The market crisis dejour - throughout time, financial markets have followed a crowd mindset. The more heated a market gets, the more people want to jump in, and the higher the prices are driven.
This bubble has occured throughout history and the cycles can be studied consistently. Professor Watson teaches business strategy and the role in the market economy. Regardless of whether we want to think about recent credit markets which have Broke, these events are not original. They have routinely occurred throughout time.
One of the most talked about historical markets that popped was Amsterdam’s Tuplip market. We can study the Tulipmania of the tulip market that burst in 1637 as a popularly reported historical account of a economy that overheated.
Tulips were originally brought from Turkey in the early 16th century. As new “varieties” of tulip bulbs were sold, competition intensified and their value soared. One apparently rare variety was the Semper Augustus which reached values in excess of 1,000 florins per single bulb in 1623. This price exceeded more than six times the average annual income.
This market mania continued - and ten years later the price had risen another ten times. At the market peak, the price of a single Semper Augustus tulip bulb reached 10,000 florins - the value of what it cost to acquire 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 valuations. Within weeks, the market value crashed and many of people were left in economic ruin.
Throughout history - we have observed similar bubbles reoccur. As the crowd mentality continues to get more excited, those contrary views become less and less popular to be heard. Are any of the recent market bubbles any different? In modern environment of PC speech, are the contrarian voices that stand up for morality, ethics, and integrity any different? Throughout time, these contrarian voices have been ridiculed and ignored. But the market for products and the market for ideas has a way of eventually 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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