This is not a Minsky moment. A Minsky moment would have taken place if the housing market had collapsed in early 2005 after the Fed had started raising rates.
This is much, much worse than Minsky moment. On top of the natural tendency toward speculation we have a new class of speculative derivatives that had been illegal for more than a century before Congress chose to legalize them. This is not a natural Minsky bubble, this a souped-up bubble in hyperdrive. On top of this souped up bubble, we have a financial sector that has been encouraged to increase its “efficiency” by maintaining minimal equity capital and relying on the government for a bailout whenever things go a little bit wrong. These are not Minsky’s natural speculators, these are speculators who fully expect to be permitted to charge their losses to a government credit card.
What we are going through is much more frightening than a Minsky moment. I think we’re going through a Minsky moment cubed.