America’s Minsky Moment Approaches

Commentary Named after American economist Hyman Minsky, the idea behind a Minsky moment is that a financial markets crisis (especially in credit markets) is caused by a sudden and systemic collapse in asset prices, usually after a sustained period of speculative investment, excessive borrowing, and widespread financial risk taking. In other words, it’s the moment when the music stops playing, investors stop buying, and the Ponzi game ends abruptly. It’s a hard crash. America may be on the brink of its Minsky moment. This process, which moves from slowly, slowly, to suddenly and now, goes back decades. The confrontation with reality that was required to put America’s economic house back in order after the global financial crisis of 2008–09 was deferred to a later date by politicians, central bankers, and government officials alike, presumably when they would no longer be around....