After the sub-prime crisis, many studies of Minsky have been published. In
general, Post Keynesian and Marxian Economics rather than Neo-classical
have shown interest in Minsky. However, there are various opinions in the
Post Keynesian interpretations on Minsky with regard to this crisis. Thus,
they cause some confusion in understanding Minsky’s theory and message.
The purpose of this paper is to clarify the essence of Minsky’s theory and the
relationship between Minsky’s theory and the current crisis.
This paper deals with three issues. The first is on the meaning and the role
of ‘euphoria’ in Minsky’s theory. The recent Post Keynesian researches argue
that the causes of this crisis are deregulations and financial innovations rather
than euphoria or irrational exuberance, and that Minsky’s theory is based on
something more than euphoria. The second is on the relationship between
Minsky’s theory and the modern financial system. Kregel insists that the
current crisis differs from the traditional analysis of a Minsky crisis. The third
is on the distinction between illiquidity and insolvency. Davidson argues that
the recent crisis is due to an insolvency problem, and that Minsky’s theory
cannot explain the crisis because it deals with a illiquidity problem. This paper
examines the validity of these Post Keynesian arguments.