Market Concentration

 

4. Many things can be said about the U.S. economy but the ordinary tendency

of markets to concentrate is important to appreciate. Market's concentrate

along the following three lines:

1. Wealth and income are concentrated in a small percentage of households.

2. Markets select for ever larger firms who eventually come to dominate their market sector.

3. Markets concentrate people, wealth, and productive enterprise in urban areas.

 

5. We now visit the financial system of institutions that are engaged in money and debt creation

and present Minsky's model of an asset speculation cycle driven along by an ever more reckless

approach to lending by banks.

 

6. The observed evolution of bank lending produces an increasingly fragile financial system.

Why is that? Minsky argued that periods of financial stability lull normally sober regulators

and bankers into a false sense of security. Slowly over time, banks invent new ways to sell money

and insure against risk. At the same time, financial businesses lobby government to lessen regulations

put in place due to prior financial crises. Eventually, the financial industry ignites an assetspeculation bubble.

While the speculative bubble grows profits are made which are then pumped back

into the system feeding the further growth of the asset bubble. A mass psychology takes hold in which

speculators and asset traders assume tomorrow will be just like yesterday. An unsustainable and dangerous

economic process, an ever increasing growth in asset prices and profits, is believed to be the normal

condition of the economy.