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Thesis: The main topic of the article is “A Minsky Meltdown: Lessons for Central
Bankers”. The idea behind the article is the ways to cope up with the financial turmoil of
Running head: ASSIGNMENT
A Minsky Meltdown: Lessons for Central Bankers
The main topic of the article is “A Minsky Meltdown: Lessons for Central Bankers”.
The idea behind the article is the ways to cope up with the financial turmoil of 2008.
The essential features of the Minsky's view are that the borrowers, lenders, and
regulators are attracted into the complacency as asset prices rise. According to Minsky, the
long term interest rates below the short term rates are appropriate for the interest rates and
loan pricing. This acts as a safety measure for investors during the financial boom. The
foreign savings generated in developing nations like India and China has demanded dollardominated assets. The availability of large foreign savings resulted in the vast funds to slosh
the economy. According to Minsky's financial instability hypothesis, when the optimism is
high and sufficient funds are there for investors, the investors tend to shift from safe
investment to the rescue speculative and Ponzi end. The new methods of financial
engineering allow the comp...