I know that the clergy of the SEC don’t have much reason or opportunity to give themselves to financial euphoria. But we might find a sermon or two in a book which is being much recommended at the moment: JK Galbraith’s ‘A Short History of Financial Euphoria.’ Basically it’s the story of the euphoria which precedes the inevitable crash – and all human nature is in there – a sort of Palm Sunday and Good Friday of economics.
He suggests that there is a pattern – a mass psychosis of financial euphoria which precedes the crash. People make money and borrow more money to make more money. They suspend disbelief .. they acquire a vested interest in error .. vested interests rubbish any alternative thinking. He quotes WalterBagehot, ‘People are most credulous when they are most happy.’
Interesting too the comments on leadership of financial institutions – the bureaucratic mind is predisposed to select for leadership those with the most predictable ideas and then surrounds them with others who agree and do not criticise.