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Stabiliser une économie instable
“Mr. Minsky long argued markets were crisis prone. His 'moment' has arrived.” -The Wall Street Journal
In his seminal work, Minsky presents his groundbreaking financial theory of investment, one that is startlingly relevant today. He explains why the American economy has experienced periods of debilitating inflation, rising unemployment, and marked slowdowns-and why the economy is now undergoing a credit crisis that he foresaw. Stabilizing an Unstable Economy covers:
The natural inclination of complex, capitalist economies toward instability Booms and busts as unavoidable results of high-risk lending practices “Speculative finance” and its effect on investment and asset prices Government's role in bolstering consumption during times of high unemployment The need to increase Federal Reserve oversight of banksHenry Kaufman, president, Henry Kaufman & Company, Inc., places Minsky's prescient ideas in the context of today's financial markets and institutions in a fascinating new preface. Two of Minsky's colleagues, Dimitri B. Papadimitriou, Ph.D. and president, The Levy Economics Institute of Bard College, and L. Randall Wray, Ph.D. and a senior scholar at the Institute, also weigh in on Minsky's present relevance in today's economic scene in a new introduction.
A surge of interest in and respect for Hyman Minsky's ideas pervades Wall Street, as top economic thinkers and financial writers have started using the phrase “Minsky moment” to describe America's turbulent economy. There has never been a more appropriate time to read this classic of economic theory.
736 pages, Paperback
First published September 10, 1986
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2238 people want to read
About the author
Hyman P. Minsky
21 books72 followersHyman Philip Minsky (September 23, 1919 – October 24, 1996) was an American economist, a professor of economics at Washington University in St. Louis, and a distinguished scholar at the Levy Economics Institute of Bard College. His research attempted to provide an understanding and explanation of the characteristics of financial crises, which he attributed to swings in a potentially fragile financial system. Minsky is sometimes described as a post-Keynesian economist because, in the Keynesian tradition, he supported some government intervention in financial markets, opposed some of the financial deregulation policies popular in the 1980s, stressed the importance of the Federal Reserve as a lender of last resort and argued against the over-accumulation of private debt in the financial markets.
Minsky's economic theories were largely ignored for decades, until the subprime mortgage crisis of 2008 caused a renewed interest in them.
Minsky's economic theories were largely ignored for decades, until the subprime mortgage crisis of 2008 caused a renewed interest in them.
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August 25, 2012
Hyman Minsky huh
Minsky, who taught at Washington University in St. Louis, was a marginalized figure throughout his professional life, and died, still marginalized, in 1996. And to be honest, Minsky’s heterodoxy wasn’t the only reason he was ignored by the mainstream. His books are not, to say the least, user-friendly; nuggets of brilliant insight are strewn thinly across acres of turgid prose and unnecessary algebra. And he also cried wolf too often; to paraphrase an old joke by Paul Samuelson, he predicted around nine of the last three major financial crises.
these days many economists, yours truly very much included, recognize the importance of Minsky’s “financial instability hypothesis.” And those of us, again like yours truly, who were relative latecomers to Minsky’s work wish that we had read it much earlier. Minsky’s big idea was to focus on leverage—on the buildup of debt relative to assets or income. Periods of economic stability, he argued, lead to rising leverage, because everyone becomes complacent about the risk that borrowers might not be able to repay. But this rise in leverage eventually leads to economic instability. Indeed, it prepares the ground for financial and economic crisis.
this book is a must read
Minsky, who taught at Washington University in St. Louis, was a marginalized figure throughout his professional life, and died, still marginalized, in 1996. And to be honest, Minsky’s heterodoxy wasn’t the only reason he was ignored by the mainstream. His books are not, to say the least, user-friendly; nuggets of brilliant insight are strewn thinly across acres of turgid prose and unnecessary algebra. And he also cried wolf too often; to paraphrase an old joke by Paul Samuelson, he predicted around nine of the last three major financial crises.
these days many economists, yours truly very much included, recognize the importance of Minsky’s “financial instability hypothesis.” And those of us, again like yours truly, who were relative latecomers to Minsky’s work wish that we had read it much earlier. Minsky’s big idea was to focus on leverage—on the buildup of debt relative to assets or income. Periods of economic stability, he argued, lead to rising leverage, because everyone becomes complacent about the risk that borrowers might not be able to repay. But this rise in leverage eventually leads to economic instability. Indeed, it prepares the ground for financial and economic crisis.
this book is a must read
April 27, 2012
As with any classic, it's hard for me to gauge my feelings about this book now, and they may well be different several months on. But I'm very glad to have read it. For those who are not econ nerds, Minsky was an economist in the second half of the 20th century who was non-mainstream but whose views came back into vogue after the financial crisis, which appeared to validate his theories.
The only math in this book is algebra, mostly to do with simplified national accounting identities. In this sense Minsky is the forebear to modern MMT types. I like this style of argument: asserting the simple identities, then generating theory around "what adjusts."
In a nutshell, Minsky's argument is that capital goods are not amenable to the same equilibrium-welfare arguments that consumption goods are, due to uncertainty (as opposed to "risk") regarding the future. This leads to a fundamental and endogenous instability, which brings about financial crises. I think this is a productive line of argument, which reflects the real possibility of crashes without resorting to some hand-waving about irrationality the way some behavioral economics does. I have recently discovered the work of Roman Frydman (a current economist) and think his ideas have some similar good qualities.
Finally, I have to note that this is one of the worst-edited books I've read recently! Come on, guys!
The only math in this book is algebra, mostly to do with simplified national accounting identities. In this sense Minsky is the forebear to modern MMT types. I like this style of argument: asserting the simple identities, then generating theory around "what adjusts."
In a nutshell, Minsky's argument is that capital goods are not amenable to the same equilibrium-welfare arguments that consumption goods are, due to uncertainty (as opposed to "risk") regarding the future. This leads to a fundamental and endogenous instability, which brings about financial crises. I think this is a productive line of argument, which reflects the real possibility of crashes without resorting to some hand-waving about irrationality the way some behavioral economics does. I have recently discovered the work of Roman Frydman (a current economist) and think his ideas have some similar good qualities.
Finally, I have to note that this is one of the worst-edited books I've read recently! Come on, guys!
August 11, 2013
A very difficult read in many spots but I think I got most of his arguments. I found it entertaining how much of what he wrote 20 years ago seems all together familiar and applicable today.
June 23, 2019
Some interesting ideas that are certainly timely but the writing style killed any sense of thematic momentum. I think I will find myself reading commentary and analysis of Minsky's ideas.
January 6, 2024
According to Minsky, during “good” times businesses in profitable sectors of the economy are rewarded for increasing their debt levels. The more one borrows, the more profit one seems to make. The rising profit attracts other entrepreneurs and encourages them to raise their debt levels.
Since the economy is doing well and borrowers show visible improvements in their financial health, lenders are more eager to lend. Over time, however, the pace of debt accumulation starts to rise much faster than the borrower’s ability to repay and serve the debt. It is at this stage that the foundation for an economic bust is set.
Minsky distinguishes between three types of borrowers. The first type he calls hedge borrowers, who can meet all debt payments from their cash flows. The second type are speculative borrowers, who can only meet interest payments but must constantly roll over their debt to repay the original loan.
Minsky labels the third group as Ponzi borrowers, who can repay neither the interest nor the original loan. These borrowers depend upon the appreciation of their assets’ values to refinance their debt.
These classifications describe what Minsky calls the financial instability hypothesis. According to the financial instability hypothesis, the financial structure of the capitalist economy becomes increasingly fragile during a period of prosperity. The longer the period of prosperity, the more fragile the system becomes. According to Minsky, “In particular, over a protracted period of good times, capitalist economies tend to move from a financial structure dominated by hedge finance units to a structure in which there is large weight to units engaged in speculative and Ponzi finance.”
The financial instability hypothesis also posits that during good times, banks and other intermediaries try to lure investors to buy the debt by means of sophisticated innovations. Minsky labeled them as “merchants of debts.”
The chase to make more profits causes investors in financial markets to place their money in financial instruments that have very little substance but are attractively packaged. However, once economic conditions change, the true state of many borrowers surfaces, leading to a crisis. Lenders curtail their supply of funds, and borrowers are pushed to bankruptcy for they cannot renew their borrowing to pay debts with a financial crisis emerging.
According to Minsky, as time goes by, both borrowers and lenders tend to become reckless, leading to a financial crisis. However, why should it be this way?
Does the Expansion of Credit Lead to Instability?
Loaned savings are the key for economic expansion. Savings fund the production of tools and machinery, permitting the expansion of final goods. This expansion, in turn, permits a further increase in savings that supports building a more sophisticated production structure.
The introduction of money does not alter this process. Individuals can use money to channel savings, which permits widening the wealth-generation process. Whenever someone lends money, the borrower can obtain consumer goods that will support him while he is producing goods and services.
In the above example, the expansion of credit due to the increase in savings cannot be bad for the economy. On the contrary, such credit, when fully backed by savings, leads to economic growth. The expansion of fully backed credit does not result in the good times being a precursor of bad times. Contrary to Minsky, the accumulation of capital makes the economy more robust and less vulnerable.
Unbacked Credit and Economic Instability:
Trouble, however, erupts when savings do not back up lending. The borrower, holding the empty money, exchanges it for final consumer goods, taking from the pool of savings without any additional savings taking place. The actual wealth producers who have contributed to the pool of consumer goods—the pool of savings—will discover that the money in their possession over time allows them to purchase a smaller amount of consumer goods. The reason is that borrowers have consumed some of the consumer goods, diverting wealth (consumer goods) from wealth-generating activities toward the holders of money, which emerged out of thin air.
As the pace of unbacked credit expands relative to the supply of savings, less savings becomes available to genuine wealth generators. Consequently, less savings means less wealth. In an extreme case, if everybody were to just consume without contributing to the pool of savings, no one would eventually be able to consume.
In a free market economy, intermediaries such as banks will have difficulty expanding unbacked credit, since banks are likely to encounter difficulties honoring their checks because of the unbacked-by-savings lending. The threat of bankruptcy is likely to deter banks from pursuing the expansion of unbacked credit.
Hence, there is no inherent tendency in the capitalist economy to generate unbacked credit that will destabilize the economy. In the modern capitalist economy, what enables banks to engage in the reckless expansion of credit that makes the capitalist system unstable is the existence of the central bank.
The central bank makes it possible for banks to engage in the expansion of unbacked credit. At the end of the day during clearance time, if Bank A is short fifty dollars and cannot settle a claim from Bank B, it can sell some of its assets to the central bank for cash, thus preventing Bank A from being “caught.” Bank A can also secure the fifty dollars by borrowing them from the central bank. Where does the central bank get the money? It actually generates money out of thin air.
The modern banking system can be seen as one huge bank, which is guided and coordinated by the central bank. Banks in this framework can be regarded as branches of the central bank. By means of monetary injections, the central bank makes sure that the banking system is “liquid enough” so banks will not bankrupt each other.
While Minsky’s framework describes the present financial market volatility, it doesn’t provide any satisfactory explanation based on previously established and identified phenomena. Hence, Minsky’s framework describes but does not explain. It arbitrarily puts the blame for instability on the capitalistic economy without establishing verification for this claim.
Contrary to Minsky, we have to conclude that there is nothing wrong with capitalism. To avoid the menace of boom-bust cycles, what is needed is to close all the loopholes for creating money out of nothing. Not so, argues Minsky and the post-Keynesian School of Economics. On the contrary, they hold that any attempt to revert to a proper free market laissez-faire economy is a prescription for economic disaster.
This response is not surprising since Minsky accepted beforehand that capitalism is unstable and hence never questioned this premise. For Minsky, the only way to fix supposedly unstable capitalism is through a larger dosage of government and central bank interference with the economy.
Conclusion:
Contrary to the post-Keynesian School of Economics and Minsky, the existence of the central bank makes the present economic framework unstable. In addition, it is not the expansion of debt as such that leads to instability but the expansion of double-entry book credits.
It is through unbacked credit that savings are diverted from productive activities to nonproductive activities, which in turn weakens the process of wealth expansion. We can thus conclude that Minsky’s financial instability hypothesis does not establish that the capitalist system is inherently unstable. The instability that Minsky has identified has nothing to do with capitalism but rather with the central bank preventing the efficient functioning of capitalism.
Since the economy is doing well and borrowers show visible improvements in their financial health, lenders are more eager to lend. Over time, however, the pace of debt accumulation starts to rise much faster than the borrower’s ability to repay and serve the debt. It is at this stage that the foundation for an economic bust is set.
Minsky distinguishes between three types of borrowers. The first type he calls hedge borrowers, who can meet all debt payments from their cash flows. The second type are speculative borrowers, who can only meet interest payments but must constantly roll over their debt to repay the original loan.
Minsky labels the third group as Ponzi borrowers, who can repay neither the interest nor the original loan. These borrowers depend upon the appreciation of their assets’ values to refinance their debt.
These classifications describe what Minsky calls the financial instability hypothesis. According to the financial instability hypothesis, the financial structure of the capitalist economy becomes increasingly fragile during a period of prosperity. The longer the period of prosperity, the more fragile the system becomes. According to Minsky, “In particular, over a protracted period of good times, capitalist economies tend to move from a financial structure dominated by hedge finance units to a structure in which there is large weight to units engaged in speculative and Ponzi finance.”
The financial instability hypothesis also posits that during good times, banks and other intermediaries try to lure investors to buy the debt by means of sophisticated innovations. Minsky labeled them as “merchants of debts.”
The chase to make more profits causes investors in financial markets to place their money in financial instruments that have very little substance but are attractively packaged. However, once economic conditions change, the true state of many borrowers surfaces, leading to a crisis. Lenders curtail their supply of funds, and borrowers are pushed to bankruptcy for they cannot renew their borrowing to pay debts with a financial crisis emerging.
According to Minsky, as time goes by, both borrowers and lenders tend to become reckless, leading to a financial crisis. However, why should it be this way?
Does the Expansion of Credit Lead to Instability?
Loaned savings are the key for economic expansion. Savings fund the production of tools and machinery, permitting the expansion of final goods. This expansion, in turn, permits a further increase in savings that supports building a more sophisticated production structure.
The introduction of money does not alter this process. Individuals can use money to channel savings, which permits widening the wealth-generation process. Whenever someone lends money, the borrower can obtain consumer goods that will support him while he is producing goods and services.
In the above example, the expansion of credit due to the increase in savings cannot be bad for the economy. On the contrary, such credit, when fully backed by savings, leads to economic growth. The expansion of fully backed credit does not result in the good times being a precursor of bad times. Contrary to Minsky, the accumulation of capital makes the economy more robust and less vulnerable.
Unbacked Credit and Economic Instability:
Trouble, however, erupts when savings do not back up lending. The borrower, holding the empty money, exchanges it for final consumer goods, taking from the pool of savings without any additional savings taking place. The actual wealth producers who have contributed to the pool of consumer goods—the pool of savings—will discover that the money in their possession over time allows them to purchase a smaller amount of consumer goods. The reason is that borrowers have consumed some of the consumer goods, diverting wealth (consumer goods) from wealth-generating activities toward the holders of money, which emerged out of thin air.
As the pace of unbacked credit expands relative to the supply of savings, less savings becomes available to genuine wealth generators. Consequently, less savings means less wealth. In an extreme case, if everybody were to just consume without contributing to the pool of savings, no one would eventually be able to consume.
In a free market economy, intermediaries such as banks will have difficulty expanding unbacked credit, since banks are likely to encounter difficulties honoring their checks because of the unbacked-by-savings lending. The threat of bankruptcy is likely to deter banks from pursuing the expansion of unbacked credit.
Hence, there is no inherent tendency in the capitalist economy to generate unbacked credit that will destabilize the economy. In the modern capitalist economy, what enables banks to engage in the reckless expansion of credit that makes the capitalist system unstable is the existence of the central bank.
The central bank makes it possible for banks to engage in the expansion of unbacked credit. At the end of the day during clearance time, if Bank A is short fifty dollars and cannot settle a claim from Bank B, it can sell some of its assets to the central bank for cash, thus preventing Bank A from being “caught.” Bank A can also secure the fifty dollars by borrowing them from the central bank. Where does the central bank get the money? It actually generates money out of thin air.
The modern banking system can be seen as one huge bank, which is guided and coordinated by the central bank. Banks in this framework can be regarded as branches of the central bank. By means of monetary injections, the central bank makes sure that the banking system is “liquid enough” so banks will not bankrupt each other.
While Minsky’s framework describes the present financial market volatility, it doesn’t provide any satisfactory explanation based on previously established and identified phenomena. Hence, Minsky’s framework describes but does not explain. It arbitrarily puts the blame for instability on the capitalistic economy without establishing verification for this claim.
Contrary to Minsky, we have to conclude that there is nothing wrong with capitalism. To avoid the menace of boom-bust cycles, what is needed is to close all the loopholes for creating money out of nothing. Not so, argues Minsky and the post-Keynesian School of Economics. On the contrary, they hold that any attempt to revert to a proper free market laissez-faire economy is a prescription for economic disaster.
This response is not surprising since Minsky accepted beforehand that capitalism is unstable and hence never questioned this premise. For Minsky, the only way to fix supposedly unstable capitalism is through a larger dosage of government and central bank interference with the economy.
Conclusion:
Contrary to the post-Keynesian School of Economics and Minsky, the existence of the central bank makes the present economic framework unstable. In addition, it is not the expansion of debt as such that leads to instability but the expansion of double-entry book credits.
It is through unbacked credit that savings are diverted from productive activities to nonproductive activities, which in turn weakens the process of wealth expansion. We can thus conclude that Minsky’s financial instability hypothesis does not establish that the capitalist system is inherently unstable. The instability that Minsky has identified has nothing to do with capitalism but rather with the central bank preventing the efficient functioning of capitalism.
January 27, 2016
Stabilizing an Unstable Economy, by Hyman Minsky, is a wonderful, but complex book on macroeconomic theory. Minsky examines the United States of the post WWII era (up to the 90's) and dissects the inherent instability in the system. His book is widely credited with "predicting" the crash of '08, although this is mostly through economic modeling and prediction on credit swapping and a growing "small government" movement within the US Federal Reserve.
Minsky's book was highly interesting, and very complicated. It focuses much more on Macro-Financing at the National level, as opposed to actual macroeconomic stabilization theory. It is very technical, and I would recommend a solid grasp of algebra, economics and finance/accounting to fully grasp the recommendations Minsky offers on correcting the imbalance he saw in the US economy at the time.
Although complicated, this is a great read for those interested in US macro-financial theory and a history of US federal financing. Minsky was an advocate for Keynesian style Big Government financial controls, and disagreed with small government or market led mechanisms for overall financial control of an economy. He goes into great detail on how market led forces can cause instability, and great detail on important financial and monetary policy schemes a government could enact to encourage financial stability mechanisms are in place. All in all, a classic economics read from a man who understood macro-financing and banking and how these factors effect overall social justice, efficiency of state and market mechanisms, and the liberty of democratic citizens.
Minsky's book was highly interesting, and very complicated. It focuses much more on Macro-Financing at the National level, as opposed to actual macroeconomic stabilization theory. It is very technical, and I would recommend a solid grasp of algebra, economics and finance/accounting to fully grasp the recommendations Minsky offers on correcting the imbalance he saw in the US economy at the time.
Although complicated, this is a great read for those interested in US macro-financial theory and a history of US federal financing. Minsky was an advocate for Keynesian style Big Government financial controls, and disagreed with small government or market led mechanisms for overall financial control of an economy. He goes into great detail on how market led forces can cause instability, and great detail on important financial and monetary policy schemes a government could enact to encourage financial stability mechanisms are in place. All in all, a classic economics read from a man who understood macro-financing and banking and how these factors effect overall social justice, efficiency of state and market mechanisms, and the liberty of democratic citizens.
May 17, 2013
This work of Minsky focuses on his Financial Instability Hypothesis and is a direct challenge to the market efficiency assumptions of the Neoclassical synthesis. It is also a reflection of the cost of Fordism through Keynesian mechanisms or inflation. But chiefly the book is an indictment of financial capitalism and continues a line of economic thought from Smith to Marx to Keynes. Minsky is a critical link in the Smith-Marx-Keynes-Sraffa-Schumpeter-Minsky synthesis.
Minsky recognizes the dynamic nature of the business cycle and identifies the inherent inconsistencies that result from investor behavior in the course of financial relations. He also explains the relationship between Big Government and the use of Keynesian tools to stabilize fluctuations in the economy, maintenance of corporate profits, and inflation. Most importantly Minsky warns of the danger of capitalism in fields of critical importance to society such as education, transportation, and utilities.
With the dawning of the Great Recession economists were faced with the necessity of acknowledging the Minsky Moment and searched for the first edition of this book. In response, McGraw-Hill released this new edition and provided an opportunity for all of us to learn the lessons previously not learned. It is well worth your time to read this book that explains the times we live in.
Minsky recognizes the dynamic nature of the business cycle and identifies the inherent inconsistencies that result from investor behavior in the course of financial relations. He also explains the relationship between Big Government and the use of Keynesian tools to stabilize fluctuations in the economy, maintenance of corporate profits, and inflation. Most importantly Minsky warns of the danger of capitalism in fields of critical importance to society such as education, transportation, and utilities.
With the dawning of the Great Recession economists were faced with the necessity of acknowledging the Minsky Moment and searched for the first edition of this book. In response, McGraw-Hill released this new edition and provided an opportunity for all of us to learn the lessons previously not learned. It is well worth your time to read this book that explains the times we live in.
August 22, 2021
Stunning.
The insights provided in this book are transformational. The heavy focus on banking and finance is critical to the policy insights Minsky brings to the table. If you’ve read any other macro books you know that banking and finance is glossed over or very often not even part of the equation! (Insanity!!!)
There is the usual (well now usual) evisceration of neoclassical, and new-Keynesian schools of thought and their models. At the time this book was written it would have been fresh, which is important to think about in the context of the other insights illustrated in this book. Minsky was truly a thinker ahead of his time.
The recommendations for the Federal Reserve to utilize its discount window more, and minimize reliance on interest rate policy to distribute monetary policy is validated by current Fed policy, especially revolving around the 'extraordinary' policies the Fed took surrounding its response to the COVID-19 crisis; expanding the scope the discount window(s), thereby becoming a true buyer of last resort across multiple institutions placing a floor on commercial paper, municipal bonds, and opening international swap lines, supporting currencies of our partners who needed dollars to maintain their own operations. This is what the Fed is supposed to do, and why it was designed in the first place after the 1907 Knickerbocker Crisis.
Minsky's recommendation for the government to create a job guarantee so the government becomes the buyer of last resort for labor, is also again, revolutionary in the sense that today in 2021 there are serious discussions on creating a jobs guarantee program along the lines of the WPA program of yesteryear. Minsky, as well as countless before, understand the idea of 'natural' market equilibrium where labor and firms come into an equalized state at which permanent full employment is realized is a farce. Endogenous to our market system are inherent incoherencies that, over time, manifest into crisis which lead to the boom and bust cycles we have seen since 1966. Stability leads to instability.
The government acting as a buyer of last resort for labor, removes the necessity of a minimum wage, and provides one of the basic functions of a society, to provide an opportunity to live a dignified life. Our market system as structured, and institutional designs of the institutions that police the market, will not, and can not provide that.
This is an important book.
The insights provided in this book are transformational. The heavy focus on banking and finance is critical to the policy insights Minsky brings to the table. If you’ve read any other macro books you know that banking and finance is glossed over or very often not even part of the equation! (Insanity!!!)
There is the usual (well now usual) evisceration of neoclassical, and new-Keynesian schools of thought and their models. At the time this book was written it would have been fresh, which is important to think about in the context of the other insights illustrated in this book. Minsky was truly a thinker ahead of his time.
The recommendations for the Federal Reserve to utilize its discount window more, and minimize reliance on interest rate policy to distribute monetary policy is validated by current Fed policy, especially revolving around the 'extraordinary' policies the Fed took surrounding its response to the COVID-19 crisis; expanding the scope the discount window(s), thereby becoming a true buyer of last resort across multiple institutions placing a floor on commercial paper, municipal bonds, and opening international swap lines, supporting currencies of our partners who needed dollars to maintain their own operations. This is what the Fed is supposed to do, and why it was designed in the first place after the 1907 Knickerbocker Crisis.
Minsky's recommendation for the government to create a job guarantee so the government becomes the buyer of last resort for labor, is also again, revolutionary in the sense that today in 2021 there are serious discussions on creating a jobs guarantee program along the lines of the WPA program of yesteryear. Minsky, as well as countless before, understand the idea of 'natural' market equilibrium where labor and firms come into an equalized state at which permanent full employment is realized is a farce. Endogenous to our market system are inherent incoherencies that, over time, manifest into crisis which lead to the boom and bust cycles we have seen since 1966. Stability leads to instability.
The government acting as a buyer of last resort for labor, removes the necessity of a minimum wage, and provides one of the basic functions of a society, to provide an opportunity to live a dignified life. Our market system as structured, and institutional designs of the institutions that police the market, will not, and can not provide that.
This is an important book.
April 8, 2025
I completed this book over the weekend and what a time to go through such a masterpiece. Hyman Philip Minsky is referred to as someone who was ahead of his time, due to his work on inherent financial instability of a system that was first published in the late 1950s but only got prominence at the time of the Global Financial Crisis in 2008. The GFC is also referred to as the "Minsky Moment". Minsky accurately predicted the transformation of an economy in his work and his prediction came true in 2007. The book, "Stabilizing an Unstable Economy" was first published in 1986, in which he analysed multiple financial crises. The underlying theme of his work is that persistent stability of a financial system leads to instability itself. His explanation of concepts of Hedge Finance, Speculative Finance and Ponzi Finance clearly lays out the path in which an economy shifts from stability to instability, as proportion of Speculative and Ponzi finance increases relative to Hedge finance. Minsky explained that there is an inherent and fundamental instability in the economy that tends toward a speculative boom, and external shocks don't always play a role in financial instability. He has also stressed the importance of the Federal Reserve as a lender of last resort . His recommendations on how the Fed can prevent financial instability/crises were also ignored unfortunately and it's only in the last few years some of his ideas are becoming mainstream. He also talks about the role the government plays in a capitalist economy, sometimes necessary, through its fiscal muscle and how does it affect inflation, private consumption, business profitability and unemployment. A recent evidence is from the post Covid-era when the US fiscal stimulus led to a sharp recovery in growth, private consumption, higher corporate profitability, revival of labor markets and runaway inflation.
The book is phenomenal and while reading it last month I realised how far ahead Minsky was for his era. That's the sign of a true genius. The book is mostly written in a clear style but definitely requires good understanding of Economics and Finance. I should have read it earlier but will say that better late than never.
The book is phenomenal and while reading it last month I realised how far ahead Minsky was for his era. That's the sign of a true genius. The book is mostly written in a clear style but definitely requires good understanding of Economics and Finance. I should have read it earlier but will say that better late than never.
June 7, 2020
I’ve never admired Minsky. It explains why I didn’t dig deeper once he said turbulence in an economy is inherent and endogenous. First time I read that line, I threw the book away from my lap. Why?
Well, I read this book during the pandemic. In the beginning of January 2020, once 44 respiratory issues were identified as disease caused by Coronavirus in Wuhan, I started to delve into this book deliberately to seek for Minsky “advices” in terms of stabilizing economic turbulence caused by geopolitical tension, oil issue in Arabia related to drone attack, riots in Hong Kong and southern America, killing of Iran’s army general, and trade wars between The US and China, as well as Japan and Korea.
Did I get “advices” from Minsky, one that I expected? None, but “endogeneity” as the root of the economic turbulence. That is to say, turbulence is neither a result of external/internal shock nor government failure, but it’s more a natural cycle as a result of embedded inherent factor in the system. In other words, turbulence is not a big deal for traditional fiscal and monetary policy are more than enough to stabilize it.
I sensed a classical economics theory revisited, here actually. He’s like saying that everything is gonna be alright just like Bob Marley have said in No Woman No Cry. Well, is it really gonna be alright? Answer is absolutely NOPE! NOPE! and NOPE! The truth is everything are paralyzed. Demand, supply, global supply chains, commodity price, investor and consumer confidence, affect heuristic has been rising, social crisis has been escalating and incrementally awaken the sleeping giant of financial crisis and angry mob.
This pandemic shows that Minsky did make a fatal fallacy by saying that shock should not to be blamed for a crisis. This is exactly why I threw the book away to the floor and got disappointed.
Well, I read this book during the pandemic. In the beginning of January 2020, once 44 respiratory issues were identified as disease caused by Coronavirus in Wuhan, I started to delve into this book deliberately to seek for Minsky “advices” in terms of stabilizing economic turbulence caused by geopolitical tension, oil issue in Arabia related to drone attack, riots in Hong Kong and southern America, killing of Iran’s army general, and trade wars between The US and China, as well as Japan and Korea.
Did I get “advices” from Minsky, one that I expected? None, but “endogeneity” as the root of the economic turbulence. That is to say, turbulence is neither a result of external/internal shock nor government failure, but it’s more a natural cycle as a result of embedded inherent factor in the system. In other words, turbulence is not a big deal for traditional fiscal and monetary policy are more than enough to stabilize it.
I sensed a classical economics theory revisited, here actually. He’s like saying that everything is gonna be alright just like Bob Marley have said in No Woman No Cry. Well, is it really gonna be alright? Answer is absolutely NOPE! NOPE! and NOPE! The truth is everything are paralyzed. Demand, supply, global supply chains, commodity price, investor and consumer confidence, affect heuristic has been rising, social crisis has been escalating and incrementally awaken the sleeping giant of financial crisis and angry mob.
This pandemic shows that Minsky did make a fatal fallacy by saying that shock should not to be blamed for a crisis. This is exactly why I threw the book away to the floor and got disappointed.
July 28, 2025
The first 100 pages of this are somewhat easy reading, (especially if you have some background in banking/financial econonomics) so I was pleasantly surprised by Minsky's style at that point - but from then he expounds on theory for the rest of the book and it becomes more and more agonizing to read through. As an economist, though, he's really interesting and I think he actually provides an incredibly meaningful and useful starting point for a positive alternative of market-clearing equilibrium theory rather than just being one of those people who *only* complains that the equilibrium stuff is silly and unrealistic.
January 30, 2021
Livro sobre a economia monetária na linha pós-keynesiana, inspirada nos escritos de Keynes e Schumpeter. Explica porque a economia capitalista moderna é tão propensa a flutuações e como sua latente instabilidade tem sido mantida sob controle. Explora a relação entre investimento, lucratividade e expectativas. Destaca a importância do Estado e do Banco Central na estabilidade do sistema.
June 22, 2021
I went from Friedman to Minsky and really enjoyed reading them both. I think Friedman was a better writer but I find Minsky's analysis of the financial service sector more convincing. Although do be careful, once you read this, you'll find the world frustrating because no-one in government seems to pay attention to Minsky's insights.
May 15, 2020
Personally, I think this is the one book you need to read to understand how and why our economy at its current state.
He explained the whole process of the economic activities, with more weight on lenders, rather than central banks - like almost every other econ books.
He explained the whole process of the economic activities, with more weight on lenders, rather than central banks - like almost every other econ books.
March 11, 2018
Fascinating analytical framework. Difficult to read... Lots of passive voice.
December 5, 2018
the pricing section kicks ass
May 19, 2020
Difficult to read due to the technical language. The book was written in 1980's decade, but still valid today to understand the present flaws of capitalism.
July 26, 2022
An advanced read with tons of technical language. Reads like a graduate level textbook. Not for the finance layman
July 8, 2023
brilliant and indispensable. I paused halfway through to read the general theory. that was a good idea, even if no less dense. will be coming back to this for a long time.
January 14, 2024
Amazing!
November 26, 2012
Una versión alternativa de las crisis desde la gran depresión, partiendo de una visión post-keynesiana. Un muy buen libro para entender algunas características y fallas del sistema capitalista en el siglo XX con algunas ideas interesantes sobre como fortalecer el sistema y eliminar sus inestabilidades endogenas.
Muy recomendando para los interesados en Macroeconomía y Economía Política.
Muy recomendando para los interesados en Macroeconomía y Economía Política.
December 12, 2010
A must read :)
June 1, 2012
Finally got around to finishing this. I enjoyed reading Minsky's analysis even though I disagree with his ideas on monetary policy. If financial markets are your thing it's worth reading.
Want to read
June 24, 2012
September 8, 2016
This book is really technical, but a very good read.
June 6, 2013
written in 1986. reasonably describes the dot.com bubble/crash and the sub-Prime mortgage bubble/crash. proposition has credibility.
February 12, 2014
The Financial Instability Theory is one of the most important economic ideas of the last 50 years, but the length and dry style makes this best-suited for people truly interested in economics.
February 6, 2015
It is difficult but eloquent. It is different and meaningful. It certainly deserves a detailed second reading
May 7, 2016
One of the best economics books. It explains how bubbles form and why in economic, and not just psychological, terms.
December 11, 2021
Kitap guzel, ceviri kotu.
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