Tulips are one of the favorite flowers of many people. Women like them because they are beautiful, colorful and allergy friendly. Even though flowers can be expensive, they are still given by people to the ones they love. How much would you pay for a tulip? Because did you know that there was a period in the Dutch Golden Age during which contract prices for some bulbs of tulip reached extremely high levels and then crashed? Yes, that’s true and it was called Tulip Mania.
Tulip Mania was one of the original market bubbles that definitely expanded and burst. Much like the dot com bubble and the real-estate bubble except this one was for the extremely benign tulip.
If it’s your first time to hear about this or you’re curious about it, then we are going to tell you all about the strange and unusual history of Tulip Mania.
The History of Tulip Mania
Most people may not know that the tulip is a national symbol of the Netherlands which is also known as the flower shop of the world. People all around the world travel and visit the Netherlands because it is known for its wonderful and colorful tulip landscape in the Dutch countryside. There are also a lot of tulip museums and festivals annually celebrated all over the country. When the Dutch migrated abroad, they still brought their love for tulips with them. They started tulip festivals in New York and other places like Holland, Michigan.
Regardless of their passionate love towards the tulips, it actually the flower originated in the Pamir and Tian Shan mountain ranges in Central Asia particularly in Kazakhstan, Tajikistan, and Afghanistan. In the late 16th century during the Ottoman Empire, the flower was brought and cultivated to the Netherlands.
In the 1590s, Carolus Clusius, a botanist, began a botanical garden at the University of Leiden. He was one of the pioneers that cultivated tulips in the Netherlands. He also owned a private garden where he grew many beautiful, bright, and colorful tulips. Later on, he studied the tulip and the phenomenon called tulip breaking.
Tulip breaking is when the colors of the petals of the flowers change into a multicolored pattern which was later understood to be caused by a virus that infected them. As a result of this phenomenon, Tulip Mania occurred.
The infected multicolored tulips became more popular and more valuable than the uninfected ones which resulted in botanists competing to cultivate more beautiful kinds of tulips. They would trade with other small groups of botanists and other flower experts. This trade grew beyond this small group to people they didn’t know were contacting them to buy the bulbs and seeds which were often traded for money.
What made the appeal in the tulips grow more is the eagerness of people to pay actual money for them. At that period, the Netherlands was the richest country in Europe because of trading. Even the middle-class merchants, artisans, and tradesmen had money to spend. Besides that, the Netherlands had existing strong trading platforms. For example, the Baltic Grain Trade had begun running for some time and the Amsterdam Stock Exchange opened in 1602. This set up the Netherlands to be ready to support Tulip Mania.
In 1620, the price of tulips continued to increase to an insane level to the point that an entire townhouse was offered to be traded for 10 bulbs of Semper Augustus which was a type of a Tulip that looks like a candy cane. The offer was rejected which shows how valuable their flowers were at the time.
Years later, it was noted that tulip bulbs were traded more than the actual flowers. The speculators traded the bulbs rather than the flower itself which developed a type of futures market. A futures market is where people exchange futures contract or a contract to buy a specific amount or number of products at a specific price and a specific delivery date in the future. The Dutch used the bulbs as a type of currency. Even land properties were exchanged for the bulbs.
The prices for the bulbs increased as the word was spread about how buying and selling bulbs could make someone a fortune. For example, the Semper Augustus was worth 5,500 guilders in 1633 and doubled to 10,000 guilders 4 years later.
As time progressed, the prices of tulips continued to increase especially in 1637, when Switsers, which was a popular bulb, increased nearly 1000%. When the price was insanely high, people started to realize that it was too high and couldn’t keep growing and decided to stop buying and started selling and of course, prices started to drop.
As the saying goes, what goes up must come down, more and more people started to sell at lower prices. This is where the bubble bursts. People then realized they had gambled their life savings and homes for tulip bulbs. Even the Dutch government had tried to stop the fall. They offered to honor the futures contracts at 10% of the face value but still, the prices continued to drop. This caused financial problems to a lot of people because the bulbs that they bought for such a high amount ended up being worth almost nothing.
It’s hard to imagine a whole nation engrossed in a buying fever over tulip bubbles. But as the market went up and up people felt they were getting rich but then all of a sudden those bulbs they actually owned or had futures contracts to own became worthless and there was nothing to be done about it.