Crash Course on Hyman Minsky, L. Randall Wray

[@neilanderson891]

At 2:32, Dr. Wray asserts the Fed's interventions (to "save" the economy) were predicted to be successful, so we wouldn't "learn anything", which enables markets to march into successively bigger and bigger debacles (until a "Too Big To Overcome" debacle is met). The failure to "learn anything" seemly refers to the lack of economic adjustments that would normally occur during a "correction" in the market(s). Unfortunately, no one seemed to recognize the obvious signs of "market corrections being evaded" during the "Greenspan Fed" from the year 2000 [after Greenspan's "Irrational Exuberance" speech] to, say, 2005, during which Greenspan exhibited his "rescuer" behavior that was so predictable (i.e., rescuing the market from minor turbulence) that bond market participants even labeled (and lauded) such predictable behavior as "the Greenspan Put". Excuse me, excuse me, why didn't any economist recognize what the "the Greenspan Put" label really was, and call-it-out for what it was? It was prime-fascia evidence that Greenspan's behavior was not consistent with what he had assiduously marketed himself to be: The High Priest of Free Market Capitalism. Greenspan even invited Ayn Rand (the venerated author of "Atlas Shrugged" (the so-called "Bible of Free Market Capitalism") and Philosopher of Individualism (in opposition to Socialism)) to his 2nd swearing-in ceremony. We will never see clearer "signaling" than that. Where was Hyman Minsky when we needed him? Dead, since 1996. Where was Milton Friedman when we needed him? Dead, since 2006. So it seems that during those naive years, virtually all market participants had deluded themselves into believing that the previous years of laudable economic performance was due to the ultimate realization of "True Capitalism". Yet, everyone intrinsically knows what happens if you prevent little market-corrections from occurring for a long period of time: You'll end up with a big one, ala Minsky et al. In summary, Capitalism doesn't tolerate interventions.

[@neilanderson891]

@Brady Fox Rather than expounding on what Wray was NOT implying (which has virtually unlimited possibilities), It'd be more interesting to talk about what Wray WAS implying (which is a much smaller subset of the universe of ideas). Bu I'd be even more interested in what Wray said loud & clear. You do report Wray was implying that "when the free market is indeed established in the short term it will work fairly well ..." Sorry, that's obvious. It's like saying nothing at all. What you report of Keynes sounds more like Hayek. Keynes was all about animal spirits. What you said about Minsky is a jumble of mumbles. By 1935, Keynes was well aware of the reduction in the US money supply during the Great Depression, but didn't believe it had anything to do with the UK's problems. Keynes also knew that the UK government was trying to re-establish the gold parity after WW1 but didn't see that as a problem, either. Keynes thought low "animal spirits" caused the depression (much like clinical depressiobn). But Keynes was also aware that Italy, under "Il Duce", was hardly affected by the Great Depression, even in 1936, when his "GToEI&M" was "self-published". Hitler had also taken note of Italy's experience. In 1946, Keynes admitted to Hayek (his friend and ideological foe, who forced Keynes to tighten-up his ideas) that his ideas in the "GToEI&M" were dangerous, but he would swat them down when they emerged. Keynes died 6-months later, in 1947.

[@neilanderson891]

@Brady Fox Well, Mr Fox, out of all the things that I commented-on in your negative comment (i.e., "expounding on what Wray was NOT saying"), it's surprising that you'd implode your focus & attention on my one obscure reference to Hayek, and challenge me to cite book & chapter. Perhaps it would be helpful if I add that Hayek explained the cause of the Great Depression as partially a mal-investment wherein mistaken policies led to "investment products" being produced instead of "consumption products" (i.e., what you said was that

[@neilanderson891]

@Brady Fox Seems like you have mispoken, because you said, "central banks are the only banks that can create and keep the sovereign currency" ... which is wrong because commercial banks also create money, and keep money (ie deposits). And when you say, "MMT should revolve around central banking" you seem to ignore my previous challenge to you when I said "MMT is incompatible with a central bank, which means you're not engaging in conversation with me, or you don't have a basic understanding how MMT is defined ... and when you mention I'm for the gold standard, you seem to be grasping for straws because you don't know how to refute my simple assertion. Let me assure you that if you have a fiat currency, printed by "the sovereign", with or without a gold standard, then any MMT regime will be incompatible with a central bank. Are you aware of the primary benefit central banks bring to any economy?

[@neilanderson891]

@Brady Fox My apologies to you, too. Now, to the debate: The "real" point about commercial banks was "just" to be sure we're on the same page. We are indeed on the same page. With that out-of-the-way, I think you're asking me why MMT is incompatible with a central bank. I'd rather not tell you the answer, because, if you can see it for yourself, then you'll understand it more fully. So, let me ask a few questions: In any M.M.T. regime, which entity issues the base money into circulation, and how is it so issued? In any central bank regime, which entity issues the base money into circulation, and how is it so issued? How does a central bank fight inflation? How does an MMT regime propose to fight inflation?

[@neilanderson891]

@Brady Fox Your answer was not responsive to my question, which suggests you would not understand the reason why MMT is incompatible with a central bank, even if I were to spell it out. For that reason, I'm dropping-out of this conversation, unless you can be responsive to my questions in my previous post.

[@Achrononmaster]

@0:58 either Wray misrepresents Minsky, or Minsky must have been guilty of flowery language, because stability is not destabilizing, that’s utter crap. Minsky argued that profit making is destabilizing. But the rest is good I think. Steve Keen’s dynamical models which take into account the banking sector show periodic cycles culminating in a massive instability, which I think is consistent with Wray’s description of many minor downturns in between major crashes.

[@parallaxcrafttale]

Holy shit Minsky said profit making was destabilizing? Another W for the market socialists, I love it.

[@trixn4285]

_"stability is not destabilizing, that’s utter crap"_ That's kinda harsh 🤣 How about the "the principle of charity"? I think what's meant is the fact that stability gives confidence and confidence leads to higher profit expectations and taking more risk until profit falls short of the expectations. So in that sense stability induces destabilizing behaviour.

[@jimmlygoodness]

@@trixn4285 Yep. That is exactly what Mr Wray described. I think the poster above was not really listening.

[@johnpilcher4936]

When income is sufficient to make interest & principal = Hedge When income covers interest but not principal = Speculative When income can cover neither and you must borrow to pay interest = Ponzi It's 2022 and all we did since this excellent interview was borrow A LOT more. US $31T & FED $9T? Interest on national debt at market UST rates is 100% of the budget. Meanwhile the Treasury issues bonds to pay interest on Fed debt.

[@thomasd2444]

Don't panic about money. Act rapidly to secure an earth temperature which can sustain life kzbin.info/www/bejne/eqCwgZ99atCahKc MMT in Minsky at the 2nd Poznan MMT Summer School 2022 . People not familiar with system dynamic mathematics & differential Calculus can be helped with a good visual . kzbin.info/www/bejne/Y2GQXo1_p89qq6s Macroeconomic Dynamics and Energy In Minsky Poznan Summer School 2022

[@tiki2188]

I support the idea of the job guarantee btw, I think its probably better to have a true "safety net" that would also benefit the overall nation instead of tinkering. Leave the markets be, and be ready to catch those who fall out and better them with guaranteed jobs and etc

[@pilkingtonphil]

@FINfreedomfighter Maybe - but the modern post-1930s banking sector wasn't in place back then (the Fed was established in 1913, which might be thought of as the beginning). In addition to this, he is specifically talking about the financial 'innovations' which were geared to 'burrow through' New Deal financial regulations and laws. So, that's why he begins his analysis from the 50s...

[@InnerSunshine]

Minsky: Economic stability leads to over-confidence and hubris, leading to too-great risk taking leading to endgame fragility. Is the answer more, greater and smarter gov regulation?

[@AnniesEggs]

This half century build in the USA can clearly be seen. I've seen a graph - in the 2010 budget report which shows the build up of the problem over the last quarter of a century.

[@johnellington1932]

Stability by itself not stability. Good one. Minsky - Imagine sit down listen to him in Conference. Layman's Terms.-

[@neilanderson891]

At 1:40, Wray touched on the proliferation of safe (i.e., risk-free) government debt (and, more importantly, the "consequences of it's consequences" ala Minsky's school of thought). During the 1970s, there was some talk about a new strain of government debt, "infected" with a clause containing a "risk-laden" random variable, purposed to inject a bit of risk into the (otherwise) risk-free asset. Would have been too easy to circumvent with the "Law of Large Numbers" (i.e., the Central Limit Theorem). Besides, the risk-free asset changed the "efficient frontier" in Finance theory, and the real culprit seemed to be Central Bank interventions which (under 1970s Keynesianism) were purposed to keep interest rates low with full-knowledge that that would foster a boom and inflation. But such inflation (in theory) would be "kept in check" by high marginal tax rates. This was "mainstream stuff" from 1970 to 1980, during which time the US experienced 3 painful episodes of stagflation, which no "mainstreamer" could explain. Robert Mundell. the father of Supply Side Economics, figured it out very quickly: The marginal tax rates discouraged high earners (whose output in various industries was of high value) from "working a 5 day week" which had the effect of reducing the economy's output of goods and services, and when coupled with "Loose Money" monetary policy at the Fed, did nothing but exacerbate the (expected) inflation. Voila: Stagflation. So, as mentioned by others, MMT is nothing new. Just as Supply Side Economics is really just a re-discovery of the valid principles and practices of Classical Economics.

[@bashful228]

you have no idea what MMT is if this is what you believe.

[@neilanderson891]

@@bashful228 - I'm pretty familiar with MMT, but always willing to listen to someone who thinks I'm wrong about something. So, what's my error?

[@bashful228]

@@neilanderson891 much of it. I'm writing an overdue assessment ATM so I'll have to come back to this. When I come back I'll post some links specifically addressing the concerns and assertions you've made.

[@neilanderson891]

@@bashful228 I'll expect you to provide specific reasons for each link, ie, what the point of each link is.

[@isawaturtle]

not enough intervention has given us global crises one after the other and now look at how big business is organizing the GFC mark II ... enough is enough and time to tame those big banks

[@meegz149]

SVB brought me here.

[@tiki2188]

So the post keynesians, who are the most "liberal" economists out there seem to say too much government meddling can cause issues. Funny, the righties/austrians gripe about too much Fed meddling, and here its said Fed and Treasury meddling was bad. "not learn much" and how greenspan finally "mastered" the economy, but that stability brought instability. Intresting...im not an austrian but there may be validity to it ironic the post keynesians help shed light on that!

[@tiki2188]

I hope this isn't misinterpreted, Im NOT an austrian supporter, but isnt this kind of lending suppor to the CORE of austrian theory? That too much intervening, by fed and treasury, can have very bad impact, and isnt "stability is de stabilizing" kind of like what they say about too much gov support leading to increase risk? Of course wall street "innovation" is to blame as well. plus de-regulation but yeah, 87 to 07 we all thought we "beat" the cycle and it led to massive irrationality

[@christopherhardin1848]

Verbose language if ever.

[@earltaylor6071]

What an actor! Will someone please get the clapper! All of this debt? Why don't you define debt buddy. Who got bailed out? Big banks,corporations,the very rich.

[@thomasd2444]

Keep learning Seven Deadly Innocent Frauds of Economic Policy by Warren Mosler moslereconomics.com/wp-content/powerpoints/7DIF.pdf . kzbin.info/www/bejne/iYjbhqywhZZsZsk .

[@earltaylor6071]

All bull crap! Hiding financial truths with this language mumble jumble. Don't you mean archestrated crises. He is like a person who utters the word lavatory for the word bathroom.