How the tulip mania burst the economic bubble (or do we scent chaos in the market?)

Scottish journalist Charles Mackay wrote a book called Extraordinary Popular Delusions and the Madness of Crowds in which he attempted to find some rationale behind the herd instinct which seems to bedevil markets. Sound familiar? Well, Charles Mackay published his findings way back in 1841 and although more recently some of his conclusions have been debunked, his basic ideas still attract support.

Mackay was writing about what many argue was the first “economic bubble” ... Tulip Mania ... which engulfed the Dutch economy in the 1630s. It centred around an exotic bulb brought from the Ottoman Empire which became a “must have” purchase in the fashionable salons of Europe, almost regardless of price. The inevitable happened; the price rose to the point at which the market collapsed.

Diagnosing the financial pandemic

... or why Wall Street’s problems could cause more than a sneeze across global markets.

When Canadian communications specialist Marshall McLuhan wrote about the rise of the global village in the 1960s, it seemed like a good idea at the time. The whole “village” concept of interdependency coupled with self help and a drive towards levelling out inequality was an attractive one.

What followed eventually was a drive towards global standards for good and services; cross-border brands which delivered wherever you lived; free trade as a matter of course; and the famous time/space continuum reduced by the increasing power and penetration of electronic communications. In fact many years before, Richard Cobden argued in 1843 that any law which hindered the free movement of goods “interferes with the wisdom of Divine Providence and substitutes the law of wicked men for the law of nature.” Strong stuff.