IDEAS home Printed from
   My bibliography  Save this article

On the Inevitability of Economic Crises in the Modern Market Economy


  • Burenin, Aleksey N.

    (Moscow State Institute of International Relations)


This article examines the problem of the modern market economy crises. As part of the analysis, the author shows that an unlimited credit expansion stimulated by financial innovations and the natural desire of most people to improve their well-being periodically lead to debt overburdening of economy. Credit relations mediate the entire reproduction process and thus a violation in one of its links provokes negative consequences for the economy and inevitably leads to an economic crisis. At the beginning of an economic cycle, interest rates are low, and economic agents actively take loans. General optimism is supported by new loans. The situation changes when the economy approaches a boom phase. Credit chains take form of a real web permeating the entire economic organism. At the peak of the economic boom, the credit load reaches a critical level, a trigger is released, and a crisis begins. The function of the trigger belongs to the actions of economic agents in the market where the financial bubble was formed. In previous economic systems, credit was limited to a relatively narrow framework, so that a new pattern of economic functioning that inevitably leads to crises could form on its basis. Only capitalism, with its innovative nature, opens access to credit for almost any household and firm. Credit has creative power because in a short time it allows to get the necessary resources to finance large-scale projects, but it creates a threat to economic stability in the country if it reaches a very large scale. Our analysis brings us to a conclusion that it is impossible to solve the problem of crises, because capitalism makes maximal use of loans as a means of stimulating household consumption and financial innovations provide manifold possibilities for this on an ever-increasing scale.

Suggested Citation

  • Burenin, Aleksey N., 2017. "On the Inevitability of Economic Crises in the Modern Market Economy," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 5, pages 8-21, October.
  • Handle: RePEc:rnp:ecopol:ep1751

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. George C. Bitros, 2015. "Thinking Ahead of the Next Big Crash," Cato Journal, Cato Journal, Cato Institute, vol. 35(1), pages 67-93, Winter.
    2. Allan H. Meltzer, 2014. "Current Lessons from the Past: How the Fed Repeats Its History," Cato Journal, Cato Journal, Cato Institute, vol. 34(3), pages 519-539, Fall.
    3. Richard Kovacevich, 2014. "The Financial Crisis: Why the Conventional Wisdom Has It All Wrong," Cato Journal, Cato Journal, Cato Institute, vol. 34(3), pages 541-556, Fall.
    4. L. Wray, 2011. "Minsky's Money Manager Capitalism and the Global Financial Crisis," International Journal of Political Economy, Taylor & Francis Journals, vol. 40(2), pages 5-20.
    5. Jan Kregel, 2008. "Using Minsky's Cushions of Safety to Analyze the Crisis in the U. S. Subprime Mortgage Market," International Journal of Political Economy, Taylor & Francis Journals, vol. 37(1), pages 3-23.
    6. Fred E. Foldvary, 2015. "The Austrian Theory of the Business Cycle," American Journal of Economics and Sociology, Wiley Blackwell, vol. 74(2), pages 278-297, March.
    7. Doukas, John A. & Zhang, Hao, 2013. "The performance of NDF carry trades," Journal of International Money and Finance, Elsevier, vol. 36(C), pages 172-190.
    Full references (including those not matched with items on IDEAS)

    More about this item


    credit; economic crisis; Austrian school.;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G1 - Financial Economics - - General Financial Markets


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rnp:ecopol:ep1751. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (RANEPA maintainer). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.