The public confidence crisis dejour - historically, markets have experienced a crowd mentality. The more popular 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 Watson teaches entrepreneurial marketing and the role in the market economy. Regardless of whether we want to analyze recent banking markets which have Broke, these fluctuations are not original. They have regularly occurred throughout history.
One of the most popular historical markets that broke was Amsterdam’s Tuplip market. We can evaluate the Tulipmania of the tulip market that burst in 1637 as a popularly known historical account of a economy that overheated.
Tulips were originally imported from Turkey in the early 16th century. As new “varieties” of tulips were discovered, 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. That price was more than six times the average annual income.
This industry mania continued - and ten years later the value 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 acquire a house in central 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 value crashed and thousands of people were left in economic ruin.
Throughout time - 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 modern times of politically correct speech, are the contrarian voices that stand up for character, ethics, and honesty any different? Throughout history, these contrarian voices have been ridiculed and ignored. But the market for products and the market for principles has a way of eventually correcting itself from the heat of the crowd - and those extremist views tend to have their bubbles burst as the inevitable correction occurs. Today’s market is no different.
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