BOOM BUST BOOM: MINSKY AT THE MOVIES


New Economic Perspectives has the article BOOM BUST BOOM: MINSKY AT THE MOVIES by L. Randall Wray.

I highly recommend a movie to be released next year (that is, the year that begins next week). Terry Jones, of Monty Python fame, is one of the key developers of the film. It is on the Global Financial Crisis, but also provides a quick history of bubbles and crashes. It is highly entertaining and as good as any that I’ve seen on the crisis.

I’ll want to keep my eye on the movie’s web site to know when it will be released.

Terry Jones presents Boom Bust Boom, a unique look at why crashes keep happening combining live action with animation, puppetry, song and experts to explain economics to everyone.

The web site has a link to a booklet that inspired the movie,  Endogenous Instability : You Don’t Want To Think About It!  This is written by Theo Kocken, Professor of Risk Management at the VU University in Amsterdam. I haven’t had a chance to read it at this late hour, so I have made this blog post to make it easy for me to find it again.

Abstract

Financial Risk Management is strongly hindered by the conventional macro-economic vision of the world, assuming stabilising cyclical processes, that are once in a while temporarily taken out of equilibrium due to external shocks. Reality is much more hectic and has more similarities with debt-driven instability created from within the economy. This results in much more severe market crashes and deeper depressions than conventional theory teaches us. This is the theory of Endogenous Instability.

After a brief explanation of the theory of endogenous instability, already developed after the crisis years of the 1930s, an effort is made to use recent cognitive psychological insights to explain why this theory has difficulties to become mainstream and why – in the context of money and uncertainty – we tend not to learn lessons from history.

I will conclude with suggestions for education, research, financial regulation, governmental policy and risk management in order to curb the excesses of capitalism: Self-made destructive debt accumulation leading to endogenous instability.

 

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