So far, Minsky would probably approve

Bailouts and guarantees by central banks and governments around the world over the last 36 hours appear to be having the desired effect and stock markets seem to approve.

This commentary($) by George Magnus in the Financial Times suggests that Hyman Minsky would also approve of actions that have been taken since last weekend's G7 summit in Washington.

Bold moves by Gordon Brown in the U.K. to recapitalize banks and a dollar tsunami unleashed on the world by Fed chief Ben Bernanke have been two of the key elements of the latest market interventions.

Now comes word that the U.S. government will soon write checks for $250 billion to shore up the balance sheets of nine banks - Goldman Sachs, Morgan Stanley, J.P. Morgan Chase, Bank of America Corp, Citigroup, Wells Fargo, Bank of New York Mellon, and State Street Corp - as other industries begin lining up to claim their fair share of the newly expanded government largess.

The $250 billion equates to more than a thousand dollars from every U.S. taxpayer.

For the moment at least, it seems that policymakers have succeeded in averting a "Mynsky Meltdown" after having clearly experienced a "Mynsky Moment".

What could go wrong? George Magnus explains:

Even if a financial meltdown is averted, we should be under no illusion that the deleveraging in the financial and household sectors will stop. As a result, four big battlegrounds remain.

First, there is a high possibility of further bouts of financial stress and failures. Money markets are still broken and recovery will take time.

Second, illiquidity, a preference for cash-type instruments, even over government bonds, and a considerably ex­panded supply of government bonds raise the threat of an untimely increase in bond yields.

Third, the global recession that has started may yet turn out to be sharper than expected – and certainly longer. This will bring sustained, and some new, credit risks.

Fourth, much slower growth and the risk of some home-made financial crises in emerging markets warrant close scrutiny.

It seems that almost all of these are sure to happen.

As unthinkable as the prospect might be, what central banks and governments are now doing could well be the "new normal" for some time to come.