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Subprime Crisis and Instability of Global Financial Markets

Author

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  • Ognjen Radonjić
  • Miodrag Zec

Abstract

In order to prescribe adequate remedies to treat the current financial crisis one has to understand what in the first place went wrong. An age ago, older generations wrote that disease could not be cured without an accurate diagnosis. In contrast to mainstream “efficient markets hypothesis” we argue that Minsky’s financial instability hypothesis gives numerous valuable insights into sources and possible consequences of current global financial crisis. Furthermore, two decades ago Hyman P. Minsky predicted possible developments and perils of ever growing process of securitization of illiquid assets. Key words: Speculation, Debt, Financial instability hypothesis, Ponzi unit, Securitization.JEL: E12, E44, G01.

Suggested Citation

  • Ognjen Radonjić & Miodrag Zec, 2010. "Subprime Crisis and Instability of Global Financial Markets," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 57(2), pages 209-224.
    • Handle: RePEc:voj:journl:v:57:y:2010:i:2:p:209-224:id:184
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    More about this item

    Keywords

    Speculation; Debt; Financial Instability hypothesis; Ponzi unit; Securitization;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises

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