Back to phase one. But the various phases of the cycle are not only affected by psychology - they affect it. During periods of inflation people are willing to take on risk. Yet, higher returns inevitably and invariably imply higher risks. Paradoxically, an inflationary period is a period of certainty.
Inflation is certain.
People tend to develop an ideological type of economics. Communism is a prime example, of course - but so is the 'Free Marketry' variant of capitalism, as practiced by the IMF and by central bankers. Deflation, on the other hand, is usually a much shorter period. People do not expect it to last. They fully expect it to be followed by inflation - they just do not know when.