Stabilizing an Unstable Economy

“Mr.Minskylongarguedmarketswerecrisisprone.His'moment'hasarrived.”-TheWallStreetJournalInhisseminalwork,Minskypresentshisgroundbreakingfinancialtheoryofinvestment,onethatisstartlinglyrelevanttoday.HeexplainswhytheAmericaneconomyhasexperiencedperiodsofdebilitatinginflation,risingunemployment,andmarkedslowdowns-andwhytheeconomyisnowundergoingacreditcrisisthatheforesaw.StabilizinganUnstableEconomycovers:Thenaturalinclinationofcomplex,capitalisteconomiestowardinstabilityBoomsandbustsasunavoidableresultsofhigh-risklendingpractices“Speculativefinance”anditseffectoninvestmentandassetpricesGovernment'sroleinbolsteringconsumptionduringtimesofhighunemploymentTheneedtoincreaseFederalReserveoversightofbanksHenryKaufman,president,HenryKaufman&Company,Inc.,placesMinsky'sprescientideasinthecontextoftoday'sfinancialmarketsandinstitutionsinafascinatingnewpreface.TwoofMinsky'scolleagues,DimitriB.Papadimitriou,Ph.D.andpresident,TheLevyEconomicsInstituteofBardCollege,andL.RandallWray,Ph.D.andaseniorscholarattheInstitute,alsoweighinonMinsky'spresentrelevanceintoday'seconomicsceneinanewintroduction.AsurgeofinterestinandrespectforHymanMinsky'sideaspervadesWallStreet,astopeconomicthinkersandfinancialwritershavestartedusingthephrase“Minskymoment”todescribeAmerica'sturbulenteconomy.Therehasneverbeenamoreappropriatetimetoreadthisclassicofeconomictheory.