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With an introduction by Benjamin J. Cohen

This book begins with a recapitulation of the main themes of Strange's earlier Casino Capitalism, stressing the major policy decisions and non-decisions that, in her opinion, had first allowed financial markets seemingly to outgrow governmental control. It adds a number of newer systemic developments that had emerged in the years after Casino Capitalism was published. Following this opening tour d'horizon, the book evaluates many of these developments in greater detail, covering the revolution in information technology interstate politics, contagion risks, global debt, money laundering and the roles of both national governments and multilateral agencies such as the International Monetary Fund and Bank for International Settlements. Great emphasis is placed on the relationship between the United States and Japan, the 'US-Japan axis', which is considered crucial to the effective management of financial crises. All the strings of Strange's discussion are pulled together where she turns her eyes to the future. Most financial research at the time seemed biased toward midlevel theory building, focusing primarily on key relationships within a broader structure whose characteristics were assumed, normally, to be given and stable. The book discusses hypotheses about the most important changes that have affected the global financial system and the international political economy. Key decisions, or non-decisions in the case of failures to act when positive action would have been possible, are also discussed.

Chapter 8 Managing mad money – national systems There are two reasons for regulating the behaviour of international financial dealers and the conduct of international financial markets. One is to moderate and restrain greed. The other is to moderate and restrain fear. Greed and fear are the two human emotions most evident in the day-to-day behaviour of the international financial system today. Mad money is the result. Either dealers are drawn by greed to take too big risks with their own or, more often, with other people’s money; or they are overcome by fear

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3 Money Introduction In Wall Street:  Money Never Sleeps, the banks have taken over Gekko’s job. I was shocked when I went back to this in 2010. In Wall Street, Gekko had been the outsider, the inside trader guy, the thief, the blackmailer –​and that’s what the banks do now. In the old days the banks would never have done that, it was considered immoral, but by 2010 the whole thing had shifted because of deregulation.1 By the time Wall Street: Money Never Sleeps hit cinemas in September 2010, banking, the financial markets and capitalism in general had all

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Chapter 7 Finance and crime As noted in ­chapter 1, one of the big changes in international finance in recent years has been the greatly increased use of the system by organised crime. It would have hardly been possible to design a ‘non-regime’ that was better suited than the global banking system to the needs of drug dealers and other illicit traders who want to conceal from the police the origin of their large illegal profits. The business of money laundering could not have so prospered and grown without the facilities for swift and relatively invisible

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could also be our only real weapon against giving in to completely passive determinism. Are we going to say, ‘What’s going to happen is going to happen. Nothing I  can do or say is going to stop it. Nobody has any influence whatever on the destiny of the world economy’? If we succumb to that sort of dismal fatalism, we deserve whatever unpleasant fate does lie in store. For the sake of clarity, let me suggest just five simple conclusions that I believe can be safely drawn from the foregoing account of what has happened to affect money, finance and governments since

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potentially profitable activities. Some examples where political authority has taken different decisions according to time, place and social mores, are over the opportunity to profit from running casinos or brothels, of selling blue movies, alcohol or patent medicines. In some circumstances, the opportunity can also be given – or denied – by non-state authorities. There have been times when large firms, or trade associations, have opposed and prevented innovations that threatened profits even though they might have benefited consumers. The interest of mafia bosses in money

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comprehensive survey of all the recent developments in the international financial system. That would be a vast undertaking. Even to survey all the developments in the treatment of transnational debt 97 98 Mad money would be a massive task. Rather, my aim is the more limited purpose of analysing – and if possible explaining – how the system has changed in recent years, and with what consequences for social classes, for creditors and debtors and for institutions, including firms as well as national governments. The main purpose is neither descriptive nor prescriptive, but

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already there, the Federal Reserve Board laid up trouble for the future. Others – including Alan Greenspan, who ultimately was responsible for the decision – argued that, in a crisis, financial authorities could not dare take the greater, more immediate risk of doing nothing – just in case the wealth effect did not work. What the Fed did therefore was to interrupt their earlier strategy of gradually increasing US interest rates. In the weeks before Black Monday, they had raised the Fed funds rate from 6.5 per cent to 7.25 80 Mad money per cent. The injections of

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, there was nothing to celebrate. Millions faced job losses and ­unemployment. Family businesses painstakingly built up over the years were bankrupted. The future looked dark indeed for the once-proud 1 2 Mad money ‘tiger economies’ of east Asia. It was a coincidence that the book to which this is some sort of sequel, Casino Capitalism, had ended with just such a graphic image of the financial operators drinking champagne, while outside the tower-block offices other people were having a hard time of it (Strange 1986). The only difference was that the imaginary

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  – as everyone knows  – that summit declarations are one thing, action another. And the reasons for inaction are not technical or economic, but fundamentally political. That is hardly surprising since the same is true for international action on global warming and 43 44 Mad money environmental protection, on the control of nuclear weapons and power plants, on the protection of human rights or the rules for international trade and intellectual property. On all these matters, the international political system, based on an obsolete principle of the sovereignty (i

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