Economic Bubbles that Break – Is anything different Today?
Posted by Thomas on January 19, 2012
The marketing trauma dejour – throughout history, financial markets have followed a crowd mentality. The more popular a market gets, the more individuals want to jump in, and the higher the prices are driven.
This bubble has occured throughout history and the cycles can be analyzed consistently. Professor G. Watson teaches business ethics and the role of the market economy. Regardless of whether we want to evaluate recent finance markets which have Pop, these fluctuations are not unique. They have regularly occurred throughout history.
One of the most reported upon historical markets that burst was Amsterdam’s Tuplip sector. We can study the Tulipmania of the tulip market that burst in 1637 as a popularly documented 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 introduced, competition intensified and their prices 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 wage.
This economic mania continued – and ten years later the price had increased another ten times. At the market height, the price of a single Semper Augustus bulb reached 10,000 florins – the value of what it cost to buy a house in the middle of Amsterdam at the time.
With time the market peaked and there was no-one remaining who still wanted to acquire these tulips at such high valuations. Within months, the market price crashed and many of people were left in economic ruin.
Throughout time – we have seen similar bubbles reoccur. As the crowd 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 modern environment of politically correct 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 politically correct views tend to have their bubbles burst as the inevitable correction occurs. Today’s market is no different.
Filed Under: Sports - Comments: Comments are off for this article