Minsky and me

Regrettably, it is (the) reassuring, consensus driven approach to [economic] forecasting that is part of what went wrong. The flaw was brilliantly identified many years ago by the post-Keynsian economist Hyman Minsky, who observed that benign real economy circumstances invite increasingly aggressive financial market wagers.

The longer, these "Goldilocks" conditions persist – not too hot, not too cold – the more innovative the financial markets become in attempting to leverage them for gain. Extended periods of economic calm thus result in increasing financial system fragility.

Thus Jeremy Warner in the Telegraph.

Now, my reader knows I am not one to blame Gordon Brown for everything, automatically, by some unthinking knee-jerk reflex. No, mine is more a sort of thinking knee-jerk reflex.

Yes, dear reader, I blame the Great Ruiner for our present plight. And I am vindicated by no less an eminence than Minsky.

Gordon Brown told the markets what to believe. Gordon Brown insisted, year in and year out, that he had ended boom and bust once and for all. Gordon Brown bragged endlessly that his steady, expert hand, the hand on the tiller of Britain's greatest 20th century Chancellor, the Saviour of the world, had finally steered the United Kingdom's ship of state into permanently calm economic waters. By his vanity and his spin, Gordon Brown created the very condiitions of hazard about which Minsky warned.

And before my Socialist heckler starts chanting 'Lehman Brothers', here is Warner on that point:

Lehman's was much more of a symptom than a cause of the crisis.

Gordon Brown's mad arrogance convinced him that he had beaten the system, beaten the market, and outsmarted every economist since King Solomon's Keeper of the Gold of Egypt. And just look at the mad bastard's qualifications: a PhD in the history of Socialism in Scotland. Such useful grounding for one who wants to command one of the Western world's mighty capitalist economies, eh? Obviously, he thought that was enough -- that plus his innate genius -- and didn't bother to mug up on Minsky. Stupid, arrogant, soon-to-be-on-the-scrap-heap bastard. Get yer coat, Brown - yer not stopping.