The crisis dejour - throughout history, markets have followed a crowd mindset. The more popular a market gets, the more people want to buy in, and the higher the prices are pushed up.
This mindset has occured throughout history and the cycles can be observed consistently. Professor Watson teaches serial entrepreneurs and the role in the market economy. Regardless of whether we want to analyze recent stock markets which have Broke, these events are not new. They have regularly occurred throughout history.
One of the most popular historical markets that popped was Amsterdam’s Tuplip sector. 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 imported from Turkey in the early 16th century. As new “varieties” of tulips were marketed, competition intensified and their value soared. One legitimately rare variety was the Semper Augustus which reached prices in excess of 1,000 florins per single bulb in 1623. That price exceeded more than six times the average annual income.
This economic mania continued - and ten years later the price had increased another ten times. At the market height, the value of a single Semper Augustus bulb reached 10,000 florins - the equivalent of what it cost to acquire a house in central Amsterdam at the time.
Eventually the market peaked and there was no-one remaining who still wanted to acquire these bulbs 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 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 environment of politically correct speech, are the contrarian voices that stand up for morality, ethics, and honesty any different? Throughout time, 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 - and those politically correct views tend to have their bubbles burst as the inevitable correction occurs. Today’s market is no different.