Insights into the financial crisis: a Minskyian perspective drawing on interviews with Australian regulators and risk managers

Among divergent approaches to understanding the global financial crisis, Minsky's Financial Instability Hypothesis has gained increased attention. In part, the paper will draw upon Minsky's notion that the seeds of instability are sown when banks, households and firms move from hedge, to speculative, and then into Ponzi financial positions, which are seen as the last stage before markets collapse into a "black hole". In addition, the paper will discuss the findings arising from an analysis of interviews undertaken after the subprime crisis with practitioners who were closely involved in regulation and risk-management. The paper emphasizes the need for governments to promote full employment to enable the non-government sector to heal more rapidly from the damage arising from the financial crisis in Australia.