Financial Street Telecommunications/Economics 2022-10-03 08:01. It can be understood as: when there are good days, investors dare to take risks; the longer the good days, the more risks the investors take until they take risks.

Minsky moment

Financial Street Telecommunications/Economics 022-10-03 08:01

included in the collection #Economics 43

/01/

Are we rational?

Minsky's moment represents the turning point between market prosperity and recession.

can be understood as: when there are good days, investors dare to take risks; the longer the good days, the more risks the investors take until they take risks. Step by step, investors will reach a critical point where the cash generated by their assets is no longer enough to pay for the debts they use to obtain the assets. Losses of speculative assets prompt lenders to recover their loans. "This leads to the collapse of asset value."

Hyman P. Minsky (September 23, 1919-October 24, 1996), an economist born in Chicago, Illinois, USA. He served as a professor of economics at the University of Washington, St. Louis. His research seeks to provide an understanding and explanation of the characteristics of financial crisis. He is sometimes described as a radical Keynesian , and his research is favored by Wall Street .

as the authority in contemporary research on financial crisis. Minsky's "financial instability hypothesis" is one of the classic theories in the financial field and is constantly discussed and improved. The "financial instability hypothesis" he insisted on believes that the nature of capitalism determines the instability of the financial system, and the financial crisis and its harm to economic operation are inevitable. He is the first economist to raise uncertainty, risks and how financial markets affect the economy. He taught at the University of Washington for 25 years and is an outstanding scholar at the Levi Institute of Economics at Bard College.

/02/

Why?

Take the real estate bubble as an example. Suppose we buy a big house that exceeds our own income level with a loan. When the salary income cannot be offset by the mortgage interest, our debts will be more and more. At this time, the income cannot be repaid, and we can only sell the house or default on the bank loan. When everyone does this, the prices of real estate and bank credit assets mortgaged with real estate will collapse. The "Minsky Moment" is coming.

economist Minsky believes that the unrestricted increase in debt leverage ratio will cause interest expenses to rise. The real economy needs more and more cash flow to repay interest, but profit growth has its upper limit. There is a moment when profit is not enough to repay debt interest. This moment is called the "Minsky Moment". At this time, enterprises and individuals begin to go bankrupt, asset prices plummet, triggering financial instability, and a financial crisis breaks out. Hyman Minsky believes that the nature of the capitalist economy chasing profits and the natural short-term behavior of financial capitalists have led to the instability of the capitalist financial industry, which cannot be eradicated. As long as there is a business cycle, the inherent instability of the financial industry will inevitably evolve into a financial crisis, and further pull the overall economy into the abyss of a great crisis.

In the rising stage of the business cycle, the internal crisis is overshadowed by economic growth, but once the economy enters a stagnation or even down cycle, the contradiction will rapidly intensify, and high-risk financial entities will sell their assets to repay their debts, which is the Minsky moment summarized by later scholars. Therefore, as a supporter of a typical Keynesian school, Minsky firmly believes in the role of the government's macro-control of . SUMMER SLIGHT HEATMinsky moment is divided into three stages.

st stage, investors bear a small amount of liabilities, and there is no problem in repaying their capital and interest expenses. This stage is called hedging financing.

The second phase, they expanded their financial scale so that they could only afford interest expenses. This phase is called speculative financing.

stage 3, namely Ponzi scheme , their debt level requires a rising price level to live safely, which can be called " Ponzi financing

htt ml4

Financial Street Telecommunication only provides learning and communication for

#50 people Independent economist # Executive President of the Chinese Doctoral Association President of Financial Street Telecommunications CECU China Enterprise Capital Alliance Chairman Du Meng, a famous independent economist, Ph.D. in economics, is known as one of China's four major financial geeks and a Ph.D. in Ghost Town. Party member of the Peking University branch of the Democratic League. Representative works: "Monetary", " Monetary Banking ", "Introduction to Investment Management", "Real Estate Development and Operation", "Ghost Town" and so on. He has been in charge of the daily operation and management of the group headquarters and listed companies, and has the management and control of the development area of ​​tens of millions of square meters of investment areas and subsidiaries. He has a background of the main person in charge of domestic and foreign listed companies, and has dual work experience in capital operation and real estate investment and development. He is a representative figure of the academic and practical faction of the financial and real estate industry; He has served as an executive of corporates with different backgrounds such as military enterprises, state-owned enterprises, school-enterprises, and listed groups.

China Doctoral Association Financial Street Telecom Henan

Wang Xinhua/Editor

Financial Street Telecom is the earliest portal website in the financial industry invested and founded by the Chinese Doctoral Association entrepreneurs. China's leading financial information and business information provider, pioneering the "real-time" model of financial information and business information, pushing important information in seconds, providing users with information, data, market conditions, research and community services, 7*24 hours a year-round uninterrupted

Business Finance International Perspective Focus on the pulse of the business economy Explore the direction of industrial development

html ml4

Chairman of Financial Street Telecom Henan CECU China Enterprise Capital Alliance Huaqi Entrepreneurs (Central Yuan) Club Editor