by Steve Keen · 21 Sep 2011 · 823pp · 220,581 words
Recession. Ultimately, the most apposite critique of Bernanke’s defense of the indefensible is to compare his position with that of the post-Keynesian economist Hyman Minsky. Minsky argued that, since crises like the Great Depression have occurred, a crucial test for the validity of an economic theory is that it must
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of the Federal Reserve. Part 3, ‘Alternatives,’ considers alternative approaches to economics. It has six chapters: Chapter 13 (‘Why I did see “It” coming’) outlines Hyman Minsky’s ‘Financial Instability Hypothesis,’ and my nonlinear and monetary models of it, which were the reason I anticipated this crisis, and why I went public
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to uncertainty, expectations, liquidity preference determining the rate of interest, speculative capital asset prices, and so on? They are nowhere to be seen. Sometime later, Hyman Minsky commented that ‘Keynes without uncertainty is rather like Hamlet without the Prince’ (Minsky 1975: 75), but this is what Hicks served up as Keynes. Even
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economic theory of how asset prices are determined. Decades later, Fisher’s ‘Debt Deflation Theory of Great Depressions’ was rediscovered by the non-orthodox economist Hyman Minsky, while at much the same time Fisher’s pre-Great Depression theory was formalized into the efficient markets hypothesis. Fisher thus has the dubious distinction
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puzzle’). (Ibid.: ix) However, from this point on, his neoclassical priors excluded both salient data and rival intellectual perspectives on the data. His treatment of Hyman Minsky’s ‘Financial Instability Hypothesis’ – which is outlined in Chapter 13 – is particularly reprehensible. In the entire volume, there is a single, utterly dismissive reference to
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Minsky: Hyman Minsky (1977) and Charles Kindleberger […] have in several places argued for the inherent instability of the financial system but in doing so have had to depart
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and money in their models of the economy, and many economists in these schools expected a crisis – the former group because of their familiarity with Hyman Minsky’s Financial Instability Hypothesis, and the latter because of their familiarity with Hayek’s argument about the impact of interest rates being held too low
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had developed a mathematical model of how this crisis might come about. That model put into dynamic, disequilibrium form the economic vision of the late Hyman Minsky, which was in turn built on the insights of the great non-neoclassical thinkers Marx, Schumpeter, Fisher and Keynes. Minsky’s strength was to weave
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the kind of institutional analysis that Keynes provided in 1936. Two such analyses have been provided: by Robert Haugen in the ‘Inefficient Markets Hypothesis,’ and Hyman Minsky in the ‘Financial Instability Hypothesis,’ as discussed in Chapter 13. The Inefficient Markets Hypothesis After a long career as an academic finance economist, Bob Haugen
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: Pluto Press Australia/Zed Books. Keen, S. (2001b) ‘Minsky’s thesis: Keynesian or Marxian?’ in R. Bellofiore and P. Ferri (eds), The Economic Legacy of Hyman Minsky, vol. 1: Financial Keynesianism and Market Instability, Cheltenham: Edward Elgar, pp. 106–20. Keen, S. (2003) ‘Standing on the toes of pygmies: why econophysics must
by Kindleberger, Charles P. and Robert Z., Aliber · 9 Aug 2011
’ – musty terms used by earlier generations of economists including Adam Smith, John Stuart Mill, Knut Wicksell and Irving Fisher. These concepts were developed further by Hyman Minsky, who argued that the financial system in a market economy is unstable, fragile, and prone to crisis. The Minsky model has great explanatory power for
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occurred regularly at ten-year intervals (1816, 1826, 1837, 1847, 1857, 1866), thereafter less regularly (1873, 1907, 1921, 1929). The model A model developed by Hyman Minsky helps explain the financial crises in the United States, Britain and other market economies. Minsky highlighted that the changes in the supply of credit were
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J.-P. Laffargue, eds, Financial Crises: Theory, History and Policy (Cambridge: Cambridge University Press, 1982), pp. 13–29. For a view of the work of Hyman Minsky in historical context, see Perry Mehrling, ‘The Vision of Hyman P. Minsky’, in the Journal of Economic Behavior and Organization, vol. 39 (1999), pp. 125
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Estes, Billie Sol 122, 131 euphoria 12–13, 84, 91 asset price bubbles and 107–16 causes of 29 effects of 30 international 31–2 Hyman Minsky on 43 swindles/fraud and 140–1 see also economic booms; manias Eurocurrency market 64, 65, 69 European Union 3, 256 Evans, D. Morier 163
by Nouriel Roubini and Stephen Mihm · 10 May 2010 · 491pp · 131,769 words
of economists. Chapter 2 introduces economic thinkers who can help us do just that. Some, like John Maynard Keynes, are reasonably well known; others, like Hyman Minsky, are not. Chapter 3 explains the deep structural origins of the recent crisis. From the beginning, it has been fashionable to blame it on recently
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too did the writings of economists who had languished in obscurity for many years. John Maynard Keynes came back into vogue, as did Joseph Schumpeter, Hyman Minsky, Irving Fisher, and even Karl Marx. Their sudden reappearance was significant, if portentous: all had made their mark studying how capitalism could collapse in crisis
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, but its ambition is straightforward: to highlight what’s useful. As always, pragmatism informs our choices. Keynes is here, as is his most radical interpreter, Hyman Minsky, but so are economists from other camps: Robert Shiller, one of the most visible proponents of behavioral economics; Joseph Schumpeter, the grand theorist of capitalist
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government to stimulate demand was retained, but almost everything else Keynes wrote was ignored. Not everyone discounted the other implications of Keynes’s work, however. Hyman Minsky, a professor of economics at Washington University in St. Louis, dedicated his life to building a theoretical edifice on the foundation that Keynes had laid
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G-20 group. All of these reforms will help reduce the incidence of crises, but they will not drive them to extinction. As the economist Hyman Minsky once observed, “There is no possibility that we can ever set things right once and for all; instability, put to rest by one set of
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, What Are the Questions? And Other Essays: Further Contributions to Modern Economics (Armonk, N.Y.: M. E. Sharpe, 1980), 34. 50 “Instability . . . is an inherent . . .”: Hyman Minsky, Stabilizing an Unstable Economy (New York: McGraw-Hill, 2008), 134. 50 “Implicit in [Keynes’s] analysis . . .”: Minsky, John Maynard Keynes, 11-12. 51 “The interposition
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of this veil . . .”: John Maynard Keynes, Essays in Persuasion (New York: W.W. Norton, 1963), 169. 51 Financial Instability Hypothesis: Hyman Minsky, “The Financial Instability Hypothesis: An Interpretation of Keynes and an Alternative to ‘Standard’ Theory,” and “The Financial Instability Hypothesis: A Restatement,” both in Minsky, Can
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the Fed conference at Jackson Hole in 2007, McCulley elaborated on it in a newsletter for PIMCO. See Paul McCulley, “The Shadow Banking System and Hyman Minsky’s Economic Journey,” Global Central Bank Focus, PIMCO, May 2009. See also James Crotty, “Structural Causes of the Global Financial Crisis: A Critical Assessment of
by Doug Henwood · 30 Aug 1998 · 586pp · 159,901 words
times in this chapter, I've barely fleshed out the mentions. But two matters deserve closer attention — theories of monetary endogeneity, and the work of Hyman Minsky. Both are barely acknowledged, much less known, in the mainstream. money emerges from within In conventional economics, of both the monetarist and the eclectically mainstream
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the economy, but there's often many a slip between tightening and slowdown. The reason for this gap was explored nearly 40 years ago by Hyman Minsky (1957) in a classic paper modestly titled "Central Bank and Money Market Changes." Minsky pointed to two innovations of that relatively sleepy time, the federal
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short-term government paper seem as good as gold. Minsky Of all the modern theorists in the Keynesian tradition, one of the most interesting is Hyman Minsky, who devoted his career to exploring the relations between finance and the real world. ^"^ We've already looked at his contribution to theories of monetary
by Satyajit Das · 14 Oct 2011 · 741pp · 179,454 words
emotion and value judgements which seems to [me] a symptom of a defective sense of humor.”32 In his 1986 book Stabilizing an Unstable Economy, Hyman Minsky, an American economist, outlined a hypothesis as to why modern economies are liable to fluctuate and how obvious instability can be masked for a time
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used to the fact that quick money is not a healthy business. Values played no role in what happened.”29 Children of Privilege The economist Hyman Minsky theorized that in the early stages of a business cycle money is only available to creditworthy borrowers, known ironically as hedge finance. As the cycle
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come in and say the problems building.”34 Free markets and deregulation were conventional wisdom—everyone was paid to agree with the broad consensus. As Hyman Minsky wrote: “As a previous crisis recedes in time, it’s quite natural...to believe that a new era has arrived. Cassandra-like warnings that nothing
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World Economy, Princeton University Press, Princeton and Oxford: 141. 34. John Cassidy (2009) How Markets Fail: The Logic of Economic Calamities, Allen Lane: 226. 35. Hyman Minsky (2008) Stabilizing an Unstable Economy, McGraw-Hill, New York: 233. 36. Testimony to the House Oversight and Government Reform Committee (22 October 2008). 37. Alan
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, 250, 252 Centaurus Energy, 319 clientele, 247-248, 250 compensation, 314 fees, 245 formula for, 239 Fortress, 318 George Soros, 240 Hedgestock, 252, 261-262 Hyman Minsky, 260-262 leverage, 254 markets, 241 Porsche, 257-260 returns, 243-244, 255-257 Sharpe ratios, 246-247 strategies, 241-243 structure of CDOs, 195
by Tim Jackson · 8 Dec 2016 · 573pp · 115,489 words
kind of natural exuberancy that takes over when things appear to be going well. British economist John Maynard Keynes called this ‘animal spirits’. US economist Hyman Minsky described the emergence of financial instability in terms of three stages characterised by three different types of borrower. The most cautious borrowers, who are also
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’. This question could partly be answered by saying that policy makers (and indeed many economists) were on the whole painfully ignorant of the work of Hyman Minsky and the small number of economists who might have shed some light on what was going on. Those looking at the profitability of firms and
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role of countercyclical public spending Source: Jackson and Victor (2015: figure 11). These findings would likely come as no surprise to Keynes or indeed to Hyman Minsky. Both economists saw fiscal policy as critical to the stability of the economy. Minsky in particular proposed a vital role for government as ‘employer of
by Grace Blakeley · 9 Sep 2019 · 263pp · 80,594 words
and wealthy individuals from around the world to channel money into the UK’s stock markets, unencumbered by capital controls or restrictions on foreign trading. Hyman Minsky has argued that we now live in an age of “money manager capitalism”, in which these pools of capital are some of the most important
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Stability leads to instability. The more stable things become and the longer things are stable, the more unstable they will be when the crisis hits. — Hyman Minsky On 15 September 2008, Lehman Brothers, one of America’s largest and oldest banks, filed for bankruptcy. The bank held $600trn worth of assets, making
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reason the financial crisis of 2008 was so big is that the period of exuberance that had preceded it had been so long. According to Hyman Minsky, “stability is destabilising” — long periods of calm in financial markets encourage behaviours that lead to instability.4 Minsky’s work built on Keynes’ theory that
by Paul Krugman · 30 Apr 2012 · 267pp · 71,123 words
economists have also made strong and justified comebacks: a contemporary of Keynes’s, the American economist Irving Fisher, and a more recent entrant, the late Hyman Minsky. What’s especially interesting about Minsky’s new prominence is that he was very much out of the economic mainstream when he was alive. Why
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beginning of this chapter, top officials at the Federal Reserve—now invoking his name? The Night They Reread Minsky Long before the crisis of 2008, Hyman Minsky was warning—to a largely indifferent economics profession—not just that something like that crisis could happen but that it would happen. Few listened at
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now, as opposed to five or six years ago? And how did debtors get that deep into debt in the first place? That’s where Hyman Minsky comes in. As Minsky pointed out, leverage—rising debt compared with income or assets—feels good until it feels terrible. In an expanding economy with
by Kevin Phillips · 31 Mar 2008 · 422pp · 113,830 words
acolyte, Kurt Richebächer, had predicted just that unhappy fate for the U.S. housing bubble several years before his death during the summer of 2007. Hyman Minsky (1919-96), part Keynesian, part disciple of Joseph Schumpeter, became so well known for preaching the financial system’s vulnerability to speculation and risk that
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, the magazine had adopted a phrase used in the 1930s by Joseph Schumpeter, an economist of the Austrian School, and then in the 1970s by Hyman Minsky. Both men argued that downturns evolved from financial and credit excesses. “Merchants of debt” was their epithet for banks and other financial entities that strove
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enough to lead many commentators to suggest that a ‘new era’ had arrived.”25 Economists tied to the Austrian School or admirers of the iconoclastic Hyman Minsky were almost beside themselves. In January 2007, Kurt Richebächer wrote that “measured by its level of indebtedness, today’s U.S. economy is the worst
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roll. Of course, we now know that history had not ended; the muse had merely started learning Mandarin, Hindi, and Arabic, rereading Karl Polanyi and Hyman Minsky, and pondering what might befall a leading world economic power that so worshipped its markets as to entrust them to hedge funds, bad quantitative mathematics
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., January, 22, 2007. 3 Fred Sheehan, “Tin Men,” Whiskey and Gunpowder, July 5, 2007. 4 “Merchants of Debt,” Time, February 28, 1977. 5 Ibid. 6 Hyman Minsky, Stabilizing an Unstable Economy (New Haven, Conn.: Yale University Press, 1986). 7 Fred Shannon, The Farmer’s Last Frontier: Agriculture, 1860-1897 (Armonk, N.Y
by Edward Chancellor · 15 Aug 2022 · 829pp · 187,394 words
authority is said to have sniped. Borio can’t be modelled, sneered critics in the academy. Similar comments were once directed at the maverick economist Hyman Minsky, whose brilliant insights into financial instability were belatedly recognized after the subprime crisis. Minsky and Borio have much in common; both are unorthodox and eclectic
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that is the case, then monetary policy should not interrupt a recession’s cleansing effect.fn4 Put another way, if financial stability is destabilizing (as Hyman Minsky maintained), too much economic stability induces sclerosis. EUROPE’S SOVEREIGN DEBT CRISIS The Eurozone’s sovereign debt crisis, which erupted in 2010, is often considered
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and modern research confirms, encourage investors to take more risk. Ultra-low rates and central banks’ money-printing may have dampened market volatility, but, as Hyman Minsky pointed out – and the recent experience of the subprime crisis confirmed – financial stability is destabilizing. Moral hazard teaches us that when insurance premiums are set
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creditor (including the holders of wealth management products) would always be protected. As a result, interest rates in China didn’t reflect credit risk.114 Hyman Minsky coined the term ‘Ponzi finance’ to describe the situation when a borrower can’t service its debts from current income and remains solvent only if
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than 30,000 compliance officers (Sital Patel, ‘Citi Will Have Almost 30,000 Employees in Compliance by Year-End’, MarketWatch, 14 July 2014). fn11 As Hyman Minsky observed, most financial innovation is intended to get around the regulations put in place after the last crisis. In this way, financial regulation resembles the
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