“the duration will be shorter-this may hold true even for a housing market”
I have given this question considerable (previous) thought as my investing strategy is to anticipate economic (micro and macro) trends and inflection points, positioning investments ahead of those changes.
I agree with half your argument: Minsky Moments unfold at faster rates.
I believe Minsky Moments now involve more extreme economic swings away from steady-state, with more rapid onset, and may occur more frequently, but I figure markets take just as long (or longer) to be driven back to a safe equilibrium . The theory obviously is that technology has increased the transaction “speed” of money and information and vastly increased interconnection (interdependency) of global financial markets.
Obviously, volumes have been written on this very subject (comparing market instability vs. efficient markets theory) by quite intelligent and well-respected authors, such as Soros.
Also, many have argued that technology has brought certain new complex financial instruments and activity outside of the control of the Fed that inadvertently act to expand or constrict the money supply, or create instability. So the Fed’s toolbox is now relatively weaker to reign in these extreme swings.
Let’s revisit this say three years from now and see if your theory has held true for the mortgage meltdown crisis (and associated recession) being short-lived!
It seems the “Minsky Moment” economic theory of instability is gaining supporters, at least according to the WSJ:
