Financial production and the subprime mortgage crisis

Abstract

The causes of the 2007-8 subprime crisis continue to be the subject of much debate, with explanations ranging from de-regulation and fraudulent behavior to global imbalances and rising inequality. However, a comprehensive analysis of the endogenous forces that made the crisis inevitable has yet to be presented. This paper offers a ‘structural’ interpretation of the crisis by synthesising insights from conventional financial economics and the Minskyian and Schumpeterian literature.