ABSTRACT
Chapter 3 exposes Minsky’s evolutionary macro-vision of the debt-driven ‘Wall Street’ economies. The analysis focuses on the Schumpeter-Keynes foundations of his ‘financial instability hypothesis’ and points out that macroeconomic incoherence prevails when coordination failure between cash inflows and outflows induce solvency and default risks and failed margins of safety that make units incapable of meeting the commitments derived by evolving liability structures. Unregulated financial processes parasitise the financial structure of effective demand and the symbiosis between industry and finance, and make the failure of private investment an endogenous phenomenon. Minsky’s ‘two-price systems’ establish micro-meso-macro foundations that enable us to comprehend why the macro-system is predisposed to cycles of over-leverage, deleverage and debt deflation.
