# Minsky Financing Stages Hyman Minsky's test for a bubble: can the borrower's cash flow pay its debts? | Stage | Pays interest | Pays principal | |---|---|---| | Hedge finance | Yes | Yes | | Speculative finance | Yes | No. Must roll the debt. | | Ponzi finance | No | No. Needs new money or rising prices. | ```mermaid flowchart LR H["Hedge<br/>cash flow covers all"] --> S["Speculative<br/>must refinance"] S --> P["Ponzi<br/>must raise new capital"] P --> M{{"Minsky moment<br/>new money stops"}} M --> D["Forced selling<br/>prices fall"] ``` - Stability breeds instability. Good years invite more debt. - A Ponzi borrower is safe only while prices rise and lenders stay open. - Current use case: [[AI Bubble - Ponzi Finance Stage]]. ---- tags: #boat #investing #economics links: [[Asia Macro MOC]] [[Stock Market Bubbles]] [[Economic Machine]] [[AI Bubble - Ponzi Finance Stage]]