On Mar 18, 2008, at 8:23 PM, Mike Beggs quoted Minsky:
> "What we seem to have is a system that sustains instability even as it
> prevents the deep depressions of the past. Instead of a financial
> crisis
> and a deep depression being separated by decades, threats of crisis
> and
> deep depression occur every few years; instead of a realised deep
> depression, we now have chronic inflation..."
But we didn't have that for more than 20 years. The Fed was able both to keep inflation down and engage in regular bailouts. The disinflationary/deflationary effects came mainly from the real sector after Volcker left - weak labor and stronger product market competition. Most of the inflation came in asset prices. But after China stopped being a deflationary force and shifted towards pushing commodity prices higher - this is not the wage-driven inflation of the 1970s - that all changed. This is the first time I remember central bank credibility being an issue since the 1980s. Poor Bailout Ben has a full plate.
Doug