Blog: This year's Debt Limit Crisis is different, to markets.
Will this debt limit crisis lead to a bout of "creative destruction" in the Austrian economics sense?
The current market's ho-hum reaction to the debt ceiling stand-off is different than the past. But that seems to largely be a “We’ve seen this before, and it won’t happen” feeling. While explaining the market’s recent behavior, the reaction as the default event comes closer may not be as sanguine. The major difference this time around is financial leverage and the possibility of a Minsky Moment.
Previous debt ceiling standoffs occurred in 2011, 2013 and to a smaller extend 2021. Below is a chart of the Financial Instability “Minsky” Regime over time:
This post is for subscribers only
Already have an account? Sign in.