The Price of “Stuff” Screams, FIRE!
September 21, 2021
When Euphoria Fragilizes the
Financial System – Price Instability Shakes It Down!
In 1982, Hyman Minsky published Can It Happen Again?
referring to the Great Depression of 1929, bred primarily from an antecedent
factor—a mass psychology of financial euphoria. Back then, prior to the market crash,
euphoria bred a concomitant explosion of corporate debt accumulation that fueled
speculation and rising income inequality, which bred social and geopolitical
unrest (populist riots and World War II).
Minsky’s body of work on investor behavior provided the author’s insight into the crux
of investing. Investing is taking risk to hedge portfolio assets from the Price
Volatility of things mined, farmed, harvested from the wild, produced,
refined, and distributed as products for consumption (Stuff). Financial assets
become more volatile when the Price of Stuff goes wild! Minsky’s insights
led to the author’s creation of The Price Index Score (PIS, red line Figures
1-2) in Feb 2001.