Instability hypothesis

The Chairman of the Federal Reserve appears to be a convert to the Financial Instability Hypothesis. This theory was developed by the late economist Hyman Minsky who argued that during periods of economic stability, financial players are lured into taking on ever greater amounts of risk, thereby precipitating the next crisis. In his latest speech, Alan Greenspan endorses this view. However, he still maintains that the Fed cannot prevent bubbles from forming. In fact, had Greenspan during his lon...