Monday, April 23, 2012

Read What the Policymakers Read: Economist Hyman Minsky

To understand what the policy makers (both public and private) are thinking, read the intellectual works that inform their worldview.

This is why you should check out Hyman Minsky (1919-1996).

Minsky pointed out that the economic system is inherently unstable, and given to excesses of credit euphoria (sound familiar?).

However, it's less clear what Minsky advocates as a response. On the one hand, Minsky cautions against avoiding dips (they are healthy), but also seems to leave the door open to state intervention like propping up busted markets (sound REALLY familiar?) with monetary policies to avoid catastrophe.

As a bonus, Minsky also foresaw the shadow banking system and derivatives in piling up unsustainable private debt that would eventually affect everyone.

Familiarize yourself with his works and then watch people try to make Minsky support their ideas.

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