted that the last time that happened was at Overend, Gurney, a London bank that got in trouble in the railway and docks boom of the 1860s. Britain’s deposit-insurance scheme guaranteed fully only the first £2,000 of deposits, and then 90 percent of only the next £33,000.

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Lines continued to form the next day, Saturday.13 On Monday, September 17, shares opened 31 percent lower. With lines forming again. Alistair Darling intervened, pledging that the government would guarantee all deposits. Northern Rock was eventually nationalized on February 17, 2008. The run was halted. The man in the street was rightly upset at the failure to stop a bank run. The Bank of England knew well before it failed that Northern Rock was in trouble and did nothing about it. It was obvious that if Northern Rock, which depended on access to wholesale money markets and had relatively few depositors, was in trouble so would be others that were dependent on that source of funding.

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“Preferred Hours of Work and Corresponding Earnings.” Monthly Labor Review (November): 40–44. Shiller, R. J. 1997. “Why Do People Dislike Inflation?” In Reducing Inflation: Motivation and Strategy, ed. C. Romer and D. H. Romer, 13–70. Chicago: University of Chicago Press. Shin, H. S. 2009. “Reflections on Northern Rock: The Bank Run That Heralded the Global Financial Crisis.” Journal of Economic Perspectives 23 (1): 101–11. Shiskin, J. 1976. “Employment and Unemployment: The Doughnut and the Hole.” Monthly Labor Review (February): 3–10. Silver, N. 2016. “Education, Not Income, Predicted Who Would Vote for Trump.” FiveThirtyeight.com, November 22.

The Lords of Easy Money: How the Federal Reserve Broke the American Economy
by Christopher Leonard
Published 11 Jan 2022

Congress passed a law after the Civil War that chartered a series of national banks around the country, which issued a more uniform currency. But even if the currency problem got ironed out, there was a second reason that a central bank was necessary. The American banking system was still hyperfragile and subject to regular panics and failures. Major bank panics broke out, one after the next, in 1893, 1895, and 1907. Bank runs were inevitable in panics because there wasn’t an all-powerful central bank that could print money and act as a “lender of last resort,” providing loans when every bank needed money at the same time. Without a lender of last resort, the banks were left to bail out one another, using whatever reserves they happened to have on hand, or to fail.

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Continental was the problem of the Chicago Federal Reserve, which extended a $3.6 billion emergency loan to the bank. Even this wasn’t enough. New York’s J. P. Morgan pulled together a group of lenders to assemble a $4.5 billion line of credit for Continental, but that also wasn’t enough. Continental’s customers lost faith in the bank and started a bank run, withdrawing about $10.8 billion in a year. Continental was going to fail. Even Paul Volcker became nervous when he was faced with the failure of Continental Illinois. He communicated constantly with the FDIC as the bank teetered. He was warned that Continental’s collapse could not be contained.

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She portrayed the coronavirus pandemic as something like a bank panic that went beyond the banks and affected the entire American economy. The Fed was now the lender of last resort for everyone. “When [the coronavirus] came along and people realized how very serious it was going to be, there was just a huge, broad-based flight from risky assets of every type. And that’s like a modern-day bank run. Again, you know, fortunately the banks, the core banking system, is in good shape. Again this was centered in the shadow banking system. People are terrified of losses and they’re running from lending and want to be in the safety of cash. The role of the central bank is to take risks, to avoid harm to the economy, when no one else is willing to do so,” Yellen said.

More Money Than God: Hedge Funds and the Making of a New Elite
by Sebastian Mallaby
Published 9 Jun 2010

If Chanos had resented Schwartz’s suggestion when he first heard it, his mood morphed into unrestrained outrage over the next day or so. At six-thirty on Friday morning, when Squawk Box was on the air, word began to spread that the Fed was brokering a rescue for Bear Stearns; the closing of its hedge funds’ margin accounts had been followed by a collapse of confidence and a classic bank run. Schwartz had known the previous evening that his bank was going down, and yet he had tried to inveigle Chanos onto television anyway. “That fucker was going to throw me under the bus,” Chanos recalled later.2 Chanos’s exchange with Schwartz captured the transformed relationship between banks and hedge funds.

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Lehman and its rivals had borrowed billions in the short-term money markets, then used the money to buy assets that were hard to sell in a hurry. When the crisis hit, short-term lending dried up instantly; everyone could see that the investment banks might face a crunch, and of course the fear was self-fulfilling. To stave off this sort of bank run, commercial banks have government insurance to reassure depositors and access to emergency lending from the Federal Reserve. But investment banks have no such safety net. Believing that they were somehow invincible, they had behaved as though they did have one. The next domino to fall was Merrill Lynch, the investment bank famous for its “thundering herd” of nearly seventeen thousand stockbrokers.

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As one newspaper wrote, it was as if Wal-Mart were buying Tiffany’s. Now that Bear, Lehman, and Merrill were gone, the two remaining investment banks, Morgan Stanley and Goldman Sachs, came under pressure. All of Wall Street knew that their reliance on short-term funding, coupled with extremely high leverage, made them vulnerable to a bank run; and the Morgan and Goldman stock prices began to show up permanently at the top of the CNBC screen, in what traders called the “death watch.”25 The trouble at the giant insurer AIG only made things worse. By writing credit default swaps, AIG had sold protection against the danger that all manner of bonds might go into default—it was the kind of crazy risk taking you got when you located an ambitious trading operation inside the bosom of a well-capitalized firm, imbuing the traders with a heady sense of invulnerability.

Adaptive Markets: Financial Evolution at the Speed of Thought
by Andrew W. Lo
Published 3 Apr 2017

Rather than accepting one view and rejecting the other, it’s possible to reconcile these two opposing perspectives within a single consistent adaptive framework. We’ll need to know something about how the brain works, how we make decisions, and crucially, how human behavior evolves and adapts, before we can understand bubbles, bank runs, and retirement planning. Each of the disciplines we’ll draw on is a blind monk, unable to provide us with a complete theory, but when taken as a whole, we’ll see the elephant in sharp focus. DON’T TRY THIS AT HOME Many of us have felt fear individually when faced with the power of financial markets, but 2008 was the year the global financial crisis gave the entire world a taste of the finance of fear.

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When a bank supervisor first identifies a troubled bank—for example, one that invested its deposits in bad loans that have defaulted—she must decide whether to require the bank to raise additional capital, or to wait and see whether the bank’s assets will rebound. Requiring a bank to raise capital is costly to a bank supervisor. The bank’s response will invariably be negative, and there’s always the risk that this action may cause a loss of confidence among the bank’s customers, possibly triggering a bank run, which is exactly what the additional capital is supposed to help avoid. Even worse, the regulatory action may seem unwarranted after the fact, causing a loss of confidence in the regulator’s competence and bringing down political wrath on the regulator’s agency. Here we have all the ingredients for a classic case of loss aversion: a sure loss to the regulator if she takes action, but a riskier alternative with the possibility of redemption, if only she waits.

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In older black-and-white photos, the crowd might be in Germany or the United States. The crowd might be orderly, assembling itself into neat lines or queues. At other times, however, the crowd will be visibly unsettled or on the knife-edge of violence, and the next series of images will be of riots, burning ATMs, and looted banks. Economists call this form of behavior a bank run, and when many banks are involved, we call it a banking panic. However, if an alien biologist with no experience of Homo sapiens were to see this behavior, s/he/it would be hard pressed to distinguish the crowd of humans from a flock of geese or a herd of gazelle or springbok. Qualitatively, they’re engaging in the same behavior.

Unhappy Union: How the Euro Crisis - and Europe - Can Be Fixed
by John Peet , Anton La Guardia and The Economist
Published 15 Feb 2014

The deal was sealed with another layer of the favourite Franco-German mix: Sarkozy secured a commitment to hold twice-yearly euro-zone-only summits with the option, in future, of having a separate president; Merkel obtained support for yet another revision of the treaty aimed vaguely at “strengthening economic convergence within the euro area, improving fiscal discipline and deepening economic union”. Yet within days the markets were struck by another bombshell: the Greek prime minister announced on October 31st that he would hold a referendum to approve the terms of the new rescue programme. Markets tumbled. The ECB worried that bank runs would start in Greece. After two years of crushing austerity, nobody could be expected to vote for more of it. Greek bond yields shot up, pulling everyone else along (see Figure 5.1). Italian bonds again pushed past the 6% mark. The euro zone was close to breaking. FIG 5.1 From crisis to crisis Ten-year bond yields, 2010–2012, % Source: Thomson Reuters Caned in Cannes The system of peer-pressure, shy at first and then ever more insistent as the crisis worsened, reached its logical and brutal climax at the G20 summit hosted by Sarkozy in Cannes on November 3rd–4th 2011.

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Whether done by returning to national money, or by creating a Germanic northern euro and a Latin southern one, redenomination would mean that currencies, assets and liabilities would all be repriced abruptly. Some companies, in both creditor and debtor countries, would go bust. Some countries that devalued would be crushed by their euro-denominated debt and default. And there could be bank runs as depositors in southern countries rushed to move their savings to northern ones. The dislocation would be most acute for the deficit countries. If the euro has to be split, it would probably be least disruptive if Germany were to leave, either alone or with a group of northern neighbours, allowing the rest to devalue.

Two and Twenty: How the Masters of Private Equity Always Win
by Sachin Khajuria
Published 13 Jun 2022

So, in effect, the TV and radio stations are captive clients. The private equity bidders see the attraction of stable revenues and cash flow, and together with drawing on lessons learned from investments in media and technology in other parts of their portfolios, they feel they understand the proposition. The Wall Street bank running the auction on behalf of European Broadcast, Goldman Sachs, has offered to underwrite junk bonds and loans for the winning bidder to finance the leveraged buyout. The deal will be the first of this kind, the carve-out of infrastructure and related assets from quasi-state entities, and, if successful, it will likely prompt a wave of similar transactions involving communications infrastructure assets in other markets.

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The public service broadcasters that constituted the client base were dependent on the tower infrastructure to provide TV and radio signals to the population, to provide continuity of universal service, as required in the licenses that permitted them to function. There was no question of non-payment, given that the broadcasters were supported by state bodies in Western democracies; they were AAA-rated clients. Safe as houses. The due diligence executed by the Australian team was more comprehensive than anything that Goldman Sachs, the Wall Street bank running the sale, had ever seen. They were thorough to the point of being paranoid that they would miss something important—and relentless. The team built a comprehensive picture of the target’s revenues and cash flow from the ground up, contract by contract. They did not rely on lawyers or consultants to summarize the contractual terms; they read them individually themselves to make sure.

The Controlled Demolition of the American Empire
by Jeff Berwick and Charlie Robinson
Published 14 Apr 2020

When the central banks crank up the printing press and generate billions of dollars that they give to their criminal friends running the big banks, they refer to that as “quantitative easing” and not counterfeiting. Central banks manipulate interest rates, something that would be illegal for anyone else to do so that people cannot calculate the real cost of money. Any arrests for this? Of course not, because the banks run the world, not the governments. The people of America no longer even hold out any hope of justice being served because, after years and years of watching these criminal banks steal with impunity, with nobody going to prison for these crimes, the public has essentially gone numb. Not only has nobody gone to prison, nobody has even been put in handcuffs, no perp walks, and not a single executive has even been taken down to the police station for questioning.

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The crime wave that is sweeping western governments is the rigging of financial markets, and it has been happening in most global marketplaces for years. It has only been recently that those involved in the fraud have been investigated, but it always ends with nobody doing any prison time and the company getting off with a small fine and no admission of any wrong-doing. The big banks run Wall Street, and Wall Street has a tremendous amount of influence in Washington. They have set up a feedback loop of bankers that go to Washington, and bureaucrats from Washington that rotate through lower Manhattan. Nowhere was this more evident than when former Attorney General Eric Holder decided that he did not want to actually do anything to hold those that crashed the economy in 2008 accountable for their mountain of blatant crimes.

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One major possibility for causing massive civil unrest has to do with the one aspect of American society that all citizens have in common, and that is the dollar. The outrage that erupts when an unarmed black teenager is shot by police tends to be limited either geographically or due to race, but everyone would be impacted and vocal if there was a bank run. The scary truth is that what is separating this scenario from crossing over from a possibility to reality is not very much at all. In fact, it is dumb luck that it has not happened already. PUSHING DOWN THE PLUNGER The “Invisible Enemy” Once the building with the rotten foundation has been pre-weakened, the support columns have been identified and rigged with explosives and the co- conspirators have safely fled the crime scene, there is only one thing left to do: wait for the right time to push down the plunger and take this building down.

The Social Life of Money
by Nigel Dodd
Published 14 May 2014

They are, in this sense, the special purpose money of the Eurozone. Similar issues have arisen elsewhere in Euroland during this crisis. In Greece, a “slow motion bank run” has been underway since the country’s sovereign debt crisis blew up in late 2011. Here, the onus is on moving funds out of the Greek banking system and into safe haven elsewhere in the Eurozone. At its height, Greek banks were reporting €30 million of outflow of funds into other Eurozone member states. This was not a conventional bank run, fueled by fear of bank failure, but a run caused by prevailing concerns about exchange rate risk, and more specifically, about the prospect of an instantaneous devaluation of Greek deposits should the country exit the Eurozone altogether.47 Here too, then, not all euros were equal: not because they could not move but because of an overwhelming sense that they had to.

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While wealthier Greeks were investing heavily in London real estate, others were hoarding cash in more mundane domestic spaces because of what might happen to their bank accounts should Greece leave the Eurozone and launch its own independent currency. Fearful that their savings would be decimated overnight, Greeks were reversing the conventional wisdom that a bank is the most secure place to keep your money. What began as a crisis in the U.S. subprime mortgage market in 2007 was now manifesting itself as a slow-motion bank run. This problem was not confined to Greece but was happening throughout the Eurozone amid widespread doubt about the future of a project that had been launched with such optimism a little more than a decade before. Since the collapse of Lehman Brothers in September 2008, the world’s major central banks have been plowing vast quantities of money into the banking system.

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Should a eurozone member ultimately find itself unable to consolidate its budgets or restore its competitiveness, this country should, as a last resort, exit the monetary union while being able to remain a member of the EU” (Schäuble 2010). 46 After initially proposing a levy or tax on all deposit accounts—9.9 percent for those too big to be covered by the EU-mandated €100,000 deposit guarantee, and 6.75 percent for the smaller depositors—the government reached a compromise whereby only larger depositors would be hit. 47 See Gavyn Davies, “The Anatomy of the Eurozone Bank Run,” Financial Times, May 20, 2012. 48 Following Schmitt, Agamben defines sovereignty in terms of the capacity to suspend the rule of law. He describes the declaration of a state of exception: the ban. It is an idea that “calls into question every theory of the contractual origin of state power and, along with it, every attempt to ground political communities in something like a ‘belonging,’ whether it be founded on popular, national, religious, or other identity” (Agamben 1998: 181). 49 As Agamben describes it, the camp is a piece of land that is “placed outside the normal juridical order, but is nevertheless not simply an external space” (Agamben 2000: 133).

When Free Markets Fail: Saving the Market When It Can't Save Itself (Wiley Corporate F&A)
by Scott McCleskey
Published 10 Mar 2011

In December 2008, nine months after the implosion of Bear Stearns, its former Chairman Ace Greenberg said in an interview that the investment banking model is now dead, that ‘‘that model just doesn’t work because it’s at the mercy of rumors,’’2 and later added that a rumor can put any of these firms at peril. . . . (Even Goldman Sachs and Merrill Lynch) had to convert over the weekend to banks, had to have infusions of capital because they couldn’t withstand the selffulfilling prophecies of the rumors.3 Bank runs and rumors—underlying it all is the crucial, though somewhat slippery, issue of confidence. Once a firm’s ability to raise money and to meet its obligations is questioned, its entire business can seize up almost literally overnight. The downward spiral picks up speed when those responsible for assessing the firm’s value or its ability to pay its debts—research analysts and credit rating agencies, respectively—downgrade the firm’s stock and credit ratings.

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See Self-Regulatory Organizations (SROs) Standard & Poor (S&P), 84, 88, 94 structured finance products, 32, 34–36, 73, 84, 88 Stuart, John, xvii–xviii subprime mortgages AAA rating for, 33–34 interest rates, rising, 86 investment bankers, xxi mortgage payments and, 34 pooled risk, 33 ratings, downgrading, xvii–xix, 88, 93 structured investments backed by, 37 as toxic assets, 32–34, 37 systemic risk and market meltdown about, 1 AIG and credit default swaps, 5 Bear Stearns, 2–6, 10, 13–14 borrowed money, short vs. long-term, 2 ‘‘breaking the buck,’’ 8 collateral damage, 6–7 conclusion, 12 economy is about connections, 1 economy is not the sum of its parts, 1 funding, day-to-day, 2–3 government intervention, 9–10, 12 hedge fund redemption, 6 investment practice, legal covenants governing, 4 Lehman repos, 8 leverage, 6 Long Term Capital hedge fund collapse, 11 loss of confidence, 3 margin call, 6 money market fund, 7–9, 11, 92 regulation to focus on firms vs. system as a whole, 12 regulatory reform proposals, 2, 12 repurchase agreement (repo), 3, 6–8, 13 risk of fluctuation in the overnight price of an asset, 3 rumor control and market psychology, 4 rumors, at the mercy of, 4–6 rumors, self-fulfilling nature of, 9 rumors and bank runs, 4 rumors cause a crisis, 4 run on the bank, institutional, 6 SEC regulations restricting what money market fund for investment, 7 six degrees of separation, 11 speculative (junk) bond status, 4 system collapse, why not before?, 10–12 systemic, how a problems goes, 3–10 systemic risk, how it works, 2–9 systemic risk, macro/micro, 2 systemic risk and Bear Stearns, 13–14 system is complex and prone to uncertainty and rumor, 12 toxic assets, difficult-to-price, 6 T TARP.

The Future of Capitalism: Facing the New Anxieties
by Paul Collier
Published 4 Dec 2018

But an increase in the supply of housing needs to be gradual: a quantum increase would risk crashing house prices, plunging many young home owners into negative equity. Correspondingly, it makes sense to curb household growth by restoring restrictions on immigration. The credit frenzy unleashed by financial deregulation did not usher in nirvana – it ended in the regulatory disgrace of a bank run. The sight of depositors besieging the branches of Northern Rock was the first such spectacle in Britain for 150 years. As with a house building programme, change will need to be gradual, but its direction is unambiguous: we need to return to ceilings on the ratios of mortgages to income and of mortgages to deposits.

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One is that they widen inequality to no good purpose. The super-smart work for themselves: this is the implication of the bonus system in investment banks, where the stars in effect pay the firm a modest share of their individual profits for the services it provides. Deutsche Bank, the most extreme example of an investment bank run for stars, paid €71 billion in bonuses, dwarfing the €19 billion paid to shareholders.* Power is no longer in the hands of owners of capital, nor even of the managers of their wealth. Pension funds cannot pay the mega-salaries that would be required to recruit stars, and so they are managed by the slightly less smart.

On the Brink: Inside the Race to Stop the Collapse of the Global Financial System
by Henry M. Paulson
Published 15 Sep 2010

To meet demands for payment, first Bear and then other firms would be forced to sell whatever they could, in any market they could—driving prices down, causing more losses, and triggering more margin and collateral calls. The firms that had already started to pull their money from Bear were simply trying to get out first. That was how bank runs started these days. Investment banks understood that if any questions arose about their ability to pay, creditors would flee at wildfire speed. This is why a bank’s liquidity was so critical. At Goldman we had absolutely obsessed over our liquidity position. We didn’t define it just in the traditional sense as the amount of cash on hand plus unencumbered assets that could be sold quickly.

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For the day, the dollar hit a then-record low of $1.56 against the euro, while gold soared to a new high of $1,009 an ounce. Despite the backing of JPMorgan and the Fed, doubts remained about Bear’s ability to survive. Its accounts continued to flee, draining its reserves further. We needed to get a deal done by Sunday night, before the Asian markets opened and the bank run went global. That afternoon during a meeting on our housing initiatives, I asked Neel Kashkari if he was going to be around during the weekend, because we might need help on Bear. Neel said: “I have to imagine I’d be more useful to you in New York than sitting next to you in D.C.” I agreed, but before he took off I said, “I am sending you to do something you are totally unqualified to do, but you’re all I’ve got.”

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This idea was being pushed by Larry Lindsey, a former economic adviser to the president and onetime Fed governor. To pay their bills, companies routinely kept sums of cash in their checking accounts that far exceeded the $100,000 FDIC insurance limit. That left them prone to pulling their money at the first sign of danger and, as with Wachovia, thereby fueling bank runs. We discussed the idea of unlimited guarantees to stabilize these accounts, but we worried that in the midst of a panic, foreign depositors would move their money to the U.S. to take advantage of this new protection, sparking retaliatory actions by other countries and weakening the global financial system.

An Empire of Wealth: Rise of American Economy Power 1607-2000
by John Steele Gordon
Published 12 Oct 2009

The Glass-Steagall Act also established the Federal Bank Deposit Insurance Corporation (FDIC), which guaranteed the deposits of banks that joined the system (only banks that were members of the Federal Reserve were required to join) up to $5,000 per account. At a stroke, the bank run, a recurring nightmare in the American economy since the first one in 1809, became a thing of the past. Roosevelt had worried about the “moral hazard” created by a system that relieved bankers of the worry that their depositors’ assets would be wiped out. But he decided that eliminating bank runs was worth it. There has not been a significant American bank run since, but events long after his death would prove that Roosevelt had been right to worry. Glass-Steagall greatly strengthened national banks by permitting them to branch within the states where they were headquartered, if that state permitted branch banking.

How Asia Works
by Joe Studwell
Published 1 Jul 2013

Captive banks ask fewer questions than independent ones and, when regulation is weak, can lend their owners a great deal of money compared with the investment needed to start or buy a bank. In the United States, havoc broke out among under-regulated small banks in 1907, in a crisis referred to as the Panic. In 1927 Japan faced an even greater number of bank runs and failures. Since the most hopelessly conflicted banks were small ones, the Japanese government passed a new Banking Act that forced banks to merge. However, this simply opened the way for a few huge zaibatsu lenders to dominate. The four biggest ones came to control the majority of credit, pursuing mostly intra-group lending while denying finance to downstream manufacturers outside their groups.

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Printing money became the only form of finance left. Like Korea, the Philippines was used to an elevated inflation rate because of rediscounting, but price rises accelerated greatly in the mid 1980s. The inflation rate was 50 per cent in 1984 and the currency slid from 7.5 pesos to the dollar in 1980 to 20 in 1986. Following bank runs, bank nationalisations and the closure of large investment houses in 1981, another four banks had to be shut.55 In February 1986, amid large-scale protests, Marcos fled on a US government airplane, at the zenith of a crisis in which the Philippine economy shrank by a quarter.56 The meltdown signalled the end of the Philippines’ association with a particularly perverted form of developmental finance.

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When the Asian crisis spread from Thailand to Indonesia, there was so much panic that BCA, Liem Sioe Liong, the Suhartos and all their monopolies went down with it. The rupiah’s value started to fall at the end of 1997 and it quickly became apparent that the banking system as a whole would be unable to meet its foreign obligations. Bank runs ensued without reference to the particular solvency of individual banks. An extraordinary IDR65 trillion (around USD8 billion)87 was withdrawn from BCA in two weeks as depositor queues snaked around its branches. Liem Sioe Liong was required to put up collateral assets to cover money the central bank lent BCA to pay out its depositors.

Endless Money: The Moral Hazards of Socialism
by William Baker and Addison Wiggin
Published 2 Nov 2009

That year saw a stock market rally and active government and Fed intervention, with President Hoover claiming credit for engineering a recovery with a hat tip to the central bank in a speech before the American Bankers Association in October. However, the monetary contraction picked up steam in each year through 1933, ultimately shrinking bank money to $32.2 billion from $46.6 billion four years earlier. Stock market panics, bank runs, and business depressions were much more in the memory of individuals in that era than today. Probably by late 1931 the progression of events began to imbed fear and severely altered behavior, because hopes of merely replaying the comparatively shorter crises since the early 19th century were dashed by the severity of the decline in stock prices through the end of that year, over 74 percent as measured by the Cowles Commission data.

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An effort by central banks to slightly improve their central bank balance sheets through boosting gold backing by 10 to 30 percent 104 ENDLESS MONEY (i.e., Sweden going from 29% gold backing to 32%) probably brightened the internal investment climate. On one hand it might discourage currency and bank runs, but on the other hand it would not spook capital markets by monopolizing limited state resources through hoarding. Even more interesting is that some countries such as Denmark could take the approach of dialing down what may have been excessive reserves (40% in 1929) to a more manageable ratio (25% in 1934), and be rewarded for it.

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Bernanke also added in the possibility that the Fed could become involved in the foreign exchange market, noting that the 40 percent devaluation of the dollar against gold in 1933-34 enforced by Franklin Roosevelt had been effective in ending deflation. Prior to this, the government had outlawed private ownership of gold before resetting its price to $35, in effect taxing private savings and eliminating this refuge from bank runs. Like his statements about the alchemist, this is also nonsensical, because now there is no link to gold. A Penny In the Fuse Box In 2008 Federal Reserve governors more than doubled the central bank’s balance sheet, pumping roughly $1 trillion of credit into member banks and securities markets, and importantly other central banks globally.

More: The 10,000-Year Rise of the World Economy
by Philip Coggan
Published 6 Feb 2020

But Roosevelt proclaimed that “We put those payroll contributions there so as to give contributors a legal, moral and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program.”80 History has proved him right. Among Roosevelt’s other important reforms were the introduction of deposit insurance, which reduced the temptation for bank runs, the Glass–Steagall Act, which separated commercial from investment banking, and the creation of the Securities Exchange Commission to regulate the finance sector. The idea was to make sure that the riskiest parts of banking, linked to asset trading, did not pull down the conventional business of taking deposits and making loans.

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Banks have a natural mismatch. They owe money to depositors who can withdraw it at any time, while on the other side of their balance sheets they lend money to individuals and businesses for long periods. If enough depositors want to withdraw their money at once, even a well-run bank will get into trouble. Once a bank run starts, it is hard to stop. If depositors fear a bank will go bust, it makes sense for them to withdraw their money immediately. But this loss of confidence only makes the crisis worse. At this point, the central bank can step in and lend money to the ailing bank to tide it over. It took time for the Bank of England to accept this responsibility.

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The Queen’s question So why didn’t anyone see the crisis coming (as Queen Elizabeth II memorably asked when opening a new building at the London School of Economics)?14 There were several causes. Regulators had been lulled into a false sense of security about the strength of the banking sector in the developed world. The introduction of deposit insurance, in the wake of the Great Depression, seemed to have solved the problem of banking runs. But a moral hazard had been created, in which there was every incentive for bankers to take risk. In the late 19th century, banks in Britain had equity capital equivalent to 15–25% of their assets. By the 1980s, this cushion was just 5%.15 The long period of low interest rates and rising asset prices meant that bankers who were aggressive in their lending practices had been successful.

Grave New World: The End of Globalization, the Return of History
by Stephen D. King
Published 22 May 2017

According to the IMF, ‘In 1966, foreign central banks and governments held over 14 billion US dollars. The United States had $13.2 billion in gold reserves, but only $3.2 billion of that was available to cover foreign dollar holdings. The rest was needed to cover domestic holdings.’2 Put another way, the entire financial system was vulnerable to a public sector version of a bank run. If other nations thought there was any risk that their dollar holdings would be devalued, they would sensibly demand that their reserves should immediately be converted into gold. If, however, everyone thought that way, then devaluation would become inevitable. The link between dollars and gold established by Harry Dexter White in the 1940s was ultimately an act of faith: by the mid-1960s, however, faith was in short supply.

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With state after state declaring a bank holiday, something had to be done. The answer came partly in the form of deposit insurance. As an emergency measure in direct response to the March meltdown, Congress agreed to offer insurance protection to each depositor up to a maximum of $2,500 ($44,800 in 2015 US dollars) in the hope that bank runs would be stymied. In July of the following year, the level of protection was raised to $5,000 ($89,000 in 2015 US dollars). The policy worked, to the extent that the financial system was stabilized and confidence returned. It also, however, introduced moral hazard. Thanks to deposit insurance, most depositors no longer had to worry about what their bank was up to: their money was safe, come what may.

The Year That Changed the World: The Untold Story Behind the Fall of the Berlin Wall
by Michael Meyer
Published 7 Sep 2009

Bush on, 2, 5 fall of, in Bulgaria, 190–191 fall of, in Czechoslovakia, 28, 114, 128, 135–143, 175–190, 205–206 fall of, in GDR, 163–174, 203–205 fall of, in Hungary, 28, 29–39, 41–42, 46, 61, 66–74, 125, 128, 137, 139–140, 143–145, 206–207, 228–231, 236 fall of, in Poland, 28, 35–36, 43–54, 125, 128–133, 137, 139–140, 205 fall of, in Romania, 105–111, 193–201 fall of, throughout Eastern Europe, 41–42, 48, 54, 62, 173–174, 204 oppression in, 36 Reagan and, 13 as term, 224 See also Politburo Constantinescu, Emil, 201 consumer goods, 171–172, 177, 198–199 containment policy, 5, 61 Cooper, Gary, 79 Cornea, Doina, 197–198 counterculture, 21 Cousteau, Jacques, 95 crash of 2008, 218 cult of personality, 110 Cuthbertson, Ian, 228 Czechoslovakia denouement, 205–206 fall of Berlin Wall and, 8 fall of communism in, 28, 114, 128, 135–143, 175–190, 205–206, 233 Prague Spring (1968), 39, 45 refugees from GDR and, 122–123, 135, 141, 148, 152–153 reopening of border with GDR, 158–159 as totalitarian state, 135–143 Velvet Revolution (Prague; 1989), 170, 173, 175–190, 236 Warsaw Pact invasion of (1968), 105–106, 205 See also Prague Dalai Lama, 135, 206 Danner, Mark, 237 Davis, John, 231 DDR Museum (Berlin), 224 death strip (Berlin Wall), 16–18 democracy in Czechoslovakia, 185, 186, 206 in Eastern Europe, 99 in Hungary, 29–32, 41, 55–58, 110, 230–231 in Poland, 58–61, 79–84, 94, 110, 128–133, 225–226, 229–230 Reagan and, 3 U.S., 29, 30, 41 Democratic Forum, 97–99, 99 détente, 5, 61 Deutsche Bank, 73 Diensthier, Jiri, 233 Diepgen, Eberhard, 13 Dietrich, Marlene, 4 Dinescu, Mircea, 197–198 Dissolution (Maier), 163–164, 230–231, 232, 234, 235 Dresden bank runs in, 165 Freedom Train and, 124, 152–153, 154 refugees from GDR and, 117, 124, 135, 152–153, 160 rise of opposition, 152–153, 158 Dubcek, Alexander, 45, 177, 186–187, 226 Duberstein, Kenneth, 11 Dukakis, Michael, 39–40 East Berlin fall of Berlin Wall, 5–9, 65–76, 88–94, 165–173, 203–204 Jubilee of 1989 and, 115, 147–152 May Day (1989), 65–66, 69–70, 228 refugees from GDR and, 119–120, 160–161 rise of opposition, 158 See also Berlin; German Democratic Republic (GDR) Eastern Europe collapse of communism throughout, 41–42, 48, 54, 62, 173–174, 204 revolutions in, 14, 84, 216 Soviet withdrawal from, 12, 38–39, 91 See also names of specific countries East Germany.

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Nikolaus Cathedral (Prague), 142 Saint Sebastian, 2 Sakharov, Andrei, 36 samizdat, 32 Schabowski, Gunter collapse of GDR and, 165–173, 204–205, 234–235 fall of Berlin Wall and, 7–10, 65, 69–70, 91, 165–173, 223, 234 Politburo and, 140–141, 148–150, 165–173 refugees from GDR and, 116–117, 120, 123–124, 133–135, 232 repudiation of communism, 204–205 rise of opposition in GDR, 155–156, 158 at Warsaw Pact summit (Bucharest; 1989), 93–94 Schirndling, 160 Schmidt, Helmut, 119 Schultz, George, 61 Schultz, Kurt-Werner, 103 Schumacher, Hans, 236 Schurer, Gerhard, 164, 235 Schwartz, Stephen, 224 Schwerin, bank runs in, 165 Scoblic, Peter, 237–238 Scowcroft, Brent, 9, 40, 60, 61, 95, 224–225, 227, 231, 232 SEATO, 21 secret police, 11–12, 25, 53, 65, 104, 106, 114, 134–136, 140, 151–152, 157, 191, 194–198, 201 Securitate (secret police in Romania), 106, 191, 194–198, 201 September 11, 2001, 2, 215 Shevardnadze, Eduard, 148 fall of Berlin Wall and, 90–91 German reunification proposal and, 125–126 refugees from GDR and, 118 replaces Gromyko, 12 Shultz, George, 75, 227 Siani-Davies, Peter, 236 Sicherman, Harvey, 227 Siegessäule (Berlin), 15 Sieland, Gisela, 19 Skoda, Jan, 185 Skoda autoworks, 185 Sleepwalking through History (Hutchings), 227 Slum Clearance (Havel), 206 Smith, Stephen, 128, 141–142 socialism Gorbachev and, 56 as term, 224 Socialist Unity Party, 26 Society for a Merrier Present (Czechoslovakia), 139 soft power, 13–14 Solidarity (Poland) elections of 1989, 79–84, 128–133, 225–226, 229–230, 233 fall of communism and, 28, 32, 35–36 Jaruzelski embraces, 45–46, 50–54, 205 origins of, 47, 52, 94 in revolution of 1989, 47–54 rise of, 50–54, 58–61 uprising of 1980, 43–46 Somalia, 210 Sopron, Hungary, Pan-European Picnic (1989), 97–104 Soviet Union, former ascent of Gorbachev within, 11–14, 25 Brezhnev Doctrine and, 39, 45, 63 collapse of, 5, 14, 45, 62, 71, 204 fall of Berlin Wall, 5–10, 90–91 fall of communism in Czechoslovakia, 28 fall of communism in Hungary, 28, 29–39, 41–42, 66–74 fall of communism in Poland, 28 flaws of Soviet system, 11–12 Hungarian revolt of 1956, 34–35 Hungary and, 38 impact of Cold War and.

Digital Bank: Strategies for Launching or Becoming a Digital Bank
by Chris Skinner
Published 27 Aug 2013

In particular, the fact that Second Life allowed real commerce to be transacted by converting real US dollars to virtual dollars, meant that everyone started to test commerce in virtual worlds through the service. For example, several banks invested in major projects in Second Life, including ING, Wells Fargo, SAXO Bank and Deutsche Bank. However, several banks also operated in Second Life that were managed by guys in their bedrooms. These included banks such as Ginko Bank, run by a Brazilian chap at home. The trouble Ginko Bank experienced started when internet gambling was forced to close under US Laws. The management of Second Life decided that they also had to close access to gambling in virtual worlds in July 2007 to comply with this policy, which led to a major run on the virtual banks.

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Second Life’s operators were worried that this might affect them, and hence they banned gambling too. What the operators of Second Life did not realise is that gambling was really popular in their virtual world and, as a result of the gambling lockdown, many users wanted to withdraw their funds. So began a small bank run, with one of the largest banks in Second Life at this time being Ginko Bank. Ginko Bank had L$300 million in assets – about US$1.5 million in real money. As the bank saw a mass withdrawal of funds – around L$100 million in a couple of days – the bank’s owner deleted his Second Life account. Yes, you guessed it, Ginko Bank was just a virtual bank being run by a Sao Paolo internet freak, Andre Sanchez, from his bedroom.

Rethinking the Economics of Land and Housing
by Josh Ryan-Collins , Toby Lloyd and Laurie Macfarlane
Published 28 Feb 2017

The story is a remarkable insight into the way in which property and land in the UK has become financialised over the past century. Northern Rock was a bank when, at the height of the financial crisis in February 2008, it was nationalised by the government. Six months earlier, customers were queuing outside its doors to withdraw their cash in the first genuine bank run in the UK since the nineteenth century. But only seven years before Northern Rock was a quite different kind of institution: it was a building society. Over time, many building societies merged, enabling the pooling of liquidity that allowed for larger home building schemes and mortgage financing.

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Banks and other providers of liquidity were suddenly no longer prepared to roll over existing wholesale funding as trust between financial institutions collapsed. Because of its heavy money-market exposure, Northern Rock swiftly ran in to a liquidity crisis. By 14 September 2007, queues were forming outside its doors as people sought to withdraw their deposits: a full-on bank run. The bank was swiftly nationalised. The bank’s shareholders lost all of their money. On 1 January 2010 the government split the bank in to two parts: ‘assets’ and ‘banking’. The bad ‘assets’ part, called UK Asset Resolution (Ukar), was made up of the Granite assets as well as the bad loans from another collapsed demutualised building society, the Bradford and Bingley.

The Great Depression: A Diary
by Benjamin Roth , James Ledbetter and Daniel B. Roth
Published 21 Jul 2009

Insurance for the unemployed and guaranteed Social Security income for the elderly and infirm are standard features of the American economy; without them, the impact of current recessions on individuals could easily be as bad as it was during the Depression. On the federal policy level, the government guarantee of bank deposits up to a certain monetary amount makes panicky bank runs less likely and less damaging (though by no means impossible, and of course there are those who argue that such guarantees are harmful; see the above observation about the earth and the sun). And when banks do close, the process is orderly and the impact on the overall financial system minimized.

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The stock market started a decline in October 1929 which continued intermittently until the summer of 1932. At that time good stocks and bonds were selling at 5% and 10% of their 1929 prices. Sheet and Tube had fallen from 175 to 6; Republic from 140 to 2; U.S. Steel from 200 to 20; Western Union sold at 13; Penn RR at 6, etc. Along with this, business was at a stand-still. Bank runs were starting; more than 40,000 people in Youngstown were in bread lines. It was a terrible time. In the meanwhile the voice of the demagog began to be heard throughout the land. Socialism, Communism, more equitable distribution of wealth, new currency and other panaceas became ordinary table talk. 8/12/46 We had very little inflation during the past ten years although it has been widely discussed.

The World's Banker: A Story of Failed States, Financial Crises, and the Wealth and Poverty of Nations
by Sebastian Mallaby
Published 24 Apr 2006

Not surprisingly, this halfhearted effort to excise the cancer in the banking system failed to instill confidence. Coupled with a fatal IMF miscalculation, it proved disastrous. Toward the end of its mission, the IMF had debated whether to shore up the remaining banks by announcing a guarantee on deposits. One side insisted that a guarantee was essential to prevent a bank run; the other side objected that a blanket guarantee would rescue rich depositors who had made millions from Indonesia’s corrupt system, and who had entrusted their money to sleazy banks with their eyes wide open. In the end, the fear of rewarding crony depositors won out, and only the smallest deposits were guaranteed.

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In Thailand the IMF mistakenly urged high interest rates and cuts in government spending, on the theory that tough anti-inflation policies were needed to keep yet more investors from dumping the currency; as a result, Thailand’s subsequent recession was worse than it needed to be. In Indonesia the IMF had embarrassed itself again when its attempt to stabilize the banks had instead precipitated a bank run. In South Korea the IMF had put together a bailout that was too small to turn investor sentiment around, so that a second rescue had to be thrown together three weeks later. Stiglitz could not contain his glee. He lambasted the IMF, focusing particularly on two errors that resonated with the veterans of the Fifty Years Is Enough campaign, who regarded both the IMF and the World Bank as pushers of free-market dogma that harmed poor people.

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Jaycox interview, January 9, 2003. 53. Brian Falconer interview, January 15, 2003. 54. Tony Burdon interview, May 27, 2003. 55. The Bank has three principal sources of income: fees, which are charged to countries that borrow from the soft-loan IDA operations, and which are also levied on donor grants to Bank-run trust funds; profits on market-based lending; and profits on investing reserves. If the Bank ceased market-based lending, it would lose the second of these sources, forgoing $800 million or so in annual revenue. Some analysts suggest that this would not hurt too much, since the Bank would retain something like $800 million from fees plus $1 billion a year in revenue from investing reserves.

Future Files: A Brief History of the Next 50 Years
by Richard Watson
Published 1 Jan 2008

The serious point here is that life is blurring between the real and the virtual, and financial services are no exception. People are Money and Financial Services 131 already exchanging real money for virtual goods and vice versa, so why not invent new products and services for this market? Several US-based retailers (including a real bank) have opened virtual branches inside virtual games, so why not open a bank-run virtual currency-trading exchange where gamers can exchange their World of Witchcraft EU gold or Second Life Linden dollars for real gold or US dollars? If that’s a bit too weird for you, how about a real credit card that earns the virtual currency of your choice when you buy a pair of real jeans or an iPod?

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But in a downturn, security will be paramount and new entrants and foreign banks will be rejected in favor of long-established local names. Except, that is, if the name includes words like “Northern” and “Rock”. I was in Australia in 2007 when the UK’s fifth-largest mortgage lender became the first bank in Britain since 1866 to be the subject of a bank run. There were people queuing down high streets all over the country trying to get their cash out, until the government agreed to use taxpayers’ money to guarantee their savings. It effectively said that it would bail out anyone who invested 140 FUTURE FILES in a major UK financial institution that had forgotten that there should be some balance between borrowing and lending.

Layered Money: From Gold and Dollars to Bitcoin and Central Bank Digital Currencies
by Nik Bhatia
Published 18 Jan 2021

This reverses when the money pyramid enters contraction and the objective difference between money and money-like instruments is suddenly pronounced. Instruments that previously had a high degree of perceived trust are no longer desired, and their owners dump them for instruments higher in the hierarchy, such as gold coins. Contractions can result in redemption requests, called bank runs, and eventually financial crises. These crises can be more easily thought of as attempts to climb the pyramid of money, as holders of lower-layer money scramble to secure a superior, higher-layer form of money. The Clearance Problem As layered money evolved to solve problems with coin-money, new problems arose.

Fault Lines: How Hidden Fractures Still Threaten the World Economy
by Raghuram Rajan
Published 24 May 2010

However, an intriguing study suggests that bank CEOs in some of the worst-hit banks did not lack for incentives to manage their banks well.8 Richard Fuld at Lehman owned about $1 billion worth of Lehman stock at the end of fiscal year 2006, and James Cayne of Bear Stearns owned $953 million. These CEOs lost tremendous amounts when their firms were brought down by what were effectively modern-day bank runs. Indeed, the study shows that banks in which CEOs owned the most stock typically performed the worst during the crisis. These CEOs had substantial amounts to lose if their bets did not play out well (no matter how rich they otherwise were). Unlike those of some of their traders, their bets were not one-way.

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Perhaps a better question is whether banks should have deposit insurance at all. This may be a strange question to ask at a time when governments all over the world have guaranteed all the debt issued by their banks, not just the small, already insured deposits. But that is precisely the reason for my question. Deposit insurance is not meant to quell panics by preventing bank runs: the government, as we have recently seen, takes care of that. Instead, it merely protects individual banks from market discipline. Put differently, with implicit government guarantees all over the place, should we not strive to remove explicit government guarantees where we can? One reason for insuring deposits was to provide a safe means of savings to households where none existed.

The Physics of Wall Street: A Brief History of Predicting the Unpredictable
by James Owen Weatherall
Published 2 Jan 2013

He has just enough money that, at the close of the business day, the bank has $1 left and they can shut the doors for the night without going out of business. They have survived the run, but at the expense of Bailey’s dreams of traveling the world. Bank runs were fairly common during the Depression, and even more common during the nineteenth century. They were associated with financial panics, periods in which the economy seemed especially uncertain and no one was sure which banks would survive. A small piece of news that a particular bank was endangered could practically ensure that the bank would fail. Today, bank runs in the United States are a thing of the past, because in 1934 the U.S. government instituted the Federal Deposit Insurance Corporation (FDIC), which insures all consumer bank deposits.

Postcapitalism: A Guide to Our Future
by Paul Mason
Published 29 Jul 2015

Today there is no Geneva Convention when it comes to the fight between elites and the people they govern: the robo-cop has become the first line of defence against peaceful protest. Tasers, sound lasers and CS gas, combined with intrusive surveillance, infiltration and disinformation, have become standard in the playbook of law enforcement. And the central banks, whose operations most people have no clue about, are prepared to sabotage democracy by triggering bank runs where anti-neoliberal movements threaten to win – as they did with Cyprus in 2013, then Scotland and now Greece. The elite and their supporters are lined up to defend the same core principles: high finance, low wages, secrecy, militarism, intellectual property and energy based on carbon. The bad news is that they control nearly every government in the world.

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Look in the window and you’ll see ads for jobs at the minimum wage – but which require more than minimum skill. Press operatives, carers on night shift, distribution centre workers: jobs that used to pay decent wages now pay as little as legally possible. Somewhere else, out of the limelight, you will come across people picking up the pieces: food banks run by churches and charities; Citizens’ Advice Bureaux whose main business has become advising those swamped by debt. Just one generation earlier these streets were home to thriving real businesses. I remember the main street of my home town, Leigh, in northwest England, in the 1970s, thronged on Saturday mornings with prosperous working-class families.

A Pelican Introduction Economics: A User's Guide
by Ha-Joon Chang
Published 26 May 2014

She knows that her bank actually does not have the cash to pay all her fellow depositors, should a sufficient number of them want to withdraw their deposits in cash at the same time. Even though the belief may be totally unfounded – as was the case with the Fidelity Fiduciary Bank – it will become a ‘self-fulfilling prophecy’ if enough account holders think and act in this way. This situation is known as a bank run. We have seen examples of it in the wake of the 2008 global financial crisis. Customers queued up in front of Northern Rock bank branches in the UK, while online depositors in the UK and the Netherlands clogged up the website of Icesave, the internet arm of the collapsing Icelandic bank Landsbanki.

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Under this insurance scheme, the government commits itself to compensate all depositors up to a certain amount (for example, €100,000 in the Eurozone countries at the moment), if their banks are unable to pay their money back. With this guarantee, savers do not have to panic and withdraw their deposits at the slightest fall in confidence in their banks. This significantly reduces the chance of a bank run. Another way to manage confidence in the banking system is to restrict the ability of the banks to take risk. This is known as prudential regulation. One important measure of prudential regulation is the ‘capital adequacy ratio’. This limits the amount that a bank can lend (and thus the liabilities it can create in the form of deposits) to a certain multiple of its equity capital (that is, the money provided by the bank’s owners, or shareholders).

Rewriting the Rules of the European Economy: An Agenda for Growth and Shared Prosperity
by Joseph E. Stiglitz
Published 28 Jan 2020

Reforming Europe’s financial system has to go hand in hand with reforming the dysfunctional macro-institutional architecture of the euro, as we discussed in Chapter 2. An unreformed shadow banking system both increases the risk of a crisis and undermines the ability of the ECB to respond. A lender of last resort that can address a bank run caused by retail deposit withdrawals faces a far greater challenge when market liquidity evaporates and falling securities prices prompt a run on wholesale funding. In this latter case, the scale of required intervention is greater and the mechanisms for preventing systemic collapse are less straightforward.

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Such forbearance may prove essential, especially in the absence of the maneuverability provided by flexible exchange rates and differential interest rates. Common resolution When all else fails, Europe will need a mechanism for the resolution of troubled banks that winds them down without triggering a systemic crisis. When a single, isolated bank runs into a problem, resolution is straightforward: one wants to protect depositors, promote the continued flow of credit, and minimize the cost to taxpayers. The difficulty arises in a crisis, when many banks are in trouble at the same time. The United States created a new process for complex banks (Orderly Liquidation Authority) and a requirement that firms plan for their own demise (living wills) to supplement the previous system in which the Federal Deposit Insurance Corporation wound down banks while protecting depositors.

Unfinished Business
by Tamim Bayoumi

The overall result, however, is similar and since the data does not go back reliably over time I use the simpler definition of debt and equity flows. 5.There is a similar, if less direct, increase in risk for investors who lend in dollars, as a depreciation in the value of the pound increases the cost of dollar repayments for all foreign investors, thereby making all of the loans riskier. 6.Jeanne and Zettelmeyer (2005) provide a survey. See Krugman (1992) on the first generation models and Obstfeld (1996) on the second generation. 7.This is closely related to earlier models of bank runs, in which a run is always a risk unless government insurance gives depositors the assurance that their money is safe. Diamond and Dybvig (1983). 8.Bergsten and Green (2016). 9.IMF (2012b) paragraph 18 and references therein. 10.Garber (1993) contains a more detailed description of the collapse of the Bretton Woods system. 11.Eichengreen (1992). 12.Eichengreen (2008) contains a description of the evolution of capital market regulation over time. 13.Skidelsky (2001). 14.The Bretton Woods system came to maturity in 1960 after the termination of the European Payments Union (EPU), an arrangement that curtailed even current account transactions because of the severe shortages of dollars after the war. 15.Federal Deposit Insurance Corporation (1997b), Cline (1984 and 1995), Cohen (1992) and Dooley (1994) contain descriptions. 16.Quoted in Federal Deposit Insurance Corporation (1997b), pp. 197–8. 17.Ibid., p. 204. 18.Seidman (2000), pp. 127–8. 19.L.

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Davis Polk (2015): “Federal Reserve’s Proposed Rule on Total Loss-Absorbing Capacity and Eligible Long-Term Debt”, available at davispolk.com. Dermine (2002): Jean Dermine, “European Banking: Past, Present, and Future”, paper given at The Transformation of the European Financial System, Second ECB Central Banking Conference, Frankfurt am Main, October 24–25, 2002. Diamond and Dybvig (1983): Douglas W. Diamond and Philip H. Dybvig, “Bank Runs, Deposit Insurance, and Liquidity”, Journal of Political Economy, Vol. 91, No. 3 (June 1983), pp. 401–19. Dooley (1994): Michael P. Dooley, “A Retrospective on the Debt Crisis”, NBER Working Paper No. 4963, December 1994. Edwards (1999): Franklin R. Edwards, “Hedge Funds and the Collapse of Long-Term Capital Management”, Journal of Economic Perspectives, Vol. 13, No. 2 (Spring 1999), pp. 189–210.

The Permanent Portfolio
by Craig Rowland and J. M. Lawson
Published 27 Aug 2012

Counterparty risk is hard to manage, in part, because the periods when an investor most needs access to their funds are often the periods when the parties holding the funds are the least able to return them (usually because they need them for their own emergency). Emergencies cause cascading effects. A common counterparty risk is a bank run. This is when a large number of depositors want their money at the same time and the bank doesn't have enough funds on hand. The result could be the bank simply goes out of business and then, hopefully, government insurance takes over. That's counterparty risk. In order to meet the requirement of absolute safety, Permanent Portfolio investors shouldn't have to evaluate the creditworthiness of the party to whom they are entrusting their wealth.

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This business model means that at any given time the bank will only have a small amount of its depositors' money available for withdrawal (the rest is loaned out to the bank's customers and is tied up in their car, home, business, etc.). But what happens when too many people try to withdraw their money from the bank at the same time? This situation causes the familiar bank runs. The government has attempted to ease the fear of this sort of event through the Federal Deposit Insurance Corporation (FDIC), which was created in the 1930s and insures all deposits up to a certain amount. Although FDIC deposit insurance has worked to date, the reality is that the FDIC actually has very few assets in relation to its liabilities.

Boom and Bust: A Global History of Financial Bubbles
by William Quinn and John D. Turner
Published 5 Aug 2020

Banks had lent considerable sums of money to investors and merchants who had been tempted by the rising stock and commodity prices, and were therefore extremely vulnerable to a downturn.76 By the autumn, several banks in the west of England had collapsed, unsettling the money markets and the Bank of England. Then, at the beginning of December 1825, a major 54 THE FIRST EMERGING MARKET BUBBLE London bank, Pole, Thornton and Company, which had been investing in risky securities, failed after experiencing a run. This collapse was followed by a series of bank runs and failures of English country banks. The panic peaked on 14 December 1825, the notorious ‘day of terror’, in which many London and country banks closed their doors; there were few towns in England where the ‘stoppage of local banks had not occurred or was not feared hourly’.77 According to The Times, in the week after the day of terror, banks all over England and Wales faced severe runs.78 Many of the banks which closed during December eventually reopened.

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The clogging up of the securitisation machine and the freezing of the interbank market had a major impact on Northern Rock, then the leading British mortgage bank. On 13 September 2007, it received liquidity assistance from the Bank of England. However, when news of this leaked out, its depositors mounted a run on the bank which ended only when Chancellor Alistair Darling guaranteed its deposits. This was Britain’s first bank run in over 150 years. On 17 February 2008, Northern Rock was nationalised. About one month later, the US bank Bear Stearns was rescued by the Federal Reserve and taken over by JP Morgan for only a fraction of what its market value had been the previous week. Over the next few months, mortgage delinquencies continued to soar, MBSs continued to default and banks reported ever larger losses.

London Under
by Peter Ackroyd
Published 1 Nov 2011

As the price of gold rises ever higher many London banks are building larger and deeper vaults to accommodate the precious metal; they are great caverns of treasure. It is estimated that 250 million ounces of gold are concealed beneath the ground. But no London cellar is more wonderful than the vaults of the Bank of England. They contain the second biggest hoard of gold bullion on the planet. A network of tunnels, radiating out from the bank, runs beneath the City streets. Several thousand bars of 24-carat gold, each one weighing 28 pounds, are stored within them. They may be said to light up the bowels of the earth. You would not know, on walking along High Holborn or Whitehall, that there is a secret world beneath your feet. There is no echo, no sign or token, of corridors and chambers below the surface.

Why Wall Street Matters
by William D. Cohan
Published 27 Feb 2017

“As has been frequently observed, the recent financial crisis began, like most banking crises, with a run on short-term liabilities by investors who had come to doubt the value of the assets they were funding through various kinds of financial intermediaries,” he said in his July 2016 speech. He noted correctly that unlike the bank runs that typified the 1930s, when small depositors lined up to get their money out, in 2008 it was the institutions that ran for the exits without having to line up at all. They got out simply by—literally—pushing a button on their computers. What happened next, Tarullo explained, was that the Wall Street banks, “lacking enough liquidity to repay all the counterparties who declined to roll over their investments,” were forced “into fire sales that further depressed asset prices, thereby reducing the values of assets held by many other intermediaries, raising margin calls, and leading to still more asset sales.”

Planet Ponzi
by Mitch Feierstein
Published 2 Feb 2012

The chairman of Northern Rock, Matt Ridley, was interrogated by British parliamentarians in the wake of the crisis‌—‌a crisis that had prompted the first bank run in Britain for 150 years. Instead of sounding apologetic or humble about his failures, Ridley sounded plaintive. He complained: ‘The idea that all markets would close simultaneously was unforeseen by any major authority. We were hit by an unexpected and unpredictable concatenation of events.’14 Well, duh! Of course you don’t expect the unexpected. That’s why you take precautions and prudently manage your risks accordingly. The fact that Britain hadn’t experienced a bank run for 150 years suggests that those precautions were hardly unknown to Ridley’s predecessors.

Prosperity Without Growth: Foundations for the Economy of Tomorrow
by Tim Jackson
Published 8 Dec 2016

The so-called Chicago plan – which calls for 100 per cent backing of bank deposits with government-issued money – was first put forward in the 1930s by the US economist Irving Fisher and supported most notably by the Chicago School economist Milton Friedman.38 There have been a number of recent calls to revive this idea – perhaps most surprisingly from the International Monetary Fund. A recent IMF working paper identifies several clear advantages to the plan, including: its ability to better control credit cycles, the potential to eliminate bank runs, and the effect of dramatically reducing both government debt and private debt. The plan would essentially return control of the money supply directly to the government.39 Similar proposals call for an end to banks’ power to create money and the implementation of a so-called ‘sovereign money’ system.

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INDEX Locators in italic refer to figures absolute decoupling 84–6; historical perspectives 89–96, 90, 92, 94, 95; mathematical relationship with relative decoupling 96–101, 111 abundance see opulence accounting errors, decoupling 84, 91 acquisition, instinctive 68 see also symbolic role of goods adaptation: diminishing marginal utility 51, 68; environmental 169; evolutionary 226 advertising, power of 140, 203–4 Africa 73, 75–7; life-expectancy 74; philosophy 227; pursuit of western lifestyles 70; growth 99; relative income effect 58, 75; schooling 78 The Age of Turbulence (Greenspan) 35 ageing populations 44, 81 agriculture 12, 148, 152, 220 Aids/HIV 77 algebra of inequality see inequality; mathematical models alienation: future visions 212, 218–19; geographical community 122–3; role of the state 205; selfishness vs. altruism 137; signals sent by society 131 alternatives: economic 101–2, 139–40, 157–8; hedonism 125–6 see also future visions; post-growth macroeconomics; reform altruism 133–8, 196, 207 amenities see public services/amenities Amish community, North America 128 An Inquiry into the Nature and Causes of the Wealth of Nations (Smith) 123, 132 angelised growth see green growth animal welfare 220 anonymity/loneliness see alienation anthropological perspectives, consumption 70, 115 anti-consumerism 131 see also intrinsic values anxiety: fear of death 69, 104, 115, 212–15; novelty 116–17, 124, 211 Argentina 58, 78, 78, 80 Aristotle 48, 61 The Art of Happiness (Dalai Lama) 49 arts, Baumol’s cost disease 171–2 assets, stranded 167–8 see also ownership austerity policies xxxiii–xxxv, 189; and financial crisis 24, 42–3; mathematical models 181 Australia 58, 78, 128, 206 authoritarianism 199 autonomy see freedom/autonomy Ayres, Robert 143 backfire effects 111 balance: private interests/common good 208; tradition/innovation 226 Bank for International Settlements 46 bank runs 157 banking system 29–30, 39, 153–7, 208; bonuses 37–8 see also financial crisis; financial system basic entitlements: enterprise as service 142; income 67, 72–9, 74, 75, 76, 78; limits to growth 63–4 see also education; food; health Basu, Sanjay 43 Baumol, William 112, 147, 222, 223; cost disease 170, 171, 172, 173 BBC survey, geographical community 122–3 Becker, Ernest 69 Belk, Russ 70, 114 belonging 212, 219 see also alienation; community; intrinsic values Bentham, Jeremy 55 bereavement, material possessions 114, 214–15 Berger, Peter 70, 214 Berry, Wendell 8 Better Growth, Better Climate (New Climate Economy report) 18 big business/corporations 106–7 biodiversity loss 17, 47, 62, 101 biological perspectives see evolutionary theory; human nature/psyche biophysical boundaries see limits (ecological) Black Monday 46 The Body Economic (Stuckler and Basu) 43 bond markets 30, 157 bonuses, banking 37–8 Bookchin, Murray 122 boom-and-bust cycles 157, 181 Booth, Douglas 117 borrowing behaviour 34, 118–21, 119 see also credit; debt Boulding, Elise 118 Boulding, Kenneth 1, 5, 7 boundaries, biophysical see limits (ecological) bounded capabilities for flourishing 61–5 see also limits (flourishing within) Bowen, William 147 Bowling Alone (Putnam) 122 Brazil 58, 88 breakdown of community see alienation; social stability bubbles, economic 29, 33, 36 Buddhist monasteries, Thailand 128 buen vivir concept, Ecuador xxxi, 6 built-in obsolescence 113, 204, 220 Bush, George 121 business-as-usual model 22, 211; carbon dioxide emissions 101; crisis of commitment 195; financial crisis 32–8; growth 79–83, 99; human nature 131, 136–7; need for reform 55, 57, 59, 101–2, 162, 207–8, 227; throwaway society 113; wellbeing 124 see also financial systems Canada 75, 206, 207 capabilities for flourishing 61–5; circular flow of the economy 113; future visions 218, 219; and income 77; progress measures 50–5, 54; role of material abundance 67–72; and prosperity 49; relative income effect 55–61, 58, 71, 72; role of shame 123–4; role of the state 200 see also limits (flourishing within); wellbeing capital 105, 107–10 see also investment Capital in the 21st Century (Piketty) 33, 176, 177 Capital Institute, USA 155 capitalism 68–9, 80; structures 107–13, 175; types 105–7, 222, 223 car industry, financial crisis 40 carbon dioxide emissions see greenhouse gas emissions caring professions, valuing 130, 147, 207 see also social care Cat on a Hot Tin Roof (Williams) 213 causal path analysis, subjective wellbeing 59 Central Bank 154 central human capabilities 64 see also capabilities for flourishing The Challenge of Affluence (Offer) 194 change see alternatives; future visions; novelty/innovation; post-growth macroeconomics; reform Chicago school of economics 36, 156 children: advertising to 204; labour 62, 154; mortality 74–5, 75, 206 Chile xxxiii, xxxvii, 58, 74, 74, 75, 76 China: decoupling 88; GDP per capita 75; greenhouse gas emissions 91; growth 99; life expectancy 74; philosophy 7; post-financial crisis 45–6; pursuit of western lifestyles 70; relative income effect 58; resource use 94; savings 27; schooling 76 choice, moving beyond consumerism 216–18 see also freedom/autonomy Christian doctrine see religious perspectives chromium, commodity price 13 Cinderella economy 219–21, 224 circular economy 144, 220 circular flow of the economy 107, 113 see also engine of growth citizen’s income 207 see also universal basic income civil unrest see social stability Clean City Law, São Paulo 204 climate change xxxv, 22, 47; critical boundaries 17–20; decoupling 85, 86, 87, 98; fatalism 186; investment needs 152; role of the state 192, 198, 201–2 see also greenhouse gas emissions Climate Change Act (2008), UK 198 clothing see basic entitlements Club of Rome, Limits to Growth report xxxii, xxxiii, 8, 11–16, Cobb, John 54 collectivism 191 commercial bond markets 30, 157 commitment devices/crisis of 192–5, 197 commodity prices: decoupling 88; financial crisis 26; fluctuation/volatility 14, 21; resource constraints 13–14 common good: future visions 218, 219; vs. freedom and autonomy 193–4; vs. private interests 208; role of the state 209 common pool resources 190–2, 198, 199 see also public services/amenities communism 187, 191 community: future visions of 219–20; geographical 122–3; investment 155–6, 204 see also alienation; intrinsic values comparison, social 115, 116, 117 see also relative income effect competition 27, 112; positional 55–61, 58, 71, 72 see also struggle for existence complexity, economic systems 14, 32, 108, 153, 203 compulsive shopping 116 see also consumerism Conference of the Parties to the UN Framework Convention on Climate Change (CoP21) 19 conflicted state 197, 201, 209 connectedness, global 91, 227 conspicuous consumption 115 see also language of goods consumer goods see language of goods; material goods consumer sovereignty 196, 198 consumerism 4, 21, 22, 103–4, 113–16; capitalism 105–13, 196; choice 196; engine of growth 104, 108, 120, 161; existential fear of death 69, 212–15; financial crisis 24, 28, 39, 103; moving beyond 216–18; novelty and anxiety 116–17; post-growth economy 166–7; role of the state 192–3, 196, 199, 202–5; status 211; tragedy of 140 see also demand; materialism contemplative dimensions, simplicity 127 contraction and convergence model 206–7 coordinated market economies 27, 106 Copenhagen Accord (2009) 19 copper, commodity prices 13 corporations/big business 106–7 corruption 9, 131, 186, 187, 189 The Cost Disease: Why Computers get Cheaper and Health Care Doesn’t (Baumol) 171, 172 Costa Rica 74, 74, 76 countercyclical spending 181–2, 182, 188 crafts/craft economies 147, 149, 170, 171 creative destruction 104, 112, 113, 116–17 creativity 8, 79; and consumerism 113, 116; future visions 142, 144, 147, 158, 171, 200, 220 see also novelty/innovation credit, private: deflationary forces 44; deregulation 36; financial crisis 26, 27, 27–31, 34, 36, 41; financial system weaknesses 32–3, 37; growth imperative hypothesis 178–80; mortgage loans 28–9; reforms in financial system 157; spending vs. saving behaviour of ordinary people 118–19; and stimulation of growth 36 see also debt (public) credit unions 155–6 crises: of commitment 192–5; financial see financial crisis critical boundaries, biophysical see limits (ecological) Csikszentmihalyi, Mihalyi 127 Cuba: child mortality 75; life expectancy 74, 77, 78, 78; response to economic hardship 79–80; revolution 56; schooling 76 Cushman, Philip 116 Dalai Lama 49, 52 Daly, Herman xxxii, 54, 55, 160, 163, 165 Darwin, Charles 132–3 Das Kapital (Marx) 225 Davidson, Richard 49 Davos World Economic Forum 46 Dawkins, Richard 134–5 de Mandeville, Bernard 131–2, 157 death, denial of 69, 104, 115, 212–15 debt, public-sector 81; deflationary forces 44; economic stability 81; financial crisis 24, 26–32, 27, 37, 41, 42, 81; financial systems 28–32, 153–7; money creation 178–9; post-growth economy 178–9, 223 Debt: The First Five Thousand Years (Graeber) 28 decoupling xix, xx, xxxvii, 21, 84–7; dilemma of growth 211; efficiency measures 84, 86, 87, 88, 95, 104; green growth 163, 163–5; historical perspectives 87–96, 89, 90, 92, 94, 95; need for new economic model 101–2; relationship between relative and absolute 96–101 deep emission and resource cuts 99, 102 deficit spending 41, 43 deflationary forces, post-financial crisis 43–7, 45 degrowth movement 161–3, 177 demand 104, 113–16, 166–7; post-financial crisis 44–5; post-growth economy 162, 164, 166–9, 171–2, 174–5 dematerialisation 102, 143 democratisation, and wellbeing 59 deposit guarantees 35 deregulation 27, 34, 36, 196 desire, role in consumer behaviour 68, 69, 70, 114 destructive materialism 104, 112, 113, 116–17 Deutsche Bank 41 devaluation of currency 30, 45 Dichter, Ernest 114 digital economy 44, 219–20 dilemma of growth xxxi, 66–7, 104, 210; basic entitlements 72–9, 74, 75, 76, 78; decoupling 85, 87, 164; degrowth movement 160–3; economic stability 79–83, 174–6; material abundance 67–72; moving beyond 165, 166, 183–4; role of the state 198 diminishing marginal utility: alternative hedonism 125, 126; wellbeing 51–2, 57, 60, 73, 75–6, 79 disposable incomes 27, 67, 118 distributed ownership 223 Dittmar, Helga 126 domestic debt see credit dopamine 68 Dordogne, mindfulness community 128 double movement of society 198 Douglas, Mary 70 Douthwaite, Richard 178 downshifting 128 driving analogy, managing change 16–17 durability, consumer goods 113, 204, 220 dynamic systems, managing change 16–17 Eastern Europe 76, 122 Easterlin, Richard 56, 57, 59; paradox 56, 58 eco-villages, Findhorn community 128 ecological investment 101, 166–70, 220 see also investment ecological limits see limits (ecological) ecological (ecosystem) services 152, 169, 223 The Ecology of Money (Douthwaite) 178 economic growth see growth economic models see alternatives; business-as-usual model; financial systems; future visions; mathematical models; post-growth macroeconomics economic output see efficiency; productivity ‘Economic possibilities for our grandchildren’ (Keynes) 145 economic stability 22, 154, 157, 161; financial system weaknesses 34, 35, 36, 180; growth 21, 24, 67, 79–83, 174–6, 210; post-growth economy 161–3, 165, 174–6, 208, 219; role of the state 181–3, 195, 198, 199 economic structures: post-growth economy 227; financial system reforms 224; role of the state 205; selfishness 137 see also business-as-usual model; financial systems ecosystem functioning 62–3 see also limits (ecological) ecosystem services 152, 169, 223 Ecuador xxxi, 6 education: Baumol’s cost disease 171, 172; and income 67, 76, 76; investment in 150–1; role of the state 193 see also basic entitlements efficiency measures 84, 86–8, 95, 104, 109–11, 142–3; energy 41, 109–11; growth 111, 211; investment 109, 151; of scale 104 see also labour productivity; relative decoupling Ehrlich, Paul 13, 96 elasticity of substitution, labour and capital 177–8 electricity grid 41, 151, 156 see also energy Elgin, Duane 127 Ellen MacArthur Foundation 144 emissions see greenhouse gas emissions employee ownership 223 employment intensity vs. carbon dioxide emissions 148 see also labour productivity empty self 116, 117 see also consumerism ends above means 159 energy return on investment (EROI) 12, 169 energy services/systems 142: efficiency 41, 109–11; inputs/intensity 87–8, 151; investment 41, 109–10, 151–2; renewable xxxv, 41, 168–9 engine of growth 145; consumerism 104, 108, 161; services 143, 170–4 see also circular flow of the economy enough is enough see limits enterprise as service 140, 141–4, 158 see also novelty/innovation entitlements see basic entitlements entrepreneur as visionary 112 entrepreneurial state 220 Environmental Assessment Agency, Netherlands 62 environmental quality 12 see also pollution environmentalism 9 EROI (energy return on investment) 12, 169 Essay on the Principle of Population (Malthus) 9–11, 132–3 evolutionary map, human heart 136, 136 evolutionary theory 132–3; common good 193; post-growth economy 226; psychology 133–5; selfishness and altruism 196 exchange values 55, 61 see also gross domestic product existential fear of death 69, 104, 115, 212–15 exponential expansion 1, 11, 20–1, 210 see also growth external debt 32, 42 extinctions/biodiversity loss 17, 47, 62, 101 Eyres, Harry 215 Fable of the Bees (de Mandeville) 131–2 factor inputs 109–10 see also capital; labour; resource use fast food 128 fatalism 186 FCCC (Framework Convention on Climate Change) 92 fear of death, existential 69, 104, 115, 212–15 feedback loops 16–17 financial crisis (2008) 6, 23–5, 32, 77, 103; causes and culpability 25–8; financial system weaknesses 32–7, 108; Keynesianism 37–43, 188; nationalisation of financial sector 188; need for financial reforms 175; role of debt 24, 26–32, 27, 81, 179; role of state 191; slowing of growth 43–7, 45; spending vs. saving behaviour of ordinary people 118–21, 119; types/definitions of capitalism 106; youth unemployment 144–5 financial systems: common pool resources 192; debt-based/role of debt 28–32, 153–7; post-growth economy 179, 208; systemic weaknesses 32–7; and wellbeing 47 see also banking system; business-as-usual model; financial crisis; reform Findhorn community 128 finite limits of planet see limits (ecological) Fisher, Irving 156, 157 fishing rights 22 flourishing see capabilities for flourishing; limits; wellbeing flow states 127 Flynt, Larry 40 food 67 see also basic entitlements Ford, Henry 154 forestry/forests 22, 192 Forrester, Jay 11 fossil fuels 11, 20 see also oil Foucault, Michel 197 fracking 14, 15 Framework Convention on Climate Change (FCCC) 92 France: GDP per capita 58, 75, 76; inequality 206; life-expectancy 74; mindfulness community 128; working hours 145 free market 106: financial crisis 35, 36, 37, 38, 39; ideological controversy/conflict 186–7, 188 freedom/autonomy: vs. common good 193–4; consumer 22, 68–9; language of goods 212; personal choices for improvement 216–18; wellbeing 49, 59, 62 see also individualism Friedman, Benjamin 176 Friedman, Milton 36, 156, 157 frugality 118–20, 127–9, 215–16 fun (more fun with less stuff) 129, 217 future visions 2, 158, 217–21; community banking 155–6; dilemma of growth 211; enterprise as service 140, 141–4, 147–8, 158; entrepreneur as visionary 112; financial crisis as opportunity 25; and growth 165–6; investment 22, 101–2, 140, 149–53, 158, 169, 208; money as social good 140, 153–7, 158; processes of change 185; role of the state 198, 199, 203; timescales for change 16–17; work as participation 140, 144–9, 148, 158 see also alternatives; post-growth macroeconomics; reform Gandhi, Mahatma 127 GDP see gross domestic product gene, selfish 134–5 Genuine Progress Indicator (GPI) 54, 54 geographical community 122–3 Germany xxxi; Federal Ministry of Finance 224–5; inequality 206; relative income effect 58; trade balance 31; work as participation 146 Glass Steagal Act 35 Global Commodity Price Index (1992–2015) 13 global corporations 106–7 global economy 98: culture 70; decoupling 86–8, 91, 93–5, 95, 97, 98, 100; exponential expansion 20–1; inequality 4, 5–6; interconnectedness 91, 227; post-financial crisis slowing of growth 45 Global Research report (HSBC) 41 global warming see climate change Godley, Wynne 179 Goldman Sachs 37 good life 3, 6; moral dimension 63, 104; wellbeing 48, 50 goods see language of goods; material goods; symbolic role of goods Gordon, Robert 44 governance 22, 185–6; commons 190–2; crisis of commitment 192–5, 197; economic stability 34, 35; establishing limits 200–8, 206; growth 195–9; ideological controversy/conflict 186–9; moving towards change 197–200, 220–1; post-growth economy 181–3, 182; power of corporations 106; for prosperity 209; signals 130 government as household metaphor 30, 42 governmentality 197, 198 GPI (Genuine Progress Indicator) 54, 54 Graeber, David 28 Gramm-Leach-Bliley Act 35 Great Depression 39–40 Greece: austerity xxxiii–xxxiv, xxxvii, 43; energy inputs 88; financial crisis 28, 30, 31, 77; life expectancy 74; schooling 76; relative income effect 58; youth unemployment 144 Green Economy initiative 41 green: growth xxxvii, 18, 85, 153, 166, 170; investment 41 Green New Deal, UNEP 40–1, 152, 188 greenhouse gas emissions 18, 85, 86, 91, 92; absolute decoupling 89–92, 90, 92, 98–101, 100; dilemma of growth 210–11; vs. employment intensity 148; future visions 142, 151, 201–2, 220; Kyoto Protocol 18, 90; reduction targets 19–20; relative decoupling 87, 88, 89, 93, 98–101, 100 see also climate change Greenspan, Alan 35 gross domestic product (GDP) per capita 3–5, 15, 54; climate change 18; decoupling 85, 93, 94; financial crisis 27, 28, 32; green growth 163–5; life expectancy 74, 75, 78; as measure of prosperity 3–4, 5, 53–5, 54, 60–1; post-financial crisis 43, 44; post-growth economy 207; schooling 76; wellbeing 55–61, 58 see also income growth xxxvii; capitalism 105; credit 36, 178–80; decoupling 85, 96–101; economic stability 21, 24, 67, 80, 210; financial crisis 37, 38; future visions 209, 223, 224; inequality 177; labour productivity 111; moving beyond 165, 166; novelty 112; ownership 105; post-financial crisis slowing 43–7, 45; prosperity as 3–7, 23, 66; role of the state 195–9; sustainable investment 166–70; wellbeing 59–60; as zero sum game 57 see also dilemma of growth; engine of growth; green growth; limits to growth; post-growth macroeconomy growth imperative hypothesis 37, 174, 175, 177–80, 183 habit formation, acquisition as 68 Hall, Peter 106, 188 Hamilton, William 134 Hansen, James 17 happiness see wellbeing/happiness Happiness (Layard) 55 Hardin, Garrett 190–1 Harvey, David 189, 192 Hayek, Friedrich 187, 189, 191 health: Baumol’s cost disease 171, 172; inequality 72–3, 205–6, 206; investment 150–1; and material abundance 67, 68; personal choices for improvement 217; response to economic hardship 80; role of the state 193 see also basic entitlements Heath, Edward 66, 82 hedonism 120, 137, 196; alternatives 125–6 Hirsch, Fred xxxii–xxxiii historical perspectives: absolute decoupling 86, 89–96, 90, 92, 94, 95; relative decoupling 86, 87–9, 89 Holdren, John 96 holistic solutions, post-growth economy 175 household finances: house purchases 28–9; spending vs. saving behaviour 118–20, 119 see also credit household metaphor, government as 30, 42 HSBC Global Research report 41 human capabilities see capabilities for flourishing human happiness see wellbeing/happiness human nature/psyche 3, 132–5, 138; acquisition 68; alternative hedonism 125; evolutionary map of human heart 136, 136; intrinsic values 131; meaning/purpose 49–50; novelty/innovation 116; selfishness vs. altruism 133–8; short-termism/living for today 194; spending vs. saving behaviour 34, 118–21, 119; symbolic role of goods 69 see also intrinsic values human rights see basic entitlements humanitarian perspectives: financial crisis 24; growth 79; inequality 5, 52, 53 see also intrinsic values hyperbolic discounting 194 hyperindividualism 226 see also individualism hyper-materialisation 140, 157 I Ching (Chinese Book of Changes) 7 Iceland: financial crisis 28; life expectancy 74, 75; relative income effect 56; response to economic hardship 79–80; schooling 76; sovereign money system 157 identity construction 52, 69, 115, 116, 212, 219 IEA (International Energy Agency) 14, 152 IMF (International Monetary Fund) 45, 156–7 immaterial goods 139–40 see also intrinsic values; meaning/purpose immortality, symbolic role of goods 69, 104, 115, 212–14 inclusive growth see inequality; smart growth income 3, 4, 5, 66, 124; basic entitlements 72–9, 74, 75, 76, 78; child mortality 74–5, 75; decoupling 96; economic stability 82; education 76; life expectancy 72, 73, 74, 77–9, 78; poor nations 67; relative income effect 55–61, 58, 71, 72; tax revenues 81 see also gross domestic product INDCs (intended nationally determined commitments) 19 India: decoupling 99; growth 99; life expectancy 74, 75; philosophy 127; pursuit of western lifestyles 70; savings 27; schooling 76 indicators of environmental quality 96 see also biodiversity; greenhouse gas emissions; pollution; resource use individualism 136, 226; progressive state 194–7, 199, 200, 203, 207 see also freedom/autonomy industrial development 12 see also technological advances inequality 22, 67; basic entitlements 72; child mortality 75, 75; credible alternatives 219, 224; deflationary forces 44; fatalism 186; financial crisis 24; global 4, 5–6, 99, 100; financial system weaknesses 32–3; post-growth economy 174, 176–8; role of the state 198, 205–7, 206; selfishness vs. altruism 137; symbolic role of goods 71; wellbeing 47, 104 see also poverty infant mortality rates 72, 75 inflation 26, 30, 110, 157, 167 infrastructure, civic 150–1 Inglehart, Ronald 58, 59 innovation see novelty/innovation; technological advances inputs 80–1 see also capital; labour productivity; resource use Inside Job documentary film 26 instant gratification 50, 61 instinctive acquisition 68 Institute for Fiscal Studies 81 Institute for Local Self-Reliance 204 institutional structures 130 see also economic structures; governance intended nationally determined commitments (INDCs) 19 intensity factor, technological 96, 97 see also technological advances intentional communities 127–9 interconnectedness, global 91, 227 interest payments/rates 39, 43, 110; financial crisis 29, 30, 33, 39; post-growth economy 178–80 see also credit; debt Intergovernmental Panel on Climate Change (IPCC) 18, 19, 201–2 International Energy Agency (IEA) 14, 152 International Monetary Fund (IMF) 45, 156–7 intrinsic values 126–31, 135–6, 212; role of the state 199, 200 see also belonging; community; meaning/purpose; simplicity/frugality investment 107–10, 108; ecological/sustainable 101, 152, 153, 166–70, 220; and innovation 112; loans 29; future visions 22, 101–2, 140, 149–53, 158, 169, 208, 220; and savings 108; social 155, 156, 189, 193, 208, 220–3 invisible hand metaphor 132, 133, 187 IPAT equation, relative and absolute decoupling 96 IPCC (Intergovernmental Panel on Climate Change) 18, 19, 201–2 Ireland 28; inequality 206; life expectancy 74, 75; schooling 76; wellbeing 58 iron cage of consumerism see consumerism iron ore 94 James, Oliver 205 James, William 68 Japan: equality 206; financial crisis 27, 45; life expectancy 74, 76, 79; relative income effect 56, 58; resource use 93; response to economic hardship 79–80 Jefferson, Thomas 185 Jobs, Steve 210 Johnson, Boris 120–1 Kahneman, Daniel 60 Kasser, Tim 126 keeping up with the Joneses 115, 116, 117 see also relative income effect Kennedy, Robert 48, 53 Keynes, John Maynard/Keynesianism 23, 34, 120, 174, 181–3, 187–8; financial crisis 37–43; financial system reforms 157; part-time working 145; steady state economy 159, 162 King, Alexander 11 Krugman, Paul 39, 85, 86, 102 Kyoto Protocol (1992) 18, 90 labour: child 62, 154; costs 110; division of 158; elasticity of substitution 177, 178; intensity 109, 148, 208; mobility 123; production inputs 80, 109; structures of capitalism 107 labour productivity 80–1, 109–11; Baumol’s cost disease 170–2; and economic growth 111; future visions 220, 224; investment as commitment 150; need for investment 109; post-growth economy 175, 208; services as engine of growth 170; sustainable investment 166, 170; trade off with resource use 110; work-sharing 145, 146, 147, 148, 148, 149 Lahr, Christin 224–5 laissez-faire capitalism 187, 195, 196 see also free market Lakoff, George 30 language of goods 212; material footprint of 139–40; signalling of social status 71; and wellbeing 124 see also consumerism; material goods; symbolic role of goods Layard, Richard 55 leadership, political 199 see also governance Lebow, Victor 120 Lehman Brothers, bankruptcy 23, 25, 26, 118 leisure economy 204 liberal market economies 106, 107; financial crisis 27, 35–6 life expectancy: and income 72, 73, 74, 77–9, 78; inequality 206; response to economic hardship 80 see also basic entitlements life-satisfaction 73; inequality 205; relative income effect 55–61, 58 see also wellbeing/happiness limits, ecological 3, 4, 7, 11, 12, 20–2; climate change 17–20; decoupling 86; financial crisis 23–4; growth 21, 165, 210; post-growth economy 201–2, 226–7; role of the state 198, 200–2, 206–7; and social boundaries 141; wellbeing 62–63, 185 limits, flourishing within 61–5, 185; alternative hedonism 125–6; intrinsic values 127–31; moving towards 215, 218, 219, 221; paradox of materialism 121–23; prosperity 67–72, 113, 212; role of the state 201–2, 205; selfishness 131–8; shame 123–4; spending vs. saving behaviour 118–21, 119 see also sustainable prosperity limits to growth: confronting 7–8; exceeding 20–2; wellbeing 62–3 Limits to Growth report (Club of Rome) xxxii, xxxiii, 8, 11–16 ‘The Living Standard’ essay (Sen) 50, 123–4 living standards 82 see also prosperity Lloyd, William Forster 190 loans 154; community investment 155–6; financial system weaknesses 34 see also credit; debt London School of Economics 25 loneliness 123, 137 see also alienation long-term: investments 222; social good 219 long-term wellbeing vs. short-term pleasures 194, 197 longevity see life expectancy love 212 see also intrinsic values low-carbon transition 19, 220 LowGrow model for the Canadian economy 175 MacArthur Foundation 144 McCracken, Grant 115 Malthus, Thomas Robert 9–11, 132–3, 190 market economies: coordinated 27, 106; liberal 27, 35–6, 106, 107 market liberalism 106, 107; financial crisis 27, 35–6; wellbeing 47 marketing 140, 203–4 Marmot review, health inequality in the UK 72 Marx, Karl/Marxism 9, 189, 192, 225 Massachusetts Institute of Technology (MIT) 11, 12, 15 material abundance see opulence material goods 68–9; identity 52; language of 139–40; and wellbeing 47, 48, 49, 51, 65, 126 see also symbolic role of goods material inputs see resource use materialism: and fear of death 69, 104, 115, 212–15; and intrinsic values 127–31; paradox of 121–3; price of 126; and religion 115; values 126, 135–6 see also consumerism mathematical models/simulations 132; austerity policies 181; countercyclical spending 181–2, 182; decoupling 84, 91, 96–101; inequality 176–8; post-growth economy 164; stock-flow consistent 179–80 Mawdsley, Emma 70 Mazzucato, Mariana 193, 220 MDG (Millennium Development Goals) 74–5 Meadows, Dennis and Donella 11, 12, 15, 16 meaning/purpose 2, 8, 22; beyond material goods 212–16; consumerism 69, 203, 215; intrinsic values 127–31; moving towards 218–20; wellbeing 49, 52, 60, 121–2; work 144, 146 see also intrinsic values means and ends 159 mental health: inequality 206; meaning/purpose 213 metaphors: government as household 30, 42; invisible hand 132, 133, 187 Middle East, energy inputs 88 Miliband, Ed 199 Mill, John Stuart 125, 159, 160, 174 Millennium Development Goals (MDG) 74–5 mindfulness 128 Minsky, Hyman 34, 35, 40, 182, 208 MIT (Massachusetts Institute of Technology) 11, 12, 15 mixed economies 106 mobility of labour, loneliness index 123 Monbiot, George 84, 85, 86, 91 money: creation 154, 157, 178–9; and prosperity 5; as social good 140, 153–7, 158 see also financial systems monopoly power, corporations 106–7 The Moral Consequences of Economic Growth (Friedman) 82, 176 moral dimensions, good life 63 see also intrinsic values moral hazards, separation of risk from reward 35 ‘more fun with less stuff’ 129, 217 mortality fears 69, 104, 115, 212–15 mortality rates, and income 74, 74–6, 75 mortgage loans 28–9, 35 multinational corporations 106–7 national debt see debt, public-sector nationalisation 191; financial crisis 38, 188 natural selection 132–3 see also struggle for existence nature, rights of 6–7 negative emissions 98–9 negative feedback loops 16–17 Netherlands 58, 62, 206, 207 neuroscientific perspectives: flourishing 68, 69; human behaviour 134 New Climate Economy report Better Growth, Better Climate 18 New Deal, USA 39 New Economics Foundation 175 nickel, commodity prices 13 9/11 terrorist attacks (2001) 121 Nordhaus, William 171, 172–3 North America 128, 155 see also Canada; United States Norway: advertising 204; inequality 206; investment as commitment 151–2; life expectancy 74; relative income effect 58; schooling 76 novelty/innovation 104, 108, 113; and anxiety 116–17, 124, 211; crisis of commitment 195; dilemma of growth 211; human psyche 135–6, 136, 137; investment 150, 166, 168; post-growth economy 226; role of the state 196, 197, 199; as service 140, 141–4, 158; symbolic role of goods 114–16, 213 see also technological advances Nudge: Improving Decisions about Health, Wealth, and Happiness (Thaler and Sunstein) 194–5 Nussbaum, Martha 64 nutrient loading, critical boundaries 17 nutrition 67 see also basic entitlements obesity 72, 78, 206 obsolescence, built in 113, 204, 220 oceans: acidification 17; common pool resources 192 Offer, Avner 57, 61, 71, 194, 195 oil prices 14, 21; decoupling 88; financial crisis 26; resource constraints 15 oligarchic capitalism 106, 107 opulence 50–1, 52, 67–72 original sin 9, 131 Ostrom, Elinor and Vincent 190, 191 output see efficiency; gross domestic product; productivity ownership: and expansion 105; private vs. public 9, 105, 191, 219, 223; new models 223–4; types/definitions of capitalism 105–7 Oxfam 141 paradoxes: materialism 121–3; thrift 120 Paris Agreement 19, 101, 201 participation in society 61, 114, 122, 129, 137; future visions 200, 205, 218, 219, 225; work as 140–9, 148, 157, 158 see also social inclusion part-time working 145, 146, 149, 175 Peccei, Aurelio 11 Perez, Carlota 112 performing arts, Baumol’s cost disease 171–2 personal choice 216–18 see also freedom/autonomy personal property 189, 191 Pickett, Kate 71, 205–6 Piketty, Thomas 33, 176, 177 planetary boundaries see limits (ecological) planning for change 17 pleasure 60–1 see also wellbeing/happiness Plum Village mindfulness community 128 Polanyi, Karl 198 policy see governance political leadership 199 see also governance Political Economy Research Institute, University of Massachusetts 41 pollution 12, 21, 53, 95–6, 143 polycentric governance 191, 192 Poor Laws 10 poor nations see poverty population increase 3, 12, 63, 96, 97, 190; Malthus on 9–11, 132–3 porn industry 40 Portugal 28, 58, 88, 206 positional competition 55–61, 58, 71, 72 see also social comparison positive feedback loops 16–17 post-growth capitalism 224 post-growth macroeconomics 159–60, 183–4, 221; credit 178–80; degrowth movement 161–3; economic stability 174–6; green growth 163–5; inequality 176–8; role of state 181–3, 182, 200–8, 206; services 170–4; sustainable investment 166–70 see also alternatives; future visions; reform poverty 4, 5–6, 216; basic entitlements 72; flourishing within limits 212; life expectancy 74, 74; need for new economic model 101; symbolic role of goods 70; wellbeing 48, 59–60, 61, 67 see also inequality; relative income effect power politics 200 predator–prey analogy 103–4, 117 private credit see credit private vs. public: common good 208; ownership 9, 105, 191, 219, 223; salaries 130 privatisation 191, 219 product lifetimes, obsolescence 113, 204, 220 production: inputs 80–1; ownership 191, 219, 223 productivity: investment 109, 167, 168, 169; post-growth economy 224; services as engine of growth 171, 172, 173; targets 147; trap 175 see also efficiency measures; labour productivity; resource productivity profits: definitions of capitalism 105; dilemma of growth 211; efficiency measures 87; investment 109; motive 104; post-growth economy 224; and wages 175–8 progress 2, 50–5, 54 see also novelty/innovation; technological advances progressive sector, Baumol’s cost disease 171 progressive state 185, 220–2; contested 186–9; countering consumerism 202–5; equality measures 205–7, 206; governance of the commons 190–2; governance as commitment device 192–5; governmentality of growth 195–7; limit-setting 201–2; moving towards 197–200; post-growth macroeconomics 207–8, 224; prosperity 209 prosocial behaviour 198 see also social contract prosperity 1–3, 22, 121; capabilities for flourishing 61–5; and growth 3–7, 23, 66, 80, 160; and income 3–4, 5, 66–7; limits of 67–72, 113, 212; materialistic vision 137; progress measures 50–5, 54; relative income effect 55–61, 58, 71, 72; social perspectives 2, 22, 48–9; state roles 209 see also capabilities for flourishing; post-growth macroeconomics; sustainable prosperity; wellbeing prudence, financial 120, 195, 221; financial crisis 33, 34, 35 public sector spending: austerity policies 189; countercyclical spending strategy 181–2, 182; welfare economy 169 public services/amenities: common pool resources 190–2, 198, 199; future visions 204, 218–20; investment 155–6, 204; ownership 223 see also private vs. public; service-based economies public transport 41, 129, 193, 217 purpose see meaning/purpose Putnam, Robert 122 psyche, human see human nature/psyche quality, environmental 12 see also pollution quality of life: enterprise as service 142; inequality 206; sustainable 128 quality to throughput ratios 113 quantitative easing 43 Queen Elizabeth II 25, 32, 34, 37 quiet revolution 127–31 Raworth, Kate 141 Reagan, Ronald 8 rebound phenomenon 111 recession 23–4, 28, 81, 161–3 see also financial crisis recreation/leisure industries 143 recycling 129 redistribution of wealth 52 see also inequality reforms 182–3, 222; economic structures 224; and financial crisis 103; financial systems 156–8, 180 see also alternatives; future visions; post-growth economy relative decoupling 84–5, 86; historical perspectives 87–9, 89; relationship with absolute decoupling 96–101, 111 relative income effect 55–61, 58, 71, 72 see also social comparison religious perspectives 9–10, 214–15; materialism as alternative to religion 115; original sin 9, 131; wellbeing 48, 49 see also existential fear of death renewable energy xxxv, 41, 168–169 repair/renovation 172, 220 resource constraints 3, 7, 8, 11–15, 47 resource productivity 110, 151, 168, 169, 220 resource use: conflicts 22; credible alternatives 101, 220; decoupling 84–9, 92–5, 94, 95; and economic output 142–4; investment 151, 153, 168, 169; trade off with labour costs 110 retail therapy 115 see also consumerism; shopping revenues, state 222–3 see also taxation revolution 186 see also social stability rights: environment/nature 6–7; human see basic entitlements risk, financial 24, 25, 33, 35 The Road to Serfdom (Hayek) 187 Robinson, Edward 132 Robinson, Joan 159 Rockström, Johan 17, 165 romantic movement 9–10 Roosevelt, Franklin D. 35, 39 Rousseau, Jean Jacques 9, 131 Russia 74, 76, 77–80, 78, 122 sacred canopy 214, 215 salaries: private vs. public sector 130, 171; and profits 175–8 Sandel, Michael 150, 164, 218 São Paulo, Clean City Law 204 Sardar, Zia 49, 50 Sarkozy, Nicolas xxxi, 53 savage state, romantic movement 9–10 savings 26–7, 28, 107–9, 108; investment 149; ratios 34, 118–20, 119 scale, efficiencies of 104 Scandinavia 27, 122, 204 scarcity, managing change 16–17 Schumpeter, Joseph 112 Schwartz, Shalom 135–6, 136 schooling see education The Science of Desire (Dichter) 114 secular stagnation 43–7, 45, 173 securitisation, mortgage loans 35 security: moving towards 219; and wellbeing 48, 61 self-development 204 self-expression see identity construction self-transcending behaviours see transcendence The Selfish Gene (Dawkins) 134–5 selfishness 133–8, 196 Sen, Amartya 50, 52, 61–2, 123–4 service concept/servicization 140–4, 147–8, 148, 158 service-based economies 219; engine of growth 170–4; substitution between labour and capital 178; sustainable investment 169–70 see also public services SFC (stock-flow consistent) economic models 179–80 shame 123–4 shared endeavours, post-growth economy 227 Sheldon, Solomon 214 shelter see basic entitlements shopping 115, 116, 130 see also consumerism short-termism/living for today 194, 197, 200 signals: sent out by society 130, 193, 198, 203, 207; social status 71 see also language of goods Simon, Julian 13 simplicity/simple life 118–20, 127–9, 215–16 simulations see mathematical models/simulations slow: capital 170; movement 128 smart growth 85, 163–5 see also green growth Smith, Adam 51, 106–7, 123, 132, 187 social assets 220 social boundaries (minimum standards) 141 see also basic entitlements social care 150–1 see also caring professions social comparison 115, 116, 117 see also relative income effect social contract 194, 198, 199, 200 social inclusion 48, 69–71, 114, 212 see also participation in society social investment 155, 156, 189, 193, 208, 220–3 social justice 198 see also inequality social logic of consumerism 114–16, 204 social stability 24, 26, 80, 145, 186, 196, 205 see also alienation social status see status social structures 80, 129, 130, 137, 196, 200, 203 social tolerance, and wellbeing 59, 60 social unrest see social stability social wage 40 social welfare: financial reforms 182–3; public sector spending 169 socialism 223 Sociobiology (Wilson) 134 soil integrity 220 Solon, quotation 47, 49, 71 Soper, Kate 125–6 Soros, George 36 Soskice, David 106 Soviet Union, former 74, 76, 77–80, 78, 122 Spain 28, 58, 144, 206 SPEAR organization, responsible investment 155 species loss/extinctions 17, 47, 62, 101 speculation 93, 99, 149, 150, 154, 158, 170; economic stability 180; financial crisis 26, 33, 35; short-term profiteering 150; spending: behaviour of ordinary people 34, 119, 120–1; countercyclical 181–2, 182, 188; economic stability 81; as way out of recession 41, 44, 119, 120–1; and work cycle 125 The Spirit Level (Wilkinson and Pickett) 71, 205–6 spiritual perspectives 117, 127, 128, 214 stability see economic stability; social stability stagflation 26 stagnant sector, Baumol’s cost disease 171 stagnation: economic stability 81–2; labour productivity 145; post-financial crisis 43–7, 45 see also recession state capitalism, types/definitions of capitalism 106 state revenues, from social investment 222–3 see also taxation state roles see governance status 207, 209, 211; and possessions 69, 71, 114, 115, 117 see also language of goods; symbolic role of goods Steady State Economics (Daly) xxxii steady state economies 82, 159, 160, 174, 180 see also post-growth macroeconomics Stern, Nicholas 17–18 stewardship: role of the state 200; sustainable investment 168 Stiglitz, Joseph 53 stock-flow consistent (SFC) economic models 179–80 Stockholm Resilience Centre 17, 201 stranded assets 167–8 see also ownership structures of capitalism see economic structures struggle for existence 8–11, 125, 132–3 Stuckler, David 43 stuff see language of goods; material goods; symbolic role of goods subjective wellbeing (SWB) 49, 58, 58–9, 71, 122, 129 see also wellbeing/happiness subprime lending 26 substitution, between labour and capital 177–178 suffering, struggle for existence 10 suicide 43, 52, 77 Sukdhev, Pavan 41 sulphur dioxide pollution 95–6 Summers, Larry 36 Sunstein, Cass 194 sustainability xxv–xxvi, 102, 104, 126; financial systems 154–5; innovation 226; investment 101, 152, 153, 166–70, 220; resource constraints 12; role of the state 198, 203, 207 see also sustainable prosperity Sustainable Development Strategy, UK 198 sustainable growth see green growth sustainable prosperity 210–12; creating credible alternatives 219–21; finding meaning beyond material commodities 212–16; implications for capitalism 222–5; personal choices for improvement 216–18; and utopianism 225–7 see also limits (flourishing within) SWB see subjective wellbeing; wellbeing/happiness Switzerland 11, 46, 157; citizen’s income 207; income relative to wellbeing 58; inequality 206; life expectancy 74, 75 symbolic role of goods 69, 70–1; existential fear of death 212–16; governance 203; innovation/novelty 114–16; material footprints 139–40; paradox of materialism 121–2 see also language of goods; material goods system dynamics model 11–12, 15 tar sands/oil shales 15 taxation: capital 177; income 81; inequality 206; post-growth economy 222 technological advances 12–13, 15; decoupling 85, 86, 87, 96–8, 100–3, 164–5; dilemma of growth 211; economic stability 80; population increase 10–11; role of state 193, 220 see also novelty/innovation Teilhard de Chardin, Pierre 8 terror management, and consumption 69, 104, 115, 212–15 terrorist attacks (9/11) 121 Thailand, Buddhist monasteries 128 Thaler, Richard 194 theatre, Baumol’s cost disease 171–2 theology see religious perspectives theory of evolution 132–3 thermodynamics, laws of 112, 164 Thich Nhat Hanh 128 thrift 118–20, 127–9, 215–16 throwaway society 113, 172, 204 timescales for change 16–17 tin, commodity prices 13 Today programme interview xxix, xxviii Totnes, transition movement 128–9 Towards a Green Economy report (UNEP) 152–3 Townsend, Peter 48, 61 trade balance 31 trading standards 204 tradition 135–6, 136, 226 ‘Tragedy of the commons’ (Hardin) 190–1 transcendence 214 see also altruism; meaning/purpose; spiritual perspectives transition movement, Totnes 128–9 Triodos Bank 156, 165 Trumpf (machine-tool makers) Germany 146 trust, loss of see alienation tungsten, commodity prices 13 Turkey 58, 88 Turner, Adair 157 21st Conference of the Parties to the UN Framework Convention on Climate Change (2015) 19 UBS (Swiss bank) 46 Ubuntu, African philosophy 227 unemployment 77; consumer goods 215; degrowth movement 162; financial crisis 24, 40, 41, 43; Great Depression 39–40; and growth 38; labour productivity 80–1; post-growth economy 174, 175, 183, 208, 219; work as participation 144–6 United Kingdom: Green New Deal group 152; greenhouse gas emissions 92; labour productivity 173; resource inputs 93; Sustainable Development Strategy 198 United Nations: Development Programme 6; Environment Programme 18, 152–3; Green Economy initiative 41 United States: credit unions 155–6; debt 27, 31–32; decoupling 88; greenhouse gas emissions 90–1; subprime lending 26; Works Progress Administration 39 universal basic income 221 see also citizen’s income University of Massachusetts, Political Economy Research Institute 41 utilitarianism/utility, wellbeing 50, 52–3, 55, 60 utopianism 8, 38, 125, 179; post-growth economy 225–7 values, materialistic 126, 135–6 see also intrinsic values Veblen, Thorstein 115 Victor, Peter xxxviii, 146, 175, 177, 180 vision of progress see future visions; post-growth economy volatility, commodity prices 14, 21 wages: and profits 175–8; private vs. public sector 130, 171 walking, personal choices for improvement 217 water use 22 Wealth of Nations, An Inquiry into the Nature and Causes (Smith) 123, 132 wealth redistribution 52 see also inequality Weber, Axel 46 welfare policies: financial reforms 182–3; public sector spending 169 welfare of livestock 220 wellbeing/happiness 47–50, 53, 121–2, 124; collective 209; consumer goods 4, 21, 22, 126; growth 6, 165, 211; intrinsic values 126, 129; investment 150; novelty/innovation 117; opulence 50–2, 67–72; personal choices for improvement 217; planetary boundaries 141; relative income effect 55–61, 58, 71, 72; simplicity 129; utilitarianism 50, 52–3, 55, 60 see also capabilities for flourishing western lifestyles 70, 210 White, William 46 Whybrow, Peter 68 Wilhelm, Richard 7 Wilkinson, Richard 71, 205–6 Williams, Tennessee 213 Wilson, Edward 134 wisdom traditions 48, 49, 63, 128, 213–14 work: as participation 140–9, 148, 157, 158; and spend cycle 125; sharing 145, 146, 149, 175 Works Progress Administration, USA 39 World Bank 160 World Values Survey 58 youth unemployment, financial crisis 144–5 zero sum game, growth as 57, 71

Toward Rational Exuberance: The Evolution of the Modern Stock Market
by B. Mark Smith
Published 1 Jan 2001

Shortly thereafter, the Banking Act of 1933, to become better known as the Glass-Steagall Act, gave the Federal Reserve more control over member banks’ speculative activities and drew a distinct line between the activities of commercial and investment banks by requiring that commercial banks divest themselves of investment affiliates. The legislation also created the Federal Deposit Insurance Corporation to insure bank deposits, an extremely important innovation that would virtually eliminate bank runs in the future. Neither the Securities Act of 1933 nor Glass-Steagall met strong resistance from the Wall Street community, which recognized that some form of new regulation was inevitable and found these first pieces of New Deal legislation to be at least tolerable. Overt regulation of the market, however, was a different matter.

…

At the time of the 1963 “salad oil” debacle, the New York Stock Exchange had intervened to protect customers of Ira Haupt & Company, establishing an important precedent that led to the formation of the Securities Investor Protection Corporation, which removed a significant element of risk (brokerage firm failures) that had in the past led to stock market panics. The 1930s reform legislation that provided federal deposit insurance for banks had already greatly reduced the risk of bank runs, another former cause of panics. Now, in 1980, the Fed’s decision to effectively bail out the Hunts indicated a proactive willingness to intervene in the markets to forestall crises that, if left unchecked, could wreak havoc on the financial system and the stock market. This is an extremely important point.

For Profit: A History of Corporations
by William Magnuson
Published 8 Nov 2022

As a result, if a large number of savers all of a sudden decide they want to reclaim their money, the bank has a problem. It does not have enough reserves on hand to pay them all back. When savers get wind of this, they may become increasingly panicked and rush to the bank in ever greater numbers to withdraw their savings, triggering a liquidity crisis—in other words, a run on the bank. Bank runs have a way of becoming self-fulfilling prophecies. Worry about a bank failing can cause the bank to fail. And what is more, given the first consequence of banking—its intricate interweaving in the broader economy—banking crises have a nasty tendency to ripple outward, bringing panic and crisis everywhere they reach.

…

By 1893, the Union Pacific had outstanding $11.5 million in collateral trust notes and $5.2 million in maturing sinking fund bonds, two bond types popular with railroads at the time; the first was secured by other bonds or securities, and the second required the corporation to set aside certain profits to redeem them. The Union Pacific had no chance of paying such a massive debt load. And then, in May, the Panic of 1893 struck the final blow. A series of bank runs and commodity crashes led to a drastic reduction in commerce, and railroads, already overstretched by years of building and expansion, faced a reckoning. “Bottom dropped out of west bound transcontinental business,” wrote the Union Pacific’s new president, Silas Clark. In the first six months of 1893, the Union Pacific’s net revenue dropped $800,000 from the previous year, and the decline only accelerated from there.

The Making of Global Capitalism
by Leo Panitch and Sam Gindin
Published 8 Oct 2012

It was the difficulty of raising funds on these markets that forced France’s largest bank, BNS Paribas, on August 9, 2007, to suspend payments due on three of its investment funds. By September Northern Rock, the UK’s fifth-largest lender, had gone to the Bank of England for emergency support, leading to a classic bank run. Within days the UK government had guaranteed Northern Rock’s deposits, and the Bank of England announced that it would provide loans to keep the bank going and extend the same support to other banks. Although President Bush declared in a major speech on the crisis at the end of August that “the government has got a role to play—but it’s limited,” the Treasury had by the beginning of that month already switched to full crisis-management mode, with Paulson “in hourly contact with the Fed, other officials in the administration, finance ministries and regulators overseas and people on Wall Street.”32 Meanwhile, the Fed was in contact with the European Central Bank, the Bank of Japan, and the Bank of England about the role they would all play as lenders of last resort.

…

Available at globalsecuritisation.com. 29 Deborah Solomon, “Questions for Paul O’Neill: Market Leader,” New York Times, March 30, 2008. 30 Ben Bernanke, “GSE Portfolios, Systemic Risk and Affordable Housing,” speech to the Independent Community Bankers of America’s Annual Convention, Honolulu, March 6, 2007. 31 Both quotes are from Gretchen Morgenson, “The Bank Run We Knew So Little About,” New York Times, April 3, 2011. 32 Vikas Bajaj, “Central Banks Intervene to Calm Volatile Markets,” New York Times, August 1, 2007. For the Bush speech, see Gillian Tett, Fool’s Gold, London: Little, Brown, 2009, p. 227. 33 Quoted in Peter Baker, “A Professor and a Banker Bury Old Dogma on Markets,” New York Times, September 20, 2008.

…

See Ben Bernanke, “Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression,” American Economic Review 73: 3 (June 1983); and Essays on the Great Depression, Princeton: Princeton University Press, 2000. 34 See Bank for International Settlements, “The International Interbank Market: A Descriptive Study,” BIS Papers 8, Monetary and Economic Department, July 1983; and David Gaffen, “The Meaning of LIBOR,” Wall Street Journal, September 7, 2007. 35 The leading borrowers in the months to come were Citibank ($3.5 billion in September), Deutsche Bank ($2.4 billion in November) and Calyon of France ($2 billion in December). See Morgenson, “The Bank Run We Knew So little About”; Jody Shenn, “Bank of China New York Branch Was Second-Largest Fed Borrower in Aug. 2007,” Bloomberg, March 31, 2011; and Bradley Keoun and Craig Torres, “Foreign Banks Tapped Fed’s Secret Lifeline Most at Crisis Peak,” Bloomberg, April 1, 2011. 36 Michael Shedlock, “Banks Worldwide Engage in Global Coordinated Panic,” Seeking Alpha, December 14, 2007.

DeFi and the Future of Finance
by Campbell R. Harvey , Ashwin Ramachandran , Joey Santoro , Vitalik Buterin and Fred Ehrsam
Published 23 Aug 2021

A noteworthy early example of an algorithmic stablecoin is Basis,11 which had to close due to regulatory hurdles. Current examples of algorithmic stablecoins include Ampleforth (AMPL)12 and Empty Set Dollar (ESD).13 The drawback to non-collateralized stablecoins is that they have a lack of inherent underlying value backing the exchange of their token. In contractions, this can lead to “bank runs,” in which many holders are left with large sums of the token that are no longer worth the peg price. There is still much work to be done – and regulatory hurdles to overcome – in creating a decentralized stablecoin that both scales efficiently and is resistant to collapse in contractions.14 Stablecoins are an important component of DeFi infrastructure because they allow users to benefit from the functionality of the applications without risking unnecessary price volatility.

Other People's Money: Masters of the Universe or Servants of the People?
by John Kay
Published 2 Sep 2015

The Glass–Steagall Act of 1933 imposed the separation of commercial and investment banking. The House of Morgan was divided into J.P. Morgan, the commercial banking arm, and Morgan Stanley, an investment bank. The Federal Deposit Insurance Corporation (FDIC) would in future insure depositors against losses from bank runs or bank failures. In both Britain and the USA different functions within the financial system were provided by different institutions. Commercial banks operated the payments system and met the short-term lending needs of their customers. Investment banks (then called ‘merchant banks’ in the UK) handled larger transactions involving the issue of securities.

…

In extreme cases of illiquidity, households end up hoarding cash under the bed. These supply chain inefficiencies may be costly, in both the milk supply chain and the money market. In September 2007 a picture of depositors queuing up to withdraw money from Northern Rock, a small British mortgage lender, made the front page of every national newspaper. This was a ‘bank run’, when everyone was attempting to withdraw their deposits before the cash was exhausted. But financial services are not unique in their vulnerability to runs. If people suspect there is not enough milk, they will queue to obtain whatever milk is available, and the fears of shortage will prove – temporarily – justified.

Panderer to Power
by Frederick Sheehan
Published 21 Oct 2009

Fortunately, this recent period of turbulence in financial markets has occurred at a time when U.S. commercial banks are strongly capitalized, reflecting years of robust profits.”36 Bernanke seemed incapable of learning from his own experience. In August, Countrywide Bank, a part of Angelo Mozilo’s empire, suffered a bank run when depositors fought their way into Countrywide branches. By that time, the Implode-O-Meter Web site listed 126 imploded mortgage companies, including 10 that closed up shop the same week.37 Yet, Bernanke told a group of central bankers and economists in October that he had no way of knowing if there had been a housing bubble.38 33 Frederic S.

…

In London, he told the Daily Telegraph that “Britain is more exposed than we are [to mortgage defaults]—in the sense that you have a good deal more adjustable-rate mortgages.”17 That would seem to contradict his variable-rate advice in February 2004, when he advised Americans to look overseas, “where adjustable-rate mortgages are far more common.”18 His statement to the Telegraph was on September 17, in the midst of a bank run on Northern Rock, a British bank. He may not have heightened the hysteria sweeping Britain, but he could have kept his mouth shut. 14 Interview with Leslie Stahl, 60 Minutes, September 16, 2007. 15 Jane Wardell, “Greenspan Defends Subprime,” Associated Press, October 2, 2007. 16“World Markets Still Affected by Fear: Greenspan,” Le Figaro, September 23, 2007. 17“UK More Vulnerable than America to the Credit Crunch, Greenspan says,” Daily Te l eg raph (London), September 18, 2007.

Bit by Bit: How P2P Is Freeing the World
by Jeffrey Tucker
Published 7 Jan 2015

Government likes to control the money because it can depreciate it and thereby have another revenue source besides taxes. It can guarantee its own debts to prevent markets from evaluating them realistically. The banks oblige this wish. In exchange, they are protected from market competition and enjoy protection against bank runs. In essence, the government grants banks the right to counterfeit so long as government can enjoy the first fruits of the printing press. Once you release yourself from the myth that government created money, new possibilities emerge. Menger describes the emergence of money in evolutionary terms.

Makers and Takers: The Rise of Finance and the Fall of American Business
by Rana Foroohar
Published 16 May 2016

Senator Glass, along with Congressman Henry Steagall, crafted the Glass-Steagall Act to separate commercial and investment banking in the United States. For more than six decades afterward, the law helped to ring-fence commercial lending from risky proprietary trading. Glass-Steagall also created the Federal Deposit Insurance Corporation (FDIC), which insured bank depositors up to $5,000 each, reducing the risk of bank runs and assuring the general public that it would be safe in case of a financial crisis. Finally, the legislation put limits on the amount of interest that banks could offer savers to attract their money. This measure, known as Regulation Q, was designed in part to prevent banks from competing too vigorously with one another for deposits by offering higher and higher interest rates, which might in turn push them into the sort of risky investments that had precipitated Black Tuesday in 1929.

…

And it worked, at least for a few decades. The period between the Great Depression and the 1960s was one in which banking was held largely in check, providing mostly plain-vanilla services to average people. Think of the 1946 movie It’s a Wonderful Life, in which Jimmy Stewart’s character, George Bailey, stems a bank run with a famous monologue explaining the local building and loan as the glue holding the community together: “The money’s not here. Your money’s in Joe’s house that’s right next to yours. And in the Kennedy house and Mrs. Macklin’s house and a hundred others.” Bankers of the time thought of themselves not as dealmakers but as stewards of individual wealth and lubricators of industry.

Vultures' Picnic: In Pursuit of Petroleum Pigs, Power Pirates, and High-Finance Carnivores
by Greg Palast
Published 14 Nov 2011

They thought of it as a fine way to test their policies against The Market’s expected reaction. Stiglitz thought it sick, bad governance, and a blatant conflict of interest. He pointed that out and got no more than a look one would give a child that doesn’t understand the ways of the adult world. In regard to letting banks run wild worldwide, Stiglitz raised some questions and got more tolerant “you’ll see when you grow up” looks. In 2008, when Barack Obama was elected by a nation in deep economic recession, the President-Elect waited barely a week before picking his economic cabinet: Larry Summers to the new post of Economics Czar and Tim Geithner as Czarina, Secretary of the Treasury.

…

In Ecuador’s December 2006 election, the IMF and international banks were counting on the owner of the biggest banana plantation in this banana republic to be returned to the presidency. But Correa, which means “The Belt” in Spanish, whipped him. The country’s credit rating, in bad shape, fell apart. Correa grinned. Ecuador’s agreement to pay off the losses of banks run by straight-out crooks had been coerced out of Palacio’s and Correa’s psychotic predecessors. (There are more psycho presidents in history than I can count, from Iran to the USA. But Ecuador’s Abdala Bucaram, removed in 1997, had an official medical diagnosis.) Correa’s presidential campaign anthem was Twisted Sister’s “We’re Not Gonna Take It.”

The Death of Money: The Coming Collapse of the International Monetary System
by James Rickards
Published 7 Apr 2014

A run on the Iranian banking system commenced, as depositors tried to get their rials out to purchase black-market currencies or hard assets to preserve wealth. The government raised interest rates in an effort to stop the run on the banks. The United States had inflicted a currency collapse, hyperinflation, and a bank run and had caused a scarcity of food, gasoline, and consumer goods, through the expedient of cutting Iran out of the global payments system. Iran fought back, even before the escalation of U.S. efforts, by dumping dollars and buying gold to prevent the United States or its allies from freezing its dollar balances.

…

As long as holders remain in paper contracts, the system is in equilibrium. If holders in large numbers were to demand physical delivery, they could be snowflakes on an unstable mountain of paper gold. When other holders realize that the physical gold will run out before they can redeem their contracts for bullion, the slide can cascade into an avalanche, a de facto bank run, except the banks in this case are the gold warehouses that support the exchanges and ETFs. This is what happened in 1969 as European trading partners of the United States began cashing in dollars for physical gold. President Nixon shut the window on these redemptions in August 1971. If he had not done so, the U.S. gold vaults at Fort Knox would have been stripped bare by the late 1970s.

How Markets Fail: The Logic of Economic Calamities
by John Cassidy
Published 10 Nov 2009

Between 1929 and 1932, more than five thousand banks went out of business, and in early 1933, there was another big wave of failures as depositors in many states rushed to get out their money. The panic was stemmed only when FDR, the new president, declared a bank holiday, during which he introduced a federal system of deposit insurance. Since then, bank runs have been rare. Deposit insurance provides an effective means of dealing with the problem of hidden information, but it creates moral hazard. If a bank gets into serious trouble, the government will make good the deposits of all its customers up to an agreed limit, which was recently raised to $250,000.

…

The inevitable result, fans of Jimmy Stewart and the 1946 Frank Capra film It’s a Wonderful Life won’t need reminding, is a run on the bank. During early March, rumors about Bear’s financial health began to circulate. Many Bear employees suspected that short sellers were spreading malicious stories to drive down the firm’s stock. The worst thing about bank runs is that they can be self-fulfilling: once the logic of the prisoner’s dilemma takes over, even an economically sound institution can be felled. To this day, Bear’s senior executives insist the firm was in this category. Its mortgage exposures, although considerable, were smaller than those of many of its rivals.

Money for Nothing
by Thomas Levenson
Published 18 Aug 2020

In its partisans’ view, that would be the saving of the nation. Alternatively, as the skeptical Defoe warned, the clever men of Exchange Alley had figured out a way to get rich off of the public interest: they were “ready, as Occasion offers, and Profit presents, to Stock-jobb [buy and sell] the Nation, couzen [trick] the Parliament, ruffle the Bank, run up and run down Stocks, and put the Dice upon the whole Town.” “Stock-jobb the nation.” That was the crux of Defoe’s polemic: schemes like this transformed the national debt—a public necessity—into a form that could be manipulated for private profit. That was, he argued, if not treason itself, then treachery’s nearest cousin: “Is not all that is taken from the Credit of the Publick, on such an Occasion…is not every Step that is taken in Prejudice of the King’s Interest…a plain constructive Treason in the Consequences of it?”

…

To most Englishmen and -women, the Alley was an exotic, perilous place—and nowhere more so than at Jonathan’s Coffee House, inside those rooms in which, as the ever-skeptical Daniel Defoe would warn, the unwary and the ignorant could fall prey to “some of the great Follies of Life.” * This assumption turns out to be true, except on the rare occasions when it has proved to be very false indeed: episodes like bank runs during the Great Depression that inspired both new regulatory demands and institutional changes, like the creation of deposit insurance, to reduce the risk to the public. CHAPTER FIVE “more paper credit” Nothing remains of Jonathan’s today. Exchange Alley is itself a ghost: a narrow, deserted pedestrian corridor flanked by faceless office buildings from the High Banal epoch in British architecture.

The Tyranny of Nostalgia: Half a Century of British Economic Decline
by Russell Jones
Published 15 Jan 2023

As the US Treasury, the Federal Reserve and Congress grappled with the TARP, and as global markets convulsed, Brown, Darling and King concluded that there was no alternative but to put in place a bold and decisive bank recapitalization plan. Events were moving so rapidly, especially where RBS (one of the world’s biggest banks) and HBOS (Britain’s largest mortgage lender) were concerned, that inaction or undue delay threatened further bank runs, and possibly the implosion of the entire UK financial system. That is to say: no functioning ATMs; no possibility of cashing cheques; no acceptance of credit cards; no wages paid; indeed, no financial transfers of any kind. This outcome − tantamount to societal breakdown − would have been far beyond anything experienced during the Great Depression.

…

And if it had happened in the UK it would have proved contagious and happened elsewhere too. It had to be avoided at all costs. A firebreak had to be put in place. In the meantime, something called emergency liquidity assistance (ELA) was hastily concocted in order to keep RBS and HBOS afloat and to avert further bank runs. This was a secret Bank of England facility (underwritten by a partial Treasury indemnity) that allowed RBS and HBOS in particular to access tens of billions of pounds in emergency financial assistance in return for collateral (much of it highly questionable) and substantial fees. At its peak on 17 October, RBS would draw £36.6 billion from this facility, while HBOS drew £25.4 billion on 13 November.17 The loans were repaid, however, and the banks’ collateral was returned in December and January, respectively.

Seven Crashes: The Economic Crises That Shaped Globalization
by Harold James
Published 15 Jan 2023

“Sudoku for Economists”: 2008 Data ($ billions) Source: Mervyn King, speech at the University of Exeter, January 19, 2010 For the financial world, globalization meant something quite particular, not just the extension of manufacturing. Financial systems looked stable: the United States believed that Depression-era banking legislation including deposit insurance had solved the problem of bank runs; and the UK could point out that there had not been a major or generalized bank run since 1866, perhaps even since 1825. Lessons about financial instability that might have been drawn from previous crashes were thus ignored or forgotten. The United States was manufacturing debt that was then used to boost demand, and selling it merrily to the rest of the world, not just to the export-promoting superindustrializers.

Expected Returns: An Investor's Guide to Harvesting Market Rewards
by Antti Ilmanen
Published 4 Apr 2011

Thoughts on the origins of the financial crisis The big picture is that the crisis followed the broad underpricing of risk in several asset classes amid persistently loose financial conditions. Recall Alan Greenspan’s warning during the boom years: “History has not dealt kindly with the aftermath of protracted periods of low risk premia.” A related interpretation is that the crisis was a modern-day bank run, where a bank run is defined as loss of confidence in a given bank, an asset class, or even the whole financial system. There was arguably too much trust and confidence during the preceding years, leading to complacency and excessive risk taking. Modern financial markets rely on liquidity. Once trust and confidence vanished, so did market liquidity in several assets.

…

In many real-world cases, the investment horizon is uncertain (and the perceived horizon is often positively related to market conditions and investor risk appetite). Banks, central banks, and corporations tend to have a short horizon, while customer deposits, FX reserves, and excess cash tend to be held for long periods. These institutions need to be prepared to satisfy sudden cash demands (such as are caused by a bank run, currency crisis, or various corporate expenses). Endowments, foundations, and sovereign wealth funds are closest to having permanent capital, but the first two have recurring spending needs each year, whereas the sovereign wealth funds of some commodity-rich countries can expect their net inflows to grow for another decade and net outflows to start only in the distant future.

Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State
by Paul Tucker
Published 21 Apr 2018

3 Buchanan, “Constitutionalization of Money,” p. 255. 4 Smith, Rationale of Central Banking; Hayek, Denationalisation of Money; and Dowd, Private Money, which contains a short section entitled “Abolishing the Bank of England,” possibly explaining why Eddie George asked for a summary (Buchanan, “Constitutionalization”). 5 With thanks to Nellie Liang, Brookings Institution and former director for financial stability at the Fed Board, for comments on late drafts of this and the next chapter, which discusses whether a stability regime can meet the Design Precepts. 6 George, “Approach to Macroeconomic Management,” makes clear that the 1990s’ Bank of England leadership felt much more comfortable gaining operational independence after supply-side reforms in the 1980s had made the real economy more flexible, as that reduced the burden on demand management in accommodating shocks to the economy. 7 That story is broadly captured in Diamond and Dybvig, “Bank Runs.” 8 This is how Mervyn King persuaded the UK that quantitative easing was not inherently inflationary: we were addressing a problem of “not enough money” threatening deflation. By contrast, the Fed tends not to highlight the monetary part of quantitative easing (or of monetary policy more generally), which left it exposed to accusations that it risked runaway inflation by creating too much money. 9 Under the Hayek proposal, there would be competition between different standards chosen by the issuing banks themselves.

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“Why Central Banks Should Be Financial Supervisors.” Vox Subprime Series, part 3. CEPR Policy Portal, November 30, 2007. ________. “Central Bank Independence: A Path Less Clear.” Bank for International Settlements, 2013. Cecchetti, Stephen G., and Kermit L. Schoenholtz. “Narrow Banking Won’t Stop Bank Runs.” Money, Banking and Financial Markets (blog), April 28, 2014. Cecchetti, Stephen G., and Paul Tucker. “Is There Macro-Prudential Policy without International Cooperation?” In Policy Challenges in a Diverging Global Economy, Proceedings of the Asia Pacific Policy Conference, edited by R. Glick and M.

…

Dewatripont, Mathias, Ian Jewitt, and Jean Tirole. “The Economics of Career Concerns, Part II: Application to Missions and Accountability of Government Agencies.” Review of Economic Studies 66, no. 1 (1999): 199–217. Dewey, John. The Public and Its Problems. Athens, OH: Swallow Press, 1954. Diamond, Douglas W., and P. H. Dybvig. “Bank Runs, Deposit Insurance, and Liquidity.” Journal of Political Economy 91, no. 3 (1983): 401–19. Dicey, A. V. Introduction to the Study of the Law of the Constitution. London: Macmillan, 1982. Doehler, Marian. “Institutional Choice and Bureaucratic Autonomy in Germany.” West European Politics 25, no. 1 (2002): 101–24.

The Man Who Knew: The Life and Times of Alan Greenspan
by Sebastian Mallaby
Published 10 Oct 2016

In the absence of the “Greenspan put,” the vast shadow-banking sector that had grown up on Greenspan’s watch was in danger of imploding. A quarter of a century earlier, the Fed and the Reagan administration had responded to history’s first electronic bank run, on Continental Illinois, by extending its safety net to the bank’s uninsured creditors. On Friday, September 19, 2008, a terrified Bush administration responded to history’s first shadow-bank run in the same way: it extended its safety net to cash parked in money-market funds, even though these had been explicitly excluded from federal deposit insurance. Over the weekend, the new government backstop was expanded even more.

…

As Continental’s loans proved uncollectible, traders from Asia to Europe began to fear that it might fail; and the day that Regan harrumphed about Volcker, the jitters turned into a full-blown panic. Banks cut credit lines to Continental as quickly as they could; and the clearinghouse of the Chicago Board of Trade, Continental’s neighbor and one of its largest customers, withdrew a $50 million deposit. History’s first electronic bank run had begun. There were no mobs of frenzied customers outside Continental’s doors. There were just numbers flashing on computer screens, heralding disaster.60 On Friday, May 11, the Federal Reserve Bank of Chicago hastily propped up Continental with a loan of $3.6 billion—more even than it had taken to stabilize Mexico.

…

The FOMC members were being asked to assent to a rescue whose details they had no part in negotiating. But Greenspan sold the Mexico operation forcefully. The crisis presented a textbook case for last-resort lending, he explained—Mexico was temporarily illiquid, not irredeemably insolvent. If the Fed could help the country survive the equivalent of an irrational bank run, the crisis would soon pass. Besides, the Fed’s assistance would be conditional. The Mexicans would have to commit to reforms before they borrowed the Fed’s money.16 His committee more or less appeased, Greenspan returned to the bull sessions with Rubin. The Fed was willing to help Mexico, he reported, but the Mexicans should also help themselves: to persuade investors to keep cash in their country, they should be instructed to raise interest rates.17 But over the next week or so, Greenspan contributed another perspective, too—one that drew inspiration from General Colin Powell, the victor of the Gulf War.

The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance
by Ron Chernow
Published 1 Jan 1990

The Pecora hearings would lead straight to Glass-Steagall and the dismemberment of the House of Morgan. IN the autumn of 1932, Hoover presided over one last humiliation—a nationwide banking crisis. Three years of deflation had eroded the collateral behind many loans. As banks called them in, the business slump worsened and produced more bank runs and failures. Before 1932, the thousands of bank closings were mostly confined to small rural banks. Then, that October, Nevada’s governor shut the state’s banks. There followed a frightening crescendo of state bank closings—euphemistically called holidays—climaxed by an eight-day closing of Michigan banks in February.

…

With an end to fixed exchange rates in the early 1970s, foreign-exchange trading became a wild poker game. In November 1973, Morgan president Walter Hines Page warned friends at Franklin National Bank against excessive foreign-exchange gambling and quietly alerted the New York Fed to the problem. In May 1974, Franklin’s foreign-exchange losses led to the first major bank run since the Depression and the biggest bank failure in U.S. history. When Bankhaus Herstatt, West Germany’s biggest private bank, mysteriously failed in June, it saddled Morgan Guaranty with a $13-million loss. That fall, Fortune warned, “The nation’s financial system is facing its gravest crisis since the Bank Holiday of 1933.

…

When domestic money managers balked, the bank relied more on Japanese and European funds and sent its financial evangelists abroad to preach calm. “We had the Continental Illinois Reassurance Brigade and we fanned out all around the world,” said David Taylor, Continental’s chairman in 1984.11 The bank never fully recuperated from Penn Square, which led to the first global electronic bank run in May 1984. It began with a fugitive rumor floating around Tokyo that an American investment bank was shopping Continental to possible buyers. This triggered the sale of up to $1 billion in Continental CDs in the Far East, spilling over into panicky European selling the next day. The Continental run was like some modernistic fantasy: there were no throngs of hysterical depositors, just cool nightmare flashes on computer screens.

The Scandal of Money
by George Gilder
Published 23 Feb 2016

It plunged the nation into a “Great Recession” marked by an oppressively skewed distribution of wealth, with an estimated $5 trillion in bonuses for bankers over seven years and unemployment soaring above 10 percent in the face of a shrinking percentage of adults in the workforce.3 Like most financial crises in history, they argue, this one required active governmental interventions, such as extended unemployment benefits and financial stimuli. But an $800 billion stimulus over three years represented less than 2 percent of the economy. As usual when there are widespread bank runs and financial turmoil, the Federal Reserve had to step in as “lender of last resort,” necessarily expanding governmental debts. Needed also was renewed regulation of systemic risks. But our debt levels remained under control compared with those of other countries and in the context of America’s world-leading gross domestic product (GDP).

Flash Boys: Not So Fast: An Insider's Perspective on High-Frequency Trading
by Peter Kovac
Published 10 Dec 2014

The real issue isn’t the prices he received – which are exactly what he asked for – but rather how the information about his order in a “dark” pool was known to somebody. That is troubling, and worth probing. Dark pools don’t disseminate market data to any of their clients, high-frequency or otherwise. But, as Lewis points out, clients didn’t know “whether the Wall Street bank [running the dark pool] allowed its own proprietary traders to know of the big buy order.” This is absolutely true. Some dark pool operators make no guarantees about their own trading in the dark pool. For those that promise that their bank’s proprietary traders have no special advantages, it’s still blind faith: unlike the public markets, there are few police on this beat.

The Color of Money: Black Banks and the Racial Wealth Gap
by Mehrsa Baradaran
Published 14 Sep 2017

Senate hearing described the federal imprimatur as follows: “The pass book issued to the depositors in the Freedmen’s Bank bore on its cover the likeness of President Lincoln, General Grant, also General Howard and others whom the freedmen had learned to revere as the special benefactors of their race. The flag of the United States was draped over the buildings, and designed to assure them that the United States would protect their interest."88 How else could a bank run by whites convince newly freed blacks to trust them with their hard-earned savings? The bank was also seen as trustworthy because of its prominent white leaders. John W. Alvord, the superintendent of the Freedmen’s Bureau department of education, was the driving force behind the bank’s creation and became an original trustee.

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Jr., 172-173 American Dilemma, 97 “American Dream, The,” 140-141 Anderson, Charles H., 76, 77 Antidiscrimination laws, 131-132, 210-211 Anti-Semitism, 130 Arendt, Hannah, 36-37 Assets, as vulnerability of black banks, 89-93 Atwater, Lee, 212, 218 Backing Black Business, 276-277 Baldwin, James: on ghettos, 4; on Reconstruction, 21; on black leaders, 46; on treatment of blacks during WWII, 130; on urban renewal programs, 141; on crime, 160, 217; on impact of racism, 284 Baltimore, Maryland, 249 #BankBlack Movement, 276 Banking and banks: community, 4, 123, 124, 127; Hamilton on, 4, 13, 14; lost faith in, 31-32; cooperative, 35; affiliated, 40-44; discrimination in hiring and lending, 194-196, 332n145; change in nature of, 239-242; regulated and unregulated systems in, 260; tax credits for, 266; bailout for, 268-269, 270, 271-273, 352n152. See also Black banking and banks; Minority banks Banking and Currency Committee, 146-148 Banking deserts, 260-261 Bank of America, 6, 126, 240, 258 Bank of Italy, 6, 125-126 Bank of New England, 242 Bank runs, 88 Banks, N. P., 23 Barlow, Frank C., 19 Bates, Timothy, 244 Beck, Glenn, 268-269 Beckert, Sven, 295n150 Bell, Ryan, 272 Benevolent societies, 40 Benga, Ota, 303n123 Berry, Edwin, 112 Biggert, Judy, 268 Binga, Jesse, 71-74, 92, 304n14, 305n27, 308n110 Binga State Bank, 71, 72-74, 92, 304n17, 305n27 Birth of a Nation, 65-66 Black banking and banks: study of, 1-2; origin of, 2, 12-16, 288n15; impact of, 2-3, 83; support for, 4, 100, 204-206, 327n38; theory of, 4; effectiveness and demise of, 4-6, 7-8, 275-276; and disadvantage of blacks, 9; Freedmen’s Savings Bank, 22-32; pride through, 32-33; affiliation with black institutions, 40-44; private, 44-46; black business and, 51-52, 85-86, 89-90, 97-98, 294n140; Great Migration and rise of, 69-71; in Chicago’s black belt, 71-75; in New York, 75-81, 306nn45,49; trust in, 84-86; Great Depression’s impact on, 86-87; failure of, 88-97, 99-100, 241-243; criticism of, 98-99, 200-204; mortgages provided by, 113-116; civil rights and, 116-122; New Deal’s impact on, 122-125; King on, 159; demand for, 181; black leaders’ support for, 191-192; black capitalism and, 196-205; CRA’s impact on, 234; challenges facing, 243-245, 268-273, 278-279; profitability of, 265-266; noneconomic appeal of, 266-267; revival of, 276-277; preservation of, 279; and eliminating wealth gap, 279-280; Black banking and banks (continued) unrecognized, 304n7; need for, 354n172 Black business: support for, 47-51, 97-99, 100, 191-192, 222, 263, 327n38; black banking and, 51-52, 85-86, 89-90, 97-98, 294n140; growth of, 51-52, 294n140; black churches and, 52-53; challenges facing, 53-54; types of, 54-56; in Durham and Tulsa, 56-63; and black nationalism, 82-83; civil rights and, 121-122, 128-130; King on, 158-159; Malcolm X on, 161; Nixon on, 165; demand for, 181-182; renewed emphasis on, 192; success of, in late 1960s, 193-194; as solution to black problems, 299n52; exclusivity of, 300-301nn74,75,77; sales volume of, 318n121; engagement in, 337n35 Black capitalism: as political diversion, 3; support for, 4, 204-214, 220-222; and wealth gap, 6-7; Nixon and, 164-166, 176-184; and failed attempts at integration, 166-171; proposed plans for advancement of, 171-176; black power and, 178, 188-190; focus on small businesses, 184-185; and Minority Bank Deposit Program (MBDP), 185; and affirmative action, 186; participation in, programs, 187-188; results of, 188-192; and class tensions, 192-193; banking and, 194-196; black banking and, 196-205; criticism of, 200-204; as remedy for systemic exclusion, 206-207; change in purpose of, 222-226; revitalized under Clinton, 226-228; Buckley on, 329n77.

Sabotage: The Financial System's Nasty Business
by Anastasia Nesvetailova and Ronen Palan
Published 28 Jan 2020

Morgan would loan Bear Stearns the funds, which J. P. Morgan borrowed from the central bank. The loan was extended for twenty-eight days.34 The next day, Friday, seemed to have started well: the markets did not appear to be fazed over the overnight deal. It would be a few hours later that the storm hit. The bank run escalated, and Bear’s capital reserves depleted quickly. On the evening of Friday the 14th, Hank Paulson, Treasury Secretary, called Bear’s CEO. Paulson threatened to cut the credit line granted the night before if Schwartz did not arrange a takeover by Sunday. Over the weekend several bidders engaged in talks with Bear’s executives, but all eventually dropped out.

100 Baggers: Stocks That Return 100-To-1 and How to Find Them
by Christopher W Mayer
Published 21 May 2018

We talked about the composition of the index. The highest weight (37 percent) was in consumer discretionary stocks—such as AutoNation, Carnival, Hyatt Hotels or Wendy’s. There is hardly any weight in mining, which ought to tell you something. There are many financial and real estate companies. BOK Financial, for example, is a bank run by George Kaiser in Oklahoma. “That’s one of the best run banks in history,” Matt said. “We’re not talking about a Citi or JP Morgan.” The insurer W. R. Berkley is another great one. “Greenlight RE—run by Einhorn,” Matt added. “That’s a financial, but it’s really David Einhorn’s vehicle.” You can find all the names—a kind of ready-made watch list—by just looking at the fund’s holdings, which it discloses publicly.

All the Devils Are Here
by Bethany McLean
Published 19 Oct 2010

Thanks to deposit insurance, the days were long gone when bank customers stood in line to pull their money out of a shaky bank, creating a run on the bank that usually ended in its collapse. But as Gorton and fellow Yale economist Andrew Metrick would later argue in a paper, the repo market created the conditions for the modern version of the bank run. You never saw this kind of bank run in photographs, but it was every bit as devastating. Where were the regulators as this buildup of risk was taking place? They were nowhere to be found. Just as the banking regulators had averted their eyes from the predatory lending on Main Street, so did they now ignore the ferocious accumulation of risk, much of it tied to subprime mortgages, on Wall Street.

Pity the Billionaire: The Unexpected Resurgence of the American Right
by Thomas Frank
Published 16 Aug 2011

Under Herbert Hoover, the bailout agency’s doings were enormously unpopular, thanks to episodes that should sound very familiar to us today. In 1932, the RFC went to the rescue of railroads that were essentially fronts for Wall Street interests. (Like AIG!) Then it poured money into a big Chicago bank run by the man who had been not only the RFC’s chairman a few weeks before, but also Calvin Coolidge’s vice president. (Cronyism!) And it did these things while denying funds to cities that had run out of money to pay schoolteachers. (Where’s my bailout?)3 Although it was almost never mentioned in our present-day debates over the legacy of Franklin Roosevelt, those bad bailouts were one of the targets of Roosevelt’s famous “forgotten man” speech of 1932, in which he charged that “the infantry of our economic army” had been overlooked while Hoover dispensed billions to the “big banks, the railroads, and the corporations of the nation.”4 Did FDR’s criticism of the bailouts mean there would be no more of them?

The Payoff
by Jeff Connaughton

One report by researchers at the Bank of International Settlements estimated that the size of the overall repo market in the United States, the U.K., and the euro zone totaled approximately $11 trillion at the end of 2007. Incredibly, that was almost $5 trillion more than the total value of domestic bank deposits at that time, which was less than $7 trillion. The overreliance on such wholesale financing made the entire financial system vulnerable to a bank run, as during the Great Depression (before we instituted a system of deposit insurance and strong bank supervision). Remarkably, although there is a prudential cap on the amount of deposits the largest banks can hold, nothing limits bank liabilities like repos, which often must be rolled over every day.

Bitcoin: The Future of Money?
by Dominic Frisby
Published 1 Nov 2014

Prologue We have not only saved the world, er, saved the banks… Gordon Brown, former UK Prime Minister In September 2008, crisis gripped the world. Many believed the entire financial system was about to collapse. It was a ‘global financial tsunami’; we were ‘on the brink’ and ‘staring into the abyss’.1 Capitulating stock markets, bankruptcies, bank runs – events came thick and fast and, at first, nobody seemed to know quite what to do. Then, under immense pressure from the world of finance, governments and central banks reacted dramatically. They created money and credit on a scale unprecedented in human history. Banks were bailed out, interest rates were slashed to levels never seen before and the process of creating money electronically known as quantitative easing was begun.

Humans Need Not Apply: A Guide to Wealth and Work in the Age of Artificial Intelligence
by Jerry Kaplan
Published 3 Aug 2015

As momentum built, and other programs automatically executed “stop-loss” orders to sell at any price, the denominator of that percentage grew and grew. But that’s only the start of the story. Safety alarms, responsibly incorporated into HFT programs all over the world, went off. Detecting unusual market fluctuations, some began dutifully unwinding positions at a furious pace to protect their patron’s money. It was a full-on instant electronic bank run. The more aggressive ones, sensing a rare opportunity, smelled blood in the water. Interpreting the frantic buying and selling of their electronic counterparts as prey on the run, they traded furiously on their proprietary algorithms’ predictions that the generous spreads would quickly evaporate.

Swimming With Sharks: My Journey into the World of the Bankers
by Joris Luyendijk
Published 14 Sep 2015

Finding out what the problem is in the first place – “root cause analysis” – that’s nearly always the most time-consuming. Nobody has a complete and in-depth overview.’ He seemed genuinely concerned that one day a megabank would be shut out of its own data. What happens to the companies who rely on that bank’s payment system? ‘It would make the panic during a bank run look innocent.’ He spoke of colleagues who retain paper copies of all their internet banking statements and confirmed with a grin a favourite quote of mine from another IT specialist I’d interviewed: ‘The generation who built the computer systems when automation took off is now reaching retirement age.

Strong Towns: A Bottom-Up Revolution to Rebuild American Prosperity
by Charles L. Marohn, Jr.
Published 24 Sep 2019

As people withdraw investment, conditions worsen, as conditions worsen, confidence in the housing market – confidence in your neighborhood – drops, which causes further disinvestment, which causes further erosion of confidence. It just keeps cycling. We were basically a community engaged in a bank run on confidence. We have the capacity to revitalize our neighborhoods and communities, but we just don’t have the confidence.1 In my hometown, our poorest neighborhoods are also some of our most financially productive. There is a general sense among some of the more affluent in town that the people in these poor neighborhoods don’t want nice things.

The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality
by Brink Lindsey
Published 12 Oct 2017

The main explicit subsidies consist of (1) the Federal Reserve System’s discount window, established in 1913, through which the Fed can act as a “lender of last resort” and supply emergency liquidity to distressed banks; and (2) federal deposit insurance, first instituted in 1933, through which covered depositors are held harmless in the event of a bank failure. Both these policies are justified on the grounds of preventing and containing bank runs—a particularly serious problem in the United States because historical limits on branch banking rendered US banks under-diversified and consequently crisis-prone. Yet even as they reduced the risks of contagion and financial meltdown, these policies simultaneously reduced the risks of high leverage.

The River: A Novel
by Peter Heller
Published 5 Mar 2019

Wynn dumped the blueberries out of the pot and yelled at Maia to pull up her hood, she did, and he dipped the pan and doused her with water and then himself and he yelled and tossed the pot to Jack. They needed to get to the bank. It was low along here, it was the shadow of a wall, a cut bank running to three or four feet above the water, running down to water’s edge and rising again like a moldering stone fence. The fire was coming fast and they needed to get against the dirt down low maybe in the water and get their heads in moss or roots, he didn’t know what. As he thought that, he heard another rush beneath the fire: the current was picking up.

Confessions of a Crypto Millionaire: My Unlikely Escape From Corporate America
by Dan Conway
Published 8 Sep 2019

Since this ledger isn’t controlled by any one party, it is decentralized. Financial transactions and, theoretically, any type of complex business can be completed on the Bitcoin, Ethereum or other public blockchain ledgers. The big-picture implications of the triple-entry ledger are huge. Today, the world economy is controlled by corporations and banks running centrally controlled double-entry ledgers. The Internet was supposed to be free, but even it has been captured. The FAANG companies (Facebook, Apple, Amazon, Netflix, and Google) have made it a gated community. Blockchain is an opportunity to organize in a different way. It has the potential to weaken the gatekeepers, rule makers, and monopolies through decentralization.

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown
by Philip Mirowski
Published 24 Jun 2013

In the rush to judgment, anyone who said or wrote anything about some kind of bubble or imbalance or financial instability sometime in the 2000s suddenly sought to be credited as rivaling the Oracle at Delphi, engaging in the most exquisite augury. Some Nobel winners in particular pushed this ploy well beyond the breaking point, eliding prediction proper, and instead suggesting that anyone who had ever produced a mathematical model mentioning bank runs or financial fraud or irrational expectations or debt deflation or (fill in the blank) was proof positive that the economics profession had not been caught unawares.23 It helped if the interlocutor stopped paying attention to what had been taught in the macroeconomics classes across the most highly ranked economics departments.

…

De Soto, Hernando. “The Destruction of Economic Facts,” Business Week, April 28, 2011. Deuber-Mankowsky, Astrid. “Nothing Is Political, Everything Can Be Politicized: On the Concept of the Political in Michel Foucault and Carl Schmitt,” Telos 142 (2008): 135–61. Diamond, Douglas, and Philip Dybvig. “Bank Runs, Deposit Insurance and Liquidity,” Journal of Political Economy 91 (1983): 401–19. Diamond, Marie. “The Return of Debtor’s Prisons” (2011), at http://thinkprogress.org/justice/2011/12/13/388303/the-return-of-debtors-prisons-thousands-of-americans-jailed-for-not-paying-their-bills/. Diamond, Sara.

Money and Government: The Past and Future of Economics
by Robert Skidelsky
Published 13 Nov 2018

is much less serious than a solvency crisis; temporary funds from the central bank can alleviate a liquidity crisis, but are of no use if the bank is insolvent. Still, the two are somewhat related. In the period 2007–8, confusion over who was solvent and who was not meant that banks stopped lending to each other, drying up their principal source of liquidity; this led to the bank run on the UK’s Northern Rock in 2007. Similarly, illiquidity can force a bank into insolvency if its financing costs exceed the interest it receives on its assets, or if it has to ‘fire-sell’ its assets in order to pay its debts on time. Leverage A bank’s leverage is the ratio of its debt to its equity.

…

In theory, all public investment could be a charge on the state’s capital budget. However, where projects are potentially profitable but, for short-termist or other reasons, unattractive to private investors, there is a good case for outsourcing them to independent or quasi-independent institutions, such as a State Investment Bank, run on commercial lines. The reasons for doing so are partly psychological. 355 A N e w M ac roe c onom ic s Their borrowing would be ‘off budget’ and so avoid the hostility which attaches to any increase in the government deficit.8 Public confidence in the value of their investments will be increased if they are seen to be independent of politics.

I.O.U.: Why Everyone Owes Everyone and No One Can Pay
by John Lanchester
Published 14 Dec 2009

In one form or another, balance sheet abysses of this sort are responsible for all the collapses we’ve seen. Perhaps we can experience a twinge of national pride at the thought that this planetwide problem began with Northern Rock, which in September 2007 experienced the single most dreaded event which can overtake any financial institution, not seen in Britain for more than a century: a bank run. So many people turned up in person to withdraw money that the bank ended up paying out 5 percent of its total assets, a cool £1 billion in cash. Perhaps we can also experience a twinge of nostalgia at the fact that at the time of its nationalization a few months later, the £25 billion Northern Rock bailout was the biggest sum any government anywhere in the world had ever given to a private company.

The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse
by Mohamed A. El-Erian
Published 26 Jan 2016

To make things worse, each side had difficulties convincing the other of its seriousness. As such, the risk of a Graccident rose considerably, culminating in an economic “sudden stop” in June–July 2015—one in which a total breakdown in negotiations, amplified by acrimonious accusations and bitter personal attacks, led to a bank run that forced the disorderly closure of the banking system. Together with capital controls aimed at keeping whatever euros were left within Greece, the result was a collapse in economic activity, trade, and trust in the system. Even tourism, a key sector for Greece, was disrupted. The already alarming levels of unemployment headed even higher, already strained social safety nets were stretched even more, and poverty deepened and spread.

The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders
by Kate Kelly
Published 2 Jun 2014

In the course of a week, the very sorts of events that Andurand and others had feared all summer actually came to pass: a teetering Merrill Lynch was sold to Bank of America in a last-minute deal, and Goldman Sachs and Morgan Stanley rapidly converted into bank holding companies that could borrow from the government in order to assuage investors’ terrors about a future bank run. The century-and-a-half-old investment bank Lehman Brothers filed for Chapter 11 bankruptcy protection. The insurer American International Group, beleaguered by bad investments in subprime mortgages that were now creating windfalls for traders to whom AIG had sold insurance policies to guard against defaults in those very same loans, had to accept a massive government bailout.

How to Run the World: Charting a Course to the Next Renaissance
by Parag Khanna
Published 11 Jan 2011

The Philippines, South Africa, and other countries have become the world’s liveliest laboratories for the interplay of remittances, micro-credit, FDI, bilateral donors, and new public-private partnerships—with results tracked and measured on websites such as AidData.org. Stories of success inspire replication and scale. Small models that work are far more useful than failed big ones. In Nepal, the Asian Development Bank runs a performance-based grant system: Local constituencies that spend money wisely get more as a reward. Members of the public are informed about which districts are getting what resources, so they have started to lobby hard for better local governance. This is a good model for better global governance as well.

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
Published 30 Apr 2016

Notable here is that they wouldn’t use the funds to expand their footprint, acquire talent and/or competitors, or enhance the customer experience; instead the funds raised would be invested in highly liquid, largely risk-free securities (think U.S. Treasuries) so that the money could be accessed amid a “crisis” or “bank run.” Banks would have a “cushion.” The problems with this idea are many, however. For one, the capital raise would dilute existing shareholders owing to the issuance of new shares, all the while doing nothing to enhance the bank itself. Remember, capital would be raised solely as a cushion to be accessed in an emergency when credit is “tight.”

The Fix: How Bankers Lied, Cheated and Colluded to Rig the World's Most Important Number (Bloomberg)
by Liam Vaughan and Gavin Finch
Published 22 Nov 2016

Rising defaults on mortgages in the U.S. had spooked markets, drying up the easy flow of credit between financial institutions and exposing the shaky foundations upon which years of easy profits had rested. Banks were forced to write down the value of their assets by billions of dollars and were left perilously close to insolvency. Northern Rock was nationalized in February 2008 after the mortgage lender became the first British firm in 150 years to suffer a bank run. BNP Paribas, France’s biggest lender, created panic the previous August when it froze redemptions from its funds, refusing to give investors their money back. Most of the afternoon was spent discussing the pressing issue of how to access enough capital to stay alive. At one point, Angela Knight, the BBA’s chief executive and a former politician,broached the issue of Libor.

Hubris: Why Economists Failed to Predict the Crisis and How to Avoid the Next One
by Meghnad Desai
Published 15 Feb 2015

Northern Rock initially tried to borrow money on the wholesale money market, but found it too expensive. As rumors circulated that Northern Rock was in trouble, depositors queued up to withdraw their money. The UK government had to rush to the rescue and nationalize the bank. Northern Rock was not the only UK bank to experience trouble, but it was the first UK bank to experience a bank run in over a century. The crisis deepened in March 2008 when the 80-year-old American investment bank Bear Stearns also found itself in trouble. It had exposed itself in the securitized mortgage market and as the prices fell, its exposure increased and the Fed could not rescue it. It had assets of $400 billion but a debt of $33 per each dollar of its capital.

Dead Companies Walking
by Scott Fearon
Published 10 Nov 2014

I’d always heard about the sleazy tricks fund managers use to fleece their investors. But I’d never been on the business end of any of them personally until I signed over that money to my former friend. The first thing that worried me was that he bought a lot of dodgy green energy companies brought public by an investment bank run by a Silicon Valley promoter named Laird Cagan. We’re talking about pure “story” stocks, companies whose only assets were a couple of engineering PhDs and—maybe—a patent or two. To be honest, I was ready to write my investment off when I saw those stocks in the audited financials. But to my pleasant surprise, my friend’s picks actually did pretty well.

The Behavioral Investor
by Daniel Crosby
Published 15 Feb 2018

A study by Kirk, Brown and Downar that matched 34 meditators with 44 matched controls found that those who meditated showed lower neural activations in the caudate nucleus and ventromedial prefrontal cortex during reward anticipation when compared to their less enlightened peers. What does this all mean in plain English? The parts of the brain associated with greed – expecting and anticipating reward – are actually less active in the minds of those who meditate. Fear and greed, responsible for calamitous financial decisions as diverse as bank runs, investment bubbles, and affinity fraud, both show evidence of being tamed by the simple act of mindfulness meditation. Most impressive of all is the growing body of evidence that meditation seems to be able to physically restructure our bodies in certain ways, a reality that almost sounds like science fiction.

99%: Mass Impoverishment and How We Can End It
by Mark Thomas
Published 7 Aug 2019

Conventional macro-economic models are not fit for purpose There are many types of macro-economic model in use, ranging in sophistication from complex mathematical models that can be run only by experts through to simple models that ordinary people can carry around in their minds. Probably the three most widely used types of model are General Equilibrium models, econometric models and simple mental models. Like all models, all three are wrong – the question is: which are useful? GENERAL EQUILIBRIUM MODELS Many central banks run models known as Dynamic Stochastic General Equilibrium (DSGE) models. The name alone is off-putting. Let’s take each part in turn. ‘Dynamic’ simply means not static (i.e. that the model operates over an interval of time rather than simply at one specific point in time). ‘Stochastic’ means that the model allows for some factors to have probabilities associated with them rather than specific values (for example, the oil price can have a probability distribution linked with it rather than an assumption that the price will remain fixed during the forecast period).

Dreams of Leaving and Remaining
by James Meek
Published 5 Mar 2019

But not everyone makes a clear distinction between the Brown who managed the Treasury carefully – which he did – and the Brown who did not act to stop the banks pursuing the demented expansion of their balance sheets. Which he also did. When, in 2007, Northern Rock had to be rescued by the Labour government after it suffered the first bank run in Britain since the nineteenth century, it turned out that the bank’s management had bundled together much of its future income stream from people making monthly mortgage repayments and used it as collateral to borrow £49 billion from around the world, with which it created more mortgages. It did this via a so-called charitable trust called Granite, based in the offshore tax haven of Jersey, which used, as its nominal charity, a tiny organisation from the North-East that helps those with Down’s syndrome.

GDP: The World’s Most Powerful Formula and Why It Must Now Change
by Ehsan Masood
Published 4 Mar 2021

The third represented GDP in 1999. America’s GDP for 1900 was a lowly $290 billion. Twenty-nine years later it was $730 billion. In 1999, six decades after the great invention, US GDP had leapt to $9.2 trillion. Next to the other two years, that period appeared like a skyscraper on Daley’s slide. “Gone are the bank runs, the financial panics, the deep and drawn out recessions, and the long lines of the unemployed,” Daley said. “Obviously, the GDP accounts are not solely responsible for putting America’s economy on a steadier track—as much as I’d like to make that claim. But no question about it: They have had a very positive effect on America’s economic well-being.”

Great Continental Railway Journeys
by Michael Portillo
Published 21 Oct 2015

Behind the building initiative which continued throughout the 1850s was mostly French money, although German and English investors later alighted on Spanish railway projects. Two French banks were responsible for creating key railway companies. The Madrid–Zaragoza–Alicante Railway, better remembered as MZA, was financed from 1856 by the French bank run by James de Rothschild. He was already a major player in the French railway company that ran the busy service from Paris to Boulogne-sur-Mer, where ferries were perpetually docked in preparation for cross-Channel voyages to England. The other company, known colloquially as Norte, was financed from 1858 by journalists Isaac (1806–1880) and Émile (1800–1875) Péreire, the founders and operators of the Paris–Orléans Railway.

The Dollar Meltdown: Surviving the Coming Currency Crisis With Gold, Oil, and Other Unconventional Investments
by Charles Goyette
Published 29 Oct 2009

ANSWER: Anything can happen and it is useless to consider the possibilities when it is too late. For the time being safety deposit boxes may be safe. You are likely to be better off buying gold and keeping it in a safety deposit box if you must, than not having any at all. But do keep in mind that we have already experienced bank runs in the current crisis. Banks can close in the event of a monetary breakdown or a bank holiday. QUESTION: What about the risk of the exchange-traded funds like GLD being nationalized? That’s a lot of gold up for grabs. ANSWER: The growing mountains of gold in exchange-traded funds may indeed be an attractive target for government plunder, even though the $35 billion in market capitalization early in 2009 of the two gold ETFs is not enough to make a dent in the government’s financial predicament.

Before Babylon, Beyond Bitcoin: From Money That We Understand to Money That Understands Us (Perspectives)
by David Birch
Published 14 Jun 2017

This would increase financial stability by reducing the concentration of liquidity risk and credit risk. Non-bank financial institutions, in particular, would benefit from being able to hold funds in central bank money rather than in the form of an uninsured bank account. Incidentally, Dyson and Hodgson go on to remark that the existence of digital fiat might well exacerbate bank runs as people, for whatever reasons, retreat from other forms of liquidity to risk-free central bank money. The existence of risk-free digital currency in the United Kingdom could plausibly lead to an inflow of funds from foreign banks into sterling digital cash, and that could in turn push up exchange rates.

The Economics of Belonging: A Radical Plan to Win Back the Left Behind and Achieve Prosperity for All
by Martin Sandbu
Published 15 Jun 2020

Where governments find themselves unable to borrow the money for deficit spending in their budgets, the limits of “fiscal space” are real. This happened to Greece and other countries hit by the eurozone debt crisis of 2010–12. Meanwhile, on the monetary side, the claim has been that once interest rates come close to zero—often dubbed the “zero lower bound”—central banks run out of ammunition to boost demand. In both cases, the excuse for letting economy-wide spending collapse is nevertheless weaker than it may seem. The reasons for this, however, belong to a much broader theme, which is how the West’s financial system has worked against the economy of belonging, and what policies are required to change this.

Flash Crash: A Trading Savant, a Global Manhunt, and the Most Mysterious Market Crash in History
by Liam Vaughan
Published 11 May 2020

As the crisis deepened and the value of sovereign debt fell, the counterparties on the repo trades began issuing what are known as margin calls, forcing MF Global to hand over additional cash to cover potential losses. In October 2011, rating agencies downgraded the firm’s credit rating to “junk,” sparking the equivalent of a bank run, with customers calling up and demanding to withdraw their funds and lenders closing credit lines. In the frenzied final hours, a middle-ranking executive dipped into what should have been sacrosanct, segregated client funds to plug the gaps. It wasn’t enough to save the firm, and in the days after MF Global folded, it emerged that $1.6 billion belonging to twenty-six thousand retail traders, farmers, and small businesses was unaccounted for.

That Wild Country: An Epic Journey Through the Past, Present, and Future of America's Public Lands
by Mark Kenyon
Published 2 Dec 2019

As a child, I’d spent every summer canoeing the lakes and rivers of New York’s Adirondack Mountains, and grew up boating and canoeing Michigan’s inland lakes and tributary rivers. More recently, I’d spent time kayaking and paddle boarding around the mountain lakes of Wyoming and Montana. I considered myself boat savvy. So when Chip asked, I had no hesitations. The last of the winter’s snow had just melted, and the river was swollen with runoff right to the top of its banks, running fast, thick, and frothy, swirling in front of us like just-stirred chocolate milk. Fast moving as it was, a quick assessment didn’t turn up any rapids, strainers, or looming boulders. It seemed an easy enough crossing. Chip’s wife had cause to cross the river as well, so Chip devised a plan.

23 Things They Don't Tell You About Capitalism
by Ha-Joon Chang
Published 1 Jan 2010

Conclusion How to rebuild the world economy The daunting task ahead of us is to completely rebuild the world economy. Things are not as bad as they were during the Great Depression only because governments have propped up demand through huge deficit spending and unprecedented easing of money supply (the Bank of England has never had a lower interest rate since it was founded in 1644), while preventing bank runs through expansion of deposit insurance and the bailing-out of many financial firms. Without these measures, and the substantial automatic increase in welfare spending (e.g., unemployment benefit), we could be living through a much worse economic crisis than that of the 1930s. There are people who believe the currently dominant free-market system to be fundamentally sound.

The Truth About Lies: The Illusion of Honesty and the Evolution of Deceit
by Aja Raden
Published 10 May 2021

Making Money Nowhere, perhaps, is a collective fiction more believed, defended, and simultaneously denied—or at least ignored—than in the realm of currency. Money isn’t real, except in our collective imaginations. “Money” is just a word for an IOU—backed not by gold or other commodities, but by tacit agreement and unconscious consensus. Money is also one of the most precarious lies there is: hence the danger of bank runs, stock market crashes, and economic collapses—all of which can only happen when the collective ceases to believe all or some portion of the lie. All versions of money are imaginary if you examine them closely enough, and they only have value because we all agree they do. But cash—paper money—is a particularly blatant example: it’s just printed slips of paper.* This makes counterfeiting hard currency particularly easy and tempting.

A Pelican Introduction: Basic Income
by Guy Standing
Published 3 May 2017

On the contrary, it compromises the freedom of the giver as well as the supplicant. The spread of charity has largely reflected the manifold failings of means-tested social assistance, the unfairness of conditionality, the deliberate sanctions taken against vulnerable people and the spread of economic insecurity. In the UK, for instance, over 40 per cent of referrals to food banks run by a major charity, the Trussell Trust, are due to benefit delays and sanctions.40 The fact that so many people in modern society are going to food banks and shelters demonstrates social policy failure. Private philanthropy should be marginalized again; it is an undemocratic way of shaping society and the selective well-being of individuals, groups and communities.

How Did We Get Into This Mess?: Politics, Equality, Nature
by George Monbiot
Published 14 Apr 2016

The destruction of the living world would be the occasion of constant protest. This apparatus of justification, or infrastructure of persuasion, and the justifying narratives it generates allow the rich to seize much of our common wealth, to trample the rights of workers and to treat the planet as their dustbin. Ideas, not armies or even banks, run the world. Ideas determine whether human creativity works for society or against it. Ever since Andrew Carnegie, John D. Rockefeller and Thomas Edison financed the publication of Herbert Spencer’s works in the late nineteenth century,2 which argued, among other propositions, that millionaires stand at the top of a scala natura established by natural selection, with which we would be foolish to interfere, and that profound economic inequalities are both natural and necessary, global oligarchs have invested heavily in the infrastructure of persuasion.

The Great Tax Robbery: How Britain Became a Tax Haven for Fat Cats and Big Business
by Richard Brooks
Published 2 Jan 2014

‘Every single thing SCM [structured capital markets] does is a tax trade,’ said another source. ‘The deals start with tax and then commercial purpose is added to them. We were told that in one year SCM made between £900m and £1bn profit [for the bank] from tax avoidance.’‌34 Barclays was not the only bank running elaborate tax rings round the government. Whistle-blowers exposed Lloyds TSB as being up to similar tricks, if not on quite the same scale. The bank – a recent recipient of £17bn of public money and by then 43% owned by the taxpayer – was even fighting to salvage a tax avoidance scheme through the courts.

DIY Investor: How to Take Control of Your Investments & Plan for a Financially Secure Future
by Andy Bell
Published 12 Sep 2013

For subscriptions placed with providers in previous tax years, you can transfer some or all of your holdings to a different provider. But you are only allowed to transfer your current year’s ISA subscriptions if you transfer them in their entirety. If you are transferring from an insurance company or bank-run stocks and shares ISA then re-registration may not be possible and your existing ISA provider may have to sell your investments and send cash to your new ISA provider, for you to then invest. You could, of course, choose to sell all of your ISA investments prior to transferring, which may speed up the transfer process as only cash is being transferred.

Live Work Work Work Die: A Journey Into the Savage Heart of Silicon Valley
by Corey Pein
Published 23 Apr 2018

These notes, which comprised nearly 90 percent of all cash in circulation, would need to be deposited and exchanged for new bills in larger denominations. But this hassle was all for the best, the government explained—pulling the cash from circulation would “encourage” the widespread adoption of smartphone apps for digital payments. In reality, the demonetization announcement created an instant, panicked nationwide bank run, and prompted all manner of hoarding. Commerce slowed almost to a standstill, except for the lines at ATMs, which stretched on forever for months on end. Responding to criticism of the policy, the government offered up various, often contradictory rationales: rebalancing the cash supply, boosting the economy, and fighting corruption (it’s much harder to bribe someone or avoid taxes with an app that records every transaction than it is with cash).

The Light That Failed: A Reckoning
by Ivan Krastev and Stephen Holmes
Published 31 Oct 2019

It is no secret that changing countries is easier than changing one’s country. When borders were opened after 1989, exit was favoured over voice because political reform requires the sustained cooperation of many organized social interests, while the choice to emigrate is basically a solo or single-family operation, even though (like a bank run) it can become a cascade. The mistrust of ethno-nationalist loyalties and the prospect of a politically united Europe also helped make emigration the political choice for many liberal-minded Central and East Europeans. This, alongside the vanishing of anti-communist dissidents, is again why Michnik’s moral excoriation of emigration lost all moral and emotional resonance after 1989.

Built on a Lie: The Rise and Fall of Neil Woodford and the Fate of Middle England’s Money
by Owen Walker
Published 4 Mar 2021

The more fellow investors in the fund asked for their money back, the harder it would be for Kent to get its cash out. Just like with runs on a bank, when lenders are in distress and account holders queue round the block to take out their savings, funds that allow investors to withdraw their money daily are vulnerable when customers become skittish. Kent’s pension board knew all too well about the perils of a bank run. Just over a decade earlier the council had handed £50 million of taxpayers’ money and retirement savings to three Icelandic lenders, seduced by the promise of high interest rates on deposits. But when the banks – Glitnir, Landsbanki and Heritable – all buckled under the weight of the global financial crisis in 2008, those deposits were jeopardized.

The Enablers: How the West Supports Kleptocrats and Corruption - Endangering Our Democracy
by Frank Vogl
Published 14 Jul 2021

Today’s prevailing banking culture seems distant from the bygone era of Clausen and Rockefeller. Those bankers back then were not saints. Sometimes they made serious errors of judgment. As the oil-producing states in the Middle East took control of global oil prices in 1973, so they needed to find banks that could manage their staggeringly large wealth. They turned to the banks run by Rockefeller and Clausen and others, who immediately searched for opportunities to invest the oil wealth. They claimed at the time that they had sophisticated risk models guiding their record-level lending to Latin American governments. Those models were faulty. In mid-1982, Mexico announced that it could not repay its loans.

The Last Tycoons: The Secret History of Lazard Frères & Co.
by William D. Cohan
Published 25 Dec 2015

It is the unusual role in the affair played by Felix--who told the Celler commission that he wanted Lazard to be "purer than Caesar's wife"--that concerns us here. A PREREQUISITE FOR a better understanding of what transpired--from late 1968 until the matter was once and for all resolved in 1981--is a brief overview of Lazard's by then almost fifteen-year relationship with Mediobanca, an equally secretive and enigmatic Italian investment bank run with absolute authority by Enrico Cuccia. "Very shy but very clever" is how Lazard partner Francois Voss described him. If an Italian analog to Lazard were to be conjured cosmically out of "star stuff" and plunked down in the heart of Milan, Mediobanca would be it. Like Lazard, Mediobanca in Italy had its fingers in every important deal and its hand in every important politician's pocket.

…

When they returned to New York a few days later and Gregory was informing Ward Woods about the developments, Felix popped his head into Gregory's office. He didn't like what he heard Gregory saying, and he ordered Woods to fire Gregory on the spot. Woods ignored Felix, and Gregory stayed. He became a partner in 1986. By late 1988, he was running banking. "Running banking at Lazard was like being dean of a business school," Gregory said. "It was not an easy thing to do because, as you know, it was Michel's firm." INTO THIS RELATIVE anarchy, intense quirkiness, and immense prosperity strolled Steven Rattner, the one Wall Street investment banker who was every bit as scarily talented, media savvy, and professionally and politically ambitious as Felix and who, much to Felix's surprise and eventual dismay, refused to be cowed by the Great Man's prowess or play by his long-established rules.

…

But also remember that you really should--if you do, you should be able to make a moral commitment for two terms, which would be twelve years.'" Felix asked Altman for a few days to think about the offer. He was very intrigued for any number of reasons--among them, his growing frustration with the dynamic inside Lazard. But he had never run anything before, let alone something as massively bureaucratic as the World Bank. "Running a big bureaucracy was never my cup of tea," he said. And Elizabeth was dead set against it. Aside from the requisite move to Washington, there would have been extensive travel worldwide to attend ponderous meetings. And there was also the twelve-year commitment, which would have put Felix close to seventy-eight years old by the time he left the job.

Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity
by Douglas Rushkoff
Published 1 Mar 2016

If anything, the prolonged and unnecessary depression merely paved the way for the discontent that fueled Fascism. Free local currencies were also responsible for providing a means of transaction during the Great Depression in the United States. Some were successful enough to pose a threat to central powers; others were merely successful enough to get traditional banking running again. In a much more pragmatic set of writings than those of Gesell, Yale University economist Irving Fisher argued that the sole focus of an alternative currency in such circumstances should be to increase the velocity of money.60 He advocated the use of “stamp scrip” as a weapon against deflation.61 Stamp scrip would come with the requirement that it be spent and stamped at regular intervals in order to maintain its value.

Capitalism Without Capital: The Rise of the Intangible Economy
by Jonathan Haskel and Stian Westlake
Published 7 Nov 2017

If banks are less willing and less able to lend to intangible-intensive businesses, but intangible-intensive businesses are becoming more common, we would expect to see complaints that banks refused to finance viable businesses becoming more common. And current regulation disallows (almost all) intangible assets as part of capital reserves that banks must hold in case of a banking crisis.5 A preponderance of unsaleable intangible assets could even, in due course, present a gradual problem for the stability of a banking system. Because bank runs are economically catastrophic, regulators require banks to hold a certain amount of reserves against every loan on their books. The amount of reserves depends on the type of loan: on the whole, loans secured against valuable assets that are easy to sell require less reserves; loans with little security require more.

The End of Theory: Financial Crises, the Failure of Economics, and the Sweep of Human Interaction
by Richard Bookstaber
Published 1 May 2017

A public pronouncement might lead others to act in a way that will lead that pronouncement to be true, even if there’s no basis in fact. The sarcastic website Gawker proclaims, “Today’s gossip is tomorrow’s news.” In financial markets, that is too often the case. History is rife with examples of bank runs precipitated by depositors’ or investors’ beliefs, whether unfounded or not, that an institution might be in trouble. In 2008, the boss of Lehman Brothers, Richard Fuld, blamed his firm’s implosion on those circumstances. In 1907, fear that the Knickerbocker Trust was foundering caused the entire financial system to become unglued until J.

Underground, Overground
by Andrew Martin
Published 13 Nov 2012

(Or, when everyone gets off the train at Bank, you could stay on, and go back to Waterloo.) It might be an idea to set yourself up with a flat near Bank and a job near Waterloo. You would more or less always have the train to yourself. But be warned, both sides of the Trav-o-lator, or moving walkway, at Bank run in the same direction – out of the station and into the street – in the morning peak. So if you were so mad as to want to descend towards – as opposed to ascend from – the Waterloo & City platforms at Bank in the morning, you would have to use the long slope. I once asked a ticket platform guard at Bank why both tracks of the Travel-o-lator didn’t run towards the Drain platforms in the evening peak (because they don’t; they run alternately then).

Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe
by Greg Ip
Published 12 Oct 2015

“Financial systems enable the mediation of capital between those who have put aside something for consumption in the future and people who have a productive use of those resources,” Summers explained. “Those principles apply between individuals, companies, and countries. Sometimes, countries have difficulty paying the money back, and it becomes a panic, just like the game we played describing a bank run. Everyone wants to take their money out at once, and everybody can’t take their money out at once. So there is a need to provide confidence.” Confidence is central to Summers’s thinking about crises. We regard confidence as good and moral hazard as bad, but, he likes to note, they are two sides of the same coin.

The Enigma of Capital: And the Crises of Capitalism
by David Harvey
Published 1 Jan 2010

It offered a way of dealing with the surplus absorption problem. But where was the surplus cash, the surplus liquidity, to come from? By the 1990s the answer was clear: increased leverage. Banks typically lend, say, three times the value of their deposits on the theory that depositors will never all cash out at the same time. When a bank run does occur the bank will almost certainly have to close its doors because it will never have enough cash in hand to cover its obligations. From the 1990s on, the banks upped this debt–deposit ratio, often lending to each other. Banking became more indebted than any other sector of the economy. By 2005 the leveraging ratio went as high as 30 to 1.

Upstream: The Quest to Solve Problems Before They Happen
by Dan Heath
Published 3 Mar 2020

Public panic was as much of a threat as the technical bugs. Consider that, according to Koskinen, at any given time about 2% of ATM machines aren’t working. They’re broken or out of money. But on January 1, 2000, a nonfunctioning ATM might be interpreted as a Y2K problem, fueling fear. One of everyone’s biggest concerns was the possibility of a bank run. If customers worried about not being able to get money, or if they worried about banks failing, they might start pulling out money in the weeks before the millennium. And if other customers saw that, they might worry, in turn: Those people are probably being paranoid, but I don’t want them taking all the money before I can get some, so I better make some withdrawals myself.

Straight Talk on Trade: Ideas for a Sane World Economy
by Dani Rodrik
Published 8 Oct 2017

First, there are errors of omission—cases in which blind spots in the consensus prevent economists from being able to see troubles looming ahead. A prominent example was the failure of economists to grasp the dangerous confluence of circumstances that produced the global financial crisis. As I argued earlier, the oversight was not due to the lack of models of bubbles, asymmetric information, distorted incentives, or bank runs. It was due to the fact that such models were neglected in favor of models that stressed efficient markets. Then there are the errors of commission—cases in which economists’ fixation on one particular model of the world makes them complicit in the administration of policies whose failure could have been predicted ahead of time.

All Day Long: A Portrait of Britain at Work
by Joanna Biggs
Published 8 Apr 2015

These businesses exhausted themselves before she started the project she runs now, Stemettes, which encourages women to pursue careers in science, technology, engineering and maths by organising hackathons and panel events sponsored by 02, Starbucks, Accenture, Deutsche Bank and Microsoft among others. On top of Stemettes she has a job at Deutsche Bank, running their internal social network. ‘I’m constantly aware that I might not be fulfilled,’ she says. ‘So I kind of pre-empt that by just doing other stuff.’ In May 2012, the coalition government announced that loans of £2,500 would be made available for entrepreneurs aged between 18 to 24 to start their own businesses before April 2015.

The Classical School
by Callum Williams
Published 19 May 2020

One story, “Berkeley the Banker”, is an argument in favour of a gold standard–ie, where a currency could be freely exchanged for some quantity of gold bullion. A confectioner is given a five-pound note in exchange for some sweets. The confectioner finds that she does not have enough change, and says, “Oh, I can’t change that note.” People misunderstand her as saying that there is not enough gold to exchange the note; a bank run ensues. “Under a gold standard,” explains Annette Van, “citizens of the town… never could have misinterpreted [the] remarks–they would have known that the note must be honoured and that, therefore, the confectioner merely lacked the correct change.” (As you can probably tell, Martineau is not the world’s subtlest writer.)

The Pay Off: How Changing the Way We Pay Changes Everything
by Gottfried Leibbrandt and Natasha de Teran
Published 14 Jul 2021

Large depositors (who are not covered by deposit insurance) may prefer to convert their bank deposits into CBDCs, especially in times of uncertainty about the banking sector’s solidity, as many depositors indeed were at the height of the last financial crisis. Doing so could suck liquidity out of commercial banks, hamper their ability to lend, cause bank runs and exacerbate a crisis. There are also political considerations. Issuing a CBDC could lead to ‘dollarisation’ (whereby people start to use the US dollar alongside or instead of their local currency), particularly in countries whose citizens don’t trust the national currency. This would be the digital equivalent of what has been happening with physical dollars and euros, many of which circulate in Latin America and Africa (in the case of the dollar) or Eastern Europe (in the case of the euro), as described in Chapter 4.

Rough Sleepers: Dr. Jim O'Connell's Urgent Mission to Bring Healing to Homeless People
by Tracy Kidder
Published 17 Jan 2023

He went on: Andy had planned to leave this morning, but Mike Jellison, the recovery coach, had talked him out of it, and by the way, Nick was about to lose his housing again. And even though Jackie looked clean, he was undernourished—“He don’t eat much at all, Jim.” BJ almost always figured in Tony’s reports, and the news was rarely good. BJ had refused to come into McInnis, or he had left McInnis AMA, because he got a check in the mail and missed the bank run, so he took off to cash the check and find some crack cocaine. “BJ’s big time wit’ crack now, Jim. That’s all he talks about. How do you go from alcohol to that? Big jump. I don’t know how he got on it, but I know the last check he got, he had four hundred seventy dollars, and he blew it all on crack, and he lied, he said someone ripped him off.”

Carmageddon: How Cars Make Life Worse and What to Do About It
by Daniel Knowles
Published 27 Mar 2023

The result will, supposedly, be a big increase is the capacity of motorways, as people no longer have to travel several car lengths apart for safety reasons. Already, this is used as an argument for why investment in new public transport, such as trains, is redundant. In Britain Matt Ridley, a Conservative member of the House of Lords who was chairman of Northern Rock, the only British bank to suffer a bank run in more than a century, is among those who reckon that HS2, Britain’s new high-speed railway, will quickly be made redundant by autonomous vehicles. So too do the Taxpayers’ Alliance, a group that opposes any government spending on anything. In the immediate term, the problem with this is that despite decades of development, autonomous driving technology has scarcely improved enough to navigate normal suburban streets at 30 miles per hour.

Shocks, Crises, and False Alarms: How to Assess True Macroeconomic Risk
by Philipp Carlsson-Szlezak and Paul Swartz
Published 8 Jul 2024

On the real side, the damaged bank will need to liquidate assets, driving down their value and thus harming other banks that own similar positions. On the psychological side, distress at one bank (or even a nonbank financial intermediary) will cause customers of other banks to fear for the safety of their deposits. A bank-run mentality can set in, and funding flight can topple banks like dominoes. Deleveraging, the process of selling assets to reduce liabilities, can be particularly damaging because the pain of falling asset prices can spread to healthy banks, firms, and households—and is difficult to stop once started.

The Globalization Paradox: Democracy and the Future of the World Economy
by Dani Rodrik
Published 23 Dec 2010

Modern economies have invented powerful tools against this pathology. Their central banks act as lenders-of-last-resort, providing the liquidity needed to stabilize troubled banks and stem potential panic. In addition, bank deposits are insured up to certain limits in most countries. Thanks to these governmental safeguards, conventional bank runs have become a thing of the past. Except in international finance. The countries of East Asia had been doing just what traditional commercial banks do. They borrowed short term in international financial markets to finance domestic investments. (Short-term debt was preferred both because it was cheaper and because prevailing capital-adequacy standards required lenders to set aside less capital when they were extending short-term loans.)

The Butterfly Defect: How Globalization Creates Systemic Risks, and What to Do About It
by Ian Goldin and Mike Mariathasan
Published 15 Mar 2014

Individual actors or small groups who, for political, religious, economic, or psychotic reasons, wish to attack society can gain leverage from the information, supplies, and high-impact nodes that are characteristic of globalization. Building resilience requires an appreciation of the corresponding vulnerabilities. The aim should thus be to minimize the threats but also to ensure that no individual action could lead to cascading risks. Ensuring that individuals or small groups cannot cause a bank run or the collapse of a key transport, cyber, energy, water, or other vital hub should be a priority of all governments concerned with the stability of the “ecosystem” that provides the foundation for our globalized society. LESSONS FOR CHALLENGING GLOBAL INEQUALITIES Three key policy lessons for managing global inequalities follow from the discussion in this chapter.

Present Shock: When Everything Happens Now
by Douglas Rushkoff
Published 21 Mar 2013

Opposite reactions to collapse of political narrative, the Tea Party yearns for finality while the Occupy movement attempts to sustain indeterminacy. Inspired by the social-media-influenced revolutions of the Arab Spring, Occupy Wall Street began as a one-day campaign to call attention to the inequities inherent in a bank-run, quarterly-focused, debt-driven economy. It morphed into something of a permanent revolution, however, dedicated to producing new models of political and economic activity by its very example. Tea Partiers mean to wipe out the chaotic confusion of a world without definitive stories; the Occupiers mean to embed themselves within it so that new forms may emerge.

Why It's Still Kicking Off Everywhere: The New Global Revolutions
by Paul Mason
Published 30 Sep 2013

There is a ‘heroic’ period of globalization, beginning in 1989 and ending around 1999, during which China’s entry into the world market helps suppress inflation; where falling wages are offset by a seemingly sustainable expansion of credit; where house prices rise, allowing the credit to be paid off and a whole bunch of innovations are suddenly deployed—above all mobile telephony and broadband Internet. Then there is a second phase in which the disruption overwhelms the innovations: China’s increased consumption of raw materials creates world-wide inflationary pressure; the house-price boom ends, because the banks run out of poverty-stricken workers to lend to; mass migration begins to exert a downward pressure on the wages of unskilled workers in Europe and the USA; the financial dynamic overtakes, dominates and ultimately chokes off the dynamics of production, trade and innovation. The rise of finance, wage stagnation, the capture of regulation and politics by a financial elite, consumption fuelled by credit rather than wages: it all blew up spectacularly.

The Weather of the Future
by Heidi Cullen
Published 2 Aug 2010

My roommate had decided, uncharacteristically, that she was going to Times Square with some friends, and so I tagged along not wanting to be home alone in the apartment. It was almost midnight, so Fifty-Ninth Street was as close as we could get to Times Square. Despite frigid temperatures and months of media hype with dire predictions of power outages, bank runs, and other random catastrophes, there we all were. Hundreds of thousands of people from all over the world, ready to hug a stranger and ring in the New Year. As always, there was a sense that the New Year—in this case, it was also celebrated as the start of a new millennium—held the possibility of something better.

Zero-Sum Future: American Power in an Age of Anxiety
by Gideon Rachman
Published 1 Feb 2011

It provoked a short but very deep recession and required emergency loans of billions of dollars from the United States. The emerging-market panic of 1998, which started in Russia, sparked another bout of capital flight in Latin America, mirroring the debt crisis of 1982 that had provoked the free-market reforms in the first place. There were severe downturns and bank runs across Latin America. When I visited Argentina for the first time in 2002, I encountered the tail end of that country’s crisis, leaving me with a vivid impression of what a financial system in crisis looks like. The banks resembled mini-fortresses, buttressed by corrugated iron—with one narrow door through which customers filed, in the hope of withdrawing money.

The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay
by Guy Standing
Published 13 Jul 2016

Like its counterparts in the USA, the firm bundled up these risky mortgages and sold them as income-generating assets to investors, using the proceeds to help pay its debts. When the credit crunch came in 2007, the demand for securitised mortgage assets dried up and Northern Rock was unable to meet debt commitments. There was a run on the bank, the first UK bank run in 150 years, and in 2008 it was taken into state ownership. Billions of pounds of outstanding mortgages remained, many in arrears. The government held on to them until the market picked up. Then, in 2015, it sold a ‘book of loans’, the collective mortgage debt of 125,000 households, to an American private equity group, Cerberus, for £13 billion.

SUPERHUBS: How the Financial Elite and Their Networks Rule Our World
by Sandra Navidi
Published 24 Jan 2017

Accordingly, their views, business models, and risk appetites closely resemble one another.38 The tendency to act in concert leads to “executive contagion” when collective behavior at the highest level spreads through the system and destabilizes it. The term “contagion” is derived from epidemiology and means transmission by contact. In finance, such contagion can be triggered by panics such as bank runs, in which so many savers concurrently withdraw their deposits that institutions become illiquid and eventually insolvent, as in Jimmy Stewart’s It’s a Wonderful Life. By the same token, loss of faith and panic can spread among executives as well. Such executive contagion starts at the top, spreads laterally, and cascades down the system—often with grave consequences.

Deep Sea and Foreign Going
by Rose George
Published 4 Sep 2013

The canal takes 14 hours to transit and has existed in some form ever since Pharaoh Senusret III, ruler in 1874 BC, chopped through the land mass to make a passage between open seas. It was built by Egyptian labourers working to the design of the French engineer Ferdinand de Lesseps; 20,000 new workers had to be drafted in every 10 months, according to the official Suez canal website, ‘from the ranks of peasantry’. Alongside its banks runs a railway and a ‘sweet water canal’. I write in my notebook that somewhere nearby there is a vegetable oil pipeline marked on a chart, but I never find it again. The Suez Canal took 10 years to construct, is 100 miles long, and earns the Egyptian government £3 billion a year. Right, say the crew.

Nervous States: Democracy and the Decline of Reason
by William Davies
Published 26 Feb 2019

Let’s try to imagine it for a moment. The banking crisis of autumn 2008 came after a year in which banks had been increasingly reluctant to lend to each other, or what was known as the “credit crunch.” If banks were allowed to collapse, confidence in the overall banking system would likely evaporate, producing bank runs, which could only be averted if banks remained closed, withdrawing all credit-making facilities in the process. The sensible thing for customers to do would be to extract as much cash from ATMs as possible until they were empty. Banks would not fill them up again, and payment processing facilities would be suspended.

Rolling Nowhere
by Ted Conover
Published 14 Jun 1984

Once it had been a cool, pretty spot, according to Bill, but now it was, in his words, “a slum.” Every slob in the world appeared to have jungled there, and most had left behind trash, old vegetables, grungy clothing, or shit. We poked around just the same, hoping to find something of value another tramp had left behind. But having no luck, we cleared a spot for ourselves on the small bank running down to the tracks and were about to begin lunch when two more men appeared on the scene. They were winos, with the staggers and the bottle to prove it. One looked about 50, one about 65; both wore visor caps and were having a hard time standing up. The younger, less deteriorated of the two offered us a drink from the bottle, and Bill took him up on it.

Thinking About It Only Makes It Worse: And Other Lessons From Modern Life
by David Mitchell
Published 4 Nov 2014

The fact that so many felt otherwise is a sign of how hysterical with envy some people, and a lot of news reporting, have become. * Occasionally, just for a moment, I think it might be a good thing if money ceased to exist, if the eurozone sovereign debt crisis spiralled so hopelessly out of control that there was an international bank run of catastrophic proportions, and so all of the numbers – and, in millions of cases, negative numbers – next to our names on screens became academic because the screen-owning institutions had run out of the pieces of paper that the numbers were supposed to represent – and indeed weren’t even sure for how much longer they’d receive the electricity to run the computers that stored these now notional numbers.

Rockonomics: A Backstage Tour of What the Music Industry Can Teach Us About Economics and Life
by Alan B. Krueger
Published 3 Jun 2019

In many walks of life, an understanding of how reliance on interconnections generates a power law relationship can help us understand why extreme events—like a neighbor’s daughter becoming the next Taylor Swift, or a devastating blackout that lasts for days—sometimes occur. The type of social dynamic that generates power laws—where people’s beliefs, knowledge, and behavior are influenced by the beliefs, knowledge, and behavior of their associates—can help explain the occurrence of critically important macroeconomic phenomena, including bank runs, financial crises, and housing bubbles. In particular, this type of social dynamic, where individuals’ views are influenced by others’, can create a self-fulfilling prophecy. For example, the widespread belief that home prices will rise causes more and more people to jump into the housing market before prices rise, in turn causing home prices to be bid up even further.

The City
by Tony Norfield

FB2–3, at censtatd.gov.hk. 40Bank for International Settlements, ‘Triennial Central Bank Survey: Global Foreign Exchange Market Turnover in 2013’, February 2014, p. 72. 41Monetary Authority of Singapore, ‘Recent Economic Developments in Singapore’, 11 June 2013, p. 19. 42Calculated from Central Statistics Office Ireland, ‘National Accounts Output and Value Added by Activity, 2002–2009’, 29 November 2012, Table 2. 43Michael Lewis has given an excellent analysis of the Irish property disaster. He noted how the Irish government’s decision to guarantee not only bank deposits (a reasonable policy to prevent a bank run), but also bank-issued bonds, lumbered taxpayers with the losses that would otherwise have been borne by the bond investors. Michael Lewis, ‘When Irish Eyes Are Crying’, Vanity Fair, 8 February 2011. 44Calculated from Central Statistics Office Ireland, ‘National Accounts Output and Value Added by Activity, 2002–2009’, 29 November 2012. 45An enlightening discussion of Switzerland in this respect, although now somewhat dated, is Jean Ziegler, Switzerland Exposed, trans.

Practical Doomsday: A User's Guide to the End of the World
by Michal Zalewski
Published 11 Jan 2022

The model made lending a far less personal affair, replacing mutual indebtedness with a reality where everybody somehow owed money to a bank. More tangibly, banks—lacking the military, police, and tax powers of the government—were far more prone to crises and collapses than their state-level counterparts. In the early 20th century, the world kept running into that very problem, experiencing a series of bank runs and economic contractions that forced governments to act. At that stage, outlawing fractional-reserve banking was no longer politically or economically tenable. A simpler alternative was to let go of gold and move to fiat money—an abstract currency that eschewed any pretense, however flimsy, of being tied to any physical commodity.

Golden Gates: Fighting for Housing in America
by Conor Dougherty
Published 18 Feb 2020

The difference between those cataclysms and street homelessness is that they could be by and large explained by the ups and downs of the economy. That is, when job opportunities improved, housing conditions did too. This new thing, this literal homelessness, seemed to have little to do with the number of jobs or the level of interest rates or foreign wars or bank runs, and instead served as the most extreme example of how brutal and unstable America was becoming. It was as if the country had started specializing in creating new ways for people to be and remain subsistent while jettisoning the programs designed to help. The concurrent growth of single-occupant households and the newfound ease of procuring hard drugs—a hit of crack could cost as little as $2.50 in the 1980s, bringing the fleeting excitement of cocaine to people who previously couldn’t afford it—weakened the family tethers and made it easier to fall to the depths.

The Price of Life: In Search of What We're Worth and Who Decides
by Jenny Kleeman
Published 13 Mar 2024

The courses they run are generally for top surgeons trying out cutting-edge techniques, and they are paying a lot of money for the specimens. Nothing has gone missing so far, but she usually makes sure she gets the tissue in a few weeks early. ‘Just to give you that buffer in case the flight got cancelled, or it got held up at customs for some reason.’ If these American tissue banks, run for profit, didn’t exist, Laura reckons the courses would either not run, or would take place without enough specimens to go round. ‘Is everybody getting their full experience if they’re having to share one specimen between four or five?’ she asks. ‘I wouldn’t want them practising on me first.’ Anatomists, medical students, surgeons and medical engineers in the UK who want to use British donors depend on the altruism and resourcefulness of those who are determined to leave their bodies to medical research and education.

Basic Economics
by Thomas Sowell
Published 1 Jan 2000

Now there was no longer a reason for depositors to start a run on a bank, so very few banks collapsed, and as a result there was less likelihood of a sudden and disastrous reduction of the nation’s total supply of money and credit. While the Federal Deposit Insurance Corporation is a sort of firewall to prevent bank failures from spreading throughout the system, a more fine-tuned way of trying to control the national supply of money and credit is through the Federal Reserve System. The Federal Reserve is a central bank run by the government to control all the private banks. It has the power to tell the banks what fraction of their deposits must be kept in reserve, with only the remainder being allowed to be lent out. It also lends money to the banks, which the banks can then re-lend to the general public. By setting the interest rate on the money that it lends to the banks, the Federal Reserve System indirectly controls the interest rate that the banks will charge the general public.

…

But state deposit insurance proved to be inadequate to its task. During the 1920s, and especially during the Great Depression of the 1930s, the thousands of American banks that failed were concentrated overwhelmingly in small communities in states with laws against branch banking.{611} Federal deposit insurance, created in 1935, put an end to ruinous bank runs, but it was solving a problem largely created by other government interventions. In Canada, not a single bank failed during the period when thousands of American banks were failing, even though the Canadian government did not provide bank deposit insurance during that era. But Canada had 10 banks with 3,000 branches from coast to coast.{612} That spread the risks of a given bank among many locations with different economic conditions.

Stigum's Money Market, 4E
by Marcia Stigum and Anthony Crescenzi
Published 9 Feb 2007

Also the repo market, unlike the fed funds and Eurodollar markets, is an anonymous market in the sense that no other banks or brokers are tracking how much a bank borrows there. Thus, a bank can make substantial use of the repo market without impairing its liquidity. Many money market banks act as dealers in government and other exempt securities. Since a dealer by definition acts as a principal in all transactions, buying and selling for its own account, a bank running a dealer operation inevitably assumes both long and short securities positions. This can distort the amount of risk that a casual observer might believe exists on the banking industry’s balance sheet. To illustrate, consider the notional and fair value holdings of derivatives by all U.S. banks at the end of 2005.

…

Several large banks that receive many deposits of nondollar Eurocurrencies and also have many requests for loans denominated in those currencies actually run books in each of these currencies, matching deposits in these currencies against loans and placements in the same currencies. Doing so eliminates transactions costs associated with swaps into and out of dollars—the foreign-exchange dealers’ spreads between bid and asked prices in the spot and forward markets and some bookkeeping and ticket costs. Banks running books in Euroyen and Euro Swissy feel that this reduction in costs permits them to offer depositors and borrowers of these currencies slightly better rates than they could if they consistently swapped all the natural yen and Swiss franc business they received into dollar assets and liabilities.

…

A conservative corporation might, if rates are correct, add 1% to its total borrowings in order to do money market arbitrages. Less conservative corporations are willing to borrow far more. A company that borrows to finance money market arbitrages makes this activity a profit center, rather like a bank running a Eurobook or a dealer running a book in repo and reverse. A few nonfinancial firms may be running arbitrage books into the billions. More typically, the numbers run in the hundreds of millions, and then there are the smaller players with books running at $5 million, $25 million, or $50 million.

The Irrational Economist: Making Decisions in a Dangerous World
by Erwann Michel-Kerjan and Paul Slovic
Published 5 Jan 2010

The likelihood of a given dollar amount of hurricane damage is much more objective and transparent than the likelihood of a deep recession, or, more accurately, of AAA securities trading at only pennies on the dollar. We can objectively simulate storm frequency, severity, and trajectory based on our knowledge of physical systems. We cannot objectively simulate the “madness of crowds”—by which I mean shifts in sentiment, so-called animal spirits, or runs on banks, runs on markets, or runs on consumption. Finally, cat risk is not systematic—it is not correlated with the risks of major financial markets. This means that we have a good idea of what the “fair market” price of cat risk should be. Specifically, because cat risk is diversifiable, the fair-value premium for a reinsurance contract that incurs no losses 99 percent of the time and incurs losses up to a given limit 1 percent of the time is 1 percent.

The Inevitable: Understanding the 12 Technological Forces That Will Shape Our Future
by Kevin Kelly
Published 6 Jun 2016

If text literacy meant being able to parse and manipulate texts, then the new media fluency means being able to parse and manipulate moving images with the same ease. But so far, these “reader” tools of visuality have not made their way to the masses. For example, if I wanted to visually compare recent bank failures with similar historical events by referring you to the bank run in the classic movie It’s a Wonderful Life, there is no easy way to point to that scene with precision. (Which of several sequences did I mean, and which part of them?) I can do what I just did and mention the movie title. I might be able to point to the minute mark for that scene (a new YouTube feature).

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
Published 11 Jul 2011

Like the Cowardly Lion, the Scarecrow, and the Tin Man getting green spectacles from the Wizard of Oz, the depositors happily walk around thinking their cash is available whenever they want it. Woe betide any bank whose depositors take their green spectacles off. The need to keep the illusion intact (and to save the economy from bank runs) was the driver behind the invention of central banking and deposit insurance. But what happens if you dispense with banks, and central banks as well? What happens if an unregulated free market creates a parallel system that connects depositors with CDOs, subprime mortgage bonds, and a web of derivatives?

The Paypal Wars: Battles With Ebay, the Media, the Mafia, and the Rest of Planet Earth
by Eric M. Jackson
Published 15 Jan 2004

Foreign bondholders grew nervous as the economic minister seized control of the central bank and raised the specter of devaluing the peso as a cheap way to pay off Argentina’s mounting debts. During the second half of 2001, Argentina’s citizens acted on these fears by emptying their bank accounts and converting their pesos into dollars. Instead of making the difficult choices needed to address the underlying economic problems, the government tried to put a stop to the bank run with a 1,000 pesos-per-month limit on withdrawals. Argentines took to the streets in protest, prompting a stream of officials, including the president, to resign. But the withdrawal limit remained in place, and at the beginning of 2002 the government ended the peso’s peg to the dollar and defaulted on its debt.

How the City Really Works: The Definitive Guide to Money and Investing in London's Square Mile
by Alexander Davidson
Published 1 Apr 2008

Around 200 companies are PLUSquoted with their listing on the PLUS primary market, as at May 2007. 7 Investment banking Introduction Investment banks raise money for clients in the capital markets, and they advise on mergers and acquisitions. Investment banking is also known as corporate finance, and this chapter explains how it works. Read it in conjunction with Chapter 6, which covers new issues. Overview In the lucrative area of investment banking, the procedures for getting together a syndicate of banks, running a book and underwriting are broadly similar for issuing equities, on which this chapter is mainly focused, and debt. Banks are increasingly merging their equities and bonds origination activities. Investment banking also includes mergers and acquisitions advice, covered at the end of this chapter.

An Optimist's Tour of the Future
by Mark Stevenson
Published 4 Dec 2010

Klaus’s requirements amount to just 0.000025 per cent of the $787 billion the US government pulled out of the hat for its American Recovery and Reinvestment Act of 2009 – money for stimulating the economy out of the economic crisis. One quarter of one ten-thousandth of a per cent. It’s ironic that when it came to saving the financial system, governments around the world couldn’t move fast enough. Yet there is another platform all the banks run on. It’s called the atmosphere, and the social and financial implications of global warming will do more to hamper Wall Street than anything they’ve done to themselves. When, I wonder, did a human-friendly atmosphere not become an infrastructural investment? A back of a napkin calculation suggests we could build enough scrubbers to reclaim all the carbon we pump into the atmosphere each year (and start to reclaim the backlog) for the equivalent of a three per cent tax on car prices for the next ten years.

Money: The Unauthorized Biography
by Felix Martin
Published 5 Jun 2013

The discussion in which Wolf and Summers made these comments is available at: http://​ineteconomics.​org/​net/​video/​playlist/​conference/​bretton-​woods/​V. Summers’ response referred to here is his answer to the first question in the interview, starting at 6:04. 8. Ibid. Summers also mentioned the 1981 Nobel Laureate James Tobin as an important influence, as well as alluding to the microeconomic literature on bank runs. 9. Ibid., second question starting at 10:58. 10. Ibid. 11. It was the short-lived but highly influential economic historian Arnold Toynbee who seems to have coined the name in lectures that he delivered at Oxford in the late 1870s which were published after his death in 1883 as The Industrial Revolution. 12.

The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy
by Stephanie Kelton
Published 8 Jun 2020

Each time a player rounds the board, they receive a $200 payment from the person who controls the currency. Because the players are merely users of the currency, they can and do go broke. The issuer, however, can never run out of money. In fact, the official rules12 of the game literally read: “The Bank never ‘goes broke.’ If the Bank runs out of money, the Banker may issue as much more money as may be needed by writing on any ordinary paper” (emphasis mine). I thought about this idea of writing on paper to make money when I took my own kids on a tour of the US Bureau of Engraving and Printing in Washington, DC. If you haven’t done it, I highly recommend it.

Team of Teams: New Rules of Engagement for a Complex World
by General Stanley McChrystal , Tantum Collins , David Silverman and Chris Fussell
Published 11 May 2015

The workings of a complicated device like an internal combustion engine might be confusing, but they ultimately can be broken down into a series of neat and tidy deterministic relationships; by the end, you will be able to predict with relative certainty what will happen when one part of the device is activated or altered. Complexity, on the other hand, occurs when the number of interactions between components increases dramatically—the interdependencies that allow viruses and bank runs to spread; this is where things quickly become unpredictable. Think of the “break” in a pool game—the first forceful strike of the colored balls with the white cue ball. Although there are only sixteen balls on the table and the physics is that of simple mechanics, it is almost impossible to predict where everything will end up.

The Reckoning: Financial Accountability and the Rise and Fall of Nations
by Jacob Soll
Published 28 Apr 2014

One poet later wrote that double-entry bookkeeping was the secret to Dutch wealth: This was the fam’d and quick invention, which Made Venice, Genoa and Florence rich: The Low-Countries (in all senses such) By this Art now speaks high and mighty Dutch. By the mid-seventeenth century, Amsterdam’s burgomasters had founded the Wisselbank, which guaranteed currency for invesment. Adam Smith would later note that balanced accounts made the bank run smoothly. The Dutch Republic was also home to the world’s primary stock exchange. Dutch banks offered loans that could be directly invested in merchandise futures. With the proliferation of business to every level of Dutch society, there was a general consensus that double-entry accounting was necessary knowledge.

Nomad Capitalist: How to Reclaim Your Freedom With Offshore Bank Accounts, Dual Citizenship, Foreign Companies, and Overseas Investments
by Andrew Henderson
Published 8 Apr 2018

That is because most of those banks only keep one or two cents per dollar of your money on hand. Compare that to 20, 25, or even 30 cents per dollar in some offshore banks. Just because a bank is in a wealthy country does not mean it is safer. If you have ever wondered what would happen in a modern-day bank run, just look at Europe: banks there have limited their customers’ access to their money. And when banks went under, not even deposit insurance protected them in some cases. If the entire country is bankrupt, the government cannot very well guarantee your money anyway. Why not go with the best? Why not go with the strongest?

A Fever in the Heartland: The Ku Klux Klan's Plot to Take Over America, and the Woman Who Stopped Them
by Timothy Egan
Published 4 Apr 2023

In the weeks that followed, more names were revealed—a prominent bank president, businessmen, civil servants. Chicago members of the Klan were listed under the headline who’s who in nightgowns. In a city where Catholics, Blacks, immigrants, and Jews combined were a majority of the population of three million, the revelations caused an uproar. Hundreds of families withdrew their money from the bank run by the Klansman. Citywide investigations followed, as did resignations. A week after publication, the city council voted to condemn the Klan and pledged to “rid the community of this organization.” It didn’t take long for many of the Who’s Who to ditch their nightgowns. And within a few months, the state passed a law making it illegal to wear a mask while parading in public.

The Bond King: How One Man Made a Market, Built an Empire, and Lost It All
by Mary Childs
Published 15 Mar 2022

Central bankers, finance ministers, professors, and the most important market participants checked into Jackson Lake Lodge in late August 2007, passing the lobby’s huge picture windows where the Teton Range lined up at the horizon. Every evening, amid the “howls of coyotes and bugling of elk,” as Yale economics professor Robert Shiller recalled, regulators and economists tried to gauge just how bad the current housing slowdown was. It looked like a classic bank run and yet was worse, scarier. Was it just a correction? A bubble popping? Whose fault was it? Should the Fed do something? What? Part of the problem: the Fed could touch really only the banking system. But much of the current troubles were roiling things that were not banks. McCulley, sporting a “professional professor” look, his thick mustache halfway to walrus, his orderly brown hair graying in the front, adjusted his rimless glasses, cleared his throat, and began.

What's Next?: Unconventional Wisdom on the Future of the World Economy
by David Hale and Lyric Hughes Hale
Published 23 May 2011

The temporary arrangements that were cobbled together for Greece in May 2010 were replaced with a permanent mechanism of collective responsibility for European sovereign and bank debts: In other words, the EU must take a decisive step towards fiscal federalism. This was always the main condition for a credible single currency. 2. No burden-sharing for any senior bank creditors, so as to avoid triggering Lehman-style bank runs across the eurozone: According to the news reports and briefings from Brussels and Dublin, these seemed to have been confirmed in the Irish bailout. But the language of the Irish program was rather ambiguous, and contained ominous warnings for owners of bank bonds. 3. No haircuts or burden-sharing on any sovereign debts currently outstanding: This seemed to have been promised by only applying the proposed Collective Action Clauses (CACs) to new debts that are issued after mid-2013. 4.

Free to Choose: A Personal Statement
by Milton Friedman and Rose D. Friedman
Published 2 Jan 1980

However, if everyone tries to get cash at once, the situation is very different—a panic is likely to occur, just as it does when someone cries "fire" in a crowded theater and everyone rushes to get out. One bank alone can meet a run by borrowing from other banks, or by asking its borrowers to repay their loans. The borrowers may be able to repay their loans by withdrawing cash from other banks. But if a bank run spreads widely, all banks together cannot meet the run in this way. There simply is not enough currency in bank vaults to satisfy the demands of all depositors. Moreover, any attempt to meet a widespread run by drawing down vault cash—unless it succeeds promptly in restoring confidence and ends the run so that the cash is redeposited—enforces a much larger reduction in deposits.

Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism
by Kevin Phillips
Published 31 Mar 2008

For obvious reasons, quick short-term profits usually worked to diminish the concern vendors would have over long-term stability. 12 Ibid. 13 “Nasty Side Effects of Debt Innovation,” Financial Times, September 10, 2007. 14 John Authers, “Big Banks Are Moving Back to Center Stage,” Financial Times, August 25, 2007. 15 “New Players Join the Credit Game,” Financial Times, March 13, 2007. 16 The old individual quotations are no longer necessary now that the spreading economic crisis has put a new spotlight on Greenspan’s collusions and mistakes. For examples of this emerging genre, see “Roots of Credit Crisis Laid at Fed’s Door,” MarketWatch, October 24, 2007, and Edmund L. Andrews, “Fed and Regulators Shrugged as the Subprime Crisis Spread,” New York Times, December 18, 2007. 17 “Credit Turmoil ‘Has Hallmarks of Bank Run,’ ” Financial Times, September 2, 2007. 18 Mohamed El-Erian, “In the New Liquidity Factories, Buyers Must Still Beware,” Financial Times, March 22, 2007. 19 David W. Tice, “Report to Shareholders,” Prudent Bear Funds, Inc., April 30, 2007. 20 Satyajit Das, “Credit Crunch: The New Diet Snack of Financial Markets,” www.prudentbear.com, September 5, 2007. 21 Bill Gross, “What Do They Know?”

The Great Surge: The Ascent of the Developing World
by Steven Radelet
Published 10 Nov 2015

Coral Davenport, “Philippines Pushes Developing Countries to Cut Their Emissions,” New York Times, December 8, 2014, www.nytimes.com/2014/12/09/world/americas/philippines-pushes-developing-countries-to-cut-their-emissions-.html. 7. Jane Perlez, “U.S. Opposing China’s Answer to World Bank,” New York Times, October 9, 2014, http://www.nytimes.com/2014/10/10/world/asia/chinas-plan-for-regional-development-bank-runs-into-us-opposition.html. 8. Nancy Birdsall, ed., The White House and the World: A Global Development Agenda for the Next U.S. President (Washington, DC: Center for Global Development, 2008), p. 28. See also Nancy Birdsall, Christian Meyer, and Alexis Sowa, “Global Markets, Global Citizens, and Global Governance in the 21st Century,” working paper 329, Center for Global Development, Washington, DC, September 2013, www.cgdev.org/publication/global-markets-global-citizens-and-global-governance-21st-century-working-paper-329-0. 9.

Startup CEO: A Field Guide to Scaling Up Your Business, + Website
by Matt Blumberg
Published 13 Aug 2013

If you have gathered all the input you need and you’re still not sure what to do, give yourself a deadline for making the decision. Try bouncing the decision off a couple of people who you trust to see how it feels to articulate the decision and explain its consequences. Then stick to your deadline and decide one way or the other. No extensions. CHAPTER NINETEEN MAKING SURE THERE’S ENOUGH MONEY IN THE BANK Running a business is very different from managing your personal finances. The revenue is less predictable than a salary; multiple people contribute to expenses; and there’s a lag time between revenue/expense and cash impact. Keeping a watchful eye on cash is especially important for two reasons: funding requirements and funding availability don’t always go hand-in-hand and most startups regularly have to deal with the fundamental quandary of rapid growth being at odds with profitability.

The Everything Store: Jeff Bezos and the Age of Amazon
by Brad Stone
Published 14 Oct 2013

Moreover, the company’s negative-working-capital model would continue to generate cash from sales to fund its operations. Amazon was also well along in the process of cutting costs. The real danger for Amazon was that the Lehman report might turn into a self-fulfilling prophecy. If Suria’s predictions spooked suppliers into going on the equivalent of a bank run and demanding immediate payment from Amazon for their products, Amazon’s expenses might rise. If Suria frightened customers and they turned away from Amazon because they believed, from the ubiquitous news coverage, that the Internet was only a fad, Amazon’s revenue growth could go down. Then it really could be in trouble.

The American Way of Poverty: How the Other Half Still Lives
by Sasha Abramsky
Published 15 Mar 2013

The percentage of poverty is higher in the rural counties and parishes. It’s a serious concern for us, say, in Washington Parish, where there’s not much economics driving things. We have challenges geographically. It’s spreading; it’s not just an urban phenomenon. We see the homeless population increasing; food banks run low. If you talk to our food bank directors, they’ll tell you it’s a continuing challenge to keep the banks stocked. In our imagination, we hermetically seal off this kind of saga from the broader American story. We like to think that the “pockets” of poverty referred to by Costanza are just that: isolated pockets in a land of plenty.

The Global Money Markets
by Frank J. Fabozzi , Steven V. Mann and Moorad Choudhry
Published 14 Jul 2002

When there is a deficit, the “fixed-rate gap” is consistent with the assumption that the gap will be funded through liabilities for which the rate is unknown. This funding is then a variable-rate liability and is the bank’s risk, unless the rate has been locked-in beforehand. The same assumption applies when the banks run a cash surplus position, and the interest rate for any period in the future is unknown. The gap position at a given time bucket is sensitive to the interest rate that applies to that period. The gap is calculated for each discrete time bucket, so there is a net exposure for say, 0–1 month, 1–3 months, and so on.

Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist
by Kate Raworth
Published 22 Mar 2017

Page numbers in italics denote illustrations A Aalborg, Denmark, 290 Abbott, Anthony ‘Tony’, 31 ABCD group, 148 Abramovitz, Moses, 262 absolute decoupling, 260–61 Acemoglu, Daron, 86 advertising, 58, 106–7, 112, 281 Agbodjinou, Sénamé, 231 agriculture, 5, 46, 72–3, 148, 155, 178, 181, 183 Alaska, 9 Alaska Permanent Fund, 194 Alperovitz, Gar, 177 alternative enterprise designs, 190–91 altruism, 100, 104 Amazon, 192, 196, 276 Amazon rainforest, 105–6, 253 American Economic Association, 3 American Enterprise Institute, 67 American Tobacco Corporation, 107 Andes, 54 animal spirits, 110 Anthropocene epoch, 48, 253 anthropocentrism, 115 Apertuso, 230 Apple, 85, 192 Archer Daniels Midland (ADM), 148 Arendt, Hannah, 115–16 Argentina, 55, 274 Aristotle, 32, 272 Arrow, Kenneth, 134 Articles of Association and Memoranda, 233 Arusha, Tanzania, 202 Asia Wage Floor Alliance, 177 Asian financial crisis (1997), 90 Asknature.org, 232 Athens, 57 austerity, 163 Australia, 31, 103, 177, 180, 211, 224–6, 255, 260 Austria, 263, 274 availability bias, 112 AXIOM, 230 Axtell, Robert, 150 Ayres, Robert, 263 B B Corp, 241 Babylon, 13 Baker, Josephine, 157 balancing feedback loops, 138–41, 155, 271 Ballmer, Steve, 231 Bangla Pesa, 185–6, 293 Bangladesh, 10, 226 Bank for International Settlements, 256 Bank of America, 149 Bank of England, 145, 147, 256 banking, see under finance Barnes, Peter, 201 Barroso, José Manuel, 41 Bartlett, Albert Allen ‘Al’, 247 basic income, 177, 194, 199–201 basic personal values, 107–9 Basle, Switzerland, 80 Bauwens, Michel, 197 Beckerman, Wilfred, 258 Beckham, David, 171 Beech-Nut Packing Company, 107 behavioural economics, 11, 111–14 behavioural psychology, 103, 128 Beinhocker, Eric, 158 Belgium, 236, 252 Bentham, Jeremy, 98 Benyus, Janine, 116, 218, 223–4, 227, 232, 237, 241 Berger, John, 12, 281 Berlin Wall, 141 Bermuda, 277 Bernanke, Ben, 146 Bernays, Edward, 107, 112, 281–3 Bhopal gas disaster (1984), 9 Bible, 19, 114, 151 Big Bang (1986), 87 billionaires, 171, 200, 289 biodiversity, 10, 46, 48–9, 52, 85, 115, 155, 208, 210, 242, 299 as common pool resource, 201 and land conversion, 49 and inequality, 172 and reforesting, 50 biomass, 73, 118, 210, 212, 221 biomimicry, 116, 218, 227, 229 bioplastic, 224, 293 Birmingham, West Midlands, 10 Black, Fischer, 100–101 Blair, Anthony ‘Tony’, 171 Blockchain, 187, 192 blood donation, 104, 118 Body Shop, The, 232–4 Bogotá, Colombia, 119 Bolivia, 54 Boston, Massachusetts, 3 Bowen, Alex, 261 Bowles, Sam, 104 Box, George, 22 Boyce, James, 209 Brasselberg, Jacob, 187 Brazil, 124, 226, 281, 290 bread riots, 89 Brisbane, Australia, 31 Brown, Gordon, 146 Brynjolfsson, Erik, 193, 194, 258 Buddhism, 54 buen vivir, 54 Bullitt Center, Seattle, 217 Bunge, 148 Burkina Faso, 89 Burmark, Lynell, 13 business, 36, 43, 68, 88–9 automation, 191–5, 237, 258, 278 boom and bust, 246 and circular economy, 212, 215–19, 220, 224, 227–30, 232–4, 292 and complementary currencies, 184–5, 292 and core economy, 80 and creative destruction, 142 and feedback loops, 148 and finance, 183, 184 and green growth, 261, 265, 269 and households, 63, 68 living metrics, 241 and market, 68, 88 micro-businesses, 9 and neoliberalism, 67, 87 ownership, 190–91 and political funding, 91–2, 171–2 and taxation, 23, 276–7 workers’ rights, 88, 91, 269 butterfly economy, 220–42 C C–ROADS (Climate Rapid Overview and Decision Support), 153 C40 network, 280 calculating man, 98 California, United States, 213, 224, 293 Cambodia, 254 Cameron, David, 41 Canada, 196, 255, 260, 281, 282 cancer, 124, 159, 196 Capital Institute, 236 carbon emissions, 49–50, 59, 75 and decoupling, 260, 266 and forests, 50, 52 and inequality, 58 reduction of, 184, 201, 213, 216–18, 223–7, 239–41, 260, 266 stock–flow dynamics, 152–4 taxation, 201, 213 Cargill, 148 Carney, Mark, 256 Caterpillar, 228 Catholic Church, 15, 19 Cato Institute, 67 Celts, 54 central banks, 6, 87, 145, 146, 147, 183, 184, 256 Chang, Ha-Joon, 82, 86, 90 Chaplin, Charlie, 157 Chiapas, Mexico, 121–2 Chicago Board Options Exchange (CBOE), 100–101 Chicago School, 34, 99 Chile, 7, 42 China, 1, 7, 48, 154, 289–90 automation, 193 billionaires, 200, 289 greenhouse gas emissions, 153 inequality, 164 Lake Erhai doughnut analysis, 56 open-source design, 196 poverty reduction, 151, 198 renewable energy, 239 tiered pricing, 213 Chinese Development Bank, 239 chrematistics, 32, 273 Christianity, 15, 19, 114, 151 cigarettes, 107, 124 circular economy, 220–42, 257 Circular Flow diagram, 19–20, 28, 62–7, 64, 70, 78, 87, 91, 92, 93, 262 Citigroup, 149 Citizen Reaction Study, 102 civil rights movement, 77 Cleveland, Ohio, 190 climate change, 1, 3, 5, 29, 41, 45–53, 63, 74, 75–6, 91, 141, 144, 201 circular economy, 239, 241–2 dynamics of, 152–5 and G20, 31 and GDP growth, 255, 256, 260, 280 and heuristics, 114 and human rights, 10 and values, 126 climate positive cities, 239 closed systems, 74 coffee, 221 cognitive bias, 112–14 Colander, David, 137 Colombia, 119 common-pool resources, 82–3, 181, 201–2 commons, 69, 82–4, 287 collaborative, 78, 83, 191, 195, 196, 264, 292 cultural, 83 digital, 82, 83, 192, 197, 281 and distribution, 164, 180, 181–2, 205, 267 Embedded Economy, 71, 73, 77–8, 82–4, 85, 92 knowledge, 197, 201–2, 204, 229, 231, 292 commons and money creation, see complementary currencies natural, 82, 83, 180, 181–2, 201, 265 and regeneration, 229, 242, 267, 292 and state, 85, 93, 197, 237 and systems, 160 tragedy of, 28, 62, 69, 82, 181 triumph of, 83 and values, 106, 108 Commons Trusts, 201 complementary currencies, 158, 182–8, 236, 292 complex systems, 28, 129–62 complexity science, 136–7 Consumer Reaction Study, 102 consumerism, 58, 102, 121, 280–84 cooking, 45, 80, 186 Coote, Anna, 278 Copenhagen, Denmark, 124 Copernicus, Nicolaus, 14–15 copyright, 195, 197, 204 core economy, 79–80 Corporate To Do List, 215–19 Costa Rica, 172 Council of Economic Advisers, US, 6, 37 Cox, Jo, 117 cradle to cradle, 224 creative destruction, 142 Cree, 282 Crompton, Tom, 125–6 cross-border flows, 89–90 crowdsourcing, 204 cuckoos, 32, 35, 36, 38, 40, 54, 60, 159, 244, 256, 271 currencies, 182–8, 236, 274, 292 D da Vinci, Leonardo, 13, 94–5 Dallas, Texas, 120 Daly, Herman, 74, 143, 271 Danish Nudging Network, 124 Darwin, Charles, 14 Debreu, Gerard, 134 debt, 37, 146–7, 172–3, 182–5, 247, 255, 269 decoupling, 193, 210, 258–62, 273 defeat device software, 216 deforestation, 49–50, 74, 208, 210 degenerative linear economy, 211–19, 222–3, 237 degrowth, 244 DeMartino, George, 161 democracy, 77, 171–2, 258 demurrage, 274 Denmark, 180, 275, 290 deregulation, 82, 87, 269 derivatives, 100–101, 149 Devas, Charles Stanton, 97 Dey, Suchitra, 178 Diamond, Jared, 154 diarrhoea, 5 differential calculus, 131, 132 digital revolution, 191–2, 264 diversify–select–amplify, 158 double spiral, 54 Doughnut model, 10–11, 11, 23–5, 44, 51 and aspiration, 58–9, 280–84 big picture, 28, 42, 61–93 distribution, 29, 52, 57, 58, 76, 93, 158, 163–205 ecological ceiling, 10, 11, 44, 45, 46, 49, 51, 218, 254, 295, 298 goal, 25–8, 31–60 and governance, 57, 59 growth agnosticism, 29–30, 243–85 human nature, 28–9, 94–128 and population, 57–8 regeneration, 29, 158, 206–42 social foundation, 10, 11, 44, 45, 49, 51, 58, 77, 174, 200, 254, 295–6 systems, 28, 129–62 and technology, 57, 59 Douglas, Margaret, 78–9 Dreyfus, Louis, 148 ‘Dumb and Dumber in Macroeconomics’ (Solow), 135 Durban, South Africa, 214 E Earning by Learning, 120 Earth-system science, 44–53, 115, 216, 288, 298 Easter Island, 154 Easterlin, Richard, 265–6 eBay, 105, 192 eco-literacy, 115 ecological ceiling, 10, 11, 44, 45, 46, 49, 51, 218, 254, 295, 298 Ecological Performance Standards, 241 Econ 101 course, 8, 77 Economics (Lewis), 114 Economics (Samuelson), 19–20, 63–7, 70, 74, 78, 86, 91, 92, 93, 262 Economy for the Common Good, 241 ecosystem services, 7, 116, 269 Ecuador, 54 education, 9, 43, 45, 50–52, 85, 169–70, 176, 200, 249, 279 economic, 8, 11, 18, 22, 24, 36, 287–93 environmental, 115, 239–40 girls’, 57, 124, 178, 198 online, 83, 197, 264, 290 pricing, 118–19 efficient market hypothesis, 28, 62, 68, 87 Egypt, 48, 89 Eisenstein, Charles, 116 electricity, 9, 45, 236, 240 and Bangla Pesa, 186 cars, 231 Ethereum, 187–8 and MONIAC, 75, 262 pricing, 118, 213 see also renewable energy Elizabeth II, Queen of the United Kingdom, 145 Ellen MacArthur Foundation, 220 Embedded Economy, 71–93, 263 business, 88–9 commons, 82–4 Earth, 72–6 economy, 77–8 finance, 86–8 household, 78–81 market, 81–2 power, 91–92 society, 76–7 state, 84–6 trade, 89–90 employment, 36, 37, 51, 142, 176 automation, 191–5, 237, 258, 278 labour ownership, 188–91 workers’ rights, 88, 90, 269 Empty World, 74 Engels, Friedrich, 88 environment and circular economy, 220–42, 257 conservation, 121–2 and degenerative linear economy, 211–19, 222–3 degradation, 5, 9, 10, 29, 44–53, 74, 154, 172, 196, 206–42 education on, 115, 239–40 externalities, 152 fair share, 216–17 and finance, 234–7 generosity, 218–19, 223–7 green growth, 41, 210, 243–85 nudging, 123–5 taxation and quotas, 213–14, 215 zero impact, 217–18, 238, 241 Environmental Dashboard, 240–41 environmental economics, 7, 11, 114–16 Environmental Kuznets Curve, 207–11, 241 environmental space, 54 Epstein, Joshua, 150 equilibrium theory, 134–62 Ethereum, 187–8 ethics, 160–62 Ethiopia, 9, 226, 254 Etsy, 105 Euclid, 13, 15 European Central Bank, 145, 275 European Commission, 41 European Union (EU), 92, 153, 210, 222, 255, 258 Evergreen Cooperatives, 190 Evergreen Direct Investing (EDI), 273 exogenous shocks, 141 exponential growth, 39, 246–85 externalities, 143, 152, 213 Exxon Valdez oil spill (1989), 9 F Facebook, 192 fair share, 216–17 Fama, Eugene, 68, 87 fascism, 234, 277 Federal Reserve, US, 87, 145, 146, 271, 282 feedback loops, 138–41, 143, 148, 155, 250, 271 feminist economics, 11, 78–81, 160 Ferguson, Thomas, 91–2 finance animal spirits, 110 bank runs, 139 Black–Scholes model, 100–101 boom and bust, 28–9, 110, 144–7 and Circular Flow, 63–4, 87 and complex systems, 134, 138, 139, 140, 141, 145–7 cross-border flows, 89 deregulation, 87 derivatives, 100–101, 149 and distribution, 169, 170, 173, 182–4, 198–9, 201 and efficient market hypothesis, 63, 68 and Embedded Economy, 71, 86–8 and financial-instability hypothesis, 87, 146 and GDP growth, 38 and media, 7–8 mobile banking, 199–200 and money creation, 87, 182–5 and regeneration, 227, 229, 234–7 in service to life, 159, 234–7 stakeholder finance, 190 and sustainability, 216, 235–6, 239 financial crisis (2008), 1–4, 5, 40, 63, 86, 141, 144, 278, 290 and efficient market hypothesis, 87 and equilibrium theory, 134, 145 and financial-instability hypothesis, 87 and inequality, 90, 170, 172, 175 and money creation, 182 and worker’s rights, 278 financial flows, 89 Financial Times, 183, 266, 289 financial-instability hypothesis, 87, 146 First Green Bank, 236 First World War (1914–18), 166, 170 Fisher, Irving, 183 fluid values, 102, 106–9 food, 3, 43, 45, 50, 54, 58, 59, 89, 198 food banks, 165 food price crisis (2007–8), 89, 90, 180 Ford, 277–8 foreign direct investment, 89 forest conservation, 121–2 fossil fuels, 59, 73, 75, 92, 212, 260, 263 Foundations of Economic Analysis (Samuelson), 17–18 Foxconn, 193 framing, 22–3 France, 43, 165, 196, 238, 254, 256, 281, 290 Frank, Robert, 100 free market, 33, 37, 67, 68, 70, 81–2, 86, 90 free open-source hardware (FOSH), 196–7 free open-source software (FOSS), 196 free trade, 70, 90 Freeman, Ralph, 18–19 freshwater cycle, 48–9 Freud, Sigmund, 107, 281 Friedman, Benjamin, 258 Friedman, Milton, 34, 62, 66–9, 84–5, 88, 99, 183, 232 Friends of the Earth, 54 Full World, 75 Fuller, Buckminster, 4 Fullerton, John, 234–6, 273 G G20, 31, 56, 276, 279–80 G77, 55 Gal, Orit, 141 Gandhi, Mohandas, 42, 293 Gangnam Style, 145 Gardens of Democracy, The (Liu & Hanauer), 158 gender equality, 45, 51–2, 57, 78–9, 85, 88, 118–19, 124, 171, 198 generosity, 218–19, 223–9 geometry, 13, 15 George, Henry, 149, 179 Georgescu-Roegen, Nicholas, 252 geothermal energy, 221 Gerhardt, Sue, 283 Germany, 2, 41, 100, 118, 165, 189, 211, 213, 254, 256, 260, 274 Gessel, Silvio, 274 Ghent, Belgium, 236 Gift Relationship, The (Titmuss), 118–19 Gigerenzer, Gerd, 112–14 Gintis, Herb, 104 GiveDirectly, 200 Glass–Steagall Act (1933), 87 Glennon, Roger, 214 Global Alliance for Tax Justice, 277 global material footprints, 210–11 Global Village Construction Set, 196 globalisation, 89 Goerner, Sally, 175–6 Goffmann, Erving, 22 Going for Growth, 255 golden rule, 91 Goldman Sachs, 149, 170 Gómez-Baggethun, Erik, 122 Goodall, Chris, 211 Goodwin, Neva, 79 Goody, Jade, 124 Google, 192 Gore, Albert ‘Al’, 172 Gorgons, 244, 256, 257, 266 graffiti, 15, 25, 287 Great Acceleration, 46, 253–4 Great Depression (1929–39), 37, 70, 170, 173, 183, 275, 277, 278 Great Moderation, 146 Greece, Ancient, 4, 13, 32, 48, 54, 56–7, 160, 244 green growth, 41, 210, 243–85 Greenham, Tony, 185 greenhouse gas emissions, 31, 46, 50, 75–6, 141, 152–4 and decoupling, 260, 266 and Environmental Kuznets Curve, 208, 210 and forests, 50, 52 and G20, 31 and inequality, 58 reduction of, 184, 201–2, 213, 216–18, 223–7, 239–41, 256, 259–60, 266, 298 stock–flow dynamics, 152–4 and taxation, 201, 213 Greenland, 141, 154 Greenpeace, 9 Greenspan, Alan, 87 Greenwich, London, 290 Grenoble, France, 281 Griffiths, Brian, 170 gross domestic product (GDP), 25, 31–2, 35–43, 57, 60, 84, 164 as cuckoo, 32, 35, 36, 38, 40, 54, 60, 159, 244, 256, 271 and Environmental Kuznets Curve, 207–11 and exponential growth, 39, 53, 246–85 and growth agnosticism, 29–30, 240, 243–85 and inequality, 173 and Kuznets Curve, 167, 173, 188–9 gross national product (GNP), 36–40 Gross World Product, 248 Grossman, Gene, 207–8, 210 ‘grow now, clean up later’, 207 Guatemala, 196 H Haifa, Israel, 120 Haldane, Andrew, 146 Han Dynasty, 154 Hanauer, Nick, 158 Hansen, Pelle, 124 Happy Planet Index, 280 Hardin, Garrett, 69, 83, 181 Harvard University, 2, 271, 290 von Hayek, Friedrich, 7–8, 62, 66, 67, 143, 156, 158 healthcare, 43, 50, 57, 85, 123, 125, 170, 176, 200, 269, 279 Heilbroner, Robert, 53 Henry VIII, King of England and Ireland, 180 Hepburn, Cameron, 261 Herbert Simon, 111 heuristics, 113–14, 118, 123 high-income countries growth, 30, 244–5, 254–72, 282 inequality, 165, 168, 169, 171 labour, 177, 188–9, 278 overseas development assistance (ODA), 198–9 resource intensive lifestyles, 46, 210–11 trade, 90 Hippocrates, 160 History of Economic Analysis (Schumpeter), 21 HIV/AIDS, 123 Holocene epoch, 46–8, 75, 115, 253 Homo economicus, 94–103, 109, 127–8 Homo sapiens, 38, 104, 130 Hong Kong, 180 household, 78 housing, 45, 59, 176, 182–3, 269 Howe, Geoffrey, 67 Hudson, Michael, 183 Human Development Index, 9, 279 human nature, 28 human rights, 10, 25, 45, 49, 50, 95, 214, 233 humanistic economics, 42 hydropower, 118, 260, 263 I Illinois, United States, 179–80 Imago Mundi, 13 immigration, 82, 199, 236, 266 In Defense of Economic Growth (Beckerman), 258 Inclusive Wealth Index, 280 income, 51, 79–80, 82, 88, 176–8, 188–91, 194, 199–201 India, 2, 9, 10, 42, 124, 164, 178, 196, 206–7, 242, 290 Indonesia, 90, 105–6, 164, 168, 200 Indus Valley civilisation, 48 inequality, 1, 5, 25, 41, 63, 81, 88, 91, 148–52, 209 and consumerism, 111 and democracy, 171 and digital revolution, 191–5 and distribution, 163–205 and environmental degradation, 172 and GDP growth, 173 and greenhouse gas emissions, 58 and intellectual property, 195–8 and Kuznets Curve, 29, 166–70, 173–4 and labour ownership, 188–91 and land ownership, 178–82 and money creation, 182–8 and social welfare, 171 Success to the Successful, 148, 149, 151, 166 inflation, 36, 248, 256, 275 insect pollination services, 7 Institute of Economic Affairs, 67 institutional economics, 11 intellectual property rights, 195–8, 204 interest, 36, 177, 182, 184, 275–6 Intergovernmental Panel on Climate Change, 25 International Monetary Fund (IMF), 170, 172, 173, 183, 255, 258, 271 Internet, 83–4, 89, 105, 192, 202, 264 Ireland, 277 Iroquois Onondaga Nation, 116 Israel, 100, 103, 120 Italy, 165, 196, 254 J Jackson, Tim, 58 Jakubowski, Marcin, 196 Jalisco, Mexico, 217 Japan, 168, 180, 211, 222, 254, 256, 263, 275 Jevons, William Stanley, 16, 97–8, 131, 132, 137, 142 John Lewis Partnership, 190 Johnson, Lyndon Baines, 37 Johnson, Mark, 38 Johnson, Todd, 191 JPMorgan Chase, 149, 234 K Kahneman, Daniel, 111 Kamkwamba, William, 202, 204 Kasser, Tim, 125–6 Keen, Steve, 146, 147 Kelly, Marjorie, 190–91, 233 Kennedy, John Fitzgerald, 37, 250 Kennedy, Paul, 279 Kenya, 118, 123, 180, 185–6, 199–200, 226, 292 Keynes, John Maynard, 7–8, 22, 66, 69, 134, 184, 251, 277–8, 284, 288 Kick It Over movement, 3, 289 Kingston, London, 290 Knight, Frank, 66, 99 knowledge commons, 202–4, 229, 292 Kokstad, South Africa, 56 Kondratieff waves, 246 Korzybski, Alfred, 22 Krueger, Alan, 207–8, 210 Kuhn, Thomas, 22 Kumhof, Michael, 172 Kuwait, 255 Kuznets, Simon, 29, 36, 39–40, 166–70, 173, 174, 175, 204, 207 KwaZulu Natal, South Africa, 56 L labour ownership, 188–91 Lake Erhai, Yunnan, 56 Lakoff, George, 23, 38, 276 Lamelara, Indonesia, 105–6 land conversion, 49, 52, 299 land ownership, 178–82 land-value tax, 73, 149, 180 Landesa, 178 Landlord’s Game, The, 149 law of demand, 16 laws of motion, 13, 16–17, 34, 129, 131 Lehman Brothers, 141 Leopold, Aldo, 115 Lesotho, 118, 199 leverage points, 159 Lewis, Fay, 178 Lewis, Justin, 102 Lewis, William Arthur, 114, 167 Lietaer, Bernard, 175, 236 Limits to Growth, 40, 154, 258 Linux, 231 Liu, Eric, 158 living metrics, 240–42 living purpose, 233–4 Lomé, Togo, 231 London School of Economics (LSE), 2, 34, 65, 290 London Underground, 12 loss aversion, 112 low-income countries, 90, 164–5, 168, 173, 180, 199, 201, 209, 226, 254, 259 Lucas, Robert, 171 Lula da Silva, Luiz Inácio, 124 Luxembourg, 277 Lyle, John Tillman, 214 Lyons, Oren, 116 M M–PESA, 199–200 MacDonald, Tim, 273 Machiguenga, 105–6 MacKenzie, Donald, 101 macroeconomics, 36, 62–6, 76, 80, 134–5, 145, 147, 150, 244, 280 Magie, Elizabeth, 149, 153 Malala effect, 124 malaria, 5 Malawi, 118, 202, 204 Malaysia, 168 Mali, Taylor, 243 Malthus, Thomas, 252 Mamsera Rural Cooperative, 190 Manhattan, New York, 9, 41 Mani, Muthukumara, 206 Manitoba, 282 Mankiw, Gregory, 2, 34 Mannheim, Karl, 22 Maoris, 54 market, 81–2 and business, 88 circular flow, 64 and commons, 83, 93, 181, 200–201 efficiency of, 28, 62, 68, 87, 148, 181 and equilibrium theory, 131–5, 137, 143–7, 155, 156 free market, 33, 37, 67–70, 90, 208 and households, 63, 69, 78, 79 and maxi-max rule, 161 and pricing, 117–23, 131, 160 and rational economic man, 96, 100–101, 103, 104 and reciprocity, 105, 106 reflexivity of, 144–7 and society, 69–70 and state, 84–6, 200, 281 Marshall, Alfred, 17, 98, 133, 165, 253, 282 Marx, Karl, 88, 142, 165, 272 Massachusetts Institute of Technology (MIT), 17–20, 152–5 massive open online courses (MOOCs), 290 Matthew Effect, 151 Max-Neef, Manfred, 42 maxi-max rule, 161 maximum wage, 177 Maya civilisation, 48, 154 Mazzucato, Mariana, 85, 195, 238 McAfee, Andrew, 194, 258 McDonough, William, 217 Meadows, Donella, 40, 141, 159, 271, 292 Medusa, 244, 257, 266 Merkel, Angela, 41 Messerli, Elspeth, 187 Metaphors We Live By (Lakoff & Johnson), 38 Mexico, 121–2, 217 Michaels, Flora S., 6 micro-businesses, 9, 173, 178 microeconomics, 132–4 microgrids, 187–8 Micronesia, 153 Microsoft, 231 middle class, 6, 46, 58 middle-income countries, 90, 164, 168, 173, 180, 226, 254 migration, 82, 89–90, 166, 195, 199, 236, 266, 286 Milanovic, Branko, 171 Mill, John Stuart, 33–4, 73, 97, 250, 251, 283, 284, 288 Millo, Yuval, 101 minimum wage, 82, 88, 176 Minsky, Hyman, 87, 146 Mises, Ludwig von, 66 mission zero, 217 mobile banking, 199–200 mobile phones, 222 Model T revolution, 277–8 Moldova, 199 Mombasa, Kenya, 185–6 Mona Lisa (da Vinci), 94 money creation, 87, 164, 177, 182–8, 205 MONIAC (Monetary National Income Analogue Computer), 64–5, 75, 142, 262 Monoculture (Michaels), 6 Monopoly, 149 Mont Pelerin Society, 67, 93 Moral Consequences of Economic Growth, The (Friedman), 258 moral vacancy, 41 Morgan, Mary, 99 Morogoro, Tanzania, 121 Moyo, Dambisa, 258 Muirhead, Sam, 230, 231 MultiCapital Scorecard, 241 Murphy, David, 264 Murphy, Richard, 185 musical tastes, 110 Myriad Genetics, 196 N national basic income, 177 Native Americans, 115, 116, 282 natural capital, 7, 116, 269 Natural Economic Order, The (Gessel), 274 Nedbank, 216 negative externalities, 213 negative interest rates, 275–6 neoclassical economics, 134, 135 neoliberalism, 7, 62–3, 67–70, 81, 83, 84, 88, 93, 143, 170, 176 Nepal, 181, 199 Nestlé, 217 Netherlands, 211, 235, 224, 226, 238, 277 networks, 110–11, 117, 118, 123, 124–6, 174–6 neuroscience, 12–13 New Deal, 37 New Economics Foundation, 278, 283 New Year’s Day, 124 New York, United States, 9, 41, 55 Newlight Technologies, 224, 226, 293 Newton, Isaac, 13, 15–17, 32–3, 95, 97, 129, 131, 135–7, 142, 145, 162 Nicaragua, 196 Nigeria, 164 nitrogen, 49, 52, 212–13, 216, 218, 221, 226, 298 ‘no pain, no gain’, 163, 167, 173, 204, 209 Nobel Prize, 6–7, 43, 83, 101, 167 Norway, 281 nudging, 112, 113, 114, 123–6 O Obama, Barack, 41, 92 Oberlin, Ohio, 239, 240–41 Occupy movement, 40, 91 ocean acidification, 45, 46, 52, 155, 242, 298 Ohio, United States, 190, 239 Okun, Arthur, 37 onwards and upwards, 53 Open Building Institute, 196 Open Source Circular Economy (OSCE), 229–32 open systems, 74 open-source design, 158, 196–8, 265 open-source licensing, 204 Organisation for Economic Co-operation and Development (OECD), 38, 210, 255–6, 258 Origin of Species, The (Darwin), 14 Ormerod, Paul, 110, 111 Orr, David, 239 Ostrom, Elinor, 83, 84, 158, 160, 181–2 Ostry, Jonathan, 173 OSVehicle, 231 overseas development assistance (ODA), 198–200 ownership of wealth, 177–82 Oxfam, 9, 44 Oxford University, 1, 36 ozone layer, 9, 50, 115 P Pachamama, 54, 55 Pakistan, 124 Pareto, Vilfredo, 165–6, 175 Paris, France, 290 Park 20|20, Netherlands, 224, 226 Parker Brothers, 149 Patagonia, 56 patents, 195–6, 197, 204 patient capital, 235 Paypal, 192 Pearce, Joshua, 197, 203–4 peer-to-peer networks, 187, 192, 198, 203, 292 People’s QE, 184–5 Perseus, 244 Persia, 13 Peru, 2, 105–6 Phillips, Adam, 283 Phillips, William ‘Bill’, 64–6, 75, 142, 262 phosphorus, 49, 52, 212–13, 218, 298 Physiocrats, 73 Pickett, Kate, 171 pictures, 12–25 Piketty, Thomas, 169 Playfair, William, 16 Poincaré, Henri, 109, 127–8 Polanyi, Karl, 82, 272 political economy, 33–4, 42 political funding, 91–2, 171–2 political voice, 43, 45, 51–2, 77, 117 pollution, 29, 45, 52, 85, 143, 155, 206–17, 226, 238, 242, 254, 298 population, 5, 46, 57, 155, 199, 250, 252, 254 Portugal, 211 post-growth society, 250 poverty, 5, 9, 37, 41, 50, 88, 118, 148, 151 emotional, 283 and inequality, 164–5, 168–9, 178 and overseas development assistance (ODA), 198–200 and taxation, 277 power, 91–92 pre-analytic vision, 21–2 prescription medicines, 123 price-takers, 132 prices, 81, 118–23, 131, 160 Principles of Economics (Mankiw), 34 Principles of Economics (Marshall), 17, 98 Principles of Political Economy (Mill), 288 ProComposto, 226 Propaganda (Bernays), 107 public relations, 107, 281 public spending v. investment, 276 public–private patents, 195 Putnam, Robert, 76–7 Q quantitative easing (QE), 184–5 Quebec, 281 Quesnay, François, 16, 73 R Rabot, Ghent, 236 Rancière, Romain, 172 rating and review systems, 105 rational economic man, 94–103, 109, 111, 112, 126, 282 Reagan, Ronald, 67 reciprocity, 103–6, 117, 118, 123 reflexivity of markets, 144 reinforcing feedback loops, 138–41, 148, 250, 271 relative decoupling, 259 renewable energy biomass energy, 118, 221 and circular economy, 221, 224, 226, 235, 238–9, 274 and commons, 83, 85, 185, 187–8, 192, 203, 264 geothermal energy, 221 and green growth, 257, 260, 263, 264, 267 hydropower, 118, 260, 263 pricing, 118 solar energy, see solar energy wave energy, 221 wind energy, 75, 118, 196, 202–3, 221, 233, 239, 260, 263 rentier sector, 180, 183, 184 reregulation, 82, 87, 269 resource flows, 175 resource-intensive lifestyles, 46 Rethinking Economics, 289 Reynebeau, Guy, 237 Ricardo, David, 67, 68, 73, 89, 250 Richardson, Katherine, 53 Rifkin, Jeremy, 83, 264–5 Rise and Fall of the Great Powers, The (Kennedy), 279 risk, 112, 113–14 Robbins, Lionel, 34 Robinson, James, 86 Robinson, Joan, 142 robots, 191–5, 237, 258, 278 Rockefeller Foundation, 135 Rockford, Illinois, 179–80 Rockström, Johan, 48, 55 Roddick, Anita, 232–4 Rogoff, Kenneth, 271, 280 Roman Catholic Church, 15, 19 Rombo, Tanzania, 190 Rome, Ancient, 13, 48, 154 Romney, Mitt, 92 Roosevelt, Franklin Delano, 37 rooted membership, 190 Rostow, Walt, 248–50, 254, 257, 267–70, 284 Ruddick, Will, 185 rule of thumb, 113–14 Ruskin, John, 42, 223 Russia, 200 rust belt, 90, 239 S S curve, 251–6 Sainsbury’s, 56 Samuelson, Paul, 17–21, 24–5, 38, 62–7, 70, 74, 84, 91, 92, 93, 262, 290–91 Sandel, Michael, 41, 120–21 Sanergy, 226 sanitation, 5, 51, 59 Santa Fe, California, 213 Santinagar, West Bengal, 178 São Paolo, Brazil, 281 Sarkozy, Nicolas, 43 Saumweder, Philipp, 226 Scharmer, Otto, 115 Scholes, Myron, 100–101 Schumacher, Ernst Friedrich, 42, 142 Schumpeter, Joseph, 21 Schwartz, Shalom, 107–9 Schwarzenegger, Arnold, 163, 167, 204 ‘Science and Complexity’ (Weaver), 136 Scotland, 57 Seaman, David, 187 Seattle, Washington, 217 second machine age, 258 Second World War (1939–45), 18, 37, 70, 170 secular stagnation, 256 self-interest, 28, 68, 96–7, 99–100, 102–3 Selfish Society, The (Gerhardt), 283 Sen, Amartya, 43 Shakespeare, William, 61–3, 67, 93 shale gas, 264, 269 Shang Dynasty, 48 shareholders, 82, 88, 189, 191, 227, 234, 273, 292 sharing economy, 264 Sheraton Hotel, Boston, 3 Siegen, Germany, 290 Silicon Valley, 231 Simon, Julian, 70 Sinclair, Upton, 255 Sismondi, Jean, 42 slavery, 33, 77, 161 Slovenia, 177 Small Is Beautiful (Schumacher), 42 smart phones, 85 Smith, Adam, 33, 57, 67, 68, 73, 78–9, 81, 96–7, 103–4, 128, 133, 160, 181, 250 social capital, 76–7, 122, 125, 172 social contract, 120, 125 social foundation, 10, 11, 44, 45, 49, 51, 58, 77, 174, 200, 254, 295–6 social media, 83, 281 Social Progress Index, 280 social pyramid, 166 society, 76–7 solar energy, 59, 75, 111, 118, 187–8, 190 circular economy, 221, 222, 223, 224, 226–7, 239 commons, 203 zero-energy buildings, 217 zero-marginal-cost revolution, 84 Solow, Robert, 135, 150, 262–3 Soros, George, 144 South Africa, 56, 177, 214, 216 South Korea, 90, 168 South Sea Bubble (1720), 145 Soviet Union (1922–91), 37, 67, 161, 279 Spain, 211, 238, 256 Spirit Level, The (Wilkinson & Pickett), 171 Sraffa, Piero, 148 St Gallen, Switzerland, 186 Stages of Economic Growth, The (Rostow), 248–50, 254 stakeholder finance, 190 Standish, Russell, 147 state, 28, 33, 69–70, 78, 82, 160, 176, 180, 182–4, 188 and commons, 85, 93, 197, 237 and market, 84–6, 200, 281 partner state, 197, 237–9 and robots, 195 stationary state, 250 Steffen, Will, 46, 48 Sterman, John, 66, 143, 152–4 Steuart, James, 33 Stiglitz, Joseph, 43, 111, 196 stocks and flows, 138–41, 143, 144, 152 sub-prime mortgages, 141 Success to the Successful, 148, 149, 151, 166 Sugarscape, 150–51 Summers, Larry, 256 Sumner, Andy, 165 Sundrop Farms, 224–6 Sunstein, Cass, 112 supply and demand, 28, 132–6, 143, 253 supply chains, 10 Sweden, 6, 255, 275, 281 swishing, 264 Switzerland, 42, 66, 80, 131, 186–7, 275 T Tableau économique (Quesnay), 16 tabula rasa, 20, 25, 63, 291 takarangi, 54 Tanzania, 121, 190, 202 tar sands, 264, 269 taxation, 78, 111, 165, 170, 176, 177, 237–8, 276–9 annual wealth tax, 200 environment, 213–14, 215 global carbon tax, 201 global financial transactions tax, 201, 235 land-value tax, 73, 149, 180 non-renewable resources, 193, 237–8, 278–9 People’s QE, 185 tax relief v. tax justice, 23, 276–7 TED (Technology, Entertainment, Design), 202, 258 Tempest, The (Shakespeare), 61, 63, 93 Texas, United States, 120 Thailand, 90, 200 Thaler, Richard, 112 Thatcher, Margaret, 67, 69, 76 Theory of Moral Sentiments (Smith), 96 Thompson, Edward Palmer, 180 3D printing, 83–4, 192, 198, 231, 264 thriving-in-balance, 54–7, 62 tiered pricing, 213–14 Tigray, Ethiopia, 226 time banking, 186 Titmuss, Richard, 118–19 Toffler, Alvin, 12, 80 Togo, 231, 292 Torekes, 236–7 Torras, Mariano, 209 Torvalds, Linus, 231 trade, 62, 68–9, 70, 89–90 trade unions, 82, 176, 189 trademarks, 195, 204 Transatlantic Trade and Investment Partnership (TTIP), 92 transport, 59 trickle-down economics, 111, 170 Triodos, 235 Turkey, 200 Tversky, Amos, 111 Twain, Mark, 178–9 U Uganda, 118, 125 Ulanowicz, Robert, 175 Ultimatum Game, 105, 117 unemployment, 36, 37, 276, 277–9 United Kingdom Big Bang (1986), 87 blood donation, 118 carbon dioxide emissions, 260 free trade, 90 global material footprints, 211 money creation, 182 MONIAC (Monetary National Income Analogue Computer), 64–5, 75, 142, 262 New Economics Foundation, 278, 283 poverty, 165, 166 prescription medicines, 123 wages, 188 United Nations, 55, 198, 204, 255, 258, 279 G77 bloc, 55 Human Development Index, 9, 279 Sustainable Development Goals, 24, 45 United States American Economic Association meeting (2015), 3 blood donation, 118 carbon dioxide emissions, 260 Congress, 36 Council of Economic Advisers, 6, 37 Earning by Learning, 120 Econ 101 course, 8, 77 Exxon Valdez oil spill (1989), 9 Federal Reserve, 87, 145, 146, 271, 282 free trade, 90 Glass–Steagall Act (1933), 87 greenhouse gas emissions, 153 global material footprint, 211 gross national product (GNP), 36–40 inequality, 170, 171 land-value tax, 73, 149, 180 political funding, 91–2, 171 poverty, 165, 166 productivity and employment, 193 rust belt, 90, 239 Transatlantic Trade and Investment Partnership (TTIP), 92 wages, 188 universal basic income, 200 University of Berkeley, 116 University of Denver, 160 urbanisation, 58–9 utility, 35, 98, 133 V values, 6, 23, 34, 35, 42, 117, 118, 121, 123–6 altruism, 100, 104 anthropocentric, 115 extrinsic, 115 fluid, 28, 102, 106–9 and networks, 110–11, 117, 118, 123, 124–6 and nudging, 112, 113, 114, 123–6 and pricing, 81, 120–23 Veblen, Thorstein, 82, 109, 111, 142 Venice, 195 verbal framing, 23 Verhulst, Pierre, 252 Victor, Peter, 270 Viner, Jacob, 34 virtuous cycles, 138, 148 visual framing, 23 Vitruvian Man, 13–14 Volkswagen, 215–16 W Wacharia, John, 186 Wall Street, 149, 234, 273 Wallich, Henry, 282 Walras, Léon, 131, 132, 133–4, 137 Ward, Barbara, 53 Warr, Benjamin, 263 water, 5, 9, 45, 46, 51, 54, 59, 79, 213–14 wave energy, 221 Ways of Seeing (Berger), 12, 281 Wealth of Nations, The (Smith), 74, 78, 96, 104 wealth ownership, 177–82 Weaver, Warren, 135–6 weightless economy, 261–2 WEIRD (Western, educated, industrialised, rich, democratic), 103–5, 110, 112, 115, 117, 282 West Bengal, India, 124, 178 West, Darrell, 171–2 wetlands, 7 whale hunting, 106 Wiedmann, Tommy, 210 Wikipedia, 82, 223 Wilkinson, Richard, 171 win–win trade, 62, 68, 89 wind energy, 75, 118, 196, 202–3, 221, 233, 239, 260, 263 Wizard of Oz, The, 241 Woelab, 231, 293 Wolf, Martin, 183, 266 women’s rights, 33, 57, 107, 160, 201 and core economy, 69, 79–81 education, 57, 124, 178, 198 and land ownership, 178 see also gender equality workers’ rights, 88, 91, 269 World 3 model, 154–5 World Bank, 6, 41, 119, 164, 168, 171, 206, 255, 258 World No Tobacco Day, 124 World Trade Organization, 6, 89 worldview, 22, 54, 115 X xenophobia, 266, 277, 286 Xenophon, 4, 32, 56–7, 160 Y Yandle, Bruce, 208 Yang, Yuan, 1–3, 289–90 yin yang, 54 Yousafzai, Malala, 124 YouTube, 192 Yunnan, China, 56 Z Zambia, 10 Zanzibar, 9 Zara, 276 Zeitvorsoge, 186–7 zero environmental impact, 217–18, 238, 241 zero-hour contracts, 88 zero-humans-required production, 192 zero-interest loans, 183 zero-marginal-cost revolution, 84, 191, 264 zero-waste manufacturing, 227 Zinn, Howard, 77 PICTURE ACKNOWLEDGEMENTS Illustrations are reproduced by kind permission of: archive.org

The Evolution of Everything: How New Ideas Emerge
by Matt Ridley

One high-profile failure, of the aptly named Ayr Bank in 1772, showed how the system of self-regulation worked. The Ayr Bank’s aggressive lending was distrusted by its rivals, so they had avoided entangling themselves with it. Instead the Ayr Bank borrowed from London banks, including the Bank of England. It went bust because of a series of bank runs starting in London, which took down more than twenty prominent banking houses. Because it had been avoided by the main Scottish banks, the Ayr Bank’s failure took only a few local Scottish banks with it. The main issuing banks acted as lenders of last resort to smaller banks during the crisis, which not only saved them but gave the whole system future credibility.

The Economics of Enough: How to Run the Economy as if the Future Matters
by Diane Coyle
Published 21 Feb 2011

She was with Northern Rock, and there was an old-fashioned run on the bank. It was unable to meet customers’ demand for withdrawals and had to ask the Bank of England to lend it the cash. The television news showed lines of anxious depositors hoping to take out all their funds. It was the first full-fledged bank run in living memory in the United Kingdom. I told her that the government would bail out all the depositors, as it would be political suicide to do anything else. My sister ignored my advice (although it ultimately turned out to be right) and joined the line outside her local branch. As for Northern Rock, it had to be taken over by the British government.

Arguing With Zombies: Economics, Politics, and the Fight for a Better Future
by Paul Krugman
Published 28 Jan 2020

Recessions, even nasty ones, didn’t stop happening; the U.S. unemployment rate hit almost 11 percent in 1982. But that recession, like most slumps after World War II, was more like shock therapy than a heart attack: it was more or less deliberately imposed by policymakers to cool off what they feared was about to become runaway inflation. Nobody expected the return of old-style “panics,” with bank runs and businesses going under because people were hiding their savings under mattresses. But that’s what happened in Thailand, Malaysia, Indonesia, South Korea in the late 1990s. A slower-motion crisis, a sustained malaise, came to Japan, which just a few years before had been widely seen as an emerging economic superpower.

Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens
by Nicholas Shaxson
Published 11 Apr 2011

Banks take in deposits (which are liabilities of the bank) and make loans (which are its assets), but they also hold capital, which is the safety buffer that investors put in. If loans go bad this capital serves as a shock absorber: It is the investor capital, not the deposits, that take the hit (though if more and more loans go bad and the capital is exhausted, then the bank runs into real trouble, as happened to banks in the latest financial crisis). Prudent bankers will restrict their loans up to a multiple of, say, ten times the capital buffer. Capital is far more valuable to bankers than deposits: The more capital you have, the more you may multiply your balance sheet.

Super Thinking: The Big Book of Mental Models
by Gabriel Weinberg and Lauren McCann
Published 17 Jun 2019

The deterrence model can be appropriate when you want to try to prevent another person or organization from taking an action that would be harmful to you or society at large. In the criminal justice system, punishments may be enacted to try to deter future crime (e.g., three-strikes laws). Government regulations are often designed in part to deter unpleasant future economic or societal outcomes (e.g., deposit insurance deterring bank runs). Businesses also take actions to deter new entrants, for example, by using their scale to price goods so low that new firms cannot profitably compete (e.g., Walmart) or lobbying for regulations that benefit them at the expense of competition (e.g., anti–net neutrality laws). The primary challenge of this model, though, is actually finding an effective deterrent.

Value of Everything: An Antidote to Chaos The
by Mariana Mazzucato
Published 25 Apr 2018

Banking, it is argued, provides three main ‘services': ‘maturity transformation' (the conversion of short term deposits into mortgages and business loans); liquidity (the instant availability of cash through a short-term loan or overdraft for businesses and households that need to pay for something); and, perhaps most importantly, credit assessment (vetting loan applications to decide who is creditworthy and what the terms of the loan should be). As well as channelling funds from lenders to borrowers, banks run the various payments systems linking buyers to sellers. These activities, especially the transformation of short-term deposits into long-term loans and the guarantee of liquidity to customers with overdrafts, also mean a transfer of risk to banks from other private-sector firms. This bundle of services collectively constitutes ‘financial intermediation'.

Your Money: The Missing Manual
by J.D. Roth
Published 18 Mar 2010

Lower fees. It's a shame to throw money away on service charges and other fees, so ask about free checking or to have fees reduced. Automation. Does the bank have a new website? Do they now offer free billpay? Can they help you set up a direct deposit of your paycheck? Special offers. Is the bank running any promotions? Banks often introduce new products and services to meet customer demand. They're perfectly content, however, to let you keep your old low-interest, high-fee accounts. It's up to you to take the initiative to ask for better deals! Tip It can pay to develop a relationship with a banker.

Influence: Science and Practice
by Robert B. Cialdini
Published 1 Jan 1984

John, Kevin, 211 Salovey, Peter, 200 Sanka coffee, 183, 184, 191–192 Saturday Night Fever, 221 Scarcity principle, 199–200 and censorship, 210–213 competition for resources, 217–221 defense against, 221–225 numerical scarcity and, 200–202 operating conditions for, 213–221 psychological issues in, 203–206 time limits and, 203 Schachter, Stanley, 103–107 Schein, Edgar, 61 Segal, Henry, 66 Self, William, 219 Self-esteem, disassociated from attractiveness, 148 Shadel, Doug, 94 Shaklee Corporation, 144 Sheen, Martin, 184 Sherif, Muzafer, 154 Sherman, Steven, 60 Shopping carts, 109–110 scarcity principle and, 218–219 Similarity effect on social relations, 148–149 and social proof principle, 118–120 Singapore, bank run in, 136–137 Size, conveying status, 185–186 Social proof principle, 99 advertising and promotion uses of, 99–102, 142 benefits of, 131 and bystander phenomenon, 110–117 and copycat crime, 126–128 cultural issues in 136–137 defending oneself against, 131–137 and herd mentality, 135–138 manipulation of, 132–135, 138 and religion, 102–109 research on, 100–101, 113–115 similarity and, 118–120 and suicide, 120–126, 128–131 therapies based on, 101–102 uncertainty in, 110–112 Sports, association principle and, 166–170 Stanko, Jack, 60 Status clothing indicating, 188–190 size and, 185–186 titles and, 184–187 trappings of, 190–191 Stereotyped behavior, 7 Stevenson, McLean, 149 Stomach signs, regarding undue influence, 89–91 Streisand, Barbra, 182 Styron, William, 79 Suicide mass, 128–131 social proof principle and, 120–126 statistics on, 123–125 Swanson, Richard, 76–77 Tamraz, Roger, 26 Technology, and automaticity, 230 Teen years, psychological reactance in, 206–207, 208 Television, canned laughter on, 98 Terrible twos, 205–206, 208 Thonga people, 74 Thorne, Avril, 168 Tiananmen Square, 80 Time pressure, 203 Titles, conveying authority, 184–187 Toy industry, use of consistency principle by, 57–59 Trappings, of status, 190–191 Travolta, John, 221 Trigger feature, 3 Tupperware parties, 142–143 Turkeys, parenting by, 2–3, 99, 228–229 Uncertainty, and social proof principle, 110–112 Uniforms, 188–189 Van Kampen, Jakob, 109 Vartan Bhanji, 19 Virgil, 174 Watergate scandal, 41–42 Watson, Thomas, 9–10 Weather readers, attitudes toward, 159–160, 161 Werther effect, 122–126 West, Louis Jolyon, 129 Whitaker, Chuck, 161 Whitehead, Alfred North, 1 Williams, Brian, 184 Wilson, Lee Alexis, 112 Wilson, S.

Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry
by Steven Rattner
Published 19 Sep 2010

Further, GMAC hoped for access to other support programs, particularly those administered by the Federal Deposit Insurance Corporation. But the FDIC had wanted no part of the huge auto lender. An independent agency that, like the Federal Reserve, is not under the direct control of any branch of government, the FDIC was established during the Depression chiefly to insure consumers' savings accounts and put an end to 1930s-style bank runs, which it had done. Then came the current crisis, which saw the Bush administration turning to the FDIC for help. In response, the FDIC offered something called the Temporary Liquidity Guarantee Program. I had read about the TLGP but had no idea what it did. I learned that, in return for a fee, it enabled cash-strapped banks to sell bonds and commercial paper backed by an FDIC guarantee, allowing the banks to raise fresh capital at exceptionally low rates.

Radical Technologies: The Design of Everyday Life
by Adam Greenfield
Published 29 May 2017

Perhaps the futurists would have been less puzzled had they attended more closely to what was going on in the world. It’s not such a stretch, after all, to imagine that people might be terrified by the thought of committing their assets to something so intangible, at a time when it felt like the wheels were coming off the entire global economy. With its carnage of foreclosures, evictions, layoffs and bank runs, the acute crisis of 2008 sufficed to prove to many that the core financial institutions of the West couldn’t be trusted—and if not the central banks, how much less so a bunch of cowboy startups? Perhaps people simply had more pressing concerns on their mind, and weren’t necessarily inclined to take a wild leap into the technological unknown.

The Establishment: And How They Get Away With It
by Owen Jones
Published 3 Sep 2014

Even the Conservative MP Andrew Tyrie claimed that government amendments had reduced the powers of the financial watchdog to enforce such a separation. In opposition, Vince Cable of the Liberal Democrats had called for the total separation of high street and investment banking, but this demand was abandoned by the coalition government. Many of the proposals of the report were watered down or abandoned, including limits on risks that major banks run. Lending to businesses is a pretty good indicator of the role banks are playing in helping to resuscitate an economy they had crashed. Yet rather than lending to businesses, banks used their new money to rebuild their balance sheets instead. In the autumn of 2013, bank lending suffered its biggest fall in two and a half years, plunging by £4.7 billion.

The Black Box Society: The Secret Algorithms That Control Money and Information
by Frank Pasquale
Published 17 Nov 2014

The real reason that they are more creditworthy than a collegian is that the government itself implicitly or explicitly backs them.9 There’s no theoretical reason that interest rates couldn’t be reduced for students and raised for banks. But students lack the backroom connections that the finance sector so richly exploits.10 Of course, there has to be some federal support for fi nancial institutions—the bank runs of the Great Depression were too devastating for us to go back to 1920s-style laissez-faire. But the price of government support used to be an intricate set of regulations that strictly limited the risks banks could take. The Dodd-Frank Act of 2010 was supposed to adapt such risk regulation to the contemporary finance sector, but it is being implemented so slowly (and so incompletely) that it is hard to credit it as anything more than window dressing.11 It promises that Congress is “doing something” while leaving enough legal loopholes to ensure that little changes.12 And the quid pro quo between banks and government remains stacked in the banks’ favor. 

The Levelling: What’s Next After Globalization
by Michael O’sullivan
Published 28 May 2019

Since 1820,” May 3, 2016, Metrocosm, http://metrocosm.com/animated-immigration-map/. 9. UN Refugee Agency, UNHCR, “Number of Refugees and Migrants from Venezuela Reaches 3 Million,” November 8, 2018, https://www.unhcr.org/news/press/2018/11/5be4192b4/number-refugees-migrants-venezuela-reaches-3-million.html. 10. Standard Chartered Bank runs a renminbi globalization indicator, which indicates that the international use of the Chinese currency has flagged in recent years. Standard Chartered, “Renminbi Tracker: How Global Is the Renminbi?,” October 10, 2018, https://www.sc.com/en/trade-beyond-borders/renminbi-globalisation-index/. Estimates provided in the Triennial Central Bank Survey of foreign exchange turnover in April 2016, released in September 2016.

Samuelson Friedman: The Battle Over the Free Market
by Nicholas Wapshott
Published 2 Aug 2021

. … We live in the age after Keynes, and there is no going back to Herbert Hooverism.”17 But by denigrating over many decades government intervention of any sort, Milton Friedman and others had invited the return of do-nothing Hooverism. And if in 2008 a second Great Depression had been narrowly avoided by a return to Keynes-like policies, the financial freeze served to upset the cozy assumption held by Bernanke and others that the bad old days of bank runs and serial bankruptcies had been replaced by the sunlit certainty of the Great Moderation. The events of 2008 undermined the logic of the rational-expectations school who argued that those who operate the markets know enough to avoid catastrophe. Why had there been no “rational expectation” of a financial freeze?

The Economics Anti-Textbook: A Critical Thinker's Guide to Microeconomics
by Rod Hill and Anthony Myatt
Published 15 Mar 2010

Postscript 1 Three of the better-known acronyms are SIVs (structured investment vehicles), CDOs (collateralized debt obligations) and ABCPs (asset-backed commercial paper). 2 This was the Depository Institutions Deregulation and Monetary Control Act of 1980. 3 This was the Alternative Mortgage Transaction Parity Act of 1982. 4 It also established the Federal Deposit Insurance Corporation (FDIC), which provided government insurance on bank deposits to prevent bank runs. This aspect of Glass-Steagall is still in place. 5 In this case the economies were called ‘economies of scope’ (the benefits that come from producing a variety of goods and services). 6 These consequences came to light only as the corporate and banking scandals emerged with the bankruptcy of Enron in 2001 and Worldcom in 2002. 7 Fannie Mae (and its ‘younger ­brother’ Freddie Mac) did themselves need bailouts.

Transcending the Cold War: Summits, Statecraft, and the Dissolution of Bipolarity in Europe, 1970–1990
by Kristina Spohr and David Reynolds
Published 24 Aug 2016

Zhao was a keen economic modernizer and a vocal advocate of better relations with the United States, and losing him to the conservatives could well derail Deng’s entire reform agenda. So the general secretary pressed on, with Deng’s backing, but his difficulties multiplied in late 1988 and early 1989, in large part because of rash economic moves that sent prices soaring, leading to bank runs and shortages of basic goods.17 American intelligence analysts picked up signs of this power struggle in early 1989. Yet, equally significant for US policy towards China were the momentous changes underway in Sino-Soviet relations. Beijing and Moscow had been on a gentle upward slope towards normalization since 1982 but, even though bilateral trade had recently picked up and contacts intensified, Deng was not yet willing to bury the hatchet after decades of personal and geopolitical antagonism without first extracting something from the Soviets.

Buy Now, Pay Later: The Extraordinary Story of Afterpay
by Jonathan Shapiro and James Eyers
Published 2 Aug 2021

‘I handed the keys over to [Nick] and he really ramped it up and became the top seller of jewellery for eBay Australia.’16 As Nick’s studies neared an end, he started eyeing a career in investment banking, influenced by the lectures and his fellow students in his commerce degree. He’d also struck up a friendship with his neighbour, Anthony Eisen, who was half-suspicious, half-curious about Molnar’s nocturnal business activities. Eisen brokered an interview for Molnar at Lazard, the global investment bank run by Eisen’s former boss, John Wylie. Molnar missed out on the role, but Wylie referred him to his former business partner and mate from Oxford University, Mark Carnegie, who had run Lazard’s private-equity business for a few years before setting up his own shop, M.H. Carnegie & Co. Carnegie had a venture capital fund that was operating out of a warehouse-style space in Underwood Street, Paddington, and was recruiting talented young analysts to help him identify and manage start-ups.

That Used to Be Us
by Thomas L. Friedman and Michael Mandelbaum
Published 1 Sep 2011

At the same time, regulations and regulatory bodies provide the vital foundation of trust that fosters innovation and risk-taking. The creation of the Securities and Exchange Commission in 1934 increased the importance of the New York Stock Exchange by making it a less risky place. The Federal Deposit Insurance Corporation, created by the Banking Act of 1933, substantially reduced the chance of bank runs, and the stability of the FDIC helped attract capital from around the world. The North American Free Trade Agreement, which went into effect in 1994, created a regulatory framework that has triggered massive cross-border investments and trade between the United States and both Mexico and Canada.

A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers
by Lawrence G. Mcdonald and Patrick Robinson
Published 21 Jul 2009

New people arrived who did not fit in, and established staff members could feel the difference so sharply that at one point it seemed everyone I knew was looking for a new job. It’s a strange truth, but when you have the right mix of people, and there’s mutual respect for what other people do and how they operate, a corporation such as an investment bank runs really smoothly. But it never takes much to screw that up, and once that happens, suddenly the chemistry has gone. I suppose it’s like that in sports teams too, probably in everything. All I knew was I had to get out of there. I was still seeking the holy grail, and the son of a bitch had to be somewhere.

Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase
by Duff McDonald
Published 5 Oct 2009

Paulson called Dimon in early September and urged him to consider adding Morgan Stanley to his list of conquests for 2008—at a cost of literally zero—in the hope of averting a possible collapse of the highly respected investment bank. Hedge funds were pulling their money out of Morgan Stanley’s prime brokerage unit, and regulators were worried that another bank run might be in the offing. This time, Dimon balked. Taking over a company with so much overlap, he explained, would result in two or more years of internal bloodbaths, and would be likely to turn the company into a decidedly unpleasant place to work. Although he coveted the investment bank’s brokerage subsidiary, Dean Witter, it just wasn’t worth all this.

Sacred Economics: Money, Gift, and Society in the Age of Transition
by Charles Eisenstein
Published 11 Jul 2011

It could also encompass the social and ecological effects of the investment. Whatever entity performs this function, be it a traditional bank, cooperative, or P2P community, must have a good general understanding of business and must be willing to assume responsibility for its evaluations. New forms of P2P banking run up against the same general problem of determining creditworthiness over the anonymous gulf of cyberspace. One could imagine a system in which a database connects you, who have $5,000 you want to lend for six months, to a distant person who wants to borrow it for six months. You don’t know her.

The Euro: How a Common Currency Threatens the Future of Europe
by Joseph E. Stiglitz and Alex Hyde-White
Published 24 Oct 2016

But Europe’s federal budget is, as we have noted, miniscule. There is simply little discretionary money that can be used in a countercyclical way. In the United States, there is a third source of shared support in the event of an adverse shock: the banking system is, to a large extent, a national banking system. If any bank runs into a severe problem (as happened to many a bank in 2008), the institution is bailed out not by the individual state but by a federal agency (the Federal Deposit Insurance Corporation, or FDIC). If the state of Washington had been forced to bail out Washington Mutual, the country’s largest bank that failed in the financial crisis, it couldn’t have done it—it would have been similar to Iceland trying to bail out banks ten times bigger than the country’s GDP.10 Similarly, California might have had a hard time dealing with the problems posed by the failure of Countrywide Financial (the largest mortgage company, other than Fannie Mae and Freddie Mac).

The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street
by Justin Fox
Published 29 May 2009

“The whole intellectual edifice collapsed in the summer of last year,” Greenspan admitted at the October 2008 hearing.4 That was when the private market for U.S. mortgage securities collapsed, beginning a fitful unraveling of asset market after asset market around the world. Distrust spread. Many previously thriving credit markets shut down entirely. Bank runs—long thought to endanger only actual banks—threatened any financial institution that ran on borrowed money. After Greenspan’s successor at the Fed, Ben Bernanke, and Treasury Secretary Hank Paulson decided in September 2008 not to step in to avert such a run on Lehman Brothers, global finance virtually ceased functioning.

The Trade Lifecycle: Behind the Scenes of the Trading Process (The Wiley Finance Series)
by Robert P. Baker
Published 4 Oct 2015

Banks need to:      hold and use the right data satisfy an exponential rise in regulator demands for reporting and disclosure convince regulators they can understand, aggregate and disaggregate, manage risks by correct use of data, systems and IT architecture deal with regulatory pressure to improve their internal aggregation and reporting of risk data enhance business pressures to make better use of their data and to improve the efficiency of their data handling. This is creating massive costs for banks and forcing tough decisions about the prioritisation of competing IT projects. Some banks run the risk of building a castle made of sand given the absence of existing robust systems. Meanwhile, banks also need to address the new and unforeseeable risks in data privacy and cybercrime, conflicting national laws and the impact of retrospective investigations, in an environment where vast amounts of data are indefinitely available. 

How I Became a Quant: Insights From 25 of Wall Street's Elite
by Richard R. Lindsey and Barry Schachter
Published 30 Jun 2007

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. JWPR007-Lindsey 302 May 7, 2007 17:27 h ow i b e cam e a quant No More Mr.

Efficiently Inefficient: How Smart Money Invests and Market Prices Are Determined
by Lasse Heje Pedersen
Published 12 Apr 2015

For instance, at most 20% of the capital can pass through the gate during any quarter end. This limit helps the hedge fund avoid a fire sale, but the downside is that investors who fear that the gate will close may try to get their capital back before it is too late, which can create a “run” on the hedge fund similar to a bank run. Hence, having a gate can make it more likely that the fund will need it. Whereas gates are sometimes used by hedge funds that generally invest in illiquid but tradable securities, side pockets are used by hedge funds that own mostly liquid securities but have a subset of securities that are very illiquid.

Shutdown: How COVID Shook the World's Economy
by Adam Tooze
Published 15 Nov 2021

What brought Lehman down and threatened all the other banks was the fact that it lost access to the repo markets in which it had previously funded its giant balance sheet of mortgage-backed securities.15 The collective withdrawal of confidence on the part of its repo market counterparties was the equivalent of an instant bank run on the scale of hundreds of billions of dollars. Mortgage-backed securities had been put up for repo to such a large extent because they had been rated as AAA. In other words, they had been packaged to appear as safe assets. Most were in fact quite safe, but in a super-fast-moving market, all you needed was a whisper of doubt to shut off repo funding completely, for mortgage-backed securities or any other type of private debt.

The Contrarian: Peter Thiel and Silicon Valley's Pursuit of Power
by Max Chafkin
Published 14 Sep 2021

On September 15, Lehman Brothers, a Wall Street institution that had survived the Civil War, the Great Depression, and 9/11, but that had been aggressively underwriting securities tied to subprime mortgages, collapsed and filed for bankruptcy protection. Later that month, Washington Mutual, which had been founded in 1889 and which had earlier in the decade boasted about becoming the “Wal-Mart of Banking,” failed, causing a bank run. A deep recession followed in which regular people lost their jobs and, having been locked into mortgages they couldn’t afford, lost their homes. The fund managers who’d anticipated this pain and found trades to exploit it got ridiculously rich. Most famously, John Paulson made $4 billion buying credit default swaps as the market collapsed, which inspired Gregory Zuckerman’s book The Greatest Trade Ever.

The Bank That Lived a Little: Barclays in the Age of the Very Free Market
by Philip Augar
Published 4 Jul 2018

One bank in particular, HBOS, was finding it hard to fund itself, having reported a halving of profits and a one-third increase in bad debts at the end of July. The Bank of England was covertly providing it with funds but customers were withdrawing deposits at an alarming rate, and the British government had to facilitate its rescue by Lloyds on 17 September. There were similar bank runs and rescues across Europe: Glitnir bank in Iceland, Fortis Group in Belgium, Luxembourg and Holland, and Dexia in Belgium. In a futile attempt to stabilize markets, the British, American, Canadian and French authorities banned the short selling of bank shares. Brown led other world leaders in thinking through the crisis, and he was the first to see where it might lead.

Adam Smith: Father of Economics
by Jesse Norman
Published 30 Jun 2018

The effect of this combination of factors is to give asset markets, far more than product markets, a pronounced tendency towards boom and bust. Far from moving towards equilibrium, these markets are often subject to destabilizing forces which operate through, and are worsened by, channels specific to them. In the banking system, the most basic form of this is a bank run. In normal times banks operate by taking savers’ deposits, which can generally be withdrawn at will, and then lending them out for weeks or months, sometimes years, at a time. If savers all seek their deposits at once, however, the bank cannot meet the demand from cash on hand; and if the bank is not large enough, or cannot borrow enough in time from the money markets for other reasons to cover the shortfall, it will quickly fail.

The Hour of Fate
by Susan Berfield

When he traveled, he noted the latitude of his destination and the time of his arrival, and wherever he was he kept a leather-bound journal of daily expenses: paper and postage,5 ice cream and strawberries, beaver hats, silk gloves, buggy rides, opera tickets. In 1854, the family moved to London after Junius accepted a partnership in the British office of the premier American private bank, run by George Peabody, to help direct European capital to the United States. Junius would one day take over, and he hoped Pierpont would do so after him: a Morgan dynasty. Pierpont was seventeen. He had graduated from the English High School of Boston, which specialized in math, and was eager to begin his career.

Wall Street: How It Works And for Whom
by Doug Henwood
Published 30 Aug 1998

(To give a measure of how detailed: "sales of heavy trucks rose sharply, and business purchases likely accounted for some of the recent sizable increase in sales of light trucks; on the other hand, shipments of complete aircraft were weak.") All this discussion of the real economy preceded discussion of financial and monetary affairs, and far exceeded it in volume as well. The central bank runs a huge economic data generation and analysis apparatus, which confi- RENEGADES dently second-guesses official statistics, and, a Fed economist once told me, frequently prompts corrections that are buried in routine monthly revisions in Commerce and Labor Department data. Every twitch in the statistics is noted and mused over to death.

Superclass: The Global Power Elite and the World They Are Making
by David Rothkopf
Published 18 Mar 2008

He pauses for a second and then adds, “Too many people—other than those linked with special interest groups—have simply been disconnected from these issues of international economic policy. So the reality is that whether it is because institutions are too weak and insufficiently democratic, or because people aren’t engaged enough in the process, we are leaving key decisions to the special interest groups and those that lead them.” In the case of banks running debt restructurings, the financial institutions have an obligation to their shareholders to maximize repayment in a way that may run directly contrary to the interests of the citizens of the borrower country, who may prefer the country invest its limited capital in social or job-creation programs, for example.

The Best Business Writing 2013
by Dean Starkman
Published 1 Jan 2013

So despite a wave of policy overhauls by new national leaders, Italian and Spanish borrowing costs were rising to unsustainable levels. As they rose, so did borrowing costs for the countries’ small businesses, and they were gasping for affordable credit. Political turmoil in Greece raised the odds of a euro exit that many feared would trigger bank runs across Europe’s south. Companies around Europe made preparations for a breakup of the euro. Investors were increasingly pricing in catastrophe. Mr. Draghi and allies on the ECB’s executive board, especially Benoit Coeure of France and Jorg Asmussen of Germany, decided they needed a contingency plan.

The Forgotten Man
by Amity Shlaes
Published 25 Jun 2007

Roosevelt asked for war powers to handle the emergency, just as Hoover had suggested in a note during the interregnum. Hoover had called for a bank holiday to end the banking crisis; Roosevelt’s first act was to declare a bank holiday to sort out the banks and build confidence. Now Roosevelt’s team worked with Republicans to write the first emergency legislation to stop the bank runs. Hoover had had Ogden Mills; Roosevelt had another respectable man as treasury secretary, Will Woodin. Ray Moley would later write of that period, “Mills, Woodin, Ballantine, Awalt, and I had forgotten to be Republicans or Democrats. We were just a bunch of men trying to save the banking system.”

Goddess of the Market: Ayn Rand and the American Right
by Jennifer Burns
Published 18 Oct 2009

Although they are clearly written by partisans of Rand and thus lack a critical edge, the essays in Mayhew’s books are based on historical evidence and carefully argued. They represent a significant step forward in Objectivist scholarship. Another major source of funding for Objectivist scholars is the charitable foundation of BB&T, one of the country’s largest banks. Run by John Allison, an avowed Objectivist, BB&T has stirred controversy with its grants to universities that require the teaching of Atlas Shrugged. Most of the scholars supported by BB&T are also affiliated with ARI in some capacity, including the Aristotelian scholar Alan Gotthelf and the philosopher Tara Smith, who holds the BB&T Chair for the Study of Objectivism at the University of Texas, Austin, and is the author of Ayn Rand’s Normative Ethics (2006).

The Sovereign Individual: How to Survive and Thrive During the Collapse of the Welfare State
by James Dale Davidson and William Rees-Mogg
Published 3 Feb 1997

It was more stable, with less inflation than the more heavily regulated and politicized system of banking and money employed in England during the same period.2' Michael Prowse of the Financial Times summarized Scotland's free-banking experience: "There was little fraud. There was no evidence of over-issue of notes. Banks did not typically hold either excessive or inadequate reserves. Bank runs were rare and not contagious. The free banks commanded the respect of citizens and provided a sound foundation for economic growth that outpaced that in England for most of the period."22 What worked well under the technological conditions of the eighteenth and nineteenth centuries will work even better with twenty-first-century technology.

The-General-Theory-of-Employment-Interest-and-Money
by John Maynard Keynes
Published 13 Jul 2018

Relative Movements of Real Wages and Output (1939)353 Afterword by Robert Skidelsky 373 Index 377 Introduction by Paul Krugman History may not repeat itself, but sometimes the rhyming is pretty spectacular. That’s definitely true when it comes to recent macroeconomic events: the financial crisis of 2008 was all too reminiscent of the bank runs of the 1930s, and the protracted period of high unemployment that followed clearly echoed the Great Depression. And everything old was new again when it came to policy, too: in response to these shocks, many economists called for policies—like temporary fiscal stimulus to boost spending—whose roots obviously lay in a three-generations-old book, John Maynard Keynes’s The General Theory of Employment, Interest, and Money.

The Finance Curse: How Global Finance Is Making Us All Poorer
by Nicholas Shaxson
Published 10 Oct 2018

Another reason was that they allowed banks to create new money out of thin air without any official restraint. The banking system in any country constantly creates new money when banks make new loans to customers. As the US economist J. K. Galbraith put it, ‘the process by which money is created is so simple that the mind is repelled’. To stop banks running amok, governments put brakes on money creation by enforcing reserve requirements, which restrict how much they can lend out in relation to their deposits. But the Euromarkets had none of these brakes. Eurodollar lending, a Bank of England memo noted, ‘is not controlled, as regards amount, nature or tenor: reliance is placed on the commercial prudence of the lenders’.

Adventures in the Anthropocene: A Journey to the Heart of the Planet We Made
by Gaia Vince
Published 19 Oct 2014

When slum communities organise themselves, as many have begun to do either individually or as part of the wider, Slum-Dwellers International network which originated in India, they can achieve infrastructure improvements for a fraction of the cost of state provision. Residents of the Orangi slum in Karachi, Pakistan, for example, built their own sewerage system in the 1980s, slashing infant mortality. In Delhi, a bank run by and for street children since 2001, called the Children’s Development Khazana (‘treasure chest’), allows its 1,000 young customers to safely store and save their meagre earnings in twelve branches across the city, accumulating 5% interest. In a Durban slum, I met a group of waste-pickers, who were campaigning for greater recognition of the work they do and some protection for their livelihoods as South Africa mechanises and develops.

Money: 5,000 Years of Debt and Power
by Michel Aglietta
Published 23 Oct 2018

Trust companies had grown considerably in both size and number in the great wave of expansion during the early years of the twentieth century. On 21 October, the Knickerbocker Trust Company was unable to honour the deadlines of its engagements with banks on the New York market.14 This prompted a bank run on its deposits and the suspension of its payments. This financial firm was not a member of the New York Clearing House (NYCHA) because, like most other trusts, it had refused to accept the latter’s conditions. It was thus unable to make use of the clearing house’s emergency aid. On 24 October, the contagion spread to all trusts and banks.

How to Be a Liberal: The Story of Liberalism and the Fight for Its Life
by Ian Dunt
Published 15 Oct 2020

‘The complete evaporation of liquidity in certain market segments of the US securitisation market,’ it said, ‘has made it impossible to value certain assets fairly regardless of their quality or credit rating.’ It was the death knell of an entire way of doing business. If the securities could not be valued, they could not be used as collateral. And if they could not be used as collateral, there would be no funding. That signified a general liquidity freeze: a bank run the size of the world. In September 2007, the British bank Northern Rock failed. Savers queued up outside its branches trying to take their money out. It seemed like a replay of the Great Depression, when lack of confidence in banks had pulverised the economy. But in fact, 80 per cent of Northern Rock’s funding had nothing to do with the queueing depositors.

The Craft: How Freemasons Made the Modern World
by John Dickie
Published 3 Aug 2020

The plan involved planting a suitcase containing the same explosive as that recently used in the Bologna station massacre, with a view to implicating foreign terrorists rather than the Italian neo-Fascists who were actually responsible. • In 1998, Gelli went on the run just after the Supreme Court confirmed a twelve-year sentence for his role in the collapse of the Banco Ambrosiano–the bank run by Roberto Calvi, of Blackfriars Bridge notoriety. The Venerable Master was recaptured four months later in the South of France; he had a beard and was wearing a beret. • Gelli was also convicted of slandering the magistrates investigating his case. But the conviction was cancelled under the statute of limitations.

Animal Spirits: The American Pursuit of Vitality From Camp Meeting to Wall Street
by Jackson Lears

Selling accelerated on August 24 when the Ohio Life Insurance and Trust Company, a bank with large mortgage holdings, went belly-up, revealing not only the corrupt practices of its directors but also the dependence of the railroad industry and western land markets on bad loans, overextended credit, and poor management. By the end of September, all the banks in Philadelphia suspended specie payment, provoking bank runs across the nation. Through the fall, investors’ confidence plummeted. By early October, the historian James Huston writes, “men, especially in banking circles, seemed utterly possessed by some demonic force.” Since British and French capital had invested heavily in American land and railroads, the crisis soon spread across the Atlantic.

Crash of the Titans: Greed, Hubris, the Fall of Merrill Lynch, and the Near-Collapse of Bank of America
by Greg Farrell
Published 2 Nov 2010

No longer the compliant bunch that rubber-stamped every one of Lewis’s initiatives, BofA’s directors discussed the situation at length, trying to figure out the best way forward. Lewis and their own lack of oversight had brought them to a difficult place, where the future of their own bank was in jeopardy. They were faced with a difficult choice. If BofA tried to bail out of the Merrill deal, the Charlotte bank could trigger a financial panic worse than the bank runs of the previous September, and expose BofA to a massive legal judgment brought by the estate of Merrill Lynch. If the directors accepted the government’s offer of assistance, they would be saddling their shareholders with Merrill Lynch’s black hole of losses. It fell to Meredith Spangler, the oldest member of the board, to ask Lewis the one hardheaded question that needed to be asked: Can you get this in writing?

Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right
by Jane Mayer
Published 19 Jan 2016

What transpired was a war council in which the twenty assembled chieftains coordinated their plans of action and divided up their territory. Kenneth Vogel, in Big Money, describes it as “the birthplace of a new Republican Party—one steered by just a handful of unelected operatives who answered only to the richest activists who funded them.” Two organizations soon emerged as virtual private banks run by these operatives. The first, American Crossroads and its 501(c)(4) wing, Crossroads GPS, was initiated by Rove. For funds, it drew heavily on his network of Texas tycoons. The second was Noble’s Center to Protect Patient Rights, which began to fill with donations from the Koch donor summits. Working closely with both was the U.S.

Debtor Nation: The History of America in Red Ink (Politics and Society in Modern America)
by Louis Hyman
Published 3 Jan 2011

Small retailers, already facing difficulties, must have been dubious, despite the opportunity to lure customers back in. Such a novel program as the Charg-It system was not unique, but more of an incremental improvement over existing wartime department store practices that many banks were discovering.65 Biggin’s Charg-It system was not the only centralized, bank-run charge credit program independently created in the early 1950s, and all the rest relied on the same factors: offering department store credit techniques in exchange for hefty cuts of the revenue. Like the Charg-It plan, they were created for cash stores outside the downtown to compete with the large credit-granting department stores.66 These credit programs, though resulting from innovative bankers seizing the opportunities of the moment, only became possible because of the spread of department store credit practices.

A Splendid Exchange: How Trade Shaped the World
by William J. Bernstein
Published 5 May 2009

The royal family and its favored merchants and captains earned fabulous wealth from the spice trade, but the nation itself was bankrupted by the staggering military expenses of a global empire. Portugal became known as the "Indies of the Genoese," chronically in debt and beholden to Italian merchants and German banks run by the Fugger family, the kingdom's major creditors." Even during the sixteenth century, Portugal was an impoverished nation of subsistence farmers with little excess capital or functioning credit markets with which to provision the expeditions with ships, sailors, silver, and trade goods. The Portuguese were so short of cash that often, having paid the inevitable price in men and ships, they lacked the silver and trade goods with which to purchase spices when their fleets finally arrived in the Indies.

The Unwinding: An Inner History of the New America
by George Packer
Published 4 Mar 2014

“I was going to expose these people who were taking advantage of the rest of us.” With two colleagues, Warren spent the 1980s doing her research. And that was when the first story she told, her own story, ran across the second, which went like this: Starting in 1792 with George Washington, there were financial crises every ten or fifteen years. Panics, bank runs, credit freezes, crashes, depressions. People lost their farms, families were wiped out. This went on for more than a hundred years, until the Great Depression, when Oklahoma turned to dust. “We can do better than this,” Americans said. “We don’t need to go back to the boom-and-bust cycle.” The Great Depression produced three regulations: The FDIC—your bank deposits were safe.

The Accidental Empire: Israel and the Birth of the Settlements, 1967-1977
by Gershom Gorenberg
Published 1 Jan 2006

The evaluation was not changed by Nasser’s sudden death from a heart attack in late September, and his replacement by the little-known Anwar al-Sadat. The United States could keep Israel strong and wait for Egypt to come knocking for help.99 New diplomatic paths led to dead ends. Allon held another secret meeting with Hussein in the fall. In Allon’s account, he suggested as an interim arrangement that Israel institute autonomy in the West Bank, run from Amman via pro-Jordanian local Arabs. In an arrangement explicitly short of full peace, Hussein could live with the Allon Plan lines, while asserting his influence and reducing the PLO’s. The proposal was strictly Allon’s own, without the advance backing he had received from Eshkol. In his telling, “in a short time, I received a positive answer” from Hussein.

The Rise and Fall of Nations: Forces of Change in the Post-Crisis World
by Ruchir Sharma
Published 5 Jun 2016

‡ In most of these cases, GDP growth was strong during the five-year period when credit was growing dangerously fast, so credit growth was the main reason the credit/GDP ratio was rising § Here I use financial crisis to mean a banking crisis as defined by Carmen Reinhart and Kenneth Rogoff in This Time Is Different (2009), which captures bank runs that force a government to close, merge, bail out, or take over one or more financial institutions. ¶ In twenty-six of the thirty cases, the average annual rate of growth fell over the next five years. The other four—Malaysia, Uruguay, Finland, and Norway—experienced a serious contraction in the economy, but the recovery came soon enough to lift the average rate of growth for the next five years

The Information: A History, a Theory, a Flood
by James Gleick
Published 1 Mar 2011

For Dennett, the first four notes of Beethoven’s Fifth Symphony were “clearly” a meme, along with Homer’s Odyssey (or at least the idea of the Odyssey), the wheel, anti-Semitism, and writing.♦ “Memes have not yet found their Watson and Crick,” said Dawkins; “they even lack their Mendel.”♦ Yet here they are. As the arc of information flow bends toward ever greater connectivity, memes evolve faster and spread farther. Their presence is felt if not seen in herd behavior, bank runs, informational cascades, and financial bubbles. Diets rise and fall in popularity, their very names becoming catchphrases—the South Beach Diet and the Atkins Diet, the Scarsdale Diet, the Cookie Diet and the Drinking Man’s Diet all replicating according to a dynamic about which the science of nutrition has nothing to say.

A Line in the Sand: Britain, France and the Struggle for the Mastery of the Middle East
by James Barr
Published 15 Feb 2011

When it became clear that they had no such plans, in 1940 Stern had passed a message into Vichy Syria, offering to fight for Germany if Hitler would support ‘the re-establishment of the Jewish state in its historic borders, on a national and totalitarian basis, allied to the German Reich’.⁵ Stern’s strange offer seems to have come to the attention of Colombani, who relayed it to the German embassy in Ankara. After waiting in vain for a reply from Hitler, at the start of 1942 Stern launched a short-lived campaign of violence by which he hoped to force the British government to give the Jews in Palestine their independence. Desperately short of money, his gang robbed a bank run by their ideological opposites, the Histadrut, but killed two Jewish bystanders. Two of the three Palestine policemen they murdered in a bombing days later were also Jewish. The Gang had quickly made a lot of enemies, and when the police offered a reward for information they soon received a tip-off about its members’ whereabouts.

Collision of Empires: The War on the Eastern Front in 1914
by Prit Buttar
Published 19 Jun 2014

Hindered by a mixture of bad weather and Russian resistance, it took Wieber’s cavalry, operating in conjunction with I Corps’ infantry, until early on 6 October to secure Sandomierz. By then the Russians had completed an orderly withdrawal across the river. Nor did the Austro-Hungarian V Corps enjoy better success on the other bank, running into the Russian XIV Corps in prepared positions. Although V Corps was able to advance, it could not interfere with the Russian withdrawal from Sandomierz. Dankl’s advance on either bank of the Vistula placed his army about two days’ march ahead of its neighbour to the south. Conrad moved what reserves he had to protect the exposed eastern flank, and ordered Dankl to concentrate on clearing the area where the San ran into the Vistula.

Extreme Money: Masters of the Universe and the Cult of Risk
by Satyajit Das
Published 14 Oct 2011

Despite minimal exposure to subprime mortgages, Northern Rock was unable to raise money as the securitization market seized up. In mid-September 2007, queues of panicked customers outside Northern Rock branches waited to withdraw deposits. In the Internet banking age, the signs of an old-fashioned bank run sealed Northern Rock’s fate. Adam Applegarth confessed to a UK parliamentary hearing that he understood: “the logic of somebody who has their life savings invested in an institution and who sees pictures of people queuing outside the door and they go join that queue.”22 Unable to issue commercial paper as holdings of toxic assets fell in value, conduits triggered parent bank credit lines, returning the assets to the mother ship.

The Dream Machine: The Untold History of the Notorious V-22 Osprey
by Richard Whittle
Published 26 Apr 2010

Bianca screeches, then yells at Wright: “GET OUT, LEFTY, WE GOT IT!” Wright jumps out of the cockpit and joins the troops on the runway behind his Osprey. At the other end of the airfield, a bright fire is burning, the source of the black smoke that made crew chief Banks think his Osprey was on fire. With the last of the infantry safely away, Banks runs out the rear ramp and stops. He takes a step toward the flames, then feels a hand grab his shoulder from behind. “Hey,” crew chief instructor Sharp tells Banks somberly, “it’s over.” With Wright out of the cockpit, Bianca takes a deep breath, then calmly reports over the radio: “This is Nighthawk Seven One.

The Price of Time: The Real Story of Interest
by Edward Chancellor
Published 15 Aug 2022

The influx of foreign capital funded a current account deficit equivalent to a quarter of Icelandic GDP. fn2 On 7 August 2007, the French bank BNP Paribas suspended redemptions on three funds that owned US mortgage securities. Cut off from the international capital markets, Northern Rock, a mid-sized British bank, closed its doors a few months later. Northern Rock’s was the first English bank run since Overend Gurney’s collapse of 1866. (See Viral Acharya and Sascha Steffen, ‘The Banking Crisis as a Giant Carry Trade Gone Wrong’, VoxEu, 23 May 2013.) fn3 Jeremy Grantham, ‘Time to Wake Up: Days of Abundant Resources and Falling Prices are Over Forever’, GMO Quarterly Letter, April 2011.

Unreal Estate: Money, Ambition, and the Lust for Land in Los Angeles
by Michael Gross
Published 1 Nov 2011

Pillsbury bought a corner lot on Rodeo for $800 and built a seven-room house for another $2,000. There were still few cars; realtor Percy Clark used a horse-drawn surrey to show houses. His clerk, whose desk was conveniently situated in the Pacific Electric station, also sold rail tickets. Then it all ground to a halt. An attempt by Easterners to corner the copper market set off a bank run, the Panic of 1907 that paralyzed financial markets, leading to a severe national recession and the eventual creation of the Federal Reserve System. In Beverly Hills, despite the expenditure of about $1 million of the Rodeo syndicate’s money, the only tangible proofs of the community’s ability to survive were that lovely name, six houses, some bungalows for laborers, and those five roads “of splendid solidity and durability … absolutely noiseless and dustless,” laid through the bean fields planted in the Hammel and Denker era that still occupied most of the empty lots.

Reminiscences of a Stock Operator
by Edwin Lefèvre and William J. O'Neil
Published 14 May 1923

in newspapers controlled by the Rockefellers, and the calling of Heinze-Morse loans made by Rockefeller-influenced banks.23 Heinze and Morse were forced to sell into the declining market to protect their banks’ cash reserves. By October 16, United was selling at $10 a share. The scheme collapsed, pulling down the brokerage houses of Gross & Kleeburg and Otto Heinze & Company. Bank runs began on the three institutions whose managements and directors were involved with the corner attempt and who were forced to resign: Mercantile National Bank, New Amsterdam Bank, and the Bank of North America. The crisis burgeoned as depositor uncertainty spread. There was a run on the Knickerbocker Trust on Tuesday, October 22, after its president, Charles T.

Switzerland
by Damien Simonis , Sarah Johnstone and Nicola Williams
Published 31 May 2006

If Switzerland’s largest metropolis once lived down to those dull descriptions, it certainly no longer does. Zürich is on the northern bank of Zürichsee (Lake Zurich) with the Limmat River running further north still, splitting the medieval city centre in two. The narrow streets of the Niederdorf quarter on the river’s eastern bank is crammed with noisy bars and restaurants; down the western bank runs the expensive Bahnhofstrasse and other shopping streets. The main Hauptbahnhof (train station) is at the northern end of Bahnfhofstrasse. Z Ü R I C H • • O r i e n t a t i o n 195 196 Z Ü R I C H C W ip Brü king cke er D Löwenbräu Areal st nen Sihlq uai r nst ne ser Ka Rigistra Universitätsstr str tr aus nto nss c mi Sih lh ö Rä os Qu ai rw eg he Bl eic Go eth e lke str ns tr Fa Kl gstr tr ns we Lö llee Ge ssn era Sih tr l ens ern Kas uai Se ln herq ffac Stau lzl ist r Ka tr Mythenquai ers Seestr 6 llik Zo 19 Feldeg La ng Ma tte nga sse tr rs ke r de rst str r rva eg est ine M str feld 4 tr To British Consulate (800m) See rstr Färbe20 ba chs str ch eu Kr estr eriv Bell Seefeldquai To Henry Moore's Sheep Sculpture (300m); Le Corbusier Pavilion & Heidi Weber Museum (600m); Chinese Garden (750m); Open-air Cinema (1.2km); Casino (1.8km) For r zst Seegartenstr str ch lstr ba rstr str To Camping Seebucht (3km) 33 21 fou 3 zbüh Du Zürichsee (Lake Zürich) 12 Kreu le üh 47 i qua Be hu lstr Le tte ns Ko Br rnha üc u ke s str str ter me so Ga r gst An Auf der Ma üc ke Lan str tr ns tte W erd Pla ltw Sechseläutenplatz M ess str str Ze 5 46 s tr Uto Sih l ch r lde Do To Dolder Grand Hotel (1.5km) tr Ma n ba ad ch str r aust To Blindekuh 23 (300m) To Zürichhorn Park (600m) Main The exhibitions at Zürich’s Design Museum (Map pp196-7; %043 446 67 67; www.museum-gestaltung .ch; Ausstellungstrasse 60; adult/concession Sfr7/4; h10am-8pm Tue-Thu, 10am-5pm Fri-Sun) are con- sistently impressive.

What Went Wrong: How the 1% Hijacked the American Middle Class . . . And What Other Countries Got Right
by George R. Tyler
Published 15 Jul 2013

O’Rourke explained the environment in which Smith wrote the Wealth of Nations in a February 2009 column in the Financial Times: “The Mississippi Scheme and the South Sea Bubble had both collapsed in 1720, three years before his (Smith’s) birth. In 1772, while Smith was writing The Wealth of Nations, a bank run occurred in Scotland. Only three of Edinburgh’s 30 private banks survived.”94 As he looked out his study window, Adam Smith could scarcely avoid the financial news of the day, and realized the barrier such abuses posed to his hopes for advancing the condition of his day.95* That accounts for his abiding support for prudent government regulation to channel the business community’s greed into competition.

Cultural Backlash: Trump, Brexit, and Authoritarian Populism
by Pippa Norris and Ronald Inglehart
Published 31 Dec 2018

The most extreme case is Greece; economic output has fallen by more than one-­fourth since 2010, about a quarter of the work force is unemployed, and about half of all bank loans are in default.48 The Greek economy still had not recovered by late 2017: per capita GDP Part II Authoritarian-Populist Values 151 was under $18,000, about half the level of its pre-­crisis peak in 2008. The dramatic shock to the Greek economy might explain the political backlash, including the rise of the ultranationalist Golden Dawn, which gained seats for the first time in 2012.49 Major financial crises (characterized by bank runs, sharp increases in default rates, bankruptcies, and large losses of capital) also seem to fuel support for political extremism; one longitudinal study examined parliamentary election results in 20 post-­industrial societies from 1870 to 2014, finding that far right parties experienced an average rise of about 30 percent in their vote share in the five years after a systemic financial crisis.50 By contrast, no equivalent gains were recorded for far left parties (and no similar effects were observed for recessions or economic downturns without a financial crash).

Americana: A 400-Year History of American Capitalism
by Bhu Srinivasan
Published 25 Sep 2017

Initially, foreigners felt safe keeping gold in American vaults due to the administration’s commitment. But in 1932 the American Treasury was no longer seen as a safe haven for gold—a shrinking economy with high unemployment and dislocation was a recipe for social unrest, or worse. Just as depositors looked to withdraw printed currency during local bank runs, central banks and large investors started a run on American gold. Now Hoover was stuck with the worst of both worlds: Escalating withdrawals of gold required even more monetary tightening, paying higher interest rates, to entice international depositors to not withdraw gold. And in an effort to signal greater fiscal responsibility, he raised income taxes in the summer of 1932.

Americana
by Bhu Srinivasan

Initially, foreigners felt safe keeping gold in American vaults due to the administration’s commitment. But in 1932 the American Treasury was no longer seen as a safe haven for gold—a shrinking economy with high unemployment and dislocation was a recipe for social unrest, or worse. Just as depositors looked to withdraw printed currency during local bank runs, central banks and large investors started a run on American gold. Now Hoover was stuck with the worst of both worlds: Escalating withdrawals of gold required even more monetary tightening, paying higher interest rates, to entice international depositors to not withdraw gold. And in an effort to signal greater fiscal responsibility, he raised income taxes in the summer of 1932.

The True and Only Heaven: Progress and Its Critics
by Christopher Lasch
Published 16 Sep 1991

In taking the position that "there can be no such thing as an entirely free market," he acknowledged agreement "with some liberals." What he resented, he said, was liberal "compassion," which was "condescending" and "patronizing." The new right's constituency included many people who believed that "oil, steel, insurance, and the banks run this country," in the words of a member of the Italian-American Civil Rights League in Brooklyn. "I'd go for public ownership of the oil companies," this man said, "if I didn't think the national politicians were a bunch of thieves." A self-designated conservative Democrat told Jonathan Rieder, "It's not only welfare but the multinational corporations who are ripping us off, taking our jobs away and sending employment to the South and West.

The Internationalists: How a Radical Plan to Outlaw War Remade the World
by Oona A. Hathaway and Scott J. Shapiro
Published 11 Sep 2017

If the American economy happened to go down, it would take the German economy down even further—which it proceeded to do. When the U.S. stock market crashed on October 29, 1929, American banks called in their loans. Without foreign capital, Germany could neither finance its economic recovery nor make reparation payments. Bank runs led to the collapse of the German financial system. Whether any politician could have saved Germany from the ensuing calamity is doubtful, but if anyone could, it would have been Stresemann. The foreign minister for seven consecutive administrations, he was the only political figure with the stature to stabilize the country when the hurricane hit.

The Age of Turbulence: Adventures in a New World (Hardback) - Common
by Alan Greenspan
Published 14 Jun 2007

T H E AGE OF T U R B U L E N C E ers' efforts to protect their reputations are important in all businesses but especially so in banking, where reputation is key to the overall soundness of a bank's operations. If a bank's loan portfolio or its employees are suspect, depositors disappear, often very quickly. But when the deposits are insured in some way, a run is less likely. Studying the damage caused by Depression-era bank runs had led me to conclude that, on balance, deposit insurance is a positive.* Nonetheless, the presence of a government financial safety net undoubtedly fosters "moral hazard," the term used in the insurance business to describe why customers take actions they would not so readily consider were they not insured against the adverse consequences of their behavior.

The Narrow Corridor: States, Societies, and the Fate of Liberty
by Daron Acemoglu and James A. Robinson
Published 23 Sep 2019

This was once again a response to fresh exigencies created by new economic conditions, this time in the form of the most severe economic downturn of modern times, the Great Depression. FDR’s New Deal initiated tighter regulation of banks (with the Emergency Banking Act of 1933, the Securities Act of 1933, and especially the founding of the Federal Deposit Insurance Corporation, which insured small deposits in order to prevent bank runs); a major expansion of government spending on public works with the establishment of the Public Works Administration and the Tennessee Valley Authority; a new program to prop up agricultural prices and farm incomes under the auspices of the newly founded Agricultural Adjustment Administration; and modern Social Security in 1935 and the Food Stamp Plan in 1939, which have remained as the mainstays of U.S. welfare policy.

The Deluge: The Great War, America and the Remaking of the Global Order, 1916-1931
by Adam Tooze
Published 13 Nov 2014

Meanwhile, despite the urging of the White House, the Fed sacrificed the stability of the banking system to its pursuit of radical deflation. Following Britain’s departure from gold in September 1931, 522 American banks with deposits to the tune of $705 million failed. And even worse was to follow. In early February 1933 as America awaited a new President, a menacing bank run started in Louisiana. By 3 March it had reached the heart of the world financial order in New York. In desperation, New York State appealed to Washington for federal action. But Hoover’s presidential powers expired that day and Franklin Roosevelt, his successor, refused to cooperate. Before daybreak on 4 March 1933, with no guidance from the national government, the Governor of New York took the decision to shut the centre of the global financial system.

The Atlantic and Its Enemies: A History of the Cold War
by Norman Stone
Published 15 Feb 2010

’ Mao thus represented the Party with at least some cohesion and force, whereas the Shanghai and southern components had been hopelessly weakened; later, he escaped to an even more remote area, where he set up the ‘Jiangxi soviet’, one of those Communist islands that appeared with all wartime resistance movements, complete with its own secret police, its own re-education arrangements and its own machinery for exploiting gullible foreigners. In any village there would be a confiscation committee, a recruitment committee, a ‘red curfew committee’ etc., and even a children’s corps. An economy developed, too. Curiously enough the area was a big source of tungsten, and exported it through a state bank run by Mao’s brother to Canton; peasant women were made to cut their hair short such that their hair-pins - their savings - could be taken in for war finance. There was, however, primary school education for the first time, and Mao gained a favourable press, with romantic American journalists such as Edgar Snow to be flattered or lied to (when the Sino-Soviet split occurred, he was refused a visa to Moscow).

EuroTragedy: A Drama in Nine Acts
by Ashoka Mody
Published 7 May 2018

As a result, bonds purchased earlier through the QE program lose market value, creating immediate accounting losses for the ECB. The Governing Council wavers. Italian 446   e u r o t r a g e d y government bond prices fall further, and yields correspondingly creep up entering a danger zone; Italian bank stocks are battered, and the risk of bank runs increases.29 By now, Governing Council members are worried that the ECB’s and the Banca d’Italia’s exposure to the risk of financial defaults in Italy is growing too large and that if the Italian government—​unable to bear the pressure of higher interest rates and banking stress—​defaults on its debt, the accounting losses will become all too real and will need to be shared by all member states.

Palo Alto: A History of California, Capitalism, and the World
by Malcolm Harris
Published 14 Feb 2023

There’s nothing un-American about a crowd of veterans demanding that the government pay them early, but in 1932, in the midst of the Great Depression, when the Bonus Army—tens of thousands strong—showed up at the Capitol looking to redeem their service-bonus certificates for cash, Hoover saw a Bolshevik military plot. The certificates were earning interest until their 1945 redemption date, but the Depression left some people unable to wait, and the troops formed a motley crew, staging an event that was half protest and half bank run. The Chief didn’t see anyone worth negotiating with on the other side, and the administration convinced themselves that they were under attack by armed communist forces looking to repeat the storming of the Winter Palace in the Washington summer. In reality, Moscow was frustrated with the American communists for failing to take control of the campaign, but Hooverites prepared for the worst.30 Army chief of staff Douglas MacArthur was just as Red-scared as his boss, and together they saw this pitiful group of their countrymen camping in tents with their families as a godless revolutionary vanguard.

The Vietnam War: An Intimate History
by Geoffrey C. Ward and Ken Burns
Published 4 Sep 2017

Safer, Morley, 3.1, 3.2, 6.1, 7.1 Safire, William Saigon (Ho Chi Minh City), 1.1, 1.2, 1.3, 1.4, 1.5, 1.6, 1.7, 1.8, 1.9, 1.10, 1.11, 1.12, 1.13, 1.14, 1.15, 1.16, 1.17, 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.8, 2.9, 2.10, 2.11, 3.1, 3.2, 3.3, 3.4, 3.5, 4.1, 4.2, 4.3, 5.1, 5.2, 5.3, 5.4, 6.1, 6.2, 7.1, 8.1, 8.2, 9.1, 9.2, 9.3, 10.1, 10.2, 10.3 bank run in bar girls and prostitutes in, 7.1, 7.2 black market in, 7.1, 7.2 Brinks Hotel bombing in, 3.1, 3.2 Buddhist protests in, 2.1, 2.2, 2.3, 4.1 Caravelle Hotel in Cercle Sportif in Citadel of, 1.1 criminal cartel in, 1.1, 1.2 evacuation of “high-risk” South Vietnamese allies from, 10.1, 10.2, 10.3, 10.4, 10.5, 10.1 fall of, itr.1, 8.1, 10.1, 10.2, 10.3, 10.4, 10.5, 10.6 final NVA advance on, 10.1, 10.2, 10.3, 10.4, 10.5 French-Vietnamese conflict in Mini-Tet attacks in, 6.1, 6.2, 6.3 1963 coup in political corruption in population explosion in Presidential Palace in, itr.1, 1.1, 2.1, 2.2, 6.1, 6.2, 6.3, 10.1, 10.2, 10.3, 10.4, 10.5 refugees in, 6.1, 6.2, 7.1, 7.2 renamed Ho Chi Minh City rioting in Tan Son Nhut airport of, see Tan Son Nhut Airport Tet Offensive in, 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15, 10.1 U.S. embassy in, 1.1, 2.1, 2.2, 3.1, 5.1, 6.1, 6.2, 6.3 U.S. evacuation of, 10.1, 10.2, 10.3, 10.4, 10.5, 10.6, 10.7, 10.8, 10.9, 10.10, 10.11 Saigon Mission Council Saigon River, 1.1, 2.1, 4.1, 10.1, 10.2 Saigon Times Saigon University St.

The power broker : Robert Moses and the fall of New York
by Caro, Robert A
Published 14 Apr 1975

The crucial point was not contested bv anyone. What Chase got in exchange is not known, although it continued to head syndicates—as it had in the past—that underwrote and purchased tens of millions of dollars in state bonds, immensely profitable to banks. Even such a bonus would probably not have persuaded the normal bank—run by a board of directors responsible to a multitude of stockholders —to abrogate its legal obligations, thereby leaving itself open to stockholder action. A bank controlled by a single family could do so, however. In the entire United States, only one bank large enough to be a trustee for $367,200,000 in bonds is still family controlled.

…

In the entire United States, only one bank large enough to be a trustee for $367,200,000 in bonds is still family controlled. What was necessary to remove Moses from power was a unique, singular concatenation of circumstances: that the Governor of New York be the one man uniquely beyond the reach of normal political influences, and that the trustee for Triborough's bonds be a bank run by the Governor's brother. Why did Moses choose to rest his future on Rockefeller's word? At least part of the answer is probably understood by the perceptive Duryea. who says he had little choice but to do so. "He didn't have much left to fight with any more," the Speaker says. And probably another part is provided by Shapiro, who, asked why his boss had not exacted a promise in writing, says: "I suppose because he couldn't really believe that they wouldn't want him in the picture at all.

God's Bankers: A History of Money and Power at the Vatican
by Gerald Posner
Published 3 Feb 2015

Tosches, Power on Earth, 120; Rupert Cornwell, God’s Banker, 50; memorandum of Paul Marcinkus to the Joint Investigating Committee, Vatican and Italy, into the Affairs of the IOR, quoted in Raw, The Moneychangers, 67; see also pages 66–71. 112 Unnamed Bank of Italy official quoted in Gurwin, The Calvi Affair, 17. When Cisalpine’s links to Calvi, Sindona, and the church later became public, the Nassau bank became a fulcrum of conspiracy theorists. One of the most often repeated is a tale in which Cisalpine laundered Mafia heroin profits through an Asian bank run by a CIA-linked Cuban expatriate. All that is missing is credible evidence. 113 Ann Crittenden, “Growing Bahamian Loan Activity by U.S. Banks Causes Concern,” The New York Times, March 3, 1977, 1. Penny Lernoux, in her 1984 book, In Banks We Trust, wrote: “Then, as now [1984], the Eurocurrency market was a giant floating crap game in which exchange dealers (mostly banks) bet on the rise or fall of national currencies.” 114 Sindona quoted in Stoler, Beaty, and Kalb, “The Great Vatican Bank Mystery.” 115 Handwritten notes by Philip Willan of audiotaped interviews between John Cornwell and Marcinkus, February 8, 1988, 7a, provided to author courtesy of Willan. 116 Marcinkus quoted in Raw, The Moneychangers, 71. 117 Raw, The Moneychangers, 8, 219; Cornwell, God’s Banker, 50. 118 Cornwell, God’s Banker, 50. 119 Willey, God’s Politician, 211. 120 Clara Calvi quoted in Gurwin, The Calvi Affair, 26. 121 Marcinkus also visited the following year.

From Peoples into Nations
by John Connelly
Published 11 Nov 2019

“Four More Years,” The Economist, April 5, 2014, available at http://www.economist.com/news/europe/21600169-viktor-orban-heads-third-termand-wants-centralise-power-four-more-years. 87. See http://www.rferl.org/content/ukraine-hungarian-minority-autonomy/25412593.html (accessed December 3, 2016). 88. Frances Coppola, “The Bulgarian Game of Thrones,” Forbes, July 15, 2014. 89. See http://seekingalpha.com/article/2296535-bulgarias-strange-bank-run (accessed 3 December 2016). 90. Max Rivlin-Nadler, “Think the E.U. Is Great for Eastern Europe,” New Republic, December 16, 2013. Conclusion 1. “Nationalism may have stirred up passions in group situations … but its centrality often faded once an event had ended and more quotidian concerns took over.”

Lonely Planet Ireland
by Lonely Planet

The menu changes daily: smoked quail with celeriac remoulade, perhaps, or Castletownbere crab with spaghetti and herbs. Two-course dinners (€24) are served Tuesday to Thursday, and pre-6.30pm Friday and Saturday. ElectricMODERN IRISH€€ ( MAP GOOGLE MAP ; %021-422 2990; http://electriccork.ie; 41 South Mall; mains €14-27; hnoon-10pm; Wc) The market-sourced menu at this transformed art deco bank runs from seafood chowder to succulent steaks. There's a rustic Mediterranean-style fish bar too, but it's the big riverside deck and upstairs restaurant balcony with knock-out cathedral views that pull in the crowds – along with wines by the glass, and over two dozen varieties of beer. Strasbourg GooseIRISH€€ ( MAP GOOGLE MAP ; %021-427 9534; 17-18 French Church St; mains €15-24, 2-course set menu €21; h6-10pm Tue-Fri, 5-11pm Sat, 4-10pm Sun) There's a French accent alongside the broad Irish brogue here, with everything from prime Irish sirloin to Cork coast mussels given a Gallic twist, whether it be tarragon, a white-wine sauce or gratin potatoes.

Lonely Planet Brazil
by Lonely Planet

Torre de TVTOWER (map Google map; Eixo Monumental; h9am-7pm Tue-Sun) F The 75m-high observation deck of the TV Tower gives a decent overview of the city, but it’s still not quite tall enough to really get a sense of the city’s airplane design. The mezzanine level sometimes has exhibitions; there is also a tourist information point and cafe here, both closed for refurbishment on our last visit. Caixa CulturalMUSEUM (map Google map; %61 3206-9448; www.caixacultural.com.br; SBS Q4, Lote 3/4; h9am-9pm Tue-Sun) F This bank-run center has several galleries for temporary exhibitions, a sculpture garden, a cafe and theater. The lobby of the main bank building across the car park, the Átrio dos Vitrais, is a feast for the eyes: a series of gorgeous stained-glass panels represent each Brazilian state. Watching them shimmer over pools of water is a spectacular sight.

Corporate Finance: Theory and Practice
by Pierre Vernimmen , Pascal Quiry , Maurizio Dallocchio , Yann le Fur and Antonio Salvi
Published 16 Oct 2017

They do so via a process called book-building, which occurs at the same time that information is sent out and the securities are marketed. Volumes and prices from potential investors are listed in the book. This helps determine if the transaction is feasible and, if so, at what price. Only after the book-building process do banks choose whether or not to underwrite the deal. Book-building allows the banks running the transaction to limit their risk, by assuring them that investors are willing to buy the securities. Book-building helps to determine, at a given moment, the best price for the seller and/or company and to allocate the securities on a more or less discretionary basis. In simpler transactions such as the placement of blocks or the issue of convertible bonds, the bank will almost always get feedback from a limited number of investors on their interest in the transaction and on the pricing.

The system of the world
by Neal Stephenson
Published 21 Sep 2004

“He and his wife came here, what, five years ago, just as things began to go awry for the Whig Juncto. Oxford and Bolingbroke were plotting the Tory resurgence, getting the Queen’s ear—as I recall, there had been a run on the Bank of England, occasioned by rumors of a Jacobite uprising in Scotland.” “Is that what Braithwaite said when he showed up here penniless? That he’d been ruined in the bank run?” “He mentioned that the Mobb had rioted against the Bank.” “That it did. But this has little to do with Braithwaite. He is the sort of Englishman who is exported with great enthusiasm by his countrymen.” “There were rumors—” “Just enough, I am certain, to make him out as a saucy picaroon, and get him invited to dinner.”

Germany Travel Guide
by Lonely Planet

In front is the Fischkastenbrunnen Offline map Google map (Marktplatz), a fountain where fishmongers kept their catch alive on market days. The 36m-high glass pyramid behind the Rathaus is the city’s main library, the Zentralbibliothek Offline map Google map (Marktplatz), designed by Gottfried Böhm. Stadtmauer WALL Offline map Google map South of the Fischerviertel, along the Danube’s north bank, runs the red-brick Stadtmauer (city wall), the height of which was reduced in the 19th century after Napoleon decided that a heavily fortified Ulm was against his best interests. Walk it for fine views over the river, the Altstadt and the colourful tile-roofed Metzgerturm Offline map Google map (Butcher’s Tower; Click here), doing a Pisa by leaning 2m off-centre.

Germany
by Andrea Schulte-Peevers
Published 17 Oct 2010

Here beautifully restored half-timbered houses huddle along the two channels of the Blau River, traversed by footbridges. Harbouring art galleries, rustic restaurants, courtyards and the crookedest hotel in the world (Click here), the cobbled lanes are ideal for a leisurely saunter. South of the Fischerviertel, along the Danube’s north bank, runs the redbrick Stadtmauer (city wall), the height of which was reduced in the 19th century after Napoleon decided that a heavily fortified Ulm was against his best interests. Walk it for fine views over the river, the Altstadt and the colourful tile-roofed Metzgerturm (Butcher’s Tower), doing a Pisa by leaning 2m off-centre.

The Prize: The Epic Quest for Oil, Money & Power
by Daniel Yergin
Published 23 Dec 2008

The Wall Street Journal tagged Continental Illinois as "the bank to beat." When oil prices started to weaken, it became clear that Continental Illinois, with its huge portfolio of energy loans from Penn Square and other sources, was walking on nothing more solid than thin air. The result, in 1984, was the largest bank run in the history of the world. All around the globe, other banks and companies yanked their money out. Continental Illinois' credit was no good. The integrity of the entire interconnected banking system was now in jeopardy. The Federal government intervened, with a huge bail-out—$5.5 billion of new capital, $8 billion in emergency loans, and, of course, new management.

Engineering Security
by Peter Gutmann

Despite repeated requests to Bank of America to fix this (it’s a legitimate site, it just carries all the hallmarks of a phishing site), the problem has been present since at least 2003 [142] and was still active as of the time of writing. Some legitimate sites are so hard to verify that even experts have problems. For example a web site for NatWest (a large UK bank) run by the Royal Bank of Scotland only barely scraped through verification as a non-phishing site by the checkers at PhishTank, a phish-tracking site [143]. In another case reported at a security conference, banking security people were taken in by a phishing version of their own site! Specifically, they knew that the site they were looking at was a phishing site because they’d been told about it and could verify that traffic from it wasn’t coming back to their servers, but it took them quite some time to figure out how it was being done.