----------------------------------------
Date: Sun, 12 Dec 2010 12:35:08 +0100
Subject: the erudite scholar on the not so clearly Minskian moment in 2007
From: bellofio@unibg.it
To: gerald_a_levy@msn.com
CC: riccardo.bellofiore@unibg.it
Dear Jerry,
I saw these exchanges while going to Paris, and now I am answering from an
hotel. May you please forward this? There is an ironic twist - though I
doubt people on OPE-L, except you, is very keen on irony.
------
I met my friend, the erudite scholar Riccardo, on a train, while he was
going to Paris to see an old friend of him. I told him about the questions
raised on OPE-L. This is a very preliminary answer, I am not sure I
understood a lot.
Yes, in 2007 he remembers he presented a paper in London, HM 2007, Rhe
paper existed in Italian since September 2007, so at the time there were
> only the slides. The English version is of a couple of months later, and
it has been presented in a Post-Keynesian [or Post Keynesian?] conference
in Dijon, organised by Louis-Philippe Rochon and Claude Gnos, if he
remebers well in December that year, together with a preceding one (also
presented in London HM, but in 2006, the Italian version in this case is
2005). Both should have been published long ago in the Proceedings
(Elgar), but unfortunately there has been awful delays, so they will be
published (hopefully!) in 2011 - much after a lot of other contributions
with Halevi have already appeared.
Yes, indeed. Riccardo remembers well that he said that the crisis then was
NOT a Minsky moment in the STRICT sense. It seem that that erudite scholar
is the editor of a 2 volumes on Minsky's legacy (the intro has been
written entirely by him, except 3 pages written by Piero Ferri). So, when
he speaks of Minsky he loves to speak of MINSKY. Riccardo was not missing
the overextension of debt. Quite the contrary. But it was NOT Minsky's
kind of debt, if taken literally. It was (together with the financial
sector leverage) mainly consumer's debt, not firms' leverage. This does
not means that that debt can be accomodated within Minsky's vision, of
course. As he said already in 2007. And of course debt deflation and
deleverage etc. comes from this as well. The erudite scholar rememebres he
spoke of a triad traumatized workers, indebted consumers, manic-DEPRESSIVE
savers. What, he adds, do yu think depressive stands for, if not consumers
being forced to reduce their leverage abruptly? And then of course there
is the boom of firms debt, and debt deleverage for them and the banks etc.
He didn't change his opinion, actually. It was all there in 2007. Much
before the Lehman Brothers episode. Riccardo made polemics in Italy trying
to explain that the hope of delinking of Germany, Europe and the Italy
from the US fall was a myth. Early 2008. He thinks he was rigth.
So, to say that "In Minsky's own presentation, the
moment occurred at the end of a boom fueling excess debt and speculation, it
was a cyclical (recurrent) phenomenon." is OK, but it misses the KIND OF
EXCESS DEBT. It is not the traditional OWN Minsky's version.
BTW, the paper presented "a year later" in Toronot:
was actually the written version of HM 2007, translation of Italian paper
September 2007! May be only some narrative of the crisis has been updated.
He also said at the time that the crisis, which had to be a VERY serious
crisis [the erudite scholar, as every radical, actually presented the same
gloomy outlook in rivista del manifesto in Italian, on-line, about the
serious published March: just in time! and in London 2007 he already
thought that this crisis would have been much worse) should be understood
exactly along Minsky's and Marx's vision that is, starting not from
distributon and demand (as usually Keynesians and Sraffians do) but from
finance and production. And he said we should also start asking the
question which were the PECULIAR contradictions of the DYNAMIC and
POLITICAL special form of capitalism which went into crisis.
It is here that the 2005 (2006) paper becomes relevant. There, before the
crisis, that capitalism was depicted as a paradoxical FINANCIAL and
PRIVATIZED Keynesianism. This was said in 2007 HM conference and went
around, also quoted (favourably) by Chris Harman - so it had some
diffusion in English. Now the label "privatized Keynesianism" has gained
success, being independently introduced AFTER the crisis by Colin Crouch
(who, very nicely, when he realized that the term was utilized before in a
similar sense by the erudite scholar together with Halevi wrote him a kind
letter to the erudite, wishing to insert the reference, and assuring it
was not a case of Bell vs Marconi). The erudite scholar also thinks that
it is important to read Toporowski's analysis of capital asset inflation
to understand the limits of the original Minsky's reading, and the recent
shape of capitalism.
At HM 2007 he also reminded Minsky's own position, that IT canNOT happen
again. And indeed, this was proved right, up to a point. This crisis is
NOT like the Great Crash, and has been turned into a Great Recession. Of
course, humans are stupid, and they are building a way to try to repeat
IT. But the erudite scholar here sides with Minsky, who was skeptical on
this issue.
BTW, he thinks that the same Minsky would be the first who would have
revisited his Financial Instablity Hypothesis - and indeed his after 1986
papers on money manager capitalism are an inspiration for Riccardo. Wray
criticized the expression Minsky's MOMENT, speaking not of episode but of
Minsky's half century. Kregel has a wonderful paper on margins of safety
explaining it was not a Minsky moment. Davidson is even more critical. I
doubt we can say for them, as for the same erudite scholar, they
understated the import of the crisis.
Riccardo will send to Jerry a list of what has been published and what
will be published by him and Halevi in the last few years (a paper on the
European crisis is just printed in the 2011 Socialist Register). However,
he also advices those who are interested to go to his webpage at his
university, where there are many videos on Minsky's moment, Minsky's
meltdown, etc. Some are in Italian, but some are in Englsih (there is also
a ebate with Moseley, seminars by Toporowski and Desai, etc.).
BTW, Riccardo says he does not understand what it means "erudite scholar".
He is not erudite: he knows too well his ignorance (that's why when he
uses words, he tries to be faithful to them, and Minsky's moment must be
MINSKY's moment). And he thinks he is a scholar according to the Italian
meaning of SCOLARO, which is rather a young student having a lot to learn.
He is not young anymore, but for sure he has a lot to learn.
Comradely
rb
------
>
> Message: 1
> Date: Fri, 10 Dec 2010 10:18:10 +0100
> From: "Jurriaan Bendien"
> Subject: [OPE] Sraffa conference in Bergamo web page
> To: "Outline on Political Economy mailing list"
>
>
> You mean that erudite scholar Riccardo, who told us at the outbreak of the
>
> global financial crisis that "this was not a Minsky moment"?
>
> J.
>
> ------------------------------
>
> Message: 2
> Date: Fri, 10 Dec 2010 10:27:21 +0100
> From: Dave Zachariah
> Subject: Re: [OPE] Sraffa conference in Bergamo web page
> To: Outline on Political Economy mailing list
> Message-ID:
>
> Content-Type: text/plain; charset=UTF-8
>
> On 10 December 2010 10:18, Jurriaan Bendien
> wrote:
> > You mean that erudite scholar Riccardo, who told us at the outbreak of
> the
> > global financial crisis that "this was not a Minsky moment"?
>
> Where was this analysis written?
>
> //Dave Z
>
>
> ------------------------------
>
> Message: 3
> Date: Fri, 10 Dec 2010 13:37:41 +0100
> From: GERALD LEVY
> Subject: Re: [OPE] Sraffa conference in Bergamo web page
> To: Outline on Political Economy mailing list
> Message-ID:
> Content-Type: text/plain; charset="iso-8859-1"
>
>
> > You mean that erudite scholar Riccardo, who told us at the outbreak of
> the
> > global financial crisis that "this was not a Minsky moment"?
>
>
>
> Yes, Jurriaan, the organizer of the conference is Riccardo Bellofiore. As
> for him claiming that this is not a Minsky moment (which, according to you
> he said at the 1997 HM conference) you will also recall that you said "In
> a sense he was right".
>
> http://ricardo.ecn.wfu.edu/~cottrell/ope/archive/0812/0015.html
>
> I agree that Riccardo is indeed an erudite scholar - in the very best and
> most positive sense of the expression.
>
> In solidarity, Jerry
>
> ------------------------------
> Message: 3
> Date: Sat, 11 Dec 2010 15:06:00 +0100
> From: "Jurriaan Bendien"
> Subject: [OPE] Sraffa conference in Bergamo web page
> To: "Outline on Political Economy mailing list"
>
> Message-ID: <6979786CF23840D782BA14C9005EAA45@JurriaanshomePC>
> Content-Type: text/plain; format=flowed; charset="iso-8859-1";
> reply-type=original
>
> You are so right! Well, what I said in December 2008, was that December 2007
> had marked only the beginning of the US recession. In that sense, I said,
> Riccardo was correct. But in fact the slowdown inevitably triggerred a
> Minsky moment anyway, so I wrote "a sort of "Minsky moment" does seem to
> have arrived, though maybe not a "moment", but an "episode"." An avalanche
> of "deleveraging" subsequently occurred as investors frantically tried to
> reduce their liabilities and reschedule their debts.
>
> A "Minsky moment" occurs when investors, who borrowed capital at lower rates
> to obtain earnings at higher rates upon reinvestment, face a cashflow
> problem when yields drop, thus turn out to have overextended their
> liabilities, and therefore are forced to sell off even good-yield assets
> to
> repay their loans; that is what happened when the collapse of Lehman
> Brothers
> in 2008 fueled the panic). In Minsky's own presentation, the
> moment occurred at the end of a boom fueling excess debt and speculation, it
> was a cyclical (recurrent) phenomenon.
>
> I did not find Riccardo's analysis convincing at the time, because he failed
> to make much sense of the meaning and severity of the credit crunch, i.e.
> the overextension of debt. He seemed to miss the wood for the trees. He
> said
> plainly at the time that the current situation did not correspond to
> Minsky's idea. This, plus Fred Moseley's complete neglect of the working
> class in his analysis of the subprime crisis, disappointed me at the time,
> it seemed more like scholastic niceties.
>
> In a subsequent paper, however, a year later, Riccardo clarified his view
> that there was no structural (endogenous) reason for the leverage ratio to
> increase in the course of the boom (US non-financials were awash with
> cash);
> that, in the post-2003 recovery, investment activity in the productive
> sector had remained flat (not really true for US and EU); that Central
> bank
> policy had supported the growing debt bubble; and that there had not been a
> wage-price inflation spiral (
> http://www.laurentian.ca/NR/rdonlyres/D97CF7C5-06AA-4887-A8D2-0CB4216C6225/0/WP200904BellofioreHalevi.pdf
> )
> .
> The term "Minsky moment" was originally invented by the Pacific Investment
> Management Company (PIMCO) in 1998 for the Russian ruble crisis, when
> falling commodity prices sent the exchange rate of the ruble into a
> tailspin, in due course causing a collapse of the stocks, bond and money
> markets, and prompting a major restructuring of Russian debt (Paul
> McCulley
> said already bluntly in 2001 that "The objective of monetary policy must be
> to ease until capitalists regain their animal-spirited urge to act like
> capitalists, fleeing liquidity for the hope of capital gains... Debt
> deflation is a beast of burden that capitalism cannot bear alone."
> http://www.pimco.com/Pages/FF_01_2001.aspx ). Point was, that the Russian
> markets fairly quickly bounced back afterwards (world oil prices rose, and
> the Russian economy functioned to a large extent on the basis of
> counter-trade, not reliant on banks).
>
> J.
>
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Received on Sun Dec 12 06:57:20 2010
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