Tulipmania, the dutch Tulip inflation and economic breakdown.
In light of the verry bullish market around steem, and cheerleading attitude around the coin amongst it´s users i decided on writing something that might be unwelcomed around here but might be helpful, at least interesting to some of you. and belive me this is not a doomsday prediction, but maybe a small warning and reminder of precoution. Also i would like to state that. i am a Steem, SteemPower and SteemDollar owner myself.
Economic Bubble;
A basic characteristic of bubbles is the suspension of disbelief by most participants during the "bubble phase." There is a failure to recognize that regular market participants and other forms of traders are engaged in a speculative exercise which is not supported by previous valuation techniques.
Also, bubbles are usually identified only in retrospect, after the bubble has burst.
Tulipomania
In 1593 tulips were brought from Turkey to Amsterdam The novelty of the new flower made it widely sought after and therefore fairly pricey. soon the tulips contracted a non-fatal virus known as mosaic, which didn't kill the tulip population but altered them causing "flames" of color to appear upon the petals.
The color patterns came in a wide variety, increasing the rarity of an already unique flower. Thus, tulips, which were already selling at a premium, began to rise in price according to how their virus alterations were valued, or desired. Everyone began to deal in bulbs, essentially speculating on the tulip market, which was believed to have no limits.
Bulb buyers began to fill up inventories for the growing season, depleting the supply further and increasing scarcity and demand. Soon, prices were rising so fast and high that people were trading their land, life savings, and anything else they could liquidate to get more tulip bulbs. the originally overpriced tulips enjoyed a twenty-fold increase in value - in one month!
Needless to say, the prices were not an accurate reflection of the value of a tulip bulb. As it happens in many speculative bubbles, some prudent people decided to sell and crystallize their profits. A domino effect of progressively lower and lower prices took place as everyone tried to sell while not many were buying. The price began to dive, causing people to panic and sell regardless of losses.
Dealers refused to honor contracts and people began to realize they traded their homes for a piece of greenery; panic and pandemonium were prevalent throughout the land.
This post was inspiered by Investopeda´s series of articles titled "The greatest market crashes" by Andrew Beattie , wich i reccomend anyone interested in economic history to read, it can be found here.
http://www.investopedia.com/features/crashes/
Hope you enjoyed the reading, and careful out there in the markets.