Minsky’s financial instability hypothesis, accounting information and the 2007–9 financial crisis in the UK and US

This paper examines the financial crisis of 2007–9 in the UK and US in terms of the financial instability hypothesis (FIH), a theory of boom, bust and financial crises. It is shown that in a similar way to the crises of 1866 and 1987 (Barnes, 2007) the FIH provides an important depiction of the 2007–9 crisis and how it came about. However, it does not recognize: (1) the role of accounting information and how it may contribute to boom and bust and be used to change perceptions and mislead; and (2) the likelihood of fraud and financial swindles, all features of the 2007–9 crisis.