The euphoria phase of financial bubbles is followed by a painful reckoning from "summary" of A Short History of Financial Euphoria by John Kenneth Galbraith
The financial history of mankind is filled with episodes of euphoria. These moments are characterized by an irrational exuberance that drives individuals to believe in the possibility of easy wealth. The euphoria phase of financial bubbles is marked by a collective mania that engulfes investors, convincing them that the good times will last forever. During this phase, asset prices soar to unprecedented levels as investors rush to take advantage of what seems like an endless opportunity for profit. People become blinded by greed and lose sight of the underlying realities that govern the financial markets. They abandon caution and prudence, instead embracing a sense of invincibility that leads them to take increasingly risky bets. However, the euphoria phase is not sustainable. Eventually, the irrational exuberance gives way to a painful reckoning. The bubble bursts, and reality comes crashing down on investors who are left holding overvalued assets. The sudden realization that their investments are not worth what they once thought sparks panic selling and a rapid decline in prices. The aftermath of the euphoria phase is marked by widespread losses, bankruptcies, and economic downturns. The reckoning is a sobering reminder of the dangers of unchecked speculation and the importance of maintaining a rational perspective in the face of market euphoria. It serves as a cautionary tale for future generations, highlighting the cyclical nature of financial bubbles and the inevitable consequences of irrational exuberance.
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