The point at which a Minsky moment becomes a Minsky meltdown has arrived. Named after the economist, Hyman Minsky, this is the point where financial instability has become so acute that only an exceptional, immediate and global government attack on the causes of instability is likely to avert a systemic banking failure, in which non-financial companies could rapidly fail too. The Group of Seven leading industrialised nations and the European Union now look like they “get it”, but with several hundred billion dollars of debt to be rolled over in the coming weeks, the question is whether they have the time to “do it” too.
Emphasis added by me.
And note this:
Even if a financial meltdown is averted, we should be under no illusion that the deleveraging in the financial and household sectors will stop. As a result, four big battlegrounds remain. First, there is a high possibility of further bouts of financial stress and failures. Money markets are still broken and recovery will take time. Second, illiquidity, a preference for cash-type instruments, even over government bonds, and a considerably expanded supply of government bonds raise the threat of an untimely increase in bond yields. Third, the global recession that has started may yet turn out to be sharper than expected – and certainly longer. This will bring sustained, and some new, credit risks. Fourth, much slower growth and the risk of some home-made financial crises in emerging markets warrant close scrutiny.
Emphasis added by me.
It still amazes me that people think the government has some fix that will automagically detox this economy and prevent its inevitable hangover.
Don't be fooled. It's still only beginning.
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