The background to the analysis, and a model of speculation, credit ex-
pansion, financial distress at the peak, and then crisis that ends in a panic
and crash is presented in Chapter 2. The model follows the early classi-
cal ideas of ‘overtrading’ followed by ‘revulsion’ and ‘discredit’—musty
terms used by earlier generations of economists including Adam Smith,
John Stuart Mill, Knut Wicksell, and Irving Fisher. The same concepts
were developed by the late Hyman Minsky, who argued that the finan-
cial system is unstable, fragile, and prone to crisis. The Minsky model
has great explanatory power for earlier crises in the United States and
in Western Europe, for the asset price bubbles in Japan in the second
half of the 1980s and in Thailand and Malaysia and the other countries
in Southeast Asia in the mid-1990s, and for the bubble in U.S. stocks,
especially those traded on the NASDAQ, at the end of the 1990s.
The mania phase of the economic expansion is the subject of
Chapter 3. The central issue is whether speculation can be destabilizing
as well as stabilizing—in other words, whether markets are always ratio-
nal. The nature of the outside, exogenous shock that triggers the mania is
examined in different historical settings including the onset and the end
of a war, a series of good harvests and a series of bad harvests, the open-
ing of new markets and of new sources of supply and the development of
different innovations—the railroad, electricity, and e-mail. A particular
recent form of displacement that shocks the system has been finan-
cial liberalization or deregulation in Japan, the Scandinavian countries,
some of the Asian countries, Mexico, and Russia. Deregulation has led to
monetary expansion, foreign borrowing, and speculative investment.4
Investors have speculated in commodity exports, commodity imports,
agricultural land at home and abroad, urban building sites, railroads, new
banks, discount houses, stocks, bonds (both foreign and domestic), glam-
our stocks, conglomerates, condominiums, shopping centers and office
buildings. Moderate excesses burn themselves out without damage to
the economy although individual investors encounter large losses. One
question is whether the euphoria of the economic upswing endangers
financial stability only if it involves at least two or more objects of specu-
lation, a bad harvest, say, along with a railroad mania or an orgy of land
speculation, or a bubble in real estate and in stocks at the same time.
The monetary dimensions of both manias and panics are analyzed in
Chapter 4. The occasions when a boom or a panic has been triggered
by a monetary event—a recoinage, a discovery of precious metals, a
change in the ratio of the prices of gold and silver under bimetallism,
an unexpected success of some flotation of a stock or bond, a sharp
reduction in interest rates as a result of a massive debt conversion, or
a rapid expansion of the monetary base—are noted. A sharp increase
in interest rates may also cause trouble through disintermediation, as
depositors flee banks and thrift institutions; the long-term securities still
owned by these institutions fall in price. Innovations in finance, as in
productive processes, can shock the system and lead to overinvestment
in some types of financial services.5
The difficulty of managing the monetary mechanism to avoid ma-
nias and bubbles is stressed in this edition. Money is a public good but
monetary arrangements can be exploited by private parties. Banking,
moreover, is difficult to regulate. The current generation of monetarists
insists that many, perhaps most, of the cyclical difficulties of the
past have resulted from mismanagement of the monetary mechanism.
Such mistakes were frequent and serious. The argument advanced in
Chapter 4, however, is that even when the supply of money was nearly
adjusted to the demands of an economy the monetary mechanism did
not stay right for very long. When government produces one quantity
of the public good, money, the public may proceed to produce many
close substitutes for money, just as lawyers find new loopholes in tax
laws about as fast as legislation closes up older loopholes. The evolution
of money from coins to bank notes, bills of exchange, bank deposits and
finance paper illustrates the point. The Currency School might be right
about the need for a fixed supply of money, but it is wrong to believe
that the money supply could be fixed forever.
The emphasis in Chapter 5 is on the domestic aspects of the crisis stage.
One question is whether manias can be halted by official warning—
moral suasion or jawboning. The evidence suggests that they cannot, or
at least that many crises followed warnings that were intended to head
them off. One widely noted remark was that of Alan Greenspan, chair-
man of the Federal Reserve Board, who stated on December 6, 1996, that
he thought that the U.S. stock market was irrationally exuberant. The
Dow Jones industrial average was 6,600; subsequently the Dow peaked
at 11,700. The NASDAQ had been at 1,300 at the time of the Greenspan
remark and peaked at more than 5,000 four years later. A similar warning
had been issued in February 1929 by Paul M. Warburg, a private banker
who was one of the fathers of the Federal Reserve system, without slow-
ing for long the stock market’s upward climb. The nature of the event
that ultimately produces a turning point is discussed: some bankruptcy,
defalcation or troubled area revealed or rumored, a sharp rise in the
central bank discount rate to halt the hemorrhage of cash into domestic
circulation or abroad. And then there is the interaction of falling
prices—the crash—and its impact on the liquidity in the economy.
Domestic propagation of the mania and then the panic is the subject
of Chapter 6. The inference from history is that a boom in one market
spills over into other markets. ‘A housing boom in Houston is an oil
boom in drag.’ Thus a financial crisis may be more serious if two or more
assets are the subject of speculation. When and if a crash comes, the
banking system may seize and banks may ration credit to reduce the
likelihood of large loan losses even if the money supply is unchanged;
indeed the money supply may be increasing. The connections between
price changes in the stock and commodities markets were especially
strong in New York in 1921 and the late 1920s, and those linking stocks
and real estate were strong in the late 1980s in Japan and in Norway,
Sweden and Finland.
Комментариев нет:
Отправить комментарий