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Title:Global Financial Crisis: A Minskyan interpretation of the causes, the Fed's bailout, and the future PDF Logo
Authors:Wray, L. Randall
Issue Date:2012
Series/Report no.:Working paper, Levy Economics Institute 711
Abstract:This paper provides a quick review of the causes of the Global Financial Crisis that began in 2007. There were many contributing factors, but among the most important were rising inequality and stagnant incomes for most American workers, growing private sector debt in the United States and many other countries, financialization of the global economy (itself a very complex process), deregulation and desupervision of financial institutions, and overly tight fiscal policy in many nations. The analysis adopts the stages approach developed by Hyman P. Minsky, according to which a gradual transformation of the economy over the postwar period has in many ways reproduced the conditions that led to the Great Depression. The paper then moves on to an examination of the US government's bailout of the global financial system. While other governments played a role, the US Treasury and the Federal Reserve assumed much of the responsibility for the bailout. A detailed examination of the Fed's response shows how unprecedented - and possibly illegal - was its extension of the government's safety net to the biggest financial institutions. The paper closes with an assessment of the problems the bailout itself poses for the future.
Subjects:Hyman Minsky
global financial crisis
financialization
money manager capitalism
bank bailout
quantitative easing
financial crisis inquiry report
fraud
Minsky moment
real estate bubble
MERS
federal reserve
JEL:B31
E30
E32
E50
G21
Document Type:Working Paper
Appears in Collections:Working Papers, Levy Economics Institute of Bard College

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