The narrative of prosperity blinds investors to the risks of speculative excess from "summary" of A Short History of Financial Euphoria by John Kenneth Galbraith
The narrative of prosperity is a powerful force that has the ability to blind investors to the risks of speculative excess. When times are good and the economy is booming, it is easy to become caught up in the excitement of potential profits and overlook the potential dangers that lie ahead. Investors are often driven by a sense of euphoria and optimism that can cloud their judgment and lead them to take on more risk than they can handle. In periods of economic growth, there is a prevailing belief that the good times will continue indefinitely. This belief creates a false sense of security and encourages investors to ignore warning signs that could indicate an impending crash. The narrative of prosperity feeds into this belief, painting a rosy picture of endless opportunity and prosperity. As investors become more and more convinced of their own invincibility, they are willing to take on increasingly risky investments in the hopes of reaping even greater rewards. This appetite for risk can lead to speculative excess, as investors chase after ever-higher returns without fully understanding or appreciating the risks involved. The narrative of prosperity also has a way of silencing dissenting voices and marginalizing those who raise concerns about the sustainability of current market trends. Critics and skeptics are often dismissed as pessimists or naysayers, while those who espouse the narrative of prosperity are hailed as visionaries and heroes. In the end, the narrative of prosperity can be a dangerous trap for investors, luring them into a false sense of security and leading them to take on risks that they may not fully comprehend. It is important for investors to remain vigilant and skeptical, even in times of economic growth, to avoid falling prey to the seductive allure of the narrative of prosperity.
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