In chapter 9 of Stabilizing an Unstable Economy, Hyman Minsky says that

The instability of a financial regime heavily weighted by speculative and Ponzi finance is due to the impact of changing interest rates that develop as an investment boom matures. As financial and product markets react to profit opportunities in an investment boom, the demand for financing increases interest rates. As a result, the margin between the present value of assets and the price of investment output decreases. If carried far enough a present value reversal occurs: that is, the value of capital assets falls below the supply price of investment. (p 239)

But I can't find an explanation of why this happens.

As I understand it, the supply of financing should move in lockstep with its demand: For example, a company wants some capital asset, so they seek a bank loan. The bank expands its balance sheet, with the loan as an asset and a deposit as a liability, and the company transfers the deposit to acquire the asset. The owner of the deposit, via the bank, then supplies exactly the amount of financing that the company needs.



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