anonB on Nostr: According to Minsky, Ponzi Finance is characterized by inefficient debt accumulation ...
According to Minsky, Ponzi Finance is characterized by inefficient debt accumulation resulting in company bankruptcies, tightening credit standards, and eventually a sudden economic crash.
One way Ponzi Finance can be created is through a rapid rise in interest rates.
Companies that require short term financing and rolling over debt become unable to pay principle due to rapidly growing interest. Tightened lending standards (credit crunch) make it difficult for companies to get new financing and are forced to default. In the process companies fire sell assets, resulting in asset price collapse triggering issues with other companies and a viscous cycle crash.
The central banks think they are fighting inflation. They are actually forcing Ponzi Finance and driving the global economy towards a Minsky Moment.
One way Ponzi Finance can be created is through a rapid rise in interest rates.
Companies that require short term financing and rolling over debt become unable to pay principle due to rapidly growing interest. Tightened lending standards (credit crunch) make it difficult for companies to get new financing and are forced to default. In the process companies fire sell assets, resulting in asset price collapse triggering issues with other companies and a viscous cycle crash.
The central banks think they are fighting inflation. They are actually forcing Ponzi Finance and driving the global economy towards a Minsky Moment.