Stocks And Precious Metals Charts - Who Could See It Coming? - Dead Reckoning The Minsky Moment

"In particular, over a protracted period of good times, capitalist economies tend to move from a financial structure dominated by hedge finance units to a structure in which there is large weight to units engaged in speculative and Ponzi finance".

Hyman Minsky, The Financial Instability Hypothesis

"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. 

Many of Minsky’s colleagues regarded his 'financial-instability hypothesis,' which he first developed in the nineteen-sixties, as radical, if not crackpot. Today, with the subprime crisis seemingly on the verge of metamorphosing into a recession, references to it have become commonplace on financial web sites and in the reports of Wall Street analysts. Minsky’s hypothesis is well worth revisiting".

John Cassidy, The Minsky Moment, The New Yorker, 4 February 2008. 

"The period of financial distress is a gradual decline after the peak of a speculative bubble that precedes the final and massive panic and crash, driven by the insiders having exited but the sucker outsiders hanging on hoping for a revivial, but finally giving up in the final collapse".

Charles Kindelberger, Manias, Panics, and Crashes: A History of Financial Crises 

Bubbles most often resolve their imbalances irresponsibly and jarringly, with a correction that is sharp and destructive. It is often triggered by some seemingly trivial event, especially if it's predatory mispricing of risk has been allowed to fester for an extended period of time...How can this be?

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