The Hill: Is the Fed Ignoring Signs of Another Financial Collapse?

Article by Desmond Lachman in The Hill

Hyman Minsky, the late Washington University credit cycle expert, must be rolling in his grave. At a time when there are the clearest of signs that the credit cycle has turned, the Federal Reserve is sticking to its mantra of high interest rates for longer in order to regain inflation control. By so doing, the Fed risks inviting a financial system crisis next year that could trigger a meaningful economic recession.

Minsky taught that a prolonged period of easy money and financial market stability sets up the conditions for pronounced financial market instability.

By this he meant that as economic confidence rises and asset prices soar in a low interest rate world, the financial system tends to make increasingly risky loans on the assumption that ......

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