Having worked in the finance industry for a great many years now, I habitually study and read up on current news and economic trends. I am also a great reader of history, especially of the historical events that shaped Europe; only rarely do I get the opportunity to combine both subjects, but one such event was the Dutch tulip mania of the 1600’s.
The Dutch tulip mania is of interest because it was perhaps the first instance of a market bubble and because it shows that all speculative bubbles since then have followed the same general pattern. Instances of this are the tech stock crash of 2000, the housing bubble in the USA and the credit default swap crunch of recent times. Of course, not all of these have run their full course, but the pattern is there to follow to its conclusion.
The said pattern was first played out thus; the first tulip bulbs were brought to Holland from Constantinople by a trader called Conrad Guestner in 1593. After a short while the bulbs’ rarity and novelty made them a much sought after luxury item and status symbol, whose possession and subsequent display to ones piers, instantly resulted in social elevation.
A short while later, a fortuitous chance caused a few bulbs to be infected with a non-lethal plant virus. The virus caused the tulip petals to become striated with ‘beautiful flames of colour’, causing even more intense demand for them. By this time the craze had caught on in neighbouring Germany, causing an even greater demand on the already tight supply.
It was not long before the craze spread to the Dutch middle classes in around 1634 and as the price of tulip bulbs rose, speculators, who saw a profit opportunity, also came into the market, pushing the price of bulbs ever higher.
By 1636 the whole Dutch nation was in the grip of this mania; people were selling their houses and putting their entire fortunes on the line in order to purchase a single tulip bulb. In today’s terms the price of a bulb could be estimated at £20,000 and even at this price, people were still buying; their greed for profits overcoming all common sense.
Of course, all bubbles come to an end when it becomes apparent that there is no ‘bigger fool’ left willing to pay an ever increasing price. And so it was that suddenly nobody was willing to buy tulip bulbs anymore causing prices to plummet, fortunes to be lost, the rich to be turned into paupers and many people to be left holding worthless bulbs.
A contemporary account of a bulb transaction at the height of the craze shows what a merchant traded for a single tulip bulb:
• Twelve fat sheep
• Four fat oxen
• Sixty three gallons of wine
• One thousand gallons of beer
• Two tons of butter
• One thousand pounds of cheese
• One bed
• One suit
• One silver drinking cup
• Four tons of wheat
• Eight tons of rye
Perhaps this above all other things shows to what depths of madness people descend during any kind of speculative bubble.
Back in those distant days, the details of occurrences such as this were recorded and then relayed to other countries where they were translated by the few multi lingual people able to carry out the task. Today of course,
language translation services are more widely available, ever ready to bring us details of any modern day re-occurrences of speculative madness.
Lingo24
Legal Translation Company in London 
