Do you know a stockbroker or financial professional that has suffered losses recently? Cheer him up with some tulips in NYC imported from Holland! Here is the story and why things no matter how bad they seem can always be worse…
As we celebrate the beginning of tulip season for yet another magnificent year… I share with you a story about this amazing flower that is sure to surprise you. The financial bubble that was caused by tulip bulbs. It took place way before the bubble in the stock market, the housing market or any other bubble and subsequent bubble that you may know of.
It was tulip mania or tulpomanie to the Dutch. This was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then suddenly collapsed.
At the peak of tulip mania, in February 1637, some single tulip bulbs sold for more than 10 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble (or economic bubble).The term “tulip mania” is sometimes used metaphorically to refer to any large economic bubble.
The event was popularized in 1841 by the book Extraordinary Popular Delusions and the Madness of Crowds, written by British journalist Charles Mackay. According to Mackay, at one point 12 acres (5 ha) of land were offered for a Semper augustus bulb. Mackay claims that many such investors were ruined by the fall in prices, and Dutch commerce suffered a severe shock. Mackay’s book is a classic that is widely reprinted today, his account is contested.
Research on the tulip mania is difficult because of the limited data from the 1630s—much of which comes from biased and anti-speculative sources. Although these explanations are not generally accepted, some modern economists have proposed rational explanations, rather than a speculative mania, for the rise and fall in prices. For example, other flowers, such as the hyacinth, also had high prices on the flower’s introduction, which then fell dramatically. The high prices may also have been driven by expectations of a parliamentary decree that contracts could be voided for a small cost—thus lowering the risk to buyers.
All we want is tulips in a vase to enjoy them all season long! They still grow in Holland. Today tulips are a harmless flower that brings much joy and are considered by many the first sign of springtime. They are commercially available as cut flowers from September to May. In the off-months you can get them, but the quality is not great and they are pricier than at their peak season (March, April and May).
Tulips: The First Worldwide Money Bubble!