Notes
The original reference source for most quotes in the text is provided where they are uncommon. In recent years, the availability of the Internet, online quotation databases, and websites and search engines (such as www.google.com) mean that many quotes are readily available online. In the interest of minimizing notes, where the quote is well known, specific sources have not been included. Quotes from films can be found at www.imdb.com
Prologue—Hubris
1. George W. Bush, Remarks on Signing the American Dream Downpayment Act (16 December 2003) (www.presidency.ucsb.edu/ws/index.php?pid=64935).
2. Quoted in Ron Chernow (1990) The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance, Touchstone Books, New York: 154.
3. Quoted in Don Thompson (2008) The $12 Million Stuffed Shark: The Curious Economics of Contemporary Art, Palgrave Macmillan, New York: 219.
4. Quoted in John Kay “A stakeholding society—what does it mean for business?” (1997) Scottish Journal of Political Economy 44/4: 425–36.
5. John Kenneth Galbraith (1975) The Great Crash 1929, Penguin Books, London: 187.
6. Quoted in “The pop star and the private equity firms” (26 June 2009) New York Times.
7. Edwin Lefèvre (2005) Reminiscences of a Stock Operator, John Wiley, New Jersey: 12.
8. F. Scott Fitzgerald (1973) The Great Gatsby, Penguin Books, London: 188.
9. Alain de Botton (2002) The Art of Travel, Penguin Books, London: 40.
10. Ibid: 57.
11. Quoted in Andrew Ross Sorkin “A ‘bonfire’ returns as heartburn” (24 June 2008) New York Times.
Chapter 1—Mirror of the Times
1. Michael Jackson “Money” from History—Past, Present And Future Book 1 (2009).
2. Adam Smith (1776) An Inquiry into the Nature and Causes of the Wealth of Nations: Book 1 Chapter 2 (http://geolib.com/smith.adam/won1-02.html).
3. Glyn Davies (2002) A History of Money: From Ancient Times to the Present Day, University of Wales Press, Cardiff: 13, 14.
4. Ibid: 18, 20.
5. Christian Oliver and Jan Cienski “North Korea offers ginseng to pay Czech debt” (10 August 2010) Financial Times.
6. Jack Wetherford (1997) The History of Money, Three Rivers Press, New York: Chapter 1.
7. Ibid: 20.
8. Quoted in Justyn Walsh (2009) Keynes and the Market, John Wiley & Sons, Chichester: 148.
9. William Jennings Bryan, Speech concluding debate on the Chicago Platform (9 July 1896), Democratic National Convention, Chicago, Illinois (http://en.wikisource.org/wiki/Cross_of_Gold_Speech).
10. Wetherford, The History of Money: 175–7.
11. Quoted in Brook Larmer “The price of gold” (January 2009) National Geographic: 42.
12. Ian Fleming (2009) Goldfinger, Penguin Books, London: 73.
13. John Updike (1982) Rabbit is Rich, Penguin Books, London: 201.
14. Adam Smith (2007) The Wealth of Nations, Cosmino, New York: 241.
15. John Kenneth Galbraith (1975) Money: Whence It Came, Whence It Went, Houghton Mifflin, Boston: 45.
16. Dylan Grice “Popular delusions: a Minskian roadmap to the next gold mania” (18 November 2009), Société Générale Cross Asset Research.
17. Walsh, Keynes and the Market: 167.
18. George Bernard Shaw (2005) The Intelligent Woman’s Guide to Socialism and Capitalism, Transaction Publishers, New Jersey: 263.
19. Quoted in Francis J. Gavin (2004) Gold, Dollars, and Power: The Politics of International Monetary Relations 1958–1971, University of North Carolina Press: 3.
20. Lewis Carroll (1871) Through the Looking Glass: Chapter 6 (www.sabian.org/Alice/lgchap06.html).
21. John Maynard Keynes (2010) The Economic Consequences of the Peace, Indo European Publishing, Los Angeles: 108.
22. Quoted in William Grieder (1987) Secret of the Temple: How the Federal Reserve Runs The Country, Simon & Schuster, New York: 231.
23. Alan Greenspan “Gold and economic freedom” (1966) The Objectivist; reprinted in Ayn Rand (1986) Capitalism: The Unknown Ideal, Signet, New York (www.321gold.com/fed/greenspan/1966.html).
24. Galbraith, Money: Whence it Came, Where it Went: 15.
25. University of Virginia Library Electronic Text Center, Thomas Jefferson Digital Archive (http://etext.lib.virginia.edu/jefferson/quotations/jeff1325.html).
26. John Maynard Keynes (2006) The General Theory of Employment, Interest and Money, Atlantic Books, New Delhi: 268.
27. Quoted in Niall Ferguson (2008) The Ascent of Money, Allen Lane, London: 85.
28. Paul Seabright (2004) The Company of Strangers: A Natural History of Economic Life, Princeton University Press, New Jersey.
29. Quoted in Grieder, Secret of the Temple: 234, 236.
30. Quoted in Wetherford, The History of Money: 137–9.
31. William Shakespeare (1599), Julius Caesar: Act I Scene ii (www.readprint.com/chapter-7839/Julius-Caesar-William-Shakespeare).
32. Robert Hughes (1980) The Shock of the New—Art and the Century of Change, British Broadcasting Corporation, London: 398; Leonard Shilan (1991) Art and Physics: Parallel Visions in Space, Time and Light, Quill William Morrow, New York: 270.
Chapter 2—Money Changes Everything
1. Quoted in Niall Ferguson (2008) The Ascent of Money, Allen Lane, London: 85.
2. F. Scott Fitzgerald (1926) The Rich Boy (http://en.wikiquote.org/wiki/Talk:F._Scott_Fitzgerald).
3. Robert Frank (2007) Richistan: A Journey through the 21st Century Wealth Boom and the Lives of the New Rich, Crown, New York.
4. Robert J. Gordon and Ian Dew-Becker “Where did the productivity growth go? Inflation dynamics and the distribution of income” (December 2005), National Bureau of Economic Research Working Paper 11842.
5. Quoted in Louis Uchitelle “The wage that meant middle class” (20 April 2008) New York Times.
6. John Kenneth Galbraith (1981) A Life In Our Times, André Deutsch, London: 122.
7. John Kenneth Galbraith (2001) “Economics and the quality of life” in The Essential Galbraith, Houghton Mifflin, New York: 103, 104.
8. Alan Greenspan (2007) The Age of Turbulence—Adventures in a New World, Allen Lane, London: 270, 271.
9. Quoted in Zygmunt Bauman (2007) Liquid Times: Living in an Age of Uncertainty, Polity Press, Cambridge: 105.
10. Suketu Mehta “What they hate about Mumbai” (28 November 2008) New York Times.
11. Quoted in Doug Wakefield “Fear and perception—the speed at which investor sentiment can change” (1 November 2007) (www.marketoracle.co.uk/Article2634.html).
12. James Quinn “The shallowest generation” (3 November 2008) (www.financialsense.com/editorials/quinn/2008/1103.html); based on data from the U.S. Census Bureau.
13. John Updike (1996) Rabbit: Rest, Penguin Books, London: 7.
14. Peter Watson (2001) A Terrible Beauty: The People and Ideas that Shaped the Modern Mind—A History, Phoenix Press, London: 594.
15. Robert Frank “A risky profile” (4 March 2007) Wall Street Journal.
16. Quoted in Norman Berlin (1998) “The late plays,” in Michael Mannheim (ed.) The Cambridge Companion to Eugene O’Neill, Cambridge University Press, Cambridge: 82.
17. Quoted in John Hills, John Ditch, and Howard Glennerster (1994) Beveridge and Social Security: An International Retrospective, Oxford University Press, Oxford: 10.
18. Quoted in Robin Blackburn (2002) Banking on Death, Verso, London: 31.
19. Quoted in Robert Winnett and Myra Butterworth “Savers told to stop moaning and start spending” (27 September 2010) Daily Telegraph.
20. Thomas Friedman (1999) The Lexus and the Olive Tree, Random House, New York: 58.
Chapter 3—Business of Business
1. Lawrence E. Mitchell (2007) The Speculation Economy: How Finance Triumphed Over Industry, Berrett-Koehler Publishing Inc., San Francisco: 13–15, 95.
2. Sir W. S. (William Schwenck) Gilbert “Songs of a Savoyard” (http://infomotions.com/etexts/gutenberg/dirs/etext97/svyrd10.htm).
3. Tom Hadden (1972) Company Law and Capitalism, Weidenfeld & Nicolson, London: 14.
4. Oscar Wilde (1965) The Works of Oscar Wilde, Spring Books, London: 93.
5. Betsy Morris “Tearing up the Jack Welch playbook” (7 November 2006) Fortune (www.CNNmoney.com).
6. The term was coined by Tony Golding, see (2001) The City: Inside the Great Expectations Machine, FT Prentice Hall, London.
7. Francesco Guerrera “Welch condemns share price focus” (12 March 2009) Financial Times.
8. Frank Partnoy (2003) Infectious Greed: How Deceit and Risk Corrupted the Financial Markets, Henry Holt, New York: 298–9.
9. “The Hondoyota GT89th” (12 September 1987) International Financing Review: 690.
10. “Mystery after China copper trader vanishes following heavy losses” (15 November 2005) Fortune.
11. Larry McDonald (2009) A Colossal Failure of Common Sense, Ebury Press, London: 165.
12. Bethany McLean and Peter Elkind (2003) The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron, Penguin Books, New York: 39.
13. Alan Greenspan (2008) The Age of Turbulence, Allen Lane, London: 360.
14. Ibid: 472.
15. Andrew Smithers and Stephen Wright (2000) Valuing Wall Street—Protecting Wealth in Turbulent Markets, McGraw-Hill, Illinois.
16. Institutional Investor (4 February 1987). Reproduced with permission from BP.
17. Satyajit Das “Key trends in Treasury management” (May 1992) Corporate Finance: 39.
18. Ron Chernow (1993) The Warburgs, Vintage Books, New York: 647–54.
19. Ibid: 653.
20. John Cassidy (2002) dot.con, Perennial, New York: 261–4.
21. This discussion of GE draws on Julie Froud, Sukhdev Johal, Adam Leaver, and Karel Williams (2006) Financialization and Strategy: Narrative and Numbers, Routledge, London: Part II, Chapter 3, 299–368.
22. The Economist (2 May 2002).
23. Robert Slater (2003) 29 Leadership Secrets from Jack Welch, McGraw–Hill, New York: 66.
24. Ibid: 171.
25. Quoted in John Plender “When clever insiders are pitted against naive outsiders” (20 April 2010) Financial Times.
26. Quoted in Berkshire Hathaway Letter to Shareholders (1995).
27. Maryann Keller (1989) Rude Awakening: The Rise, Fall, and Struggle for Recovery of General Motors (www.generalwatch.com/quotes.cfm).
28. Quoted in Niall Ferguson (2008) The Ascent of Money, Allen Lane, London: 89.
Chapter 4—Money for Sale
1. Quoted in John Lanchester (2010) Whoops! Why Everyone Owes Everyone and No One Can Pay, Allen Lane, London: 161.
2. Walter Bagehot (2006) Lombard Street: A Description of the Money Market, Cosimo, New York: 270.
3. Ron Chernow (1990) The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance, Touchstone Books, New York: 20.
4. David Gaffney (2008) Never Never, Tindal Street Press, Birmingham: 35.
5. Chernow, The House of Morgan: 612.
6. James Grant (1993) “Why not platinum?” in Minding Mr. Market: Ten Years on Wall Street with Grant’s Interest Rate Observer, Times Books, New York: 152–4.
7. Adapted from a saying by columnist Earl Wilson.
8. Jonathan A. Knee (2007) The Accidental Investment Banker, John Wiley, Chichester: 49.
9. John Cassidy (2002) dot.com, Perennial, New York: 340.
10. John Maynard Keynes (2006) The General Theory of Employment, Interest and Money, Atlantic Books, New Delhi: 176.
11. John Kenneth Galbraith (1993) A Short History of Financial Euphoria, Viking Books, New York: 19.
12. “A special report on the future of finance” (24 January 2009) The Economist: 17.
Chapter 5—Yellow Brick Road
1. Alfred Marshall (1920) Principles of Economics, Macmillan, London: 271.
2. Patrick Hosking and Suzy Jagger ‘“Wake up, gentlemen’, world’s top bankers warned by former Fed chairman Volcker” (9 December 2009) The Times.
3. Michael Lewis (1989) Liar’s Poker: Two Cities, True Greed, Hodder & Stoughton, London: 182–3.
4. Philip Augar (2000) The Death of Gentlemanly Capitalism, Penguin Books, London: 76.
5. Ibid: 3.
6. Philip Augar (2009) Chasing Alpha: How Reckless Growth and Unchecked Ambition Ruined The City’s Golden Decade, Bodley Head, London: 4.
7. Margaret Pagano “A matchless talent pool” (14 June 1999) Financial News; Tony Golding (2003) The City: Inside the Great Expectations Machine, FT Prentice Hall, London: 2.
8. William J. Bernstein (2009) A Splendid Exchange: How Trade Shaped the World, Grove Press, New York: 105, 106.
9. New York Times (20 December 2007); Kevin Phillip (2009) Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism, Scribe Publications, Melbourne: 191.
10. http://thinkexist.com/quotes/federico_garcia_lorca/2.html
11. William H. McNeill (1998) Plagues and People, Anchor Books, New York: 130.
12. Bernstein, A Splendid Exchange: 287.
13. David Roche and Bob McKee (2008) New Monetarism, Independent Strategy Publications, London.
14. Martin Hutchinson “The return of Thomas Mun” (27 July 2009) (www.prudentbear.com/index.php/thebearslairview?art_id=10254).
15. Andy Warhol (2007) The Philosophy of Andy Warhol, Penguin Books, London: 229.
16. Niall Ferguson (2008) The Ascent of Money, Allen Lane, London: 335–9.
17. Piers Brendon (2000) The Dark Valley: A Panorama of the 1930s, Pimlico, London: 222.
18. “Impact of US financial crisis will be felt around world: Chinese PM” (28 September 2008), AFP.
19. Robert A. Mundell and Paul J. Zak (2003) Monetary Stability and Economic Policy: A Dialog Between Leading Economists, Edward Elgar Publishing, Cheltenham: 136.
20. Jeffrey Thompson Schnapp and Matthew Tiews (2006) Crowds, Stanford University Press, California: 273.
21. John Maynard Keynes (2006) The General Theory of Employment, Interest and Money, Atlantic Books, New Delhi: 142.
Chapter 6—Money Honey
1. Thomas A. Bass “The future of money” (October 1996) Wired 4.10.
2. Robert Sobel (1993) Dangerous Dreamers: The Financial Innovators from Charles Merrill to Michael Milken, John Wiley, New York: 221.
3. Donald Rumsfeld (22 September 2002) quoted in Hart Seely (2005) Pieces of Intelligence: The Existential Poetry of Donald H. Rumsfeld, Free Press, New York: 60.
4. www.youtube.com/results?search_query=two+johns+subprime&aq=1
5. Julian Lee “TV news is not factual program, says regulator” (12 February 2010) Sydney Morning Herald.
6. John Pilger “The invisible government” (16 June 2007) (www.inminds.co.uk/article.php?id=10196).
7. http://en.wikipedia.org/wiki/Louis_Rukeyser
8. Chrystia Freeland “Lunch with the FT: Jim Cramer” (22 February 2008) Financial Times.
9. Sean Collins, a senior producer with NPR News, quoted in Dan Gardner (2008) Risk—The Science and Politics of Fear, Virgin Books, London: 200.
10. Donald Rumsfeld (28 February 2003) quoted in Hart Seely (2005) Pieces of Intelligence: The Existential Poetry of Donald H. Rumsfeld, Free Press, New York: 57.
11. Ibid: 23.
12. Richard Feynman in a letter to Armando Garcia Jr (11 December 1985).
13. Attributed to Albert Einstein.
14. Attributed to Winston Churchill.
15. On CBS in October 2008, responding to a question to name another Supreme Court decision, she disagreed with other than Roe v. Wade, which legalized abortion in the USA.
16. “Network effects” (17 December 2009) The Economist.
17. Paul J. Bolster and Emery A. Trahan “Investing in mad money: price and style effects” (Spring 2009) Financial Services Review.
18. Robert Pari (1987) “Wall Street Week recommendations: yes or no?” Journal of Portfolio Management 14: 74–6; Jess Beltz and Robert Jennings (1997) “Recommendations: trading activity and performance: ‘Wall Street Week with Louis Rukeyser,”’ Review of Financial Economics 6: 15–27.
19. William J. Bernstein (1996) “The basics of investing and portfolio theory” (www.efficientfrontier.com).
20. Devin Leonard “Treasury’s got Bill Gross on speed dial” (20 June 2009) New York Times.
21. Ibid.
22. Louis Rukeyser (26 July 2002) Wall Street Week, CNBC.
23. Peter Applebome “Contemplating the boobs we were” (27 December 2008) New York Times.
24. Kevin Kelly “Prophets of boom” (September 1999) Wired.
25. Ibid: 151.
26. John Cassidy (2002) dot.con, Perennial, New York: 254–5.
Chapter 7—Los Cee-Ca-Go Boys
1. Milton Friedman “Schools: Chicago” (Autumn 1974) University of Chicago Magazine 11–16: 11.
2. P.J. O’Rourke (1998) Eat The Rich, Atlantic Monthly Press, New York: 123.
3. Adam Smith (1776) An Inquiry into the Nature and Causes of the Wealth of Nations: Book 1 Chapter 2 (http://geolib.com/smith.adam/won1-02.html).
4. John Maynard Keynes (1973) The General Theory of Employment, Interest and Money in The Collected Writings of John Maynard Keynes, Macmillan, London: 321, 322.
5. Daniel Yergin and Joseph Stanislaw (2002) The Commanding Heights: The Battle for the World Economy, Touchstone Books, New York: 125.
6. Quoted in Kai Bord and Martin J. Sherwin (2006) American Prometheus: The Triumph and Tragedy of J. Robert Oppenheimer, Vintage Books, New York: 62.
7. Upton Sinclair (1965) The Jungle, Dover Publications: 32.
8. Quoted in Peter Watson (2000) A Terrible Beauty: The People and Ideas that Shaped the Modern Minds—A History, Phoenix Press, London: 81.
9. Philip Mirowski (2002) Machine Dreams: Economics Becomes a Cyborg Science, Cambridge University Press, Cambridge: 203, 204.
10. Johan van Overtveldt (2007) The Chicago School: How the University of Chicago Assembled the Thinkers Who Revolutionised Economics and Business, Agate Books, Chicago: 9.
11. Ibid: 91.
12. Justin Fox (2009) The Myth of the Rational Market: A History of Risk, Reward and Delusion on Wall Street, Harper Business, New York: 252.
13. van Overtveldt, The Chicago School: 85–7.
14. Pierre Bayard (2007) How to Talk About Books You Haven’t Read, Bloomsbury, London.
15. Yergin and Stanislaw, The Commanding Heights: 89. The quote is derived from John Ranelagh’s book, (1991) Thatcher’s People: an insider’s account of the politics, the power, and the personalities, Harper Collins, London. It is not verifiable but is likely to be true.
16. Quoted in “Lexington: the Obama cult” (25 July 2009) The Economist.
17. Yergin and Stanislaw, The Commanding Heights: 346.
18. Ibid: 333.
19. Quoted in Wolfgang Munchau “Recession is not the worst possible outcome” (6 July 2008) Financial Times.
20. James Grant (2008) Mr. Market Miscalculates: The Bubble Years and Beyond, Axios Press, Mount Jackson: 298, 299.
21. Ron Chernow (1993) The Warburgs, Vintage Books, New York: 393.
22. Quoted in Stephen Moore “Atlas Shrugged: from fiction to fact in 52 years” (9 January 2009) Wall Street Journal.
23. Niall Ferguson (2008) The Ascent of Money: A Financial History of the World, Allen Lane, London: 214.
24. van Overtveldt, The Chicago School: 60.
25. Yergin and Stanislaw, The Commanding Heights: 132, 133.
26. Quoted in Ferguson, The Ascent of Money: 65.
27. Quoted in Emmanuel Tumusiime-Mutebile (Governor of the Bank of Uganda) “Partnering with the media for effective communication and quality reporting”, Speech at the Bank of Uganda/Media Top executives’ dialogue (6 November 2009), Kampala (www.bis.org/review/r100120e.pdf).
28. Chernow, The Warburgs: 132–40.
29. Alan Greenspan (2007) The Age of Turbulence: Adventures in a New World, Allen Lane, London: 104–10.
30. The actual statement is: “The Federal Reserve...is in the position of the chaperone who has ordered the punch bowl removed just as the party was really warming up.” William McChesney Martin Jr, Address to New York Group of the Investment Bankers Association of America (19 October 1955), Waldorf-Astoria Hotel, New York.
31. Ben S. Bernanke, Remarks at the Conference to Honor Milton Friedman (8 November 2002), University of Chicago, Chicago, Illinois.
32. Frank Knight “What is truth in economics?” (1940) Journal of Political Economy.
Chapter 8—False Gods, Fake Prophecies
1. Quoted in Justin Fox (2009) The Myth of the Rational Market: A History of Risk, Reward and Delusion on Wall Street, Harper Business, New York: 79.
2. Donald MacKenzie (2008) An Engine, Not a Camera: How Financial Models Shape Markets, MIT Press, Cambridge, Massachusetts: 5.
3. Ibid: 71.
4. Peter Bernstein (2005) Capital Ideas: The Improbable Origins of Modern Wall Street, John Wiley, New Jersey: 60.
5. Ibid: 22.
6. MacKenzie, An Engine, Not a Camera: 62.
7. Quoted in ibid: 50.
8. Quoted in Leonard Silk “The peril behind the takeover boom” (29 December 1985) New York Times.
9. Fox, The Myth of the Rational Market: 98, 99.
10. Johan van Overtveldt (2007) The Chicago School: How the University of Chicago Assembled the Thinkers Who Revolutionised Economics and Business, Agate Books, Chicago: 271.
11. Bernstein, Capital Ideas: Chapter 11.
12. Ibid: 227.
13. MacKenzie, An Engine, Not a Camera: 136.
14. Bernstein, Capital Ideas: 143.
15. Quoted in ibid: 48.
16. MacKenzie, An Engine, Not a Camera: 79.
17. Ibid: 79, 80.
18. Ibid: 80.
19. Ibid: 83, 84.
20. Joel Stern “Let’s abandon earnings per share” (18 December 1972) Wall Street Journal.
21. MacKenzie, An Engine, Not a Camera: 254.
22. Barry Schachter “An irreverent guide to value at risk” (August 1997) Financial Engineering News 1/1 (www.debtonnet.com/newdon/files/marketinformation/var-guide.asp).
23. Quoted in Fox, The Myth of the Rational Market: 191.
24. Quoted in ibid: 260.
25. Paul De Grauwe, Leonardo Iania and Pablo Rovira Kaltwasser “How abnormal was the stock market in October 2008?” (11 November 2008) (www.eurointelligence.com/article.581+M5f21b8d26a3.0.html).
26. Stephen Hawking, during a 1994 debate with Roger Penrose at the Isaac Newton Institute for Mathematical Sciences, University of Cambridge; in Stephen Hawking and Roger Penrose (1996) The Nature of Space and Time, Princeton University Press, New Jersey: 26.
27. Fischer Black “Noise” (1986) Journal of Finance 41: 529–43.
28. John Maynard Keynes (2006) The General Theory of Employment, Interest and Money, Atlantic Books, New Delhi: 140.
29. Alan Greenspan (2007) The Age of Turbulence: Adventures in a New World, Allen Lane, London: 124.
30. Fox, The Myth of the Rational Market: 41.
31. MacKenzie, An Engine, Not a Camera: 95.
32. Ibid: 8–12.
33. van Overtveldt, The Chicago School: 67.
34. Dan Gardner (2008) Risk—The Science and Politics of Fear, Virgin Books, London: 53.
35. van Overtveldt, The Chicago School: 291.
36. Quoted in Greenspan, The Age of Turbulence: 55.
37. Quoted in van Overtveldt, The Chicago School: 172.
38. Quoted in Fox, The Myth of the Rational Market: 269.
39. Daniel Altman “Managing Globalization: Q & A with Joseph Stiglitz” (11 October 2006) The International Herald Tribune.
40. MacKenzie, An Engine, Not a Camera: 24.
41. Kurt Vonnegut Jr (1963) Cat’s Cradle, Holt, Rhinehart & Winston, New York: 75.
42. “Roundtable: the limits of VAR” (April 1998) Derivatives Strategy.
43. John Maynard Keynes (1991) Essays in Persuasion, W.W. Norton, New York: Chapter 5.
44. Quoted in Don Thompson (2008) The $12 Million Stuffed Shark: The Curious Economics of Contemporary Art, Palgrave Macmillan, New York: 53.
Chapter 9—Learning to Love Debt
1. “Congoleum Corporation (abridged)” (2008), Harvard Business School Case Study 9-287-029, Harvard Business School Publishing, Boston, MA.
2. Boston Globe (20 August 1986) quoted in “Congoleum Corporation (abridged)” Teaching Notes (1997), Harvard Business School Case Study 9-292-081, Harvard Business School Publishing, Boston, MA: 5.
3. Robert Sobel (1993) Dangerous Dreamers: The Financial Innovators from Charles Merrill to Michael Milken, John Wiley, New York: 40.
4. Quoted in George Anders (1992) Merchants of Debt: KKR and the Mortgaging of American Business, Basic Books, New York: 21.
5. John Brooks (1987) The Takeover Game, Truman Talley Books, New York: 29.
6. Anders, Merchants of Debt: 112.
7. Ibid: 148.
8. Ibid: 105.
9. Ibid: 191.
10. Ibid: 148, 152–5.
11. Michael C. Jensen “The modern Industrial Revolution, exit, and the failure of internal control systems” (1993) Continental Bank Journal of Applied Corporate Finance: 4–23.
12. Anders, Merchants of Debt: xix.
13. Quoted in George B. Baker and George David Smith (1998) The New Financial Capitalists: Kohlberg Kravis Roberts and the Creation of Corporate Value, Cambridge University Press, New York: 90.
14. Anders, Merchants of Debt: 41.
15. If Japan can ... Why can’t we? (1980), TV show introducing the methods of W. Edwards Deming to American managers, produced by Clare Crawford-Mason, NBC (http://en.wikipedia.org/wiki/If_Japan_Can..._Why_Can’t_We%3F).
16. Quoted in Anders, Merchants of Debt: 162.
17. Quoted in ibid: 35.
18. Quoted in Baker and Smith, The New Financial Capitalists: 204.
19. Philipp Meyer (2009) American Rust, Simon & Schuster, London: 348.
20. Quoted in Anders, Merchants of Debt: 74.
21. Quoted in Baker and Smith, The New Financial Capitalists: 82.
22. Connie Bruck (1988) The Predators’ Ball: How Michael Milken and his Junk Bond Machine Staked the Corporate Raiders, Simon & Schuster, New York: 37.
23. Benjamin J. Stein (1992) A License to Steal: The Untold Story of Michael Milken and the Conspiracy to Bilk the Nation, Simon & Schuster, New York: 24, 25.
24. Sobel, Dangerous Dreamers, John Wiley, New York: 99.
25. Stein, A License to Steal: Chapter 9.
26. Sobel, Dangerous Dreamers: 187–91.
27. Bruck, The Predators’ Ball: 29.
28. Quoted in Sobel Dangerous Dreamers: 79.
29. Bryan Burroughs and John Helyar (1990) Barbarians at the Gate: The Fall of RJR Nabisco, Harper & Row, New York.
30. Bruck, The Predators’ Ball: 66.
31. Quoted in Sobel, Dangerous Dreamers: 146.
32. Ibid: 90.
33. Bruck, The Predators’ Ball: 197.
34. Ibid: 15.
35. Ibid: 66.
36. Ibid: 295.
37. Sobel, Dangerous Dreamers: 124.
38. Quoted in Ron Chernow (1990) The House of Morgan, Simon & Schuster, New York: 693.
39. Sobel, Dangerous Dreamers: 105.
40. Quoted in ibid: 120.
41. Quoted in ibid: 168.
42. Alan Greenspan, Statement before the Senate Finance Committee (26 January 1989).
43. Michael Jensen “Corporate control and the politics of finance” (Summer 1991) Journal of Applied Corporate Finance 4/2.
44. Bruck, The Predators’ Ball: 254.
45. James B. Stewart (1992) Den of Thieves, Simon & Schuster, New York: 261.
46. Sobel, Dangerous Dreamers: 2.
47. Stein, A License to Steal: 24, 25.
48. Bruck, The Predators’ Ball: 266.
Chapter 10—Private Vices
1. Robert Sobel (1993) Dangerous Dreamers: The Financial Innovators from Charles Merrill to Michael Milken, John Wiley, New York: 191.
2. http://resident-alien.blogspot.com/2007/07/public-v-private-equity.html
3. Edward Chancellor with Lauren Silva “The Wizards of Oz: not making sense of Macquarie’s business model” (1 June 1007) Breaking Views; Gideon Haigh “Who’s afraid of Macquarie Banks? The story of the millionaire’s factory” (July 2007) The Monthly; Bethany McLean “Would you buy a bridge from this man?” (18 September 2007) Fortune.
4. Chancellor with Silva, “The Wizards of Oz.”
5. “The uneasy crown: the buy-out business is booming, but capitalism’s new kings are attracting growing criticism” (8 February 2007) The Economist.
6. Connie Bruck (1988) The Predators’ Ball: How Michael Milken and his Junk Bond Machine Staked the Corporate Raiders, Simon & Schuster, New York: 261–2.
7. Steven Kaplan and Antoinette Schoar “Private equity performance: returns, persistence and capital flows” (August 2005) Journal of Finance.
8. Ludovic Phalippou, Oliver Gottschalg and Maurizio Zollo (2007) “Performance of private equity funds: another puzzle,” Society for Financial Studies Working Paper.
9. Martin Arnold “Buy-out study queries performance” (25 July 2010) Financial Times.
10. “The uneasy crown” (8 February 2007) The Economist.
11. Andrew Capon “Endgame for private equity” (May 2009) Euromoney: 72.
12. “Blackstone’s IPO: bigger than Rod” (22 March 2007) The Economist.
13. Quoted in Henny Sender and Monica Langley “Buyout mogul: How Blackstone’s chief became $7 billion man—Schwarzman says he’s worth every penny,” (13 June 2007) Wall Street Journal.
14. http://media.washingtonpost.com/wp-srv/business/documents/conwaymemo.pdf
15. Andrew Ross Sorkin “A financier peels back the curtain” (21 September 2009) New York Times.
16. “Citicorp defiant over EMI lawsuit” (13 December 2009) Financial Times.
17. Quoted in Sorkin “A financier peels back the curtain.”
Chapter 11—Dice with Debt
1. Robert Mundell, Presentation at Conference on Globalization and Problems of Development (2–6 March 2008), Havana, Cuba.
2. Please note that all numbers here are rounded to whole numbers, as a company either defaults or it does not.
3. “Felix Salmon recipe for disaster: the formula that killed Wall Street” (23 February 2009)” Wired; Sam Jones “Of couples and copulas” (24 April 2009) Financial Times.
4. “Felix Salmon recipe for disaster.”
5. www.wib.org/conferences__education/past_programs/2008_bond_university/08_index.html
6. Charles Gasparino (2009) The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System, Harper Business, New York: 64.
7. Kevin Commins “The haunted world of mortgage-backeds” (July 1987) Intermarket: 22.
8. James Grant (2008) Mr. Market Miscalculates: The Bubble Years and Beyond, Axios Press, Mount Jackson: 326.
9. Quoted in Rebecca Solnit (2000) Wanderlust: A History of Walking, Penguin Books, New York: 256.
10. Adam Smith (2007) Wealth of Nations, Cosimo, New York: 113.
11. Alan Greenspan (2007) The Age of Turbulence: Adventures in a New World, Allen Lane, London: 230.
12. Jo Becker, Sheryl Gay Stolberg and Stephen Labaton “The reckoning—White House philosophy stoked mortgage bonfire” (20 December 2008) New York Times.
13. Ben Bernanke “Modern risk management and banking supervision” (12 June 2006), Remarks at the Stonier Graduate School of Banking, Washington.
14. Alan Greenspan “Understanding household debt obligations” (23 February 2004), Address to Credit Union National Association 2004 Governmental Affairs Conference, Washington DC.
15. Joe Bageant (2009) Deer Hunting with Jesus: Dispatches from America’s Class War, Scribe Publications, Melbourne: 99.
16. Gretchen Morgenson “How a whistle-blower conquered Countrywide” (19 February 2011) New York Times.
17. www.thisamericanlife.org/radio-archives/episode/355/the-giant-pool-of-money
18. Gasparino, The Sellout: 162.
19. Richard Bitner (2008) Confessions of a Sub-prime Lender: An Insider’s Tale of Greed, Fraud and Ignorance, Icon Books, London: 41.
20. www.thisamericanlife.org/radio-archives/episode/355/the-giant-pool-of-money
21. Bob Ivry “Deal with devil funded Carrera crash before sub-prime shakeout” (18 December 2007) New York Times.
Chapter 12—The Doomsday Debt Machine
1. The term “shadow banking system” is attributed to Paul McCulley of PIMCO, who coined it at the 2007 Jackson Hole conference; see Paul McCulley “Teton reflections” (July/August 2007), Pimco Global Central Banking Focus.
2. Roger Merrit, Ian Linnell, Robert Grossman and John Shiavetta “Hedge funds: an emerging force in global credit markets” (18 July 2005), Fitch Ratings, New York.
3. Speech at the Lord Mayor’s Banquet for Bankers and Merchants of the City of London (17 June 2009), Mansion House, London.
4. Gretchen Morgenson and Louise Story “Bundled bad debt, bet against it and won” (23 December 2009) New York Times.
5. Based on Yves Smith (2010) ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism, Palgrave Macmillan, New York: 257–61. It is assumed that 80 percent of the underlying loans were subprime, 80 percent of the Magnetar transactions were synthetic, and 20 percent of subprime component of these CDOs were 2006 vintage BBB subprime tranches. This leads to the following estimate: ($30 billion × 80% × 80% × 20%) / 3% = $128 billion. See also Jesse Eisinger and Jake Bernstein “The Magnetar trade: how one hedge fund helped keep the bubble going” (9 April 2010) ProPublica.
6. Morgenson and Story “Bundled bad debt.”
7. Andrew Ross Sorkin “A crowd with pity for Goldman” (26 April 2010) New York Times.
8. John Kenneth Galbraith (1975) The Great Crash 1929, Penguin Books, London: 90.
9. Michael Lewis (2010) The Big Short: Inside the Doomsday Machine, Allen Lane, London: 67.
10. Henny Sender and Francesco Guerrera “Goldman criticised $1bn loan product” (27 April 2010) Financial Times.
11. Nicole Bullock and Telis Demos “It pays to think before you click” (21 July 2010) Financial Times.
12. Steve Eder and Karey Wutkowski “Goldman’s ‘fabulous’ fab’s conflicted love letters” (26 April 2010), Reuters; Patrick Jenkins and Francesco Guerrera “Goldman versus the regulators” (18 April 2010) Financial Times.
13. Quoted in Louise Story “The generals who ended Goldman’s war” (16 July 2010) New York Times.
14. Quoted in Gretchen Morgenson and Louise Story “Clients worried about Goldman’s dueling goals” (18 May 2010) New York Times.
15. Eric Dash and Julie Cresswell “The reckoning: CitiGroup pays for a rush to risk” (23 November 2008) New York Times.
16. The phrase “riverboat gambler’ is used to describe Tommy Maheras, a senior Citi executive in charge of this activity, in Charles Gasparino (2009) The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System, Harper Business, New York.
17. Gasparino, The Sellout: 195.
18. Shareholder Report on UBS Writedowns (18 April 2008).
19. Walter Bagehot (2004) Lombard Street: A Description of the Money Market, Kessenger Publishing, Montana: 111.
20. “Quotes from US financial crisis commission hearing” (13 January 2010), Reuters.
21. http://jameshowardkunstler.typepad.com/clusterfuck_nation/2005/10/no_direction_ho.html
22. “The run on the Rock” (24 January 2008) House of Commons Treasury Select Committee 1: 67.
23. Gasparino, The Sellout: 318.
24. Ibid: 318, 319.
25. McKinsey Global Institute “Mapping the global capital markets—third annual report” (January 2007).
26. Gillian Tett “Should Atlas still shrug? The threat that lurks behind the growth of complex debt deals” (15 January 2007) Financial Times.
27. David A. Skeel Jr and Frank Partnoy “The promise and perils of credit derivatives” (2007) University of Cincinnati Law Review 75: 1019.
28. www.derivativesstrategy.com/magazine/archive/1999/0899qa.asp
29. Ian Kerr referred to them as Chernobyl decay obligations (www.efinancialnews.com/homepage/content/2448260317).
Chapter 13—Risk Supermarkets
1. Peter L. Bernstein (1996) Against The Gods: The Remarkable Story of Risk, John Wiley, New York: 1.
2. Jorge Luis Borges (1999) Collected Fiction, Penguin Books, New York: 105.
3. Emanuel Derman (2004) My Life As A Quant: Reflection on Physics and Finance, John Wiley, New Jersey.
4. Berkshire Hathaway Letter to Shareholders (2002).
5. Martin Z. Braun, Darrell Preston and Liz Willen “The banks that fleeced Alabama” (September 2005) Bloomberg Markets; William Selway and Martin Z. Braun “The fleecing of Alabama: the bills come due” (July 2008) Bloomberg Markets.
6. In a Dutch auction, the auctioneer begins with a high asking price that is lowered until some bidder accepts the auctioneer’s price, or a predetermined reserve price (the seller’s minimum acceptable price) is reached. The winning bidder pays the last announced price. The name derives from its use during the Dutch tulip bubble.
7. Alan Greenspan “Finance: United States and global” (22 April 2002), Institute of International Finance, New York, New York (via videoconference).
8. Joe Mysak “Moody’s, S&P help push Alabama county to insolvency” (4 March 2008), Bloomberg.
9. Michael McDonald, John Lauerman, and Gillian Wee “Harvard swaps are so toxic even Summers won’t explain” (18 December 2009), Bloomberg.
10. Ibid; John Lauerman and Michael McDonald “Harvard’s bet on interest rate rise cost $500 million to exit share business” (17 October 2009), Bloomberg.
11. Quoted in Philip Kennicott “The man in the ivory tower—Harvard’s Lawrence Summers is a study in controversy” (15 April 2005) The Washington Post.
12. Stephen Bartholomeusz “Sons of Gwalia’s gold hedging had big holes” (4 September 2004) Sydney Morning Herald; “A cautionary tale: how sons of Gwalia fell” (June 2006) Asia Risk.
13. Randall Dodd “Exotic derivatives losses in emerging markets: questions of suitability, concerns for stability” (July 2009), IMF Working Paper.
14. Tom Mitchell and Justine Lau “Citic Pacific badly scarred by its currency speculation” (22 October 2008) Financial Times.
15. Berkshire Hathaway Letter to Shareholders (2002).
16. Make Markets be Markets Conference (3 March 2010), New York City.
Chapter 14—Financial Arms Race
1. G.K. Chesterton (2009) Orthodoxy, BiblioLife: 131.
2. “Former NAB traders jailed” (4 July 2006) Sydney Morning Herald.
3. Adam Sage “SocGen trader’s fear of being caught and jailed in Paris” (11 February 2008) The Times.
4. Ben Hall “Former trader: SocGen says he got ‘a bit carried away”’ (6 February 2008) Financial Times.
5. Nelson D. Schwartz and Jad Mouawad “A French style of capitalism is now stained” (28 January 2008) New York Times.
6. “Crowds and cameras greet Kerviel’s day in court” (8 June 2010) Financial Times.
7. Scheherazade Daneshkhu “Top guns to trade legal blows in SocGen clash” (6 June 2010) Financial Times.
8. Nicola Clark “Former SocGen chairman has sharp words for trader” (22 June 2010) New York Times.
9. Scheherazade Daneshkhu “SocGen must have seen Kerviel risky trades—witness” (11 June 2010) Financial Times.
10. Nicola Clark and Katrin Bennhold “A Société Générale trader remains a mystery as his criminal trial ends” (25 June 2010) New York Times.
11. Scheherazade Daneshkhu “Kerviel was a ‘creation’ of SocGen” (25 June 2010) Financial Times.
12. Karen Maley “The making of a rogue trader” (17 June 2010). http://www.businessspector.com.au/bs.nsf/Article/The-making-of-a-rogue-trader-pd20100617-6H767.
13. “SocGen, La Banque clown” (5 October 2010) Financial Times.
14. Scheherazade Daneshkhu “Kerviel faces jail and fine in SocGen trial” (5 October 2010) Financial Times.
15. Robert O’Harrow Jr and Brady Dennis “The beautiful machine” (29, 30, 31 December 2008) Washington Post.
16. Marc Lackritz “Beware the biggest moral hazard of them all” (10 June 2010) Financial Times.
17. “The world according to Lee Wakeman” (www.derivativesstrategy.com/magazine/archive/1997/0797qa.asp).
18. Berkshire Hathaway Letter to Shareholders (2004).
19. Berkshire Hathaway Letter to Shareholders (2002).
20. Berkshire Hathaway Letter to Shareholders (2008).
21. O’Harrow and Dennis “The beautiful machine.”
22. Ibid.
23. Carrick Mollenkamp, Serena Ng, Liam Pleven and Randall Smith “Behind AIG’s fall, risk models failed to pass real-world test” (3 November 2008) Wall Street Journal.
24. Quoted in Dennis Overbye “They tried to outsmart Wall Street” (9 March 2009) New York Times.
25. O’Harrow and Dennis “The beautiful machine.”
26. Norges Bank v. CitiGroup Inc. and other Case 1:10-cv-07202-UA Document 1 (17 September 2010), United States District Court, Southern District of New York.
27. Gary Gorton (2010) Slapped by the Invisible Hand: The Panic of 2007, Oxford University Press, Oxford: 133.
28. Alister Bull “Fed focus-credit derivatives—a tool with a sharp edge” (16 May 2007), Reuters.
29. Gary Gorton “Banks, banking, and crises” (2007) NBER Reporter: Research Summary 4.
30. “A root of the financial crisis” (18 September 2008) (http://mba.yale.edu/news_events/CMS/Articles/6603.shtml).
31. Richard Duncan (2009) The Corruption of Capitalism, CLSA Books, Hong Kong: 140.
32. Alan Greenspan “Financial derivatives” (19 March 1999), Futures Industry Association, Boca Raton, Florida.
33. Martin Z. Braun and William Selway “Hidden swap fees by JP Morgan, Morgan Stanley hit school boards” (1 February 2008), Bloomberg.
34. Adair Turner “The financial crisis and the future of financial regulation” (21 January 2009) The Economist’s Inaugural City Lecture.
35. John Kay “Wind down the market in five-legged dogs” (21 January 2009) Financial Times.
36. J. Hillis Miller “Stevens’ rock and criticism as cure” (1976) Georgia Review 30: 34.
37. James Rickards “How markets attacked the Greek piñata” (11 February 2010) Financial Times.
38. Ibid.
39. David McNally “From financial crisis to world slump: accumulation, financialization, and the global slowdown” (15 December 2008), expanded version of a paper presented to the plenary session (“The global financial crisis: causes and consequences”), 2008 Historical Materialism Conference, University of London (http://marxandthefinancialcrisisof2008.blogspot.com/2008/12/david-mcnally-from-financial-crisis-to.html).
40. Alan Greenspan, Testimony to the House Committee on Oversight and Government Reform (23 October 2008).
Chapter 15—Woodstock for Hedge Funds
1. Martin Baker (1995) A Fool and His Money, Orion Books, London: 157, 158.
2. Tom Wolfe (1988) The Bonfire of the Vanities, Picador, London: 64.
3. Tony Tassell “The Goldman Sachs narrative” (8 February 2010) Financial Times.
4. Quoted in Robert Slater (2009) Soros: The World’s Most Influential Investor, McGraw Hill, New Jersey: 178.
5. Philip Delves Broughton (2009) Ahead of the Curve: Two Years at Harvard Business School, Penguin Books, New York: 99.
6. Ron Chernow (1990) The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance, Touchstone Books, New York: 43.
7. “Live-blogging the hedge fund hearing” (13 November 2008) New York Times.
8. George Soros (1995) Soros on Soros: Staying Ahead of the Curve, John Wiley, New Jersey.
9. Quoted in Peter Temple (2001) Hedge Funds: The Courtesans of Capitalism, John Wiley & Sons, Chichester: 61.
10. Fred Schwed Jr (2006) Where Are The Customers’ Yachts? Or A Good Hard Look: Wall Street, John Wiley, New Jersey: 140.
11. Bloomberg (12 July 2010).
12. John Griffin and Jun Xu “How smart are the smart guys? A unique view from hedge fund stock holdings” (2009) Review of Financial Studies: 2531–70; Burton G. Malkiel and Atanu Saha “Hedge funds: risk and return” (2005) Financial Analysts Journal 61/6.
13. Richard Bookstaber (2007) A Demon of our Own Design, John Wiley, New Jersey: 179–80.
14. “Live-blogging the hedge fund hearing.”
15. Marcia Vickers “The most powerful trader on Wall Street you’ve never heard of” (21 July 2003) Bloomberg Businessweek.
16. David S. Hilzenrath and Jia Lynn Yang “Federal investigators expose vast web of insider trading” (12 February 2011) Washington Post.
17. James Grant (2008) Mr. Market Miscalculates: The Bubble Years and Beyond, Axios Press, Mount Jackson: 86.
18. Dean P. Foster and H. Peyton Young “The hedge fund game: incentives, excess returns, and piggy backing” (November 2007, revised 2 March 2008), Economic Series Working Papers, University of Oxford.
19. “Live-blogging the hedge fund hearing.”
20. Vivek Kaul “What’s luck got to do with investing?” (28 December 2009), DNA India.
21. Temple, Hedge Funds: 5.
22. Holman W. Jenkins “How a cat becomes a dog” (5 April 2000) Wall Street Journal.
23. David Wighton, Ben White and Deborah Brewster “Citadel trading costs hit $5.5 bn” (2–3 December 2006) Financial Times: 1.
24. Merrill Lynch, Bear Stearns and Paine Webber senior executives are understood to have had invested in LTCM; see Roger Lowenstein (2002) When Genius Failed: The Rise and Fall of Long-Term Capital Management, Fourth Estate, London.
25. Scholes denies having used the word “fool” in Lowenstein, When Genius Failed: 33, 34.
26. “Trillion dollar bet” (8 February 2000), PBS; Sam Jones “Meriwether setting up new hedge fund” (22 October 2009) Financial Times.
27. Lowenstein, When Genius Failed: 147.
28. As quoted in Lowenstein, When Genius Failed: 123; actually “Markets can remain irrational a lot longer than you and I can remain solvent” from A. Gary Shilling (1993) Forbes 151/4: 236.
29. Quoted in Nicolas Dunbar (2000) Investing Money, John Wiley, Chichester: 208, 209.
30. Adam Smith (2006) Super Money, John Wiley, New Jersey: 180.
31. Michael Lewis “How the eggheads cracked” (24 January 1999) New York Times Magazine: 24–42.
32. Peter Temple (2001) Hedge Funds: The Courtesans of Capitalism, John Wiley & Sons, Chichester: 41, 42.
33. Hilary Till “Comments on the Amaranth Case: Early Lessons from the Debacle” (2006), EDHEC Working Paper; Chris C. Finger “The lights are on?” (October 2006) RiskMetrics Group—Research Monthly.
34. Jeremy Grant “Did Amaranth cause harm?” (25 June 2007) Financial Times.
35. “Amaranth hit by $6bn loss” (October 2006) Risk.
36. Ibid.
37. Katherine Burton and Jenny Strasburg “Amaranth’s slide began with offer to keep star trader” (6 December 2006), Bloomberg.
38. “Amaranth hit by $6bn loss” (October 2006) Risk.
39. Ibid.
40. Burton and Strasburg “Amaranth’s slide.”
41. www.wilmott.com/messageview.cfm?catid=11&threadid=76822&FTVAR_MSGDBTABLE=
42. Adam Smith (1776) An Inquiry into the Nature and Causes of the Wealth of Nations: Book 1, Chapter 27 (http://geolib.com/smith.adam/won1-02.html).
Chapter 16—Minsky Machines
1. William Fung, David Hsieh, Narayan Naik, and Tarun Ramadorai “Hedge funds: performance, risk and capital formation” (19 July 2006) (www.ssrn.com/abstract=778124).
2. “Rolling in it” (16 November 2006) The Economist.
3. Michael Lewis (2010) The Big Short: Inside the Doomsday Machine, Allen Lane, London: 3.
4. “The hedge fund king is getting nervous” (16 September 2006) Wall Street Journal: A.1.
5. Peter Temple (2001) Hedge Funds: The Courtesans of Capitalism, John Wiley & Sons, Chichester: 42.
6. H. Kat and H. Palaro “Who needs hedge funds? A copula-based approach to hedge fund return replication” (2005), Alternative Investment Research Centre Working Paper 27, Cass Business School, City University London; H. Kat and H. Palaro “Replication and evaluation of fund of hedge fund returns” (2006), Alternative Investment Research Centre Working Paper 28, Cass Business School, City University London; H. Kat and H. Palaro “Superstars or average Joes? A replication-based performance evaluation of 1917 individual hedge funds” (2006), Alternative Investment Research Centre Working Paper 30, Cass Business School, City University, London; H. Kat and H. Palaro “Tell me what you want, what you really, really want! An exercise in tailor-made synthetic fund creation” (2006), Alternative Investment Research Centre Working Paper 36, Cass Business School, City University London; Jasmina Hasanhodzic and Andrew W. Lo “Can hedge-fund returns be replicated? The linear case” (16 August 2006) (www.ssrn.com/abstract=924565).
7. Thorold Barker “Does it do what it says on the tin?” (2–3 December 2006) Financial Times: 11.
8. Jenny Anderson “Papers study August crisis, from first wave to last ripple” (28 September 2007) New York Times.
9. Quoted in Peter Aspden “From free love to free market” (31 July 2009) Financial Times.
10. “Hedge funds: what they told clients” (2 November 2008) The Sunday Times.
11. Ibid.
12. “Hedge funds: behind the veil” (16 August 2007) The Economist.
13. See blog associated with Geoffrey Rogow “Hedge funds: defensive in tone, aggressive in strategy” (21 October 2008) Wall Street Journal.
14. Louise Story “Paul Tudor Jones’s rules of investing” (1 December 2008) New York Times.
15. Rogow “Hedge funds.”
16. http://knowledge.wharton.upenn.edu/article.cfm?articleid=1931
17. William Hutchings “Hedge fund makes $3bn from sub-prime bet” (12 November 2007) (www.efinancialnews.com/story/2007-11-12/hedge-fund-makes-from-sub-prime-bet).
18. Michael Lewis (2010) The Big Short: Inside the Doomsday Machine, Allen Lane, London: 106.
19. “Back in business: A trader’s trespasses are forgiven” (12 October 2006) The Economist.
20. Jenny Strasburg “A decade later, John Meriwether must scramble again” (27 March 2008) New York Times; Katherine Burton and Saijel Kishan “Meriwether said to shut JWM hedge fund after losses” (8 July 2008), Bloomberg; Henny Sender “The storms that hit Meriwether’s fund” (9 July 2009) Financial Times.
21. Louise Armitstead and Richard Fletcher “How Porsche took the wind out of the hedge funds’ sails” (29 October 2008) New York Times.
22. Richard Milne and Kate Burgess “Hedge funds left reeling as VW races on” (28 October 2008) Financial Times.
23. “Equity derivatives: the Volkswagen squeeze” (December 2008) Risk 21/12.
24. Armitstead and Fletcher “How Porsche took the wind out of the hedge funds’ sails.”
25. Milne and Burgess “Hedge funds left reeling.”
26. Louise Story, Michael J. De La Merced and Carter Dougherty “Panicked traders take VW shares on a wild ride” (28 October 2008) New York Times.
27. Richard Milne “Man in the news: Wendelin Wiederking” (31 October 2008) Financial Times.
28. “Porsche and VW: squeezy money” (30 October 2008) The Economist.
29. Milne “Man in the news.”
30. Quoted in Temple, Hedge Funds: 133.
31. Richard Teitelbaum and Tom Cahill “Brevan Howard shows paranoid survive in hedge fund of time outs” (1 April 2009), Bloomberg.
32. Carol J. Loomis “Buffett’s big bet” (9 June 2008) Fortune.
33. Henny Sender “Druckenmiller exit marks end of era” (18 August 2010) Financial Times.
34. Penny Wary “Selling themselves short” (9 June 2006) The Times.
Chapter 17—War Games
1. Sean D. Naylor “War games rigged?” (16 August 2002) (www.armytimes.com/legacy/new/0-292925-1060102.php).
2. Lawrence C. Strauss “Jeremy Grantham: still holding back” (13 October 2008) Barron’s.
3. Ron Suskind (2004) The Price of Loyalty, Simon & Schuster, New York: 291.
4. Alan Greenspan (2007) The Age of Turbulence: Adventures in a New World, Allen Lane, London: 360, 361.
5. Ben Bernanke “The economic outlook” (5 May 2005), Testimony to the Joint Economic Committee, US Congress.
6. “Savings versus liquidity” (11 August 2005) The Economist.
7. Robin Harding “Bernanke says foreign investors fuelled crisis” (18 February 2011) Financial Times.
8. Fisher, Irving “The debt-deflation theory of great depressions” (1933) Econometrica: 337–57.
9. William White “Is price stability enough?” (April 2006) Bank of International Settlements.
10. Gillian Tett of the Financial Times coined the phrase; see Gillian Tett “Should Atlas still shrug?” (15 January 2007) Financial Times.
11. The phrase “new liquidity factory” was coined by Mohamed El-Erian.
12. Total outstanding volumes of derivative contracts are greater, around $600 trillion (see Chapter 14). The figure here is adjusted for double counting of derivative volumes and the estimated portion that is used for hedging.
13. Paul McCulley “The paradox of deleveraging will be broken” (November 2008), Pimco.
14. Mark E. J. Newman, Albert-László Barabási and Duncan J. Watts (2006) The Structure and Dynamics of Networks, Princeton University Press, New Jersey: L-22.
15. Donald L. Kohn “Commentary: has financial development made the world riskier?” (August 2005), Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming.
16. Quoted in Yves Smith (2010) ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism, Palgrave Macmillan, New York: 126.
17. Andrew Haldane “Rethinking the financial network” (April 2009), Speech delivered at the Financial Student Association, Amsterdam.
18. Haldane “Rethinking the financial network.”
19. Testimony before Senate Committee on Banking, Housing and Urban Affairs (18 May 1994).
20. Hyun Song Shin “Commentary: has financial development made the world riskier?” (August 2005), Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming.
21. “Containing systemic risk: the road to reform” (6 August 2008), Report of the Credit Risk Management Policy Group.
22. Charles W. Calomiris “The subprime turmoil: what’s old, what’s new and what’s next” (2 October 2008), Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming.
23. Richard Bookstaber (2007) A Demon of Our Own Design, John Wiley, Hoboken, New Jersey: 2–6.
24. Larry McDonald (2009) A Colossal Failure of Common Sense, Ebury Press, London: 175.
25. John Lanchester (2010) Whoops! Why Everyone Owes Everyone and No One Can Pay, Allen Lane, London: 142.
26. Benoit Mandlebrot (2004) The (Mis)behavior of Markets, Basic Books, New York: 237.
27. Quoted in Philip Delves Broughton (2009) Ahead of the Curve: Two Years at Harvard Business School, Penguin Books, New York: 283.
28. Marina Hyde (2009) Celebrity: How Entertainers Took Over the World and Why We Need an Exit Strategy, Harvill Secker, London: 67.
29. Victor Consoli (11 May 2006) Financial Times.
30. Steven Rattner “The coming credit meltdown” (18 June 2007) Wall Street Journal.
31. Zygmunt Bauman (2010) Living on Borrowed Time, Polity Press, Cambridge: 43.
32. Ibid: 43.
33. Lanchester, Whoops!: 71.
34. Michael Lewis “Wall Street on the tundra” (April 2009) Vanity Fair.
35. Kate Burgess, Tom Braithwaite and Sarah O’Connor “A cruel wind” (10 October 2008) Financial Times.
36. Quoted in Alex Preda (2009) Framing Finance, University of Chicago Press, Chicago and London: 63.
37. Asger Jonsson (2009) Why Iceland? McGraw Hill, New York: 36.
38. Lewis “Wall Street on the tundra.”
39. Ibid.
40. Ibid.
41. Ibid.
42. The term is associated with John Kenneth Galbraith (1975) The Great Crash 1929, Penguin Books, London.
43. Quoted in Smith, ECONned: 109.
44. Walter Bagehot “Edward Gibbon” (January 1856) in (1978) The Collected Works: Literary Essays, The Economist, London: 352.
45. The phrase is used in Olivier Blanchard “The state of macro” (2008), NBER Working Paper 14259: 27.
46. Willem Buiter (2009) “The unfortunate uselessness of most “state of the art” academic monetary economics” (http://blogs.ft.com/maverecon/2009/03/the-unfortunate-uselessness-of-most-state-of-the-art-academic-monetary-economics).
47. Samuel Brittan “Economists shuffle the deckchairs” (6 August 2009) Financial Times.
48. Walter Bagehot (1877) Lombard Street: A Description of the Money Market, Henry S. King & Sons, London: Chapter 6 (www.econlib.org/library/Bagehot/bagLom6.html).
49. David Hare (2009) The Power of Yes, Faber & Faber, London: 45.
Chapter 18—Shell Games
1. Brad DeLong “Republic of the central banker” (27 October 2008) The American Prospect.
2. Paul Mason (2009) Meltdown: The End of the Age of Greed, Verso, London: 61.
3. Philip Augar (2009) Chasing Alpha: How Reckless Growth and Unchecked Ambition Ruined the City’s Golden Decade, Bodley Head, London: 47.
4. Alan Greenspan (2008) The Age of Turbulence: Adventures in a New World, Penguin Books, London: 256, 257.
5. Peter S. Goodman “Taking a hard new look: a Greenspan legacy” (8 October 2008) New York Times.
6. “The Turner Review: A regulatory response to the global banking crisis” (March 2009), Financial Services Authority: 49.
7. Alan Greenspan “Banking in the global marketplace” (18 November 1996), Speech to Federation of Bankers Association of Japan, Tokyo.
8. Greenspan, The Age of Turbulence: 360.
9. Alan Greenspan “Do efficient financial markets mitigate financial crises?” (19 October 1999), Financial Markets Conference of the Federal Reserve Bank of Atlanta.
10. Robert Wade “The Asian financial crisis and the global economy” (November 1998) (www.wright.edu); Peter Temple (2001) Hedge Funds: The Courtesans of Capitalism, John Wiley & Sons, Chichester: 141.
11. Yves Smith “Covert nationalization of the banking system” (3 August 2008) (www.nakedcapitalism.com).
12. Martin Wolf “Why banking is an accident waiting to happen” (27 November 2007) Financial Times.
13. Roger Lowenstein (2000) When Genius Failed: The Rise and Fall of Long Term Capital Management, Fourth Estate, London: 230.
14. Quoted in Temple, Hedge Funds: 110.
15. NewsHour with Jim Lehrer (13 February 1996), PBS.
16. “Measuring the measurers” (31 May 2007) The Economist.
17. Roger Lowenstein “Triple-A failure” (27 April 2008) New York Times Magazine.
18. Ibid.
19. Ibid.
20. Stanley Correy “Background briefing: credit rating agencies” (27 July 2009), Australian Broadcasting Corporation.
21. Gretchen Morgenson “Credit rating agency heads grilled by lawmakers” (22 October 2008) New York Times.
22. Jamil Anderlini “S&P owner rejects Chinese criticism” (3 August 2010) Financial Times.
23. Arturo Cifuentes and Georgios Katsaros “CDO ratings: chronicle of a disaster foretold” (4 June 2007) Total Securitisation 11–12; Charles Calomiris and Joseph Mason “We need a better way to judge risk” (24 August 2007) Financial Times.
24. Based on Donald MacKenzie, University of Edinburgh, in “A special report on financial risk–The gods strike back” (11 February 2010). The Economist; to be published as Donald MacKenzie, “The credit crisis as a problem in the sociology of knowledge” (forthcoming) The American Journal of Sociology.
25. Anderlini “S&P owner rejects Chinese criticism.”
26. Sam Jones “When junk was gold” (17 October 2008) Financial Times.
27. Committee on Oversight and Government Reform (22 October 2008) (http://oversight.house.gov/documents/2008102212325.pdf).
28. Bill Gross “Looking for contagion in all the wrong places” (July 2007) Investment Outlook, Pimco.
29. Robert Rubin, Testimony before the Financial Crisis Inquiry Commission (8 April 2010).
30. Correy “Background briefing.”
31. Philip Delves Broughton (2009) Ahead of the Curve: Two Years at Harvard Business School, Penguin Books, New York: 58.
32. “True and Fair: fair is not hard and fast: the future of accounts” (26 April 2003) The Economist.
33. www.alangreenspan.org/more.html
34. Robert Kaplan, Robert Merton and Scott Richard “Disclose the fair value of complex securities” (17 August 2009) Financial Times.
35. www.nakedcapitalism.com/2011/01/ian-fraser-is-the-house-of-lords-crisis-inquiry-putting-the-fcic-to-shame.html
36. Quoted in John Dizard “Put the credit default swaps market out of its misery” (9 December 2008) Financial Times.
37. Congressional Oversight Panel “Oversight report—the continued risk of troubled assets (11 August 2009).
38. Michael Lewis “Wall Street on the tundra” (April 2009) Vanity Fair.
39. ©Lucy Prebble, Enron, and Methuen Drama, an imprint of Bloomsbury Publishing Plc., London: 8, 9.
40. Report of Anton R. Valukas, Examiner (11 March 2010), United States Bankruptcy Court Southern District of New York in re Lehman Brothers Holdings Inc., et al.
41. “Accounting: fooled again” (19 March 2010) Financial Times.
42. Michael J. De La Merced and Andrew Ross Sorkin “Report details how Lehman hid its woes” (11 March 2010) New York Times.
43. Sir David Tweedie, Speech to the Institute of Chartered Accountants of Scotland (September 2008) (www.iasb.org).
44. Jean-Francois Lepetit, Etienne Boris and Didier Marceau “How to arrive: fair value during a crisis” (28 July 2008) Financial Times.
45. Sir David Tweedie, Speech to the Institute of Chartered Accountants of Scotland.
46. David Hare (2009) The Power of Yes, Faber & Faber, London: 36.
47. “Will Rogers claps hands for the President’s speech” (14 March 1933) New York Times.
48. Michael Lewis (2010) The Big Short: Inside the Doomsday Machine, Allen Lane, London: 255
49. Roger Lowenstein (2010) The End of Wall Street, Scribe Publications, Melbourne: 120, 121.
50. Francesco Guerrera “Fuld ‘knew about accounting trick’”(12 March 2010) Financial Times.
51. Francesco Guerrera “Man in the news: Jamie Dimon” (16 April 2010) Financial Times.
52. 18 October 2007 in a conference call.
53. 15 September 2008 in a conference call.
54. Richard Posner (2009) A Failure of Capitalism: The Crisis of ‘08 and the Descent into Depression, Harvard University Press, Cambridge.
55. See The Financial Crisis Inquiry Report: Final Report Of The National Commission On The Causes Of The Financial And Economic Crisis In The United States - Official Government Edition; The Financial Crisis Inquiry Commission Submitted By Pursuant To Public Law 111-21 (January 2011) At 83
56. Hare, The Power of Yes: 29, 30.
57. Bradley Keoun, Jesse Westbrook and Ian Katz “Citigroup “liquidity puts” draw scrutiny from crisis inquiry” (13 April 2010), Bloomberg.
58. Vicky Ward (2010) The Devil’s Casino: Friendship, Betrayal and the High Stakes Games Played Inside Lehman Brothers, John Wiley, New Jersey: 69
59. Robert Rubin, Testimony before the Financial Crisis Inquiry Commission (8 April 2010).
60. Henry Kaufman “The fallout from Enron: lessons and consequences” (April 2002), Address to Boston Economic Club.
61. “Financial crisis stemmed from a lack of will” (15 July 2009), ABC Radio.
62. Deborah Solomon “Math is hard” (25 February 2010) New York Times.
63. P.J. O’Rourke (1988) Holidays in Hell, Grove Press, New York: 37.
64. Ibid: 36.
Chapter 19—Cult of Risk
1. Simon Johnson “The quiet coup” (May 2009) The Atlantic.
2. President Dwight Eisenhower, Farewell Address to the Nation (17 January 1961).
3. Jennifer Burns (2009) How Markets Fail: The Logic of Economic Calamities, Oxford University Press, Oxford: 84.
4. Peter Schwartz and Peter Leyden “The long boom: a history of the future, 1880–1920” (July 1997) Wired.
5. Harry Johnson and Elizabeth Johnson (1978) The Shadow of Keynes, Basil Blackwell, Oxford: 222–5.
6. Liaquat Ahamed (2009) Lords of Finance: The Bankers Who Broke The World, Penguin Books, London: 313.
7. Wilhelm Röpke (1936) Crises and Cycles, William Hodge & Co., London: 64 (http://mises.org/books/crisis.pdf).
8. John Steinbeck (1992) The Grapes of Wrath, Penguin Books, New York: 44.
9. Ma Jian (2009) Beijing Coma, Vintage Books, London: 557.
10. Quoted in James H. Austin (1999) Zen and the Brain: Toward an Understanding of Meditation and Consciousness, MIT Press, Massachusetts:129.
11. “Financial crisis stemmed from a lack of will” (15 July 2009), ABC Radio.
12. Irving Janis (1982) Groupthink: Psychological Studies of Policy Decisions and Fiascoes, Houghton Mifflin, New York.
13. Maureen Dowd “Where Atlas Shrugged is still read—forthrightly” (13 September 1987) New York Times.
14. “An interview with Paul Samuelson, part one” (17 June 2009) The Atlantic.
15. Alan Blinder and Ricardo Reis “Understanding the Greenspan standard” (August 2005), Federal Reserve Bank of Kansas City, Jackson Hole Conference.
16. Fred Sheehan “Clowning around” (19 May 2008) (www.prudentbear.com).
17. James Grant (2008) Mr. Market Miscalculates: The Bubble Years and Beyond, Axios Press, Mount Jackson: 264.
18. Ibid: 296.
19. Alan Greenspan, Remarks on the structure of the international financial system (5 November 1998), Annual Meeting of the Securities Industry Association, Boca Raton, Florida.
20. David Hare (2009) The Power of Yes, Faber & Faber, London: 33.
21. John Lanchester (2010) Whoops! Why Everyone Owes Everyone and No One Can Pay, Allen Lane, London: 167.
22. “Pimco hires Greenspan as consultant” (16 May 2007) Reuters.
23. The phrase was used by Charles Dumas of Lombard Street Research; see “Losing confidence—looking at the dollar in the old-fashioned way” (22 July 2010) The Economist.
24. Ahamed, Lords of Finance: 80, 81, 372.
25. Daniel Kadlec “Summing up Greenspan” (17 December 2000) Time.
26. David James “Wot’s all this then, Alan?” (10–16 July 2003), BRW.
27. Friedrich Wilhelm Nietzsche, R. J. Hollingdale and Michael Tanner (2003) Twilight of the Idols and Anti-Christ, Penguin Books, London: 62.
28. David Wessel (2010) In Fed We Trust: Ben Bernanke’s War on the Great Panic, Scribe Publications, Melbourne: 125.
29. Peter S. Goodman “Taking a hard new look: a Greenspan legacy” (8 October 2008) New York Times.
30. Alan Greenspan “The regulation of OTC derivatives” (24 July 1998), Testimony to the Committee on Banking and Financial Services, US House of Representatives.
31. Roger Lowenstein (2010) The End of Wall Street, Scribe Publications, Melbourne: 59.
32. John Kenneth Galbraith (1998) The Affluent Society, Mariner Books, Boston: 9.
33. Raghuram Rajan (2010) Fault Lines: How Hidden Fractures Still Threaten the World Economy, Princeton University Press, Princeton and Oxford: 141.
34. John Cassidy (2009) How Markets Fail: The Logic of Economic Calamities, Allen Lane: 226.
35. Hyman Minsky (2008) Stabilizing an Unstable Economy, McGraw-Hill, New York: 233.
36. Testimony to the House Oversight and Government Reform Committee (22 October 2008).
37. Alan Beattie “Lunch with the FT: Alan Greenspan” (30 July 2010) Financial Times.
38. Christopher Andrews “Watching your stocks?” (1 November 2008) Continuity, Insurance and Risk Magazine.
39. Simon Jenkins “It’s a bull market for humility, and shares in kindness are soaring” (17 October 2008) Guardian.
40. Alan Rappeport “Greenspan and Strauss-Kahn clash on regulation” (1 October 2009) Financial Times.
41. Quoted in Ahamed, Lords of Finance: 237–8
42. Gillian Tett “The emotional markets hypothesis and Greek bonds” (9 April 2010) Financial Times.
43. Alan Greenspan, Testimony to the Financial Crisis Inquiry Commission (7 April 2010).
44. “Greenspan, on CNBC: US in recession” (8 April 2008), Reuters.
45. Sewel Chan and Eric Dash “Greenspan rejects criticism of policies at hearing” (7 April 2010) New York Times.
46. John Maynard Keynes (2006) The General Theory of Employment, Interest and Money, Atlantic Books, New Delhi: Preface.
47. John Kenneth Galbraith (2001) The Essential Galbraith, Mariner, Boston: 241.
48. “Interview by Farah Nayeri: Greenspan was “very bad” Fed chairman, says Artus of Natixis” (30 November 2007), Bloomberg.
49. Denny Gulino “Greenspan: Congress has “amnesia” re its part in crisis” (7 April 2010) (http://imarketnews.com/node/11417).
50. Vanessa Thorpe “Magical realism...and fakery: the ailing Nobel Laureate is writing the definitive account of his life” (21 January 2001) The Observer.
51. John C. Bogle (2007) The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns, John Wiley, New Jersey: 39.
52. Philip Delves Broughton (2009) Ahead of the Curve: Two Years at Harvard Business School, Penguin Books, New York: 285.
53. Jennifer Burns (2009) How Markets Fail: The Logic of Economic Calamities, Oxford University Press, Oxford: 149.
54. John Maynard Keynes (1930) The Great Slump of 1930 (www.gutenberg.ca/ebooks/keynes-slump/keynes-slump-00-h.html).
Chapter 20—Masters of the Universe
1. Louis Aunchincloss in his 1954 novel A World of Profit, quoted in Robert Sobel (1993) Dangerous Dreamers: The Financial Innovators from Charles Merrill to Michael Milken, John Wiley, New York: 29.
2. ©Lucy Prebble, Enron, and Methuen Drama, an imprint of Bloomsbury Publishing Plc., London: 106.
3. John Lanchester (2010) Whoops! Why Everyone Owes Everyone and No One Can Pay, Allen Lane, London.
4. John Kenneth Galbraith “The 1929 parallel” (January 1987) Atlantic Monthly: 62.
5. Thomas Philippon and Ariell Reshef “Wages and human capital in the financial industry: 1909–2006” (December 2008), Working Paper, New York University and University of Virginia.
6. Quoted in Gillian Tett “Silos and silences: why so few people spotted the problems in complex credit and what that implies for the future” (July 2010) Financial System Review—Derivatives: Financial Innovation and Stability, Banque de France: 122.
7. The term was coined by Philip Delves Broughton (2009) Ahead of the Curve: Two Years at Harvard Business School, Penguin Books, New York.
8. Ibid: 50.
9. Rahul Bajaj “The privilege of living in extraordinary times” (26 January 2009) Financial Times.
10. Stephen Crittenden “Background briefing, mostly bloody awful” (29 March 2009), ABC Radio, Australia.
11. Sylvain Raynes “The state of financial engineering” (3 December 2008) (www.quantnet.com/forum/showthread.php?t=3978).
12. Emanuel Derman (2004) My Life as a Quant: Reflections on Physics and Finance, John Wiley, New Jersey: 266, 267.
13. “Prophet of climate doom a scientific black sheep” (17 September 2009), AFP (www.terradaily.com/reports/Prophet_of_climate_doom_a_scientific_black_sheep_999.html).
14. Lewis Carroll (1960) The Annotated Alice: Alice’s Adventures in Wonderland, Penguin Books, London: 129.
15. Derman, My Life as a Quant: 266, 267.
16. “The CIA on Wall Street” (19 June 2009) Financial Times.
17. Michael Jensen (1976) The Financiers: The World of the Great Wall Street Investment Banking House, Weyright & Talley, New York: 1, 2.
18. Broughton, Ahead of the Curve: 212.
19. YouTube sketch by English comedians John Bird and John Fortune (www.youtube.com/watch?v=kEL0g3As2vE).
20. Paul Tharp and Jana Winter “Two in the sac: Feds probing hedge fund hormone charges” (12 October 2007) New York Post.
21. Vicky Ward (2010) The Devil’s Casino: Friendship, Betrayal and the High Stakes Games Played Inside Lehman Brothers, John Wiley, New Jersey: 4.
22. Tom Bawden and Julia Kollewe “Pretty and colourful: what women bring to the DB boardroom, says Ackermann” (7 February 2011) The Guardian.
23. Gillian Tett “The trouble with men” (4 February 2011) Financial Times.
24. Karen Ho (2009) Liquidated: An Ethnography of Wall Street, Duke University Press, Durham and London.
25. Bret Easton Ellis (1991) American Psycho, Picador, Melbourne: 4, 399.
26. Bethany McLean and Peter Elking (2003) The Smartest Guys in the Room: The Amazing and Scandalous Fall of Enron, Penguin Books, London: 55.
27. Prebble, Enron: 29.
28. www.nytimes.com/interactive/2008/10/07/business/20080929-payout-graphic.html
29. “Executive excess” (2007), Institute for Policy Studies and United for a Fair Economy.
30. Jessica Irvine “Shock of real world for business chiefs” (21 April 2008) Sydney Morning Herald.
31. Gillian Tett “Lunch with the FT: David Hare” (25 September 2009) Financial Times.
32. Jennifer Burns (2009) How Markets Fail: The Logic of Economic Calamities, Oxford University Press, Oxford: 177.
33. Warren Buffett, Berkshire Hathaway Letter to Shareholders (2009).
34. Louise Story “On Wall Street, bonuses, not profits, were real” (17 December 2008) New York Times.
35. Quoted in Robert A.G. Monks and Nell Minow (2008) Corporate Governance, John Wiley, Chichester: 311.
36. Lucian Bebchuk, Alma Cohen and Holger Spamann “Bankers had cashed in before the music stopped” (6 December 2009) Financial Times.
37. Quoted in Yves Smith (2010) ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism, Palgrave Macmillan, New York: 169.
38. Quoted in Duff McDonald “Please, Sir, I want some more: how Goldman Sachs is carving up its $11 billion money pie” (5 December 2005) New York Magazine.
39. Owen Gleiberman “Cannes: in the dark documentaries “Inside Job” and “Countdown to Zero” it’s the end of the world as we know it” (16 May 2010) Entertainment Weekly.
40. Hugh Son “Buffett says “wildly capricious” economy inspires his charity” (16 June 2010) Bloomberg News.
41. Ho, Liquidated: 260.
42. Ibid: 270.
43. Althea Chang “Unusual perks: Goldman Sachs covers sex changes” (8 February 2008) (http://money.cnn.com/2008/02/08/news/companies/gender.fortune/index.htm).
44. Michael Lewis (2010) The Big Short: Inside the Doomsday Machine, Allen Lane, London: 63.
45. David Wessel (2010) In Fed We Trust: Ben Bernanke’s War on the Great Panic, Scribe Publications, Melbourne: 239.
46. www.youtube.com/watch?v=hXBcmqwTV9s
47. Adam Smith (1776) An Inquiry into the Nature and Causes of the Wealth of Nations: Book 3, Chapter 4 (www.marxists.org/reference/archive/smith-adam/works/wealth-of-nations/book03/ch04.htm).
Chapter 21—Financial Nihilism
1. Salvador Dali (1962) The World of Salvador Dali, Macmillan, London.
2. “Little gold-diggers” (27 January–9 February 2009) The Big Issue 321: 9.
3. Sarah Thornton (2009) Seven Days in the Art World, Granta, London: xvi.
4. Don Thompson (2008) The $12 Million Stuffed Shark: The Curious Economics of Contemporary Art, Palgrave Macmillan, New York: 177.
5. Thornton, Seven Days in the Art World: xvi; 17, 37, 83, 91.
6. Jerry Saltz, an art critic, quoted in Thompson, The $12 Million Stuffed Shark: 116.
7. Thornton, Seven Days in the Art World: 17, 37, 83, 91.
8. Thompson, The $12 Million Stuffed Shark: 189.
9. Carol Vogel “Swimming with famous dead sharks” (1 October 2006) New York Times.
10. John Steele Gordon (2004) An Empire of Wealth: The Epic History of American Economic Power, HarperCollins, New York: 262.
11. Ron Chernow (1990) The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance, Touchstone Books, New York: 78.
12. “Steve Cohen Steps Out” (2 June 2010) Vanity Fair.
13. The term “Davos man” was suggested by Samuel Huntington “Dead souls: the denationalization of the American elite” (Spring 2004) National Interest: 5–18.
14. David Rothkof (2008) Superclass: The Global Power Elite and the World They are Making, Farrar, Straus & Giroux, New York: 129.
15. “Survival of the richest” (19 August 2010) The Economist.
16. Quoted in Tom Braithwaite and Aline van Duyn “Buffett bats off criticism of Moody’s” (2 June 2010) Financial Times.
17. Quoted in Marina Hyde (2009) Celebrity: How Entertainers Took Over the World and Why We Need an Exit Strategy, Harvill Secker, London: 1.
18. Charles Gasparino (2009) The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System, Harper Business, New York: 365.
19. Alex Preda (2009) Framing Finance, University of Chicago Press, Chicago and London: 250.
20. Felipe Fernández-Armesto (2002) Food: A History, Pan Books, London: 117.
21. The phrase is from Lucy Kellaway “Why financiers are leaders in drivel” (1 August 2010) Financial Times.
22. Ray Dalio (2010) Principles, Bridgewater Associates, Westport.
23. James Thomson “Trouble over: Bridgewater” (10 July 2010) (www.businessspectator.com.au).
24. Quoted in Kellaway “Why financiers are leaders in drivel.”
25. Quoted in Mark Tier (2006) The Winning Investment Habits of Warren Buffett and George Soros, St Martin’s Griffin, New York: 219.
26. “A tract for the times” (3 December 1998) The Economist.
27. N.N. Baily, D. Farrell and S. Lund “The color of hot money” (2000) Foreign Affairs 79/2: 99–109.
28. www.izlese.org/slavoj-a-34-ia-34-ek-the-reality-of-the-virtual-1-7.html
29. Karen Ho (2009) Liquidated: An Ethnography of Wall Street, Duke University Press, Durham and London: 104.
30. ©Lucy Prebble, Enron, and Methuen Drama, an imprint of Bloomsbury Publishing Plc., London: 106.
31. “The financial crisis inquiry report: final report of the National Commission on the Causes of the Financial and Economic Crisis in the United States—official government edition” (January 2011), submitted by the Financial Crisis Inquiry Commission pursuant to Public Law 111–21: 105.
32. Malcolm Gladwell “The sure thing: how entrepreneurs really succeed” (January 2010) The New Yorker.
33. Luke Johnson “Malcolm Gladwell’s business blindspot” (2 February 2010) Financial Times.
34. Quoted in David L. Western (2004) Booms, Bubbles, and Busts in US Stock Markets, Routledge, London: 84.
35. Elizabeth Kubler-Ross (1975) Death: The Final Stage of Growth, Prentice Hall, New Jersey.
36. Greg Farrell and Henny Sender “The shaming of John Thain” (13 March 2009) Financial Times.
37. Andrew Lahde “Letter: Andrew Lahde, Lahde Capital Management” (17 October 2008) Financial Times.
38. John Gapper “Yours truly, angry mob” (24 October 2008) Financial Times.
39. Stacy-Marie Ishmael “We are Wall Street ...” (30 April 2010) Financial Times, Copyright © The Financial Times Ltd.
40. David Hare (2009) The Power of Yes, Faber & Faber, London: 61.
41. Richard Vine “Totally wired” (2005) The Guardian Unlimited (http://blogs.guardian.co.uk/theguide/archives/tv_and_radio/2005/01/totally_wired.html).
42. Johann Hari “How Goldman Sachs gambled on starving the poor—and won” (2 July 2010) The Independent.
43. Jayati Ghosh “The unnatural coupling: food and global finance” (2009), The Ideas Working Paper Series, Paper 8.
44. Michael W. Masters, Testimony before the Permanent Subcommittee on Investigations Committee on Homeland Security and Governmental Affairs United States Senate (20 May 2008).
45. “Sweet dreams: a hedge fund bets big on chocolate” (5 August 2010) The Economist.
46. Interagency Task Force on Commodity Markets, “Interim report on crude oil” (July 2008), CFTC.
47. Ghosh “The unnatural coupling.”
48. Stanley Milgram (1983) Obedience to Authority, Harper, New York: 6.
49. Kai Bord and Martin J. Sherwin (2006) American Prometheus: The Triumph and Tragedy of J. Robert Oppenheimer, Vintage Books, New York: 51.
Chapter 22—Financial Gravity
1. Quoted in Bertrand Russell (1956) Portraits from Memory and Other Essays, Simon & Schuster, London: 152.
2. Quoted in Edward Chancellor (2000) Devil Take The Hindmost: A History of Financial Speculation, Plume Books, New York: 84.
3. Quoted in Liaquat Ahamed (2009) Lords of Finance: The Bankers Who Broke the World, Penguin Books, London: 355.
4. Ron Chernow (1990) The House of Morgan, Grove Press, New York: 319, 320.
5. Attributed to physicist Robert Oppenheimer, Supervising Scientist Manhattan Project (05.29 hours, 16 July 1945) in the Jornada del Muerto desert near the Trinity site in the White Sands Missile Range, witnessing the first atomic detonation by mankind. The exact quote from the Bhagavad-Gita is: “If the radiance of a thousand suns were to burst at once into the sky, that would be like the splendor of the Mighty one...I am become Death, the shatterer of Worlds.”
6. Congressional Oversight Panel “Oversight report—assessing Treasury’s strategy: six months of TARP” (7 April 2009).
7. George Soros “The worst market crisis in 60 years” (23 January 2008) Financial Times.
8. “The financial crisis: an inside view of a stormy White House summit” (27 September 2008) Wall Street Journal.
9. Joe Nocera “As credit crisis spiraled, alarm led to action” (1 October 2008) New York Times.
10. Ibid.
11. Quoted in Ron Chernow (1993) The Warburgs: The Twentieth-Century Odyssey of a Remarkable Jewish Family, Vintage Books, New York: 89.
12. PBS Newshour “How big is too big to fail?” (15 December 2009) (www.pbs.org/newshour/bb/business/july-dec09/schultz_12-15.html).
13. Mervyn King, Governor of the Bank of England, Speech to the CBI Dinner (20 January 2009), East Midlands Conference Centre, Nottingham.
14. Senator Jim Bunning, Statement to the Senate Banking Committee on the Federal Reserve Monetary Policy Report (15 July 2008), Senate Banking Committee.
15. Naomi Klein (2008) The Shock Doctrine: The Rise of Disaster Capitalism, Picador, New York.
16. Joe Bageant (2007) Deer Hunting with Jesus: Despatches from America’s Class War, Scribe Publications, Melbourne: viii.
17. F. Scott Fitzgerald (1973) The Great Gatsby, Penguin Books, London: 186.
18. Quoted in Charles P. Kindelberger (1978) Manias, Panics and Crashes: A History of Financial Crisis, Basic Books, New York: 130.
19. “Americans “too depressed” for sex, porn barons seek US bailout” (8 January 2009) (www.abc.net.au/news/stories/2009/01/08/2461638.htm).
20. “After the race” (19 February 2011) The Economist.
21. Matthias Nass “A year of awkward anniversaries” (January 2009) The Atlantic Times.
22. Peter Hartcher “Double standard brings down rich white club” (4 April 2009) Sydney Morning Herald.
23. John Willman “Fear and loathing in the aftermath of the credit crisis” (3 October 2008) Financial Times.
24. Robert Lucas “Macroeconomic priorities” (2003) American Economic Review 93/1: 1703.
25. John Cassidy “The decline of economics” (2 December 1996) New Yorker: 54.
26. Benn Steil “Keynes and the triumph of hope over economics” (5 February 2009) Financial Times.
27. Justin Fox “The comeback Keynes” (27 January 2009) Time.
28. John Maynard Keynes (1931) Essays in Persuasion, Macmillan, London: 383.
29. Ahamed, Lords of Finance: 349.
Chapter 23—Unusually Uncertain
1. Henny Sender “On Wall Street: A tonic that works too well” (23 December 2009) Financial Times.
2. Dylan Grice “Popular delusions: government hedonism and the next policy mistake” (11 February 2010), Société Générale Cross Asset Research.
3. Joseph Tainter (1988) The Collapse of Complex Societies, New Studies in Archaeology, Cambridge University Press, Cambridge, quoted in John Dizard “Irish bail-out”s unintended consequences” (18 December 2010) Financial Times.
4. Quoted in John Chan “China’s dubious statistics cover up economic crisis” (10 August 2009) (www.wsws.org/articles/2009/aug2009/chin-a10.shtml).
5. “China’s luxury boom: the middle blingdom” (17 February 2011) The Economist.
6. Jamil Anderlini “Beijing’s housing price fury goes viral” (23 December 2010) Financial Times.
7. Wolfgang Münchau “Optimism is not enough for a global recovery” (14 June 2009) Financial Times.
8. Press release, “Lincoln hails Senate passage of tough Wall Street reforms” (20 May 2010) (http://lincoln.senate.gov/newsroom/2010-05-20-6.cfm).
9. http://en.wikipedia.org/wiki/Thomas_Pynchon
10. Andrew Ross Sorkin “Vanishing act: “advisers” distance themselves from a report” (14 February 2011) New York Times.
11. Brooke Masters and David Oakley “Markets take fright: political disorder” (20 May 2010) Financial Times.
12. Sam Jones “Hedge funds hope ‘Volcker rule’ will clip banks’ wings” (30 June 2010) Financial Times.
13. Quoted in Masayuki Oku “A cure that could do more harm than good” (13 July 2010) Financial Times.
15. Patrick Hosking and Grainne Gilmore “Spain’s challenges are severe: IMF” (25 May 2010) The Times.
16. Tyler Cohen “How will Greece get off the dole?” (21 May 2010) New York Times.
17. David Gardner, Tony Barber and Peter Spiegel “Ireland: A punt too far” (19 November 2010) Financial Times.
18. Peter Spiegel “EU leaders back new bail-out system” (16 December 2010) Financial Times.
19. John Authers “A risky revival” (25 September 2009) Financial Times.
20. www.zerohedge.com/article/rosenberg-probability-another-qe-round
21. Peter Orszag “Taking a chance can be a better way to save” (16 February 2011) Financial Times.
22. Sarah Gordon and Megan Murphy “European banks: leaning lenders” (3 June 2010) Financial Times.
23. Adam Ferguson (2010) When Money Dies: The Nightmare of the Weimar Hyper-Inflation, Old Street Publishing, London: 5.
24. Ibid: 24.
25. Liaquat Ahamed (2009) Lords of Finance: The Bankers Who Broke The World, Penguin Books, London: 363.
26. Nick Baker and Mary Childs “US Stocks gain on signs economic recovery is strengthening” (12 December 2009), Bloomberg.
27. Robert F. Kennedy, Address (18 March 1968), University of Kansas, Lawrence, Kansas.
28. Interview (18 June 2008), Bloomberg.
29. Michael Pettis “Don’t rely on the performance of China’s markets” (16 June 2010) Financial Times.
30. Bill Miller “US large-cap stocks are bargains of a lifetime” (31 August 2010) Financial Times.
31. Stieg Larsson (2008) The Girl With The Dragon Tattoo, Quercus, London: 519, 520.
32. John Steinbeck (1992) The Grapes of Wrath, Penguin Books, New York: 49, 317.
33. Adam Smith (2007) The Wealth of Nations, Cosmino Books, New York: 113.
34. “After the race” (19 February 2011) The Economist.
35. Matt Taibi “The spill, the scandal and the President” (8 June 2010) Rolling Stone.
36. “The oil well and the damage done: BP counts the political and financial cost of Deepwater Horizon” (17 June 2010) The Economist.
37. “Prophet of climate doom a scientific black sheep” (17 September 2009), AFP (www.terradaily.com/reports/Prophet_of_climate_doom_a_scientific_black_sheep_999.html).
38. “After the race” (19 February 2011) The Economist.
39. Quoted in Yves Smith (2010) ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism, Palgrave Macmillan, New York: 55.
40. Edward Abbey (1990) Desert Solitaire: A Season in the Wilderness, Touchstone, New York: 113.
41. John Updike (1981) Rabbit is Rich, Penguin Books, London: 13.
42. Andrew Gelman “What kind of law is the Law of Unintended Consequences?” (22 January 2008) (www.stat.columbia.edu/~cook/movabletype/archives/2008/01/what_kind_of_la.html).
43. Geoff Dyer “China lectures US on economy” (4 December 2008) Financial Times.
44. Hu Jintao President of the People’s Republic of China, Remarks at the 16th APEC Economic Leaders’ Meeting (22 November 2008), Lima, Peru.
45. Smith, ECONned: 1.
46. Matt Taibbi “The Great American bubble machine” (5 April 2010) Rolling Stone.
47. John Gapper “Master of risk who did God’s work for Goldman Sachs but won it little love” (23 December 2009) Financial Times.
48. John Maynard Keynes (1933) The Means to Prosperity, Macmillan, London: 37 (www.gutenberg.ca/ebooks/keynes-means/keynes-means-00-h.html).
49. Martin Hutchinson “Gross domestic fudging” (21 September 2009) (www.prudentbear.com).
50. President Franklin D. Roosevelt, State of the Union Address (11 January 1944).
51. Banksy (2006) Wall and Piece, Century, London: 204.
52. www.nakedcapitalism.com/2009/10/guest-post-still-the-masters-of-the-universe.html
53. Arundhati Roy “Confronting empire” (27 January 2003), Porto Alegre, Brazil (www.ratical.org/ratville/CAH/AR012703.html).
54. Steinbeck, The Grapes of Wrath: 471.
55. George Orwell “England My England” in (2001) Orwell’s England, Penguin Books, London: 266.
56. F. Scott Fitzgerald (1973) The Great Gatsby, Penguin Books, London: 117.
57. Ben Bernanke used the phrase to describe the economic outlook; see Richard Leong “Treasuries-Bonds slip as equities rise renews risk appetite” (23 July 2010), Reuters.
58. John Maynard Keynes “The general theory of employment” (1937) Quarterly Journal of Economics 51/2: 213–14.
Epilogue—Nemesis
1. Quoted in Allen Salkin “You try to live on 500K in this town” (6 February 2009) New York Times.
2. Quoted in Vicky Ward (2010) The Devil’s Casino: Friendship, Betrayal and the High Stakes Games Played Inside Lehman Brothers, John Wiley, New Jersey: 1.
3. Nouriel Roubini and Stephen Mihm (2010) Crisis Economics: A Crash Course in the Future of Finance, Allen Lane, London: 3.
4. Bloomberg News (20 November 2008).
5. “First draft of history” (25 June 2009) The Economist.
6. Joseph Conrad (1995) Heart of Darkness, Wordsworth Editions, Ware: 82.
7. Justin Fox “What exactly is Nouriel Roubini good for?” (26 May 2010) HBR (http://blogs.hbr.org/fox/2010/05/what-exactly-is-nouriel-roubini.html).
8. www.imf.org/external/np/vc/2002/070202.htm
9. Aaron Brown “The economist’s new clothes” (May/June 2010) Wilmott Magazine: 20.
10. Ibid: 20.
11. Richard Kay and Geoffrey Levy “Naughty Niall Ferguson: the dashing TV historian and the string of affairs that could cost him millions” (20 February 2010) Daily Mail.
12. Lewis Carroll (1976) The Annotated Alice: Through The Looking Glass, Penguin Books, London: 251.
13. Sotheby’s Catalogue (11 November 2009), Contemporary Art Evening Auction (www.sothebys.com/app/live/lot/LotDetail.jsp?lot_id=159564574).
14. Peter Gosselin (2009) High Wire: The Precarious Financial Lives of American Families, Basic Books, New York: 234.
15. Rachel Donadio “Europe’s young grow agitated over future prospects” (1 January 2011) New York Times.
16. http://en.wikipedia.org/wiki/New_Deal
17. http://crookedtimber.org/2007/04/11/when-i-hear-the-word-culture-aw-hell-with-it
18. Gregory Clark “Dismal scientists: how the crash is reshaping economics” (16 February 2009) Atlantic Monthly.
19. Newsweek (15 December 2008).
20. F. Scott Fitzgerald (1973) The Great Gatsby, Penguin Books, London: 188.
21. Olivier Coibion and Yuriy Gorodnichenko “Does the great recession really mean the end of the great moderation?” (www.voxeu.org).
22. Quoted in John Cassidy “After the blowup (letter from Chicago)” (11 January 2010) New Yorker: 28.
23. “Round three: the annual ding-dong over bank bonuses is under way” (13 January 2011) The Economist.
24. US Senator Dick Durbin, quoted in Adam Doster “Durbin on Congress: the banks “own the place”” (29 April 2009) (www.huffingtonpost.com/2009/04/29/dick-durbin-banks-frankly_n_193010.html).
25. Gregory Zuckerman “Trader racks up a second epic gain: $5 billion profit for John Paulson” (28 January 2011) Wall Street Journal.
26. Jordan Ellenberg “We’re down $700 billion. Let’s go double or nothing” (2 August 2008), Slate Magazine.
27. Abbie Bordeau, David Fitzpatrick and Scott Zamost “Wall Street: fall of the fat cats” (17 October 2008), CNN.com.
28. I am indebted to Simon Mihailovich from Eidesis for pointing this quote out to me.
29. Ben Hall “Banks cry foul: “King Eric” revolution” (6 December 2010) Financial Times.
30. Sir John Wheeler-Bennet’s description of the German people in 1919; see Adam Ferguson (2010) When Money Dies: The Nightmare of the Weimar Hyper-Inflation, Old Street Publishing, London: 14.
31. Walter Benjamin (1973) Illumination, Fontana/Collins, London: 259, 260.