Nice article on Minsky.
BBC News
Did Hyman Minsky find the secret behind financial crashes?
(h/t Andy Blatchford via Neil Wilson)
Analysis: Why Minsky Matters is broadcast on BBC Radio 4 at 20:30 GMT, 24 March 2014 or catch up on BBC iPlayer
Tuesday, March 25, 2014
BBC News — Did Hyman Minsky find the secret behind financial crashes?
Nice article on Minsky.
BBC News
Did Hyman Minsky find the secret behind financial crashes?
(h/t Andy Blatchford via Neil Wilson)
Analysis: Why Minsky Matters is broadcast on BBC Radio 4 at 20:30 GMT, 24 March 2014 or catch up on BBC iPlayer
Subscribe to:
Post Comments (Atom)
7 comments:
Except that he misses the first domino: credit expansion.
I seem to remember Walter Bagehot got pretty near saying the same thing as Minsky. I.e. after a crash, everyone is cautious. Then they get more confident. Then they get plain silly, which triggers the next crash.
Can anyone point to the relevant passage in Bagehot's work?
It has been awhile since I read Bagehot. I think the difference would be that Bagehot (and a lot of others) lump everyone together. Minsky's distinction between types of finance highlights that it is the risky borrowers who are ramping up leverage during a cycle. His mode of thinking is more easily thought of as a model; otherwise activity is just a mood and nearly impossible to analyse.
If you strip out some of the doctrinal details, Austrian business cycle theory gives a similar story.
Bob doesn't actually understand the ABCT. He just thinks he can make meaningful statements by sticking words like "funny money", "distorted" and "unsustainable" together. He has no idea what he really means by any of these words, but using them satisfies him emotionally.
electorates demonstrated that;
Marriner Eccles demonstrated a practical solution;
question: what's keeping most citizens from ever recognizing the obvious?
active misinformation?
I think that we can all agree that the intellectual old class which was too slow to react ( i.e. Fed Reserve and those that be ) did not know MMT or they used back door MMT to trick the masses.
Austrians and forward MMT'rs would have to agree
"Minsky's distinction between types of finance highlights that it is the risky borrowers who are ramping up leverage during a cycle."
It always takes two to tango. Banks make the worst loans at the very top of the cycle, and I think Minsky would agree.
"For 100 years, Austrian analysis has explained that funny money emissions and artificial credit expansions are going to induce false, distorted and unsustainable prices and price structures."
I agree that borrowing/lending decisions usually get worse at the worst possible time under fiat money regimes. However, even with hard money regimes human nature being what it, is does not exempt borrowers and lenders from making bad (manic) decisions at the top of the cycle. However, it does give lenders less wherewithal to make those loans.
I have only read a little about Minsky, but from what I know I think his analysis would have nailed the 2008 credit crisis. His descriptions of loan structures with hair all over them originated at the top of the credit cycle bear a remarkable resemblance to the infamous "TOGGLE NOTES" issued by corporates and analogous "OPTION ARMS" underwritten in mortgage space. Both examples leveraged credit by allowing borrowers to delay making interest payments in exchange for increasing the principal.
Post a Comment