A few weeks ago we talked about Veblen goods, where demand increases as the price goes up. Is there any better example than the iconic Birkin bag? Hermes is allegedly only selling them to people who have bought enough other goods to qualify. And two Californians are hopping off their Peloton, putting down their smoothie, and doing something about it.

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Minsky moment

Named after economist Hyman Minsky, a Minsky moment is when everything suddenly comes crashing down. After a period of speculative investing, asset prices collapse drastically. It’s characterized by a shift from optimism to panic among investors, which also limits the availability of credit.

In the lead-up to a Minsky moment, confidence grows as investors become increasingly complacent and willing to take on greater risk. Lenders extend credit to investors with diminishing creditworthiness, fueling the expansion of speculative bubbles. The cycle reaches a tipping point when the level of unsustainable debt makes the financial system vulnerable even to minor shocks, such as rate hikes or asset price declines.

A good example is the 2008 financial crisis. Years of easy credit had led to a housing bubble in the US. Lenders increasingly gave mortgages to borrowers with poor credit histories. When the bubble burst, there were widespread defaults on subprime mortgages, leading to bank failures, liquidity crises, and a severe recession.

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Hermes sued over Birkin bag sales

French luxury giant Hermes is being sued in California over claims it only allows customers with a strong enough track record of buying its products to purchase the iconic Birkin handbag. In the lawsuit, plaintiffs argue Hermes is violating antitrust law by “tying” the sale of one item to the purchase of another.

Customers can’t buy a Birkin online from Hermes, and the bags, which are handmade and can cost thousands of dollars, aren’t displayed in the company’s stores, according to the plaintiffs. They are bringing a class action lawsuit on behalf of thousands of US customers who bought Hermes goods or who were asked to buy them in order to purchase a Birkin.

The plaintiffs are seeking monetary damages and a court order banning Hermes from using allegedly anticompetitive practices. Hermes has not made a comment.

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The bottom line