Economic Bubbles can Break – Is anything unique Today?

The marketing trauma dejour – throughout time, markets have followed a crowd mentality. The more heated a market becomes, the more individuals want to buy in, and the higher the prices are pushed up.

This social experience has occured throughout history and the cycles can be analyzed consistently. Professor G. Watson teaches entrepreneurship and the role of the market economy. Regardless of whether we want to analyze recent credit markets which have Broke, these scenarios are not new. They have consistently occurred throughout history.

One of the most talked about historical markets that popped was Amsterdam’s Tuplip economy. We can evaluate the Tulipmania of the tulip market that burst in 1637 as a popularly reported historical account of a industry that overheated.

Tulips were originally imported from Turkey in the early 16th century. As new “varieties” of tulip bulbs were discovered, competition intensified and their prices soared. One honestly rare variety was the Semper Augustus which reached prices in excess of 1,000 florins per single bulb in 1623. That price was more than six times the average annual income.

This economic mania continued – and 10 years later the value had risen another ten times. At the market height, the value of a single Semper Augustus tulip bulb reached 10,000 florins – the equivalent of what it cost to purchase a house in the middle of Amsterdam at the time.

Eventually the market peaked and there was no-one remaining who still wanted to purchase these tulips at such high prices. Within weeks, the market value crashed and many of people were left in financial ruin.

Throughout time – we have witnessed similar bubbles reoccur. As the crowd mentality continues to get more hyped, 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 politically correct speech, are the contrarian voices that stand up for morality, ethics, and honesty any different? Throughout history, these contrarian voices have been denigrated and ignored. But the market for products and the market for ideas has a way of always correcting itself from the heat of the crowd – and those extremist views tend to have their bubbles burst as the required correction occurs. Today’s market is no different.

One Man Tent

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