The influence of uncertainty in a changing financial envoronment

Ricardo A Halperin The Influence of  Uncertainty in a Changing Financial Environment An Inquiry into the Root Causes of the Great Recession of 2007-2008 www.allitebooks.com The Influence of Uncertainty in a Changing Financial Environment www.allitebooks.com Ricardo A. Halperin The Influence of Uncertainty in a Changing Financial Environment An Inquiry into the Root Causes of the Great Recession of 2007–2008 www.allitebooks.com Ricardo A. Halperin Retired from the World Bank Maryland, USA ISBN 978-3-319-48777-9    ISBN 978-3-319-48778-6 (eBook) DOI 10.1007/978-3-319-48778-6 Library of Congress Control Number: 2016959592 © The Editor(s) (if applicable) and the Author(s) 2017 This work is subject to copyright All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed The use of general descriptive names, registered names, trademarks, service marks, etc in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made Cover illustration: © Ta da!/Alamy Stock Photo Printed on acid-free paper This Palgrave Macmillan imprint is published by Springer Nature The registered company is Springer International Publishing AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland www.allitebooks.com To Emma, Sofia and Thomas www.allitebooks.com Acknowledgments At the end of 2001, I retired from the World Bank, where I had worked for 25 years, and soon after I recognized the splendid opportunity ahead: I had free time and no longer had to worry about earning a salary for a living! Even before graduate school, I had developed a love for economics inspired by an excellent teacher at the University of Buenos Aires: Julio H.G.  Olivera, and after retirement I decided to rekindle the relation While consulting assignments came my way from time to time, I was finally able to catch up on my readings, which I had neglected due to the demands of my work; it helped that I had unlimited access to the Joint Library of the IMF and the World Bank Then came the Great Recession of 2007–2008, and a few years ago I concluded that, while many excellent works discussing it were already available, some important aspects had not received the attention that they deserved, so I decided to write this book During this time, I received suggestions from many former colleagues, as well as encouragement and support from close friends and family I particularly want to thank Miguel E. Martinez, who read through several early versions of this book, providing me with very helpful comments After Palgrave Macmillan accepted to publish the book, they followed their standard practice of sending it out to a peer reviewer, who provided very constructive comments and suggestions, which I was happy to take into account as best I could He, or she, deserves my thanks! As authors usually declare, I alone bear responsibility for the ideas presented here To all those that helped this book come to print, my heartfelt thanks! vii www.allitebooks.com Contents 1 A Failure of Imagination   1 Part I  Crisis!  15 2 The Great Recession of 2007–2008  17 3 Fingers in the Dike  47 Part II  The Financial Revolution  63 4 Financial Intermediation and the Economy  65 5 The Evolution of Financial Intermediation  89 Part III  The Evolution of Economic Theory 107 6 Economics Quest for Relevance 109 ix www.allitebooks.com x   Contents 7 Theories of Business Fluctuations 151 8 The Elusive Search for Economic Motives 167 9 Risk, Uncertainty and Economic Theory 179 Part IV  Theory Confronts Reality 195 10 The Visible Hand 197 11 Regulation of the Financial Sector 203 12 Prudential Regulation 221 Part V  Looking Forward 239 13 The Challenges Ahead 241 14 Economic Policy Options 255 15 Summing Up 267 Bibliography 275 Index 281 www.allitebooks.com About the Author Ricardo A. Halperin was born in 1940 in Buenos Aires, Argentina He graduated from the University of Buenos Aires in 1963 with a CPA and later attended Columbia University, where he obtained an MBA (with concentration in Finance) in 1965 and a Ph.D (with concentration in Banking) in 1968 After graduating from Columbia, he returned to Argentina, where he taught Monetary Theory and Macroeconomics at the University of Buenos Aires until 1974, and from time to time also advised the Government on financial policy issues While in Argentina, Mr Halperin published a number of articles on economic topics, all in Spanish, as well as a book: Los Impuestos y la Inflación, which was published by Editorial Cangallo in 1975 In 1976, he joined the World Bank at its Washington DC headquarters, eventually rising through various management positions At the time of his retirement in 2002, he was Director of Infrastructure Operations for Europe and Central Asia After retiring he collaborated with the World Bank’s Pension Finance Committee, which oversees the investments of the Bank’s pension fund, and carried out many consulting assignments He also wrote several short stories and essays in Spanish, which were published by the online literary magazine Letralia Mr Halperin is married and has two daughters and three grandchildren, to which this book is dedicated He lives in the Washington DC suburbs xi www.allitebooks.com CHAPTER A Failure of Imagination Why I Wrote This Book After the financial crisis of 2007–2008 came close to ushering a depression comparable in severity to the one that the world experienced in the 1930s, Queen Elizabeth II rebuked the economics profession for failing to warn in time about the dangers that the economy had faced and asked the question in everyone’s mind: Why did nobody notice it? The London School of Economics felt compelled to respond: …In summary, your majesty, the failure to foresee the timing, extent and severity of the crisis and to head it off, while it had many causes, was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole… While this assessment is not totally fair, as several prominent economists (which include Robert Shiller, Nouriel Roubini, and Raghuram Rajan) did warn in time that the US economy was facing significant risks, by and large it is true that most in public office as well as the media did not take those warnings seriously into account Years later, the then chairman of © The Author(s) 2017 R.A Halperin, The Influence of Uncertainty in a Changing Financial Environment, DOI 10.1007/978-3-319-48778-6_1 www.allitebooks.com SUMMING UP   271 political implications which will affect the US’ closest ally as well as the EU as a whole Another issue, which has not received very close attention but could have an important impact in the world economy, is the extent by which the business sector in China has been relying on debt financing; the high extent of leverage prevailing there could be a significant recessionary source if the world economy starts to lose steam and China’s growth slows down As discussed earlier, today financial transfers across borders are easy to carry out and respond in real time to developments everywhere; hence, economists and politicians not only need to once and for all abandon the facile assumption that it is possible to develop economic policies for a country in isolation from what is taking place outside its borders, but they also need to consider how coordination of policies across countries can be strengthened and some measure of controls over short-term international financial flows established Contrary to the view of those that would take the arguments presented in this book as sufficient grounds for radical action that would sharply curtail the financial sector’s range of action, the book argues that this would be tantamount to the proverbial act of throwing out the baby with the bathwater Despite the concerns it raises, the financial sector performs a valuable role and its instruments by and large expand the choices available to households and firms in a desirable manner Hence, the policy options to be considered have to balance the trade-offs between actions that might constrain the sector too much, which could affect economic growth, and doing too little, exposing the economy to significant fluctuations driven by the sector’s behavior The Policy Options In the context of the preceding caveat, the book concludes that in the developed world and particularly in the USA, on which this book is focused, some important measures are warranted These could include fiscal policy actions, to try to reduce excessive reliance on debt by the private sector (which amplifies the impact of economic fluctuations), regulatory changes (to strengthen the resiliency of the financial system to fluctuations in economic conditions), and strengthened supervision arrangements (to respond to problems before they become unmanageable, and to limit the tendency for regulatory shopping) Despite some shortcomings, the Dodd-Frank Act may be regarded as an important step in this direction 272   R.A HALPERIN An Agenda for Action a) Eliminate double taxation of dividends, to increase reliance on equity financing; offsetting its revenue impact with tax increases that not add to the burden of those with lower incomes b) Limit further the mortgage interest deductions from personal income taxes c) If present approaches to strengthen the equity base of the largest financial intermediaries and additional actions that may be taken to curb their appetite for risk impress as insufficient, consider requiring the largest financial institutions to develop plans for divestiture of business lines that are not essential to their core business, subject to appropriate due process; and cause them to implement those plans within a reasonable time Alternatively, if this proves to be not viable under today’s laws, consider reintroducing a modified version of Glass‑Steagall, to limit commercial bank involvement in investment banking activities d) Consolidate the number of regulatory bodies operating in the financial sector and strengthen these Streamline supervision requirements to reduce the number of agencies to which intermediaries have to report e) Explore additional actions that may be needed to implement the IMF recommendations to improve oversight of the asset management industry, which include “enhancing regulation by providing more specifics for funds liquidity requirements”, “strengthening the micro-prudential supervision of risks related to individual institutions”, “ensuring that funds not take excessive leverage” and “raising the quality of supervisory practices” f) Establish a small tax on derivative transactions g) Develop a medium-term framework to reduce the public sector’s debt/GDP ratio, initially focusing on the reduction of tax evasion and the elimination of subsidies and of loopholes that reduce effective tax burdens, but keeping the option of raising taxes open, if warranted SUMMING UP   273 (continued) h) Table at the next IMF meeting a proposal to issue SDRs in a substantial amount (to be negotiated), to ease balance of payments’ pressures in developing countries and contribute to world economic growth prospects Explore further the role of the IMF and the instruments it has available i) Develop a public‑private partnership framework to substantially increase investments in public infrastructure j) Refocus macroeconomic modeling so as to take into account the activities of all important financial sector institutions, and determine the data requirements to enable econometric research that takes these activities into account 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Activity Chicago: The University of Chicago Press Turner, Adair 2012 Economics After the Crisis Cambridge: MIT Turner, Adair, et al 2010 The Future of Finance, the LSE Report London: London School of Economics and Political Science, particularly Chapter I Wessel, David, eds 2014 Central Banking After the Great Recession Washington, DC: The Brookings Institution Wolf, Martin 2010 Fixing Global Finance Baltimore: John Hopkins University Press ——— 2014 The Shifts and the Shocks What We’ve Learned—And Still Have to Learn- from the Financial Crisis New York: Penguin Press World Bank 2013 Global Financial Development Report 2013: Rethinking the Role of the State in Finance Washington, DC: The World Bank Index A AIG See American International Group (AIG) Akerlof, George, 18, 41n5, 43n24, 86n3, 170, 173, 174, 176n5, 177n9, 188, 237n9 Albania, 160, 165n23 Allais, Maurice, 173, 185, 192n9 American International Group (AIG), 19, 25, 52, 53, 57, 102, 191n1, 209, 212, 216, 263 American Recovery and Reinvestment Act (ARRA), 56, 61n8 Argentina, 102, 244 Arrow, Kenneth, 13n5, 171, 188, 192n8, 193n14 asymmetric information, 25, 29 Austrian school of economics, 148n63, 151, 152, 267 auto industry bail-out, 23, 59, 209 B Bagehot, Walter, 125, 226 Banca di San Giorgio, 90 Bank for International Settlements (BIS), 44n32, 105n17, 231, 232, 236 Bank of England, 91, 103n1, 111, 133, 226 Baring Bros, 31 Basel agreements, 72, 217, 218, 226, 231–6 Bear Sterns, 49–51, 57 Bentham, Jeremy, 119, 167, 168 Berle, Adolph, 35, 199, 201n2 Bernanke, Ben, 5, 13n9, 20, 21, 40–1n1, 43n27, 48, 51, 58, 61n12, 104n12, 149n67, 189, 193n17, 366n11 Bernoulli, Daniel, 177n15, 183, 184, 191n2, 191n3 Biddle, Nicholas, 92 bitcoin, 69 Note: Page numbers with “n” denote endnotes © The Author(s) 2017 R.A Halperin, The Influence of Uncertainty in a Changing Financial Environment, DOI 10.1007/978-3-319-48778-6 281 282   INDEX Blinder, Alan, 40–1n1, 51, 61n3 BNP Paribas, 48, 93 Bohm-Bawerk, Eugen, 124 Borio, Claudio, 66, 86n3, 230, 237n9 Boulding, Kenneth, 76, 87n15 bounded rationality, 172, 173, 175 Bretton Woods, 103, 232, 252 Bretton Woods agreements, 103 Brexit, 8, 68, 83, 85, 250, 252, 270 Bush, George W., 27, 40–1n1, 50, 55, 210, 243 C Caballero, Ricardo, 79, 88n22 Canada, 93 Carter, Jimmy, 210 Chamberlin, Edward, 123, 199 China, 8, 18, 33, 36, 70, 101, 103, 249, 255, 256, 271 Citigroup, 49, 86n8, 93, 201, 211, 215, 263 classical economics, 7, 8, 110–19, 120, 157, 172 Clayton Act, 198 Clinton, Bill, 26, 27, 210, 238n12, 241 collateralized debt obligations (CDOs), 49, 52 commercial banks, 3, 9, 11, 19, 25, 26, 36, 37, 45n39, 49, 58, 65, 75, 78, 79, 90–6, 101, 135, 136, 139, 140, 142, 205–7, 209, 213, 215, 216, 218n7, 222, 225–9, 231, 233, 234, 244, 268–70, 272 bank regulation, 9, 231, 269 Commodities Futures Trading Commission, 72 Commodity Futures Modernization Act, 33, 102 comparative advantage, 117, 142n2, 143n13 Comptroller of the Currency, 39, 72, 136, 206, 213, 222 convertible capital instruments (CoCos), 228, 237n5 Cooke, Jay, 94 Corrigan, Edward G., 33, 44n31 Countrywide Financial Services, 48 credit default swaps (CDS), 19, 52 cyber threats cyber insurance, 263 cyber security, 263–4 D Depression of 1930, 78, 133 derivatives, 24, 25, 30, 33, 44n32, 44n33, 68, 69, 78, 89, 94, 102, 105n17, 142, 181, 208, 212, 214, 216, 219n13, 272 Dexia, 245, 246 Dodd-Frank Act, 35, 39, 72, 73, 96, 99, 136, 203, 207, 211–18, 270, 271 E Eichengreen, Barry, 102, 105n18 endowment effect, 174 Espirito Santo bank, 248 euro, 36, 55, 69, 245, 246, 248, 249 European Central Bank (ECB), 245, 248, 249 European Financial Stability Fund (EFSF), 245 European Union (EU), 8, 24, 36, 55, 60, 68, 205, 218, 244, 245, 247–50, 252, 270, 271 executive compensation(s), 9, 69, 214 F Fanny Mae, 49, 50, 57 Federal Deposit Insurance Co (FDIC), 38, 39, 60n1, 136, 203, 207–8, 212–14, 222, 225 INDEX   Federal Home Loan Bank Act, 95 Federal Housing Finance Agency, 50 Federal Insurance Office (FIO), 209, 214, 218n4 Federal Reserve Federal Reserve Bank of NY, 33, 49, 52, 57, 58, 207 Federal Reserve System, 31, 49, 136, 148n62, 149n63, 206 Feldstein, Martin, 13n5, 44n31, 246, 253n6 Ferguson, Niall, 90, 160, 165n24 Financial Crisis Inquiry Report, 40–1n1, 42n12, 43n27, 252n1 Financial Institutions Reform, Recovery and Enforcement Act, 96 Financial Stability Oversight Council (FSOC), 73, 207, 209, 212–16, 219n14, 264, 266n16 First Bank of the United States, 91 fiscal trap, 132 Fischer, Stanley, 21, 41n11, 177n8 Fisher, Irving, 13n9, 77, 123, 124, 132, 145n30, 146n31, 147n46, 155, 164n10, 207, 218n2, 227 framing, 174 Freddy Mac, 24, 49, 50, 57 Friedman, Milton, 6, 8, 99, 125, 132–40, 147n48–51, 148n56, 148n60, 148–9n63, 149n64–7, 161, 163, 166n28, 169, 176n3, 241, 270 and Schwarz, Anna, 82, 207 G Geithner, Tim, 21, 40–1n1, 41n10, 50, 53 Germany, 24, 36, 103, 125, 126, 144n21, 232, 244, 245, 249 Glass-Steagall Act, 96, 205, 209–10 Goldsmith, Raymond, 139 283 Gordon, Robert, 121, 257, 265n4 government sponsored enterprise (GSE), 27, 50 Gramm-Leach-Bliley Act, 36, 205, 210, 211, 218n7 Great Moderation, 76, 78, 252 Greece, 146n32, 244–6, 248, 249 Greenspan, Allan, 2, 13n1, 26, 34, 41n8, 43n21, 44n35, 47, 241, 260 Greenspan put, 26, 42n17, 259 Gurley, John, 139, 140, 149n70 H Hamilton, Alexander, 91, 92 Hansen, Alvin, 126, 256, 264n2 Harrod, Roy, 126, 158 Hecksher, Eli, 142n1, 143n13 hedge funds, 23, 32, 65, 69, 89, 90, 98–101, 104n10–n12, 142, 212, 214, 219n9, 237n6, 268 Hicks, John, 143n6, 146n36, 146n37, 158, 161, 165n19 I Industrial Revolution, 2, 8, 21, 22, 67, 68, 111, 114, 115, 118 IndyMac, 49, 60n1 insurance sector insurance companies, 52, 53, 97, 104n8, 124, 139, 181, 208, 212, 214, 250, 251 insurance regulation, 218n3, 218n4 International Monetary Fund (IMF), 26, 38, 39, 42n12, 45n41, 75, 103, 165n23, 229, 232, 237n6, 243, 245, 247–9, 252, 253n5, 258, 259, 272, 273 investment banks, 36, 37, 49, 50, 79, 90, 94, 100, 101, 142, 201, 205, 210, 211, 218n7, 272 284   INDEX Ireland, 24, 113 Italy, 90, 232, 244, 250 J Jackson, Andrew, 92, 198 Jefferson, Thomas, 91, 92, 198 Jevons, Stanley, 115, 120, 151, 154, 168 Juglar, Clement, 152 K Kahn, Alfred, 210, 218n5 Kahneman, Daniel, 159, 165n21, 170, 177n19 and Tversky, Amos, 168, 173–5, 177n16, 177n18, 179, 188 Kashkari, Neel, 212 Keynes, John Maynard, 4, 5, 8, 23, 27, 28, 67, 74, 83, 122, 124–31, 133, 139–41, 145n24, 146n34, 146n36–8, 147n39, 147n41–3, 147n46, 148n56, 152, 154–6, 158, 160–3, 164n11, 166n26, 172, 183–7, 241, 242, 256, 259, 267, 269 Kindleberger, Charles, 32, 44n30, 161 King, Mervyn, 226–8, 237n3 Knickerbocker Trust Co., 31 Knight, Frank, 184, 191n6 Kondratieff, Nikolai, 152 Koo, Richard, 76, 87n17 Krugman, Paul, 23, 31, 57, 61n10, 133, 147n50 L Lehman Bros., 51 Leijonhufvud, Axel, 130, 147n45 leverage, 11, 20, 22, 27–30, 43n23, 76, 79, 87n18, 87n20, 100, 189, 215, 228, 229, 235, 236, 242, 245, 261, 269, 271, 272 LIBOR, 70 liquidity coverage ratio (LCR), 236 liquidity trap, 128, 131, 141, 242 Long Term Capital Management, 99 Lucas, Robert, 147n47, 169, 171 Luce, Duncan, 186, 193n10 Lynch, Merrill, 49 M Malthus, Thomas, 113, 256–9 Mandelbrot, Benoit, 23, 42n14 Markowitz, Harry, 6, 13n4, 22, 23, 83, 140, 141, 182, 187 Marshall, Alfred, 120–2, 124, 128, 145n25, 145n27, 154 Marx, Karl, 115, 116, 118, 126, 156, 157 Medicare, 260 mercantilism, 7, 109–11, 142n1, 267 Merton, Robert, 23, 88n21 MetLife, 73, 215 MF Global, 44n33, 102 Mian, Atif, 20, 31, 40n1, 41n7, 41n8, 76, 78, 87n19 Mill, John Stuart, 118, 128 Miller, Merton, 77, 88n21 Minsky, Hyman, 7, 13n8, 130, 131, 147n44, 161, 166n25, 187, 193n12, 193n13 Mitchell, Wesley, 153, 154, 164n5 Modigliani, Franco, 77, 88n21 money definition, 82 quantity of, 74, 84, 131, 132, 138, 140, 148n51, 149n66 money market funds, 58, 65, 90, 96–7, 237n6, 268 INDEX   Monte dei Paschi di Siena, 90 moral hazard, 71, 217 Morgenstern, Oskar, 164n8, 171, 177n15, 185, 192n7 N National Bureau of Economic Research (NBER), 20, 42n19, 86n6, 87n20, 101, 105n13, 105n15, 153, 164n5, 241 neo classical economics, 4, 7, 8, 119–25, 127, 130, 157, 168, 175, 198 new classical school, 131, 169–72 New Keynesian synthesis, 172, 177n12 Northern Rock Bank, 49, 245 O Obama, Barack, 40n1, 56, 61n11, 137, 243 Occupy Wall Street, 244 Office of Financial Stability (OFS), 55, 56 Olivera, Julio H. G., 164n9 Operation Twist, 59 Orderly Liquidation Authority (OLA), 214 Ownit, 21, 48 P Panic of 1907, 31, 43n26, 198 Patinkin, Don, 88n24, 131, 137, 138, 145n28, 149n68, 161 Pecora investigation, 209 peer to peer lending, 70, 142 Philippon, Thomas, 67, 86n6, 86n9, 217, 219n20 physiocrats, 112 285 Pigou, Arthur C., 154, 156 Piketty, Thomas, 41n3, 45n45, 121, 256, 257, 265n6 policy ineffectiveness proposition, 171 Ponzi, 34, 70, 187, 188 Portugal, 248 prudential regulation, 71, 93, 95, 190, 204, 221–38 Public Company Accounting Oversight Board, 201 Pujo investigation, 198 Q quantitative easing, 57, 59, 249, 251, 258 quantity theory of money, 82, 128, 134, 138, 148n51 R Radcliffe Committee, 140 Raiffa, Howard, 186, 193n10 Rajan, Raghuram, 1, 25, 26, 44n36 rating agencies, 24, 38–40, 45n44, 49, 210, 214, 243 rational expectations/new classical school, 18, 43n21, 163, 168–72, 177n7 Reagan, Ronald, 210 regulation Q, 96 regulatory capture, 37, 72, 216, 221 regulatory shopping, 72, 222, 225, 271 Reinhardt, Carmen, 43n25, 61n12, 146n33 “repos”, 24, 29, 66, 85n1 Ricardo, David, 114–19, 121, 126, 142n2, 143n6, 143n7, 143n8, 143n12, 143n13, 144n18 286   INDEX risk, 1, 2, 4, 9, 11, 12, 19–26, 28–32, 34–9, 42n12, 44n27, 48, 50, 52, 65, 69–79, 83, 85n1, 89, 90, 94–8, 100, 101, 126, 128, 129, 140, 141, 145n24, 153, 157, 159, 160, 163, 168, 169, 173, 179–93, 205, 208, 211, 213–17, 221–6, 228, 229, 231, 233–6, 237n2, 241–3, 248, 250–2, 261–3, 268–70, 272 Robertson, Dennis H., 128, 141, 147n39, 150n75 Robinson, Joan, 6, 13n7, 123, 167, 199 Rogoff, Kenneth, 30, 40n1, 43n25, 44n36, 105n19, 125, 242, 253n3, 257, 258, 265n7, 265n8 Roosevelt, Franklin Delano, 125, 136 Roosevelt, Theodore, 198, 199, 209 Roubini, Nouriel, 1, 26, 42n20 Russia/Soviet Union, 169, 244, 255 S Samuelson, Paul Anthony, 158, 165n17, 171 Sarbanes-Oxley Act, 201, 203 savings and loans associations, 94–6 savings glut, 36–7, 146n36 Say, Jean Baptiste, 118 Scholes, Myron, 23 Schumpeter, Joseph, 139, 152, 156–8, 164n12, 165n14, 165n15 Second Bank of the United States, 92 Securities and Exchange Commission (SEC), 38–40, 72, 200, 203, 205, 213, 214, 229, 263 securitization, 18, 19, 161, 236 Shackle, George, 192n8 Shaw, Edward, 139, 140, 149n70 Sherman Act, 198 Shiller, Robert, 1, 18, 25, 41n5, 42n18, 98, 104n9, 174, 176, 176n5, 188 Simon, Herbert, 168, 169, 173, 175, 177n14, 177n21, 178n22 Simons, Henry, 137, 138 Slutsky, Eugen, 154, 158, 164n8 Smith, Adam, 35, 68, 91, 103n2, 111–15, 117, 142n4, 143n5, 157 Smoot-Hawley Act, Social Security, 260 Solvency II, 218 Soros, George, 99–101 Sovereign debt restructuring (SDR), 258, 273 Spain, 24, 244 Sraffa, Piero, 122, 123, 145n29 Stiglitz, Joseph, 19, 25, 27, 29, 41n6, 57, 61n9, 87n10, 141, 142, 150n74, 237n9, 246, 253n5, 253n7 and Greenwald, Bruce, 141, 142, 150n74 Strong, Benjamin, 125, 206, 207 Structured Investment Vehicle (SIV), 29, 190 Sub-prime mortgages, 18, 23, 24, 29, 36, 37, 48, 54, 242, 243 Sufi, Amir, 20, 31, 41n7, 41n8, 78, 87n19 Summers, Larry, 26, 44n36, 61n11, 126, 256 T Tarullo, Daniel, 231, 238n12 Taylor, John, 44n34, 44n36, 138, 149n69, 264n1 Thatcher, Margaret, 210 Tirole, Jean, 13n3, 18, 39, 40, 41n4, 45n43, 55, 61n7, 87n16, 237n1, 238n13 Tobin, James, 131, 135, 140, 148n59, 150n73, 172, 177n10, 177n11, 187, 269 Treaty of Versailles, 126, 232 INDEX   Troubled Assets Relief Program (TARP), 52, 53, 55 Turner, Adair, 80, 88n23 U uncertainty, 2, 4, 5, 7–9, 11, 12, 23, 27, 28, 55, 60, 68–71, 74, 75, 80–5, 88n25, 120, 126, 129–31, 140, 145n24, 172, 179–93, 224, 228, 243, 246, 247, 249–52, 259–61, 263, 266n11, 268–70, 273 V valuation asymmetry, 69 287 velocity of money, 82, 128, 134 Volcker, Paul, 72, 95 von Mises, Ludwig, 139, 153 von Neumann, John, 171, 177, 185, 192n7 W Walras, Leon, 121, 145n27 Wicksell, Knut, 139, 152, 153, 163n1, 163–4n2 Wolf, Martin, 227, 248 Y Yellen, Janet, 193n13, 260 .. .The Influence of Uncertainty in a Changing Financial Environment www.allitebooks.com Ricardo A.  Halperin The Influence of Uncertainty in a Changing Financial Environment An Inquiry into the. .. as the media did not take those warnings seriously into account Years later, the then chairman of © The Author(s) 2017 R .A Halperin, The Influence of Uncertainty in a Changing Financial Environment,... interpretation, the financial sector debacle was the second act of a tragedy that started in the real sector of the economy They point that the National Bureau of Economic Research (NBER) has dated the beginning