Re: WSJ discovers Minsky
On Aug 26, 2007, at 1:42 AM, bhandari@berkeley.edu wrote:
However good his dance steps, can’t possibly see how Minsky’s
theory can be understood as Marxist. No real impediments in the real sector of the economy? No wonder Meyer and others can enthuse about his theory.
Doug, you don’t agree with that yourself, given your insistence that the Fed responds to a real tightness in the labor market, though Fed action
does not seem as mechanical as that either.
You, Crotty, and the rest are right that Minsky ignores the real
sector, as do a lot of PKs. But a lot of Marxists ignore the
financial sector. It would be hard to explain the U.S. economy of the
last 25 years without paying a lot of attention to what went on in
finance. For someone like Shaikh, causality only flows from the real
to the financial and never vice versa.
Not sure what you mean by the Fed’s not being as mechanical as making
policy on the unemployment rate. Of course that’s not the only thing,
but it’s an important indicator of the balance of class relations.
They rarely reverse a tightening cycle by loosening until the
unemployment rate has risen by 0.3 point or more. That hasn’t
happened yet, though it’s close. I heard Bernanke at the CFR before
he became Fed chair. He said that sagging productivity is a late
cycle phenom, and it would incline the Fed to be tighter than it
otherwise would be. So I think they’re not enthusiastic about having
to ease for financial reasons, so they’re being as coy & grudging as
possible. If it looks like things are going haywire, they will ease
of course.
Doug