Monday, March 19, 2018

Edward Harrison — Hyman Minsky And Asset Price Inflation Versus Consumer Price Inflation

Hyman Minsky’s financial theory of investment rests on a bifurcation of an economy’s price systems. On the one hand, there’s the price system for goods and services. And inflation here is what central banks look to hold in check. But at the same time, there is a wholly separate price system for assets. And it’s here where stability leads to asset price inflation, a build up in debt, instability, and, eventually, crisis.
Economics professor Randall Wray is a real Minsky scholar. He studied under Minsky at Washington University in St. Louis. And last year, he wrote a book “Why Minsky Matters: An Introduction to the Work of a Maverick Economist“. Here’s what Wray says about Minsky’s two price systems:
Credit Writedowns
Hyman Minsky And Asset Price Inflation Versus Consumer Price Inflation
Edward Harrison

5 comments:

Ryan Harris said...

Interest rates = lever for asset prices
Fiscal policy = lever for goods and services

What about commodities? Sort of assets but sort of a good

Tom Hickey said...

Commodities are now considered an "asset class."

Didn't use to be that way. They were mostly for use and futures were primarily a way of locking in a price for planning.

Bob Roddis said...

Minsky, von Mises, and asset price inflation
But you also have more debt and higher debt service costs too. And so I like to think of Minsky’s financial stability hypothesis as being consistent with Ludwig von Mises’ concept of malinvestment.


This article is such garbage. Von Mises explains in detail what is going on. Artificial credit creation by banks is the cause of the boom and bust cycle. That has nothing to do with "capitalism". Minsky makes that essential detail disappear from his half-assed fraudulent theory so that "capitalism" is mysteriously subject to boom and bust cycles. Minsky is like the Clampetts when they hear the doorbell. There goes that spook playin' music in the walls again.

Matt Franko said...

“Artificial credit creation by banks is the cause of the boom and bust cycle.”

There is nothing artificial about it Bob...

the increase in loans/leases result in increase in tax flows and eventually the surpluses have traditionally ended up in depository accounts not the Treasury General Account .... so banks experience a short term increase in reserve assets which displace other risk assets in the balance sheet and economic activity recedes...

Matt Franko said...

The whole “inflation!” meme is a joke...

You have gas go from $2 to $4 and nobody thinks it’s “inflation!” .... now it goes up 15 cents and everybody thinks the world is going to end from “inflation!” ...

How do these peoples brains work?

I’d call Darwin and complain if I were them...