Risk Is Everyone 's Best Friend And Worst Nightmare

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Risk is everyone’s best friend and worst nightmare. Risk, in all regards, brings excitement to life. Whether in the form of going for a new job, making an investment, or driving a little bit faster than you should on the highway, humans love the thrill of pushing the limits of what they can do—we love the possibility of failure; it makes us feel a sense of accomplishment. It is this factor that makes risky things enticing on an emotional level. The other component necessitating risk is the economic aspect. To illustrate the necessity, imagine a world without risk, where we could succeed in everything. This would be wonderful, except goods, money, etc. are scarce and therefore limited. Accordingly, “success” can run out especially in regards to financial decisions simply because there is not an infinite supply of money. Now, moving back to reality, a usually quantification of risk is that the greater risk of losing, the higher the potential gain and vice versa. The reason we do not find a perfect equilibrium as one would expect is because of the aforementioned human component—we all perceive expected values differently, utilizing different heuristics from minimizing potential losses to maximizing potential gains. This causes market fluctuations, instability, and the like. We will examine these principles in the context of the pre- and post-1971 financial system with regards to the risk, innovation, and implications of the leaving the Bretton Woods system.
The idea behind the

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