How so? By reasoning that "all hell" inevitably breaks loose at some point financially, even though monetary stability may be carefully maintained. One also hears this phenomenon referred to as the Minsky moment. In a recent post, Marcus Nunes noted some of the conclusions in Barry Eichengreen's new book, Hall of Mirrors, which diverged from what had been reasonable arguments, up to that point:
The book provides a detailed account of the recent economic history. And, therefore, is very useful. Nevertheless, I take serious issue with some of Eichengreen's conclusions, in particular the view that "persistent stability is likely bad for financial (and economic) health".Is anyone really to feel confident about the future, if - regardless of what is done to preserve monetary and economic stability - the whole edifice is somehow "rotten to the core"? Are we all just zombies waiting for the financial apocalypse? I agree with Marcus, because the premise that one "can't win for losing" in the long run is lousy. All too often, when this sort of argument comes up, it is capable of derailing the prior context of the entire discussion.
More than anything, the idea of permanent financial instability - despite careful monetary guidance - suggests a lack of imagination or resolve to overcome the structural issues which no one is willing to address. Perhaps the "permanent instability" is really the egos involved, which would rather not provide adequate means for lower income levels to tend to their affairs. As a result, governments continuously pull back on "excesses" in the hard consumption definitions that have been imposed...only to turn around shortly thereafter and perpetuate the same theatrics which everyone was railing against to begin with.
As a result, macroeconomics has been questioned as to its actual validity, by onlookers such as Arnold Kling. He is one of the rare birds who has had the patience to struggle with some of the more ridiculous aspects of the regulatory environment in housing. If he is convinced that nothing good can come of the mindset in Washington, I can understand why. In one recent post, Kling is in first class snark form, "Now is a Great Time to Subsidize the Housing Market!" And as Kevin Erdmann notes, today's rigged mortgage credit system enjoys wide partisan support.
Why would anyone want to dismantle the government and finance gravy train? Some readers, upon noting my production reform arguments for the first time must think, what...is she some kind of a nutcase? There are excellent reasons why these kinds of changes have not already taken place. After all, doing so indiscriminately would upset too many local "dynasties" in little communities around the U.S. which have few other viable sources of wealth. The fact this sticky marketplace remains so determined to divide income categories into haves and have nots, provides some explanation why a certain torch has not been passed...
However I digress, and need to return to some earlier thoughts in this post. In recent years I've started to read Hyman Minsky's "Stabilizing An Unstable Economy" more than once, only to set it aside. After finding that "Hall of Mirrors" (which I actually want to read) has been affected by this instability myth, it's time to finish Minsky's book whether I want to or not. It just seems incredibly basic to me that the only reason financial instability exists is the fact that no one wants to adjust their marketplace priors. However in a quick perusal of Minsky's suggested policy proposals, I found this quote:
The markets of a capitalist economy are not well suited to accommodate specialized, long lived, expensive capital assets.Then why for Pete's sake is this all that gets offered to lower income levels, over and over again, only to be pulled away when it proves to be too much? That's what I meant by passing the torch. The work that could transform macroeconomic bungling, needs to be taken on by individuals who are not economists but rather those tho seek to improve their destinies with the resources at their disposal.
Unfortunately, the torch that needs to be passed is structural, and I'm beginning to think that the word itself is shrouded in complete confusion. Where have I even found discussions about structural solutions, that suggest anything other than more government b.s. with tax rules? However, this is all that anyone with a career at stake dares to take on, without serious repercussions. Even the most anti-government factions run to government for cover, when it comes to protecting their own turf.
But something needs to be done. A lack of structural reform is what puts the "dismal" into economics, when it's just not necessarily so. Sticky markets and NIMBY factions are really to blame for the financial structures which are still treated as a ticking time bomb. Yet who imagines governments to have the incentive to generate structural solutions for their own citizens? No wonder so many individuals with a reputation to uphold, are not willing to touch real structural solutions with a ten foot pole. It needs to happen, just the same.