Instability in the financial system is a byproduct of speculative excess from "summary" of A Short History of Financial Euphoria by John Kenneth Galbraith
Speculative excess is the breeding ground for financial instability, a fact well known to those who have studied the history of financial euphoria. When individuals and institutions engage in excessive speculation, they create an environment that is ripe for instability. This is because speculation often leads to price distortions and unsustainable trends in the financial markets. During periods of speculative excess, investors tend to abandon rational decision-making and instead follow the herd. This herd mentality can result in the formation of asset bubbles, where prices are driven to unsustainable levels by the collective actions of speculators. These bubbles inevitably burst, leading to sharp corrections in asset prices and widespread financial instability. The after...Similar Posts
Behavioral finance principles are relevant in currency trading
Behavioral finance principles provide valuable insights into the behavior of market participants, including currency traders. T...
Dividends can provide steady income
The concept of receiving dividends from investments is an important one for investors seeking steady income. Dividends are paym...
Competition fosters innovation
The concept of competition fostering innovation is a fundamental principle in economics. When firms are faced with competition ...
Stock prices are not random
Stock prices are not random. This simple statement has profound implications for our understanding of financial markets. The ra...
Markets exhibit collective behavior
The concept of markets exhibiting collective behavior is fundamental to understanding the dynamics of financial markets. It is ...
Mark Baum recognized the flaws in the system
Mark Baum’s keen eye for detail and his relentless pursuit of the truth led him to a startling realization: the financial syste...
2008 financial crisis
The financial crisis of 2008 was a calamity of epic proportions that shook the very foundations of the global economy. It was a...
Asset prices can be influenced by market speculation
Market speculation can have a significant impact on asset prices. Speculation refers to the act of trading assets based not on ...
Technology has revolutionized financial services
Technology has transformed the financial services industry in recent years. With the advent of new technologies, such as artifi...
Excessive borrowing amplifies the impact of financial euphoria
The financial world is a place where emotions often run high. When people see others making money, they want to get in on the a...