Why Hyman Minsky matters

12 September, 2018 at 09:12 | Posted in Economics | 3 Comments

HymanMinsky2Listen to BBC 4 where Duncan Weldon tries to explain in what way Hyman Minsky’s thoughts on banking and finance offer a radical challenge to mainstream economic theory.

As a young research stipendiate in the U.S. yours truly had the great pleasure and privilege​ of having Hyman Minsky as a ​teacher.

He was a great inspiration at the time.

He still is.

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3 Comments

  1. “Stability leads to instability” in money matters is what is being told here. It is not true nor the basic reason why our social system has instability within its nature. When a system starts to become unstable it may not necessarily reach full instability before it begins to self-correct and this is what has been happening repeatedly as in 2007. The system itself is bot stable with destabilizing trends. We need to better define what we mean by these various terms and then to discover how much instability we can tolerate before it is truly going “to sink the ship”!

    • You said;

      “When a system starts to become unstable it may not necessarily reach full instability before it begins to self-correct and this is what has been happening repeatedly as in 2007”.

      What self-corrected during the GFC?

      In fact nothing self-corrected! The central bankers(USFED) swapped bad assets from bankers balance-sheets against risk-free government-bonds(aka bankreserves=money with interest). To fully restore confidence they(with politicians) even had to let government entities(Freddie Mac/Fanny May i.e) to buy these severely downgraded assets(poor people´s mortgages) from the market. Taxpayers are still paying. No one in jail as in the Savings&Loan-scandal in the 90´s.

      Self-correcting? Huhhh!!

      • “Taxpayers are still paying.”
        .
        No, TARP was political theater and was repaid with interest. The real bailout came in the form of unlimited currency swap lines and other lending programs from the Fed. As Dudley says in the Federal Open Market Committee September 16, 2008 transcript (http://www.federalreserve.gov/monetarypolicy/files/FOMC20080916meeting.pdf):
        .
        (From Page 17)
        .
        MR. DUDLEY. I think a lot of the programs that we have are actually open ended. The discount window is open ended in the sense that it’s limited only by the amount of collateral that the banks post there. The Primary Dealer Credit Facility is open ended in that it is limited only by the size of the tri-party repo system. My point here is that, if foreign banks worry about capacity limits, even having a large program could in principle not be sufficient in extremis. But if the program is open ended, the rollover risk problem goes away. If I lend you more dollars today, I don’t have to worry about getting those dollars back because I always know that the facility is there.
        […]
        MR. LACKER. But we will communicate a program size?
        .
        MR. DUDLEY. I think that remains to be discussed with our counterparties. I think we need to have discussions about what would be most effective. Would a big size that’s fixed in quantity be most effective? Would an open limit be most effective? I think we have to have those discussions. I think the important thing here – and what we’re going for – is credibility. In a crisis you need enough force – more force than the market thinks is necessary to solve the problem – and we’re going to have to have discussions to determine how much is enough force.


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