Stabilizing an Unstable Economy
Praise for the prescient work of Hyman P. Minsky&#8220;Twenty-five years ago, when most economists were extolling the virtues of financial deregulation and innovation, a maverick named Hyman  P. Minsky maintained a more negative view of Wall Street; in fact, he noted that bankers, traders, and other financiers periodically played the role of arsonists, setting the entire economy ablaze.&#8221;--John Cassidy,The New Yorker&#8220;The journey from subprime mortgages to a major credit crisis, a weak economy and broken business models in finance could all have been foreseen through Hyman Minsky&#8217;s perspectives. His work remains essential to understanding the ground beneath us and the path ahead.&#8221;&#8212;-George Magnus, Senior Economic Adviser, UBS Investment Bank&#8220;It is time to revive an old issue: Just how inherently unstable are economies? But instead of getting much guidance these days from contemporary economists, we need to turn to some of the giants from the past. The work of Hyman Minsky . . . is especially on the mark.&#8221;--Jeff Madrick,The New York Times&#8220;Hyman Minsky's work has never been more valuable.  His financial instability hypothesis, complete with hedge, speculative and ponzi units, has played out to a T in the U.S. property and mortgage markets over the last half decade.&#8221;--Paul McCulley, Managing Director, PIMCO&#8220;As it happens, Minsky is enjoying something of a revival. Two of his books,John Maynard Keynes, andStabilizing an Unstable Economywere just republished by McGraw-Hill, and his contention that stability is inherently unstable seems more relevant than ever in the aftermath of the period of low market volatility that ended in the current crisis."In the latter of those books, published in 1986, Minsky wrote, 'If the institutions responsible for the lender-of-last resort function stand aside and allow market forces to operate, then the decline in asset values relative to current output prices will be larger than with intervention; investment and debt financed consumption will fall by larger amounts; and the decline in income, employment and profits will be greater.' In other words, without government bailouts, there can be a downward spiral.&#8221;--The New York Times