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 past 45 years - Essay Example 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.