Destabilizing a Stable Economy: Minsky Meets Graziani’s Monetary Circuit

This article explores the contrasting yet complementary economic theories of Augusto Graziani and Hyman Minsky, focusing on their analyses of money, finance, and economic instability within capitalist systems. Graziani’s rendition of the “Theory of the Monetary Circuit” (TMC) provides a structural framework for understanding the endogenous creation and circulation of money, emphasizing the roles of banks, firms, and workers abstracting from subjective perceptions. In contrast, Minsky’s “Financial Instability Hypothesis” (FIH) highlights the dynamic and inherently unstable nature of financialized economies, in which periods of stability lead to increased risk-taking and eventual crises. While Graziani’s approach abstracts from individual behaviors and crises, Minsky emphasizes the role of uncertainty and speculative behavior. The article concludes by showing that integrating these two perspectives into a three-industry SFC dynamic model offers a comprehensive understanding of the interplay between money circulation, production conditions, and financial instability in capitalist economies.