Animal Spirits

"Animal spirits" is a term coined by economist John Maynard Keynes to describe the emotional and psychological factors that drive investors' and consumers' decisions in the economy. It refers to the confidence, optimism, and emotions that influence economic behavior, often leading to market trends and economic cycles that might not align with purely rational decision-making. In the context of financial markets, animal spirits can cause booms and busts, as investors' moods swing from excessive optimism (leading to bubbles) to pessimism (leading to crashes).

Example

A surge in consumer confidence and optimism about the economy can lead to increased spending and investment, driven by animal spirits, even if underlying economic fundamentals haven't changed significantly.