Credit Writedowns » Hyman Minsky

Economics in the Age of Deleveraging

Guest Author — Wed, 01 Feb 2012 16:00:05 +0000

Clearly, economic policy is now far more complex than it appeared to be before the GFC. As we enter this Age of Deleveraging, the worst thing we can do is apply policies that appeared to work during the preceding Age of Leverage—but were in fact predicated on ever-rising private sector indebtedness. Politicians should be sceptical of conventional economic advice at this time; it would be much wiser to study the history of the 1930s instead

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The Fetish for Liquidity (and Reform of the Financial System)

Randall Wray — Tue, 31 Jan 2012 19:00:03 +0000

So here’s the deal. What happened is that the financial sector taken as a whole moved into extremely short-term finance of positions in assets. This is a huge topic and is related to the transformation of investment banking partnerships that had a long-term interest in the well-being of their clients to publicly-held, pump-and-dump enterprises whose only interest was the well-being of top management. It also is related to the rise of shadow banks that appeared to offer deposit-like liabilities but without the protection of FDIC. And it is related to the Greenspan “put” and the Bernanke “great moderation” that appeared to guarantee that all financial practices—no matter how crazily risky—would be backstopped by Uncle Sam. And it is related to very low overnight interest rate targets by the Fed (through to 2004) that made short-term finance extremely cheap relative to longer-term finance. All of this encouraged financial institutions to rely on insanely short short-term finance

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[PREMIUM] The Ultimate QE is the Fed’s Coming Purchase of Real Assets

Edward Harrison — Fri, 27 Jan 2012 19:35:43 +0000

I would bet on near-systemic collapse before the Fed starts either asset purchases or Congress resorts to fiscal activism. But eventually, the Fed is going to purchase more than just treasuries. They will purchase a lot of financial assets and probably some real assets as well

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A brief note on Corporatism

Edward Harrison — Thu, 10 Mar 2011 22:00:07 +0000

This post is designed to be a quick hit but I wanted to put up a few thoughts on corporatism, stimulus and austerity. Consider it an extension of my post "Corporatism masquerading as Liberty". I intend to argue that corporatism is integrally related to the policy options available to an economy experiencing a secular deleveraging.

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The Fall of the New Monetary Consensus

Randall Wray — Tue, 11 Jan 2011 14:00:26 +0000

By L. Randall Wray The following is a paper given at the ASSA conference in Denver this past week for a panel organized by James Galbraith, titled Pressures on the Paradigm, sponsored by Economists for Peace & Security. The Queen famously asked her economists why none had seen the global crisis coming. Obviously the answer

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Grantham: Finance Goes Rogue

Edward Harrison — Wed, 21 Jul 2010 15:00:00 +0000

Grantham argues that a disproportionate share of the US economy is devoted to financial services

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On Crises of Capitalism

Edward Harrison — Wed, 07 Jul 2010 21:00:00 +0000

Great video detailing explanations for why the financial crisis happened. Big hat tip to the Pragmatic Capitalist. I like this first aspect of the video and I LOVE the drawings. Very cool. Of course, you know that you’re going to get another view which the author of the video says is the right one. He

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James Galbraith: How financial stability creates instability

Edward Harrison — Tue, 01 Dec 2009 13:48:16 +0000

Below are three videos from a talk at the 2009 Economics of Peace Conference in Sonoma, CA, where James Galbraith talks about the Hyman Minsky concept of the instability of stability. This concept is fundamental to the behavioural psychology behind capitalist systems. This is a case where stability invites greater risk-taking and eventually creates instability.

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Steve Keen: Debt and the economy – how do we pay for all of this?

Edward Harrison — Wed, 18 Nov 2009 21:38:25 +0000

Hat tip Rolfe Winkler. Related Posts Steve Keen and the spectre of terminal debt 15 Sep 2009 Steve Keen: On the Edge with Max Keiser 21 Sep 2009 Steve Coll talks Pakistan with Charlie Rose 20 Mar 2009 More About: Austrian Economics, bubbles, credit crisis, debt, Economics, financial history, Hyman Minsky, journalism, media, recession, Steve

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The next crisis is already under way

Edward Harrison — Mon, 19 Oct 2009 21:52:06 +0000

Wolfgang Munchau of the Financial Times wrote a very important comment piece in today’s Financial Times. In it he said that central banks are targeting asset prices to avoid the brunt of cyclical downturns. This policy is inducing asset bubbles and creating a more volatile real economy with unpredictable negative consequences. I want to expand

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It’s the debt, stupid

Edward Harrison — Wed, 23 Sep 2009 14:40:51 +0000

Let’s say I run a company. For the sake of argument, we’ll call it a shoe store in New York City. I am making $100,000 net per year now. But, I look around me and see huge opportunity for growth. So I go to my bank and ask for a loan to expand my business.

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Steve Keen: On the Edge with Max Keiser

Edward Harrison — Mon, 21 Sep 2009 12:00:09 +0000

Last week, I highlighted some of the ideas of Australian economist Steve Keen in my post, “Steve Keen and the spectre of terminal debt.” Keen is of the Minsky camp and he believes that an unsustainable debt bubble has build up in the industrialized world which can only be brought to heel through a ‘debt

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Steve Keen and the spectre of terminal debt

Edward Harrison — Tue, 15 Sep 2009 22:35:02 +0000

Say I’m a politician and I am concerned about my re-election prospects in 2010. I have been a member of Congress for seven years now and have developed a good reputation as a reform-minded economic realist willing to listen to a number of competing economic ideas. However, right now I am a bit concerned about

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Minsky: Turning neoclassical economics on its head

Edward Harrison — Tue, 21 Jul 2009 18:46:49 +0000

This post is going to be a bit wonkish. I apologize for those of you who are not economics geeks. Hopefully, you will find it interesting nonetheless. At the urging of my good friend Marshall Auerback, I have been looking into the Minskyian twist to the neoclassical view of the world. Economists who follow Hyman

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