The Impossible Quest for Financial Stability under Financialised Capitalism A Minskyian theory of how safeguarding market liquidity became the bedrock of economic policy and why it should be contested
- Hyman P. Minsky`s works on financial instability provide the basis of the following conceptualisation of a financialised state-finance nexus characteristic to contemporary capitalism.
Minsky’s analysis highlights that processual changes in financial relations towards fragility are endogenous to capitalism and therein always joined by evolvements in regulatory, fiscal and monetary institutions and policies that exert a stabilising influence.
However, if crises are successfully contained and managed, the structure of liabilities generated by boom-era risky practices and financial innovations is ‘validated’, which can induce an upward dynamic of systemic risk. In modern financialised economies this is
embodied in the liquidity of highly complex, sophisticated and interwoven markets, the guarantee of which structurally requires ever broader access to the Lender of Last Resort function of monetary authorities. Any withdrawal of public stabilization threatens market
liquidity and thus potentially translates into systemic instability and crisis. With this work we seek call into question this seeming aporia of financial stabilisation.