Financial Instability Hypothesis

        The financial structure is a cause of both the 
        adaptability and instability of capitalism.

• "An investment theory of the cycle and a financial theory of investment"

• Three levels of fragility of finance

  • Hedge

  • Speculative

  • Ponzi

• Stability leads to instability

  • Crisis-prone situations emerge out of the normal profit-seeking activities of borrowers and lenders

  • No one reform is sufficient for all time

  • "Big Government" and the "Big Bank" must counteract the fragility of finance