chapter  5
5CHAPTER ◾ U.S. Mortgage Crisis: Subprime or Systemic?
ByERIC TYMOIGNE
Pages 22

Minsky’s theoretical framework is a good point of reference to understand the current fi nancial crisis. He provided a detailed explanation of how “stability is destabilizing,” that is, how a period of enduring economic prosperity creates a favorable environment for the emergence of what he called a Ponzi process. Th e forces that generate instability are not based on irrationality, greed, or market imperfections; they are intrinsic to the way the capitalist economic system works. Th us, rather than providing fi nancial literacy, imposing a tax on fi nancial transactions, or improving disclosure of information, Minsky emphasized the importance of orienting fi nancial reforms toward understanding and managing systemic risk from a cash-fl ow perspective.