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The Global Financial Crisis, Credit Crunches and Deleveraging

Journal of Australian Political Economy, The
Issue 64 (2009)

Abstract: The proposition that the crisis was inherently unpredictable is a recurrent theme amongst those charged with preventing such events. It is also a convenient untruth. A Netherlands academic did a survey of the literature, to identify 12 economists and market analysts who did foresee this crisis - of whom I was one. More importantly, he identified common elements to the analyses that led these researchers to foresee what neoclassical economists in particular failed to anticipate. Bezemer noted that though we came from varied intellectual backgrounds, we shared four common factors. My own analysis extends Hyman Minsky's 'financial instability hypothesis', using a theory of monetary dynamics known as Circuit Theory, which originated in Europe. Both perspectives played a key role in helping identify that a crisis was imminent. Minsky emphasised the importance of the debt to GDP ratio as the key indicator of financial fragility; while the Circuit School's insights enabled the development of a purely monetary model of the economy in which changes in debt play a crucial role in determining the level of aggregate demand.

To cite this article: Keen, Steve. The Global Financial Crisis, Credit Crunches and Deleveraging [online]. Journal of Australian Political Economy, The, No. 64, 2009: 22-36. Availability: <http://search.informit.com.au/documentSummary;dn=393454802702172;res=IELBUS> ISSN: 0156-5826. [cited 30 Jun 16].

Personal Author: Keen, Steve; Source: Journal of Australian Political Economy, The, No. 64, 2009: 22-36 Document Type: Journal Article ISSN: 0156-5826 Subject: Unemployment; Economic history; Production (Economic theory); Gross domestic product; Global Financial Crisis (2008-2009); Debts, Public; Peer Reviewed: Yes Affiliation: (1) Associate Professor, Department of Economics and Finance, University of Western Sydney

Database: Business Collection