Hyman Minsky's Financial Instability Hypothesis and the Accounting Structure of Economy

Accounting, Economics and Law: A Convivium, 3 (3) - 2013

Posted: 6 Jun 2013

See all articles by Yuri Biondi

Yuri Biondi

French National Center for Scientific Research (CNRS)

Date Written: June 1, 2013

Abstract

Hyman Minsky’s view of the accounting structure of economy is essentially based upon ownership of wealth, cash flows and financial instruments as entitlements to both. Further accounting notions are introduced here that improve on Minsky’s financial analysis. From the accounting viewpoint, revenues and expenses, assets and liabilities are organized through economic entities that frame and shape cash transfers through an accruals basis of accounting. Including these ongoing entities and their accruals upgrades Minsky’s frame of analysis from both heuristic and theoretical viewpoints. Current international and US accounting standards and practices provide examples concerning leases, repos, special purpose entities, goodwill, depreciation and liquidation values, and mark-to-market valuation of corporate liabilities. Notably, banking and government agencies can then be understood as dynamic holistic connections that layer upon ownership of wealth and entitlements to it, generating a credit-debt economy that fundamentally differs from a “capitalist” economy. Among others, Schumpeter and Keynes originate this collective dynamic understanding of bank borrowing and government borrowing, respectively. Both borrowings can be and have been employed to generate investment, production and consumption that could not have been generated without them. Some implications for economic theory and analysis of financial stability, banking and money are developed.

Keywords: financial instability hypothesis, goodwill and repurchase agreements, Hyman Minsky, Joseph Alois Schumpeter, John Maynard Keynes

JEL Classification: M41, L51, B26, G00, K22

Suggested Citation

Biondi, Yuri, Hyman Minsky's Financial Instability Hypothesis and the Accounting Structure of Economy (June 1, 2013). Accounting, Economics and Law: A Convivium, 3 (3) - 2013. Available at SSRN: https://ssrn.com/abstract=2274055

Yuri Biondi (Contact Author)

French National Center for Scientific Research (CNRS) ( email )

IRISSO - University Paris Dauphine PSL
Place Marechal Lattre Tassigny
75016 Paris
France

HOME PAGE: http://yuri.biondi.free.fr/

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