Disorder, page 40
56. There remains a persistent line of argument that monetary union emerged as a response to German unification, but the EC had already agreed to implement the Delors Report on monetary union in June 1989. For a demolition of these claims see Andrew Moravcsik, The Choice for Europe: Social Purpose and State Power from Messina to Maastricht (London: UCL Press,1999), pp. 396–401.
57. On the Bundesbank’s claim to represent the German people in a different way than the German state and the mythical stories about German economic history used to legitimate that claim see Hjalte Lokdam, ‘Banking on Sovereignty: A Genealogy of the European Central Bank’s Independence’, PhD dissertation submitted to the London School of Economics, 2019, ch. 2.
58. See Chiara Zilioli and Martin Selmayr, ‘The Constitutional Status of the European Central Bank’, Common Market Law Review 44, no. 2 (2007): pp. 355–99.
59. On the move to monetary union and the terms agreed in the Maastricht Treaty see James, Making the European Monetary Union, chs. 6–8; David Marsh, The Euro: The Battle for the New Global Currency (New Haven: Yale University Press, 2009), chs. 3–6.
60. Nonetheless, the Italian government was the French government’s initial strongest supporter in asking for monetary union.
61. Moravcsik, The Choice for Europe, p. 404.
62. Moravcsik, The Choice for Europe, p. 443.
63. James Sloam, The European Policy of the German Social Democrats: Interpreting a Changing World (London: Palgrave Macmillan, 2004), pp. 138–40.
64. Alan Cowell, ‘Kohl Casts Europe’s Economic Union as War and Peace Issue’, New York Times, 7 October 1995, https://www.nytimes.com/1995/10/17/world/kohl-casts-europe-s-economic-union-as-war-and-peace-issue.html
65. Cowell, ‘Kohl Casts Europe’s Economic Union as War and Peace Issue’.
66. David Howarth, ‘The French State in the Euro-Zone: “Modernization” and Legitimatizing Dirigisme’ in European States and the Euro: Europeanization, Variation, and Convergence, edited by Kenneth Dyson (Oxford: Oxford University Press, 2002), p. 167.
67. Moravcsik, The Choice for Europe, p. 446.
68. Maria Demertzis, Konstantinos Efstathiou, and Fabio Matera, ‘The Italian Lira: The Exchange Rate and Employment in the ERM’, Bruegel Blog, 13 January 2017, https://www.bruegel.org/2017/01/the-italian-lira-the-exchange-rate-and-employment-in-the-erm/
69. Quoted in Katherine Butler and Yvette Cooper, ‘Lira Up as Italy’s Tax for Europe Gets Go-Ahead’, Independent, 22 February 1997, https://www.independent.co.uk/news/business/lira-up-as-italy-s-tax-for-europe-gets-goahead-1279992.html
70. Quoted in Butler and Cooper, ‘Lira Up as Italy’s Tax for Europe Gets Go-Ahead’.
71. Thompson, The British Conservative Government and the European Exchange Rate Mechanism, pp. 203–7.
72. For the argument that it was calculations about the financial sector that drove British governments’ decision to stay outside see Ophelia Eglene, Banking on Sterling: Britain’s Independence from the Euro Zone (Lanham, MD: Lexington Books, 2010).
Chapter 5
1. Janet Yellen, ‘The Outlook for the Economy’, Remarks at the Providence Chamber of Commerce, Providence, Rhode Island, 22 May 2015, https://fraser.stlouisfed.org/title/statements-speeches-janet-l-yellen-930/outlook-economy-521732
2.Yellen ‘The Outlook for the Economy’.
3. The renminbi is China’s official currency and used to describe the currency as a medium of exchange. The yuan is the unit of account for measuring prices.
4. Federal Open Market Committee, Press Conference, 17 September 2015, https://www.federalreserve.gov/monetarypolicy/fomcpresconf20150917.htm
5. G20 Finance Ministers and Central Bank Governors’ Meeting, Shanghai, 27 February 2016, Communiqué, http://www.g20.utoronto.ca/2016/160227-finance-en.html
6. National Security Strategy of the United States of America, https://trumpwhitehouse.archives.gov/wp-content/uploads/2017/12/NSS-Final-12-18-2017-0905.pdf, pp. 27, 3, 18.
7. Remarks By Vice President Pence on the Administration’s Policy Towards China, Hudson Institute, Washington, DC, 4 October 2018, https://www.hudson.org/events/1610-vice-president-mike-pence-s-remarks-on-the-administration-s-policy-towards-china102018
8. Quoted in Richard N. Haass, ‘The Crisis in US-China Relations: The Trump Administration has Staked Out an Aggressive Position, But its Critique of Chinese Behaviour Is Widely Shared and Points to the Need for a New American Strategy’, Wall Street Journal, 19 October 2018, https://www.wsj.com/articles/the-crisis-in-u-s-china-relations-1539963174. Former Australian prime minister Kevin Rudd gave a speech in October 2018 on the Trump administration’s China approach in 2018 as a watershed for the world. ‘The United States and China and the avoidable war’, Speech at the United States Naval Academy, 10 October 2018, https://asiasociety.org/policy-institute/united-states-and-china-avoidable-war
9. Quoted in Jim Brunsden, ‘EU Warns of $300 billion Hit to US Over Car Import Tariffs’, Financial Times, 1 July 2018.
10. US Census, Foreign Trade, Trade in Goods with China, https://www.census.gov/foreign-trade/balance/c5700.html
11. On the French employment shock see Clément Malgouyres, ‘The Impact of Chinese Import Competition on the Local Structure of Employment and Wages: Evidence from France’, Banque de France, Document du Travail, No. 603. In Germany, but not elsewhere, there was a large counter-movement of exports, including cars and machinery, into China. Wolfgang Dauth, Sebastian Findeisen, and Jens Suedekum ‘The Rise of the East and the Far East: German Labour Markets and Trade Integration’, Journal of the European Economic Association 12, no. 6 (2014): pp. 1643–75.
12. The case for a large shock has been made in several studies by the economists David Autor, David Dorn, and Gordon Hanson. See, for example, David H. Autor, David Dorn, and Gordon H. Hanson, ‘The China Shock: Learning from Labour Market Adjustment to Large Changes in Trade’, NBER Working Paper Series, 21906. See also Justin R. Pierce and Peter K. Schott, ‘The Surprisingly Swift Decline of US Manufacturing Employment’, American Economic Review 106, no. 7 (2016): pp. 1632–62; Daron Acemoglu, David Autor, David Dorn, Gordon Hanson, and Brendan Price, ‘Import Competition and the Great U.S. Employment Sag of the 2000s’, Journal of Labor Economics 34, no. 1 (2016): pp. S141–198. For criticisms of Autor, Dorn, and Hanson’s arguments see Jonathan T. Rothwell, ‘Cutting the Losses: Reassessing the Costs of Import Competition to Workers and Communities’ (19 October 2017), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2920188. For an argument stressing the benefits see Kyle Handley and Nuno Limão, ‘Policy Uncertainty, Trade, and Welfare: Theory and Evidence for China and the United States’, American Economic Review 107, no. 9 (2017): pp. 2731–83.
13. Federal Reserve of St Louis Data, Current Employment Statistics, All Employees, Manufacturing, https://fred.stlouisfed.org/series/MANEMP
14. For example, the early period from 2000 to 2002 coincided with a period of dollar strength. On how to read this variable in relation to the China shock see Brad Setser, ‘China’s WTO Entry, 15 Years On’, Council on Foreign Relations Blog, https://www.cfr.org/blog/chinas-wto-entry-15-years
15. Quoted in Robert E. Lighthizer, Testimony Before the US-China Economic and Security Review Commission: Evaluating China’s Role in the World Trade Organization Over the Last Decade, 9 June 2010, p. 10, https://www.uscc.gov/sites/default/files/6.9.10Lighthizer.pdf
16. Quoted in Helen Thompson, China and the Mortgaging of America: Domestic Politics and Economic Interdependence (London: Palgrave, 2010), p. 38.
17. There were substantial reasons for thinking that China’s currency was a primary reason for China’s trade surplus. See Brad Setser, Testimony before the Senate Committee on Small Business and Entrepreneurship, Hearing on Made in China and the Future of US Industry, 27 February 2019, https://www.sbc.senate.gov/public/_cache/files/3/b/3bd85987-d8b4-48b3-a53e-8b49d2060821/4E39BD152B9F358A5E4254D80A512D8B.setser-testimony.pdf. For the argument that the problem was not China but US macro-economic policy see Ronald McKinnon, The Unloved Dollar Standard: From Bretton Woods to the Rise of China (Oxford: Oxford University Press, 2013), ch. 13.
18. See Henry M. Paulson, Jr, ‘A Strategic Economic Engagement: Strengthening US-China Ties’, Foreign Affairs 87, no. 5 (September/October 2008): pp. 59–77.
19. Sean Starrs, ‘American Economic Power Hasn’t Declined—It Globalised! Summoning the Data and Taking Globalization Seriously’, International Studies Quarterly 57, no. 4 (2013): pp. 818–20.
20. Quoted in Charles Duhigg and Keith Bradsher, ‘How the US Lost out on iPhone Work’, New York Times, 21 January 2012, https://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html
21. Quoted in Duhigg and Bradsher, ‘How the US Lost out on iPhone Work’.
22. Greg Linden, Kenneth L. Kraemer, and Jason Dedrick., ‘Who Captures Value in a Global Innovation System? The Case of Apple’s iPod’, UC Irvine Personal Computing Industry Center, The Paul Merage School of Business, University of California, Irvine, June 2007, https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.419.2289&rep=rep1&type=pdf
23. Matthew Klein and Michael Pettis have suggested that trade wars are ultimately class wars. In regard to US–China trade, and indeed US–German trade, they argue that ‘the world’s rich were able to benefit at the expense of the world’s workers and retirees because the interests of American financiers were complementary to the interests of Chinese and German industrialists’. Matthew C. Klein and Michael Pettis, Trade Wars are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace (New Haven: Yale University Press), p. 224.
24. US Energy Information Administration, international statistics. On rising demand see Thompson, Oil and the Western Economic Crisis, pp. 10–12.
25. On the supply problems see Thompson, Oil and the Western Economic Crisis, pp. 12–24.
26. Macro-trends, Crude Oil Prices—70 Year Historical Chart, https://www.macrotrends.net/1369/crude-oil-price-history-chart
27. Carlo Edoardo Altamura, European Banks and the Rise of International Finance (London: Routledge, 2017), ch. 3. On consortium banking in the Eurodollar markets see Richard Roberts (with C. Arnander), Take Your Partners: Orion, the Consortium Banks and the Transformation of the Euromarkets (London: Palgrave Macmillan, 2001).
28. On the emergence of an international banking sector up to the late 1970s see Helmut W. Mayer, ‘Credit and Liquidity Creation in the International Banking Sector’, BIS Economic Papers, no. 1, 1 November 1979, https://www.bis.org/publ/econ1.htm On the shift in the US to a more finance-centric economy see Judith Stein, Pivotal Decade: How the United States Traded Factories for Finance in the Seventies (New Haven: Yale University Press, 2011).
29. See Carlo Edoardo Altamura, European Banks and the Rise of International Finance, ch 3. There was again some debate after the second oil price shock including draft proposals by central banks to force banks to publish consolidated balance sheets that would include their Eurodollar activities, but nothing eventually materialized. Izabella Kaminska, ‘A Global Reserve Requirement for All Those Eurodollars’, Financial Times Alphaville, 15 April 2016, https://www.ft.com/content/226e90ec-ead3-311d-9361-b0f2c2bfd9e3. On the importance of European states to international approaches to open capital flows see Rawi Abdelal, Capital Rules: The Construction of Global Finance (Cambridge, MA, Harvard University Press, 2007). On the importance of central banks to the development of the post–Bretton Woods version of the Eurodollar system see Benjamin Braun, Arie Kramp, and Steffen Murau, ‘Financial Globalization as Positive Integration: Monetary Technocrats and the Eurodollar Market in the 1970s’, Review of International Political Economy. Published online 22 March 2020, DOI: 10.1080/09692290.2020.1740291; Rawi Abdelal, ‘Writing the Rules of Global Finance: France, Europe, and Capital Liberalization’, Review of International Political Economy 13, no. 1 (2006): pp. 1–27.
30. Charles Goodhart, The Basel Committee on Banking Supervision (Cambridge: Cambridge University Press, 2011), p. 41.
31. Alan Greenspan, ‘The Challenge of Central Banking in a Democratic Society’, Remarks, 5 December 1996, https://fraser.stlouisfed.org/title/statements-speeches-alan-greenspan-452/challenge-central-banking-a-democratic-society-8581
32. Greenspan, ‘The Challenge of Central Banking in a Democratic Society’.
33. Greenspan, ‘The Challenge of Central Banking in a Democratic Society’.
34. Claudio Borio and William White, ‘Whither Monetary and Financial Stability? The Implications of Evolving Policy Regimes’, BIS Working Papers, no. 147, 2004, p. 5, https://www.bis.org/publ/work147.pdf
35. At his most optimistic Greenspan argued that the large increase in the size of what he called ‘cross-border finance’ made it easier for the world economy to absorb shocks. Alan Greenspan, ‘World Finance and Risk Management’, Remarks at Lancaster House, London, 25 September 2002, https://www.federalreserve.gov/boarddocs/speeches/2002/200209253/default.htm. After the crash, Greenspan accepted some criticisms of his tenure but held to his view that monetary policy could not be directed pre-emptively at asset bubbles. See Alan Greenspan, ‘The Crisis’, Brookings Papers on Economic Activity (Spring 2010), pp. 201–46, https://www.brookings.edu/bpea-articles/the-crisis/. For the view expressed before the 2007–8 crash that the supposed Great Moderation necessarily contained the conditions for financial instability see Borio and White, ‘Whither Monetary and Financial Stability?’.
36. On internationalized banking from the late 1990s see Iain Hardie and David Howarth, eds, Market-Based Banking and the International Financial Crisis (Oxford: Oxford University Press). For Germany’s lead role see Helen Thompson, ‘Enduring Capital Flow Constraints and the 2007-8 Financial and Euro-zone Crises’, British Journal of Politics and International Relations 8, no. 1 (2016): pp. 216–33; Iain Hardie and David Howarth, ‘Die Krise and Not la Crise? The Financial Crisis and the Transformation of German and French Banking Systems’, Journal of Common Market Studies 47, no. 5 (2009): pp. 1017–39.
37. On the impact of internationalized banking on the sharp rise in international capital flows between 2002 and 2007 see: Philip R. Lane, Capital Flows in the Euro Area. European Commission, Economic Papers 497, April 2013, https://ec.europa.eu/economy_finance/publications/economic_paper/2013/pdf/ecp497_en.pdf; Philip. R. Lane, ‘Financial Globalisation and the Crisis’, BIS Working Papers, no. 39, December 2012, https://www.bis.org/publ/work397.htm; Philip R. Lane and Gian Maria Milesi-Ferretti, ‘The Drivers of Financial Globalisation’, American Economic Review 98, no. 2 (2008): pp. 327–32; Gian Maria, Milesi-Ferretti, Francesco Strobbe, and Natalia Tamirisa, ‘Bilateral Financial Linkages and Global Imbalances: A View on the Eve of the Financial Crisis’, IMF Working Paper, WP/10/257, 1 November 2010, https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Bilateral-Financial-Linkages-and-Global-Imbalances-a-View-on-The-Eve-of-the-Financial-Crisis-24350
38. BIS Committee on the Global Financial System, The Functioning and Resilience of Cross-Border Funding Markets, CGFS Paper no. 37, March 2010, p. 10, https://www.bis.org/publ/cgfs37.htm; Patrick McGuire and Goetz von Peter, The US Dollar Shortage in Global Banking, BIS Quarterly Review (March 2009): p. 48, https://www.bis.org/publ/qtrpdf/r_qt0903f.pdf?noframes=1
39. Ben S. Bernanke, ‘The Great Moderation’, Speech at the Eastern Economic Association, Washington, DC, 20 February 2004, https://www.federalreserve.gov/boarddocs/speeches/2004/20040220/
40. Bernanke, ‘The Great Moderation’.
41. Charles Bean, ‘The Great Moderation, the Great Panic, and the Great Contraction’, BIS Review 101 (2009): pp. 4–7, https://www.bis.org/review/r090902d.pdf
42. See Sandra Eickmeier and Markus Kühnlenz, ‘China’s Role in Global Inflation Dynamics’, Macroeconomic Dynamics 22, no. 2 (2016): pp. 225–54.
43. Charles Bean, Christian Broda, Takatoshi Ito, and Randall Kroszner, ‘Low for Long? Causes and Consequences of Persistently Low Interest Rates’, Geneva Reports on the World Economy 17, International Center for Monetary and Banking Studies (ICMB) and Center for Economic Policy Research (CEPR), Geneva and London, October 2015, pp. 1, 3, 14, https://voxeu.org/sites/default/files/file/Geneva17_28sept.pdf
44. Bean, Broda, Ito, and Kroszner, ‘Low for Long?’, p. 10.
45. Bean, Broda, Ito, and Kroszner, ‘Low for Long?’, pp. 28–32.
46. Ben S. Bernanke, ‘The Global Saving Glut and the U.S. Current Account Deficit’, Remarks at the Sandridge Lecture, Virginia Association of Economists, 14 April 2005, https://www.federalreserve.gov/boarddocs/speeches/2005/200503102/
47. Brad W. Sester and Arpana Pandey, ‘China’s $1.5 Trillion Bet: Understanding China’s External Portfolio’, Council for Foreign Relations, Working Paper, 13 May 2009, p. 1, https://www.cfr.org/report/chinas-15-trillion-bet
48. Michael P. Dooley, David Folkerts-Landau, and Peter Garber, ‘The Revived Bretton Woods System’, International Journal of Finance and Economics 9, no. 4 (2004): pp. 307–13.
49. Niall Ferguson and Moritz Schularick, ‘Chimerica and the Global Asset Boom’, International Finance 10, no. 3 (2007): pp. 215–39.
50. Lawrence H. Summers, ‘The US Current Account Deficit and the Global Economy’, Lecture at the Per Jacobsson Foundation, 3 October 2004, pp. 13, 8, https://www.imf.org/en/Publications/Other-Periodicals/Issues/2016/12/31/The-U-S-17872
51. On the general effect of oil prices on monetary decision-making for the Fed, ECB, and the Bank of England between 2004 and 2008 see Thompson, Oil and the Western Economic Crisis, pp. 26–34.
52. Alan Greenspan, The Age of Turbulence (London: Allen Lane, 2007), p. 463.
53. Quoted in ‘Greenspan Clarifies Iraq War Comment’, Irish Times, 17 September 2007, https://www.irishtimes.com/news/greenspan-clarifies-iraq-war-comment-1.812331
