Using Minsky to Simplify Financial Regulation

The basic error in the current regulatory approach embodied in Dodd-Frank is that it does very little to limit the creation of fictitious liquidity or to redirect the creation of that liquidity for financing capital development of the system. A more expeditious method of reform that could replace Dodd-Frank would be to ask if there were any reason why the fictitious-liquidity structures that have grown up in the process of deregulation are necessary for the operation of the economy.

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