The Dutch Tulip Craze

by | Apr 26, 2017

b638b20a8c8318e10de77c0617d72c5a-300x218-5083561

The tulip was introduced to Europe in the 16th century from the Ottoman Empire.  They became especially popular in the Netherlands and were considered a luxury item and a status symbol.  By the 1620s – 1630s many types of tulips became very sought after and valuable in The Netherlands.  By the late 1620s a single tulip bulb could cost 1,000 Dutch florins (the average laborer made 150 florins/year).  By 1635 the price of tulip bulbs had reached even more extraordinary levels and was increasing rapidly.  Tulip bulbs traded on stock exchanges and could be traded for livestock and land.  Regular people began speculating in tulips as their prices skyrocketed.  Tulip futures contracts came into existence (thought to be some of the first derivatives to trade on an exchange).  By late 1636 a single tulip bulb might trade for as much as 15,000 florins.

In February 1637 tulip traders could no longer get inflated prices for their bulbs, and they began to sell. The bubble burst. People began to suspect that the demand for tulips could not last, and as this spread a panic developed. Some were left holding contracts to purchase tulips at prices now ten times greater than those on the open market, while others found themselves in possession of bulbs now worth a fraction of the price they had paid. Prices crashed and many suffered financial ruin.

This situation is referred to as “the Dutch Tulip Craze” or as “tulipmania.” These are now financial terms for an unsustainable bubble. Here’s a really beautiful picture of Dutch tulip fields:

shfqi-6957816

0 Comments

Subscribe To The IFOD

Subscribe To The IFOD

If you'd like to subscribe to get email notifications when there is a new post, please enter your email below. You can unsubscribe at any time.

You have Successfully Subscribed!

Share This