Tulip ManiaHow a flower grew into an economic monster!
HollandA region and former province located on the western coast of the NetherlandsThe term Holland is also frequently used to refer to the whole of the country of the Netherlands.
Key TermsSpeculation - investment in stocks, property, or other ventures in the hope of gain but with the risk of loss.Example: buying stock on the stock marketExample: betting on a horse raceExample: buying government bondsFinancial Bubble - An economic cycle characterized by rapid growth (more $$$) followed by a contraction (less $$$)Example: The Great DepressionExample: The decline of the .com market in the 90sExample : The collapse of the housing market in 2007
The Tulip ArrivesIntroduced to Europe in mid 16th Century form Ottoman EmpireBecame very popular in United Provinces (now the Netherlands)Charles de lEcluse a Flemish horticulture professor started growing them at University of LeidenFlowers could tolerate harsh climate of the regionA Love Affair BeginsTulip became coveted luxury itemWhat is a luxury item?Can you think of some modern luxury items?Many varieties were developed:One-colored tulips known as Coulerens Multi-colored Cosen, Violetten, Rosen, and BizardenBecame most popularVivid colors, lines, and flamesWe now know what caused these variationsTulip breaking virus
roots of Tulip ManiaTulips bloom from April to May for about a weekSecondary blooms appear shortly afterFrom June to September they can be uprooted and movedThe rest of the year traders developed a market for these flowersSigned contracts to purchase tulips at end of the seasonBetting on being able to sell them for more laterWhat does this sound like?Developed many of the modern techniques of financeThe CrazinessThe population, even to its lowest dregs, embarked in the tulip trade by the promise of wealthAmusing anecdotes from this period:1 bulb for two lasts of wheat, four lasts of rye, four fat oxen, eight fat swine, twelve fat sheep, two containers of wine, four containers of beer, two tons of butter, 1,000 lbs of cheese, a complete bed, a suit of clothes, and a silver drinking cupIn 1635, 40 bulbs for 100,000 florins (keep in mind that a skilled laborer made about 150 florins a year)Sailor mistook an precious bulb for an onion and ate a breakfast worth a years worth of food!
A last was a medieval measure of gunpowder used mainly in England. It was defined by the English Ordnance Board as 24 barrels of gunpowder, each of 100lbs net weight. 7
Why were people willing to pay so much for tulips?Intending on reselling for even moreWhat contemporary examples can you think of?It couldnt last if people were no longer able to pay that priceFebruary 1637 was that daypeople would no longer pay inflated pricesPeople stopped wanting to buy them (demand dropped)Prices plummeted Speculative bubble burstPeople were left holding contracts to purchase bulbs at 10x their valuesTulip speculators sought help of governmentDeclaring contracts void for 10% feeGovernment ultimately considered this gambling and didnt help
On the upside, People still travel to Holland to see their (In)famous Tulips
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