private-sector salaries in Greece had dropped . . . : “Salaries Drop by over 10 Pct Within a Year,” ekathimerini, July 2, 2013, http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_02/07/2013_507091.
“Across Europe’s southern rim, people recoil . . .”: Marcus Walker and Alessandra Galloni, “Embattled Economies Cling to the Euro,” Wall Street Journal, February 13, 2013, p. A1, http://online.wsj.com/news/articles/SB10001424127887324761004578284203099970438.
132“Europe was not built for economic reasons . . .”: Matthew Kaminski, “Guy Sorman: Why Europe Will Rise Again,” Wall Street Journal, August 18, 2011, p. A11, http://online.wsj.com/news/articles/SB10000872396390444375104577592850332409044.
“everything from Greek real estate . . .”: Stelios Bouras and Philip Pangalos, “Foreign Money Is Revisiting Greece,” Wall Street Journal, February 25, 2013, p. C1, http://online.wsj.com/news/articles/SB10001424127887323864304578320431435196910.
“The drive to improve competitiveness . . .”: Hugo Dixon, “The Gloom Around Greece Is Dissipating,” New York Times, April 21, 2013, http://www.nytimes.com/2013/04/22/business/global/the-gloom-around-greece-is-dissipating.html.
The fifteen-hundred-acre former Athens airport site . . . : Liz Alderman and Demitris Bounias, “Privatizing Greece, Slowly but Not Surely,” New York Times, November 18, 2012, http://www.nytimes.com/glogin?URI=http://www.nytimes.com/2012/11/18/business/privatizing-greece-slowly-but-not-surely.html.
“On Cosco’s portion of the port . . .”: Liz Alderman, “Under Chinese, a Greek Port Thrives,” New York Times, October 19, 2012, http://www.nytimes.com/2012/10/11/business/global/chinese-company-sets-new-rhythm-in-port-of-piraeus.html?pagewanted=all.
All these investment and expansion plans will have positive . . . : Ralph Minder, “Car Factories Offer Hope for Spanish Industry and Workers,” New York Times, December 28, 2012, p. B1, http://www.nytimes.com/2012/12/28/business/global/car-factories-offer-hope-for-spanish-industry-and-workers.html?pagewanted=all; Angeline Benoit, Manuel Baigorri, and Emma Ross-Thomas, “Rajoy Drives Spanish Revolution with Low-Cost Manufacture,” Bloomberg, December 19, 2012, http://www.bloomberg.com/news/2012-12-19/rajoy-drives-spanish-revolution-with-low-cost-manufacture.html.
adverse demographics as a major hurdle . . . : Buttonwood, “The Euro Zone Crisis: Growth Problem,” Economist, December 17, 2012, http://www.economist.com/blogs/buttonwood/2012/12/euro-zone-crisis.
a €60 billion bailout fund . . . : Matina Stevis, “Euro Zone Closes In on Bank Plans,” Wall Street Journal, June 13, 2013, http://online.wsj.com/article/SB10001424127887323734304578542941134353614.html.
Chapter 6: BELLs, BRICS, and Beyond
The original term BRIC was created . . . : Jim O’Neill, “Building Better Global Economic BRICs,” Goldman Sachs, Global Economics Paper no. 66, November 30, 2001, http://www.goldmansachs.com/our-thinking/archive/archive-pdfs/build-better-brics.pdf.
“The other members would need to recognise . . .”: Ibid., p. S11.
He attributes economic success in the Baltics . . . : Anders Åslund, “Southern Europe Ignores Lessons from Latvia at Its Peril,” Peterson Institute for International Economics, Policy Brief no. PB12-17, June 2012, http://www.iie.com/publications/pb/pb12-17.pdf.
“The government prohibited double incomes . . .”: Ibid.
143“Shoppers throng Nordic design shops . . .”: Paul Ames, “Estonia Uses the Euro, and the Economy Is Booming,” CNBC, June 5, 2012, http://www.cnbc.com/id/47691090.
Estonia in particular has become a high-tech hub . . . : Ibid.
“When a credit-fueled economic boom . . .”: Andrew Higgins, “Used to Hardship, Latvia Accepts Austerity, and Its Pain Eases,” New York Times, January 1, 2013, http://www.nytimes.com/2013/01/02/world/europe/used-to-hardship-latvia-accepts-austerity-and-its-pain-eases.html?pagewanted=all.
“While challenges remain today, you have . . .”: Christine Lagarde, “Latvia and the Baltics—A Story of Recovery,” speech delivered in Riga, Latvia, June 5, 2013, http://www.imf.org/external/np/speeches/2012/060512.htm.
“Today, Estonia’s economy is the fastest-growing . . .”: Ott Ummelas, “Why Estonia Loves the Euro,” Bloomberg Businessweek, February 2, 2012, http://www.businessweek.com/magazine/why-estonia-loves-the-euro-02022012.html.
O’Neill has consistently downplayed the idea . . . : Jim O’Neill, interview, CNN Marketplace Africa, April 5, 2011, http://edition.cnn.com/2011/BUSINESS/04/05/jim.oneill.africa.bric/index.html.
“We directed our Finance Ministers to examine . . .”: eThekwini Declaration, Fifth BRICS Summit, Durban, South Africa, March 27, 2013, http://www.brics5.co.za/assets/eThekwini-Declaration-and-Action-Plan-MASTER-27-MARCH-2013.pdf.
“We support the reform and improvement . . .”: Ibid.
a twenty-thousand-mile undersea fiber optic cable . . . : “Brazil Plans to Go Offline from US-Centric Internet,” Hindu, September 17, 2013, http://www.thehindu.com/news/international/world/brazil-plans-to-go-offline-from-uscentric-internet/article5137689.ece.
the SCO’s rejection of a U.S. application . . . : Dilip Hiro, “Shanghai Surprise—The Summit of the Shanghai Cooperation Organisation Reveals How Power Is Shifting in the World,” Guardian, June 16, 2006, http://www.guardian.co.uk/commentisfree/2006/jun/16/shanghaisurprise.
The Prime Ministers Council of the SCO signed an agreement . . . : “The Interbank Consortium of the Shanghai Cooperation Organisation,” Shanghai Cooperation Organisation, March 16, 2009, http://www.sectsco.org/EN123/show.asp?id=51.
“the Shanghai Cooperation Organisation is a good . . .”: Rick Rozoff, “The Shanghai Cooperation Organization: Prospects for a Multipolar World,” Centre for Research on Globalisation, May 2009, http://www.globalresearch.ca/the-shanghai-cooperation-organization-prospects-for-a-multipolar-world.
a joint Sino-Russian declaration . . . : “China, Russia Sign Five-Point Joint Statement,” Xinhua, June 18, 2009, http://news.xinhuanet.com/english/2009-06/18/content_11558133.htm.
several candidates for an alternative peg . . . : See Dr. Syed Abul Basher, “Regional Initiative in the Gulf: Search for a GCC Currency,” paper presented at the International Institute for Strategic Studies Seminar, Bahrain, September 30, 2012, http://www.iiss.org/en/events/geo-economics%20seminars/geo-economics%20seminars/archive/currencies-of-power-and-the-power-of-currencies-38db.
A logical extension, then, of the SDR basket approach . . . : The author is indebted to Dr. Syed Abul Basher for the suggestion and explication of the SDR-plus-oil approach to the currency peg, ibid.
the United States would continue its loose monetary policy . . . : Ben S. Bernanke, “U.S. Monetary Policy and International Implications,” remarks at IMF–Bank of Japan seminar, Tokyo, October 14, 2012, http://www.federalreserve.gov/newsevents/speech/bernanke20121014a.htm.
“Today most advanced economies remain . . .”: Ben S. Bernanke, “Monetary Policy and the Global Economy,” speech at the London School of Economics, London, March 25, 2013, http://www.federalreserve.gov/newsevents/speech/bernanke20130325a.htm.
“The purpose of the purchases was and is . . .”: “Quantitative Easing Explained,” Bank of England, http://www.bankofengland.co.uk/monetarypolicy/Pages/qe/default.aspx.
“The impact on economic activity . . .”: S. Pelin Berkmen, “Bank of Japan’s Quantitative and Credit Easing: Are They Now More Effective?” IMF Working Paper no. WP/12/2, January 2012, http://www.imf.org/external/pubs/ft/wp/2012/wp1202.pdf.
“It’s very rare for monetary policy . . .”: Ambrose Evans-Pritchard, “Japan’s Shinzo Abe Prepares to Print Money for the Whole World,” Telegraph, December 17, 2012, http://www.telegraph.co.uk/finance/economics/9751609/Japans-Shinzo-Abe-prepares-to-print-money-for-the-whole-world.html.
The BOJ pledged to purchase $1.4 trillion . . . : “Introduction to the ‘Quantitative and Qualitative Monetary Easing,’” Bank
of Japan, April 4, 2013, http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf.
“The bank will achieve . . .”: Ibid.
Chapter 7: Debt, Deficits, and the Dollar
the contract theory of money. . . : See Eerik Lagerspetz, “Money as a Social Contract,” Theory and Decision 17, no. 1 (July 1984), pp. 1–9. The contract theory of money has philosophical and legal roots as old as Aristotle and, in more recent centuries, John Locke and Samuel von Pufendorf. It is presented here in an updated version for the purpose of illuminating the intrinsic rather than extrinsic value of money.
the quantity theory of money . . . : Irving Fisher, “The Debt-Deflation Theory of Great Depressions,” Econometrica (1933), available from the Federal Reserve Bank of St. Louis, http://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf; and Milton Friedman, Studies in the Quantity Theory of Money (Chicago: University of Chicago Press, 1967).
the state theory of money . . . : Georg Friedrich Knapp, The State Theory of Money (San Diego: Simon, 2003).
John Maynard Keynes adopted chartalism . . . : John Maynard Keynes, Treatise on Money, vol. 1, The Pure Theory of Money, and vol. 2, The Applied Theory of Money (London: Macmillan, 1950).
acolytes of the theory of money as an arm of state power . . . : Paul McCulley and Zoltan Pozsar, “Helicopter Money: Or How I Stopped Worrying and Love Fiscal-Monetary Cooperation,” GIC Global Society of Fellows, January 7, 2013, http://www.interdependence.org/wp-content/uploads/2013/01/Helicopter_Money_Final1.pdf; Stephanie A. Bell and Edward J. Nell, eds., The State, the Market, and the Euro: Metallism versus Chartalism in the Theory of Money (Northampton, Mass.: Edward Elgar, 2003).
the quantity theory of credit . . . : Richard Duncan, The New Depression: The Breakdown of the Paper Money Economy (Singapore: John Wiley & Sons Singapore Pte., 2012).
His work could properly be called creditism . . . : Fiona Maclachlan, “Max Weber and the State Theory of Money,” working paper, http://home.manhattan.edu/~fiona.maclachlan/maclachlan26july03.htm.
“bet on the country”: Warren Buffett, interview by Becky Quick and Joe Kernan, CNBC, November 3, 2009, http://www.cnbc.com/id/33603477.
Not only did this spending not produce . . . : John F. Cogan, Tobias Cwik, John B. Taylor, and Volker Wieland, “New Keynesian Versus Old Keynesian Government Spending Multipliers,” National Bureau of Economic Research, Working Paper no. 14782, February 2009, http://www.nber.org/papers/w14782.pdf?new_window=1.
the relationship of U.S. debt and deficits . . . : John H. Makin, “Trillion-Dollar Deficits Are Sustainable for Now, Unfortunately,” American Enterprise Institute, December 13, 2012, http://www.aei.org/outloook/trillion-dollar-deficits-are-sustainable-for-now-unfortunately.
Contrary to the oft-cited . . . : Carmen M. Reinhart and Kenneth S. Rogoff, “Growth in a Time of Debt,” National Bureau of Economic Research, Working Paper no. 15639, January 2010, http://www.nber.org/papers/w15639.
“The Liquidation of Government Debt”: Carmen M. Reinhart and M. Belen Sbrancia, “The Liquidation of Government Debt,” National Bureau of Economic Research, Working Paper no. 16893, March 2011, http://www.nber.org/papers/w16893.
“A . . . reason why forward guidance may be needed . . .”: Michael Woodford, “Methods of Policy Accommodation at the Interest-Rate Lower Bound,” paper presented at the Federal Reserve Bank of Kansas City Symposium, Jackson Hole, Wyo., August 31, 2012, p. 6, emphasis in the original, http://www.kc.frb.org/publicat/sympos/2012/mw.pdf.
“In particular, the committee decided to keep . . .”: Federal Reserve, press release, December 12, 2012, http://www.federalreserve.gov/newsevents/press/monetary/20121212a.htm.
The Fed’s own staff have expressed reservations . . . : Marco Del Negro, Marc Giannoni, and Christina Patterson, “The Forward Guidance Puzzle,” Federal Reserve Bank of New York, Staff Report no. 574, October 2012, http://newyorkfed.org/research/staff_reports/sr574.pdf.
“a thinly disguised way of aiming . . .”: Charles Goodhart, “Central Banks Walk Inflation’s Razor Edge,” Financial Times, January 30, 2013, http://www.ft.com/intl/cms/s/0/744e4a96-661c-11e2-b967-00144feab49a.html.
a highly detailed critique of the Fed’s easy-money policy . . . : Jeremy C. Stein, “Overheating in Credit Markets: Origins, Measurement, and Policy Responses,” Federal Reserve Bank of St. Louis Research Symposium, February 7, 2013, http://www.federalreserve.gov/newsevents/speech/stein20130207a.htm.
Chapter 8: Central Bank of the World
To meet Dr. Min Zhu . . . : The profile in this chapter is based on Dr. Min Zhu, conversation with the author, New York City, November 8, 2012; Dr. Min Zhu, lecture at the Watson Institute, Brown University, Providence, R.I., March 29, 2013.
a China–western hemisphere supply-chain cluster . . . : Riordan Roett and Guadalupe Paz, eds., China’s Expansion into the Western Hemisphere: Implications for Latin America and the United States (Washington, D.C.: Brookings Institution Press, 2008).
After being vetted and groomed in midlevel positions . . . : See William D. Cohan, “Rethinking Robert Rubin,” Bloomberg Businessweek, September 30, 2012, http://www.businessweek.com/articles/2012-09-19/rethinking-robert-rubin; and Jonathan Stempel and Dan Wilchins, “Robert Rubin Quits Citigroup amid Criticism,” Reuters, January 9, 2009, http://www.reuters.com/article/2009/01/09/us-citigroup-rubin-idUSN0930738020090109.
Min Zhu believes the world . . . : Min Zhu, conversation with the author.
“Central bankers like to say . . . ”: Ibid.
IMF economists such as José Viñals . . . : IMF Monetary and Capital Markets Department, “Macrofinancial Stress Testing—Principles and Practices,” August 22, 2012, http://www.imf.org/external/np/pp/eng/2012/082212.pdf.
“Each member shall deal with the Fund . . .”: IMF Articles of Agreement, Article V, Section 1, http://www.imf.org/external/pubs/ft/aa/index.htm.
Today the IMF website touts loans . . . : “IMF Lending Arrangements as of May 13, 2013,” International Monetary Fund, http://www.imf.org/external/np/fin/tad/extarr11.aspx?memberKey1=ZZZZ&date1key=2020-02-28.
the SDR-to-dollar exchange rate . . . : This analysis uses an exchange rate of one U.S. dollar to 0.667 SDRs. Updates to the exchange rate are available at “Exchange Rate Archives by Month,” International Monetary Fund, http://www.imf.org/external/np/fin/data/param_rms_mth.aspx.
President Obama sent letters to the congressional leadership . . . : “Letters from the President to the Bipartisan Leadership on NAB Fund,” Office of the Press Secretary, White House, April 20, 2009, http://www.whitehouse.gov/the-press-office/letters-president-bipartisan-leadership-nab-fund.
203The president’s letter said: Ibid.
“significant step forward”: “IMF Managing Director Dominique Strauss-Kahn Welcomes U.S. Congressional Approval of IMF-Related Legislation, Including U.S. Financial Commitment of up to US$100 Billion,” International Monetary Fund, Press Release no. 09/220, June 18, 2009, http://www.imf.org/external/np/sec/pr/2009/pr09220.htm.
“Why Is the U.S. Bankrolling . . .”: John Gizzi, “Why Is the U.S. Bankrolling IMF’s Bailouts in Europe?” Human Events, April 25, 2011, http://www.humanevents.com/2011/05/02/why-is-the-us-bankrolling-imfs-bailouts-in-europe.
“We will miss them”: Sandrine Rastello and Timothy R. Homan, “Lagarde Boosting China IMF Clout Requires New Allies,” Bloomberg, April 10, 2013, http://www.bloomberg.com/news/2013-04-10/lagarde-boosting-china-imf-clout-requires-new-allies.html.
However, President Obama did not include the new requests in his 2012 or 2013 budgets . . . : Lesley Wroughton and David Lawder, “Senate Rebuffs Obama Request to Shift Fund for IMF,” Reuters, March 12, 2013, http://www.reuters.com/article/2013/03/12/us-usa-imf-reforms-idUSBRE92B04K20130312.
“I am here with my little bag . . .”: Pan Pylas, “Christine Lagarde at Davos 2012: ‘I Am Here with My Little Bag, to Collect a Bit
of Money,’” Huffington Post, January 28, 2012, http://www.huffingtonpost.com/2012/01/28/christine-lagarde-davos-2012_n_1239050.html.
“We have been able to significantly increase . . .”: Howard Schneider, “Q & A with IMF Director Christine Lagarde,” Washington Post, June 29, 2013, http://articles.washingtonpost.com/2013-06-29/business/40269400_1_christine-lagarde-imf-former-french-finance-minister.
object to the use of the term money . . . : “Easy Money: Consequences of the Global Liquidity Glut,” Milken Institute 2012 Global Conference, May 1, 2012, http://www.milkeninstitute.org/events/gcprogram.taf?function=detail&EvID=3353&eventid=GC12.
“The SDR may be allocated by the IMF . . .”: International Monetary Fund, Annual Report 2012, Appendix VI: Financial Statements for FY 2012, Independent Auditors’ Report on the Special Drawing Rights Department, June 21, 2012, p. 31, http://www.imf.org/external/pubs/ft/ar/2012/eng/pdf/a6.pdf; emphasis added.
“The SDR differed from nearly all prior proposals . . .”: Kenneth W. Dam, The Rules of the Game: Reform and Evolution in the International Monetary System (Chicago: University of Chicago Press, 1982), pp. 151–52.
the Price-adjusted Broad Dollar Index . . . : This index is available as part of the statistical series published by the board of governors of the Federal Reserve System and available as part of the Foreign Exchange Rates H.10 data series at http://www.federalreserve.gov/releases/h10/summary/indexbc_m.htm.
a multiyear, multistep plan . . . : IMF Strategy, Policy, and Review Department, “Enhancing International Monetary Stability—A Role for the SDR?” January 7, 2011, http://www.imf.org/external/np/pp/eng/2011/010711.pdf.
Beyond the SDR bond market creation . . . : Ibid. See also IMF Finance and Strategy, Policy, and Review Departments, “Criteria for Broadening the SDR Currency Basket,” September 23, 2011, http://www.imf.org/external/np/pp/eng/2011/092311.pdf.
The Death of Money Page 37
