Minsky moment

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A Minsky moment is the point in a credit cycle or business cycle when investors have cash flow problems due to spiraling debt they have incurred in order to finance speculative investments. At this point, a major selloff begins due to the fact that no counterparty can be found to bid at the high asking prices previously quoted, leading to a sudden and precipitous collapse in market clearing asset prices and a sharp drop in market liquidity.

Named after economist Hyman Minsky, the Minsky moment comes after a long period of prosperity and increasing values of investments, which has encouraged increasing amounts of speculation using borrowed money.

The concept has some parallels with Austrian Business Cycle Theory, although Hyman Minsky himself was known as a "radical" Keynesian.

[edit] References

• In Time of Tumult, Obscure Economist Gains Currency -- The Wall Street Journal
• What's a Minsky moment? -- Seattle Post-Intelligencer
• Minsky has his moment -- Financial Reality
• Housing Minsky moment -- Doctor Housing Bubble