Stabilizing an Unstable Economy

Minsky, H. P. (1986). Stabilizing an Unstable Economy. Yale University Press.

Type

Book

Intellectual base

Review or monograph

Year

1986

Link

https://archive.org/details/stabilizingunsta0000mins_d5y8

Cited from

biology_ecology, economics_finance, engineering_design, systems_cybernetics

Cited by

5 citations across 5 artifacts.

Each citation links to the sentence it supports in the citing article.

Primes

• Benign-Sampling Safety Drift
  • Each year a fund or bank carries a little more leverage, a little less capital, a thinner liquidity buffer, and each year the tail event does not arrive
• Eutrophication
  • Capital flows and credit booms: excess cheap credit drives a productivity-and-asset-price bloom whose down-leg depletes trust and balance-sheet capacity, locking the system into a debt-deflation regime harder to exit than to enter.

    This sourceDevelops the financial-instability hypothesis: cheap credit fuels an asset-price boom whose down-leg depletes balance-sheet capacity and trust, locking the system into a debt-deflation regime hard to exit.

• Overshoot and Collapse
  • In finance and economics, a credit boom runs the identical structure: credit is beneficial to growth at moderate levels, but past the economy's capacity to deploy it productively the surplus inflates an asset bubble (the inversion), leverage and speculation amplify it (the self-amplifying loop), the bust depletes liquidity and balance-sheet equity (the secondary resource), and the post-crash regime — deleveraging, credit freeze, depressed activity — is hysteretic, not reversed by cutting interest rates back to where they were.
• Speculative Bubble
  • It separates two regimes (a value anchored to fundamentals and a value driven by the expectation of further appreciation) and names the self-reinforcing dynamic that carries a quantity from the first regime into the second and then collapses it back, a life-cycle Minsky (1986) formalized in his financial-instability hypothesis as the endogenous drift of a stable system toward fragility.

    This sourceDevelops the financial-instability hypothesis: stable conditions endogenously encourage rising leverage and speculative positions, drifting a system from robustness toward fragility and the eventual reversal.

• Stability-Induced Fragility
  • Finance. Stable returns lower perceived default risk and raise leverage and exposure to common shocks; the discharge is the Minsky moment, and a long calm of moderate growth can literally license the leverage that breaks the system.

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