Financial Instability Hypothesis
a.k.a. Minsky moment
Economist Hyman Minsky's idea that long periods of stability encourage ever-riskier borrowing until the…
In plain English
Economist Hyman Minsky's idea that long periods of stability encourage ever-riskier borrowing until the system breaks.
Hyman Minsky argued that calm breeds complacency. In good times, lenders and borrowers take on more debt; eventually many borrow on the assumption that prices will keep rising. When that stops, the whole structure can collapse.
The moment the bubble bursts is often called a 'Minsky moment'. The financial instability hypothesis got a lot of attention after 2008.
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