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.
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. Thus, its nature is more transitory. Assured of low prices and preoccupied with economic survival people become strongly risk averse.