Macroeconomic Theory and its Failings
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Macroeconomic Theory and its Failings Alternative Perspectives on the Global Financial Crisis

Alternative Perspectives on the Global Financial Crisis

Edited by Steven Kates

This innovative book focuses on the current global financial crisis and the inadequacies of the economic theories being used to guide policy. In so doing, it tackles the economic theories that have been used firstly to understand its causes and thereafter to contain the damage it has brought.
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Chapter 15: Minsky, the Global Money-Manager Crisis, and the Return of Big Government

L. Randall Wray

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15. Minsky, the global moneymanager crisis, and the return of big government L. Randall Wray1 MONEY-MANAGER CAPITALISM AND THE CRISIS As of spring 2009, the world faces the worst economic crisis since the 1930s. Even some mainstream economists have labeled it a depression. References to Keynesian theory and policy are now commonplace, with only a few fringe economists and policy-makers arguing against massive government spending to cushion the collapse, and reregulation to prevent future crises. A variety of explanations has been proffered for the causes of the crisis: lax regulation and oversight, rising inequality that encouraged households to borrow to support spending, greed and irrational exuberance, and excessive global liquidity – spurred by easy money policy in the USA and by US current account deficits that flooded the world with too many dollars. Unfortunately, these do not recognize the systemic nature of the global crisis, even if some of them contain an element of truth. Hyman Minsky’s work has enjoyed unprecedented interest, with many calling this the ‘Minsky moment’ or ‘Minsky crisis’ (Cassidy, 2008; Chancellor, 2007; McCulley, 2007; Whalen, 2007). However, I have argued that this is not a ‘moment’ that can be traced to recent developments (Wray, 2008a). Rather, as Minsky argued for nearly 50 years, what we have seen is a slow transformation of the global financial system toward what Minsky called ‘money-manager capitalism’. Hence I argue that this is a crisis of money-manager capitalism. While I shall focus on the USA (where the current crisis was triggered), money-manager...

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