They Traded Tulip Bulbs for Houses??

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A Student's Guide to Tulip Mania

What was the Tulip Bulb Mania?

By Hannah Rasmussen, for About.com


The Tulip Bulb Mania was the rapid rising in price of the tulip bulbs that had just been introduced into Holland.

During the Tulip Bulb Mania people throughout Holland were speculating with tulip bulbs trying to make a profit. During the Tulip Bulb Mania the bulbs were traded on local market exchanges. People traded everything for these bulbs. They never intended to plant the bulbs. They were purchased with the intention of selling them again for a higher price. Property, animals and money were all traded for these bulbs. Some varieties of tulips could cost more than an Amsterdam house at the time.

Eventually the tulip market began to decline as some people began to liquidate their tulips bulbs and other tulip bulbs were introduced to the supply. Quickly after this, there was a panic in which everyone started realizing that tulips were not worth the prices. people were paying for them. In less than 6 weeks the tulip prices crashed by over 90%. When the manis was over, the price of tulips dropped from a high of $76,000 to less than one dollar.

The Tulip Mania caused long lasting financial problems in Holland. Today we would describe the result of the end of the mania as a mild depression. The effects of the Tulip Mania left the Dutch very conscious about speculative investments for a long time.


Tulip Mania - When Did it Occur?

In 1593, botanist Carolus Clusius brought tulips from Constantinople to Holland for research. He refused to give or sell any to the locals so some of his neighbors stole some of these exotic new bulbs. This started the Dutch tulip trade. Over the next seventy years the tulips increased dramatically in popularity and price
Tulip Mania - Where Did it Occur?

Tulip Mania mostly occurred in Holland but England and Germany did experience small amounts of the mania. In 1636 tulips were publicly sold on the London Exchange.
Tulip Mania - Why Did it Occur?

It can be hard to understand why market manias occur. It seems strange to value tulips so much that you would sell your house to get one. But it is not that different from other market manias. In these markets investors start to act irrationally. They often begin to invest because they see other people doing it and making money. Eventually people invest far more money in an item, be it a bulb or a stock, than is sustainable.

 

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