The Alchemists: Three Central Bankers and a World on Fire (63 page)

“has been stretched and, in some cases, disregarded”
:
“Too Close to State Financing via the Money Press,’”
Der Spiegel,
August 29, 2012, http://www.spiegel.de/international/europe/spiegel-interview-with-bundesbank-president-jens-weidmann-a-852285.html.

“Mephistopheles stirs up the general elation even further”
:
“Money Creation and Responsibility,” speech at the 18th colloquium of the Institute for Bank-Historical Research (IBF) in Frankfurt, September 18, 2012, http://www.bundesbank.de/Redaktion/EN/Reden/2012/2012_09_20_weidmann_money_creaktion_and_responsibility.html.

“I think that, in my job as president”
:
Mario Draghi, press conference, September 6, 2012, http://www.ecb.int/press/pressconf/2012/html/is120906.en.html.

“this precious stone set in the silver sea”
:
Mervyn King, Speech to the South Wales Chamber of Commerce, October 23, 2012, http://www.bankofengland.co.uk/publications/Documents/speeches/2012/speech613.pdf.

“Is not the mere existence of general unemployment”
:
Mervyn King “Twenty Years of Inflation Targeting,” Stamp Memorial Lecture, London School of Economics, October 9, 2012, http://www.bankofengland.co.uk/publications/Documents/speeches/2012/speech606.pdf.

1
: Kungl. Myntkabinettet (The Royal Coin Cabinet)

2
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3
: AP Photo/Staff/Putnam

4
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5
: AP Photo/Chick Harrity

6
: © European Commission Audiovisual Library

7
: Bloomberg/Getty Images

8
: © Bank for International Settlements

9
: Federal Reserve photo, Britt Leckman

10
: Federal Reserve photo, Britt Leckman

11
: Brendan Smialowski/Getty Images

12
: Bloomberg/Getty Images

13
: Bloomberg/Getty Images

14
: Pete Souza/Official White House photo

15
: AP Photo/Remy de la Mauviniere

16
: AP Photo/Virginia Mayo

17
: © European Central Bank, Frankfurt am Main, Germany

18
: © European Central Bank, Frankfurt am Main, Germany

19
: © European Central Bank, Frankfurt am Main, Germany

20
: AP Photo/Phillippe Wojazer, Pool, File

21
: John Stillwell/PA Wire

22
: AP Photo/The Canadian Press, Fred Chartrand

23
: AP Photo/The Canadian Press, Fred Chartrand

24
: Bloomberg/Getty Images

25
: © European Central Bank, Frankfurt am Main, Germany

26
: © European Central Bank, Frankfurt am Main, Germany

27
: © European Central Bank, Frankfurt am Main, Germany

28
: © European Central Bank, Frankfurt am Main, Germany

29
: © European Central Bank, Frankfurt am Main, Germany

30
: AP Photo/Ng Han Guan

The page numbers in this index refer to the printed version of this book. To find the corresponding locations in the text of this digital version, please use the “search” function on your e-reader. Note that not all terms may be searchable.

Ackermann, Josef, 314

Ahamed, Liaquat, 164

Akerlof, George, 96

Alchemists, 24–25

Aldrich, Nelson, 35–36, 42–44

Aldrich-Vreeland Act (1908), 43

Alvarez, Scott, 140, 193

American International Group (AIG)

bailout inquiry, 170–71, 177

collapse and bailout of, 145–47

Anglo Irish Bank, 294

Asmussen, Jörg, 228, 290, 323, 380

Assange, Julian, 250

Asset Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF), 150

Audit the Fed, 175–76, 185–86, 193–94, 197

Austerity programs.
See
Deficit reduction

Auto industry bailout, 151

Axelrod, David, 189

Axilrod, Stephen, 64–65

Bachmann, Michele, 170

Bagehot, Walter, 10, 28–30

Bagehot’s dictum, 33, 149

Bailouts

AIG, 145–47

Bear Stearns, 133–34, 139

Bernanke defense of, 170–71, 176–77, 181–82

Bernanke/Geithner analysis for, 147–49

in European crisis.
See
European Central Bank (ECB) remedies

first, by Bank of England (1866), 27–28, 32–34

historical basis of, 42

postcrisis opposition to, 172–81

Texas S&Ls (1980s), 79

Wall Street crash (1929), 56

Banca
, 19

Banca d’Italia

head of.
See
Draghi, Mario

political control of, 75

Bank, origin of word, 19

Bank failures

Black Friday (1866), 10, 26–28

Continental Illinois National Bank and Trust (1982), 179

England (1866), 10, 26–28

and financial crisis (2007–2012).
See
Investment bank failures

Great Depression (1870s), 39–40

and recessions, 3, 23, 33–34, 39–40, 42–43

remedies.
See
Bailouts

Stockholms Banco (1668), 17–18, 23–24

Texas S&Ls (1980s), 79

Bank for International Settlements (BIS), 59, 223–25

Global Economy Meeting (2010), 223–32

Banknotes

history of, 20–21, 29

value and national stability, 29–30

Bank of Canada, 130, 153, 388

eurozone interventions by, 349–50

Bank of England

Bank Rate cuts, 238–39

creation of, 27

eurozone interventions by, 349–50

governors.
See
Carney, Mark; King, Marvyn; Norman, Montagu

Great Depression actions, 55, 60

imperialism, connection to, 10, 28–31

inflation, differing views of, 252–53

interest rate cuts (2009), 162–63

under Labour, limited powers, 234–35, 237–38, 242

location of, 30–31

MPC, King leadership of, 123, 239

MPC meetings, structure of, 239–40, 246

Northern Rock PLC crisis and bailout, 125–28

Osborne, new role proposed by, 247–48

Panic of 1866 bailout by, 27–28, 32–34

political independence, 121–22

quantitative easing (2009), 238–41

quantitative easing (QE2), 334–36, 340

Soros/Druckenmiller and devaluation of pound, 72–74

strong action, lack of, 138–39, 387–88

value of pound sterling (1992), 72

Bank of Greece, governor.
See
Provopoulos, George

Bank of Japan, 86–94

Bernanke on, 84–85, 88–89

currency swaps with ECB (2011), 349–50

Hayami as governor, 87, 89–92

post–World War II power of, 86

quantitative easing by, 90–91, 255

zero-interest-rate policy, 87–88, 90–92

Bank of the Estates of the Realm, 24

Bank of the United States (1791), 37

Banque de France, 55, 115

Barclays, 154

Barker, Kate, 7, 122, 243, 247, 250

Barwell, Richard, 122

Bastasin, Carlo, 316–17

Bater, Jeff, 254

Bean, Charles, 97, 124, 142, 240–41

Bear Stearns

bailout, 133–34, 139

collapse of, 132–33

Beck, Glenn, 256, 276

Beer Hall Putsch, 52–53

Benton, Thomas Hart, 38

Bérégovoy, Pierre, 77

Berlin Wall, end of, 76–77

Berlusconi, Silvio

bombastic remarks of, 223, 299, 319–20

and ECB bailout conditions, 319–21, 346

successor to.
See
Monti, Mario

Bernanke, Ben

background information, 7–8, 115–20

beginning crisis, view of, 7–8, 128

defends Fed actions during crisis, 170–71, 176–77, 181–82

on financial accelerator, 7, 58, 119, 132

financial crisis leadership.
See
Federal Reserve remedies

on first day of crisis, 1, 4–6

on global savings glut, 101–2

goal-based Fed actions, statement on (2012), 385–87

as Great Depression scholar, 7–8, 116, 119–20, 149–50

Jackson Hole (2007), 111–12, 123–24

Jackson Hole (2010), 265–66, 268

Jackson Hole (2012), 384–85

on Japanese economic decline (1990s), 84–85, 88–89

nominal GDP targeting, interest in, 338–39

-Obama relationship, 181, 183

personal traits, 116–17, 118–19, 176, 200

as “Person of the Year,” 151, 184

public statement, first, 5–6

and quantitative easing (QE2), 259–61, 264–76, 279–80

reappointment (2010), 181–84, 189–93

and TARP, 156–57, 160

Teal Book, 262

on tight money approach, 208–9

and tipping point theory, 267–68

Besley, Tim, 162, 241

Biddle, Nicholas, 37–39

Bills of exchange, 31

Bini Smaghi, Lorenzo, 293–94

BIS.
See
Bank for International Settlements

Black Friday (1866).
See
Panic of 1866 (England)

Blackstone, Brian, 318

Blair, Tony, 81–82

Blanchard, Oliver, 116

Blanchflower, David “Danny”

on interest rate cuts, 162–63

-King conflict, 123, 138–39, 239, 250–51

Blankfein, Lloyd, 190

Blinder, Alan, 91, 94, 97, 119

BNP Paribas, crisis and bailout, 1–4, 111

Bois, William, 26, 31

Bonds

ECB bond purchases.
See
Outright Money Transactions (OMT); Securities Markets Programme (SMP)

federal, as war financing, 37

government bonds, large-scale purchase.
See
Quantitative easing

market, economic importance of, 370

rating AAA as safe, 103

Boxer, Barbara, 189

Boyle, Andrew, 59

Brainard, Lael, 346

Bretton Woods (1944), 63

Bridgewater Associates, 5

Brown, Gordon, 82, 238, 242

Brown, Scott, 188

Buck, Pearl S., 51

Bullard, James, 188, 265, 272, 385

Bundesbank

ECB actions, opposition to, 229–32, 351, 381–84

ECB actions approved by, 231, 384

on longer-term remedies (2011), 351

as model for ECB, 77

presidents.
See
Weber, Axl; Weidmann, Jens

prohibitions of, 221–22

public trust in, 75

Bunning, Jim, 184

Burns, Arthur, 11, 252

bullied by Nixon, 63–65

inflation, approach to, 63–67

Cameron, David, 243, 251, 291

Canada, central bank.
See
Bank of Canada

Carney, Mark, 161

as Bank of England governor, 388

Carter, Jimmy, inflation, approach to, 67–71

Central bank.
See also
banks under specific countries

Bagehot influence on, 28, 33

history of.
See
European banking history; U.S. banking history

interventions and public resentment, 34, 70–71, 172–81, 278–80

missteps by.
See
Central bank ineffectiveness

power of, 8–11, 106–7

war financing by, 37

Central bankers

annual meetings for, 12

close relationship of, 12–13

comments, impact on markets, 9

multiple roles of, 235

power of, 8, 91, 265

Central bank ineffectiveness

Bank of England passivity, 138–39, 387–88

Bank of Japan economic boom, 86–87

ECB errors and fiscal crisis, 135–37, 212–13, 303–5

ECB and Greek bailout, 212–13

financial panic as result, 31–32

Franco-German Declaration, 291–92

gold standard abandoned, Nixon era, 63–64

and Great Depression, 11, 60–61, 84–85, 132

housing bubble (2005), lack of understanding, 104–7

and inflation (1970s), 63–67

Ireland, bank guarantees, 283

Reichsbank, paper money mass issuance (1914–1918), 47–53

societal impact of, 11, 60–61

Stockholms Banco rise and fall, 17–24

Central Bank of Ireland, 284–85, 292

China

central bank.
See
People’s Bank of China

economic issues, 375–76

economic success of, 361

during Great Moderation, 94–95

paper money, origin of, 22

Western collapse, impact on, 364–66

Chirac, Jacques, and European unity negotiations, 81–82

Chopra, Ajai, 283–84

Civil War, 39

Clay, Henry, 38

Clearinghouses, first, 40

Clegg, Nick, 247

Clinton, Hillary, 189

Coakley, Martha, 188

Code Pink, 169–70

Cœuré, Benôit, 380

Cohen, Norma, 249

Colson, Charles, 65

Commercial paper, origin of, 31

Commercial Paper Funding Facility, 150–51

Commodity prices

high, financial crisis (2007–), 134–35, 137

increase, impact of, 65–66, 134–35

Connally, John, 62

Conservative Party, King alignment with, 235, 242–47

Continental Illinois National Bank and Trust, 179

Control theory, 367–68

Conway, Edmund, 242

Copper-based currency, 20–22

Corker, Bob, 177, 190, 329

Cowen, Brian, 294–95

Coyne, Joe, 69

Credit-Anstalt, 58

Currency.
See
Dollar; Euro; Gold standard; Money

Currency swaps

by China, 371–72

by Fed during crisis, 130, 153–55, 227, 229, 349–50

Dale, Spencer, 241, 334

Daler plates, 20

Dalio, Raymond, 5

Dallara, Charles, 312–15

Darling, Alistair

and eurozone bailout, 245

on Irish bank guarantees, 158

-King conflict, 121, 233–35, 238, 242

and Mansion House speech, 233–35

and Northern Rock crisis, 125–28

Davis, Tom, 95–96

Debt restructuring, Greece, 312–16

Deficit reduction

Great Britain, 237–38, 241–49

Greece, 209–10, 286, 302, 353–54

Ireland, 284–85, 294

Italy, 319, 321–22, 346, 353

Portugal, 220, 353

as risk management, 242, 248–49

state pay/pension cuts, 302–3, 309–10

tight money approach, 208–9

Deflation, Japan (1990s), 84–92

De Grauwe, Paul, 80

Delors, Jacques, 75

DeMint, Jim, 191

Democrats

and Bernanke reappointment, 189, 189–91, 192

unpopularity of (2010), 188–89

Denmark, outside the eurozone, 77

Depression.
See also
Great Depression

Eurozone countries, 292, 303, 341, 389

Great Depression (1870s), 39–40

Deroose, Servaas, 285

Dexia, 154, 159

Dimon, Jamie, 190

Dodd, Christopher, 173–74, 177, 197.
See also
Dodd-Frank Act

as Bernanke supporter, 183–84

Dodd-Frank Act, 194–200.
See also
U.S. financial reform

emergency lending limits, 349

original proposals, 185–88

passage of, 199

revisions to, 194–99

Dollar

gold standard abandoned, Nixon era, 62–64

as single national currency, benefits of, 75

Dombret, Andreas, 231, 323

Donohue, Tom, 190

Dorgan, Byron, 189

Dornbusch, Rudiger, 78

Dot-com bubble, 98, 149

Draghi, Mario

background information, 116, 300–301

on coordination of remedies, 226–27

diplomatic tasks of, 380, 382

ECB selection as president, 300–301

euro preservation, statement on, 358, 380–81

first days at ECB, 342–44

interest rate cuts (2011), 344, 352

and Italy bailout, 319

leadership style, 343–44

Outright Money Transactions (OMT), 382–84

policy change as emphasis of, 350, 355, 379–80

positive steps by, 344, 350–53

Weidmann opposition to policies, 381–84

Druckenmiller, Stan, 72–74

Dudley, Bill, 133, 140, 257, 263, 269–70, 275, 385

global effort leadership, 152–53

Duisenberg, Wim, 81–82

Duke, Betsy, 264

Duke, Elizabeth, 385

Durbin, Dick, 190–91

Economic Consequences of the Peace, The
(Keynes), 49–50

Economic crisis.
See entries under
Financial crisis

Economic stability

Great Moderation ingredients, 98

Jackson Hole Consensus on, 98

and low-risk premiums, 107

Ehrlichman, John, 64–65

Eichengreen, Barry, 79

Elizabeth II, queen of England, 236

Emanuel, Rahm, 172–73, 189

Emigration, within U.S. versus Europe, 79

Employment gains, goal-based Fed actions based on (2012), 385–87

Employment losses.
See
Unemployment

English, Bill, 265

Euro

establishment of, 75–77, 82–83

Greek adoption of, 203

nations on currency.
See
Eurozone

value fixation (1999), 82

Eurobonds, 228, 230, 323–24

Europe

European Union (EU), 78–80

financial crises.
See
European financial crisis (2007–2012)