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The Intellectual Origins of the Global Financial Crisis$
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Roger Berkowitz and Taun N. Toay

Print publication date: 2012

Print ISBN-13: 9780823249602

Published to Fordham Scholarship Online: January 2013

DOI: 10.5422/fordham/9780823249602.001.0001

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Managed Money, the “Great Recession,” and Beyond

Managed Money, the “Great Recession,” and Beyond

Chapter:
(p.123) Twelve Managed Money, the “Great Recession,” and Beyond
Source:
The Intellectual Origins of the Global Financial Crisis
Author(s):

Dimitri B. Papadimitriou

Publisher:
Fordham University Press
DOI:10.5422/fordham/9780823249602.003.0013

This chapter expands on the ideas of the late Levy Institute scholar, Hyman Minsky, to show how the financial crisis is attributed to flaws in the constitution of the current financial structure. Papadimitriou traces the emergence of “money manager capitalism,” which characterizes our current economy with its higher level of uncertainty due to the dominant role played by mutual funds, high leverage and pension funds hungry for higher returns that systematically underprice risk. This system was prone to a “Minsky moment,” the rapid debt deflation that we witnessed in 2008. After highlighting the history and shortcoming of this iteration of capitalism, the author concludes that austerity measures are the wrong medicine for the current situation. What is needed is a return to Keynesianism in the form of reinvigorating fiscal expansion to combat anemic growth and high unemployment.

Keywords:   The Great Recession, John Maynard Keynes, Friedrich Hayek, Hyman Minsky, The Great Depression, Collateralized debt obligations, Monetarism, Alan Greenspan, FDIC

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