Market Bubbles may Pop – Is anything original Today?
The marketing trauma dejour – throughout history, financial markets have followed a crowd mindset. The more excited a market gets, the more people want to buy in, and the higher the prices are driven.
This bubble has occured throughout history and the cycles can be observed consistently. Professor G. Watson teaches corporate ethics and the role in the market economy. Regardless of whether we want to evaluate recent technology markets which have Broke, these scenarios are not original. They have consistently occurred throughout time.
One of the most popular historical markets that burst was Amsterdam’s Tuplip economy. We can evaluate the Tulipmania of the tulip market that burst in 1637 as a popularly known historical account of a industry that overheated.
Tulips were originally imported from Turkey in the early 16th century. As new “varieties” of tulips were marketed, competition intensified and their value soared. One apparently rare variety was the Semper Augustus which reached prices in excess of 1,000 florins per single bulb in 1623. This price was more than six times the average annual income.
This market mania continued – and ten years later the price had risen another ten fold. At the market peak, the value of a single Semper Augustus tulip bulb reached 10,000 florins – the value of what it cost to purchase 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 weeks, the market price crashed and thousands of people were left in financial ruin.
Throughout time – we have observed similar bubbles develop. As the crowd mentality continues to get more hyped, those contrary views 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 integrity 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 eventually correcting itself from the heat of the crowd mentality – and those extremist views tend to have their bubbles burst as the required correction occurs. Today’s market is no different.