Irrational Exuberance

This post is to examine the meaning and idea of irrational exuberance, a term first used by Alan Greenspan in a speech regarding the state of the U.S. market in the late 1990s (1996 was when the speech was delivered). To be honest, I’ve had a difficult time trying to understand what was meant and what this means, and most importantly why it exists. So, I’m going to break it down:

Wikipedia provides the following under the definition of irrational:

“Factors which affect rational behavior include:

• stress, which in turn may be emotional or physical
• the introduction of a new or unique situation
• intoxication
• peers who convey irrational thoughts as necessary idiosyncrasy for social acceptance”

Now exuberance, or definitions of exuberant (from Dictionary.com) (since it’s hard to find a decent definition of exuberance- COME ON MERRIAM-WEBSTER!):

• “effusively and almost uninhibitedly enthusiastic; lavishly abundant
• abounding in vitality; extremely joyful and vigorous.
• extremely good; overflowing; plentiful
• profuse in growth or production; luxuriant; superabundant”

So, why the economy is fucked right now:

Because of stress to make money for corporations/stock-holders/themselves, the introduction of sneaky ways to make money (sub-prime loans, derivatives, and other financial words and ideas I do not understand- and the ones I do are thanks to “This American Life”), the intoxication of greed, and the normalcy of class division and financial abuse of Americans, we find ourselves fucked. Irrational exuberance is the lack or reason in financial institutions who act in attempt to create a false world of limitless money and resources for their (the rich) and only their use for profit and gain.