Bankers' self-interest vs market equilibrium

From that man again:

It is the self-interest of the butcher and baker that leads to the provision of meat and bread. This dictum, propounded by Adam Smith, has led to the proposition that the pursuit of self-interest leads to the achievement of market equilibrium; the neoclassical results follow from the effects in markets of action based on self-interest. It is in the self-interest of bankers to make loans, to spread the use of their services, and it is in the self-interest of investors to use bankers' services as long as the price of capital assets exceeds the supply price of investment goods. Whereas in commodity production the process of supply generates income equal to the market value of supply, in financial markets with responsive banking the demand for finance generates an offsetting supply of finance. Furthermore, if the supply of finance exceeds the demand at the current relative price of capital assets and investment output, the excess supply will push up the price of capital assets relative to the supply price of investment output, and this will increase the demand for investment and therefore finance.

In a world with capitalist finance it is simply not true that the pursuit by each unit of its own self-interest will lead an economy to equilibrium. The self-interest of bankers, levered investors, and investment producers can lead the economy to inflationary expansions and unemployment-creating contractions. Supply and demand analysis - in which market processes lead to an equilibrium - does not explain the behaviour of a capitalist economy, for capitalist financial processes mean that the economy has endogenous destabilizing forces. Financial fragility, which is a prerequisite for financial instability, is, fundamentally, a result of internal market processes.