Minsky moment (fg)

I found an in-depth analysis on current macro-finance developments from a Minskian perspective. Although Columbia Professor C. Calomiris does not provide a description of the sources of recent turmoils, he tries to link aggregate finance and debt data to the events of Minsky's financial instability hypothesis. Especially, he tries to give an answer whether the US economy reached a Minsky moment, i.e. the reversal to shrinking asset prices, detoriation of balance sheets and the evolution of a credit crunch. He concludes that

• Housing prices may not be falling by as much as some economists say they are
• Although the inventory of homes for sale has risen, housing construction activity has fallen substantially
• The shock to the availability of credit has been concentrated primarily in securitisations rather than in credit markets defined more broadly (for example, in asset-backed commercial paper but not generally in the commercial paper market).
• Aggregate financial market indicators improved substantially in September and subsequently. Stock prices have recovered, treasury yields rose in September as the flight to quality subsided, and bond credit spreads have fallen relative to their levels during the flight to quality
• Nonfinancial firms are highly liquid and not overleveraged. Thus, many firms have the capacity to invest using their own resources, even if bank credit supply were to contract.
• Financial institutions’ balance sheets remain strong, for the most part, even under reasonable worst-case scenarios about financial sector losses associated with the subprime fallout
• Banks hold much more diversified portfolios today than they used to

To him, we have not (yet) arrived at a Minsky moment.