ML-Implode News - Minsky's moment

Minsky's legacy has more to do with focusing on the right things than correctly structuring quantifiable models. It is enough to observe that debt and financial instability, his main preoccupations, have become some of the principal topics of inquiry for economists today. A new version of the "Handbook of Macroeconomics", an influential survey that was first published in 1999, is in the works. This time, it will make linkages between finance and economic activity a major component, with at least two articles citing Minsky. As Mr Krugman has quipped: "We are all Minskyites now."
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Will the moment last? Minsky's own theory suggests it will eventually peter out. Economic growth is still shaky and the scars of the global financial crisis visible. In the Minskyan trajectory, this is when firms and banks are at their most cautious, wary of repeating past mistakes and determined to fortify their balance-sheets. But in time, memories of the 2008 turmoil will dim. Firms will again race to expand, banks to fund them and regulators to loosen constraints. The warnings of Minsky will fade away. The further we move on from the last crisis, the less we want to hear from those who see another one coming.

This being The Economist, the article has to end by smugly ensuring us that things are fine now, and we have nothing to worry about until some indeterminate time YEARS in the future. This glibly ignores the fact that it's already been YEARS since the 2007/2008 crisis. But crediting the view that we won't necessarily see a re-peat of the Minsky Moment of 2007/2008 is that, this time, it's government debt that is the main problem. And it's not at all clear that governments -- especially not "all" of them racing towards putative default and currency collapse at the same time -- face the same dynamics. As we've said on numerous occasions, it will certainly be interesting to see how the denoument of the continuation of the credit excesses of 2007/2008 plays out. But we wouldn't exactly derive much comfort from the sequel playing out as a pure free-market Minsky Moment; perhaps it will be much uglier...

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Minsky's moment