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MENTAL MODEL · M2570

Minsky Moment

Minsky Moment
BusinessHigh supportMacroeconomics
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Version 1.0.0 · Updated 2026-07-30

CORE DEFINITION

Long-term stability leads to irresponsible risk-taking (leveraging), thereby planting the seeds of instability. When asset prices collapse and over-indebted borrowers are forced to sell assets to repay debts, the market instantly falls into a spiral of collapse. That is, stability itself is the source of instability.

SCAFFOLDING EFFECT

psychology

Reduce cognitive load

An alarm for boom cycles. When everyone thinks 'the market is safe, housing prices will always rise,' that is precisely the moment of highest risk. The Minsky Moment reminds us: do not be lulled by long-term calm; proactively deleverage (reduce debt) during booms, rather than being forced to deleverage during a crash.

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Minsky proposed that long-term prosperity and the accumulation of leverage make the financial structure fragile. Once confidence reverses, asset sales and deleveraging reinforce each other, triggering a sudden collapse—the 'Minsky Moment.'

MINIMUM ACTION

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Source support: Explicit

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    en.wikipedia.orghttps://en.wikipedia.org/wiki/Minsky_momentZH · Explicit
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