The Alchemists: Three Central Bankers and a World on Fire
Page 56
Nixon-era actions, 62–67
price increases, extent of, 65–68
Volker and end of, 67–71
Ingves, Stefan, 152, 161
Insolvency, versus illiquidity, 41
Institute of International Finance (IFF), 287, 312–15
Interest rate charges, Bagehot’s dictum, 33, 149
Interest rate cuts
Bank of Japan (1990s), 86–87
Bernanke options for, 163
ECB under Draghi, 344, 352
end of inflation of 1970s, 71
by Federal Reserve, 128, 163
global coordination of (2008), 161–63
goal-based actions, Fed plan (2012), 385–87
in Great Depression, 56
Greenspan era, 99
ineffectiveness, rationale for, 378–79, 386–87
zero-interest-rate policy, 87–88, 90–91
Interest rate increases
debt dynamics, 205
ECB (2008), 137, 160
ECB (2011), 303–4
to end inflation of 1970s, 69–71
Internal devaluation, 302–3
International Monetary Fund (IMF)
European Financial Stability Facility funding, 230
and Greek bailout, 205–6, 211–12, 215–17, 285–86, 310–11
and Greek debt restructuring, 312–16
Ireland bailout, 283–84, 294
Strauss-Kahn resignation, 308
Investment bank failures
Bear Stearns, 133–34
emergency 13(3) provision, 133–34
Lehman Brothers, 139–42
Ireland, economic success, era of, 283
Ireland financial crisis, 283–84, 292–95
bailouts, 283–84, 287, 294–96
banks, government guarantee (2008), 158–59, 283
deficit reduction, 284–85, 294, 353
elements of, 217, 292–94
Irish Nationwide Building Society, 294
Issing, Otmar, 74
Italy
Berlusconi successor. See Monti, Mario
central bank. See Banca d’Italia
Italy financial crisis, 316–23
deficit reduction, 319, 321, 346
deficit reduction failure, 321–22
ECB bond buying program, 319–22, 347–48
inflation rate (1980s), 75
Monti, positive steps by, 353
worsening (2011), 347–48
Jackson, Andrew, 38–39, 45
Jackson, James “Left Eye,” 36–37
Jackson Hole conference, 95–98
creation of, 95–96
purpose of, 95, 97–98
traditions/folklore of, 97
Jackson Hole conference (2005), 93–101
on end of Greenspan tenure, 93–94
on Great Moderation, 94–95, 98–99, 106–7
housing bubble, economists’ fears about, 104–8
Jackson Hole conference (2007), 111–12
crisis management at, 111–12, 123–24
housing bust warnings, 112, 124
Jackson Hole conference (2010), Bernanke speech, 265–66, 268
Jackson Hole conference (2012), 377–79
Bernanke speech, 384–85
Woodford principles, 378–79, 386, 390
Jaffee, Dwight, 117
Japan
central bank. See Bank of Japan
economic boom (1980s), 85–86
economic decline (1990s), 84–92
real estate price run-up, 85–86
zaitech, 85–86
Jaspers, Karl, 77
Jay Cooke & Co., 39
Jekyll Island, First Name Club meeting (1910), 35–36, 43–44
Jiang Zemin, 367, 368
John Paul II, pope, 68–69
Johnson, Tim, 329
J.P. Morgan, 134
Juncker, Jean-Claude, 306–7, 345
Karl X Gustav, king of Sweden, 19, 21
Kennedy, Ted, 188
Keynes, John Maynard, 25, 388
on German reparations, 49–50
on Great Depression policy errors, 60
King, Mervyn. See also Bank of England
background information, 6–7, 120–23
bailouts, negative view of, 6, 126–27
beginning crisis, view of, 7, 128
-Blanchflower conflicts, 138–39, 239, 250–51
and Conservatives, 235, 242–47
on coordination of remedies, 162–63, 349
-Darling conflict, 121, 233–35, 238, 242
on deficit reduction, 237–38, 241–47, 246–47
economic orientation of, 121–22
economic stability, view of, 6–7, 387–89
end of term (2012), 388
on first day of crisis, 1, 6–7
government endorsement statement controversy, 249–51
housing bubble, fears about, 104
inflation, approach to, 253, 334–36
Labour criticism by, 234–35, 237–39, 242
Mansion House Dinner speech (2009), 233
Mansion House Dinner speech (2010), 247
Mansion House Dinner speech (2012), 232
quantitative easing amount, outvoted on, 238–41
successor to. See Carney, Mark
Klobuchar, Amy, 198–99
Knickerbocker Trust Co., 41
Kocherlakota, Narayana, 196, 264–65, 330, 332, 385
Kohl, Helmut, and European unity negotiations, 76–77, 82, 288
Kohn, Donald, 5, 97, 111, 133, 140, 193, 264
Koo, Richard, 88
Krugman, Paul, 80, 96, 116, 329
Labour Party, King criticism of, 234–35, 237–39, 242
Lacker, Jeffrey, 196, 264, 275, 385
Lagarde, Christine, 229, 289
Lamont, Norman, 73
Lamont, Thomas W., 42
Large-scale asset purchases. See Quantitative easing
Laws, David, 244
Lazear, Edward P., 147
Lehman Brothers
collapse, 139–41, 205
no bailout for, 141–42, 143–45, 151–52
Lehnert, Andreas, 104, 105
Lender of last resort, 3, 127. See also Central bank
Fed as global lender, 153–55
Lenihan, Brian, 152, 158
Liar loans, 100
Liberal Democrat Party, 244, 253
Li Bo, 371
Liikanen, Erkki, 114, 300
Lipsky, John, 308, 310
Liquidity
central bank cash infusions. See Bailouts
and highly rated securities, 2
Liquidity transformation, 30
Loans
home loans. See Home mortgages
securities created from, 102–3. See also Mortgage-backed securities
Lockhart, Dennis, 385
Lomax, Rachel, 7, 121
Lombard Street: A Description of the Money Market (Bagehot), 28
Low-risk premiums, 107
Lubbers, Ruud, 77
Luther, Hans, 53
Great Depression, actions during, 58–60
Maastricht Treaty, 77, 114, 217, 318
McAndrews, Jamie, 141
McCarthy, Callum, 126
McConnell, Mitch, 191–92
McFall, John, 139
Madigan, Brian, 4, 111
Madison, James, 37
Maizière, Thomas de, 228
Major, John, 73
Malekan, Omid, 257
Mankiw, Greg, 271–72
Mansion House Dinner
/>
King’s speech (2009), 233
King’s speech (2010), 247
King’s speech (2012), 232
Manzullo, Donald, 171
Marchioni, Dina, 277–78
Marsh, David, 114
Masuch, Klaus, 284
Maturity Extension Program (Operation Twist), 331–32, 340
Mayer, Thomas, 2
Meltzer, Allan, 94
Mencken, H.L., 53
Merkel, Angela
approval ratings, high, 356
bondholders pay bailouts decision, 289–92
on coordination of remedies, 160
and Greek financial crisis, 210–12, 288–89
-Sarkozy relationship, 287–92, 356
Mersch, Yves, 300
Miles, David, 241
Millennium Bridge, 107–8
Miller, G. William, 67
Mitterrand, François, 76–77
Monetary policy, and economic stability, 98
Monetary Policy Committee. See Bank of England
Money
excessive printing, and hyperinflation, 48–53
printing, Bernanke on, 279
value, basis of, 22
Money market contact group, 2
Money market funds
emergency relief, 150–51
near collapse (2008), 147–48
Money Market Investor Funding Facility (MMIFF), 151
Money supply
decreasing, and inflation of 1970s, 69–71
quantitative easing goals, 263
Monti, Mario
positive steps by, 353
as prime minister, 342, 347, 348
Moreau, Émile, 55
Morgan, John Pierpont
First Name Club meeting (1910), 35–36, 43–44
U.S. Treasury bailouts by, 41
Mors, Matthias, 285
Mortgage-backed securities
collapse, beginning of, 2
creation as investment vehicle, 101–2
European exposure, extent of, 129, 145, 159
Fed QE1 purchase of, 263
inventor of, 5
Northern Rock sale of, 126
rating AAA as safe, 102, 103
size of portfolio estimates (2011), 263–64
Mortgage brokers, 103
Moskow, Michael, 105
MoveOn.org, 191
National Banking Act (1863), 39
National Monetary Commission (1908), 43
National Reserve Association, 43
New Democracy, 203, 310, 341–42, 354, 357–58
Newton, Sir Isaac, 24–25
Nixon, Richard
Fed chairman bullied by, 63–65
gold standard abandoned, 62–64
inflation, approach to, 62–67
Nominal GDP targeting, 338–39
Nominal wage rigidity, 302–3
Norinchukin, 154
Norman, Montagu, Great Depression actions by, 11, 55, 59, 60
Northern Rock PLC, crisis and bailout of, 125–28
Obama, Barack
Bernanke reappointment, 181–84, 189–93
-Bernanke relationship, 181, 183
debt limit, raising, 317
Group of 20 meeting (2010), 257
Group of 20 meeting (2011), 345–46
and QE2 criticisms, 257
Recovery Summer, 259
O’Donnell, Gus, 244
Office of Thrift Supervision, 146
Oil prices
decline (2008), 161
increases in 1970s, 66
Olson, Mark, 105
Operation Twist, 331–32
Operation Twist 2, 340
Optimal currency area, and euro, views of, 79–80
Organization of Petroleum Exporting Countries (OPEC), oil price hikes of 1970s, 66
Osborne, George, 238, 242
deficit reduction agenda, 245–49
Outright Money Transactions (OMT), 382–84
Overend, Gurney & Co. collapse (1866), 10, 26–28, 31. See also Panic of 1866 (England)
Overend, John, 26–27
Oxenstierna, Axel, 19
Palmstruch, Johan, Stockholms Banco innovations/failure, 17–24
Panhellenic Socialist Movement (PASOK), 203, 310, 341, 354, 357–58
Panic of 1866 (England), 10, 26–28, 31–34
Bagehot’s analysis of, 28
Bank of England bailout, 32–34
economic impact of, 33–34
Overend & Gurney collapse, 10, 26–28, 31
Panic of 1907 (U.S.), 40–43
Papaconstantinou, George, 202, 205, 209–10, 215, 287, 310
Papademos, Lucas, 225, 342, 347, 353–54
Papadia, Francesco, 152
as ECB markets desk head, 1
Papandreou, George, 202, 214–15, 287, 297, 306, 309–11, 341
referendum on euro, 343, 345
Paper money, origin of, 22–23
Paris Club, 114
Parkinson, Patrick, 140
Paul, Ron, 170–71, 174–75, 185–86, 197
Paulson, Hank
and Lehman collapse, 142, 144–45
and TARP, 156–57
Peach, Richard, 104
People’s Bank of China
bond market of, 370–71
creation of, 362
currency swaps, 371–72
financial crisis remedies (2008–2009), 365–66
functions of, 362–64
governor of. See Zhou Xiaochuan
policymaking secrecy, 363–64, 373–74
Zhou reforms/programs, 369–73, 375–76
Perry, Rick, 327–28
Peston, Robert, 127
Peterson, Pete, 62
Pianalto, Sandra, 258
PIIGS nations, 213
Pimlott, Daniel, 249–50
Plosser, Charles, 192, 196, 258, 264, 275, 330, 332, 337, 385
Pooling, 74–75
Portugal financial crisis, 296–98
deficit reduction, 220, 353
ECB bond buying program, 287, 295
Posen, Adam, 247, 250, 252–53, 334, 337, 390
Powell, Jay, 385
Price increases. See also Inflation
self-perpetuation of, 65–66, 134–35
Privatization
Greece, 309–16
Italy, 319
Provopoulos, George, 201–2, 203, 215
Quantitative easing
by Bank of England (2009), 238–41
by Bank of England (2011), 334–36, 340
by Bank of Japan (2000), 90–91, 255
by Fed (QE1), 263
by Fed, second round. See Quantitative easing (QE2)
goals of, 238–39, 255
Quantitative easing (QE2), 255–80
Bernanke briefing in South Korea about, 273–74
economic rationale for, 259–61, 263–65, 267–70
effectiveness of, 279–80, 328
execution of purchase, 277–78
FOMC meeting on, 254–55, 274–76
goals of, 255, 374–75
implementation strategies, 272–73
negative reaction to, 256–58, 274, 275–76, 278–80, 328–29, 374–75
portfolio balance channel, 331
risks of, 267, 271–72, 274
Quantum Fund, 73
Rajan, Raghuram, 107–8
Rajoy, Mariano, 348
Ranieri, Lewis, 5
Raskin, Sarah Bloom, 275
Real estate prices. See Housing prices
Recessions
&n
bsp; and bank failures, 3, 23, 33–34, 39–40
and end of inflation of 1970s, 70–71
eurozone (2012), 354–55
during Greenspan tenure, 95, 99
Reed, James A., 45
Rehn, Olli, 209–10
Reichsbank, 47–53
creation of, 47
gold for paper money swap, 48–49
Great Depression measures, 58–60
hyperinflation, pre–Nazi era, 11, 50–53
paper money mass issuance (1914–1918), 48–49
Reid, Harry, 146
Rentenmark, origin of, 54
Republicans
anti-Bernanke, 184, 190–92, 327–28, 330
QE2, objection to, 256
Reserve Primary Fund, 147–48
Riksbank, 152
Robertson, Linda, 177, 189–90, 193, 195
Romer, Christina, 338
Roosevelt, Franklin Delano
gold standard abandoned, 60–61
“try it all” approach, 149–50
Rosengren, Eric, 264, 271, 275
Roumeliotis, Panagiotis, 341–42
Royal Bank of Scotland, 154
Royal Exchange, 31
Rubin, Robert, 94
Ryan, Paul, 256
Sack, Brian, 270
Salary cuts, as deficit reduction, 302–3, 309–10
Salary increases, and inflation, 65–66, 134–35
Salstrom, Sandra, 254–55
Samaras, Antonis, 310, 342, 345, 354
Samuelson, Paul, 65
Sanders, Bernie, 175–76, 189, 197–98
San Francisco earthquake (1906), 40
Sarkozy, Nicolas, 159, 211
bondholders pay bailouts decision, 289–92
on EFSF bank charter, 326
-Merkel relationship, 287–92, 356
Savings & loan bank failures (1980s), 79
Schabowski, Günter, 76
Schacht, Hjalmar Horace Greeley, Great Depression, actions during, 53–54, 57, 60
Schäuble, Wolfgang, 228, 257, 289, 290, 380, 382
Schmidt, Helmut, 325
Schultz, George, 62–63
Schuman, Robert, 74
Schumer, Chuck, 186
Seasonal loans, 40, 42–43
Second Bank of the United States (1816), 37–39
Securities Markets Programme (SMP)
Greece bailout, 286–89, 310–11
initial proposal for, 220–23
Ireland bailout, 283–84, 287, 294–96
Italy bailout, 319–22, 347–48
opposition to, 229–32, 320, 322–23
Portugal bailout, 295
reactivation of (2011), 317–18
Spain bailout, 287, 320–21
suspension of, 304–5
Sentance, Andrew, 252
September 11 attack, economic remedies following, 98–99, 130
Sheets, Nathan, 227
Shelby, Richard, 174, 184–85, 261
Shiller, Robert, 112
Skidmore, David, 4