Challenging the Premisses
| Start with the debt problem, three views of it,
and the most important thing. Here's a longer look at the debt problem.
Here's a short one on economic policy, some surprising trends, and a few unusual policy recommendations. How'd we get into this mess? Read Policy Venn and Policies of the Venn Overlap. Still with me? Read A Matter of Life and Death. And for an overview, download my 12-page PDF |
This guy doesn't
There are a few problems with going back to the Golden Age - for one, the financial system we had back then was just a stroke of good luck and is irretrievable as Minsky recognised. Too much "innovation" has happened...
12 comments:
Minsky said no such thing afaik. He had proposals to make the financial system more robust again, and recognized the good points of the FDR/New Deal system. He had his criticisms, but he noted that for the next 30 years after 1933, there were no financial crises, while throughout earlier US history they had occurred every 7 years or so.
His basic answer to can "IT" happen again was "no". Because of the Big Government & the Big Bank ( the Fed). It took a lot of hard work in dismantling the New Deal system, a lot of time, a lot of robin-hood-in-reverse state-predation on behalf of the wealthy and a lot of fraud & craziness to make "IT" approximately happen again.
Thanks, Cal.
Minsky in his book 'John Maynard Keynes' pg 163:
“the apparent stability and robustness of the financial system of the 1950s and early 1960s can now be viewed as an accident of history, which was due to the financial residue of World War 2 following fast upon a great depression”
For more detail on Minsky's long-run gloomy outlook (unless investment was socialised just like Keynes also wanted), again from his book JMK:
“The success of a high-private-investment strategy depends upon the continued growth of relative needs to validate private investment. It also requires that policy be directed to maintain and increase the quasi-rents earned by capital – i.e.,rentier and entrepreneurial income. But such high and increasing quasi-rents are particularly conducive to speculation, especially as these profits are presumably guaranteed by policy. The result is experimentation with liability structures that not only hypothecate increasing proportions of cash receipts but that also depend upon continuous refinancing of asset positions. A high-investment, high-profit strategy for full employment – even with the underpinning of an active fiscal policy and an aware Federal Reserve system – leads to an increasingly unstable financial system, and an increasingly unstable economic performance. Within a short span of time, the policy problem cycles among preventing a deep depression, getting a stagnant economy moving again, reining in an inflation, and offsetting a credit squeeze or crunch….As high investment and high profits depend upon and induce speculation with respect to liability structures, the expansions become increasingly difficult to control; the choice seems to become whether to accomodate to an increasing inflation or to induce a debt-deflation process that can lead to a serious depression”
Well, that's depressing. Hi Ashwin. Thanks.
You're welcome! I should point out that I don't agree with everything Minsky said - I believe that small "natural" disturbances are good for the system and can prevent this long-term degradation. This is more of a systems insight than an economic insight.
And of course he couldn't have foreseen it but during the neo-liberal era, the govt has been quicker to abandon the full-employment goal rather than risk wage inflation.
'What has been done' is to depress the money supply after a period in which fraud was encouraged. Then natural deflation became stampeded by outright encouraging instability which coincidentally rewarded those who caused the problem on behalf of those legislating the policies and more importantly, their patrons.
Which should always lead one on the path to the Rothschilds.
But, the net is rife with Progressives' outing of the Fed, CFR, Illuminati,Bilderbergers, etc.
But you want to blog Economics. O.K.
http://www.diigo.com/oldephartte/economics
Let me know if this interests you please.
Hello, Opit. Yes, I want to blog economics. And I want to strip away everything that ain't economics and treat what's left like science. But that's just me.
Couldn't connect using the link you provide, but Google did turn up your clipmarks - oldephartte's economics here:
http://www.clipmarks.com/clipper/oldephartte/tag/economics/
Above, you wrote: 'What has been done' is to depress the money supply after a period in which fraud was encouraged...
Not clear (to me) what "period" you mean. However, the money supply has definitely been depressed by policy since the end of the Second World War. And credit-use has been encouraged.
Your move.
Still, Ashwin, what Minsky said in no way amounts to "irretrievable". "Stroke of good luck" understates the benefits of the New Deal structural reforms, and the intelligent design of the reformers then, whether or not they were inspired by Keynes, along with the benefits to the financial system caused later by the war. Look at his analysis toward the end of "Stabilizing an Unstable Economy", which I don't think is too well characterized by "stroke of good luck" - & imho Minsky overemphasizes luck over conscious design. See also that book's Papadimitrious / Wray preface.
Sure, stability is destabilizing & the high private investment strategy is inflationary & destabilizing & Minsky's recommendations are right, but it took a great deal of hard work wrecking the US economy & financial system to get it to this point. Essentially everything done since 1980 - or even the mid60s - was the opposite of what Minsky recommended. So doing nothing would have surely put off the catastrophe he envisioned - & because of the remaining Big Government & Big Bank, the Great Recession is not exactly "IT", the Great Depression again.
Calgacus - apologies for the late reply.
As the second quote highlights, Minsky did think that the successive rounds of stabilisation make the system increasingly unstable unless the private investment led strategy was abandoned. Most people like to take his in-cycle dynamics seriously without taking his long-run prophesies seriously because it leads to uncomfortable conclusions. IMO, you can't really do this unless you disagree with some part of his explanation. Else, it inexorably leads to the conclusion that socialisation of investment is necessary.
Didn't heck the thread for feedback. Sorry about that. Check your spam filter. I'll flood it with contents from Diigo - but suggest you run your own Search of that Bookmarking Community.
Not happening. Too much data. O.K. If you can't raise the bridge, lower the river. http://my.opera.com/oldephartte/blog/2013/12/30/diigo-economics-oldephartte
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