In my last post, I wrote about growing concern that the Federal Reserve’s rate hikes could trigger a financial accident that spills over into financial markets. With yesterday’s award in honor of Alfred Nobel, I found myself thinking a lot about Hyman Minsky.
It seems that the concept of the "Minsky Moment" is spreading through the mainstream as I have seen more references to it over the past few years. Unfortunately, I don't think it has reached the Fed and Jerry Powell.
Or, is it that their desire to suppress wages and grow the "reserve army of the unemployed" is more important than financial stability? From my POV it looks like the Fed is violating both sides of their dual mandate to promote financial stability and full employment.
It is, however, clarifying to see Powell admit that wage suppression is the goal. The wealthy elites running this economy really do hate the working class and they seem to find great pleasure in beating them down. Sad and disgusting.
"It’s basically about the relationship between income and debt and how it evolves over time."
Correct. And the answer is guaranteeing that individual agents always have a decent level of income...so that all but illegitimate commercial agents can compete in an ACTUALLY stabilized system. Illegitimate as in private finance because as I have posted here before it is always an exterior to the actual productive process incredibly costly and domineeringly profitable force injected either pre-production or post retail sale exposing it as a complete and de-stabilizing parasite.
If you don't see this its largely because of the last 5000 years of the acculturation of the present paradigm for the creation and distribution of new money, that is Debt Only, is blinding you.
Unfortunately the truth is there has been no actual evolution from the current paradigm AT ALL. New paradigms expose erudition as simply hide bound reformist orthodoxy. I'm sorry, study historical paradigm changes. Paradigms like wisdom insights are deep truthful simplicities. That's why I titled my book Wisdomics-Gracenomics...because what we need to do is rise to wisdom, and because the pinnacle concept of wisdom according to ALL of the world's wisdom traditions is the natural philosophical concept of grace as in love in personal action...and systemic policy...unless we just want to illogically deny/ignore the value of wisdom, especially in our temporal affairs.
I didn't know that Ponzi schemes or enterprises were numerous and always with us. Social Security has been called one; at the time, I thought how outrageous, but Minsky explains here that just not enough money is flowing in to keep the system in operation, so it had to sell off assets to survive. So it's not necessarily pure evil, although it can be.
By the way, I've also read that Social Security is a major governmental success, a program that really helps a lot of people and paid for itself until Congress borrowed heavily from it and never paid it back. Now it must depend on Congress to bail it out if it wants to pay full benefits in perpetuity. (I'm depending on memory for all that.)
Why do we even need a Fed? It's an instrument to help the banks and not the people. If the goal of society is to raise all boats the cost of money should be kept very low. The drastic increase in interest rates is extremely inflationary. The banks gain and the people and small business' lose. What I'm wondering is this "October Surprise" by design to build up the oligarchy at great expense to the people. As a retiree, God Bless the staying power of indexing of Social Security. Curse any stiff arm politician who would privatize that system to gain political contributions.
I harbor the suspicion that at some deep level, people at the Fed and others in government understand all this very well. Even so, they're proceeding on the current likely disastrous course because to do otherwise would risk revealing how finance and the economy really work to the broader public.
Does the model assume no particular regulation that creates, for example, hedge incentives? IOW could automatic stabilizers manage the risk distribution?
Surprisingly easy to understand.
Great article!
It seems that the concept of the "Minsky Moment" is spreading through the mainstream as I have seen more references to it over the past few years. Unfortunately, I don't think it has reached the Fed and Jerry Powell.
Or, is it that their desire to suppress wages and grow the "reserve army of the unemployed" is more important than financial stability? From my POV it looks like the Fed is violating both sides of their dual mandate to promote financial stability and full employment.
It is, however, clarifying to see Powell admit that wage suppression is the goal. The wealthy elites running this economy really do hate the working class and they seem to find great pleasure in beating them down. Sad and disgusting.
Very simple and insightful
Isn't the fiscal situation in the last year or so amplifying this?
"It’s basically about the relationship between income and debt and how it evolves over time."
Correct. And the answer is guaranteeing that individual agents always have a decent level of income...so that all but illegitimate commercial agents can compete in an ACTUALLY stabilized system. Illegitimate as in private finance because as I have posted here before it is always an exterior to the actual productive process incredibly costly and domineeringly profitable force injected either pre-production or post retail sale exposing it as a complete and de-stabilizing parasite.
If you don't see this its largely because of the last 5000 years of the acculturation of the present paradigm for the creation and distribution of new money, that is Debt Only, is blinding you.
Unfortunately the truth is there has been no actual evolution from the current paradigm AT ALL. New paradigms expose erudition as simply hide bound reformist orthodoxy. I'm sorry, study historical paradigm changes. Paradigms like wisdom insights are deep truthful simplicities. That's why I titled my book Wisdomics-Gracenomics...because what we need to do is rise to wisdom, and because the pinnacle concept of wisdom according to ALL of the world's wisdom traditions is the natural philosophical concept of grace as in love in personal action...and systemic policy...unless we just want to illogically deny/ignore the value of wisdom, especially in our temporal affairs.
Thanks Stephanie for explaining it so I can understand it.
I don't think you should consider becoming an artist :)
Easy to understand when presented well.
This is brilliant
I didn't know that Ponzi schemes or enterprises were numerous and always with us. Social Security has been called one; at the time, I thought how outrageous, but Minsky explains here that just not enough money is flowing in to keep the system in operation, so it had to sell off assets to survive. So it's not necessarily pure evil, although it can be.
By the way, I've also read that Social Security is a major governmental success, a program that really helps a lot of people and paid for itself until Congress borrowed heavily from it and never paid it back. Now it must depend on Congress to bail it out if it wants to pay full benefits in perpetuity. (I'm depending on memory for all that.)
Why do we even need a Fed? It's an instrument to help the banks and not the people. If the goal of society is to raise all boats the cost of money should be kept very low. The drastic increase in interest rates is extremely inflationary. The banks gain and the people and small business' lose. What I'm wondering is this "October Surprise" by design to build up the oligarchy at great expense to the people. As a retiree, God Bless the staying power of indexing of Social Security. Curse any stiff arm politician who would privatize that system to gain political contributions.
Thanks, really clear explanation
I harbor the suspicion that at some deep level, people at the Fed and others in government understand all this very well. Even so, they're proceeding on the current likely disastrous course because to do otherwise would risk revealing how finance and the economy really work to the broader public.
So, do we live with fragility or are there recommended policy actions for getting more Hedge units than Ponzi units into the system?
Go crypto! 😳
Does the model assume no particular regulation that creates, for example, hedge incentives? IOW could automatic stabilizers manage the risk distribution?