bubble, bust, rinse, repeat.

Capital Controls Washing Out the Shampoo Economy by Jared Bernstein

OTE readers know I worry about the advent of the “shampoo economy:” bubble, bust, repeat. 

The last few business cycles both here and in other advanced economies have been characterized by this pattern. To be clear, economies are cyclical…that’s a given. But nowhere is it written—well, outside of Minsky—that the cycles have to be driven by debt driven asset (or investment, as in dot.com) bubbles that are particularly damaging when they inevitably burst. (And Minsky didn’t believe financial busts were inevitable. He believed the bubbles naturally grew out of diminished risk adversity as the business cycle heats up, but could be adequately regulated.)