The year is 1637. Central Europe is in the midst of the Thirty Years' War, the bloodiest conflict the continent has seen in a long time. The Netherlands is not far from the action. Reason enough to be afraid, one would think. But anyone who thinks that doesn't know the Dutch very well! In the midst of this chaos, they had nothing better to do than grow flowers and speculate wildly with them. This tulip fever would become the world's first well-documented economic crisis. And a pretty stupid one at that. Reason enough to take a closer look!
(Of course, this has absolutely nothing to do with the recently released film "Tulpenfieber" with Christoph Waltz. But if someone wants to sponsor me:bring it on!
The Netherlands in the Golden Age
The fact that the Dutch had time to deal with tulips at all is actually the first surprise. In the early 17th century, the newly proclaimed Republic of the United Netherlands was still engaged in its war of independence against Spain. As you can imagine, that was quite a time-consuming task. This war was to last a full 80 years until independence was finally recognized in 1648. Despite this small hiccup and a few other "challenges" (such as a full-blown plague epidemic), the 17th century is considered a golden age for the Netherlands. The small state eventually became a major colonial power at the time.
Of course, establishing yourself as a colonial power also leaves its mark at home. Wealth broke out in parts of the population and a new, prosperous middle class emerged. So now everything has its good side. Half of the relatives may die of the plague or in war, but that means a rich heritage and a good job situation. Then you can look around for hobbies. There were a lot of possibilities. Completely incomprehensibly, however, floriculture prevailed. Floriculture... Who doesn't love to sit waist-deep in dirt and plant flower bulbs in their free time?
Tulip fever:a really strange story
The hype surrounding the tulip began in the late 16th century. At the time, the flower made its way to Europe via the Ottoman Empire and quickly became an object of desire for rich suckers everywhere. This is also easily explained:Tulips were ephemeral, dainty and rare. You just had to own something like this! In the Netherlands it was probably a certain Carolus Clusius who was the first to plant tulips on a large scale. But he wasn't alone for long. Because as I said, the growing wealthy class of the Netherlands had time for hobbies, despite the war and illness, and so circles of tulip lovers quickly formed. They then met regularly, exchanged information about new breeds, asked about the growth of the plants and exchanged flower bulbs. Extremely exciting! If Pokémon cards had existed back then, people would have really saved themselves a lot.
Unfortunately, hobbies that are so popular are rarely just that. At the latest when the first person sees his chance to make money from the hobby, things go down the drain. However, the situation was particularly bad for Dutch tulips, because all the reasons mentioned that made tulips so popular as collectors' and breeding objects also made them very valuable. Tulips were rare, ephemeral and incredibly popular. You can only win there! It's like today with bitcoins. What's supposed to go wrong?
Someone always has to overdo it...
So the old tulip lovers, traders and private individuals soon pounced on the country's tulip stocks. That wasn't even as easy as it sounds. Tulips only bloom for a few months in early summer. For this reason, onions have long been traded all year round. Think of it like this:You want a tulip next year. A dealer tells you he has an onion in the ground, it's going to be something. Of course, you rely on this blindly and buy an option on this tulip. Sounds a bit questionable in theory. In practice, however, the tulip fever was much worse!
The problem started with where to do business like this. You didn't go public for that, you went to a so-called "college". That's a fancy word for a back room of any pub. There you met your trading partner and could buy a notarized option. The next problem, of course, was that this trading partner did not necessarily have to be the owner of the onion. It could be that he had just bought the option himself and was now selling it at a higher price. He didn't really put down a lot of money for it anyway, since the payment for the flowers themselves only takes place when they are delivered. That means the price of the option was entirely market driven with no real product behind it. If you have the last few economic crises in the back of your mind, you can now imagine that there might be a problem lurking...
It's just a flower
Then, in the 1630s, speculative trading in warrants exploded. Extreme price increases were the natural consequence and the peak was reached in the winter of 1636/37. The following is said to have been paid for a single noble onion at the time:
All of that together. For a single tulip bulb! Although this specific list dates from the 19th century and is doubtful, the prices may actually have been completely insane. And then, in early 1637, it came as it had to come, and it suddenly went downhill. As it turned out, there weren't that many option holders who actually had an interest in the real tulips. The market collapsed due to lack of demand and the tulips lost up to 75% in value. Who would have thought?
In the end, tulips are just flowers and nobody needs flowers. For the traders and speculators who had relied on the agreed prices, this realization naturally meant a bitter loss. However, the impact of tulip fever on the general population has long been exaggerated. In any case, the Netherlands did not slide into a full economic crisis, the general population hardly lost any money and the country's golden age was to last for more than half a century. A place in the Hall of Fame of the dumbest economic crises of all time is still secured for the Dutch.
You can read about whether and what you should learn from this in this post, in which I deal with the often claimed repetition of history. The myth of tulip mania was recently debunked, which I don't want to withhold from you. Here is the article. The colleagues from the Zeitsprung FM podcast have also talked about the topic.