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225 some kind of conservatorship: See, for example, "The FDIC's Role as Receiver," in FDIC, Resolutions Handbook (Washington, 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, Washington, 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," Washington 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 Banishing 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, "Unleashing 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, Washington, 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 Shift 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 (Washington, 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.

SELECT BIBLIOGRAPHY.

The literature on financial crises is vast. This bibliography of works covering various facets is not intended to be comprehensive, but many of the following books, articles, working papers, and speeches informed the writing of this book.

Acharya, Viral V., and Matthew Richardson, eds. Restoring Financial Stability: How to Repair a Failed System. New York: John Wiley and Sons, 2009. Summaries available online at http://whitepapers.stern.nyu.edu/home.html.

Acharya, Viral V., and Philipp Schnabl. "Do Global Banks Spread Global Imbalances? The Case of a.s.set-Backed Commercial Paper During the Financial Crisis of 2007-09." Paper presented at the Tenth Annual Jacques Polak Research Conference, Washington, D.C., November 5-6, 2009. Online at http://www.imf.org/external/np/res/seminars/2009/arc/pdf/acharya.pdf.

Acharya, Viral V., Thomas Cooley, Matthew Richardson, and Ingo Walter, eds. Real Time Solutions for Financial Reform: An NYU Stern Working Group on Financial Reform, December 2009. Online at http://govtpolicyrecs.stern.nyu.edu/docs/whitepapers_ebook_full.pdf.

Adrian, Tobias, and Hyun Song Shin. "Financial Intermediaries and Monetary Economics." Federal Reserve Bank of New York Staff Report no. 398, October 2009. Online at http://www.newyorkfed.org/research/staff_reports/sr398.pdf.

____. "Liquidity and Leverage." Federal Reserve Bank of New York Staff Report no. 328, May 2008. Online at http://www.newyorkfed.org/research/staff_reports/sr328.pdf.

____. "The Shadow Banking System: Implications for Financial Regulation." Federal Reserve Bank of New York Staff Report no. 382, July 2009. Online at http://www.newyorkfed.org/research/staff_reports/sr382.pdf.

Ahamed, Liaquat. Lords of Finance: The Bankers Who Broke the World. New York: Penguin Press, 2009.

Akerlof, George A., and Robert J. Shiller. Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism. Princeton, N.J.: Princeton University Press, 2009.

Almunia, Miguel, Agustin S. Benetrix, Barry Eichengreen, Kevin H. O'Rourke, and Gisela Rua. "From Great Depression to Great Credit Crisis: Similarities, Differences and Lessons." Paper presented at Fiftieth Economic Policy Panel Meeting, Tilburg, Netherlands, October 23-24, 2009. Online at http://www.econ.berkeley.edu/~eichengr/great_dep_great_cred_11-09.pdf.

Bagehot, Walter. Lombard Street: A Description of the Money Market. New York: E. P. Dutton, 1920.

Baldwin, Richard, ed. The Great Trade Collapse: Causes, Consequences, and Prospects. A VoxEU. org Publication. London: Center for Economic Policy Research, 2009. Online at http://www.voxeu.org/reports/great_trade_collapse.pdf.

Barbera, Robert J. The Cost of Capitalism: Understanding Market Mayhem and Stabilizing Our Economic Future. New York: McGraw-Hill, 2009.

Basel Committee on Banking Supervision. Review of the Differentiated Nature and Scope of Financial Regulation: Key Issues and Recommendations. Basel, Switzerland: Bank for International Settlements, 2010.

Beber, Alessandro, and Marco Pagano. "Short-Selling Bans Around the World: Evidence from the 2007-09 Crisis." Centre for Studies in Economics and Finance Working Paper no. 241. Online at http://www.csef.it/WP/wp241.pdf.

Bernanke, Ben. "Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression." American Economic Review 73 (1983): 257-76.

Blanchard, Olivier, and Gian Maria Milesi-Ferretti. "Global Imbalances: In Midstream?" IMF Staff Position Note, December 22, 2009. Online at http://www.imf.org/external/pubs/ft/spn/2009/spn0929.pdf.

Blundell-Wignall, Adrian, et al. The Financial Crisis: Reform and Exit Strategies. Paris: Organisation for Economic Co-operation and Development, 2009. Online at http://www.oecd.org/dataoecd/55/47/43091457.pdf.

Bordo, Michael D. "The Lender of Last Resort: Alternative Views and Historical Experience." Federal Reserve Bank of Richmond Economic Review 76 (1990): 18-29.

Bordo, Michael D., ed. Financial Crises. 2 vols. Aldershot, Hants., U.K., and Brookfield, Vt.: Edward Elgar Publishing, 1992.

Bordo, Michael D., and Barry Eichengreen, eds. A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform. Chicago: University of Chicago Press, 1993.

Bordo, Michael D., and Andrew Filardo. "Deflation in a Historical Perspective." Bank for International Settlements Working Paper no. 186, November 2005. Online at http://www.bis.org/publ/work186.pdf?noframes=1.

Bordo, Michael D., Claudia Goldin, and Eugene N. White, eds. The Defining Moment: The Great Depression and the American Economy in the Twentieth Century. Chicago: University of Chicago Press, 1998.

Bordo, Michael D., and Harold James. "The Great Depression a.n.a.logy." National Bureau of Economic Research Working Paper no. 15584, December 2009. Online at http://www.nber.org/papers/w15584.

Boyd, John H., Sungkyu Kwak, and Bruce D. Smith. "The Real Output Losses a.s.sociated with Modern Banking Crises." Journal of Money, Credit, and Banking 37 (2005): 977-99.

Bruner, Robert F., and Sean D. Carr. The Panic of 1907: Lessons Learned from the Market's Perfect Storm. Hoboken, N.J.: John Wiley and Sons, 2007.

Brunnermeier, Markus K. "Symposium: Early Stages of the Credit Crunch: Deciphering the Liquidity and Credit Crunch 2007-2008." Journal of Economic Perspectives 23 (2009): 77-100.

Brunnermeier, Markus K., Stefan Nagel, and La.s.se H. Pedersen. "Carry Trades and Currency Crashes." National Bureau of Economic Research Working Paper no. 14473, November 2008. Online at http://www.nber.org/papers/w14473.

Brunnermeier, Markus K., and La.s.se H. Pedersen. "Market Liquidity and Funding Liquidity." Review of Financial Studies 22 (2009): 2201-38.

Caballero, Ricardo J. "The 'Other' Imbalance and the Financial Crisis." National Bureau of Economic Research Working Paper no. 15636, January 2010. Online at http://www.nber.org/papers/w15636.

Calomiris, Charles W. "Banking Crises and the Rules of the Game." National Bureau of Economic Research Working Paper no. 15403, October 2009. Online at http://www.nber.org/papers/w15403.

Calomiris, Charles W., and Larry Schweikart. "The Panic of 1857: Origins, Transmission, and Containment." Journal of Economic History 51 (1991): 807-34.

Capie, Forrest, and Geoffrey E. Wood, eds. Financial Crises and the World Banking System. New York: St. Martin's Press, 1986.

Case, Karl E., John M. Quigley, and Robert J. Shiller. "Comparing Wealth Effects: The Stock Market versus the Housing Market." Advances in Macroeconomics 5 (2005): 1-34.

Case, Karl E., and Robert J. Shiller. "Is There a Bubble in the Housing Market?" Brookings Papers on Economic Activity 2 (2003): 299-362.

Ca.s.sidy, John. How Markets Fail: The Logic of Economic Calamities. New York: Farrar, Straus and Giroux, 2009.

Cihak, Martin, and Erlend W. Nier. "The Need for Special Resolution Regimes for Financial Inst.i.tutions." VoxEU.org, January 7, 2010. Online at http://www.voxeu.org/index.php?q=node/4446.

Cooper, George. The Origin of Financial Crises: Central Banks, Credit Bubbles, and the Efficient Market Fallacy. New York: Vintage, 2008.

Cottarelli, Carlo, and Jose Vinals. "A Strategy for Renormalizing Fiscal and Monetary Policies in Advanced Economies." IMF Staff Position Note, September 22, 2009. Online at http://www.imf.org/external/pubs/ft/spn/2009/spn0922.pdf.

Crotty, James. "Structural Causes of the Global Financial Crisis: A Critical a.s.sessment of the 'New Financial Architecture.' " Cambridge Journal of Economics 33 (2009): 563-80.

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