Originally posted 2/8/08 moved to current date in light of recent events.
It is so surprising to me that no one had a "Digg" on this great New Yorker article from Feb 4th. Dad loved the New Yorker. He said it was his favorite magazine.
The article starts out:
"Twenty-five years ago, when most economists were extolling the virtues of financial deregulation and innovation, a maverick named Hyman P. Minsky maintained a more negative view of Wall Street; in fact, he noted that bankers, traders, and other financiers periodically played the role of arsonists, setting the entire economy ablaze. Wall Street encouraged businesses and individuals to take on too much risk, he believed, generating ruinous boom-and-bust cycles. The only way to break this pattern was for the government to step in and regulate the moneymen."
I like the end of the article too:
"The greatest need is for intellectual reappraisal, and a good place to begin is with a statement from a paper co-authored by Minsky that “apt intervention and institutional structures are necessary for market economies to be successful.” Rather than waging old debates about tax cuts versus spending increases, policymakers ought to be discussing how to reform the financial system so that it serves the rest of the economy, instead of feeding off it and destabilizing it. Among the problems at hand: how to restructure Wall Street remuneration packages that encourage excessive risk-taking; restrict irresponsible lending without shutting out creditworthy borrowers; help victims of predatory practices without bailing out irresponsible lenders; and hold ratings agencies accountable for their assessments. These are complex issues, with few easy solutions, but that’s what makes them interesting. As Minsky believed, “Economies evolve, and so, too, must economic policy.”
This is a very interesting article from the Feb 4th New Yorker "Talk of the Town" column about Minsky's "financial-instablity hypothesis."
from http://en.wikipedia.org/wiki/Hyman_Minsky
Hyman Minsky, Ph.D. His research attempted to provide an understanding and explanation of the characteristics of financial crises.
The article lays outs a clear sequence of facts related to the crisis and the process of financial panic as understood from Hyman Minsky's theory on "financial-instability hypothesis."
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