What Are the Similarities Between Holland's Tulip Mania and the U.S Housing Bubble? By: Gigi Cunniffe 8th Grade Mrs. Curry-Miller 11-30-17
Introduction
The Tulip Bulb Mania in Holland and the U.S. Housing Bubble were two of the most famous economic bubbles in history. These 'bubbles' affected the market and how people lived, because people who had a tulip …show more content…
The whole bubble starts out with investors. Investors become interested by a new paradigm, or plan, such as innovative new technology or historically low interest rates. This stage is known as Displacement. Prices then start to rise slowly at first, but soon gain momentum as more people buy the asset. During this phase, the Boom stage, the asset gains popularity. People fear of missing out, which furthers how fast the prices escalate. Later, in the Euphoria stage, caution about buying the asset is gone, and the price of it skyrockets. The theory that the price of an object isn't determined by its value, but the beliefs and expectations of the people buying them (a.k.a. the 'greater fool' theory) plays out everywhere. Once prices are about to reach a peak, the people that are smart with their money stop buying and selling and tales whatever profit that they have earned. Sometimes, though, it is hard to predict when the bubble will "pop". The last and final step of the bubble is Panic. Asset prices stop increasing, and descended as quickly as they rose. Investors realized the plummet in the asset prices and freak over what to do with the supply of it. Trying frantically to get rid of the asset, the sell their remaining supply at any price to earn profit. Shortly after, the bubble is gone, and the asset is claimed almost worthless. Background Info on The Tulip Mania and The U.S. Housing
Introduction
The Tulip Bulb Mania in Holland and the U.S. Housing Bubble were two of the most famous economic bubbles in history. These 'bubbles' affected the market and how people lived, because people who had a tulip …show more content…
The whole bubble starts out with investors. Investors become interested by a new paradigm, or plan, such as innovative new technology or historically low interest rates. This stage is known as Displacement. Prices then start to rise slowly at first, but soon gain momentum as more people buy the asset. During this phase, the Boom stage, the asset gains popularity. People fear of missing out, which furthers how fast the prices escalate. Later, in the Euphoria stage, caution about buying the asset is gone, and the price of it skyrockets. The theory that the price of an object isn't determined by its value, but the beliefs and expectations of the people buying them (a.k.a. the 'greater fool' theory) plays out everywhere. Once prices are about to reach a peak, the people that are smart with their money stop buying and selling and tales whatever profit that they have earned. Sometimes, though, it is hard to predict when the bubble will "pop". The last and final step of the bubble is Panic. Asset prices stop increasing, and descended as quickly as they rose. Investors realized the plummet in the asset prices and freak over what to do with the supply of it. Trying frantically to get rid of the asset, the sell their remaining supply at any price to earn profit. Shortly after, the bubble is gone, and the asset is claimed almost worthless. Background Info on The Tulip Mania and The U.S. Housing