ABSTRACT
This work applies Hyman P. Minsky’s financial instability hypothesis, with necessary modifications, to the Indonesian case, the country most affected by the East Asian crisis. The work posits the following basic characteristics of the capitalist economy:
1 The capitalist economy does not rest at equilibrium, but becomes more fragile and unstable;
2 Fragility and instability are endogenously created in economies through the evolution of the financial structure;
3 The fragility and instability of the financial structure originates in the existence of debt, that is, payment commitments;
4 The endogenous process of financial fragility and instability is driven by capitalists’ complex motivations and behaviour;
5 Crises occur when the system collapses, that is, when chains of debts can no longer be maintained.
