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Abstract
This article critiques Minsky's Financial Instability Hypothesis, arguing that fraud is a missing element in his theory and the central element in the speculative bubbles that caused “it” to happen twice in the last century in the United States.
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Acknowledgments
The author thanks two anonymous referees for their very helpful critiques.
Notes
1 This was partially addressed by Minsky in 1986: “the label Ponzi finance is evocative of fraud” (Minsky 1986, 377).
2 Bernanke actually speaks of a “balloon” in a footnote of his 2002a “bubbles” speech: “Alan Blinder has likened bubble-popping strategies to sticking a needle in a balloon; one cannot count on letting out the air slowly or in a finely calibrated amount.” We counter that if letting the air slowly out of a balloon were the task at hand, a pin prick may not be the correct tool for the job.
Additional information
Notes on contributors
Wesley C. Marshall
Wesley C. Marshall is a professor at the Universidad Autónoma Metropolitana, Iztapalapa, where he is currently responsible for the Center for Financial and Economic Studies of North America.