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Guest Post: Of Krugman And Minsky

Tyler Durden's picture




 

Submitted by John Aziz of Azizonomics blog,

Paul Krugman just did something mind-bending.

KrugMan-625x416

In a recent column, he cited Minsky ostensibly to defend Alan Greenspan’s loose monetary policies:

Business Insider reports on a Bloomberg TV interview with hedge fund legend Stan Druckenmiller that helped crystallize in my mind what, exactly, I find so appalling about people who say that we must tighten monetary policy to avoid bubbles — even in the face of high unemployment and low inflation.

 

Druckenmiller blames Alan Greenspan’s loose-money policies for the whole disaster; that’s a highly dubious proposition, in fact rejected by all the serious studies I’ve seen. (Remember, the ECB was much less expansionary, but Europe had just as big a housing bubble; I vote for Minsky’s notion that financial systems run amok when people forget about risk, not because central bankers are a bit too liberal)

Krugman correctly identifies the mechanism here — prior to 2008, people forgot about risk. But why did people forget about risk, if not for the Greenspan put? Central bankers were perfectly happy to take credit for the prolonged growth and stability while the good times lasted.

Greenspan put the pedal to the metal each time the US hit a recession and flooded markets with liquidity. He was prepared to create bubbles to replace old bubbles, just as Krugman’s friend Paul McCulley once put it. Bernanke called it the Great Moderation; that through monetary policy, the Fed had effectively smoothed the business cycle to the extent that the old days of boom and bust were gone. It was boom and boom and boom.

So, people forgot about risk. Macroeconomic stability bred complacency. And the longer the perceived good times last, the more fragile the economy becomes, as more and more risky behaviour becomes the norm.

Stability is destabilising. The Great Moderation was intimately connected to markets becoming forgetful of risk. And bubbles formed. Not just housing, not just stocks. The truly unsustainable bubble underlying all the others was debt. This is the Federal Funds rate — rate cuts were Greenspan’s main tool — versus total debt as a percentage of GDP:

fredgraph (18)

More damningly, as Matthew C. Klein notes, the outgrowth in debt very clearly coincided with an outgrowth in risk taking:

To any competent central banker, it should have been obvious that the debt load was becoming unsustainable and that dropping interest rates while the debt load soared was irresponsible and dangerous. Unfortunately Greenspan didn’t see it.
And now, we’re in the long, slow deleveraging part of the business cycle. We’re in a depression.

In endorsing Minsky’s view, Krugman is coming closer to the truth. But he is still one crucial step away. If stability is destabilising, we must embrace the business cycle. Smaller cyclical booms, and smaller cyclical busts. Not boom, boom, boom and then a grand mal seizure.

 

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Mon, 03/04/2013 - 15:24 | 3298509 fightthepower
fightthepower's picture

Keep Calm and Slave On!

 

https://www.silverbulletsilvershield.com/

 

 

 

Mon, 03/04/2013 - 15:27 | 3298527 Ahmeexnal
Ahmeexnal's picture

The truth revealed:

http://www.thelocal.de/national/20130302-48289.html

Did Rat-zinger work on one of those camps?

The camps began appearing in Germany almost as soon as the Nazis came to power in 1933. The sheer number of them – 3,000 in Berlin and 1,300 in Hamburg alone – meant there could be no doubt that the Germans had known about their existence at the time, head researcher Dean told the New York Times.

“You literally could not go anywhere in Germany without running into forced labour camps, POW camps, and concentration camps,” said Dean. “They were everywhere.”

Mon, 03/04/2013 - 15:31 | 3298536 idea_hamster
idea_hamster's picture

IMHO, the real issue here is not (only) central bank largess, but the overall volume of money -- including shadow banking liabilities.

Bernanke may be technically correct that the ECB printed less, but EU banks also run at higher leverage and London's infinite rehypothecation rules mean that their actual credit growth may have been equally large and fast.

Show me the total reserves plus shadow banking graphs for the US and the EU, and then tell me that there's no effect -- I suspect we'll see where the souce was.

Mon, 03/04/2013 - 15:52 | 3298575 TruthInSunshine
TruthInSunshine's picture

Sorry about the OT below (couldn't edit fast enough), but here's some DISSONANCE for all of you:  On the same day Krugman again heaps praise on one Ben S. Bernanke, his perpetual money losing Proxy Propagandizing employer, The New York Times, published this article, which I will exercpt from in pertinent part:

Recovery in U.S. Is Lifting Profits, but Not Adding Jobs Published: March 3, 2013

These factors, ***along with the Federal Reserve’s efforts to keep interest rates ultralow and encourage investors to put more money into riskier assets***, prompted traders to send the Dow past 14,000 to within 75 points of a [NOMINAL] record high last week [a nominal record high, equal to roughly 45% down from the real high, that only required the destruction of the actual, real economy by central banking monetary policy].

 

While buoyant earnings are rewarded by investors and make American companies more competitive globally, they have not translated into additional jobs at home.

So you see, don't stop the MONEY PRINTING THAT IS ONLY NOMINALLY SUPPORTING EQUITY PRICES [FOR NOW-- aka TRANSITORY BUBBLE-NOMICS; aka "Poof, and it's gone"], BERNANKUS, KRUGMAN SWEARS YOU'RE CREATING MORE JOBS IN PROPORTION TO THE MORE YOU PRINT AND THE MORE YOU WARP ALL ECONOMIC RATIOS, BREAK THE VERY STRUCTURE OF THE ECONOMY'S SPINAL CORD,  & ENGAGE IN  ZIRP/NIRP!!!!!!!

Mon, 03/04/2013 - 15:55 | 3298614 Dr. Richard Head
Dr. Richard Head's picture

Well twist my nipples and call me Krugman.  The Fed should then just print a million notes for EVERYONE and all will be well in the land. 

Great find on the article excerpt by the way.

Mon, 03/04/2013 - 23:34 | 3299866 All Risk No Reward
All Risk No Reward's picture

Krugman, a hatchet man for the international banking cartel, is preying on peoples' ignorance of the system.

The Fed is controlled by the same people who control the mega banks and who control government.  Keep following the money and they all lead to the Debt Money Tyrant class - and they couldn't lead any place else since they have more money than any other group by a country mile.

When Krugman blames the excessive risk, he's trying to lump in the mega bank (total control o fthe system) agenda of societal debt saturation with the borrower (zero control of the system) irresponsibility.

The mega banks and the Fed are front corporations controlled by, and for the benefit of, an international banking cartel that Eisenhower referred to as the "power of money" that should be "gravely regarded."  This isn't discussed in the media because that will simply end funding for whomever dares mention it.

This is what Vichy Krugman doesn't want the proles to know...

Debt Money Tyranny - the monetary system is engineered fraud design with the express purpose to bankrupt society and turn control of it over to the criminal international banking cartel class (Rothschilds, Rockefellers, financial oligarchs)

http://www.keepandshare.com/doc/4768883/debtmoneytyranny-6-1-pdf-60k?tr=77

Weapons of Mass Debt - The Fed and government monitored and aided and abetted the criminal activity of their allied mega-banks - all designed to saturate society with debt, send it into receivorship and then hand over control the criminal international banking cartel that will claim ownership over it.  The Vichy government will hand it over simply because that's why they were funded and promoted into office by the oligarchs.

http://www.keepandshare.com/doc/3324744/wmdebt-graph-3-79k?dn=y

Red alert - this is no joke and this is how it is going down.  Krugman is a sociopath who has sold his soul to the devil in the hopes that his efforts to lock the common folks down in steerage will get him a seat on one of the life boats.

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning. The one aim of these financiers is world control by the creation of inextinguishable debt.”
- Henry Ford

“We are grateful to the Washington Post, the New York Times, Time Magazine and other great publications whose directors have attended our meetings and respected their promises of discretion for almost 40 years......It would have been impossible for us to develop our plan for the world if we had been subjected to the lights of publicity during those years. But, the world is more sophisticated and prepared to march towards a world government. The supernational sovereignty of an intellectual elite and world bankers is surely preferable to the national autodetermination practiced in past centuries.”
- David Rockefeller

“For more than a century ideological extremists at either end of the political spectrum have seized upon well-publicized incidents such as my encounter with Castro to attack the Rockefeller family for the inordinate influence they claim we wield over American political and economic institutions. Some even believe we are part of a secret cabal working against the best interests of the United States, characterizing my family and me as 'internationalists' and of conspiring with others around the world to build a more integrated global political and economic structure--one world, if you will. If that's the charge, I stand guilty, and I am proud of it.”
- David Rockefeller

“The supranational sovereignty of an [criminal, sociopathic] intellectual elite and world bankers is surely preferable to the national auto-determination practiced in past centuries.”
- David Rockefeller, Memoirs

Mon, 03/04/2013 - 16:47 | 3298806 Ignatius
Ignatius's picture

"Get your head out, new guy."

Feels like a 'wave the Nazi' distraction.  Terrible wars crimes, absolutely, but to draw our collective attention away from ______________?  Etc..

Mon, 03/04/2013 - 15:27 | 3298528 TruthInSunshine
TruthInSunshine's picture

Oh Noes!!!  Warren "Let's Plow Taxpayer Up Their Asses Some More Charlie Munger Since BenBernank Already Saved Us 17 Billion USD" Buffett is worried about how The Bernanke will "unwind" the Fed's balance sheet!!!!!!!!!

Buffett sees 'hair trigger' when Fed ups rates

Buffett is worried about Fed policy

 

Really, Warren? You are so sincere & on top of things!

LMFAO!!!!!!!

Mon, 03/04/2013 - 15:28 | 3298540 yogibear
yogibear's picture

Warren and Charlie are shrewed greedy old men that would stop at nothing to keep their game going.

Dirty uncle Warren wouldn't think twice about raping all those college kids with student loans.

 

Mon, 03/04/2013 - 15:39 | 3298576 Charles Nelson ...
Charles Nelson Reilly's picture

Does this mean he's gonna send his lap dog assistant Charlie out to go buy some gold at the local coin shop?

Tue, 03/05/2013 - 01:55 | 3299889 All Risk No Reward
All Risk No Reward's picture

The plan all along has been to...

1. Leverage up and blow a bubble

2. Loot the monetary Christmas out of society once the bubble has finally topped (current phase coming to an end).  Of course, they won't tell you the real reason, so they came up with a good reason - to save the economy a 5th grader knows can't be saved.  Not because they are evil, mind, because they are intellectuals...  because the liars said so.  They also proclaimed their front corporations as TBTF&Jail - and the sheeple bought it.  Asset prices no longer matter for "inner party" corporations.  Their competition, however, look lame, fat and juicy.

3. Drive everyone into assets before divesting and pulling the plug on credit creation.

4. Contract credit and convert debt paper into physical holding.  Use trillions in looted cash from society and mop up the rest of society's physical assets for pennies on the dollar.  They will also bust their competition and roll up their business under their own.  They might not change the name, the average Muppet might not even know what happened.  The media sure won't tell them because it is already owned and controlled.

5. Once society is looted and almost all physical assets are rolled up under the money definer / creator class' front corporations, they will inflate and balance their own books.  The debt money international bond market will be broken - but the money power that is gravely to be regarded (Eisenhower, Farewell Speech) woon't care because they will essentially own and control the world through their front corporations.  Governments will be subjected to the supernational sovereignty of criminal international banking cartel types.

The oligarchs will show up and snatch your wife on demand - watch the original Rollerball movie for one vision of the future.

This is easy, easy, easy to predict, but ZH makes me feel like a darn rocket scientist.  It might be true that I wa sa rocket scientist if it wasn't simply the obvious conclusion of applying 5th grade math and simple cost / benefit analysis from the perspective of the oligarchs.

 

Mon, 03/04/2013 - 15:39 | 3298573 whatsinaname
whatsinaname's picture

Something fishy about the first chart ? - that debt to GDP shows up as declining in the last 4 years ? How is that ?

On the other hand the government is right about the savings rate declining and spending rising last month. My savings did decline thanks to the drop in gold prices - I was able to use "spend" some savings to get some of the metal. 

Mon, 03/04/2013 - 16:36 | 3298763 ironymonger
ironymonger's picture

Not sure but it looks like two scales are flipped; ie (right) should be (left).

Mon, 03/04/2013 - 15:22 | 3298522 mjorden
mjorden's picture

If only consumers and corporations could switch interest rates ... that would be fantastic.

Mon, 03/04/2013 - 15:26 | 3298530 yogibear
yogibear's picture

No worry about auto sales down 10% in Europe and the coming of more defaults from Europe.

Just hand over more and more bailouts to Greece Spain and now Italy.  Infinite bailouts to go with infinite printing.

Keep the dead alive and the live dead.

Mon, 03/04/2013 - 16:10 | 3298683 InTheLandOfTheBlind
InTheLandOfTheBlind's picture

I thought on keeping the dead alive:

 

The following artist inspired me:

http://www.youtube.com/watch?v=DTVOK2yvbBM

 

what about grannie copters and/or drones?  This way grannie can serve her country even after death

Mon, 03/04/2013 - 15:28 | 3298537 Confundido
Confundido's picture

Good economic data = stocks up, gold down Explanation? rotation, no need to own the "safe haven" asset

 

Bad economic data = stocks down, gold down Explanation? Margin calls, liquidity needs

 

So so economic data = dividend stocks, bonds up, gold down Explanation? Gold doesn't pay a dividend

 

More QE? Gold down! Explanation? Why own gold when stocks will outperform? Or another one: Deflation is coming. No need to own gold

 

No QE? Gold down! Self explanatory

Mon, 03/04/2013 - 15:50 | 3298602 rubearish10
rubearish10's picture

Feel your pain. Owning gold can feel regretful.

Mon, 03/04/2013 - 19:35 | 3299279 DoChenRollingBearing
DoChenRollingBearing's picture

Ud. sabe que es paciencia, Confundido.

Algun dia, van CORRER a comprar el ORO FISICO!

 

And there won´t be much, if any, left...  

Mon, 03/04/2013 - 15:30 | 3298543 Buzzworthy
Buzzworthy's picture

Who cares what Paul Krugman says anymore?  It is so detached from reality that its not worth listening to.

Mon, 03/04/2013 - 15:32 | 3298552 _ConanTheLibert...
_ConanTheLibertarian_'s picture

FUCK YOU KRUGMAN!!!!!!!!!!!

Mon, 03/04/2013 - 15:45 | 3298588 Charles Nelson ...
Charles Nelson Reilly's picture

the fact that Krugman mentions it means it absolutely drives him crazy.  He is a horribly insecure person, see here - http://www.youtube.com/watch?v=N8LmE5cfQKA 

Mon, 03/04/2013 - 16:00 | 3298637 SleepingBear
SleepingBear's picture

Yes anyone who holds a Nobel prize in economics and decries anyone who effectively destroys his arguement as "slandering his credentials" clearly has some deep-seeded insecurities

Mon, 03/04/2013 - 16:47 | 3298804 _ConanTheLibert...
_ConanTheLibertarian_'s picture

He knows he's just a muppet

Mon, 03/04/2013 - 19:37 | 3299288 DoChenRollingBearing
DoChenRollingBearing's picture

I wave my silver cross and my Gold Eagle at you, Krugman, you worthess scum.  Go crawl back into your NYT corner office...

 

Gold.Bitchez.

Mon, 03/04/2013 - 15:34 | 3298557 cougar_w
cougar_w's picture

"Not boom, boom, boom and then a grand mal seizure."

The rich make tons of money on the booms, and they don't do too bad during the seizures either. Lately, they get public money. That's good stuff.

So boom boom boom is what we get.

Mon, 03/04/2013 - 15:34 | 3298559 fonzannoon
fonzannoon's picture

rally time bitches. lets knock down metals and crude and then spike those indices. unreal.

Mon, 03/04/2013 - 15:35 | 3298561 tony bonn
tony bonn's picture

"...we must embrace the business cycle..."

bullshit. we must repudiate it as a relic of fractional reserve policy and plutocratic central planning, along with repudiation of quack economists like you.

Mon, 03/04/2013 - 15:35 | 3298564 q99x2
q99x2's picture

DHS just purchased 2,100 approx light weight tanks and mine resistant tanks. We're going to be ok even if there is a collapse. It's only those with money that have to worry.

Mon, 03/04/2013 - 15:35 | 3298565 Hohum
Hohum's picture

Mr. Aziz,

You are missing the bigger picture.  Total credit market debt has grown faster than output for 40+ years (maybe August 15, 1971).

You're in good company, though.  Krugman, Greenspan, Bernanke...

Mon, 03/04/2013 - 15:36 | 3298568 NoDebt
NoDebt's picture

I have to laugh when I see an article arguing from a purely economic point of view.  This isn't economics any more.  This is monetization of government over-spending and has been for years.  In short, it's a financial necessity to support political expediency.

When this one blows it's gonna blow big.  It's the MOAB (Mother of All Bubbles).  There is no higher level to which this can be kicked unless they hurry up and get that "one world government" or "new world order" thing done right quick.  At present, there is nothing above the sovereign nation level.  That's the level of the problem has moved to.  Nobody to turn to for a bailout when this one pops.  And when they go they'll take as many of us with them as they can in their desperation to sustain the unsustainable.

 

 

Mon, 03/04/2013 - 15:55 | 3298613 css1971
css1971's picture

The BIS, The IMF, The World Bank, The UN.

They put the infrastructure in place a long time ago.

Mon, 03/04/2013 - 16:01 | 3298644 donsluck
donsluck's picture

I would disagree with your thesis of "nothing above national...". The Euro is above national. This is why it will survive longer than the national currencies. Upon further thought, we may be headed towards a north american, or maybe american (north and south) currency.

Mon, 03/04/2013 - 16:34 | 3298758 NoDebt
NoDebt's picture

Yeah, yeah, yeah.  I figured I would get that comment.  Reason I didn't count them is because they only work if you're talking about a little country that the rest of the world can support through those instituations (and it's voluntary, not sovereign- they have no "teeth").  If a major gets in trouble it's all over.  Even a semi-major.

Not a perfect analogy, I admit, but reality is there's not much but talk and vapor above the sovereign nation level.  Nothing with real teeth.  "Real teeth" I would define roughly as fiscal union + monetary union + ability to enforce those rules everywhere.  In other words, real sovereignty at a supra-national level.  Pretty damned far from the Euro or IMF, etc.

Sorry for any confusion.

Mon, 03/04/2013 - 15:39 | 3298571 Dr Paul Krugman
Dr Paul Krugman's picture

This article presupposses that the difference between cause and effect are not differences at all, but merely replacements for each other.  The fact that there were risks heading into the crisis does not mean that proper monetary policy should be thrown into the wind like dust from an outdated book. 

Obviously (if you read the quote proper) you will note that the lead in points to how the reference to Minksy was in context to Europe, not the policies of the U.S. Fed. 

Mon, 03/04/2013 - 15:48 | 3298589 akak
akak's picture

Your standing as a professor of economics (sic) presupposes a history of honest academic achievement, an open-minded questioning of statist orthodoxy, a rigorously analytical intellect unbeholden to the pro-status-quo powers that be, and a knowledge and appreciation of the works of real, free market economists, such as Von Mises and Rothbard, all of which are conspicuously and self-evidently lacking in the person of Paul Krugman.

Mon, 03/04/2013 - 16:00 | 3298645 Dr Paul Krugman
Dr Paul Krugman's picture

Substance aside — not that substance isn’t important — Austrian economics very much has the psychology of a cult. Its devotees believe that they have access to a truth that generations of mainstream economists have somehow failed to discern; they go wild at any suggestion that maybe they’re the ones who have an intellectual blind spot. And as with all cults, the failure of prophecy — in this case, the prophecy of soaring inflation from deficits and monetary expansion — only strengthens the determination of the faithful to uphold the faith.

It would be sort of funny if it weren’t for the fact that this cult has large influence within the GOP.

- Paul Krugman, February 20th, 2013

And I'll stick to what I wrote while you doomers clutch your guns and gold while the U.S. economy recovers (albeit slowly) and dutiful investors increase their wealth while owning index funds invested in firms who benefit from said recovery...

http://krugman.blogs.nytimes.com/2013/02/20/fine-austrian-whines/

Mon, 03/04/2013 - 16:14 | 3298690 DRT RD
DRT RD's picture

Krugman. my ole man says, "that a bit dog always hollers." 

My spiritual teachers always says,"you never have to defend the truth."

You sir, are hollering and defending.  South Georgia translation = your a lying dog!

Mon, 03/04/2013 - 16:21 | 3298707 monad
monad's picture

You ignore the fact that the Keynesian bubbles were intentionally engineered. You taunt, you mock, you jeer, can it be that this is all you've got? "Neener neener neener, kiss my ass" said Nobel laureate economist Krugman. The kleptocrats use you for cover, and willingly you take their money. You are a paid disinformation stoolie. Uncle Joe would be proud.

Mon, 03/04/2013 - 16:38 | 3298772 NoDebt
NoDebt's picture

Spending all afternoon trolling the kids on ZH are we, Doc?  You have time for this?  Perhaps you are on vacation and just having a little fun.

If you're the real Paul Krugman I'll eat my old Macro Econ 101 textbook one page at a time.

 

Mon, 03/04/2013 - 16:46 | 3298802 Dapper Dan
Dapper Dan's picture

Dr Krugman,

Are you a closet Doomer?  I see you post here quite often.

Do you own any physical gold or silver?  tell the truth : ) 

Do you own a gun?  or do you live in a gated community with armed security.

 

"index funds invested in firms who benefit from said recovery"

Be so kind as to provide us a short list of the FIRMS you refer to. Help a brother out!

(don't list any banks, I already know about them)

 

** found a gem here**

http://www.krugmaniswrong.com/

"You just paid people with tax dollars"

Jeff Semon June 6, 2011

 

 

 

 

Mon, 03/04/2013 - 17:13 | 3298903 nightshiftsucks
nightshiftsucks's picture

Yeah we're recovering just like we recovered from the tech bubble and grew into the housing bubble. So Krugman what's this bubble ? The govt debt bubble ? Hey Krugman anyone ever tell you that "you have a pretty mouth" well you don't but when this shit crashes I'm going to fuck you.

Mon, 03/04/2013 - 17:39 | 3299020 myne
myne's picture

To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

Krugman - 2002

http://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip.html

 

While this statement was defended some 7 years later as using a different tone, I find the sheer length of time suspect.

Mon, 03/04/2013 - 19:07 | 3299201 WTF2
WTF2's picture

The good Professor stirring the ZH pot is always amusing.  Until proven otherwise his mantra has been correct.  The US is near new market highs with very tame inflation, thanks to helecopter Ben.  The perminent nature of high unemployeement sucks but clinging to gold and guns will not change that. Never dig your heels into a losing arguement  or a losing trade.

Mon, 03/04/2013 - 21:15 | 3299544 BigJim
BigJim's picture

Funny, when shopping for groceries or gasoline or paying my power bills, I haven't noticed inflation to be 'very tame'.

PS - I don't recall hearing the Austrians saying that hyperinflation from endless QE was imminent. I recall them saying it was inevitable.

Mon, 03/04/2013 - 19:20 | 3299234 smacker
smacker's picture

Why do socialists always project?

Tue, 03/05/2013 - 00:34 | 3299966 archon
archon's picture

I dunno... this guy talks like the real Krugman, but his appearance here at Zerohedge, where his ideas will face honest, full-throated opposition, is very uncharacteristic for an economist of his stripe, most of whom prefer to voice their beliefs unopposed in the Keynesian echo chamber.

So, "Paul", the fact that inflation hasn't happened yet is no indicator that it won't - just give it time.  An economist like yourself who chooses to believe that we didn't "End This Depression Now" because we needed to spend a few trillion more, and who also believes that an invasion by space aliens would stimulate demand and revive the economy, should not be troubled by Austrians who choose to believe that inflation will happen when central banks print trillions of dollars, just because it hasn't happened yet.

Mon, 03/04/2013 - 16:22 | 3298657 Bunga Bunga
Bunga Bunga's picture

Don't worry, a lot of this "Science" will throw itself onto the dump soon.

Mon, 03/04/2013 - 16:16 | 3298697 auric1234
auric1234's picture

Proper monetary policy means realizing you're not smart enough to tell millions of people how to run their lives.

If they don't trust the bank to lend it money, then so be it. Maybe the bank should improve to gain people's trust instead of asking for bailout.

If they don't trust the government to lend it money, then so be it. Maybe the government should stop pretending it is a profitable "investment" instead of asking for bailout.

Just take it like a man and stop whinning.

 

Mon, 03/04/2013 - 17:11 | 3298893 venturen
venturen's picture

Paul how many more days you have at that failing paper of your's. As people see it as the blatant partisan hack rag that it has become, with people like you headlining? I give it a year, two at most. I suppose Murdoch could buy it...but why. Maybe some PE guys as it sounds like the your current majority owner is having problems. 

Mon, 03/04/2013 - 17:29 | 3298972 imapopulistnow
imapopulistnow's picture

"I vote for Minsky’s notion that financial systems run amok when people forget about risk,..."

I vote for the 2004 SEC decision to effectively eliminate investment bank reserve requirements as the real Minsky Moment catalyst. 

If a banker can only lend out $12 and has say $40 in requests, loans are made only to the best risk/reward credits.  But when a banker can cover all $40 in requests, still has $10 more to lend and therefore must find a way to generate even more loan requests....well we all know how that turned out.

http://en.wikipedia.org/wiki/Net_capital_rule

Mon, 03/04/2013 - 17:36 | 3298997 imapopulistnow
imapopulistnow's picture

And from that standpoint, Greenspan is responsible for the collapse; not due to his monetary policies, but due to his "markets will self-regulate" beliefs, that he admitted were flawed after the crash when he stated that he underestimated the extent to which greed would persevere even when it is self-destructive. (paraphrased through an aging memory)

Mon, 03/04/2013 - 21:22 | 3299562 BigJim
BigJim's picture

He coudn't have believed that the markets would self-regulate; he of all people knew we didn't have any 'markets'.

So what he is actually saying is that he believed "crony-capitalism would self-regulate", which is patently absurd.

What a douchebag! And after writing one of the great pro-gold essays

   http://www.usagold.com/gildedopinion/greenspan.html

a complete turncoat, too.

Mon, 03/04/2013 - 21:27 | 3299573 Rusty Trombone
Rusty Trombone's picture

Dude, you need to get laid.

Mon, 03/04/2013 - 15:52 | 3298603 css1971
css1971's picture

Or we should reform banking and property law such that booms don't happen.

Mon, 03/04/2013 - 16:14 | 3298688 slightlyskeptical
slightlyskeptical's picture

It was the last few rates hikes by Bernanke in 2006 that sent us over the top. We could have survived a fed funds rate of 4.5 but once Bernanke took it over 5 we were sunk.

Mon, 03/04/2013 - 16:20 | 3298708 NoDebt
NoDebt's picture

I have to laugh when I see an article arguing from a purely economic point of view.  This isn't economics any more.  This is monetization of government over-spending and has been for years.  In short, it's a financial necessity to support political expediency.

When this one blows it's gonna blow big.  It's the MOAB (Mother of All Bubbles).  There is no higher level to which this can be kicked unless they hurry up and get that "one world government" or "new world order" thing done right quick.  At present, there is nothing above the sovereign nation level.  That's the level of the problem has moved to.  Nobody to turn to for a bailout when this one pops.  And when they go they'll take as many of us with them as they can in their desperation to sustain the unsustainable.

 

 

Mon, 03/04/2013 - 16:22 | 3298718 Stuck on Zero
Stuck on Zero's picture

...the Fed had effectively smoothed the business cycle to the extent that the old days of boom and bust were gone. It was boom and boom and boom.

Really.  Why didn't the middle class participate in these repeated booms?  Somehow, only the rich participated.

 

Mon, 03/04/2013 - 16:23 | 3298724 Kantbelieveit
Kantbelieveit's picture

Oh, the poor innocent banks! Their behavior is controlled by Fed decisions. When money is tight, they are sweet and virtuous, but when money is loose, they become demons. Who knew that the culture of Wall Street was determined by the Fed?

Mon, 03/04/2013 - 17:25 | 3298954 Herdee
Herdee's picture

Krugman conveniently ignores one big point though.That is the ongoing inefficiency of income tax brought in because of WW1.That's how old that type of thinking is.The solution is a Value Added Tax economy with zero income tax and no capital gains tax.There should be next to no charge for education.Especially since most of it is now online learning and most employees of these institutions are overpaid types of lazy government mindset.In order to shrink and destroy a corrupt government it must get rid of 900 military bases world wide and private health care initiated.Small government is the solution with the majority of monies downloaded to local levels.He should start listening to Ron Paul and discovery that it is actually interest rates themselves and their existence that is the root cause of economic depressions.The biggest problem though right now is the size of the federal government.I'd gut 80% of it,and break all their pensions in half. "Take a meat-axe to it"

Tue, 03/05/2013 - 00:20 | 3299944 GMadScientist
GMadScientist's picture

Please do avail yourself of some of that online education; you're desperately in need.

Mon, 03/04/2013 - 18:31 | 3299115 Edward Fiatski
Edward Fiatski's picture

Give him a cookie.

Mon, 03/04/2013 - 19:39 | 3299270 Radical Marijuana
Radical Marijuana's picture

"Smaller cyclical booms, and smaller cyclical busts. Not boom, boom, boom and then a grand mal seizure."

Since money is backed by murder, and the political economy is inside the human ecology, the same principle could THEORETICALLY be applied within the murder system, as within the monetary system.

The runaway "money" as debt system transfers more and more of the debt controls onto the future, which then also transfers more and more of the death controls onto the future. Thereby, the banksters' current systems of force backed frauds are accumulating numbers towards debt slavery becoming debt insanity, which also accumulates conditions which could go out of control to allow the global fiat "money" electronic frauds, backed by the threats of weapons of mass destruction, to actually be used, in the form of more genocidal wars, along with democidal martial law.

The alternative is to have more regular acts of death control, perceived of through radical paradigm shifts (such as that almost all of what we call "birth control" are actually forms of death control, and so forth.) Of course, since the established financial systems are runaway triumphant frauds, backed by threats, made credible by past uses of force, we are actually allowing the conditions to develop wherein the greatest of all bubbles, namely the human population itself, could go through the greatest of all busts, in which global civilization goes through "a grand mal seizure," whereby the banksters efforts to continue to prop up their runaway financial frauds, which are playing chicken with the threat of using weapons of mass destruction, finally DO cause mass murders on as astronomically amplified scale. 

Since the vast majority of people do not understand, and do not want to understand, the fundamental fact that money is backed by murder, the most probable real future is for history to default to repeating its past patterns (depression leading to war), despite science and technology having made human beings trillions of times more powerful, and able to use information, than at any time in the known past human history.

Our current financial systems deliberately ignore the laws of nature, and their environmental ecology, because their privatized fiat "money" is the result of covert organized crime being able to take over the sovereign powers of states, in order to enforce that state religion of faith based "money," as something that everyone was forced to accept and live within. Nothing can be made out of nothing, nor sent to nothing, except that fiat money appears to do that! Thus, the social facts that fiat money is backed by nothing but the sovereign powers of states, to force people to pay their taxes and other bills using that "legal tender," are something that the overwhelming vast majority of the people do not understand, and do not want to understand.

Given that our entire system is based on runaway triumphant financial frauds, and that money is backed by murder, the most probable future, given those paths that we are currently on, is that, when the debt insanity bubble pops, the human population bubble will pop at the same time. There are no solutions outside of the basic facts that human society ACTUALLY operates according to the methods and principles of organized crime. Our bankster controlled governments are the result of that. Doing that better is the only genuine solution to that problem. Doing that better means our debt controls and death controls ought to be understood and managed more regularly and consistently. Doing that worse means we will stay on the path we are on now, where the debt slavery numbers will continue towards greater debt insanity numbers, with the consequences being that we will see our currently deferred death controls finally being realized in the most insane possible ways.

These days, I am almost 100% convinced the latter is the path we will continue to be on, because articles like this one above quote authorities that continue to pose the problems within the biggest bullies' bullshit mechanical view of economics, which deliberately ignores the laws of ecology, because to regard human societies as energy systems reveals that they were being controlled by the people who were the best at being dishonest, and backing that up with violence. Therefore, our established systems are based on Huge Legalized Lies, which are necessarily therefore headed towards a series of psychotic breakdowns, or towards grand mal seizures.

Meanwhile, my macabre sense of humour is tickled by somebody like Krugman trending towards being forced to admit slightly more truth, with a nod towards Minsky. The "stability" we had was the extension of keeping a financial pyramid system, based on fraud, with payments postponed onto the future, going ...

The longer we keep the debt slavery growing towards debt insanity, the more we set up conditions for the death controls that backed up the debt slavery growing towards death insanity situations. However, since virtually nobody will admit the basic FACT that money is backed by murder, and must be, there are no reasonable ways, other than through some series of improbable political miracles, to avoid the biggest of bubbles popping in the most spectacular ways!

Since real economics was always based on organized crime, which social situation no mainstream economist will admit, we can not expect any sufficient paradigm shifting to emerge sufficiently within this emergency of a global depression, leading towards a global war. Instead, the only thing our bankster controlled governments will do is continue to double down on their frauds, until their systems finally go through psychotic breakdowns, in a series of grand mal seizures.

The good theoretical solutions are for the dominant crime gangs that control the world to negotiate better dynamic equilibria in the form of smaller cyclical booms, and smaller cyclical busts, in BOTH the money and murder systems. Of course, that would require enough people to understand and agree with that, without which we will continue to default to the biggest boom ending in the biggest bust! Since that is almost practically guaranteed to be what happens, the only thing we can do is watch and wait, and hope that the bigger bubbles can continue being blown, for as long as possible ...

 

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