The model developed in this paper describes and then
links together many of the characteristics of the global
financial crisis and previous crises. The procyclical expansion
of bank balance sheets during the upswing followed
by a contraction (over the long-term because during the
short-term, banks can avoid some FVA write-downs)
during the downturn is explained by the need to maintain
regulatory capital ratios and/or feedback effects both within
the financial sector and between the financial and real
sectors. In accordance with the doctrine of Minsky, a state