{"id":58783,"date":"2021-07-27T08:11:40","date_gmt":"2021-07-27T13:11:40","guid":{"rendered":"https:\/\/olduvai.ca\/?p=58783"},"modified":"2021-07-27T08:11:40","modified_gmt":"2021-07-27T13:11:40","slug":"markets-next-minsky-moment","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=58783","title":{"rendered":"Markets Next \u201cMinsky Moment\u201d"},"content":{"rendered":"

Technically Speaking: The Markets Next \u201cMinsky Moment\u201d<\/a><\/h3>\n
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In this past\u00a0weekend\u2019s newsletter,<\/a><\/strong>\u00a0<\/a>I discussed the issue of the markets next\u00a0\u201cMinsky Moment.\u201d<\/em>\u00a0Today, I want to expand on that analysis to discuss how the Fed\u2019s drive to create\u00a0\u201cstability\u201d<\/em>\u00a0eventually creates\u00a0\u201cinstability.\u201d<\/em><\/p>\n

In 2007, I was at a conference where Paul McCulley, who was with PIMCO at the time, discussed the idea of a\u00a0\u201cMinsky Moment.\u201d\u00a0\u00a0<\/em>At that time, this idea fell on\u00a0\u201cdeaf ears\u201d<\/em>\u00a0as markets were surging higher amidst a real estate boom. However, it wasn\u2019t too long before the 2008\u00a0\u201cFinancial Crisis\u201d<\/em>\u00a0brought the\u00a0\u201cMinsky Moment\u201d<\/em>\u00a0thesis to the forefront.<\/p>\n

So, what exactly is a \u201cMinsky Moment?\u201d<\/em><\/strong><\/p>\n

Economist Hyman Minsky argued that the economic cycle is driven more by surges in the banking system and credit supply. Such is different from the traditionally more critical relationship between companies and workers in the labor market. Since the Financial Crisis, the surge in debt across all sectors of the economy is unprecedented.<\/p>\n

\"Markets<\/figure>\n

Importantly, much of the Treasury debt is being monetized, and leveraged, by the Fed to, in theory, create\u00a0\u201ceconomic stability.\u201d<\/em>\u00a0Given the high correlation between the financial markets and the Federal Reserve interventions, there is credence to Minsky\u2019s theory. With an R-Square of nearly 80%, the Fed is clearly impacting financial markets.<\/strong><\/p>\n

\"Markets<\/a><\/figure>\n

Those interventions,\u00a0either direct or psychological<\/a><\/strong>,\u00a0<\/em>support the speculative excesses in the markets currently.<\/p>\n

\"Markets<\/figure>\n

Bullish Speculation Is Evident<\/strong><\/p>\n

Minsky\u2019s specifically noted that during periods of bullish speculation, if they last long enough, the excesses generated by reckless, speculative activity will eventually lead to a crisis. Of course, the longer the speculation occurs, the more severe the problem will be.<\/p>\n

Currently, we see clear evidence of\u00a0\u201cbullish speculation\u201d<\/em>\u00a0from:<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Technically Speaking: The Markets Next \u201cMinsky Moment\u201d In this past\u00a0weekend\u2019s newsletter,\u00a0I discussed the issue of the markets next\u00a0\u201cMinsky Moment.\u201d\u00a0Today, I want to expand on that analysis to discuss how the Fed\u2019s drive to create\u00a0\u201cstability\u201d\u00a0eventually creates\u00a0\u201cinstability.\u201d In 2007, I was at a conference where Paul McCulley, who was with PIMCO at the time, discussed the idea […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[2229,124,175,1849,8511,3018,6333,15470],"class_list":["post-58783","post","type-post","status-publish","format-standard","hentry","category-economics","tag-banking-system","tag-central-banks","tag-credit","tag-financial-markets","tag-lance-roberts","tag-minsky-moment","tag-private-banks","tag-real-investment-advice"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/58783","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=58783"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/58783\/revisions"}],"predecessor-version":[{"id":58784,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/58783\/revisions\/58784"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=58783"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=58783"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=58783"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}