The essence of Minsky’s [Financial Instability Hypothesis] is that stability is destabilizing because capitalists have a herding tendency to extrapolate stability into infinity, putting in place ever-more risky debt structures that undermine stability.
Minsky had that exactly right, I think. McCulley, not so much. He's great at describing what's happened in the rear-view mirror, but he hasn't made any significant forward-looking calls. I went to a lunch where he spoke more than a year ago, and I pressed him on the unsustainable nature of Greenspan's serial bubbles. He seemed to agree with the premise of the question, but had no appreciation for the magnitude of the fallout that was to come.
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