Heard off the Street: In Praise of Hyman P. Minsky

New York: Not all economists have sold their quantitative souls for Wall Street lucre. Here in the wonderful Ford Foundation building near the United Nations (it’s got a jungle in the middle), the Levy Economics Institute of Bard College hosts the 20th annual Hyman P. Minsky Conference.

"Bart Naylor" "Financial policy"

Some snipits from speeches and hallway conversations.

Andrew Sheng, chief advisor to the China Banking Regulatory Commission: In capitalism, it’s man v. man. And in socialism, it’s the other way around.  Also:  China’s senior leaders are all engineers. (Left  unsaid publicly but voiced in an after-speech conversation: All senior leaders in America are financial experts. And in a crisis, one protects one’s own.)

Jan Kregel, senior scholar, Levy Institute and professor, Tallinin Technical University (alas, no exotic Estonian accent): Alt A lending is

perfect for the likes of Steven Spielberg, because he has no job,  no steady income, and no interest in a $400,000 house. For most everyone else, it’s a disaster.

Mark Primoff, communications director of Bard: We’ve been famously lampooned as the “best dinner party school.”

L. Randall Wray, professor at University of Missouri-Kansas City: What we’ve just gone through is “bubbleonia.”  Also: The debt crisis is a contrived debate where Democrats have agreed to agree that it’s a problem (it’s not), so they can look good to seniors when they protect Social Security from cuts by heartless Republicans.

Robert  Prasch, economics professor, Middlebury: Wall Street executives like to tell us that no one could foresee the housing bubble as it was expanding. But if home prices are rising 12-14 percent a year and average incomes that will pay the mortgages are rising 2 percent a year, this process cannot be sustained.

Thierry Warin, Cirano Fellow, Center for Interuniversity Research and Analysis of Organizations,  professor Ecole Polytechnique de Montreal. When the financial markets quote Socrates  “All I know is that I know nothing” – without knowing by definition it was Socrates – then we are in trouble.

Gary Gensler, chairman, U.S. Commodity Futures Trading Commission on what he’d said to the CEO of Proctor & Gamble, which is one of the largest employers in Speaker Boehner’s congressional district, as to why his agency should be funded: Because the company needs honest markets where it can purchase needed hedges for the company’s many commodity transactions.

Martin Mayer, 83, Brookings Institute, eminence literaire of finance history, on being complimented for helping the Senate Banking Committee staff of the 1980s understand banking:  I am humbled.

Our own Lori Wallach, director, Global Trade Watch, Public Citizen: About the only commodity over which Americans can establish regulation in the service sector without conflicting with deregulatory requirements in international “trade” agreements: Onions. “I kid you not: onions.”

Paul McCulley, former senior officer, Pimco, son of an Iowa minister:  There is a moment when investors who have borrowed too much are forced to sell good assets to pay back their loans.  It is the point investors begin having cash flow problems due to the spiraling debt incurred financing speculative investments. At this point, a major sell off begins because no counterparty can be found to bid at the high asking prices previously quoted, leading to a sudden and precipitous collapse. That is a Minsky moment.

And the last word from Mr Hyman Minsky himself, departed  this world in 1996, but clearly very present in the sharp minds of these progressive economists. This Washington University post-Keynesian icon could reduce entire textbooks to crystal: Stability is destabilizing. Also: instability is an inherent and inescapable flaw of capitalism. And finally:  there’s nothing wrong with macroeconomics that another depression won’t cure.