Contact Us
Sign In / Sign Up for FREE
Go to advanced search...

Contrast Mackays Tulip Bulb story with the US housing market of the past 45 years - Essay Example

Comments (0) Cite this document
Considering the current state of the world economy, when the financial markets are deemed to be unexceptionally rational and digitized, the possibility of large scale market fluctuations driven by mass euphoria and idiosyncrasies seems to be utterly anachronistic…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER91.8% of users find it useful
Contrast Mackays Tulip Bulb story with the US housing market of the past 45 years
Read TextPreview

Extract of sample "Contrast Mackays Tulip Bulb story with the US housing market of the past 45 years"

of the of the Concerned 22 November 2008 Mackay's Tulip Bulb Story and the US Housing Market Considering the current state of the world economy, when the financial markets are deemed to be unexceptionally rational and digitized, the possibility of large scale market fluctuations driven by mass euphoria and idiosyncrasies seems to be utterly anachronistic. Still, the truth is always stranger then fiction. Media reports and the editorials in the popular publications, time and again point towards the fact that bubbles are a cardinal aspect of the contemporary economies, and people do get swayed by enticing perceptions and doubtable possibilities of free lunches. The recent credit crunch bothering the US economy in particular and the world economies in general, unleashed by subprime mortgages amply reveals the susceptibility of markets to speculative fads and misinformed human avarice and greed.
In the given context, Mackay's 'Tulip Bulb' story published in his book 'Extraordinary Popular Delusions and the Madness of Crowds' seems to be highly relevant. Infact the given narrative is a crystal clear example of a debilitating dichotomy between the prices of a coveted asset and the market fundamentals (Garber 14). The story is based in the year 1559, when the tulip bulbs became a priced commodity in Holland. Infact tulip bulbs were widely traded in the local market exchanges and the people went to the extent of stretching their speculative propensities far beyond their means and started investing in the tulips bulbs that sometimes fetched a price as high as 2,000 guilders. This obsessive herd mentality was totally oblivious of the pragmatic market realities and was solely driven by mass instinct (Peers 29). Eventually, in February 1637, the tulip bubble busted and brought the Dutch economy down to its knees.
The story being discussed certainly draws one's attention to the housing and real state bubble that dominated the US economy in the last five years. Owning one's own home, which was considered to be an undeniable part of the American Dream, soon became an obsession with the masses. People, driven by the long term profitable prospects of the housing market, started purchasing houses even at the cost of borrowing money from the banks. The whole banking and financial system started revolving around this novel mass fetish. Banks and mortgage firms went to the extent of extending loans to the people with unsound or dubious credit standing. The investors blindly invested in the bonds and hedge funds that were primarily used to make investments in the mortgage purchases in the US. Sadly, the housing market crashed in the mid of 2007. The subprime housing loans which constituted a manageable 5 percent of the total housing loans in 1994 rose to a scary figure of 20 percent in the year 2005 (Economy Watch). Such massive losses shook the investors' confidence in the financial markets and pushed the world economy in a precarious situation.
There is no denying the fact that people seldom learn from history, and such financial blunders will continue to occur, despite the existence of a plethora of examples pertaining to the busting of such misdirected economic bubbles.
Works Cited
Garber, Peter M. "Digging for the Roots of Tulipmania". Wall Street Journal 188
(1988): p.14
Peers, Alexandra. "Investors' Worries in Turn Heighten Volatility of Market".
Wall Street Journal (Oct. 23, 1987): p.29
"US Subprime Mortgage Crisis 2008". Economy Watch. 22 Nov. 2008 Read More
Cite this document
  • APA
  • MLA
(“Contrast Mackays Tulip Bulb story with the US housing market of the Essay”, n.d.)
Contrast Mackays Tulip Bulb story with the US housing market of the Essay. Retrieved from
(Contrast Mackays Tulip Bulb Story With the US Housing Market of the Essay)
Contrast Mackays Tulip Bulb Story With the US Housing Market of the Essay.
“Contrast Mackays Tulip Bulb Story With the US Housing Market of the Essay”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Contrast Mackays Tulip Bulb story with the US housing market of the past 45 years

Australia Housing Market

... market faces both situations since it is likely that one seller is approached by many buyers and not the other way round. The shortage in housing systems as compared to the growing population is responsible for this. Real estate auctioning in Sydney follows strict procedures, which help ensure the buyers capability to purchase the property. Before an individual is allowed to bid for a property at auction, it is mandatory that he/she registers with the auctioning agent who keeps the client’s details confidential. Generally, property auctioning in Australia is public as the bidders display their registration cards in the process of bidding. They use the open ascending bidding process where the prospective buyers bid one against the other...
3 Pages(750 words)Admission/Application Essay

Changes in US for the Past 27 Years

... Changes in U.S for the past 27 years Francis Imbuga, the of the play Aminata, said that change is like rest and an unavoidable in everyone’s life. Rapid change in technology has brought diverse effects to individual’s lives. Change comes in succession and is bond to happen in everyone’s life. How an individual approaches the changes in life becomes a question at hand. Changes that arise in an individual’s life may either be social, economically, or politically allied. Change may either have optimistic or pessimistic impacts in an individual’s life. U.S is one amongst the country’s that have undergone change with time. This paper compares intelligibly how life used to be for an American citizen 27 years ago and how life is today...
3 Pages(750 words)Essay

Housing Market in U.S

The bubble finally bursts. In housing bubble, very low interest rates and a consequent loosening of credit underwriting standards attract many borrowers in the market. In this case, a decline in demand due to high interest rates and a tightening of credit standards leads to bursting of the bubble. This paper discusses in depth about the rise and fall of the housing market in U.S. and its impact in the society. Scholarly research depicts that an economic bubble is difficult to identify with the exception of in hindsight. However, a number of cultural and economic factors have led to justification of the argument of several economists that a housing bubble existed in the U.S. As an economic bubble, the United States housing bubble...
6 Pages(1500 words)Essay

Housing Market in Australia

Bourassa (1996) has stated that the measures required for identifying the affordability of housing-ownership are primarily based upon the accumulated data but it is required to ignore the distribution of wealth and income as well as the ranges of housing prices. For analyzing the trend of housing pattern in Australia, Bourassa (1996) builds a study based upon the previous research of Grigsby and Rosenburg. The study then proposes a method of Borrowing Constraint. The method of Borrowing Constraint was applied from the year 1989 to 1990 for household survey data for Melbourne and Sydney, Australia. The results concluded that there are hypothetical changes in interest rates and deposit requirements are kept a minimum. Along with the...
6 Pages(1500 words)Literature review

Housing Market

... relationship between house market prices and the environmental risk. 8. The starting point of all hedonic analysis if the presumption of equilibrium in hedonic markets - salary and rents are adjusted in such a way that people stay indifferent in what location they are living and working (Mler, 1977). Another problem is that where the mobility between different regions is limited, market segmentation develops. Therefore, the hedonic price function will not be fixed across different areas and the results will be biased (Strazheim, 1974). 9. In the article, the author includes table about the definition of the variables used in the regression as well as characteristics of the boroughs and metropolitan areas in Great Britain. A study...
6 Pages(1500 words)Essay

Clothing Retail Market in General

The industry is оverwhelmed with cоmpetitiоn frоm cоmpаnies which hаve invested in hi-tech mаchinery leаding tо greаter efficiency оr hаve plаced their prоductiоn tо fаctоries in cheаp lаbоur cоst cоuntries tо prоduce their prоducts. Hоwever, mоst pаrt оf the cоmpаnies in this sectоr mаke nоt very high prоfits. Tо increаse the mаrket shаre in this аrenа is nоt аn eаsy tаsk, аnd therefоre it needs а greаt deаl оf endeаvоur, knоwledge, аs well аs energy аnd mоney.
Clоthes retаilers fаll intо twо brоаd cаtegоries: firstly, thоse selling оwn-brаnd clоthing аnd, secоndly, thоse selling third-pаrty weаr. Mаjоr retаilers such аs Mаrks & Spencer аnd the Аrcаdiа Grоup аre gооd exаmples оf the first grоup, аs аre chаin оperаtiоns s...
18 Pages(4500 words)Research Proposal

Starbucks in Chinese Market

In the year 1996, the coffee giant marked its global presence. Up until 2004, the Chinese government prohibited Starbucks to operate its own stores in China. As a result, the coffee giant enters the Chinese market by joint-venturing with Chinese food and beverage companies and licensing other companies to own and operate its stores--differs from its domestic approach. But the company was able to easily overcome its initial obstacles and marked its presence in China very quickly and successfully with great brand recognition and customer satisfaction. The company also tailors its stores to match the local atmosphere. This is a transnational strategy. “For example, the Starbucks strategy in Shanghai is to attract middle to high...
7 Pages(1750 words)Case Study

The Challenges of Foreign Market

Any multinational company is exposed to risks such as change of foreign currency exchange rate, commodity prices, and interest rates because it denominates its transactions in foreign currencies. That’s why there is also some uncertainty in future earnings, liabilities and assets values.
Therefore, before taking a decision on the country of entry, a profound analysis of its current political and economical situation is to be performed. According to Kotler and Armstrong (351-361), a decision on whether to enter a foreign market should be based on a profound analysis of potential risks and opportunities, as well as the company’s internal resources.
The company is a Limited Liability that exports roasted and gro...
11 Pages(2750 words)Case Study

Public Relations and School Administration: The Jena Six Story

The infamous Juvenile Correctional Centre for Youth is located in Jena, with the institution closing after merely 2 years of its opening. The closing of the institution was owed to prevalent brutality and racism. One of the scandals they were involved in was the choking of black juveniles during a meeting with a lawyer. The guards also paid inmates for them to wrestle and fight with each other for their entertainment and also laughed at teenagers who are trying to commit suicide inside the jails (Witt, 2007).
At one time, district boundaries lines had been drawn to establish or maintain white-non white separation. It was in the last 20 or so years that nonwhites had begun to move into several areas; Jena for one, previously p...
11 Pages(2750 words)Term Paper

Women in American Politics: Past and Future Challenges

The official political role of women in the colonial period was not definite at all. Political rights were founded profoundly on ascribed status such as birthrights and on achieved status such as property. Religion also contributed in determining who could and could not play a part in politics. There was no steady and widespread difficulty in the participation of women in political life, yet only a small number of women voted in England and North American colonies, and hardly any women participated in politics to the degree of putting into effect political influence (ibid). In reality, the minority had any public office at all in England, and no women can be recognized as holding elective political office in the colonies.
19 Pages(4750 words)Research Proposal

Oil Prices by OPEC and Market Fundamentals

Market failure is defined as the inefficient allocation of resources by the market, the free market is considered to optimally prices and resources in the production of goods and services, and this is because the price and quantity produced are determined by market forces which include the demand and the supply. The control of prices by a firm or an organization in the market results in market failure, therefore OPEC leads to market failure due to its nature in the market.

OPEC was formed in 1960 by 5 oil-producing countries which include Venezuela, Saudi Arabia, Kuwait, Iran and Iraq, The aim of this organization was to unify petroleum-producing countries in order to realize fair and stable prices of oil .other oil-pro...
6 Pages(1500 words)Report

The Effects of Financial Crisis on Supplier Selection Criteria of the Oil and Gas Industry Equipment Market

It is a difficult task to find those vendors who not only have the adequate quality and quantity of the needed raw materials but who also have an attitude of efficiency and display commitment to customer service (Sonmat, 2006). Further, organizations also strive to locate and select vendors who can be depended upon for long term relationship.

The number of factors or attributes desired from the vendor is vast, and different organizations and different industries place different importance on the attributes (Sonmat, 2006). Some of the vendor attributes may gain importance owing to the nature of the industry, for example, in the case of consumer perishables suppliers, like fresh vegetables or fruits, the buying firm would...
20 Pages(5000 words)Literature review

Identification of problems in the Criminal Justice System of the US

They are on trial and will be dealt with fairly. These laws ensure that no one, even if he or she has committed a crime is abused or punished cruelly.
Following the history of civilization like in china, we see the traces of systems for Criminal justice in order to provide safety for the citizens. Evolving through the years laws have been modified and changed to form the system that we know today.
 From its start, the “U.S. criminal justice system” has advocated the idea of “checks and balances”. To avoid dictatorial rule, the people who founded this system in such a way that one person was not given control or authority completely to punish the criminals. The idea of assigning a ‘jury...
6 Pages(1500 words)Assignment

Contrast of Two Explanations of Social Disorder in Contemporary UK Society

As the process of urbanization takes off and more people start residing in major cities, the fissures start to appear within the apparent harmonious co-existence. There are several reasons why disorderly conduct on part of individuals and groups takes place. Sociologists have proposed numerous theories explaining this phenomenon.

Erving Goffman was an astute observer of society, who immersed himself in the social environment which he was studying. He carefully observed and recorded the ways in which people’s behavior and interpersonal interactions are carried out in everyday life. He notes that “people perform their social roles and, as they do so, they produce social order through their actions and the regu...
6 Pages(1500 words)Article

Foreign Market Entry and Diversification

In 1990 a completely new trend was found as the domestic companies began to expand their business in a foreign market. Belgian company would be a great example as the company acquired breweries in 20 different countries. In 2004 two of the biggest breweries in the world, Interbrew and AmBev decided to merge with each other and the largest brewery in the world was created. This merger and acquisition strategy became a popular trend and it is reflected from the list of the top breweries which include SABMiller, Anheuser-Bush and InBev.

However, some of the recent trends have prompted the prediction that consumption of beer will go down in some of the European countries like France, Spain, and Germany. The threat of such a...
7 Pages(1750 words)Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Contrast Mackays Tulip Bulb story with the US housing market of the past 45 years for FREE!

Contact Us