Desmond Lachman writes about the regularity of credit cycles:

It might seem cliché to say that those who do not learn from history are doomed to repeat it, but the adage is particularly pertinent to today’s Federal Reserve. Seeming to have learned little from the Lehman Brothers bankruptcy in September 2008, the Fed is now tightening monetary policy at a rapid pace, at a time when the world is as indebted as it has ever been. It is also doing so when clear signs are emerging that major debtors are having trouble servicing their debts, and equity bubbles are bursting.
The late American economist Hyman Minsky taught that there was a regularity to credit cycles that always ends in tears. Many years of financial stability and low interest rates induce investors to take on excessive risk, lenders to make increasingly risky loans, and borrowers to take on too much leverage. That sets the stage and, eventually, euphoria gives way to panic when interest rates are increased or when the economy succumbs to recession, leaving debtors to service their debt mountains.

Read the whole thing here.