The Madness of Tulip Mania,In the 17th century the Dutch became among the wealthiest people in the w

The Madness of Tulip Mania,In the 17th century the Dutch became among the wealthiest people in the world as Dutch merchants traded goods all over the world. A smart and enterprising Amsterdam merchant could expect profits of 400-500% if a voyage to the Far East or India succeeded. With this new influx of wealth many Dutch needed new ways to spend their new found wealth.  In the mid 16th century the tulip was introduced to Europe from the Ottoman Empire.  After several decades of study by botanists, it was found that tulips thrived best in the Netherlands.  By the 17th century tulips began to be planted all over the country.The tulip trade thrived to the point that by the 1630’s people were even making careers out of growing, breeding, and selling tulips.  The flower became a status symbol among well to do and wealthy Dutch as breeders created tougher and more beautiful species of flowers.  Eventually the tulip became more than just a mere flower, but a source of wealth and prestige for the Dutch upper class.In the 1630’s the tulip became a securities instrument as investors pumped their money into tulip growing and breeding.  The profits made in the tulip business attracted more and more investors who sought to get rich quick.  Eventually the price of tulips began to skyrocket.  The mania began on November 12th of 1636.  Between Nov. 12th and February 13th, 1637, tulip prices rose 2,000%.  During that time it was recorded that one tulip transaction involved 40 bulbs being sold for 100,000 guilders.  By contrast a ton of butter cost 100 guilders and the average laborer earned around 150 guilders a year.  Left and right people were making ridiculous tulip transactions.  In one transaction 12 acres of land was traded for a single Semper Augustus bulb.  A transaction of 2,500 guilders was made for a single Viceroy bulb.  Some rare bulbs could cost as much a luxury houses.  Some people risked all of their savings to buy just one rare bulb, which was hoped to bring fortune and wealth as the price continued to rise and rise.By the height of tulip mania, the average tulip was selling for 5,000 guilders per bulb.  By the spring of 1637, the price of tulips became so inflated that the vast majority of Dutch buyers and investors could not afford to buy a single bulb.  Tulip auctions ceased to sell their bulbs as buyers could not come up with the money to cover the inflated costs.  Overnight, demand for tulips crashed to zero.  Between February and April of 1637, tulip prices crashed to 1/20th their price at the height of the mania.  Investors lost everything as their precious bulbs became instantly worthless.  Many people had their entire wealth wiped out in what would become one the first economic bubbles in history.  Those who burrowed money to invest were doubly screwed, as they now owed thousands of guilders to creditors and lenders.  By summer of 1637, the price of tulips dropped to the point that hundreds of bulbs could be bought for a single guilder. -- source link
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