During periods of euphoria when overheating of the economy is not reflected in price forecasts, and the central bank tolerates continued monetary easing despite uneasiness that leads to a delay in taking preemptive measures, the result will almost inevitably be an excess in asset prices and economic activity.
Businesses have also substituted long-term debt for short-maturity debt to improve their balance sheet liquidity and to reduce the risk of rolling over funds. In addition, many firms - especially in the most troubled industries - have retired debt through equity offerings and asset sales, while others have used their  2  BIS Review 54/2004  growing profits to retire debt.