Excessive borrowing amplifies the impact of financial euphoria from "summary" of A Short History of Financial Euphoria by John Kenneth Galbraith
The financial world is a place where emotions often run high. When people see others making money, they want to get in on the action themselves. This leads to a sense of euphoria, a feeling that the good times will never end. It is during these times of heightened emotion that people tend to take on more debt than they can handle. They borrow money to invest in assets that seem to be going nowhere but up. This excessive borrowing can amplify the impact of financial euphoria, making the highs even higher and the lows even lower. In the midst of a financial boom, investors often believe that the rules of risk and reward no longer apply to them. They convince themselves that they are smarter than everyone else, that they have found the secret to making money in the markets. This overconfidence leads them to take on more and more debt, thinking that they can always pay it back later with their newfound wealth. However, when the inevitable crash comes, these investors are left scrambling to c...
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