[jotakami]

There’s a difference between capital and printed money. Capital is the result of forgone consumption, of producing more than is consumed. Much of what people call “capital” is really just inflated paper claims to assets. A share of stock is not capital, it is just a fractional claim on the residual earnings produced by a business. Capital isn’t magically created when stock prices are bid up, because the underlying assets (“capital”) of the business don’t change.

[wffurr]

Ok, change all of my uses of "capital" to "cash" and it still holds.

Most capital can be readily exchanged for cash, hence it can be referring to as "liquid assets".

Where wealth comes from is an interesting question, but not especially relevant to the topic at hand.

[jotakami]

This is where the problem lies. Sure, liquid assets are as good as cash... until they aren’t. If everyone tries to convert assets to cash simultaneously, then cash gets scarce really quick and the difference between the two becomes clear.

This is completely relevant to the Minsky moment, because it is the illusion of wealth created by inflated asset values that leads people to take excess risks.