Boom Bust Boom Page #4

didn't wake people up, um, I don't know what will. ( yawns ) Where do we go from here? How do we deal

with these financial crisis? And one of the

most important first steps is understanding

where we've come from. Financial crises aren't some new thing

that we're going into now. We've had many financial crises. The 19th century is filled

with financial crises, and even the 18th and 17th

and 16th century, and when you start looking

at all these different examples of economies

and their financial systems

and their crashes, you start to get

a much better understanding of what financial crisis

is about. The seeds that were sown were the same seeds

that were sown in all previous crises. So, if we look to what works

and what doesn't, no better lessons are there

than those from history. Tulip Mania started back

in 1562, when a ship from Constantinople

docked in Antwerp. Aboard was a cargo of tulips, the first to be seen in Europe. Oh, tulips,

precious tulips I kiss you

with my two lips Make me healthy,

make me wealthy Tulips precious tulips The tulips proved

to be a sensation amongst the rich merchants

of Amsterdam, then embarking

on their golden era. The merchants

built grand houses surrounded by flower gardens, and the star of the show

was the tulip. Tulips grew in prestige

and popularity, and prices began to soar. By 1636, a tulip bulb

could be worth a new carriage,

two grey horses, and a complete harness. Some bulbs were reportedly

changing hands over ten times a day. It seemed like everyone

could make money if only they bought tulips. A kind of euphoria

gripped everybody. But, on February the 5th, 1637, it all came to an end. At a tulip auction in Haarlem,

in the Netherlands, only the sellers of tulip

turned up. There were no buyers. Harlem was at that time

in the grip of Bubonic plague, so perhaps that's why

no one wanted to go out

and buy tulips. But the damage was done. The bottom fell out

of the tulip market. Bulbs that had

commanded the price

of 5,000 guilders sold for fifty. This is what economists

call a bubble. Well, a bubble is

a financial episode in which the price of assets, whether it's tulips,

or equities, or gold, basically becomes

completely detached from any intrinsic value. Being in a bubble,

is like... yeah, it's a state

of extreme hope and

excitement and stupidity. And it can continue

for as long as people believe that there is something

magical or new about the valuation today. In every boom-and-bust cycle, there is a period

of exceptionalism. "This time, it's different. Everything is different." And, there's always

a cool excuse, and things like, "Well,

you know, our demographics

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