Table of Contents

 

Glossary of Terms

Prologue

1        The Master of the Universe

How Volcker conquered inflation

Alan Greenspan and The Age of Turbulence

Greenspan’s First Challenge: Black Monday, October 1987

Greenspan’s Second Challenge: the 1990s Boom

Greenspan’s Third Challenge: Financial Liberalisation post-1999

Greenspan’s Final Challenge: Monetary Policy under George W. Bush

2        The Transmission Mechanism

Who is to Blame for a Credit Crisis – the Lender or the Borrower?

Stage 1: The USA spends more than it earns

Stage 2: The US Balance of Payments deficit explodes

Stage 3: The Surplus Nations fail to take Corrective Action

Stage 4: The USA Mops up Surpluses by Issuing More Bonds

The Complete Cycle

3        The Curious Incident of the Dog in the Night-Time

The Mystery of the Somnolent Central Bank

Clue Number 1 – Rapid Growth in the Money Supply

Clue Number 2 – A Deteriorating Balance of Payments Position

Clue Number 3 – Soaring Asset Prices

Why didn’t the dog bark?

4        The Rock that Cracked

How the tripartite system failed

Seven Stress Fractures that Cracked Northern Rock

5        System Failure

The Fault at the Heart of Light Touch Regulation

The “Lender of the Last Resort” that failed to lend

The Black Horse as a White Knight

The Crisis Escalates

The Treasury steps in

6        The Emperor’s New Clothes

Relationship banking

Securitisation

The Bonus Culture

Credit Default Swaps: The New Alchemy

A Model of the New Alchemy

What happens when the Emperor turns out to be naked

7        A Tale of Two Banking Disasters

How borrowers create “value” in a credit bubble

The RBS acquisition of ABN AMRO: a deal too far

Sir Fred Goodwin is held to account

Lloyds: the Black Horse enters a Black Hole

8        The American Banking Meltdown

“Why did no-one see it coming?”

Exit Bear, Pursued by Creditors

Fannie and Freddie Disintegrate

The Merrill Lynch salvage operation

The Lehman Brothers bankruptcy

9        Armageddon Avoided

Countdown to Chaos: 15th September to 7th October 2008

Their Finest Hour: 8th October 2008

The Aftermath

10      The Queasy Feeling of Quantitative Easing

The Case for Quantitative Easing

The Pollyanna of Threadneedle Street: The Bank of England’s Flawed Forecasts

Stagflation: the Child of Quantitative Easing

What would Keynes have made of QE?

11      The Euro’s Existential Crisis

The Euro’s Fundamental Design Flaw

The Sovereign Debt Death Spiral

How to Solve a Sovereign Debt Crisis

The Long Goodbye: Requiem for the Euro

12      The Decadent Recovery

The Austrian Theory of Cyclical Recovery

Anaemic Recovery

Five Stages of Grief and Seven Lean Years

13      The Golden Mean: A Road Map to Economic Stability

The Fallacies of Modern Finance Theory

The Second Principle: NAIRU

The Third Principle: Balance of Payments Equilibrium

The Golden Mean

14      Managing Aggregate Demand

Achieving the Golden Mean

The Three Tools of Macroeconomic Policy

Fiscal Policy during the Credit Crisis

The National Infrastructure Bank

Conclusions

15      The Restoration of Sound Money

1.          Controlling the Quantity of Money

2.          Regulating bank leverage

3.          Managing banking crises

A recovery plan for distressed banks

Conclusions

16      The Return of the Guinea:  Creating a New International Monetary System

The Prisoner’s Dilemma: The Deflationary Bias in the Global Economy

Towards Global Balance

A new international currency: the Guinea

The Guinea as a Reserve Currency

The International Central Bank (ICB)

Conclusion: Beyond the Financial Crisis

Bibliography

Acknowledgements

Index

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