Can "It" Happen Again... Again?

Tyler Durden's picture




 

Many have talked about it. More have eschewed it. But Minsky's hugely important insight in asking the question "Can 'It' Happen Again?" regarding the Depression remains critical reading for any- and every-one who opines day-in and day-out on how much we need or do not need Central Bank money-printing. As Bill Gross put it:

Minsky, originator of the commonsensical “stability leads to instability” thesis; the economist with naming rights for 2008’s “Minsky Moment”; the exposer of the financial fragility of modern capitalism; probably couldn’t imagine the liquidity trap qualities of zero-based money, because who could have conceived 30 or 40 years ago that interest rates could ever approach zero per cent for an extended period of time? Probably no one.

 

Nor, more importantly I suppose, can Ben Bernanke, Mario Draghi or Mervyn King. In their historical models, credit is as credit does, expanding perpetually after brief periods of recessionary contraction, showering economic activity with liquid fertiliser for productive investment and inevitable growth.

For a long-weekend, the full 30 year-old must-read paper here:

Minsky_Can It Happen Again

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Fri, 08/31/2012 - 18:04 | 2753977 ShortTheUS
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The (empty chair)satan stands at the ready with his worn-out Ctrl+P button.

Fri, 08/31/2012 - 18:14 | 2754000 I think I need ...
I think I need to buy a gun's picture

Hyperinflation!!!! and not of the money supply,,,,,,no goods on the shelves circa argentina 2001

 

Bob pisani admitted on cnbc today that treasuries were in a bubble!!!!! Run for your lives!!!!!

Fri, 08/31/2012 - 18:43 | 2754042 MillionDollarBonus_
MillionDollarBonus_'s picture

As if doomer ZHers needed any more indication of the stability of the dollar and the US economy, the 10 year yield has closed down on the day yet again at 1.56% despite Bernanke’s QE disappointment. This is an indication that treasury yields are headed much lower. Treasuries are backed by the full faith and credit of our congress and the judicious monetary policy of our Federal Reserve, and they will remain the safe-haven of choice for investors around the world. Not everybody will benefit from the Treasury bull market however. Some people will only start buying when the yield is sub 0.5%. This will be the greatest wealth transfer in history, and it’s sad that doomer ZH investors don’t want to be part of it.

Fri, 08/31/2012 - 19:01 | 2754084 Pladizow
Pladizow's picture

Trillion Dollar Anus - This is the one comment of yours that I hope is right.

As long as rates drop, gold soars!

Fri, 08/31/2012 - 21:58 | 2754413 Pinto Currency
Pinto Currency's picture

 

Minsky's insight that people (the market) can lose their minds after not losing their minds is trite.

The real insight is that the consequences of loose monetary policy can appear in a sudden crash which is not very visible beforehand to the average (non monetary policy) observer.

All the more reason to end the Fed and fiat money.

Fri, 08/31/2012 - 22:43 | 2754475 AldousHuxley
AldousHuxley's picture

germany experienced hyperinflation after "investing" into world war 1, then losing it and owing lots of national wealth and productivity to winner of WWI.

 

US is already in debt yet ready to go to war with Iran supported by China and Russia. WHen US loses, you bet Russia and China is going to make US pay big time and only thing US can do would be hyperinflate debt owed. until US faces China/Russia directly in another war.

 

It ain't going to be pretty.

 

 

Sat, 09/01/2012 - 00:23 | 2754570 Silver Bully
Silver Bully's picture

'US is already in debt yet ready to go to war with Iran supported by China and Russia.'

The U.S. learned a long time ago to let other countries fight our wars for us. The designated proxy that will fight Iran is Israel. The United States will not go broke fighting that war . . . we're already broke, and have been for quite a long time. Meanwhile, the biggest pile of fiat money goes to China. We won't need a silly war to push the issue, merely a financial crisis. But don't worry! Ben will print more than enough Bernanke Bucks to reduce the actual size of ALL our debt. It will simply shrink to the size of a grain of sand (along with the savings of anyone foolish enough to put it all into dollars).

Its magic!

Sat, 09/01/2012 - 00:42 | 2754578 RockyRacoon
RockyRacoon's picture

Parallel worlds?  The similarity is interesting...

We might be broke but that hasn't stopped anybody from getting into a nice cozy war.

http://dailyreckoning.com/too-much-of-a-good-thing-part-iii/

Sat, 09/01/2012 - 01:43 | 2754612 i-dog
i-dog's picture

Excellent essay, with the simplest explanation for "Lebensraum" that I've seen. Always good to see a different perspective. Thanks for posting.

However, it's not a parallel. America has added $20 trillion to the $2.5 trillion debt at 1990 by borrowing from China (and others) and handing that money to banks and welfare recipients. Though the MIC has also been a beneficiary, the massive buildup has been in an internal security apparatus rather than offensive weaponry.

Sat, 09/01/2012 - 03:31 | 2754652 AnAnonymous
AnAnonymous's picture

'Americans' love their WWI German debt story.

The accurate point in the article is that the US insisted on Britain and France to repay their debt immediately. The rest, the German debt being set too high, is just a convenient story to avoid facing, among other things, that nazism started in Germany, before 1919.

Actually, the US placed itself as a conduit to enable Germany re armament, taking British and German repayments of war debt and transfering them to Germany.

Un PC, un 'American' comments and indeed, the German war debt story is much more appropriate to satisfy 'American' taste for fantasy.

Sat, 09/01/2012 - 03:53 | 2754655 Svendblaaskaeg
Svendblaaskaeg's picture

Good read (link), thank you!

Sat, 09/01/2012 - 06:51 | 2754725 Element
Element's picture

Always a bit sus of people who call a country 'she' ... the fatherland to some.  Motherland and the Homeland are equally disturbing.

Interesting take though.

And a good example/argument of the overriding fascist philosophy that viewed violence is the first-resort for achieving state policy, and that the economy and resulting centralist corporatism was just the means to obtain the weapons to furnish for that primary motivator to state action.

Like the topic of this page, "Could it happen again?"

Did it ever really stop?  Seems the only thing that altered was mutual deterrence increased and held the fascist state in check ... until they could convince/delude themselves that a 'Star Wars' program and resulting 'missile shield' could work ... then they were off to the races again.

Sat, 09/01/2012 - 21:14 | 2755681 RiskAverseAlertBlog
RiskAverseAlertBlog's picture

And if rates rise?

Fri, 08/31/2012 - 19:01 | 2754085 Muppet Pimp
Muppet Pimp's picture

Excellent Point MDB, if only the doomer libertarians would see the light.  You can in fact print prosperity. /S

FWIW (IMO) Steve Keens work regarding the relevancy of Minsky is the more profound part of that so called 'Jubilee' speech (everyone refers to 'Steve Keen's jubliee' when obviously that is more biblical in origin and was a sidebar to his presentation).  His thoughts concerning calculating potential future cash flows of residential RE with regard to the size of allowable mortgages was good stuff IMO, as rents are relatively stable and that could be a good way for the GSE's (if they survive) to base things on in the future to avoid taxpayers being on the hook for RE that people are overpaying for.  

BTW, SK also said give everyone a million dollars to fire things up which is obviously cuckoo.

Fri, 08/31/2012 - 22:41 | 2754473 geekgrrl
geekgrrl's picture

I seem to recall that Sheila Bair suggested a $1M general bonus (I thought it was in jest), but I didn't see Steve Keen call for that. I did a search and I'm not finding evidence of this claim. Do you have a link?

Fri, 08/31/2012 - 22:46 | 2754480 AldousHuxley
AldousHuxley's picture

happy go lucky joos in Germany 1940 ended up in Germany

doomer joos moved to USA and now drive german made cars

 

 

Fri, 08/31/2012 - 23:45 | 2754527 geekgrrl
Sat, 09/01/2012 - 00:43 | 2754588 RockyRacoon
RockyRacoon's picture

In that case I'm going long strippers and blow.

Wed, 09/05/2012 - 21:57 | 2766703 geekgrrl
geekgrrl's picture

LOL. It's ironic that nihilism (or is it hedonism) makes so much sense these days.

Fri, 08/31/2012 - 20:57 | 2754319 holdbuysell
holdbuysell's picture

"judicious monetary policy of our Federal Reserve"

Now that's funny.

https://www.google.com/search?q=judicious

ju·di·cious/jo?o?diSH?s/

Having, showing, or done with good judgment or sense.

Fri, 08/31/2012 - 22:11 | 2754335 Michael
Michael's picture

Query MDB,

If I paid 90% in taxes on $100 billion I earned and got to keep $10 billion dollars, Would you come after the $10 billion I still will have in savings in the future?

Clint Eastwood

http://www.youtube.com/watch?v=yoqKdWY692k

You'd think people in the entertainment industry would know what "Theatrical Property" is. Google it.

Fri, 08/31/2012 - 23:26 | 2754514 john39
john39's picture

endless war... no worries.  we can afford it, oh wait....    but "god" wants us to save the world, oh wait....     yeah, its all totally fucked up.  wake up people.

Fri, 08/31/2012 - 23:44 | 2754525 Michael
Michael's picture

The first reaction is the honest reaction. Look at the video and pause it there if need be. Does anyone know who those people are they took a camera shot of?

Sat, 09/01/2012 - 00:11 | 2754554 AldousHuxley
AldousHuxley's picture

dirty Romney money

 

Stericycle

 

a company that cleans up "medical waste" from abortion clinics....aka dead fetus.

 

yeeah, that wouldn't sit well with anti-abortion republicons, so don't report taxes on that investment.....but he can say he created those sick jobs!

 

http://www.dailypaul.com/243141/right-to-life-cares-less-that-romney-inv...

 

 

Sat, 09/01/2012 - 00:51 | 2754566 Michael
Michael's picture

The Jewtub MSM and their twisted other media are going to tell you what to think about the Clint Eastwood speech, and not discuss any of the topics and actual words he used in that speech.
All the words in Clint Eastwood's speech were truth. Tell me which words and phrases were lies?
The Jewtube MSM and their minions just want more military industrial complex taxpayer money spending.

We call it Jewtube because there are all these Ashkenazi Jews on it because of nepotism.
I'm getting sick of looking at all those Ashkenazi Jews on MSM TV all day.

Whatever happened to Diversity? I guess it doesn't apply to them.

Sat, 09/01/2012 - 02:32 | 2754629 Ghordius
Ghordius's picture

then why don't you watch     Al_Jazeerahttp://www.aljazeera.com/watch_now/

or you could try RT http://rt.com/on-air/rt-america-air/

though my advice would be: get rid of TV altogether

Sat, 09/01/2012 - 04:52 | 2754669 Michael
Michael's picture

Just one more thing;

Eastwood unseats Romney: Chair chat is meme of the moment.

This is a story about a man and his chair.

And how that chair became, for an explosive moment, the star of a presidential race.

Clint Eastwood's speech Thursday night at the Republican National Convention in Tampa was an amiable amble through the backroads of the flinty superstar's mind. No matter how high the weeds got, the crowd loved it. Scripted jests, ad libs, that throat-slice move, the off-color bits - the whole thing worked for them.

But Eastwood's speech (cbsn.ws/NAnMQv), much of it a chat between himself and an empty chair for an imaginary Barack Obama, touched off a Twitterversy that dominated post-convention conversation.

That chair became a proxy for the big party battle, the fight to frame the issues and the opposition.

It's the way politics is done now in the global living room of social media: Words and images stand as proxies for the larger, monumental clash of parties.

Even before man and chair quit the stage, thousands were cheering or mocking. Country singer Blake Shelton, a judge on NBC's The Voice, tweeted: "I. Love. Clint Eastwood." And country fiddle god Charlie Daniels jumped up on a hickory stump and tweeted that "Clint Eastwood made my day." Charleston, S.C., writer Charlet Faye tweeted that "Clint's depiction of @BarackObama MIA was dead-on . . . since absence from the 'seat' is what he's done best."

Read more;

http://www.philly.com/philly/news/20120901_Eastwood_unseats_Romney.html

Sun, 09/02/2012 - 10:24 | 2756168 supermaxedout
supermaxedout's picture

Al Jazeera is clearly a propaganda station of the Brits promoting US and UK oil interests in the Middle East.  Its pure propaganda definetely.

RT is the loudspeaker of Putins Russia.  And in comparison of these two stations RT is far better. Its of course promoting Putins policy but with a much better approach compared to Al Jazeera. RT is a station were one can find also opinions contrary to Putins sight of the world.  But in Al Jazeera only simple plain stupid war propaganda.

Sun, 09/02/2012 - 08:10 | 2756042 supermaxedout
supermaxedout's picture

Your Ashkenazy Jews bashing needs a bit more spice.  Why not saying German Jews since the Jews from Ashkenaz are the Jews from Germany which went from there to Poland, Russia etc appx 1000 years ago.  Ever wondered why Russian Jews have often so German sounding names ?  Appx 80% of the Jews nowadays are of Ashkenaz origin. In Southern Germany there are the three holy cities of the Ashkenaz, Speyer, Worms and Mainz the so called Shum cities.

Since German bashing is so popular as well as Jewsbashing it makes a lot of sense to bash them together, Saves energy and is more efficient or not?  Unfortunately  Ashkenazy heartland is  South Germany including the Alsace Lorraine region in France as well as in Nothern Italy stopping short in front o Rome.  The religion was decimted nearly completely erased by Hitler but the genes are there of course.

http://www.ukapologetics.net/12/yiddishi.htm

 

 

Sat, 09/01/2012 - 07:08 | 2754740 NoClueSneaker
NoClueSneaker's picture

I still don't understand why haven't they allowed the real guys talk: Chuck Norris & Ted Nugent .... Roundkick & Nukes r bullish ....

Fri, 08/31/2012 - 21:11 | 2754346 Shocker
Shocker's picture

Surely

 

Fri, 08/31/2012 - 23:55 | 2754536 sadmamapatriot
sadmamapatriot's picture

Million Dollar Bonus,

I take all your posts as sarcastic, humorous and full of wit. Am I mistaken? Are you serious?

Sun, 09/02/2012 - 09:59 | 2756137 Shatmadim
Shatmadim's picture

Trash MDB all you like. MDB is right...... Oh of course until MDB isn't... This can go on a lot longer... Or it can't... IMO there are fewer and fewer pulling the cart and at some point game theory overtakes monetary theory.

Fri, 08/31/2012 - 20:18 | 2754197 Zero Govt
Zero Govt's picture

Pradizlow  -  "Rickards destroys a Keynesian" which is quite easy if you've an ounce of common sense however Rickards is still wrong (and talking his book)

Money is a token of value, the problems begin and end for the economy when those tokens are in monopoly hands. Sticking your tokens to Gold or Silver with glue makes no fucking difference if the power to issue it is still held in monopolists hands

the correct answer is a Free Market (no rules, lots of market competition) in Money

anyone asking for anything else but a free market in money is part of the problem and no part of the solution

PS. the Keynsian in your Vid is clearly delusional about "price stability". The inflation rate may be flatlining (due to heavy massaging of the figures) but consider Oilì's gone from $40 a barrel to $140 back down to $40 and now we're up to $90 again. WTF is the twit talking about???

Fri, 08/31/2012 - 20:38 | 2754285 Pladizow
Pladizow's picture

Kindly point me to what statements of Rickards were wrong and exactly how he was talking his book.

On a gold standard there are no "tokens" - gold is money and money is gold. Hence there is no monopoly - its called "free coinage."

If redeemable reciepts are to be used, their issuance is limited to the quantity of gold, unless fraud is involved.

6000 years of free markets have chosen gold and silver to be money!

I do agree with your commets about the twit, but that was one of my reasons for posting the vid!

Fri, 08/31/2012 - 21:52 | 2754404 vast-dom
vast-dom's picture

a gold standard is, simply put, that which is missing today: A STANDARD. to have a central banker like bernanke do whatever he pleases for his owners the banks is anti-standards and anti-free market. so of course these sociopaths are terrified of a gold standard or any other standard. the rule of central banks is to defy any and all standards and to create money out of thin air which gold prevents and rightly so. call it gold. call it dirt, call it chicken. it's the standard that matters and it is relativly fixed and offers frame of reference which CNTRL+P into trillions inherently cannot and will not.

as Rickards said wisely: "so how many more trillions are needed to maintain this low level of inflation?" vs the natural tendency of deflation central planning is desperately trying to avoid? these are basic questions but when you have no standards you can say and do whatever the fuck you please. Keynesians are terrified of reality and facts and that is why they desperatly generate fake charts and fake reality based on nothing but unicorn dust and hopium gas. 

Sat, 09/01/2012 - 04:57 | 2754672 natty light
natty light's picture

prefuckingcisely

thank you sir

Fri, 08/31/2012 - 20:40 | 2754292 Pladizow
Pladizow's picture

Double post!

Fri, 08/31/2012 - 22:24 | 2754432 lasvegaspersona
lasvegaspersona's picture

They both fail to mention and credit the bizarre effects of the gold exchange standard (as it was in effect in 1926) that allowed the USA to essentially double count its gold. Jacques Rueff said it was "a conception so peculiarly Anglo-Saxon that there still is no French expression for it." 

I agree with Rickards that gold should not be blamed for the errors of the Fed. A gold standard worked well for almost 500 years up to 1922.

Ultimately however I believe Fofoa has IDed the next use of gold in the monetary system. It functions best as a seperate store of value outside the system and unregulated by government. In this way savers are protected as their vehicle rises in value as the fiat in their zone falls (if it is managed as our dollar currently is and as most fiats have been). Since it exists outside the control of government it does not fall to  inflation as treasuries do. Fiat persists and if managed well sees a stable price of gold in that zone. Fiat currencies fail because they try to be both a medium of exchange which they do very well but also try to be a store of value which they always fail at in the long run.

Richards has been exposed to this concept but has yet to comment definitively. I suspect he has political reasons but I believe the system will ultimately triumph as it is a superior system that will occur naturally as we move along the dollar destruction path. The Euro is spectacularly set up to function in just this way.

Fri, 08/31/2012 - 23:29 | 2754516 traderjoe
traderjoe's picture

Freegold. United States Notes. No legal tender laws. No fractional reserve banking. No taxes for buying and selling gold and silver.

Fri, 08/31/2012 - 23:36 | 2754521 blunderdog
blunderdog's picture

If gold/silver are money, you CAN'T buy and sell them.  You save and spend them.

People can't auction "dollars" directly.  You need a proxy of some kind in order to sell money.

Fri, 08/31/2012 - 18:36 | 2754031 stocktivity
stocktivity's picture

OK...Jackson Hole can go back to being a hole in the wall for another year. A year from now, the world economy will hold it's breath again waiting to see if QE 4 or 5 is announced. It's all Bullshit!

Sat, 09/01/2012 - 00:13 | 2754556 AldousHuxley
AldousHuxley's picture

has it ever not been?

 

it has always been about the central bank. not the superior stock picking talent of your financial advisor.

Fri, 08/31/2012 - 18:56 | 2754075 bank guy in Brussels
bank guy in Brussels's picture

Hyman Minsky wrote above, in this 1982 piece - last page -

« ... big government virtually ensures that a great depression cannot happen again ... »

Ha! - He sure got that one wrong

 

Fri, 08/31/2012 - 20:23 | 2754259 JR
JR's picture

Spott – “We’re Being Lied To, Even the 1% Is Having Problems”

“Just as it was easy for me, back in 2007, to say the following companies are broke, GM, Fannie Mae, Freddie Mac, Citigroup, you just take a look at the balance sheet.  You can’t make it.  You’re beyond a Minsky moment, and most countries are in that situation today.  They (central planners) just keep printing more money all the time.

“I’ve been asked before, is there a solution to the problem?  There isn’t a solution to the problem.  There’s things that might happen.  There’s a default that could happen.  There’s hyperinflation that could happen, but none of those would be deemed as solutions to the problem.  But one or the other or both is going to happen.” – Eric Sprott June 29, 2012

He also stated, “...there is no plan, no formalized plan, no agreed to plan.  It’s all just vaporware.”

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/6/29_Sprott_-_Were_Being_Lied_To,_Even_The_1_Is_Having_Problems.html

Sat, 09/01/2012 - 00:44 | 2754589 IridiumRebel
IridiumRebel's picture

http://www.sfgate.com/business/bloomberg/article/Connecticut-Homes-Bigge...

"Hedge Fund Row"
Prices down almost 13% in a few months.
.....wait for it.....WAIT FOR IT.....

Fri, 08/31/2012 - 20:34 | 2754275 Monedas
Monedas's picture

Minsky says: "the government must spend for resource development, and not for consumption."   ....   that sure sounds like "shovel ready jobs" ?      This guy was a low grade Keynesian .... before the term Keynesian came into common use !

Fri, 08/31/2012 - 22:09 | 2754427 Confused
Confused's picture

Guess it depends on how you define consumption and resource development now doesn't it? 

 

 

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