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The Minsky moment of the Swedish housing bubble

"And fragility has increased. A ‘Minsky moment’ can change the relation between fundamentals (incomes, the price level, interest rates, demographics, taxes) and the amount which households are allowed to lend overnight …

When, after such a moment, house price decreases lower the perceived collateral value of other houses this can easily lead to a deflationary house price spiral which will have larger consequences when mortgage debt levels of households are higher and more households have mortgage debt. The Netherlands post Lehman are a perfect example … Dutch economists had an excuse. They had probably not yet read Minsky while the Reinhart and Rogoff  ’this time is different’ book, which spells out the inherent historical instability of our monetary system, still had to appear. But Svensson has not. And surely not as such events have happened before and even as recently as around 1990, in Sweden."

Real-World Economics Review Blog via Lars P Syll

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