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By Jim Rhodes
Last Fall I buried in my garden several dozen tulip bulbs, which I had purchased on my way through Schiphol Airport in Amsterdam.
Now it’s April, and the tulips are blooming – a welcome splash of colorful cheer to brighten these dreary days of self-isolation from the virus pandemic, hourly updates of news of latest disasters and watching our retirement investment accounts shrinking mercilessly.
Here’s a photo.
Pondering the concatenation of tulips and crashing stock markets sent me back to my bookshelves to refresh my memory about the famous speculative Tulip Bubble of the early 17th century in Holland.
Yep, I’m talking about trading in tulip futures in the 1630s, which triggered a brief but spectacular surge in prices on the flower exchanges, when contracts were made to buy a single bulb for the price of a nice waterfront mansion on Amsterdam’s canals.
In the summer of 1633, it was reported that a house in Hoom was exchanged for three rare tulips, and a handful of bulbs were traded for a Frisian farmhouse.
A few words of background.
Tulips first made their appearance in Europe as imports from Turkey in the late 1500s. The botanist Charles de L’Escluse, who classified many varieties, was largely responsible for the tulip’s growing popularity among European horticulturalists in the 1590s, especially in Holland, which was even then a hot market for blooming plants. Breeders learned to cultivate all sorts of variations, and a virus infection in tulip bulbs caused variations with exotic color patterns.
During the first decades of the 1600s, Holland was enjoying a period of prosperity as their shipping industry flourished, creating a solid middle class of prosperous burghers with money to invest. And tulips, which were sufficiently rare to boost their value, became a much sought-after luxury, especially those with interesting color variations, with which one could visibly demonstrate his wealth to his neighbors in his front garden.
Coincidentally, an outbreak of bubonic plague in the early 1630s swept across the nation, resulting in a labor shortage that according to historians caused real wages and income to rise. Hence, more money for luxuries.
Tulip exchanges sprang up in cities across the country, where contracts to purchase bulbs were bought and sold. Because growers were selling bulbs that were already in the ground but had not yet bloomed, investors were trading in futures, not unlike today’s commodity traders. A given bulb might thus be bought and sold several times before it was lifted from the ground.
Prices soared in 1636, but the speculative price spiral had no basis in terms of real asset value, and the bubble burst in 1637 when a single bulb at an auction in Haarlem failed to attract any bidders, and prices plummeted almost instantly across the country as investors desperately sought to dump their contracts onto an already depressed market.
The Tulipmania story has been thoroughly researched and debated by modern scholars who have successfully debunked some of the misinformation propagated in popular histories of previous centuries. But the fact remains that for a brief period of three or four years there was a frenzy in tulip futures that drove up prices beyond imagination. Until the whole house of cards collapsed.
I think I bought that packet of bulbs at the airport for less than ten dollars. Well worth it. I probably spent more than that for a mug of beer at the airport bar.
I’ll leave you with this link to Judy Garland and Gene Kelly’s performance of the old classic: “When you wore a tulip, a big yellow tulip … ” Hope it cheers you up.