Financial Instability and Debt Deflation
Most of Steve Keen's recent work focuses on modeling Hyman Minsky's financial instability hypothesis and Irving Fisher's debt deflation. The hypothesis predicts that an overly large debt to GDP ratio can cause deflation and depression. Here, the falling of the price level results in a continually rising real quantity of outstanding debt. Moreover, the continued deleveraging of outstanding debts increases the rate of deflation. Thus, debt and deflation act on and react to one another, resulting in a debt-deflation spiral. The outcome is a depression. Steve Keen argues that the current global economic crisis is the result of too much debt.
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Famous quotes containing the words financial, instability and/or debt:
“Creditor. One of a tribe of savages dwelling beyond the Financial Straits and dreaded for their desolating incursions.”
—Ambrose Bierce (1842–1914)
“With one more talent one frequently stands with greater instability than with one less, as a table stands better on three legs than on four.”
—Friedrich Nietzsche (1844–1900)
“This is the debt I pay
Just for one riotous day,”
—Paul Laurence Dunbar (1872–1906)