Elgar original reference
Edited by Dimitri B. Papadimitriou and L. Randall Wray
Chapter 1: Introduction: Minsky on Money, Banking and Finance
Dimitri B. Papadimitriou and L. Randall Wray The genesis of this Companion to Minsky was the republication, in 2008, of Minsky’s two seminal books: John Maynard Keynes and Stabilizing an Unstable Economy first published in 1975 and 1986 respectively. Introducing Minsky to the wider world, the Wall Street Journal wrote: ‘Hyman Minsky spent much of his career advancing the idea that financial systems are inherently susceptible to bouts of speculation that, if they last long enough, end in crises . . . Indeed, the Minsky Moment has become a catch phrase on Wall Street.’ There is, then, hardly any need to comment on the relevance of Hyman Minsky’s work to the global financial and economic crisis that began in 2007 in the US and quickly spread around the world. Several of the chapters in this volume explicitly take up that topic. Many more economists have, recently, discovered Minsky’s Financial Instability Hypothesis (FIH) and widely applied it to the course of events in the US from 2004 until the real estate market went bust, and many commentators used his hedge, speculative, and Ponzi classification scheme to analyze the evolution of mortgage markets. Many of Minsky’s favorite themes – ‘stability is destabilizing’, the role of the ‘Big Government’ and ‘Big Bank’ in constraining endogenous instability, banker’s rationality, money non-neutrality, creative destruction and innovation by financial institutions – are taken up in the chapters especially written for this companion to Minsky. This introductory chapter does not summarize those that follow, but in a few sentences attempts to demonstrate...