Quote:
Originally Posted by nomadking
On the other hand, if potential investors get scared off from investing in certain countries, they are more likely to invest in other more 'secure' countries(eg UK?) instead
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Spain, Ireland and Iceland were deemed 'secure' just a few years ago. The problem is that doubt simply breeds more doubt and coupled with the actions of predatory speculators (such as was the case in our very own ERM debacle) that can cause mayhem. You only have to look at the contrasting economic views of the UK to see that there are those who feel the UK is far from a secure bet and there's a great deal of bad news to come.
Overconfidence fuelled the dotcom boom and housing bubble. Lack of confidence, however, can cause fundamentally sound businesses to be driven to the wall or a run on the banks as was seen with Northern Crock. It can become self-fulfilling.