A pretty clear explanation of Hyman Minsky’s key ideas:
Most macroeconomists work with equilibrium models which assume the economy is fundamentally stable and that booms or crises are precipitated by external shocks “whether that be a rise in oil prices, a war or the invention of the internet”.
Minsky disagreed. He thought that the system itself could generate shocks through its own internal dynamics. He believed that during periods of economic stability, banks, firms and other economic agents become complacent.
They assume that the good times will keep on going and begin to take ever greater risks in pursuit of profit. So the seeds of the next crisis are sown in the good time.
Read more at BBC News – Did Hyman Minsky find the secret behind financial crashes?.
Steve Keen & Minsky
http://www.debtdeflation.com/blogs/minsky/
“I’m standing on the shoulders of a true giant, Hyman Minsky. And there’s many other non-orthodox economists around the world who have also been influenced by Minsky and are not being listened to. I’ve just got the loudest mouth but certainly I’m not the only one.”
I tend to disagree with the authors premise of what most macro economists think. Isn’t the boom bust cycle part of economics 101? You can see this in mining and property development and business inventories.
EG. High property demand and low supply causes prices to rise so properties get built and as prices rise more get built causing over-supply which then causes prices to decrease as supply is now higher than demand.
This all relates to equilibrium and not external shocks. I don’t think most macro economists think in terms of external shocks. My N. Gregory Mankiw textbook would agree.
I have to believe that the destabilization is here right now as seen on the ndx.x chart from last week. I got short the index at the number 3 high at or near 3710. I will hang on to the front handle bar of this roller coaster for it is going to be one hell of a ride. I expect to see the ndx trigger the 3K mark very soon.