Crisis Economics Part 18

225 some kind of conservators.h.i.+p: See, for example, "The FDIC's Role as Receiver," in FDIC, Resolutions Handbook (Was.h.i.+ngton, D.C.: FDIC, 2003), online at http://www.fdic.gov/bank/historical/reshandbook/.

226 supervising TBTF inst.i.tutions: See, for example, William Buiter, "Too Big to Fail Is Too Big," Financial Times, June 24, 2009, online at http://blogs.ft.com/maverecon/2009/06/too-big-to-fail-is-too-big/; Wessel, "Three Theories"; Daniel K. Tarullo, "Confronting 'Too Big to Fail,' " speech to Exchequer Club, Was.h.i.+ngton, D.C., October 21, 2009, online at http://www.bis.org/review/r091023e.pdf.

226 unilaterally doubling the Basel capital ratio: Christine Seib, "UBS Unveils 2bn Capital Raising and Warns of Second-Quarter Loss," Times (London), June 26, 2009, online at http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6580096.ece. Both UBS and Credit Suisse seem capable of meeting these demands without a breakup. See Sven Egenter, "Swiss Should Tighten Rules on UBS, CS Further-OECD," Reuters, January 15, 2010, online at http://blogs.reuters.com/financial-regulatory-forum/2010/01/15/swiss-should-tighten-rules-on-ubs-cs-further-oecd/.

227 Take Citigroup: Binyamin Applebaum, "Citi's Long History of Overreach, Then Rescue," Was.h.i.+ngton Post, March 11, 2009; Andrew Martin and Gretchen Morgenson, "Can Citigroup Carry Its Own Weight?" New York Times, November 1, 2009.

228 "We're very important . . .": Blankfein quoted in John Arlidge, "I'm Doing 'G.o.d's Work.' Meet Mr Goldman Sachs," Times (London), November 8, 2009, online at http://www.timesonline.co.uk/tol/news/world/us_and_americas/article6907681.ece.

228 reckless bets and obscene leverage: Kenneth Galbraith, The Great Crash, 1929 (Boston: Houghton Mifflin, 1954), 65-70; Matt Taibbi, "Inside the Great American Bubble Machine," Rolling Stone, July 2, 2009.

231 "When the capital development of a country . . .": Keynes, General Theory, 159.

233 Banis.h.i.+ng Bubbles: This section relies heavily on information contained in Nouriel Roubini, "Why Central Banks Should Burst Bubbles," International Finance 9 (2006): 87-107.

234 writings . . . of Alan Greenspan and Ben Bernanke: See, for example, Ben S. Bernanke and Mark Gertler, "Should Central Banks Respond to Movements in a.s.set Prices?" American Economic Review 91 (2001): 253-57; Alan Greenspan, "Risk and Uncertainty in Monetary Policy," speech to the annual meeting of the American Economic a.s.sociation, San Diego, Calif., January 3, 2004, online at http://www.federalreserve.gov/boarddocs/speeches/2004/20040103/default.htm.

236 Regulation T: Peter Fortune, "Margin Requirements, Margin Loans, and Margin Rates: Practice and Principles," Federal Reserve Bank of Boston New England Economic Review (2000): 19-44.

237 a.s.set-Based Reserve Requirements: Thomas I. Palley, "a.s.set-Based Reserve Requirements: Rea.s.serting Domestic Monetary Control in an Era of Financial Innovation and Instability," Review of Political Economy 16 (2004): 43-58; Michael Holz, "a.s.set-Based Reserve Requirements: A New Monetary Policy Instrument for Targeting Diverging Real Estate Prices in the Euro Area," Intervention 4 (2007): 331-51.

Chapter 10: Fault Lines.

243 ran ever larger current account deficits: Nouriel Roubini and Brad Setser, "The US as a Net Debtor: The Sustainability of the US External Imbalances," August 2004, online at http://pages.stern.nyu.edu/~nroubini/papers/Roubini-Setser-US-External-Imbalances.pdf.

244 "sovereign debt crisis": Roubini and Setser, Bailouts or Bail-Ins?

247 The debate over current account imbalances: Nouriel Roubini, "Global Imbalances: A Contemporary 'Rash.o.m.on' Saga," November 2006, online at http://www.centrecournot.org/pdf/conference9/Nouriel%20ROUBINI.pdf. This section draws on this paper.

248 "dark matter" explanation: Ricardo Hausmann and Federico Sturzenegger, "U.S. and Global Imbalances: Can Dark Matter Prevent a Big Bang?" November 13, 2005, online at http://www.cid.harvard.edu/cidpublications/darkmatter_051130.pdf.

248 This argument has been challenged: Roubini, "Global Imbalances: A Contemporary 'Rash.o.m.on' Saga," November 2006. See also Barry Eichengreen, "Global Imbalances: The New Economy, the Dark Matter, the Savvy Investor, and the Standard a.n.a.lysis," March 2006, online at http://www.econ.berkeley.edu/~eichengr/matter.pdf.

249 "global savings glut": Ben S. Bernanke, "The Global Savings Glut and the U.S. Current Account Deficit," Homer Jones Lecture, St. Louis, Mo., April 14, 2005, online at http://www.federalreserve.gov/boarddocs/speeches/2005/20050414/default.htm.

251 "exorbitant privilege": Giscard d'Estaing quoted in Richard A. Iley and Mervyn Lewis, Untangling the U.S. Deficit: Evaluating Causes, Cures and Global Imbalances (Northampton, Ma.s.s.: Edward Elgar, 2007), 106.

251 foreign investment in U.S. equities: James K. Jackson, "Foreign Direct Investment in the United States: An Economic a.n.a.lysis," CRS Report for Congress, August 15, 2008, online at http://www.fas.org/sgp/crs/misc/RS21857.pdf.

251 nonresidents now hold about half: Justin Murray and Marc Labonte, "Foreign Holdings of Federal Debt," CRS Report for Congress, November 28, 2005, online at http://www.housegov/berry/crs/RS22331.pdf .; Financial Management Service, Treasury Bulletin, December 2009, online at http://www.fms.treas.gov/bulletin/b2009_4.pdf.

253 Only 36 percent of China's gross domestic product: Richard Dobbs, Andrew Grant, and Jonathan Woetzel, "Unleas.h.i.+ng the Chinese Consumer," Newsweek, September 5, 2009, online at http://www.newsweek.com/id/215024.

253 "balance of financial terror": Lawrence H. Summers, "The United States and the Global Adjustment Process," Third Annual Stavros S. Niarchos Lecture, Inst.i.tute for International Economics, Was.h.i.+ngton, D.C., March 23, 2004.

255 Robert Triffin: See Robert Triffin, Gold and the Dollar Crisis: The Future of Convertibility (New Haven, Conn.: Yale University Press, 1960).

256 "Bretton Woods II": See, for example, Michael Dooley, David Folkerts-Landau, and Peter Garber, "An Essay on the Revised Bretton Woods System," National Bureau of Economic Research Working Paper no. 9971, September 2003.

256 this uneasy arrangement: See http://www.ustreas.gov/offices/international-affairs/economic-exchange-rates/pdf/Appendix%201.pdf; and Ye Xie and Anchalee Worrachate, "Dollar Reaches Breaking Point as Banks s.h.i.+ft Reserves," Bloomberg.com, October 12, 2009, online at http://www.bloomberg.com/apps/news?pid=20601087&sid=a4x9dIJsPn4U.

257 footsteps of Britain: Avinash Persaud, "When Currency Empires Fall," lecture at Gresham College, London, October 7, 2004, online at http://www.321gold.com/editorials/persaud/persaud101204.html; Barry Eichengreen, "Sterling's Past, Dollar's Future: Historical Perspectives on Reserve Currency Compet.i.tion," Tawney Lecture, Economic History Society, Leicester, U.K., April 10, 2005, online at http://www.econ.berkeley.edu/~eichengr/research/tawney_lecture2apr29-05.pdf.

258 The Almighty Renminbi?: See Nouriel Roubini, "The Almighty Renminbi," New York Times, May 13, 2009.

258 the renminbi or the yuan: The Chinese currency is called the renminbi, but the unit used for accounting purposes is called the yuan. For a concise explanation of the difference, see Paul Krugman, "What's in a Name?" online at http://krugman.blogs.nytimes.com/2009/10/23/whats-in-a-name-3/.

260 Zhou Xiaochuan: See Zhou Xiaochuan, "Statement on Reforming the International Monetary System," Council on Foreign Relations, March 23, 2009, online at http://www.cfr.org/publication/18916/.

261 "bancor": John Williamson, "Bancor and the Developing Countries: How Much Difference Would It Have Made?" in A. P. Thirlwall, ed., Keynes and Economic Development: The Seventh Keynes Seminar Held at the University of Kent at Canterbury, 1985 (New York: St. Martin's Press, 1987).

262 The IMF has . . . its own problems: Edwin M. Truman, "Rearranging IMF Chairs and Shares: The Sine Qua Non of IMF Reform," in Edwin M. Truman, ed., Reforming the IMF for the 21st Century (Was.h.i.+ngton, D.C.: Inst.i.tute for International Economics, 2006), 201-32.

Conclusion

266 "resist a response . . .": See, for example, Lloyd C. Blankfein, remarks to the Council of Inst.i.tutional Investors, April 2009, online at http://www2.goldmansachs.com/ideas/public-policy/1-compensation/lcb-speech-to-cii.html.

269 "this time is different": Reinhart and Rogoff, This Time Is Different.

274 "There is no possibility . . .": Minsky, Stabilizing an Unstable Economy, 370.

Outlook

278 recent study by Alan Blinder: Alan Blinder, "How Many U.S. Jobs Might Be Offshorable?" Centre for European Policy Studies Working Paper no. 142, March 2007, online at http://www.princeton.edu/~ceps/workingpapers/142blinder.pdf.

278 savings rates rose above 4 percent: Evan Tanner and Ya.s.ser Abdih, "Rebuilding U.S. Wealth," Finance and Development 46, no. 4 (December 2009): 23-35, online at http://www.imf.org/external/pubs/ft/fandd/2009/12/tanner.htm.

280 large stocks of public debt relative to their GDP: See, for example, charts at http://www.visualeconomics.com/gdp-vs-national-debt-by-country/.

282 "pesification": Roubini and Setser, Bailouts or Bail-Ins? 271-75.

283 shoulders a gross public debt: See, for example, Organisation for Economic Co-Operation and Development, "Economic Survey of j.a.pan 2009," September 30, 2009, online at http://www.oecd.org/doc.u.ment/37/0,3343,en_2649_34595_43783525_1_1_1_1,00.html.

284 "an economy of the people": Ian Bremmer and Nouriel Roubini, "Why j.a.pan Needs a Hatobama," Wall Street Journal, December 30, 2009, online at http://online.wsj.com/article/SB10001424052748704779704574553491570666698.html.

285 robust medium-term growth: International Monetary Fund, World Economic Outlook, July 8, 2009, online at http://www.imf.org/external/pubs/ft/weo/2009/update/02/index.htm.

285 The BRICs-Brazil, Russia, India, and China: Nouriel Roubini, "Another BRIC in the Wall?" Project Syndicate, October 15, 2009, online at http://www.project-syndicate.org/commentary/roubini18/English.

290 "mother of all carry trades": Nouriel Roubini, "Mother of All Carry Trades Faces an Inevitable Bust," Financial Times, November 1, 2009.

292 The threat of default now looms over advanced economies: Nouriel Roubini, "The Risky Rich," Project Syndicate, January 18, 2010, online at http://www.project-syndicate.org/commentary/roubini21/English.

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