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Old 12-20-2017, 12:45 PM
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donquixote99 donquixote99 is offline
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What's Coming and Why

If you're supposedly schooled in Economics, you might want to skim through this 1995 paper by Steve Keen, from the Journal of Post Keynesian Economics:

"Finance and Economic Breakdown: Modeling Minsky's "Financial Instability Hypothesis"

This is based on Misnky's work dating back into the 1950's. Keen just made a simple model (simple if you're better at calculus than I am) that gives a clear idea what Minsky was talking about.

Having read this, I am therefore now smarter about both what happened in 2008, and what is likely to happen as a result of the mistakes now being made.

Short summary: the Republicans are doing exactly what must not be done, and are going to crash the economy again.

A paragraph from near the end of the paper. I added a small editorial
expansion at the beginning, in brackets, and a little emphasis at the end.

Quote:
In both cases [either high or low interest rates],
a long period of apparent stability is in fact illusory, and
the crisis, when it hits, is sudden--occurring too quickly to be reversible
by changes to discretionary policy at the time. As is evident from the
phase diagrams, the conventional policy response of governments to an
overheated economy--increasing the interest rate with the intention of
dampening investment and thus tempering the boom--acts not only
upon the incentive to invest, but also upon the level of outstanding debt.
If this level is already high, then increasing the interest rate may turn
boom into crisis. The subsequent attempt to revive the economy by
reducing interest rates and thus stimulating investment, according to
IS-LM analysis--amounts to trying to force the economy back down
into the stable section of the vortex, when it has already passed into its
catastrophic region. However, the centripetal forces that exist in that
region--the weight of accumulated debt upon a depressed economy--
are so great that any government action at that time may be too little,
too late. This emphasizes the essential policy message of the financial
instability hypothesis, that we should avoid crises in the first place, by
developing and maintaining institutions and policies that enforce "a
`good financial society' in which the tendency by businesses and bank-
ers to engage in speculative finance is constrained" (Minsky, 1982, p.
69). These institutional arrangements include close and discretionary
supervision of financial institutions and financial arrangements, and a
bias toward income equity rather than inequality.
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