Explaining Positive and Negative Feedback Loops

<p>Today, we discuss Positive and Negative Feedback Loops. &nbsp;</p> <p><br></p> <p>🚀 Join the VIP Membership Group (Discord) today! ► https://fiveorlessfinance.com/ Feedback can be positive or negative.&nbsp;</p> <p><br></p> <p>Feedback refers to channeling of a system’s output back into the system as input that forms a circuit or feedback loop leading to a self regulating system. https://www.ncbi.nlm.nih.gov/pubmed/1758196 &nbsp;&nbsp;</p> <p><br></p> <p>Positive feedback: system output multiplied by a positive number. This amplifies, snowballs, a system’s behaviour. ex. Momentum or imitative behaviour. Positive stock gains lead to more positive gains as positive news feeds on itself, price declines lead to more price declines because of imitative effects. They build on each other. Trends go far above or below rational levels. Reddit stocks: stock goes up, more positivity, more following, more analysts, more media, stock goes up… more positive if more people, more amplified &nbsp;</p> <p><br></p> <p>Examples : - The price of Crude oil from 2007 – 2009. - “The survey findings suggest that Black Monday is best explained as a vicious circle – price decline feeding on previous price declines. There appear to be no other forcing events, other than previous price declines themselves, which large numbers of investors were focusing on that day that might have prompted so many to sell at the same time.” Robert J. Shiller, The Washington post, April 10, 1988 taken from Michael Lewis, - &nbsp;- - - Panic The story of Modern Financial Insanity p.67 - May 6, 2010 – “Flash crash” - Has interventions by Central banks and the Fed since 2008 to present created a positive feedback on liquidity?? &nbsp;Negative feedback: system output multiplied by a negative number. This has a dampening effect it drives output back to equilibrium, ex. A heating or cooling system, arbitrage. Positive/negative moves come back to their original price. Like heating in winter and cooling in summer to the same price… nothing feeds off itself, tendenc