The Economic Legacy of Hyman Minsky, Volume I
Edited by Riccardo Bellofiore and Piero Ferri
Chapter 10: Minsky's analysis, the European single currency and the global financial system
10. Minsky’s analysis, the European single currency and the global ﬁnancial system Malcolm Sawyer INTRODUCTION The purpose of this chapter is to consider the implications of some of the key ideas advanced by Hyman Minsky for the future for the European single currency and for proposals for changes to the global ﬁnancial system. We begin by giving a brief resumé of those key ideas of Minsky, followed by sections in which we relate to the European Union and to the global level. In his entry in the Biographical Dictionary of Dissenting Economists (Arestis and Sawyer, 1992) Hyman Minsky summarized ‘the doctrines most associated’ with him as: 1. 2. The interpretation of Keynes as an investment theory of the business cycle and a ﬁnancial theory of investment … The ‘ﬁnancial instability hypothesis’ which holds that over a period of good times the ﬁnancial structures of a dynamic capitalist economy endogenously evolve from being robust to being fragile, and that once there is a sufﬁcient mix of ﬁnancially fragile institutions, the economy becomes susceptible to debt deﬂations. The signiﬁcance and necessity of Central Banks to be lenders of last resort in order to help abort and contain debt deﬂations and therefore the thrust towards deep depressions. The cash-ﬂow analysis of ﬁnancial relations, which emphasizes the ﬂows of incomes … from the productive part of the economy that can validate ﬁnancial obligations … The necessity and signiﬁcance of big government … The signiﬁcance of ﬁnancial innovations as reactions to perceived...
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