The Map and the Territory
Page 31
Cavallo, Domingo, 227
CCC (bond rating), 257
central bank funding, 40
central planning, 61, 100
CEO compensation, 95
CEOs, 243
charity, 190–91
chart pricing, 75, 76
Chase National Bank, 126
Chavez, Hugo, 227
Chile, 227
China, 62, 169–70, 198, 209, 229, 230, 240, 250, 267, 307
Chrysler, 155, 157, 265, 304
Citicorp, 357n
Citigroup, 70–71, 106–7
civil rights movement, 238
Civil War, U.S., 303
climate change, 147
Clinton, Bill, 193, 256
Club of Rome, 179–80
coin clipping, 373n
Cold War, 61, 240, 287
collateral, 105, 109
collateralized debt obligations, 40, 103, 117
collateral standards, 103
Commerce Department, U.S., 127, 133–34
commercial paper, 261
Commodity Credit Corporation, 158
communal groups, 26
compensation, 94–95
competition, 29–30, 250–51, 259–60, 347n
competitive drive, 18
Conference Board, 130, 358n
Conference of Business Economists, 129
Congress, U.S., 82
Congressional Budget Office, 148, 164, 206, 247
conspicuous consumption, 24, 201
Constitution, U.S., 2, 31, 122, 129, 233–34, 260, 273
Constitution, USS, 284
construction, 142, 148
consumer behavior, 25
Consumer Expenditure Survey, 376
consumer goods, 141
Consumer Price Index, 269
consumption expenditures, 81
Continental Illinois, 101, 304
Continentals, 272
contingent convertible (CoCo) bonds, 97, 115
contingent liabilities, 304–5
corporate balance sheets, 37–38
corporate earning-price yields, 292
corporate investment, 85
correlation, causation vs., 58
corruption, 232
Council of Economic Advisers (CEA), 6, 132, 195, 358n
Countrywide Financial, 38, 64
creative destruction, 93, 255–56, 363n
credit default swaps (CDSs), 40, 106–8, 109
credit rating, 28, 65, 204
leverage and, 87–89
credit-rating agencies, 46, 104
credit risk, 79
crony capitalism, 114, 153, 262, 266–67, 363n
crowding in, 367n
crowding out, 88–89, 200, 204
Cultural Revolution, 62
culture, 30, 215–36
current account deficit, 93, 118
Darwin, Charles, 260
Data Resources Inc., 132
David, Paul, 171–72
DDT, 179
debt, 49–51, 85, 87, 88–89, 295, 304, 347n
default and, 97–98
in financial crises, 99
debt collateral, 39
debt leverage, 10, 52
debtor-in-possession financing, 115
Declaration of Independence, 31
default, 97–98
deficits, 200, 264, 283–84
deficit spending, 4, 201, 204, 305, 376n
demand, 121, 185, 250–51, 252
demand curves, 33, 371n
dependency, 27
deposit insurance, 39, 40, 278
depreciation, 354n
Depression of 1907, 92, 99
Deutsche Bundesbank, 220, 222
Dimon, Jamie, 266
discounting, 21
dividends, 242
division of labor, 19, 27, 31
Dodd-Frank Act, 92, 96–97, 157–58, 250, 262, 264
Dole, Bob, 190, 306
dollar, 118, 210–11, 218, 228, 237
dot-com bubble, 49, 50, 66, 67, 71, 72, 78, 82, 164, 169, 175, 176, 250
double-entry bookkeeping, 202–3, 292
Dow Jones Industrial Average, 44, 75, 124, 156
Durbin-Watson statistic (D-W), 56–57
Earned Income Tax Credit (EITC), 191
earthquakes, 288
East Germany, 61, 349–50n
Eckstein, Otto, 132
Economic Club of New York, 72–74, 129
economic forecasting, 3–4, 121–39
age of data in, 126–28
as discipline of probabilities, 3
failures of, 7–8
of innovation, 168–69
Keynesian, 4–5, 7
macroforecasting, 129–30
monetarist, 7
in postwar years, 128–29
as private enterprise, 122–24
economic growth, 256
Economic Policy Institute, 371n
Economist, 8, 63, 96, 126, 191, 245, 249
Edison, Thomas, 171, 301
education, 241–42, 243–44, 297
Einstein, Albert, 27, 35, 151–52
Eisenhower, Dwight D., 67, 194
elasticity, 251–52
electricity, 171–72, 180–82
Emerging Japanese Superstate, The (Kahn), 169
Enlightenment, 15, 185, 300
entitlements, 189–213, 293–94
environmentalism, 179–80
Environmental Protection Agency (EPA), 179
equity, 85, 111–12
equity capital, 110–11
equity premium, 28, 63, 292
equity risk premium, 77, 80
equity stimulus, 83
euphoria, 18–19, 25, 77, 78–79, 101, 117, 145, 292
euro, 118, 215–16, 217–18, 219, 220–25, 368–69n
European Central Bank (ECB), 37, 222, 224, 225
European Monetary Union, 219
exchange rates, 9, 174, 217–18
Fabian socialists, 61–62
fairness, 31, 256–60
Fannie Mae, 64, 67, 68, 69, 72, 113, 264, 265, 266, 304
farm output, 360n
“fast thinking,” 15, 34
fat tail events, 151
FCC, 258
fear, 18–19, 25, 74, 79, 101, 118, 148, 280–81, 345n, 352n
federal budget, 82
Federal Deposit Insurance Corporation (FDIC), 43, 47, 48, 107, 257
Federal Deposit Insurance Corporation Improvement Act (FDICIA), 114
Federal Open Market Committee, 49, 53, 138, 163
Federal Reserve, 39, 42, 44, 66, 67, 81, 83, 94, 118, 119–20, 126, 127, 129, 130, 135, 167, 252–53, 261, 262, 264, 281, 304
balance sheet expansion of, 152, 358n
independence of, 18–19
tightening by, 161–62
value of assets of, 376n
Federal Reserve Act, 1, 139
Federal Reserve Bank of New York, 1
Federal Reserve Board, 1, 7, 98, 137–38, 175
FHA, 258
fiat currency, 272–75, 373n
finance, 5, 37, 173–78, 230
purpose of, 93–95
regulation of, see regulations
financial crises, debt in, 99
financial crisis of 2008, 1–2, 16, 45, 48, 72, 80, 92, 95, 112, 144, 145, 149, 152, 269, 280, 291, 293
regulators and, 93, 96–97
roots of, 10
Financial Services Authority, U.K., 47
Financial Stability Boards, 40
financing gap, 353n
Finland, 220, 222, 368n
fire departments, 287
fiscal stimulus, 83
Fitch, 46
flu epidemics, 287
Ford, Gerald R., 132, 133, 135, 136, 154, 194, 236
forecasting. See economic forecasting
Foreign Intelligence Advisory Board, 137
Fortune, 9
Fothergill, Alice, 365n
401ks, 50, 81
France, 217, 222
fraud, 101, 105
Freddie Mac, 64, 68, 72, 113, 264, 265, 266, 304
Friedman, Milton, 6–7, 274, 276
Friedman, Rose, 25, 347n
Fukushima nuclear plant, 226
funding buffers, 288–89
gambling, 32
GATT, 293
GDP, 4, 5, 23, 76, 83, 142–43, 202, 203
weight of goods in, 182–83
General Electric, 155
General Foods, 137
General Motors, 155, 157, 265, 304
General Theory of Employment, Interest and Money, The (Keynes), 4
Gerald R. Ford (aircraft carrier), 284
Germany, 63, 216, 218, 219, 222, 223, 224, 238
GI Bill, 239, 370n
Gini, Corrado, 238
Gini coefficient, 238–39, 242
Glass-Steagall Act of 1933, 355n
Global Competitive Index, 233
Global Insight, 358n
globalization, 240–41, 242
gold, 271, 368n, 373n
Goldman Sachs, 106–7, 356n, 365n
gold standard, 269
government-sponsored enterprises (GSEs), 64–65, 67–69, 71–72, 243, 266
Graham, Katharine, 305
Gramm-Leach-Bliley Act of 1999, 105, 355–56n
Great Britain, 128, 233–34, 354n
Great Depression, 2, 92, 99, 127, 130, 133, 198, 211, 257, 269, 276, 301, 303, 356n
Greece, 216, 218, 219, 221, 222, 223, 229
gross national product, 126–27, 133
gross national savings, 229, 230, 294–95
growth, stability vs., 101–2
haircuts, 115
Hansen, Alvin, 129–30
happiness, 24–25
health care, 254
health insurance, 287
hedge funds, 39, 40, 104–5
Heffetz, Ori, 346n
Heinz, John, 190
herding, 18, 24–27, 29, 30, 39, 53, 79, 101, 135, 201, 292
holding period, 272
home bias, 18, 28–30, 347n
home building, 82
home equity gains, 81
Home Mortgage Disclosure Act (HMDA), 66
home prices, 144, 155
mortgage rates and, 88
homes, 270
home scrap, 176
Homestead Act, 125, 357–58n
Homo economicus, 9–10, 14
Hong Kong, 62
Hoover, Herbert, 157
hospitals, 287
housing, 37, 38, 63, 300
boom in, 49–51, 79, 250
prices, 88, 144, 155, 348n, 359n
starts, 55
Housing and Urban Development Department, U.S., 64, 69, 351n
Hume, David, 15, 186
Huxley, Thomas, 151
immigration reform, 245
income inequality, 237–68
income-to-equity ratios, 111–12
index funds, 78
India, 61–62, 267
Indonesia, 267
industrial business cycle, 16
industrial production, 55
inflation, 6–7, 22, 77, 131, 147, 162, 163, 253, 269–81, 304, 307
information, 122–24, 176–77, 183–84
infrastructure, 283, 285–87, 293
inheritances, 32
innovations, 15, 164, 168–69, 176, 230–33, 296
Inside Mortgage Finance, 66
insurance, 95, 287–88
interest, 242, 350n
interest rates, 21, 22, 27–28, 62–63, 174, 204, 272, 292, 352n
International Monetary Fund, 7–8, 62, 113, 230, 268, 293
Interstate Commerce Commission, 372n
intuitions, 35, 346n
inventory liquidation, 134
inventory recession, 133
investment, 28, 63, 202, 207–8
cash flow ratio with, 87
corporate, 85
cost-saving, 146
crowding out of, 88
uncertainty and, 141–59
investment banks, 40, 42
IOUs, 274
iPhones, 21, 181
Iraq War, 285
Ireland, 221, 368n
Italy, 216, 218, 221, 225
Japan, 37, 63, 169, 170, 209, 238, 354n
Jessel paradox, 26, 69–70
Johnson, Karen, 138
Johnson, Lyndon B., 6
Journal of Commerce, 123, 357n
JPMorgan, 8, 87, 106–7, 137, 263, 265, 266
Bear Stearns acquired by, 1, 139
junk bonds, 70, 80
Kahn, Herman, 169
Kahneman, Daniel, 15, 17, 32
Kelly, Kieran, 219
Kennedy, John F., 6, 194–95
Keynes, John Maynard, 4, 8–9, 272
Keynesianism, 4–5, 7, 129, 194
Kirkland, Lane, 190
Klein, Lawrence, 132
Kurokawa, Kiyoshi, 226
Kuznets, Simon, 126
Labor Department, U.S., 347n
labor-saving equipment, 296–97
labor unions, 239, 240, 247
Latin America, 217, 227, 258
Lehman Brothers, 64, 116
failure of, 1, 38–39, 44, 47, 48, 51, 80, 97, 99, 102, 105, 107, 142, 149, 152, 218, 262, 279, 355n
lending, 201–2, 279
leverage, 85, 87, 98, 111, 116, 145, 348n
ratings and, 87–89
Levittown, 239–40
Limits of Growth, The, 179–80
liquid cash flow, 20–21
liquidity, 39, 71, 92, 103, 105, 109
liquidity preference paradigm, 272
liquidity requirements, 110, 118
living wills, 110
loan/money multiplier, 278–79
location, 124–26
Locke, John, 15, 186
Lockheed, 304
Loewenstein, George, 17
London blitz, 33
London Interbank Offered Rate (LIBOR), 109, 348n
lotteries, 32
Luxembourg, 220, 222
M1, 275–76
M2, 275–77, 280, 373n, 374n
M3, 275–76
Maastricht Treaty, 219, 222
McCulloch, Hugh, 117
Machinery and Allied Products Institute, 130
macroforecasting, 129–30
Maddison, Angus, 186, 360n
Making, Shaping and Treating of Steel, The, 130–31
Malkiel, Burton, 358n
Mallaby, Sebastian, 104
manufacturing, 239
marginal product, 259
marginal savings rate, 205–7
market liquidation, 153
market liquidity, 103
market mutual funds, 38
markets, 61–62
as allegedly self-correcting, 4, 91, 121, 152
central planning vs., 100
Markowitz, Harry, 43
marriage, 141
Marx, Karl, 258, 259
maturity, 28
Meany, George, 133, 154
Measuring Business Cycles (Mitchell and Burns), 127
Medicaid, 11, 167, 212
Medicare, 11, 167, 190, 191–92, 212, 254, 293
Mellon, Andrew W., 157
Menem, Carlos, 227
Merton, Robert, 43
Mesabi Range, 125, 184
Mexican financial crisis (1994–95), 100
Mexico, 28, 227
Middle East, 209
Mischel, Walter, 22
Mitchell, Wesley Clair, 127
Miyazawa, Kiichi, 226
Mobil, 137
model building, 292–93
monetarism, 7
monetary base, 280, 375n
money market mutual funds, 261
money supply, 7, 275–77, 280, 305
money velocity, 277
monopolies, 254
Moody’s, 46
Moore, Geoffrey, 127
Moore’s law, 184, 364n
moral hazard, 115, 117
Morgan, Joh
n Pierpont, 87
Morgan Stanley, 106–7, 356n
Morse, Samuel F. B., 123, 357n
mortgage-backed securities, 64–67, 350n
mortgage pools, 49
mortgage rates, home prices and, 88
mortgages, 52, 63, 103–4
see also subprime mortgages
motor vehicle industry, 128, 131, 155
Moynihan, Daniel Patrick, 190, 307
multifactor productivity (MFP), 166–68, 176, 213
multiplier, 298
mutual funds, 50, 81
Myrdal, Gunnar, 360n
nanotechnology, 185
National Association for Business Economics, 129
National Bank Act, 117, 156
national banks, 111
National Bureau of Economic Research, 118, 126, 127, 128–29
National City Bank, 126
National Commission on Social Security Reform (NCSSR), 189–90, 365n
National Industrial Conference Board, 128–29, 141
National Industrial Recovery Act (NIRA), 158, 257
natural gas, 131
Netherlands, 217, 220, 222, 354n
New Century, 64
New Deal, 128, 158–59, 235, 257, 258, 269
Newey-West estimator, 57
New York, N.Y., 100
New York Stock Exchange, 115, 151
New York Times, 124
New Zealand, 267
Nixon, Richard, 193–94
NLRB, 257
Northern Rock, 47
North Korea, 301
Nuclear Accident Independent Investigation Commission, 226
Obama, Barack, 190
OECD, 268
oil shock, 253
O’Neill, Thomas P. “Tip,” 236
optimism, 31, 32, 347n
optimum capital allocation, 89
options pricing, 44
output, downsizing of, 179–83
output per hour, 134, 162, 165, 167–68, 239
Outright Monetary Transactions (OMT), 222, 224
overnight indexed swap rates, 109
paper currency, 271
partnership finance, 116–17
Pascal, Blaise, 15
patents, 173
pension funds, 50, 81
Pepper, Claude, 190
Peru, 227
peso, 228
policy activism, 157–58
Pony Express, 123
portfolio risk, 19
Portugal, 216, 218, 219, 221, 222, 229
Prell, Mike, 138, 163
price controls, 97
price decline, 175–76
pricing, 19
Prince, Charles, 70–71
productivity, 161–87
profit, 33
profit margins, 162, 176, 209
Putin, Vladimir, 267
QEI, 152
railroads, 20, 41, 125, 126, 128, 184
Rand, Ayn, 27
rationality, 34–36
rationing, 284
Reagan, Ronald, 135, 137, 193, 194, 211
real estate, 28
real estate capitalization rates, 63
redistribution, 32
regression analyses, 11–12, 54–59, 213, 346n
of mortgage rates, 88
regulations, 46–47, 52, 91–120, 300–301, 363n
regulatory arbitrage, 104
regulatory capital standards, 92