Economic Bubbles may Pop - Is anything original Today?
The financial crisis dejour - historically, financial markets have experienced a crowd mentality. The more heated a market becomes, the more people want to invest, and the higher the prices are driven.
This mindset has occured throughout history and the cycles can be studied consistently. Professor Watson teaches entrepreneur and the role in the market economy. Regardless of whether we want to think about recent technology markets which have Broke, these events are not new. They have consistently occurred throughout time.
One of the most discussed historical markets that burst was Amsterdam’s Tuplip market. We can study the Tulipmania of the tulip market that burst in 1637 as a popularly documented historical account of a industry that overheated.
Tulips were originally brought from Turkey in the early 16th century. As new “varieties” of tulips were introduced, competition intensified and their value soared. One honestly rare variety was the Semper Augustus which reached values in excess of 1,000 florins per single bulb in 1623. That price was more than six times the average annual income.
This market mania continued - and 10 years later the value had risen another ten fold. At the market peak, the price of a single Semper Augustus bulb reached 10,000 florins - the value of what it cost to buy a house in central Amsterdam at the time.
Eventually the market peaked and there was no-one left who still wanted to purchase these bulbs at such high prices. Within months, the market value crashed and thousands of people were left in economic ruin.
Throughout history - we have witnessed similar bubbles develop. As the crowd mentality continues to get more excited, those contrary voices become less and less popular to be heard. Are any of the recent market bubbles any different? In today’s times of PC speech, are the contrarian voices that speak up for character, ethics, and honesty any different? Throughout time, these contrarian voices have been ridiculed and ignored. But the market for products and the market for principles has a way of always correcting itself from the heat of the crowd mentality - and those extremist views tend to have their bubbles burst as the neccessary correction occurs. Today’s market is no different.
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