The Death of Money

Introduction

“Suddenly Americans traveling abroad…”: Janet Tavakoli, “Who Says Gold Is Money (Part Two),” Financial Report, Tavakoli Structured Finance, August 30, 2013, http://www.tavakolistructuredfinance.com/2013/08/tavakoli-says-gold-is-money.

Chapter 1: Prophesy

“It was the most blatant case…”: John Mulheren, conversation with the author, CIA Headquarters, September 26, 2003.

His conviction was based on testimony…: John Mulheren’s 1990 conviction was overturned by the Second Circuit Court of Appeals in 1991. This complete exoneration allowed his return to the securities industry.

September 5, 2001, was the day Osama bin Laden learned…: Elisabeth Bumiller, “Bin Laden, on Tape, Boasts of Trade Center Attacks; U.S. Says It Proves His Guilt,” New York Times, December 14, 2001, http://www.nytimes.com/2001/12/14/world/nation-challenged-video-bin-laden-tape-boasts-trade-center-attacks-us-says-it.html. The September 5 reference is to the New York time zone where markets were still open. Bin Laden made the remarks in Afghanistan on September 6, 2001, local time, 9.5 hours ahead of New York.

“I say the events that happened on Tuesday…”: Tayser Allouni, “A Discussion on the New Crusader Wars,” October 21, 2001, http://www.religioscope.com/info/doc/jihad/ubl_int_2.htm.

as well as family and friends: National Commission on Terrorist Attacks upon the United States, The 9/11 Commission Report (New York: W. W. Norton, 2004), pp. 222, 237.

A normal ratio of bets…: For options trading data, see Allen M. Poteshman, “Unusual Option Market Activity and the Terrorist Attacks of September 11, 2001,” Journal of Business 79, no. 4 (July 2006), pp. 1703–26, http://www.jstor.org/stable/10.1086/503645.

“Exhaustive investigations by the Securities and Exchange Commission…”: National Commission on Terrorist Attacks, 9/11 Commission Report, p. 172.

the pre-9/11 options trading was based on inside information: See Poteshman, “Unusual Option Market Activity”; Wing-Keung Wong, Howard E. Thompson, and Kweechong Teh, “Was There Abnormal Trading in the S&P 500 Index Options Prior to the September 11 Attacks?” Social Science Research Network, April 13, 2010, http://ssrn.com/abstract=1588523; and Marc Chesney, Remo Crameri, and Loriano Mancini, “Detecting Informed Trading Activities in the Options Markets,” Swiss Finance Institute Research Paper no. 11-42 (July 2012), http://ssrn.com/abstract=1522157.

The leading academic study of terrorist insider trading…: Poteshman, “Unusual Option Market Activity.”

These techniques have proved reliable…: Erik Lie, “On the Timing of CEO Stock Option Awards,” Management Science 51, no. 5 (May 2005), pp. 802–12, http://www.biz.uiowa.edu/faculty/elie/Grants-MS.pdf.

“There is evidence of unusual option market activity…”: Poteshman, “Unusual Option Market Activity,” p. 1725.

“Companies like American Airlines, United Airlines…”: Chesney, Crameri, and Mancini, “Detecting,” p. 19.

“The system was blinking red”: George Tenet quoted in 9/11 Commission Report, p. 259.

“Get down to Disney World…”: George W. Bush quoted in Andrew J. Bacevich, “He Told Us to Go Shopping,” Washington Post, October 5, 2008, http://articles.washingtonpost.com/2008-10-05/opinions/36929207_1_president-bush-american-consumer-congress.

“CIA’s Financial Spying Bags Data on Americans”: Siobhan Gorman, Devlin Barrett, and Jennifer Valentino-Devries, “CIA’s Financial Spying Bags Data on Americans,” Wall Street Journal, November 14, 2013, http://online.wsj.com/news/articles/SB10001424052702303559504579198370113163530.

Chapter 2: The War God’s Face

“We studied RMA exhaustively…”: Quoted in “The Dragon’s New Teeth,” Economist, April 7, 2012, http://www.economist.com/node/21552193.

This classified plan, called “Air-Sea Battle”…: Greg Jaffe, “U.S. Model for a Future War Fans Tensions with China and Inside Pentagon,” Washington Post, August 1, 2012, http://articles.washingtonpost.com/2012-08-01/world/35492126_1_china-tensions-china-threat-pentagon.

“In the near future, information warfare…”: Major General Wang Pufeng, “The Challenge of Information Warfare,” China Military Science, Spring 1995, http://www.fas.org/irp/world/china/docs/iw_mg_wang.htm.

The People’s Liberation Army of China made this doctrine…: Colonel Qiao Liang, and Colonel Wang Xiangsui, Unrestricted Warfare (Beijing: People’s Liberation Army, 1999).

“Economic prosperity that once excited…”: Ibid.

China had been a net seller…: Floyd Norris, “Data Shows Less Buying of U.S. Debt by China,” New York Times, January 21, 2011, http://www.nytimes.com/2011/01/22/business/economy/22charts.html?_r=0.

the Chinese Investment Corporation (CIC)…: Andrew Ross Sorkin and David Barboza, “China to Buy $3 Billion Stake in Blackstone,” New York Times, May 20, 2007, http://www.nytimes.com/2007/05/20/business/worldbusiness/20cnd-yuan.html?pagewanted=print.

notorious for his sixtieth birthday party…: James B. Stewart, “The Birthday Party,” New Yorker, February 11, 2008, http://www.newyorker.com/reporting/2008/02/11/080211fa_fact_stewart.

“I want war, not a series…”: Quoted in Andrew Clark, “The Guardian Profile: Stephen Schwarzman,” Guardian, June 15, 2007, http://www.theguardian.com/business/2007/jun/15/4.

“to put its vast reserves…”: Sorkin and Barboza, “China to Buy.”

suggested mounting an attack on the Japanese…: Ambrose Evans-Pritchard, “Beijing Hints at Bond Attack on Japan,” Telegraph, September 18, 2012, http://www.telegraph.co.uk/finance/china-business/9551727/Beijing-hints-at-bond-attack-on-Japan.html.

Chinese hacked the Reserve Bank of Australia…: “Australia: Reserve Bank Networks Hacked,” Stratfor Global Intelligence, March 11, 2013, www.stratfor.com.

These combined efforts will prove useful to China…: For a detailed account of China’s efforts to use military intelligence to steal secrets and other intellectual property through cyberwarfare, see Mandiant, “APT1: Exposing One of China’s Cyber Espionage Units,” 2013, Mandiant Intelligence Center Report, http://intelreport.mandiant.com.

“A highly secretive unit of the National Security Agency…”: Matthew M. Aid, “Inside the NSA’s Ultra-Secret China Hacking Group,” Foreign Policy, June 10, 2013, http://www.foreignpolicy.com/articles/2013/06/10/inside_the_nsa_s_ultra_secret_china_hacking_group.

Quantum Dawn 2…: “Fact Sheet: Quantum Dawn 2, July 18, 2013,” SIFMA, http://www.sifma.org/uploadedfiles/services/bcp/qd2-fact-sheet.pdf?n=19890.

“to cause depreciation of the rial…”: Kasia Klimasinska and Ian Katz, “Useless Rial Is U.S. Goal in New Iran Sanctions, Treasury Says,” Bloomberg, June 6, 2013, http://www.bloomberg.com/news/2013-06-06/useless-rial-is-u-s-goal-in-new-iran-sanctions-treasury-says.html.

by dumping dollars and buying gold…: Jack Farchy, “Iran Bought Gold to Cut Dollar Exposure,” Financial Times, March 20, 2011, http://www.ft.com/cms/s/0/cc350008-5325-11e0-86e6-00144feab49a.html.

an oil-for-gold swap…: Dheeraj Tiwari and Rajeev Jayaswal, “India, Iran Mull over Gold-for-Oil for Now,” Economic Times, January 8, 2011, http://articles.economictimes.indiatimes.com/2011-01-08/news/28433295_1_bilateral-issue-oil-india-imports.

Turkish exports of gold to Iran…: “Turkey’s Gold Export to Iran Rises Again,” Hurriyet Daily News, May 1, 2013, http://www.hurriyetdailynews.com/turkeys-gold-export-to-iran-rises-again-.aspx?pageID=238&nid=46002.

a cargo plane with 1.5 tons of gold on board…: “Cargo Plane with 1.5 Tons of Gold Held in Istanbul,” Hurriyet Daily News, January 5, 2013, http://www.hurriyetdailynews.com/cargo-plane-with-15-tons-of-gold-held-in-istanbul-.aspx?pageID=238&nid=38427.

Reports from the Voice of Russiaspeculated…: “Gold Seized at Istanbul Airport Was Allegedly for Iran,” Voice of Russia, January 6, 2013, http://voiceofrussia.com/2013_01_06/Gold-seized-at-Istanbul-airport-was-allegedly-for-Iran.

“passengers flying from Kabul to the Persian Gulf…”: Matthew Rosenberg, “An Afghan Mystery: Why Are Large Shipments of Gold Leaving the Country?” New York Times, December 15, 2012, http://www.nytimes.com/2012/12/16/world/asia/as-gold-is-spirited-out-of-afghanistan-officials-wonder-why.html.

strict enforcement of a prohibition on gold sales…: “U.S. to Block Sale of Gold to Iran in Sanctions Clampdown,” Al Arabiya, May 16, 2003, http://english.alarabiya.net/en/business/economy/2013/05/16/U-S-to-block-sales-of-gold-to-Iran-in-sanctions-clampdown.html.

In late 2012 the United States warned Russia and China…: Benoît Faucon, “U.S. Warns Russia on Iranian Bank,” Wall Street Journal, December 11, 2012, http://online.wsj.com/news/articles/SB10001424127887323330604578145071930969966.

Iranian hackers had reportedly gained access to the software systems…: Siobhan Gorman and Danny Yadron, “Iran Hacks Energy Firms, U.S. Says,” Wall Street Journal, May 23, 2013, http://online.wsj.com/article/SB10001424127887323336104578501601108021968.html.

The Syrian government was forced to conduct business…: Steve H. Hanke, “Syria’s Annual Inflation Hits 200%,” Cato Institute, July 1, 2013, http://www.cato.org/blog/syrias-annual-inflation-hits-200.

This cat-and-mouse game…: “Three Nukes for $5 billion,” Debka-Net-Weekly 13, no. 588 (May 24, 2013), http://www.debka.com.

a highly sensitive 104-page final report: The author was a direct participant, presenter, or contributor to the Bahrain, Federation of American Scientists, Boeing, and National Defense University financial war game events described in the foregoing paragraphs.

Swiss troops defended their country…: Henry Samuels, “Swiss War Game Envisages Invasion by Bankrupt French,” Telegraph, September 30, 2013, http://www.telegraph.co.uk/news/worldnews/europe/switzerland/10344029/Swiss-war-game-envisages-invasion-by-bankrupt-French.html.

Cyberattacks on U.S. infrastructure, including banks…: Leading documented studies and white papers on the scope and pervasiveness of cyberattacks on U.S. systems, including financial systems, originating from various sources including China and Iran, are: “Global Energy Cyberattacks: ‘Night Dragon,’” McAfee Foundstone Professional Services and McAfee Labs White Paper, February 10, 2011, http://www.mcafee.com/us/resources/white-papers/wp-global-energy-cyberattacks-night-dragon.pdf; Nicolas Falliere, Liam O. Murchu, and Eric Chien, “W.32.Stuxnet Dossier Version 1.4,” Symantec, February 2011, http://www.symantec.com/content/en/us/enterprise/media/security_response/whitepapers/w32_stuxnet_dossier.pdf; and Mandiant, “APT1: Exposing One of China’s Cyber Espionage Units,” 2013, Mandiant Intelligence Center Report, http://intelreport.mandiant.com.

The official was Mary Shapiro…: Senior SEC official, conversation with author, September 2012.

the Syrian Electronic Army claimed credit…: Max Fisher, “Syrian Hackers Claim AP Hack That Tipped Stock Market by $136 Billion. Is It Terrorism?” Washington Post, April 23, 2013, http://www.washingtonpost.com/blogs/worldviews/wp/2013/04/23/syrian-hackers-claim-ap-hack-that-tipped-stock-market-by-136-billion-is-it-terrorism.

Knight Capital fiasco…: Scott Patterson, Jenny Strasburg, and Jacob Bunge, “Knight Upgrade Triggered Old Trading System, Big Losses,” Wall Street Journal, August 14, 2012, http://online.wsj.com/news/articles/SB10000872396390444318104577589694289838100.

bailout of the hedge fund Long-Term Capital Management…: The author was general counsel of Long-Term Capital Management and the principal negotiator of the 1998 bailout arranged by the Federal Reserve Bank of New York. While LTCM was a well-known trader in fixed-income and derivatives markets, the extent of its trading in equity markets was not well known. LTCM was the largest risk arbitrageur in the world, with over $15 billion in equity positions on pending deals. Upon reviewing the books and records of LTCM with the author and CEO John Meriwether on September 20, 1998, Peter R. Fisher, then head of open market operations at the Federal Reserve Bank of New York, remarked, “We knew you guys might take down the bond markets, but we had no idea you would take down the stock markets too.” The Fed’s effort to orchestrate a bailout commenced the next morning and was completed on September 28, 1998.

the highly classified plans for continuity…: Marc Ambinder, “The Day After,” National Journal, April 11, 2011, http://www.nationaljournal.com/magazine/government-still-unprepared-for-disaster-20110411.

Chapter 3: The Ruin of Markets

“The peculiar character of the problem…”: Friedrich A. Hayek, “The Use of Knowledge in Society,” American Economic Review 35, no. 4 (1935), pp. 519–30, http://www.econlib.org/library/Essays/hykKnw1.html.

Charles Goodhart first articulated Goodhart’s Law…: The paper has been reprinted in several publications. See Charles Goodhart, “Problems of Monetary Management: The U.K. Experience,” in Anthony Courakis, ed., Inflation, Depression, and Economic Policy in the West (Lanham, Md.: Rowman and Littlefield, 1981), pp. 111–46.

the wealth effect from housing prices…: U.S. Congress, “Housing Wealth and Consumer Spending,” Congressional Budget Office Background Paper, January 2007, http://www.cbo.gov/publication/18279.

“We find… a positive connection…”: Sydney Ludvigson and Charles Steindel, “How Important Is the Stock Market Effect on Consumption?” FRBNY Economic Policy Review, July 1990, http://ftp.ny.frb.org/research/epr/99v05n2/9907ludv.pdf.

heavily concentrated among the rich…: Sherif Khalifa, Ousmane Seck, and Elwin Tobing, “Financial Wealth Effect: Evidence from Threshold Estimation,” Applied Economics Letters 18, no. 13 (2011), http://business.fullerton.edu/economics/skhalifa/publication13.pdf.

“The idea of a wealth effect…: Christopher Flavelle, “Debunking the ‘Wealth Effect,’” Slate, June 10, 2008, http://www.slate.com/articles/news_and_politics/hey_wait_a_minute/2008/06/debunking_the_wealth_effect.html.

rising consumption may increase stock prices…: U.S. Congress, “Housing Wealth”; and Ludvigson and Steindel, “How Important.”

“The issue here is not whether…”: Lacy H. Hunt, “The Fed’s Flawed Model,” Casey Research, May 28, 2013, http://www.caseyresearch.com/articles/the-feds-flawed-model.

“Since wages remained soft…”: Ibid.

the reason for this damage to SME lending…: Steve H. Hanke, “The Federal Reserve vs. Small Business,” Cato Institute, June 3, 2013, http://www.cato.org/blog/federal-reserve-vs-small-business-0.

Federal Reserve low-interest-rate policy…: Giovanni Dell’Ariccia, Luc Laeven, and Gustavo Suarez, “Bank Leverage and Monetary Policy’s Risk-Taking Channel: Evidence from the United States,” IMF Working Paper no. WP/13/143, June 2013, http://www.imf.org/external/pubs/cat/longres.aspx?sk=40642.0.

This is not certain to happen but is likely…: This analysis is based on data and reporting in Buttonwood, “The Real Deal—Low Real Interest Rates Are Usually Bad News for Equity Markets,” Economist, October 20, 2012, http://www.economist.com/news/finance-and-economics/21564845-low-real-interest-rates-are-usually-bad-news-equity-markets.

“The Market for ‘Lemons’”: George A. Akerlof, “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism,” Quarterly Journal of Economics 84, no. 3 (August 1970), pp. 488–500.

“Irreversibility, Uncertainty…”: Ben S. Bernanke, “Irreversibility, Uncertainty, and Cyclical Investment,” National Bureau of Economic Research, Cambridge, Mass., July 1980, http://www.nber.org/papers/w502.

Even with huge pools of unused labor…: Jason E. Taylor and Richard K. Vedder, “Stimulus by Spending Cuts: Lessons from 1946,” Cato Institute, Cato Policy Report, May–June 2010, http://www.cato.org/policy-report/mayjune-2010/stimulus-spending-cuts-lessons-1946.

the classic distinction between risk and uncertainty…: Frank H. Knight, Risk, Uncertainty and Profit (1921; reprint Washington, D.C.: Beard Books, 2002).

“It will pay to invest…”: Bernanke, “Irreversibility, Uncertainty.”

“It would not be difficult to recast…”: Ibid.

the counterproductive nature of Bernanke’s reasoning…: Robert E. Hall, “The Routes into and out of the Zero Lower Bound,” paper prepared for the Federal Reserve Bank of Kansas City Symposium, Jackson Hole, Wyo., August 13, 2013, http://www.stanford.edu/~rehall/HallJacksonHole2013.

Chapter 4: China’s New Financial Warlords

“Things grow and grow…”: Tao Te Ching, trans. Stephen Addis and Stanley Lombardo (Indianapolis: Hackett, 1993).

the current Communist leadership’s greatest fear…: David T. C. Lie, eldest grandson of Zhang Xue Ming, mayor of Tianjin in the 1930s, conversation with the author, Shanghai, June 6, 2012.

“The Myth of Asia’s Miracle”: Paul Krugman, “The Myth of Asia’s Miracle,” Foreign Affairs, November–December 1994, p. 62, http://www.pairault.fr/documents/lecture3s2009.pdf.

“China is on the eve of a demographic shift…”: Mitali Das and Papa N’Diaye, “Chronicle of a Decline Foretold: Has China Reached the Lewis Turning Point?” IMF Working Paper no. 13/26, January 2013, http://www.imf.org/external/pubs/cat/longres.aspx?sk=40281.0.

In 2010 the ten most profitable SOEs…: James McGregor, No Ancient Wisdom, No Followers (Westport, Conn.: Prospecta Press, 2012), p. 23.

These megaprojects cover sectors…: Ibid., p. 34.

the interlocking interests of the political and economic elites…: “Heirs of Mao’s Comrades Rise as New Capitalist Nobility,” Bloomberg News, December 26, 2012, http://www.bloomberg.com/news/2012-12-26/immortals-beget-china-capitalism-from-citic-to-godfather-of-golf.html.

One report on WMP sales…: Xiao Gang, “Regulating Shadow Banking,” China Daily, October 12, 2012, p. 8, http://www.chinadaily.com.cn/opinion/2012-10/12/content_15812305.htm.

“In June, a Chinese man touched down…”: Alistair Macdonald, Paul Vieira, and Will Connors, “Chinese Fly Cash West, by the Suitcase,” Wall Street Journal, January 2, 2013, p. A1, http://online.wsj.com/news/articles/SB10001424127887323635504578213933647167020.

“Tackling inequality requires confronting…”: Bob Davis, “China Tries to Shut Rising Income Gap,” Wall Street Journal, December 11, 2012, p. A14, http://online.wsj.com/news/articles/SB10001424127887324640104578161493858722884.

corruption, cronyism, and income inequality…: Minxin Pei, “China’s Troubled Bourbons,” Project Syndicate, October 31, 2012, www.project-syndicate.org.

“Investment in China may currently…”: Il Houng Lee, Murtaza Syed, and Liu Xueyan, “Is China Over-Investing and Does It Matter?” IMF Working Paper no. WP/12/277, November 2012, http://www.imf.org/external/pubs/cat/longres.aspx?sk=40121.0.

“Let us… give China five years to bring…”: Michael Pettis, “The IMF on Overinvestment,” Michael Pettis’ China Financial Markets, December 28, 2012, http://www.economonitor.com/blog/2012/12.

The Chinese workforce is now dominated…: Houng Il Lee, Xu Qingjun, and Murtaza Syed, “China’s Demography and Its Implications,” IMF Working Paperno. WP/13/82, March 28, 2013, http://www.imf.org/external/pubs/cat/longres.aspx?sk=40446.0.

Chapter 5: The New German Reich

“the most learned man anywhere”: Einhard, The Life of Charlemagne (ninth century; reprint Kessinger, 2010).

“The final step was cannibalism…”: Lauro Martines, Furies: War in Europe, 1450–1700 (New York: Bloomsbury, 2013), p. 118.

“No statement about how to deal…”: John Williamson, “What Washington Means by Policy Reform,” Peterson Institute for International Economics, 1990, http://www.iie.com/publications/papers/paper.cfm?researchid=486.

“the Beijing Consensus… is flexible enough…”: Joshua Cooper Ramo, The Beijing Consensus (London, Foreign Policy Centre, 2004), p. 4.

the five pillars…: John Williamson, “Is the ‘Beijing Consensus’ Now Dominant?” Asia Policy, no. 13 (January 2012), pp. 1–16.

six of the top ten applicants…: World Intellectual Property Organization, WIPO IP Facts and Figures 2012, WIPO Economics and Statistics Series, http://www.wipo.int/export/sites/www/freepublications/en/statistics/943/wipo_pub_943_2012.pdf.

The average European corporate tax rate…: “Corporate Tax Rates Table,” KPMG, http://www.kpmg.com/global/en/services/tax/tax-tools-and-resources/pages/corporate-tax-rates-table.aspx.

For rail freight traffic…: Leo Cendrowicz, “Switzerland Celebrates World’s Longest Rail Tunnel,” Time, October 20, 2010, http://www.time.com/time/business/article/0,8599,2026369,00.html.

“So if there were really a large excess…”: Paul Krugman, “Sticky Wages and the Macro Story,” New York Times, July 22, 2012, http://krugman.blogs.nytimes.com/2012/07/22/sticky-wages-and-the-macro-story.

“In a currency area comprising many regions…”: Robert A. Mundell, “A Theory of Optimum Currency Areas,” American Economic Review 51, no. 4 (September 1961), pp. 657–65, esp. 659.

Europe has lagged behind the rest of the developed world…: Indermit Gill and Martin Raiser, “Golden Growth, Restoring the Lustre of the European Economic Model,” International Bank for Reconstruction and Development, 2012, http://issuu.com/world.bank.publications/docs/9780821389652.

“As Chinese companies and entrepreneurs have moved…”: Howard Schneider, “As Chinese Capital Moves Abroad, Europe Offers an Open Door,” Washington Post, February 26, 2013, http://articles.washingtonpost.com/2013-02-26/business/37297545_1_direct-investment-chinese-investors-rhodium-group.

“was an early investor in bonds…”: Lingling Wei and Bob Davis, “China’s Zhu Changhong Helps Steer Nation’s Currency Reserves,” Wall Street Journal, July 16, 2013, p. C1, http://online.wsj.com/article/SB10001424127887323664204578606301739504368.html.

the ten largest money-market funds in the United States…: Howard Schneider, “In a Two-Faced Euro Zone, Financial Conditions Ease and Joblessness Rises,” Washington Post, March 1, 2013, http://articles.washingtonpost.com/2013-03-01/business/37373712_1_euro-zone-holdings-euro-zone-17-nation-currency-zone.

Data for the first quarter of 1999…: IMF, “Currency Composition of Official Foreign Exchange Reserves (COFER),” http://www.imf.org/external/np/sta/cofer/eng/index.htm.

The cheap-dollar policy was made explicit in numerous public pronouncements…: Barack Obama, “Remarks by the President in State of the Union Address,” January 27, 2010, http://www.whitehouse.gov/the-press-office/remarks-president-state-union-address; and Ben Bernanke, “U.S. Monetary Policy and International Implications,” remarks at IMF–Bank of Japan seminar, October 14, 2012, http://www.federalreserve.gov/newsevents/speech/bernanke20121014a.htm.

private-sector salaries in Greece had dropped…: “Salaries Drop by over 10 Pct Within a Year,” ekathimerini, July 2, 2013, http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_02/07/2013_507091.

“Across Europe’s southern rim, people recoil…”: Marcus Walker and Alessandra Galloni, “Embattled Economies Cling to the Euro,” Wall Street Journal, February 13, 2013, p. A1, http://online.wsj.com/news/articles/SB10001424127887324761004578284203099970438.

“Europe was not built for economic reasons…”: Matthew Kaminski, “Guy Sorman: Why Europe Will Rise Again,” Wall Street Journal, August 18, 2011, p. A11, http://online.wsj.com/news/articles/SB10000872396390444375104577592850332409044.

“everything from Greek real estate…”: Stelios Bouras and Philip Pangalos, “Foreign Money Is Revisiting Greece,” Wall Street Journal, February 25, 2013, p. C1, http://online.wsj.com/news/articles/SB10001424127887323864304578320431435196910.

“The drive to improve competitiveness…”: Hugo Dixon, “The Gloom Around Greece Is Dissipating,” New York Times, April 21, 2013, http://www.nytimes.com/2013/04/22/business/global/the-gloom-around-greece-is-dissipating.html.

The fifteen-hundred-acre former Athens airport site…: Liz Alderman and Demitris Bounias, “Privatizing Greece, Slowly but Not Surely,” New York Times, November 18, 2012, http://www.nytimes.com/glogin?URI=http://www.nytimes.com/2012/11/18/business/privatizing-greece-slowly-but-not-surely.html.

“On Cosco’s portion of the port…”: Liz Alderman, “Under Chinese, a Greek Port Thrives,” New York Times, October 19, 2012, http://www.nytimes.com/2012/10/11/business/global/chinese-company-sets-new-rhythm-in-port-of-piraeus.html?pagewanted=all.

All these investment and expansion plans will have positive…: Ralph Minder, “Car Factories Offer Hope for Spanish Industry and Workers,” New York Times, December 28, 2012, p. B1, http://www.nytimes.com/2012/12/28/business/global/car-factories-offer-hope-for-spanish-industry-and-workers.html?pagewanted=all; Angeline Benoit, Manuel Baigorri, and Emma Ross-Thomas, “Rajoy Drives Spanish Revolution with Low-Cost Manufacture,” Bloomberg, December 19, 2012, http://www.bloomberg.com/news/2012-12-19/rajoy-drives-spanish-revolution-with-low-cost-manufacture.html.

adverse demographics as a major hurdle…: Buttonwood, “The Euro Zone Crisis: Growth Problem,” Economist, December 17, 2012, http://www.economist.com/blogs/buttonwood/2012/12/euro-zone-crisis.

a €60 billion bailout fund…: Matina Stevis, “Euro Zone Closes In on Bank Plans,” Wall Street Journal, June 13, 2013, http://online.wsj.com/article/SB10001424127887323734304578542941134353614.html.

Chapter 6: BELLs, BRICS, and Beyond

The original term BRIC was created…: Jim O’Neill, “Building Better Global Economic BRICs,” Goldman Sachs, Global Economics Paper no. 66, November 30, 2001, http://www.goldmansachs.com/our-thinking/archive/archive-pdfs/build-better-brics.pdf.

“The other members would need to recognise…”: Ibid., p. S11.

He attributes economic success in the Baltics…: Anders Åslund, “Southern Europe Ignores Lessons from Latvia at Its Peril,” Peterson Institute for International Economics, Policy Brief no. PB12-17, June 2012, http://www.iie.com/publications/pb/pb12-17.pdf.

“The government prohibited double incomes…”: Ibid.

143 “Shoppers throng Nordic design shops…”: Paul Ames, “Estonia Uses the Euro, and the Economy Is Booming,” CNBC, June 5, 2012, http://www.cnbc.com/id/47691090.

Estonia in particular has become a high-tech hub…: Ibid.

“When a credit-fueled economic boom…”: Andrew Higgins, “Used to Hardship, Latvia Accepts Austerity, and Its Pain Eases,” New York Times, January 1, 2013, http://www.nytimes.com/2013/01/02/world/europe/used-to-hardship-latvia-accepts-austerity-and-its-pain-eases.html?pagewanted=all.

“While challenges remain today, you have…”: Christine Lagarde, “Latvia and the Baltics—A Story of Recovery,” speech delivered in Riga, Latvia, June 5, 2013, http://www.imf.org/external/np/speeches/2012/060512.htm.

“Today, Estonia’s economy is the fastest-growing…”: Ott Ummelas, “Why Estonia Loves the Euro,” Bloomberg Businessweek, February 2, 2012, http://www.businessweek.com/magazine/why-estonia-loves-the-euro-02022012.html.

O’Neill has consistently downplayed the idea…: Jim O’Neill, interview, CNN Marketplace Africa, April 5, 2011, http://edition.cnn.com/2011/BUSINESS/04/05/jim.oneill.africa.bric/index.html.

“We directed our Finance Ministers to examine…”: eThekwini Declaration, Fifth BRICS Summit, Durban, South Africa, March 27, 2013, http://www.brics5.co.za/assets/eThekwini-Declaration-and-Action-Plan-MASTER-27-MARCH-2013.pdf.

“We support the reform and improvement…”: Ibid.

a twenty-thousand-mile undersea fiber optic cable…: “Brazil Plans to Go Offline from US-Centric Internet,” Hindu, September 17, 2013, http://www.thehindu.com/news/international/world/brazil-plans-to-go-offline-from-uscentric-internet/article5137689.ece.

the SCO’s rejection of a U.S. application…: Dilip Hiro, “Shanghai Surprise—The Summit of the Shanghai Cooperation Organisation Reveals How Power Is Shifting in the World,” Guardian, June 16, 2006, http://www.guardian.co.uk/commentisfree/2006/jun/16/shanghaisurprise.

The Prime Ministers Council of the SCO signed an agreement…: “The Interbank Consortium of the Shanghai Cooperation Organisation,” Shanghai Cooperation Organisation, March 16, 2009, http://www.sectsco.org/EN123/show.asp?id=51.

“the Shanghai Cooperation Organisation is a good…”: Rick Rozoff, “The Shanghai Cooperation Organization: Prospects for a Multipolar World,” Centre for Research on Globalisation, May 2009, http://www.globalresearch.ca/the-shanghai-cooperation-organization-prospects-for-a-multipolar-world.

a joint Sino-Russian declaration…: “China, Russia Sign Five-Point Joint Statement,” Xinhua, June 18, 2009, http://news.xinhuanet.com/english/2009-06/18/content_11558133.htm.

several candidates for an alternative peg…: See Dr. Syed Abul Basher, “Regional Initiative in the Gulf: Search for a GCC Currency,” paper presented at the International Institute for Strategic Studies Seminar, Bahrain, September 30, 2012, http://www.iiss.org/en/events/geo-economics%20seminars/geo-economics%20seminars/archive/currencies-of-power-and-the-power-of-currencies-38db.

A logical extension, then, of the SDR basket approach…: The author is indebted to Dr. Syed Abul Basher for the suggestion and explication of the SDR-plus-oil approach to the currency peg, ibid.

the United States would continue its loose monetary policy…: Ben S. Bernanke, “U.S. Monetary Policy and International Implications,” remarks at IMF–Bank of Japan seminar, Tokyo, October 14, 2012, http://www.federalreserve.gov/newsevents/speech/bernanke20121014a.htm.

“Today most advanced economies remain…”: Ben S. Bernanke, “Monetary Policy and the Global Economy,” speech at the London School of Economics, London, March 25, 2013, http://www.federalreserve.gov/newsevents/speech/bernanke20130325a.htm.

“The purpose of the purchases was and is…”: “Quantitative Easing Explained,” Bank of England, http://www.bankofengland.co.uk/monetarypolicy/Pages/qe/default.aspx.

“The impact on economic activity…”: S. Pelin Berkmen, “Bank of Japan’s Quantitative and Credit Easing: Are They Now More Effective?” IMF Working Paper no. WP/12/2, January 2012, http://www.imf.org/external/pubs/ft/wp/2012/wp1202.pdf.

“It’s very rare for monetary policy…”: Ambrose Evans-Pritchard, “Japan’s Shinzo Abe Prepares to Print Money for the Whole World,” Telegraph, December 17, 2012, http://www.telegraph.co.uk/finance/economics/9751609/Japans-Shinzo-Abe-prepares-to-print-money-for-the-whole-world.html.

The BOJ pledged to purchase $1.4 trillion…: “Introduction to the ‘Quantitative and Qualitative Monetary Easing,’” Bank of Japan, April 4, 2013, http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf.

“The bank will achieve…”: Ibid.

Chapter 7: Debt, Deficits, and the Dollar

the contract theory of money…: See Eerik Lagerspetz, “Money as a Social Contract,” Theory and Decision 17, no. 1 (July 1984), pp. 1–9. The contract theory of money has philosophical and legal roots as old as Aristotle and, in more recent centuries, John Locke and Samuel von Pufendorf. It is presented here in an updated version for the purpose of illuminating the intrinsic rather than extrinsic value of money.

the quantity theory of money…: Irving Fisher, “The Debt-Deflation Theory of Great Depressions,” Econometrica (1933), available from the Federal Reserve Bank of St. Louis, http://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf; and Milton Friedman, Studies in the Quantity Theory of Money (Chicago: University of Chicago Press, 1967).

the state theory of money…: Georg Friedrich Knapp, The State Theory of Money (San Diego: Simon, 2003).

John Maynard Keynes adopted chartalism…: John Maynard Keynes, Treatise on Money, vol. 1, The Pure Theory of Money, and vol. 2, The Applied Theory of Money (London: Macmillan, 1950).

acolytes of the theory of money as an arm of state power…: Paul McCulley and Zoltan Pozsar, “Helicopter Money: Or How I Stopped Worrying and Love Fiscal-Monetary Cooperation,” GIC Global Society of Fellows, January 7, 2013, http://www.interdependence.org/wp-content/uploads/2013/01/Helicopter_Money_Final1.pdf; Stephanie A. Bell and Edward J. Nell, eds., The State, the Market, and the Euro: Metallism versus Chartalism in the Theory of Money (Northampton, Mass.: Edward Elgar, 2003).

the quantity theory of credit…: Richard Duncan, The New Depression: The Breakdown of the Paper Money Economy (Singapore: John Wiley & Sons Singapore Pte., 2012).

His work could properly be called creditism…: Fiona Maclachlan, “Max Weber and the State Theory of Money,” working paper, http://home.manhattan.edu/~fiona.maclachlan/maclachlan26july03.htm.

“bet on the country”: Warren Buffett, interview by Becky Quick and Joe Kernan, CNBC, November 3, 2009, http://www.cnbc.com/id/33603477.

Not only did this spending not produce…: John F. Cogan, Tobias Cwik, John B. Taylor, and Volker Wieland, “New Keynesian Versus Old Keynesian Government Spending Multipliers,” National Bureau of Economic Research, Working Paper no. 14782, February 2009, http://www.nber.org/papers/w14782.pdf?new_window=1.

the relationship of U.S. debt and deficits…: John H. Makin, “Trillion-Dollar Deficits Are Sustainable for Now, Unfortunately,” American Enterprise Institute, December 13, 2012, http://www.aei.org/outloook/trillion-dollar-deficits-are-sustainable-for-now-unfortunately.

Contrary to the oft-cited…: Carmen M. Reinhart and Kenneth S. Rogoff, “Growth in a Time of Debt,” National Bureau of Economic Research, Working Paper no. 15639, January 2010, http://www.nber.org/papers/w15639.

“The Liquidation of Government Debt”: Carmen M. Reinhart and M. Belen Sbrancia, “The Liquidation of Government Debt,” National Bureau of Economic Research, Working Paper no. 16893, March 2011, http://www.nber.org/papers/w16893.

“A… reason why forward guidance may be needed…”: Michael Woodford, “Methods of Policy Accommodation at the Interest-Rate Lower Bound,” paper presented at the Federal Reserve Bank of Kansas City Symposium, Jackson Hole, Wyo., August 31, 2012, p. 6, emphasis in the original, http://www.kc.frb.org/publicat/sympos/2012/mw.pdf.

“In particular, the committee decided to keep…”: Federal Reserve, press release, December 12, 2012, http://www.federalreserve.gov/newsevents/press/monetary/20121212a.htm.

The Fed’s own staff have expressed reservations…: Marco Del Negro, Marc Giannoni, and Christina Patterson, “The Forward Guidance Puzzle,” Federal Reserve Bank of New York, Staff Report no. 574, October 2012, http://newyorkfed.org/research/staff_reports/sr574.pdf.

“a thinly disguised way of aiming…”: Charles Goodhart, “Central Banks Walk Inflation’s Razor Edge,” Financial Times, January 30, 2013, http://www.ft.com/intl/cms/s/0/744e4a96-661c-11e2-b967-00144feab49a.html.

a highly detailed critique of the Fed’s easy-money policy…: Jeremy C. Stein, “Overheating in Credit Markets: Origins, Measurement, and Policy Responses,” Federal Reserve Bank of St. Louis Research Symposium, February 7, 2013, http://www.federalreserve.gov/newsevents/speech/stein20130207a.htm.

Chapter 8: Central Bank of the World

To meet Dr. Min Zhu…: The profile in this chapter is based on Dr. Min Zhu, conversation with the author, New York City, November 8, 2012; Dr. Min Zhu, lecture at the Watson Institute, Brown University, Providence, R.I., March 29, 2013.

a China–western hemisphere supply-chain cluster…: Riordan Roett and Guadalupe Paz, eds., China’s Expansion into the Western Hemisphere: Implications for Latin America and the United States (Washington, D.C.: Brookings Institution Press, 2008).

After being vetted and groomed in midlevel positions…: See William D. Cohan, “Rethinking Robert Rubin,” Bloomberg Businessweek, September 30, 2012, http://www.businessweek.com/articles/2012-09-19/rethinking-robert-rubin; and Jonathan Stempel and Dan Wilchins, “Robert Rubin Quits Citigroup amid Criticism,” Reuters, January 9, 2009, http://www.reuters.com/article/2009/01/09/us-citigroup-rubin-idUSN0930738020090109.

Min Zhu believes the world…: Min Zhu, conversation with the author.

“Central bankers like to say…”: Ibid.

IMF economists such as José Viñals…: IMF Monetary and Capital Markets Department, “Macrofinancial Stress Testing—Principles and Practices,” August 22, 2012, http://www.imf.org/external/np/pp/eng/2012/082212.pdf.

“Each member shall deal with the Fund…”: IMF Articles of Agreement, Article V, Section 1, http://www.imf.org/external/pubs/ft/aa/index.htm.

Today the IMF website touts loans…: “IMF Lending Arrangements as of May 13, 2013,” International Monetary Fund, http://www.imf.org/external/np/fin/tad/extarr11.aspx?memberKey1=ZZZZ&date1key=2020-02-28.

the SDR-to-dollar exchange rate…: This analysis uses an exchange rate of one U.S. dollar to 0.667 SDRs. Updates to the exchange rate are available at “Exchange Rate Archives by Month,” International Monetary Fund, http://www.imf.org/external/np/fin/data/param_rms_mth.aspx.

President Obama sent letters to the congressional leadership…: “Letters from the President to the Bipartisan Leadership on NAB Fund,” Office of the Press Secretary, White House, April 20, 2009, http://www.whitehouse.gov/the-press-office/letters-president-bipartisan-leadership-nab-fund.

The president’s letter said: Ibid.

“significant step forward”: “IMF Managing Director Dominique Strauss-Kahn Welcomes U.S. Congressional Approval of IMF-Related Legislation, Including U.S. Financial Commitment of up to US$100 Billion,” International Monetary Fund, Press Release no. 09/220, June 18, 2009, http://www.imf.org/external/np/sec/pr/2009/pr09220.htm.

“Why Is the U.S. Bankrolling…”: John Gizzi, “Why Is the U.S. Bankrolling IMF’s Bailouts in Europe?” Human Events, April 25, 2011, http://www.humanevents.com/2011/05/02/why-is-the-us-bankrolling-imfs-bailouts-in-europe.

“We will miss them”: Sandrine Rastello and Timothy R. Homan, “Lagarde Boosting China IMF Clout Requires New Allies,” Bloomberg, April 10, 2013, http://www.bloomberg.com/news/2013-04-10/lagarde-boosting-china-imf-clout-requires-new-allies.html.

However, President Obama did not include the new requests in his 2012 or 2013 budgets…: Lesley Wroughton and David Lawder, “Senate Rebuffs Obama Request to Shift Fund for IMF,” Reuters, March 12, 2013, http://www.reuters.com/article/2013/03/12/us-usa-imf-reforms-idUSBRE92B04K20130312.

“I am here with my little bag…”: Pan Pylas, “Christine Lagarde at Davos 2012: ‘I Am Here with My Little Bag, to Collect a Bit of Money,’” Huffington Post, January 28, 2012, http://www.huffingtonpost.com/2012/01/28/christine-lagarde-davos-2012_n_1239050.html.

“We have been able to significantly increase…”: Howard Schneider, “Q & A with IMF Director Christine Lagarde,” Washington Post, June 29, 2013, http://articles.washingtonpost.com/2013-06-29/business/40269400_1_christine-lagarde-imf-former-french-finance-minister.

object to the use of the term money…: “Easy Money: Consequences of the Global Liquidity Glut,” Milken Institute 2012 Global Conference, May 1, 2012, http://www.milkeninstitute.org/events/gcprogram.taf?function=detail&EvID=3353&eventid=GC12.

“The SDR may be allocated by the IMF…”: International Monetary Fund, Annual Report 2012, Appendix VI: Financial Statements for FY 2012, Independent Auditors’ Report on the Special Drawing Rights Department, June 21, 2012, p. 31, http://www.imf.org/external/pubs/ft/ar/2012/eng/pdf/a6.pdf; emphasis added.

“The SDR differed from nearly all prior proposals…”: Kenneth W. Dam, The Rules of the Game: Reform and Evolution in the International Monetary System (Chicago: University of Chicago Press, 1982), pp. 151–52.

the Price-adjusted Broad Dollar Index…: This index is available as part of the statistical series published by the board of governors of the Federal Reserve System and available as part of the Foreign Exchange Rates H.10 data series at http://www.federalreserve.gov/releases/h10/summary/indexbc_m.htm.

a multiyear, multistep plan…: IMF Strategy, Policy, and Review Department, “Enhancing International Monetary Stability—A Role for the SDR?” January 7, 2011, http://www.imf.org/external/np/pp/eng/2011/010711.pdf.

Beyond the SDR bond market creation…: Ibid. See also IMF Finance and Strategy, Policy, and Review Departments, “Criteria for Broadening the SDR Currency Basket,” September 23, 2011, http://www.imf.org/external/np/pp/eng/2011/092311.pdf.

“If there were political willingness to do so…”: IMF Strategy, Policy, and Review Department, “Enhancing International Monetary Stability—A Role for the SDR?”

“non-members… and other official entities”: IMF Articles of Agreement, Article XVII, Section 3(i), http://www.imf.org/external/pubs/ft/aa/index.htm#a5s1.

The BIS is notorious for facilitating Nazi gold swaps…: Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank That Runs the World (New York: Public Affairs, 2013), chap. 3.

China had acquired the equivalent of $1.24 billion…: Annual Report 2012, International Monetary Fund, Appendix VI: Financial Statements for FY 2012, Independent Auditors’ Report on the Special Drawing Rights Department, June 21, 2012, Schedule 2, http://www.imf.org/external/pubs/ft/ar/2012/eng/pdf/a6.pdf. The IMF also records the positions of those members whose holdings of SDRs are less than their allocations because they have swapped SDRs for convertible currencies with other members. Such members are subject to a requirement of “reconstitution” in accordance with Article XIX, Section 6(a) of the IMF Articles of Agreement, which means that the shortfall in SDRs must be made up at some future date, presumably through repurchases of SDRs with convertible currency earned subsequent to the liquidity crisis that gave rise to the initial issuance. However, the IMF Articles of Agreement are extremely flexible with regard to how the reconstitution requirement will be applied, and Article XIX, Section 6(b) allows the rules to be changed at any time. The United States does not have effective veto power with respect to proposed changes of this kind.

“They are fake money…”: Min Zhu, conversation with the author.

“In all its decisions with respect to the allocation…”: IMF Articles of Agreement, Article XVIII, Section 1(a), http://www.imf.org/external/pubs/ft/aa/index.htm.

Chapter 9: Gold Redux

paranoid, fear-based…: Nouriel Roubini, “After the Gold Rush,” Project Syndicate, June 1, 2013, http://www.project-syndicate.org/commentary/the-end-of-the-gold-bubble-by-nouriel-roubini.

“I only know of two men who…”: Quoted in Gary Dorsch, “What’s Behind the Global Flight into Gold?” Financial Sense Observations, June 30, 2010, http://www.financialsensearchive.com/Market/dorsch/2010/0630.html.

220 “Money is gold, and nothing else”: J. P. Morgan, Testimony of J. P. Morgan Before the Bank and Currency Committee of the House of Representatives at Washington, D.C., December 18–19, 1912, http://memory.loc.gov/service/gdc/scd0001/2006/20060517001te/20060517001te.pdf.

President Nixon ended U.S. dollar convertibility into gold…: For a learned review of the workings of the Committee for Reform of the International Monetary System, the “Committee of 20,” its recommendations, and the eventual entry into force of the Second Amendment to the IMF Articles of Agreement in 1978, see Kenneth W. Dam, The Rules of the Game: Reform and Evolution in the International Monetary System (Chicago: University of Chicago Press, 1982), pp. 211–90.

the United States dumped 412 tons of gold on the market…: Ibid., p. 273n92.

The total gold supply in the world today…: This measure of total gold and all further reference to specific gold quantities in this chapter are as of July 2013 and are available from the World Gold Council, www.gold.org.

money supplies of the ECB, the Bank of Japan,…: These figures are taken from the websites of the Federal Reserve System, http://www.federalreserve.gov; the European Central Bank, http://www.ecb.int/home/html/index.en.html; the Bank of Japan, http://www.boj.or.jp/en; and the People’s Bank of China, http://www.pbc.gov.cn/publish/english/955/2013/20130313140427964275661/20130313140427964275661_.html, as of July 11, 2013. Japanese yen were converted to U.S. dollars at 100 to 1; euros at 0.77 to 1; yuan at 6.1 to 1.

chose to return sterling to gold at the prewar rate…: For an extended analysis of this topic, from which this section is partly drawn, see Murray N. Rothbard, What Has Government Done to Our Money? part 4, “The Monetary Breakdown of the West, 3. Phase III: The Gold Exchange Standard (Britain and the United States) 1926–1931,” at Ludwig von Mises Institute, http://mises.org/money/4s3.asp.

he recites it ad nauseam…: See, for example, Paul Krugman, “Golden Instability,” New York Times, August 26, 2012, http://krugman.blogs.nytimes.com/2012/08/26/golden-instability.

The facts speak for themselves…: Statistics on gold production, gold demand, and gold supply in this section are from the World Gold Council, www.gold.org.

No such prearranged central bank or IMF sales to China have been reported…: The closest correspondence to potential prearrangement appears in the fourth quarter of 2002, when China’s reported gold reserves increased 99.84 tonnes and Switzerland’s declined 70.4 tonnes at the same time; see World Gold Council, www.gold.org. However, no evidence of prearrangement between Switzerland and China has been found. If a Switzerland-to-China trade were prearranged, it would likely have been handled through the facilities of the Bank for International Settlements (BIS) in Basel. The central bank of Switzerland, the Swiss National Bank, has been a member of the BIS since its inception in 1930; see the Swiss National Bank website at http://www.snb.ch/en/iabout/internat and UN treaty archives at http://treaties.un.org/Pages/showDetails.aspx?objid=0800000280167c31.

The agents are principally located…: Senior bankers and asset managers with firsthand knowledge of China’s global gold-buying operations, conversations with the author, Hong Kong, September 2012.

In a masterpiece of market savvy…: China’s gold purchasing agents, conversations with the author, New York City, August 7, 2013; Perth Mint, e-mail to the author, dated September 25, 2013.

Partly as a result of these large-scale covert operations…: Brendan Conway, “China: Soon to Be World’s Biggest Gold Importer, If It Isn’t Already,” Barron’s, February 6, 2013, http://blogs.barrons.com/focusonfunds/2013/02/06/china-soon-to-be-worlds-biggest-gold-importer-if-it-isnt-already.

By 2012, China was producing over 370 tonnes per year…: See U.S. Geological Survey, “Gold,” Mineral Commodity Summaries, January 2013, http://minerals.usgs.gov/minerals/pubs/commodity/gold/mcs-2013-gold.pdf.

Russia is the world’s fourth-largest gold producer: Ibid.

The Federal Reserve vaults hold approximately 6,400 tonnes…: See Scott Mayerowitz, “Welcome to the World’s Largest Gold Vault,” ABC News, September 19, 2009, http://abcnews.go.com/Business/story?id=5835433&page=1; and Mike Hanlon, “The Big Picture: This Vast Vault of Gold Under the Bank of England Should Weather Credit Crunch,” Daily Mail, October 22, 2008, http://forums.canadiancontent.net/news/78369-vast-vault-gold-under-bank.html. Since the Daily Mail report, which cites a figure of 4,600 tonnes, approximately 100 tonnes have been repatriated to Venezuela.

an eight-year plan to repatriate all the gold…: “Deutsche Bundesbank’s New Storage Plan for Germany’s Gold Reserves,” Deutsche Bundesbank, press notice, January 16, 2013, http://www.bundesbank.de/Redaktion/EN/Pressemitteilungen/BBK/2013/2013_01_16_storage_plan_gold_reserve.htm.

an initiative that requires all Swiss gold…: Luzi Stamm, “‘Gold Initiative’: A Swiss Initiative to Secure the Swiss National Bank’s Gold Reserves,” Volksinitiative Rettet unser Schweizer Gold, press release, September 20, 2011, http://www.goldinitiative.ch/downloads/goldinitiative-english.pdf.

“I don’t know…”: Katharina Bart and Albert Schmieder, “Swiss Right-Wing Forces Referendum on Banning SNB Gold Sales,” Reuters, March 20, 2013, http://www.reuters.com/article/2013/03/20/us-swiss-gold-idUSBRE92J0Z320130320.

The remainder is divided…: Jaco Schipper, “90% of Dutch Gold Reserve Is Held Abroad,” Market Update, January 7, 2012, http://www.marketupdate.nl/nieuws/valutacrisis/90-of-dutch-gold-reserve-is-held-abroad.

The international monetary debate…: For a scholarly, in-depth study of efforts at reform of the international monetary system including the C-20, the Jamaica Meeting, and the Second Amendment to the IMF Articles of Agreement, see Kenneth W. Dam, The Rules of the Game: Reform and Evolution in the International Monetary System (Chicago: University of Chicago Press, 1982).

“You are… asking this to someone…”: Mario Draghi, lecture at the John F. Kennedy Jr. Forum at the Institute of Politics, Harvard University, Cambridge, Mass., October 9, 2013, https://forum.iop.harvard.edu/content/public-address-mario-draghi.

Chapter 10: Crossroads

“a chronic condition of sub-normal activity…”: John Maynard Keynes, The General Theory of Employment, Interest, and Money (San Diego: Harcourt, 1964), p. 249.

Based on duration if not strength…: John H. Makin, “Third Time Unlucky: Recession in 2014?” American Enterprise Institute, July 30, 2013, http://www.aei.org/outlook/economics/monetary-policy/third-time-unlucky-recession-in-2014.

Despite cheerleading in late 2013…: Daniel Alpert, “The New Sick-onomy? Examining the Entrails of the U.S. Employment Situation,” EconoMonitor, July 24, 2013, http://www.economonitor.com/danalperts2cents/2013/07/24/the-new-sick-onomy-examining-the-entrails-of-the-u-s-employment-situation.

By August 2013, total student loans backed…: “The Rolling Student Loan Bailout,” Wall Street Journal, August 9, 2013, http://online.wsj.com/article/SB10001424127887323968704578652291680883634.html.

“the test of a first-rate intelligence…”: F. Scott Fitzgerald, The Crack-Up (1936; reprint New York: New Directions, 2009).

The bitcoin phenomenon began in 2008…: Satoshi Nakamoto, “Bitcoin: A Peer-to-Peer Electronic Cash System,” November 1, 2008, http://bitcoin.org/bitcoin.pdf.

the history of barter is mostly a myth: David Graeber, Debt: The First 5,000 Years (Brooklyn, N.Y.: Melville House, 2011), pp. 21–41.

“Sept. 11 was not a failure of intelligence or coordination…”: Thomas L. Friedman, “A Failure to Imagine,” New York Times, May 19, 2002, http://www.nytimes.com/2002/05/19/opinion/a-failure-to-imagine.html.

Chapter 11: Maelstrom

“The broad question is whether central banks…”: Arthur F. Burns, memorandum to President Gerald R. Ford, June 3, 1975, U.S. Department of State, Office of the Historian, http://history.state.gov/historicaldocuments/frus1969-76v31/d86.

“We… feel strongly that some safeguards…”: President Gerald R. Ford to Chancellor Helmut Schmidt, June 6, 1975, Gerald R. Ford Library, Ann Arbor, Mich., http://www.fordlibrarymuseum.gov/library/document/0351/1555807.pdf.

the secret Gold and Foreign Exchange Committee…: Adam Lebor, Tower of Basel: The Shadowy History of the Secret Bank That Runs the World (New York: Public Affairs, 2013), p. 189.

“In May 1996, the market traded the equivalent…”: Dino Kos, Gold and Foreign Exchange Committee Discussion on Gold Market, April 7, 1997, http://www.gata.org/files/FedMemoG-10Gold&FXCommittee-4-29-1997.pdf.

“information relating to swap arrangements…”: Kevin M. Warsh, Board of Governors of the Federal Reserve System, to William J. Olson, September 17, 2009, http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf.

“We bought 300 tonnes of gold…”: Eisuke Sakakibara, conversation with the author, Seoul, South Korea, May 31, 2013.

The gold was transported to Japan…: Retired official of Brinks, conversation with the author, Hickory, N.C., November 10, 2013.

The most notorious and heavily criticized case…: Holly Watt and Robert Winnett, “Goldfinger Brown’s £2 Billion Blunder in the Bullion Market,” Sunday Times, April 15, 2007, http://www.thesundaytimes.co.uk/sto/Test/politics/article63170.ece.

“Around 90% of customer placements…”: Bank for International Settlements, Financial Statements, updated June 24, 2013, http://www.bis.org/banking/balsheet.htm (accessed July 21, 2013).

“The Bank transacts… gold on behalf of its customers…”: Bank for International Settlements, 83rd Annual Report, March 31, 2013, p. 110, http://www.bis.org/publ/arpdf/ar2013e7.pdf#page=44.

“Gold loans comprise fixed-term gold loans to commercial banks”: Bank for International Settlements, 80th Annual Report, March 31, 2010, p. 158n15, http://www.bis.org/publ/arpdf/ar2010e8.htm; emphasis added.

“Gold loans comprise fixed-term gold loans”: Bank for International Settlements, 83rd Annual Report, June 23, 2013, p. 133n15, http://www.bis.org/publ/arpdf/ar2013e7.pdf.

on September 18, 2009, the IMF authorized the sale of 403.3 tonnes…: Information in this extended analysis of IMF gold sales comes from “Questions and Answers, IMF Gold Sales,” International Monetary Fund, updated May 16, 2013, http://www.imf.org/external/np/exr/faq/goldfaqs.htm.

“China’s acquisition of gold makes sense…”: Dr. Min Zhu, conversation with the author, New York City, November 8, 2012.

“Somebody’s got to own it…”: High-ranking intelligence official, conversation with the author, McLean, Va., December 13, 2012.

“I never hear any discussion…”: James Himes, conversation with the author, Southport, Conn., July 15, 2013.

Mishkin warns that the Fed is dangerously close…: David Greenlaw, James D. Hamilton, Peter Hooper, and Frederic S. Mishkin, “Crunch Time: Fiscal Crises and the Role of Monetary Policy,” U.S. Monetary Policy Forum, February 22, 2013, rev. July 29, 2013, http://dss.ucsd.edu/~jhamilto/USMPF13_final.pdf.

“In the extreme, unsustainable fiscal policy…”: Ibid., pp. 61–62.

Conclusion

“The piecemeal engineer will, accordingly…”: Karl Popper, The Open Society and Its Enemies (Princeton, N.J.: Princeton University Press, 1971), pp. 157–59. Popper is quoted in George Soros, “How to Save the Euro from the EU Crisis—The Speech in Full,” Guardian, April 9, 2013, http://www.guardian.co.uk/business/2013/apr/09/george-soros-save-eu-from-euro-crisis-speech.

the state is well armed with SWAT teams…: Radley Balko, Rise of the Warrior Cop: The Militarization of America’s Police Forces (New York: Public Affairs, 2013).

Author Jonah Goldberg has documented fascism’s history…: Jonah Goldberg, Liberal Fascism: The Secret History of the American Left from Mussolini to the Politics of Meaning (New York: Doubleday, 2008).

More ominous was his remark…: Quoted in Balko, Warrior Cop, p. 333.