Tulip Mania

Reading time: 4 minutes, 15 seconds

Can you imagine living in an era where a single bulb of a tulip is worth more than acres of land? Or where a single bulb of a tulip is worth 10 times more than the average worker’s salary? Well, this real-life scenario really occurred during the Dutch Golden Age (1600-1637).

The Tulip was first introduced to Europe by the ambassador to the Sultan of Turkey. He sent the first bulbs and seeds to Vienna in 1554. The tulip was different from every other flower known to Europe at the time, with a saturated, intense petal color that no other plant had. The Tulip became a status symbol in Holland, if you had tulips, you were balling basically. Tulips rapidly became a coveted luxury item (they were Gucci before Gucci). The multi-color tulips were considered even rarer and luxurious due to the streaks on the petals that were vivid and spectacular, making the bulbs that produced these even more exotic looking plants highly sought after. As the flowers grew in popularity, professional growers paid higher, and higher prices for bulbs and prices rose (get it rose) steadily. In 1634, the French started getting in on the demand for tulips, and that attracted speculators into the market (think of speculators as modern-day stockbrokers). The price of rare bulbs continued to rise in 1636, and even by the end of the year standard bulbs were going for hundreds of guilders (Dutch equivalent to the dollar). In that same year, the Dutch created a futures market for Tulips where you could contract to buy bulbs at the end of the growing season. In these contracts no actual bulbs were changing hands yet, it was just a future contract to agree to buy the bulbs. By 1936 the Tulip bulb became the fourth leading export item of the Netherlands, after gin, herrings, and cheese, The price of tulips skyrocketed because of speculation in tulips futures. (aka tulips will continue being rare and will never go down, just go up in price!) Some bulbs were reportedly changing hands ten times in a day, and again, more importantly, no deliveries were actually made to fulfill these contracts yet.

In 1635 a sale of 40 bulbs went for 100,000 florins ( modern day $ 13.08 dollars = 1 florin) . Let me show a comparison of the prices of goods during that era to show you how crazy that price is. In that same year a ton of butter cost 100 florins, a skilled laborer could earn between 150-350 florins a year depending on his skills and eight fat pigs would cost you 240 florins. People were selling or trading their possessions to get in on the tulip market. There was one offer of 12 acres of land of land for one or two bulbs of the more exotic and rare tulips.

People were purchasing the bulbs at higher and higher prices intending to resell them for a profit. If you know history and a little bit of economics, you know such a thing can not go on forever. In February 1637, tulip traders could no longer find new buyers willing to pay the exorbitantly inflated prices for their bulbs. As this realization set in, the demand for tulips collapsed and the prices plummeted…aka the bubble burst. Some people were left holding contracts for tulips, where the rate was ten times greater than tulips were going for in the open market. Others found themselves in possession of bulbs now worth a fraction of the price they paid for them. Some people went to the courts for relief from the contracts they entered, but the courts ruled that the deals were nothing more than “legal gambling” and thus not enforceable by law. Although the prices of tulips went through the roof, money was not changing hands between buyers and sellers. Thus profits were never realized for sellers unless the seller bartered the tulip contract in exchange for other goods. Its the only thing that stopped most people from losing their shirts in the tulip market.

Mistakes Were Made:

In Modern times, have we all not heard of something that will never decrease in price and will only continue to go up in price and you better get in now and make some of this money? Oh yeah, Dot.com bubble of late 90s early 2000s, subprime mortgage bubble of mid-late 2000s and more recently…cough cough bitcoin. Hey at least with a tulip you got a tangible good you can plant and grow and look at in your yard, with bitcoin you’re just getting some imaginary money, you never touch or see. As you can see economic bubbles have been going on since way, way back in the day and will continue to happen. The modern-day lottery is sort of like this too. We all hear the jackpot is a billion dollars and everyone rushes out to buy tickets in the hope of being the person who wins the jackpot. In reality, you have better odds of being struck by lightning than winning the lottery, and we get disappointed when we lose. Once that jackpot goes up again, we’re all rushing to buy tickets and dreaming and speculating what we are going to do with all of that money when we win.

One of my favorite shows back in the day was the Wire. One of my favorite lines from the show is when Avon told Stringer Bell “what did I tell you about playing those away games!” See most of the people who enter the markets during a bubble are playing away games (meaning they are engaging in an act or business they don’t really know about). They see the lure of all the money they can make, don’t really think about the downside and most end up worse than they were before. News flash people if your cousin or sibling or significant other is telling you about some money making plan that everyone is doing and getting rich off of and this said person is not in the economic sector, you have already missed the boat my friend and that bubble is about to burst any day now. Don’t go playing that away game or if you do get in get in at the beginning before the bubble bursts because rest assured that bubble will burst eventually.
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Can you imagine living in an era where a single bulb of a tulip is worth more than acres of land? Or where a single bulb of a tulip is worth 10 times more than the average worker’s salary? Well, this real-life scenario really occurred during the Dutch Golden Age (1600-1637).
The Tulip was first introduced to Europe by the ambassador to the Sultan of Turkey. He sent the first bulbs and seeds to Vienna in 1554. The tulip was different from every other flower known to Europe at the time, with a saturated, intense petal color that no other plant had. The Tulip became a status symbol in Holland, if you had tulips, you were balling basically. Tulips rapidly became a coveted luxury item (they were Gucci before Gucci). The multi-color tulips were considered even rarer and luxurious due to the streaks on the petals that were vivid and spectacular, making the bulbs that produced these even more exotic looking plants highly sought after. As the flowers grew in popularity, professional growers paid higher, and higher prices for bulbs and prices rose (get it rose) steadily. In 1634, the French started getting in on the demand for tulips, and that attracted speculators into the market (think of speculators as modern-day stockbrokers). The price of rare bulbs continued to rise in 1636, and even by the end of the year standard bulbs were going for hundreds of guilders (Dutch equivalent to the dollar). In that same year, the Dutch created a futures market for Tulips where you could contract to buy bulbs at the end of the growing season. In these contracts no actual bulbs were changing hands yet, it was just a future contract to agree to buy the bulbs. By 1936 the Tulip bulb became the fourth leading export item of the Netherlands, after gin, herrings, and cheese, The price of tulips skyrocketed because of speculation in tulips futures (aka tulips will continue being rare and will never go down, just go up in price!) among people who actually never even seen a tulip! Some bulbs were reportedly changing hands ten times in a day, and again, more importantly, no deliveries were actually made to fulfill these contracts yet.
In 1635 a sale of 40 bulbs went for 100,000 florins ( modern day $ 13.08 dollars = 1 florin) . Let us show a comparison of the prices of goods during that era to show you how crazy that price is. In that same year a ton of butter cost 100 florins, a skilled laborer could earn between 150-350 florins a year depending on his skills and eight fat pigs would cost you 240 florins. People were selling or trading their possessions to get in on the tulip market. There was one offer of 12 acres of land of land for one or two bulbs of the more exotic and rare tulips.
People were purchasing the bulbs at higher and higher prices intending to resell them for a profit. If you know history and a little bit of economics, you know such a thing can not go on forever. In February 1637, tulip traders could no longer find new buyers willing to pay the exorbitantly inflated prices for their bulbs. As this realization set in, the demand for tulips collapsed and the prices plummeted…aka the bubble burst. Some people were left holding contracts for tulips, where the rate was ten times greater than tulips were going for in the open market. Others found themselves in possession of bulbs now worth a fraction of the price they paid for them. Some people went to the courts for relief from the contracts they entered, but the courts ruled that the deals were nothing more than “legal gambling” and thus not enforceable by law. Although the prices of tulips went through the roof, money was not changing hands between buyers and sellers. Thus profits were never realized for sellers unless the seller bartered the tulip contract in exchange for other goods. Its the only thing that stopped most people from losing their shirts in the tulip market.
Mistakes Were Made:
In Modern times, have we all not heard of something that will never decrease in price and will only continue to go up in price and you better get in now and make some of this money? Oh yeah, Dot.com bubble of late 90s early 2000s, subprime mortgage bubble of mid-late 2000s and more recently…cough cough bitcoin. Hey at least with a tulip you got a tangible good you can plant and grow and look at in your yard, with bitcoin you’re just getting some imaginary money, you never touch or see. As you can see economic bubbles have been going on since way, way back in the day and will continue to happen. The modern-day lottery is sort of like this too. We all hear the jackpot is a billion dollars and everyone rushes out to buy tickets in the hope of being the person who wins the jackpot. In reality, you have better odds of being struck by lightning than winning the lottery,and we get disappointed when we lose. Once that jackpot goes up again, we’re all rushing to buy tickets and dreaming and speculating what we are going to do with all of that money when we win.
One of my favorite shows back in the day was the Wire. One of my favorite lines from the show is when Avon told Stringer Bell “what did I tell you about playing those away games!” See most of the people who enter the markets during a bubble are playing away games (meaning they are engaging in an act or business they don’t really know about). They see the lure of all the money they can make, don’t really think about the downside and most end up worse than they were before. News flash people if your cousin or sibling or significant other is telling you about some money making plan that everyone is doing and getting rich off of and this said person is not in the economic sector, you have already missed the boat my friend and that bubble is about to burst any day now. Don’t go playing that away game or if you do get in get in at the beginning before the bubble bursts because rest assured that bubble will burst.

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