What caused both the Great Depression and the 2008 crisis?

Steve Keen

Mainstream economists completely missed what caused both the Great Depression and the 2008 crisis. Here’s what Hyman Minsky understood that they didn’t:

(a) The credit-unemployment correlation is -0.93: From 1991-2015, the relationship between credit (annual change in private debt) and unemployment was absurdly high. Any empirically-driven discipline would be asking “How do we explain this?” Mainstream economists completely ignored it.
(b) Capitalism is inherently unstable upward: The tendency to transform doing well into a speculative investment boom is the basic instability in a capitalist economy. As private debt rises, workers’ share of GDP falls, and the economy moves toward crisis.
(c) Government spending prevents collapse: The only reason 2008 wasn’t as bad as 1929 is that government is now 10 times larger (20-30% of GDP vs 2% in the 1920s). When unemployment rises, the deficit rises automatically, injecting money that stops complete collapse.
(d) We’ve demolished the safeguards: We undermined almost all the post-

Great Depression reforms intended to stop it from happening again. [US Fed chairman] Ben Bernanke gave Minsky just one paragraph, dismissing him for departing from “rational economic behaviour.”

I break down the mathematical model that predicted our current vulnerability in the a youtube discussion [1].

We ignored the warnings once. Are we doing it again?

1. https://www.youtube.com/watch?v=zr-v6glwC8Y
“A decade of despair: The great depression” top economist explains