How this site computes the Minsky stage
Last updated October 20, 2026. Thresholds below are the ones the code uses today.
Hyman Minsky argued that stability breeds risk-taking, so finance drifts from hedge (income covers debt) to speculative to Ponzi-style (prices and new borrowing keep it going) until a shock causes a Minsky moment, a sudden collapse. He published no numeric gauge, so this site counts five public fragility signals and three triggers, with every threshold shown. The stage describes how fragile conditions are, not when a crash comes; the recession flag is the Sahm rule alone.
What are Minsky's stages?
| Stage | Meaning |
|---|---|
| Hedge | Income covers debt payments; valuations and borrowing are modest |
| Speculative | Optimism grows; more of the market relies on prices holding up |
| Ponzi-style euphoria | Prices and borrowing carry the market; it needs good news to keep going |
| Minsky moment | A trigger hits: spreads jump, volatility spikes, credit is pulled |
See the Minsky moment and Minsky's financial instability hypothesis for the theory.
Which signals are counted, and at what thresholds?
| Signal | Flagged when |
|---|---|
| Fragility: Shiller CAPE | 30 or more |
| Fragility: market value to GDP (Buffett indicator) | 150% or more |
| Fragility: equity risk premium (earnings yield minus 10-year Treasury yield) | below zero |
| Fragility: margin debt | up 20% a year or within 2% of its record |
| Fragility: high-yield credit spread | below 4% |
| Trigger: high-yield spread blows out | 5% or more, or up 1 point in about 3 months (63 trading days) |
| Trigger: volatility spikes (VIX) | 30 or more |
| Trigger: unemployment turns (Sahm rule) | 0.50 or more |
How do the signals become a stage?
| Stage | Rule |
|---|---|
| Hedge | 0 or 1 fragility signals flagged |
| Speculative | 2 or 3 flagged |
| Ponzi-style euphoria | 4 or 5 flagged |
| Minsky moment | 3 or more fragility signals flagged and at least one trigger firing |
The recession flag is separate and uses one number: the Sahm rule at 0.50 or more means a recession is signalled. It confirms a downturn; it does not predict one. A missing series is shown as no data and is never counted as a flag.
Where does the data come from, and what are the limits?
All eight readings come from this site's crash indicator data: FRED (St. Louis Fed) for credit spreads, the VIX, unemployment and Treasury yields, FINRA for margin debt, and Shiller's data for the CAPE. The thresholds are this site's mapping, not Minsky's, and a rule of thumb: valuations can stay stretched for years, and a Minsky moment needs a trigger that no gauge can time.
Frequently asked questions
Does Ponzi-style mean a crash is coming?
No. It means conditions are fragile: valuations and borrowing leave little room for bad news. Fragile markets can keep rising for a long time.
Why is the recession flag separate from the stage?
A Minsky moment is a market collapse; a recession is an economic downturn. They often overlap but are different events, so each has its own reading.
Who was Hyman Minsky?
An American economist (1919 to 1996) who developed the financial instability hypothesis. His work was rediscovered after the 2008 crisis, which many described as a Minsky moment.