It’s easy to understand why people might get excited about some things: football, ‘Strictly’, ‘Dr Who’. But tulips? Surely no one could get that excited about tulips? Well, that’s just what happened in The Netherlands in the early 17th century.
Tulips are very common now, but back then they hadn’t long been introduced from Turkey. The flowers became popular, and famous artists like Brueghel included them in their paintings. It was discovered that some varieties of tulip would produce flowers of one particular colour year after year, then – quite out of the blue – yield flowers with beautiful patterns of mixed colours, such as reds and yellows. This was eventually found to be the result of a plant virus, though I’m sure nobody would have cared about the reason! (I dunno, I think that’s pretty interesting, ed.)
But this still all sounds fairly normal doesn’t it? I mean the flowers were pretty, people liked them. Where does the mania come in? Well, it wasn’t really about the flowers, but the bulbs. In fact it wasn’t even so much about the bulbs – it was about money!
Things tend to be worth what people are prepared to pay for them. This is why tickets for sold-out concerts and sporting events that had initially been on sale for say, £50, are often sold on by people (we call them touts) for hundreds and sometimes even thousands of pounds more.
Early on in the tulip craze people realised they could make a lot of money by buying bulbs, waiting for the price to go up, and then selling them again. Word got around and soon everyone was trying to make a quick buck (or should that be guilder!). Before long the Dutch were putting their most valuable belongings, sometimes even their houses, into buying tulip bulbs in the hope of getting rich. Some single, rare bulbs were actually worth as much as a house in the poshest part of Amsterdam! But the rocketing prices couldn’t continue to rise. By February 1637, they had soared to a level where most people could no longer afford even ordinary bulbs, let alone the rare ones. The novelty wore off. The rush to buy quickly faded. Almost overnight the (admittedly very lovely and fragrant) bubble had burst. Some people lost nearly everything they owned, having ploughed (sorry) all their money into bulbs. They believed the bulbs would make them rich, but they were now worth hardly anything.
Similar things have happened throughout history. In Victorian England there was a fern-collecting craze, though it never got as out of hand as tulip mania. You might even compare America’s gold rushes to tulip mania, although this wasn’t so much about putting money into a product or company, but involved riches lying around just waiting to be picked up! When word got out that places had been discovered where you could get gold by simply sifting for it in rivers, people who had very little saw their chance to make a fortune. Thousands of people dropped everything and headed for the gold fields. Those already living in America made long and dangerous journeys across the country. As the news spread even people in Britain and Europe rushed to join the search for gold. Some people did get rich, especially those who got there first, but the gold that was easiest to find was soon hoovered up. Having spent everything on travel and equipment, most adventurers ended up poorer than they’d been before.
– The Netherlands is still famous for the flowers, and in the spring when tulips are in full bloom people travel from all over the world to see the spectacular displays in the fields.
– There are flower festivals and there is even a Tulip Museum in Amsterdam.
– If you ask your grandparents they will probably remember the hit song Tulips From Amsterdam!
– Bulbs are often edible – onions are a type of bulb – but tulip bulbs taste horrible. Towards the end of World War II, The Netherlands was occupied by the German army. No food was getting through and people were starving to death, so they ate tulip bulbs to survive. But don’t try this at home! Not only do they taste bad, but parts of the bulb have to be removed first because they are poisonous.
During the bubble some tulip bulbs changed hands up to 10 times in a single day!
An economic bubble forms when something suddenly becomes much more desirable than it would normally be. The object in question could be absolutely anything. It’s often something that is fun or pretty, but that you don’t actually need in order to survive, like a fidget spinner, or a type of very fancy biscuit. What happens is this:
1 Displacement: A select group of influential people decide they want to collect these fancy biscuits and they begin buying them wherever they can.
2 Boom: The people who sell the fancy biscuits notice that suddenly these fancy biscuits are being bought at a higher rate than other similar biscuits. The price goes up a bit and more people start to buy fancy biscuits. The media joins in.
3 Euphoria: Fancy biscuit prices start to go mad as people try to acquire as many fancy biscuits as they can. Some even start selling their houses and cars to buy more fancy biscuits.
4 Profit taking: The smart money (that’s what we call the people who bought into fancy biscuits early) have sold their biscuits and made a lot of money. They can tell that the fancy biscuit bubble is about to burst.
5 Panic: The price of fancy biscuits falls sharply as investors liquidate their assets. (That means ‘sell them quickly’.) Supply has overtaken demand (there are more fancy biscuits than fancy-biscuit lovers), and those people who sold their houses are now sick of the sight of blummin’ biscuits. Crumbs!
The virtual cryptocurrency is like an online version of cash that can be used to buy products and services (although not many shops accept it yet). The difference between bitcoin and other standard currencies is that it is not controlled by governments or banks. Over the last few years, the value of bitcoin has fluctuated dramatically and its value seems to differ depending on who you speak to. In mid-December 2017, bitcoin hit a record high when it passed the US$19,850 mark, but just 12 days later the value had fallen to below US$12,000. However, by early January 2018 its value had risen once again to nearly US$15,000. It remains to be seen whether bitcoin is another example of an economic bubble that keeps expanding and contracting in quick succession OR the future of global financial trading.
What do you think?
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Words: Martyn Beardsley. Illustration: Natasha Durley