Oleg Komlik — China’s Minsky moment: stability leads to instability

Hyman Minsky (1919–1996) was a distinguished American scholar and prominent post-Keynesian economist. In the wake of the 2008-2009 crisis Minsky’s invaluable scientific contribution has widely spread, but soon he has unfortunately disappeared from public and economic discussions. 

While most of the mainstream economists are of the view that economic busts are the outcome of various external shocks, Minsky held that the capitalist system itself generates shocks through its own internal dynamics and financial capitalism is inherently unstable. A key mechanism that pushes an economy towards an inevitable crisis is the rampant speculation and the accumulation of debt by the private sector (investors, banks, companies). Minsky claimed that in prosperous times, when corporate cash flow rises beyond what is needed to pay off debt, actors take on more risk and a speculative euphoria develops. Soon thereafter debts exceed what borrowers can pay off from their incoming revenues (especially during the period of monetary tightening) which in turn produces a financial crisis. This slow movement of the financial system from stability to fragility followed by sudden major collapse is famously known as “Minsky moment”.…

Economic Sociology and Political Economy
China’s Minsky moment: stability leads to instability
Oleg Komlik | founder and editor-in-chief of the ES/PE, Chairman of the Junior Sociologists Network at the International Sociological Association, a PhD Candidate in Economic Sociology in the Department of Sociology and Anthropology at Ben-Gurion University, and a Lecturer in the School of Behavioral Sciences at the College of Management Academic Studies