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Bernard L. Madoff

Def: Minsky Moment

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For those who perceive a crash is inevitable as opposed to stagnation what you are looking for is a "Minsky Moment"

http://en.wikipedia.org/wiki/Minsky_moment

A Minsky moment is the point in a credit cycle or business cycle when investors have cash flow problems due to spiraling debt they have incurred in order to finance speculative investments. At this point, a major selloff begins due to the fact that no counterparty can be found to bid at the high asking prices previously quoted, leading to a sudden and precipitous collapse in market clearing asset prices and a sharp drop in market liquidity.[1] The term was coined by Paul McCulley of PIMCO in 1998, to describe the 1998 Russian financial crisis,[2] and was named after economist Hyman Minsky. The Minsky moment comes after a long period of prosperity and increasing values of investments, which has encouraged increasing amounts of speculation using borrowed money.

Some, such as Paul McCulley, have dated the start of the financial crisis of 2007–2009 to a Minsky Moment, and called the following crisis a "Reverse Minsky Journey"; McCulley dates the moment to August 2007,[3] while others date the start to some months earlier or later, such as the June 2007 failure of two Bear Stearns funds.

The concept has some parallels with Austrian Business Cycle Theory, although Hyman Minsky himself was known as a "radical" Keynesian, and is identified as a post-Keynesian.

I came across it reading some financial blogs and journals.

You are looking for a situation where:

At its core, the Minsky view was straightforward: When times are good, investors take on risk; the longer times stay good, the more risk they take on, until they've taken on too much. Eventually, they reach a point where the cash generated by their assets no longer is sufficient to pay off the mountains of debt they took on to acquire them. Losses on such speculative assets prompt lenders to call in their loans. "This is likely to lead to a collapse of asset values," Mr. Minsky wrote.

When investors are forced to sell even their less-speculative positions to make good on their loans, markets spiral lower and create a severe demand for cash. At that point, the Minsky moment has arrived.

The quote is from this article I read last night (on an approaching US Minsky moment):

http://www.zerohedge.com/article/minsky-moment-approaches

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I think we hit on of those points back in 2008, but then the RBA & govt stepped in with slashed interest rates, FHOGs, bank guarantees, and buying up billions worth of RMBS. This as we well know, stopped and even reversed the natural decline that would have happened.

Question is, can they do it again? I don't think it's a matter of will they, because I'm sure if they have the means to stop the collapse they will do it, and as Joe Hockey's recent statements bear out, this is the view of both the major parties.

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I think we hit on of those points back in 2008, but then the RBA & govt stepped in with slashed interest rates, FHOGs, bank guarantees, and buying up billions worth of RMBS. This as we well know, stopped and even reversed the natural decline that would have happened.

Question is, can they do it again? I don't think it's a matter of will they, because I'm sure if they have the means to stop the collapse they will do it, and as Joe Hockey's recent statements bear out, this is the view of both the major parties.

It comes down to "let it go its knackered" or "we'll defend this to national [and moral?] bankruptcy".

We source >50% of our capital from overseas. A global credit squeeze and then a complete freeze may take it out of their hands.

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TILL THE GOV think its in national interest to spend super fund money on what the gov thinks best, n the national interest of course.

i kno its a long shot, but hey its a wad of money not doing what the gov thinks best. who can say.

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TILL THE GOV think its in national interest to spend super fund money on what the gov thinks best, n the national interest of course.

i kno its a long shot, but hey its a wad of money not doing what the gov thinks best. who can say.

The European govts and American govts have chosen to not defend the property Ponzi but just put speed brakes on (a waste).

Ours will defend at all costs. The so called Keynsian stimulus is proof.

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The speed at which they junked all their policy around affordable housing the moment it looked like actually becoming affordable, is all the evidence we needed.

We can have all the affordable housing we want, so long as it doesn't involve lower prices......

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It comes down to "let it go its knackered" or "we'll defend this to national [and moral?] bankruptcy".

We source >50% of our capital from overseas. A global credit squeeze and then a complete freeze may take it out of their hands.

Tin,

I think the chinese tightening monetry policy today is exactly the sort of thing that will help create a mangy moment. Gov cant control overseas investors, only make OZ more appealing by raising rates which will deflate the bubble locally anyway.

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Tin,

I think the chinese tightening monetry policy today is exactly the sort of thing that will help create a mangy moment. Gov cant control overseas investors, only make OZ more appealing by raising rates which will deflate the bubble locally anyway.

Lord Vader I agree that is very probable.

The world economy is on a knife edge...that we know.

Interesting times (don't choke me all arriving and departing traffic from the deathstar are +-1min !!!!)

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The European govts and American govts have chosen to not defend the property Ponzi but just put speed brakes on (a waste).

The US government is funding Freddi and Fannie, purchasing mortgage-backed securities, and has a first-home buyers grant.

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For those who perceive a crash is inevitable as opposed to stagnation what you are looking for is a "Minsky Moment"

I came across it reading some financial blogs and journals.

I am pleased to see that you have finally decided to get educated.

Next item for your study should be "Ponzi Unit" link

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Next item for your study should be "Ponzi Unit" link

Man, that was cool!!! "Let me google that for you"

On the US MBS thingy. The Fed have bought $1.25T (Trillion is now yesteryears billion).

http://online.wsj.com/article/BT-CO-20100112-717045.html?mod=WSJ_latestheadlines

With >$3T worth of mortgages about to reset they are sh*tting bricks....

post-103-12634444037333_thumb.jpg

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