Economic stability is threatened by the boomand-bust cycle of speculative markets from "summary" of A Short History of Financial Euphoria by John Kenneth Galbraith
The boom-and-bust cycle of speculative markets poses a significant threat to economic stability. This pattern of euphoria followed by panic has been a recurring feature throughout financial history. Investors are driven by irrational exuberance during booms, leading to excessive speculation and inflated asset prices. This behavior creates a false sense of prosperity and encourages further risk-taking. However, this unsustainable growth eventually reaches a tipping point. The bubble bursts, triggering a sudden and severe market correction. Panic sets in as investors rush to sell their assets, causing prices to plummet. The euphoria of the boom quickly turns into despair during the bust phase. The consequences of these speculative bubbles are far-reaching. The rapid rise and fall of asset prices can destabilize financial markets, leading to widespread economic turmoil. Businesses may struggle to obtain f...
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