James Montier at GMO about “slow burning Minsky moments”
Back in the 1990s, Pimco’s Paul McCulley first dubbed the point where the stability morphs into financial carnage for a Minsky moment, and the term took off after 2007-08, for obvious reasons. Suddenness is kinda central to the whole idea, so Montier’s concept of “slow burning Minsky moments” is a bit jarring.
The argument is that the size and extent of the global private sector debt build-up has bred economic fragility that leads to a series of predictable mini-Minskys — or “grey rhinos” as some call them: large, obvious scenarios that are easily ignored until they suddenly charge you.
Surprisingly, he also seems to brush off cash, despite noting that it is the “oldest, easiest and perhaps most underrated form of tail risk hedge”. And at a time when cash actually has a chunky positive real return (at least in the US).
Robin Wigglesworth FT 14 July 2023
https://www.ft.com/content/dbc2ece4-6289-4c99-8a52-0d4791629597
You can read the full thing yourself here.
The mere mention of a “Minsky moment” is enough to send shudders through policy makers
In 1998, following the bursting of asset bubbles in Asia, Russia defaulted on its domestic debt and devalued the ruble.
(It was during that crisis that Paul McCulley, then an economist at Pacific Investment Management Co., coined the term “Minsky moment.”)
https://englundmacro.blogspot.com/2023/03/the-mere-mention-of-minsky-moment-is.html
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