A Minsky-Kindleberger Perspective on the Financial Crisis

Hyman Minsky and Charles Kindleberger discussed three different patterns of speculative bubbles, all of which appeared during the recent financial crisis: one when price rises in an accelerating way to crash sharply after reaching its peak as with oil peaking in July 2008, another when the price rise is followed by a parallel decline without crash as with housing peaking in Summer 2006, and finally one rising then initially gradually declining followed later by a sharp crash as with the stock market peaking in October 2007. Policy should be targeted at specific bubbles using specific policy instruments for each.