In a prior post on Theories of Great Depressions , the major input variable to the Systems Model was a "Shock". The shock could just be non-random "innovations" or it could be the outputs of some other system. Shocks themselves are "explained" by the Minsky-Kindleberger Framework, diagramed above. During periods of Economic Stability, lending institutions start to expand credit. Expanded credit leads to more Speculation. When some trigger (shock) comes along (e.g., a bank failure, war, etc.) sellers panic sets in which leads to an Economic Crash, implementation of tighter Regulation and a return to Stability. The Crash can be prevented if Lenders of Last Resort (Central Banks, Governments, or International Institutions such as the IMF) step in to provide liquidity and soak up non-performing assets. The model seems to fit the 1929 Great Depression , the 1997 Asian Financial Crisis , the 2000 Dot-com Bubble , the 2008 Global Financi...
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