Financial innovation often outpaces regulatory oversight, leading to instability from "summary" of A Short History of Financial Euphoria by John Kenneth Galbraith
One of the recurring themes in the history of financial euphoria is the phenomenon where financial innovation moves ahead of regulatory oversight. This mismatch between the rapid pace of financial innovation and the slower pace of regulatory adaptation often leads to instability in the financial system. In times of financial euphoria, market participants are driven by the promise of quick profits and are eager to embrace new financial instruments and practices. These innovations can be highly complex and opaque, making it difficult for regulators to fully understand and oversee them effectively. As a result, regulatory frameworks may struggle to keep up with the pace of change in the financial markets. The lack of e...
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