BY BSP DEPUTY GOVERNOR DIWA C. GUINIGUNDO

Exactly 21 years ago, in a speech delivered on 5 December 1996, then US Fed Chairman Allan Greenspan used the term “irrational exuberance” to warn investors that the spectacular rally in stock prices during the period could potentially signal that global stock markets were overheating. After these words were spoken, stock markets all over the world dropped simultaneously and yes, precipitously. Greenspan became some kind of a prophet, his speech an explicit warning about market overheating.

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