Part 3/9:
Credit Expansion: In the initial phase, credit becomes easily accessible, leading to increased borrowing. Individuals, businesses, and governments seize this opportunity to borrow heavily, propelling an initial economic boom.
Euphoria and Leverage: As confidence grows with abundant credit, asset prices begin to soar. This stage sees escalating borrowing against stocks, businesses, and even property, as investors adopt more aggressive investment strategies believing that market conditions will remain favorable.
Policy Tightening: Central banks respond to overheating economies by raising interest rates. The result is a decline in borrowing, which constrains money supply and curbs growth. Prices begin to slump in all asset classes, including cryptocurrencies.