A resilient economic climate is crucial to a powerful global economy — the subject of this conference. I would add a well-functioning financial system is crucial to long-term interpersonal, political, and geopolitical stability. Importantly, a well-functioning finance would have mechanisms that promote adjustment and self-correction. This is fundamental to market-based systems. I would claim that this is a basic idea of sound money and finance also. Sound finance would neither suppress market volatility nor work to repeal business cycles – but would instead have inherent characteristics that counteract protracted market and economic excess. To begin with, I question whether a so-called “resilient economic climate” is always a sound one.

As we’ve witnessed, obtrusive authorities measures can dictate “resilience” – in conditions of extended sanguine backdrops free from volatility, risk aversion and crisis. Yet this type of resilience fosters excesses that can end with a financial and financial crash inevitably. A decade ago most would have argued that the machine at that time was resilient forcefully.

Chair Yellen argues in her Jackson Hole paper that myriad regulatory changes have created a much more resilient economic climate and overall economy. Her long speech shows a laundry set of measures put in place since the problems. Much to my liking, 22 footnotes include referrals to even Minsky, Charles, and Kindleberger Mackay.

Total home loan Credit acquired doubled in less than seven years. Indicators of extra were all over the place. Inflation psychology had taken deep root throughout the nation’s housing markets, with California housing prices spiraling ever higher. The inflationary backdrop ensured a proliferation of new mortgage products that kept the game going with low monthly premiums for prime and subprime borrower alike. As a person who chronicled the home loan financing Bubble in its entirety on a weekly basis, it was all too conspicuous.

This was the most crucial market for finance (mortgage loans) and the real economy (casing and home-related) – that was dominated by the thinly capitalized GSE using their implied federal backing. It had been a sophisticated financial scheme. Measures going back to the Greenspan era (bolstered by “helicopter Ben” musings) convinced the markets that the Fed would respond aggressively to avert market turmoil.

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Surely, Washington could not allow a casing bust. It would simply be too devastating. In an irony of recent Bubbles, the greater they inflate the more convinced markets become that officials will not permit a bust. What might explain Bernanke’s indifference to unprecedented housing and mortgage risks? Well, his policy doctrine was at the heart of the problem: Dr. Bernanke has been a leading proponent for using home loan finance to reflate the machine following the bursting of the “tech” Bubble. Yellen: “Repeating a familiar pattern, the ‘madness of crowds’ had contributed to a bubble, in which investors and households expected rapid appreciation internal prices.

The long amount of economic stability beginning in the 1980s acquired resulted in complacency about potential risks, and the buildup of risk was not acknowledged broadly. …A self-reinforcing loop developed, …as investors sought ways to gain exposure to the rising prices of assets associated with housing and the financial sector.

As a result, securitization and the development of complicated derivatives products distributed risk across organizations in ways that were opaque and eventually destabilizing. As I’ve written in the past, I am aware why officials did what they did in the autumn of 2008 back. Clearly, they were not about to sit back watching the system collapse. They would not settle for mere stabilization also. Their epic mistake was to push forward with aggressive reflationary policies – a global monetary inflation regime to that they remain entrapped nine years later.