The term Tulip Mania refers to a historical period in which the bulbs of the modern tulip plant have reached a very high value but have ended dramatically. The Tulip Mania occurred in the Netherlands where citizens had started growing tulip flowers. The speculative bubble Mania collapsed in February 1637 leading to the socio-economic crisis. Currently, the phrase “Tulip Mania” is quoted metaphorically to explain a vibrant economic bubble characterized by the deviation of an intrinsic value from the real prices of the assets.
The first seeds and tulip bulbs were introduced by Ogier de Busbecq from the Ottoman Empire to Vienna in 1554. The Tulip plant was then distributed throughout Europe. The popularity of the tulip in the Netherlands took root in 1593 after the botanist Carolus Clusius discovered that he tolerated the climate of the Netherlands.
Popularity of tulips
The tulip has become very fashionable due to the magnificent color of the petals that no other flower in the Netherlands has shown. The flower was a status symbol and the bulb was considered a luxury item. The colors of the tulip, including red, yellow, pink, white and purple, were a phenomenon. There were several varieties of tulips, some of which were monochromatic and others multicolored. Traders have discovered the value of the tulip and have started paying higher prices. In 1634, French merchants began to compete with Dutch merchants for the product. With 1636, prices had risen and this led the Dutch to create a formal future market. The future markets referred to a situation in which written contracts for the purchase of tulips at the end of the season when the bulb matured. After gin, herring and cheese, tulips became the fourth largest foreign currency producer in the Netherlands.
Comparative value of a tulip bulb
The Tulip Mania climax was during the winter 1636-1637. During this time, a single bulb could recover ten times the annual income of an expert craftsman. In one case, the 40 light bulbs recovered the 100,000 Dutch florins compared to the 12 fat sheep that would have cost only the 120 Dutch florins. In the same period, a silver drinking cup would cost only to florins 60 (the guild was a monetary unit before the introduction of the euro).
Collapse of the tulip trade
The first indicator of tulip collapse occurred in Haarlem. On the day of the auction, buyers failed to show up. This has been attributed to an outbreak of a deadly disease known as bubonic plague. The event marked the beginning of the burst burst bubble. The consecutive days of the auction have received minor traders offering lower prices. In February 1637, traders were unable to induce a buyer to invest at inflated prices. The reality of the loss has settled when demand has fallen, so the price has collapsed. Some traders who had contracts for the purchase of tulips worth ten times the prevailing rates remained with a supply of tulips worth a quarter of the purchase price. In mid-February 1637,
Tulip traders who had invested heavily in speculation called for government intervention. The government has issued a decree by which anyone who has entered into a contract for the purchase of bulbs at a future date can avoid this loss by paying only the 10% contract cancellation fee. Both farmers and traders have suffered enormous losses. The courts could not enforce the contracts because the post was classified as gambling. Although known as the golden age, the Tulip Mania has left many people with huge debts, therefore poorer.