Do You Want to Buy a Tulip?

tulip-black.jpgIf after reading or hearing the recent economic news (for example, Jon Lansner’s The Big Orange Index, winter 2008), you are still not yet convinced that we are in a recession, then maybe you don’t believe we had a housing bubble. And if that is the case, maybe you don’t think that the downside of the housing bubble is dragging down the rest of the economy. For that matter, maybe you don’t believe in bubbles at all. If this is the case, I have a question for you: “Do you want to buy a tulip?”

Way back in 1600s there was this thing called Tulip Mania. Some of you have probably already heard of it. The world was going crazy for tulips. At one time, buyers were paying over 6 times the average yearly income for one tulip bulb? Talk about irrational exuberance! The thought was that the value of tulips would go up forever. A new paradigm for the old supply-and-demand model had been found. Or so was the thought at the time. Does this scenario sound familiar?

Much more recently we had the boom and bust. The same story: Many thought the market had found a new model. The old rules no longer applied. The price of stock would just go up, up, up. Never down. We were no longer part of a physical world that has limitations. What goes up never had to come down. These were the thoughts of the time. Now we have the housing bust. The Tulip Mania and lessons were not learned, and, unfortunately, many are suffering.

Some compassion is in order, but it may also be time to rethink our get-rich-quick mentality. A less manic approach to the economy would be more productive in the long run. We could accomplish this by putting more emphasis on what we have to contribute to the economy and then expect to be fairly compensated for our contribution. We all have some special abilities that we enjoy putting to use and would benefit the economy. Better to concentrate on this model of equal benefit than the get-something-for-nothing model.

And if after all this, you still don’t believe that our manic housing market of the last few years is the cause of our current housing and economic bust, then my question remains: “Do you want to buy a tulip?” I hear it’s the next big thing!