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Kocic On Minsky Moments, 2008 And ‘Unprecedented Outliers’
Jerome Powell and the Fed are staring warily at a prospective "damned if they do, damned if they don't" scenario.
Easing policy now to short circuit stress in the banking sector risks seeing inflation re-accelerate later -- a scenario that would demand the resumption of rate hikes.
Ongoing tightening now aimed at "finishing the job" on inflation risks exacerbating stress in the banking sector -- a scenario that could lead to a recession later, which would demand rate cuts.
"In the new context
“strange attractor dynamics”. Chaos Theory! Now, how to get the flux back into its containment space!?
The two-tailed chart in the post is a classic representation of a situation first dealt with by French Mathematician Rene Thom in his work on Catastrophe Theory. This chart is representative of what Thom called the Butterfly Catastrophe (not to be confused with any part of Chaos Theory’s so-called butterfly effect). What Thom showed was that during a circumstance where a distribution of outcomes is split in two by an exogenous event (called the splitting factor) the two tails that are produced will quickly resolve in the one with the most support. Remembering the public reactions to the Vietnam war, the split in public opinion about the war, slowly at first and then very quickly shifted to the opposition side, nearly demolishing all viable support.