The sentiments prevails/surfaces and all participants in market tend to make hey in sun shine ,And much about rationality is forgotten ,even institutional players knowingly or unknowingly driven by vested interests of more commission or compulsion to show better results or confidence that they may exit before bubble appears and burst encourages more and more irrationality.
The currencies of economies suppose to /used to have their value on their strength ,and its all segment strong enough to thwart any invasion and to benefit from competition and multiple products thereby fostering innovation.
Recently some economies are pumping money with zero interest rates to bolster economies,ones saving is earning nothing at zero interest rates,one need not to save but spend to generate demand and ones welfare is protected by govt through their social security plans ,the money is printed and more money comes in hand of people ,yet no inflation rises ,nor more debts level burdens ,they never took of flight that may necessitates safe landing.
The markets are rational more to the extent of prevailing situations and inherent strength and dynamics may change slightly when some real competitive power may emerge on horizon.
The market is play ground of multiple forces with added psychology,and they have to behave according to impetus of particular time,when there is no direction,weaker are more weak and not able to initiate much reforms to generate some goodwill and real break through and some others too concerned for their safety skid to take mantle ,as if hegemony of some is made permanent by others through their continued dithering,market swings according to conditions/whims of its riders.
A fictional newspaper contest was created by lord keynes to describe the rational behavior in stock market -as per the contest ,participants have to choose a set of six faces from photographs of woman that are the most beautiful faces correctly and price was there ,who chooses the same correctly,
Some may choose faces as they prefer ,the other one to boost their chances may think about majority perception of beauty and then make decision according to their understanding of public perception ,so that their chances of winning increases.
As wrote by keynes-it is not a case for choosing the faces that to the best of ones judgement,are really the prettiest .,nor even those that average opinion genuinely think the prettiest ,we have reached the third degree where we devote our intelligence to anticipating what average opinion expects the average opinion to be ,and there are some,i believe ,who practice the fourth,fifth and higher degrees.
it implies that vote should not go to the face that is perceived to be beautiful but the one perceived to be perceived as most beautiful .but here lies the duplicacy of present era ,where the intelligence has grown out of proportion,and the element of politics,hypocrisy is embedded in it,
The present day it is more so believed that it is rational to believe that man is not irrational,abnormality is not so abnormal.the factors like greed and fear that drives behavior of individual and of market to a big extent