Stabilizing an Unstable Economy (Chapters 1—2)

Abstract

Hyman Minski formulates his basic methodological attitudes in economic research and general principles of economic policy in the chapter 1 of his fundamental work. The chapter 2 is devoted to analysis of the period of financial instability in the U.S. from the late 1960s to the early 1980s, mostly the 1973—1975 recession. Minsky argues that the fiscal stimulus from the Big Government and the Fed's actions as a creditor of last resort provided the American economy with opportunity to avoid deep depression and quickly come through recession. It became possible not only because deficit spending supported general demand, but also because increasing government debt acted as a significant stabilizer of private debt portfolios. During the postwar period the character of economic crises and recessions changed significantly: financial instability took the form of high an potentially accelerating inflation instead of deep depressions.