(noder's note : in the old E1 days, this was spread out over 8 nodes. Hence the seven paragraphs all with close to 256 characters.)

In 1593, a man named Carolus Clusius moved to Holland to become the head botanist at the University of Leyden. He brought with him some tulips, imported from Turkey. These tulips were among the first in Europe proper, and the first ever in Holland. There, he cultivated his plants, spurning offers from prospective buyers. Apparently, one night, his gardens were ransacked, and someone made off with quite a few of his plants, including some tulips...

Tulip gardens began showing up on small plots of land inbetween the North Sea and Amsterdam, where conditions are just right for tulip cultivation. This area of land is now known as the 'Bollenstreek', or bulb-growing region. The people took notice of this new, beautiful flower; the wealthy began to desire the flowers, and bought what few there were.

Tulips were rare in the early 1600's; this translated into high tulip prices. Only a few of the rich owned tulips; so the tulip converted from flower to status symbol. Once those happened, things began to spin out of control. The rich wanted tulips, to keep up with the Joneses. The middle-class wanted tulips, to associate themselves with the rich. The poor wanted tulips, to cultivate and sell to the highest bidder. And the rarity of the bulbs made it worse.

By the mid 1620's, the craze was official. The trade of tulips was the most thriving sector of the economy by leagues. A new breed of tulip traders came into being, and they became the new rich. People blew small fortunes on very rare tulips. The 'Semper Augustus' flower, of which there were only 12 in 1624, sold for 3,000 guilders (roughly $1500 - the price of a large house). A short time later, a single bulb sold for 4,500 guilders, plus a horse and carraige.

The 1630's came. Tulip traders began making up to 60,000 guilders a month ($44,000). Tulips were sold by weight, measured in grains... just like gold. Many tulips were bought while still in the ground, before anyone knew if the tulips were good, bad, or nonexistent. The rare multicolored tulips such as the aforementioned 'Semper Augustus' now could command up to 10,000 guilders a bulb. Demand for tulips always far exceeded what could be grown.

Sometime in 1637, the crash came. If I remember correctly, the guild of merchants controlling the trade had an internal war over the price of the tulips. Word got out, prices dropped. People tried selling their tulips once the price dropped, dropping the price more... a classic market crash. Many rich people who had money locked up in tulips became extremely poor. The Dutch still loved the tulip, however; it became their national flower.

Additional info : the most valued tulips were multicolored tulips. But, in those days, no one could breed multicolored tulips... they just happened sometimes. Later, botanists discovered that a virus makes tulips turn those beautiful flaming colors, so they were actually much less healthy than normal tulips. Multicolored tulips have since been bred.

Near the end of the craze, many people didn't have enough money for a tulip, so they bartered goods.

One Viceroy tulip went for :

Two loads of wheat, four loads of rye, four fat oxen, eight fat hogs, twelve fat sheep, 145 gallons of wine, 60 kegs of beer, 30 kegs of butter, one thousand lbs. of cheese, a complete bed, a suit of clothes, and a silver drinking-cup.

What price beauty, eh?

The Dutch tulip mania of the early 17th century is probably the first recorded example of the modern phenomenon of the bubble economy, where relatively worthless commodities are driven up to insane prices by speculation.

In this case, the commodities in question were tulips, which were first imported into Europe from the east at the beggining of the 17th century. A fad for decorating and gardening with these new flowers quickly sprung up, and demand quickly oustripped supply. This was the beginning of the bubble. People began hoarding tulip bulbs, especially of new varieties, in anticipation that their prices could only increase. This hoarding quickly drove prices even higher, spiraling out of all proportion for what were, after all, only flower bulbs.

When the craze was most intense, in 1630s Holland, people would exchange all of their worldly possessions for just one bulb. Banks would use one bulb as acceptable collateral for loans, whole businesses would be exchanged for single bulbs, people would quit their jobs and sell everything to get in on the ground floor. Sound familiar?

The end came in 1637, when the Dutch government, after a series of warnings, announced that banks would no longer be allowed to use tulip bulbs as collateral for loans. Almost immediately, panic set in, and in a few days, the tulip bulbs returned to their natural price, which was nothing compared to the levels they'd been trading at a few days before. The once-thriving Dutch economy was almost ruined, and took more than twenty years to fully recover.

Of course, this whole phenomenon is entirely familiar by now. The Japanese stock and real estate markets in the late '80s behaved in the same way (at one point, the land in Tokyo was worth more on paper than all of North America), and of course, the dot-com fever more recently, seems to have been exactly the same, though that probably still hasn't bottomed out.

This is similar to pyramid schemes and multi-level marketing schemes, with the critical exception that there's no clever con-artist sitting beside the scenes manipulating everything and reaping the profits. Instead, the positive feedback loop in price comes entirely from hysteria on the part of the investors. Those who don't learn from history are doomed to repeat it.

Tu`lip*o*ma"ni*a (?), n. [Tulip + mania.]

A violent passion for the acquisition or cultivation of tulips; -- a word said by Beckman to have been coined by Menage.

⇒ In Holland, in the first half of the 17th century, the cultivation of tulips became a mania. It began about the year 1634, and, like a violent epidemic, seized upon all classes of the community, leading to disasters and misery such as the records of commerce or of bankruptcies can scarcely parallel. In 1636, tulip marts had been established in Amsterdam, Rotterdam, Haarlem, Leyden, and various other towns, where tulip bulbs were sold and resold in the same manner as stocks are on the Stock Exchange of London.

Baird.

 

© Webster 1913.

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