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Impact of Financial Markets on Economic Stability and Growth: The Case of Sub-Prime Mortgage Lending - page 24 / 42

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1/23/2015

Jamshid Damooei, PhD

24

The Unstable Nature of Economic Stability

Most mainstream economists are of the view that economic busts are the outcome of various external shocks to the economy.

Hyman Minsky (1919-1996) thought even in the absence of such shocks, the capitalistic economy has an inherent tendency to develop instability.

The instability culminates in severe economic crises.

The key mechanism that pushes the economy towards a crisis is the accumulation of debt.

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