The bubble of tulips, also called tulipomania, is the first speculative bubble in the history of capitalism. Occurred in Holland in 1600 and is a case study on almost all manuals finance.

The tulips arrived in Holland in 1562 with a cargo arrived from Constantinople and soon became an item of luxury and a status symbol among the middle and upper classes. Across Europe, especially in Holland, were a real fashion that sparked a hunt for the rarest quality.

The rarest tulip bulbs were already listed on the Amsterdam Stock Exchange, which had just been founded in 1613. All but the most beautiful, the Semper Augustus, which was the monopoly of Adriaen Pauw, mayor and co-director of the East India Company who sipped sales: in 1623 it cost 1000 florins its bulb, but he came up to 6,000 guilders in 1637 (about 312,000 € today!). "He has never seen a flower more beautiful than this, " wrote Nicolas Wassenaer, a Dutch reporter, about the "Semper Augustus".

It was 1623 and the average annual income in the Netherlands was 150 florins a ton of butter cost around 100 florins and "eight fat swine" 240 florins. With 10 000, in the Dutch capital, you could buy an entire building overlooking the canals of downtown, complete with a garden. In 1636, the tulip market, the enthusiasm was what is usually characterized by gambling, with many people who place bets on the increase or decrease in stocks of bulbs. People were convinced that the general passion would last forever and that would be all over the world flocked to the wealthy orders for which no price was too high. And for a time 'was this: the money was coming from all countries. Whole estate were liquidated to buy bulbs or, alternatively, substantial loans contracted.

All of the Dutch economy was transported by this phenomenon, and also prices of other goods, such as Staples, increased gradually. At first, sales of the bulbs were done by the end of June, when unearthed, until September, the month in which they replanted. Subsequently took place throughout the year: the price is fixed and only paid the deposit immediately and the balance was then paid in October, when, at the same time, the bulbs are resold at a higher price, even without the need for money or bulbs of the same: it was in practice precursors of modern futures contracts.

Was thus created the basic ingredient of the bubble: The arm, a multiplier effect that allows you to bet a little money so hard. Upon delivery to any buyer would have the money to pay all the bills but the same buyer does not intend to request the delivery: it includes the bulbs just to resell and make money on the price. A government edict of 1610 had made ​​this practice illegal, calling it "wind trade" and refusing to recognize such contracts, but the legislation still failed to stop this activity. Fraud, then, were the order of the day as you certainly could not determine whether the appearance of the tulip bulb was to the quality and species declared by the seller.

THE BUBBLE BURST

In September of 1636, prices began to rise dramatically. The upward trend continued in November, December and January reaching exorbitant values​​. Prices peaked between February 3 and February 5 1637.

At that point, traders began to sell tulips, not so much a prediction of type bearish on the future trend of the market price, but for the need, finally, to monetize their investment. Moreover, the prices of tulips had reached levels that discourage most (if not all) investors from entering the market. He began to think that the demand for tulips could no longer remain at those levels, and this view is widespread panic as more and therefore sales. In the short space of six weeks the price fell by 90%.

Eventually, some held contracts to purchase tulips at prices ten times higher than the market, while others had bulbs that were worth a tenth of what they had paid. Hundreds of Dutch, including businessmen and dignitaries, were financially ruined. The Dutch government made ​​attempts to resolve the situation will settle the various stakeholders, but had no success. In essence, each remained in the financial situation was at the end of the collapse and no court could require that the contracts were honored, why not lawyers.

The "tulipmania" disappeared as mysteriously as he was born. With an ironic appendix: colored prints, which had bought the less wealthy can not afford bulbs and flowers, came to be much more valuable than the originals.

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