...the crises will keep getting bigger. What happens in each cycle is the Fed validates what the banks did in the runup to each crisis by guaranteeing that the folks who bought the deals, whatever they are, will be made whole. In this case the damage was so big the US government itself got into the business of guaranteeing the deals.
It isn't actually inevitable, it just seems like it is. His recommendations for ending the cycle were (these will sound very familiar): breaking up the big banks, and being unfriendly, rather than friendly, towards financial innovation. In other words, heavily regulate the financial sector and keep an eye on anything they do to try to circumvent those regulations.
It's common sense stuff, the stuff that kept the financial sector stable from the thirties to the sixties. When Minsky wrote his books, he could already see Glass-Steagall being frayed at the edges. He didn't live long enough to see it get repealed and get this blowup we had, but he knew it was coming.
There will be another one, many years down the line. It will be even bigger than 2008. Maybe when it comes we'll finally get a reformer who will truly bring Glass-Steagall back. Until that happens, we'll be on this wheel of misfortune.
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