Table Of ContentCan “It” Happen Again?
“Today, his views are reverberating from New York to Hong Kong as
economists and traders try to understand what’s happening in the
markets ... Indeed, the Minsky moment has become a fashionable catch
phrase on Wall Street.”
Wall Street Journal
In the winter of 1933, the American financial and economic system
collapsed. Since then economists, policy makers and financial analysts
throughout the world have been haunted by the question of whether “It”
can happen again. In 2008 “It” very nearly happened again as banks and
mortgage lenders in the USA and beyond collapsed. The disaster sent
economists, bankers and policy makers back to the ideas of Hyman Minsky
– whose celebrated “Financial Instability Hypothesis” is widely regarded as
predicting the crash of 2008 – and led Wall Street and beyond to dub it as
the “Minsky Moment.”
In this book Minsky presents some of his most important economic theories.
He defines “It,” determines whether or not “It” can happen again, and
attempts to understand why, at the time of writing in the early 1980s, “It”
had not happened again. He deals with microeconomic theory, the evolution
of monetary institutions, and Federal Reserve policy. Minsky argues that any
economic theory which separates what economists call the “real” economy
from the financial system is bound to fail. Whilst the processes that cause
financial instability are an inescapable part of the capitalist economy, Minsky
also argues that financial instability need not lead to a great depression.
With a new foreword by Jan Toporowski.
Hyman P. Minsky (1919–1996) was Professor of Economics at Washington
University St Louis and a distinguished scholar at the Levy Economics
Institute of Bard College, USA. His research attempted to provide an
understanding and explanation of the characteristics of financial crises,
which he attributed to swings in a potentially fragile financial system.
Minsky taught at Brown University, the University of California, Berkeley
and in 1965 he became Professor of Economics of Washington University in
St Louis and retired from there in 1990.
Hyman
Minsky
Can “It” Happen Again?
Essays on Instability and Finance
With a new fore word by Jan Toporowski
First published in Routledge Classics 2016
by Routledge
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© Hyman P. Minsky 1982, 2016
Foreword © 2016 Jan Toporowski
All rights reserved. No part of this book may be reprin ted or repro duced or util ised in any form
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Trademark notice: Product or corpor ate names may be trade marks or registered trade marks, and
are used only for iden ti fic a tion and explan a tion without intent to infringe.
First published by M.E. Sharpe 1982
British Library Cataloguing in Publication Data
A cata logue record for this book is avail able from the British Library
Library of Congress Cataloging in Publication Data
A catalog record for this book has been requested.
ISBN: 978-1-138-64195-2 (pbk)
ISBN: 978-1-315-62560-7 (ebk)
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To Esther
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CoKNinTdeK KNininTdSd
forewordtotheroutledgeclassicsedition ix
preface xv
introduction:can“it”happenagain?:areprise xix
1 Can “It” Happen Again? 1
2 Finance and Profits: The Changing Nature of American
Business Cycles 12
3 The Financial Instability Hypothesis: An Inter pret a tion of
Keynes and an Alternative to “Standard” Theory 59
4 Capitalist Financial Processes and the Instability of Capitalism 72
5 The Financial Instability Hypothesis: A Restatement 92
6 Financial Instability Revisited: The Economics of Disaster 120
7 Central Banking and Money Market Changes 167
8 The New Uses of Monetary Powers 185
9 The Federal Reserve: Between a Rock and a Hard Place 198
10 An Exposition of a Keynesian Theory of Investment 209
11 Monetary Systems and Accelerator Models 238
12 The Integration of Simple Growth and Cycle Models 266
13 Private Sector Assets Management and the Effectiveness of
Monetary Policy: Theory and Practice 286
index 300
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ForeWord To THe rouTledge ClaSKSinICdS edITIoN
This volume of essays repres ents the early think ing of Hyman P. Minsky, one
of the most original econom ists to have come out of the United States in the
twen ti eth century. The essays reveal the themes that emerged from his
gradu ate studies at Harvard University and, as the title of the volume indi
cates, his abiding preoc cu pa tion with the finan cial crisis that gripped the
United States at the start of the 1930s. Nearly a century later we commonly
think of that crisis as being the 1929 Crash. However, as Minsky’s title essay
indic ates, the crisis that was to haunt him through to his intel lec tual matur ity
and beyond was the 1932–3 finan cial crisis, rather than the crash in the stock
market that preceded it by more than three years. The differ ence is import ant:
in 1929, the stock market crashed; in 1932–3, in response to Herbert
Hoover’s attempts to balance the United States Federal budget, the stock
market and the banking system started to fail, to be rescued only by Franklin
Roosevelt’s exten ded bank holiday, new finan cial regu la tions, includ ing the
Glass–Steagall Act and the exten sion of deposit insur ance, and the New Deal.
As these essays make clear, for Minsky avoid ing “It” was not just a matter of
support ing the stock market and refin an cing banks. It had to involve fiscal
stim u lus to prevent a fall in aggreg ate demand, but also to provide the finan
cial system with govern ment secur it ies whose value was stable.
At the time of the crisis Minsky was enter ing his teenage years. He had
been born in 1919 to parents who were Menshevik refugees from Russia.
They engaged with social ist polit ics and the trade union move ment in
