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Tulip mania or tulipomania (Dutch names include: tulpenmanie, tulpomanie, tulpenwoede, tulpengekte and bollengekte) was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then suddenly collapsed. At the peak of tulip mania, in February 1637, some single tulip bulbs sold for more than 10 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble (or economic bubble), although some researchers have noted that the Kipper- und Wipperzeit episode in 1619–22, a Europe-wide chain of debasement of the metal content of coins to fund warfare, featured mania-like similarities to a bubble. The term "tulip mania" is now often used metaphorically to refer to any large economic bubble (when asset prices deviate from intrinsic values).
Tulip mania reached its peak during the winter of 1636-37, when some bulbs were reportedly changing hands ten times in a day. No deliveries were ever made to fulfill any of these contracts because in February 1637, tulip bulb contract prices collapsed abruptly and the trade of tulips ground to a halt. The collapse began in Haarlem, when, for the first time, buyers apparenty refused to show up at a routine bulb auction. Only sellers existed, as there were no buyers, at all. While this may have been the result of the fact that Haarlem was then at the height of an outbreak of bubonic plague, within days panic had spread across the country. Despite the efforts of traders to prop up demand, the market for tulips evaporated. Flowers that had commanded 5,000 guilders a few weeks before now fetched one-hundredth that amount. While the existence of the plague may have helped create a culture of fatalistic risk-taking that allowed the speculation to skyrocket in the first place, this particular outbreak might also have been a contributing factor that helped burst the bubble.
By 1635, a sale of 40 bulbs for 100,000 florins (also known as Dutch guilders) was recorded. By way of comparison, a ton of butter cost around 100 florins, a skilled laborer might earn 150 florins a year, and "eight fat swine" cost 240 florins. (According to the International Institute of Social History, one florin had the purchasing power of €10.28 in 2002.
Many individuals grew suddenly rich. A golden bait hung temptingly out before the people, and, one after the other, they rushed to the tulip marts, like flies around a honey-pot. Every one imagined that the passion for tulips would last for ever, and that the wealthy from every part of the world would send to Holland, and pay whatever prices were asked for them. The riches of Europe would be concentrated on the shores of the Zuyder Zee, and poverty banished from the favoured clime of Holland. Nobles, citizens, farmers, mechanics, seamen, footmen, maidservants, even chimney sweeps and old clotheswomen, dabbled in tulips.
People were purchasing bulbs at higher and higher prices, intending to re-sell them for a profit. However, such a scheme could not last unless someone was ultimately willing to pay such high prices and take possession of the bulbs. In February 1637, tulip traders could no longer find new buyers willing to pay increasingly inflated prices for their bulbs. As this realization set in, the demand for tulips collapsed, and prices plummeted—the speculative bubble burst. 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.
When reading all the news about the IPO (initial public offering) for facebook, I was reminded of something.QuotePeople were purchasing bulbs at higher and higher prices, intending to re-sell them for a profit. However, such a scheme could not last unless someone was ultimately willing to pay such high prices and take possession of the bulbs.
People were purchasing bulbs at higher and higher prices, intending to re-sell them for a profit. However, such a scheme could not last unless someone was ultimately willing to pay such high prices and take possession of the bulbs.
Okay, in view of what's happened since, was I right?
I was thinking of bumping this thread following the drop in price of FB stock. The feds are looking into the loss of $2B by JP Morgan Chase & Co., but will they look into the billions lost by FB?
