The Financial Instability Hypothesis, proposed by economist Hyman Minsky, argues that prolonged periods of economic stability encourage increasingly risky financial behavior. This eventually leads to financial crises as debt levels become unsustainable, a process known as a 'Minsky Moment.'
Example
“Years of low interest rates and rising asset prices led investors to take on excessive leverage — a textbook example of Minsky's Financial Instability Hypothesis playing out before the eventual market crash.”