Stock Market Crashes : The Tulip and Bulb Mania

Greed is a human characteristic, and one that will not go away so easily.

There are lot of examples in history to prove that time and again, humans have crossed their boundary of wants and greed has rum amok leading to unprecedented stock market crashes.

The most recent one in history is the 2008 US economy debacle and one of the most earlier ones is the Tulip and Bulb craze.

The tulip and bulb mania

History has it that in 1593, a botany professor bought some unusual plants from Turkey and introduced them to the Dutch. Given the unusual nature of the plant, it caught on the fancy of buyers and demand increased.

The supply could not keep up with the pace of demands and the prices went through the sky. The tulips developed more colours and designs when they contacted some virus – this new development only made matters worse by fuelling the demand as everyone wanted tulips in their gardens.

You can imagine the value given to the bulbs when one rare bulb was considered as a dowry for a bride. Soon, the bulbs  were considered as the quickest way to get rich.

People began to put in everything they had to buy these in the hope of selling it to someone else at a higher price. They mortgaged their houses and businesses to buy the bulbs. They hoped they would sell these tulips to foreigners and make a quick buck.

Everyone, from the farmer to the rich, dabbed in tulips.

The Tulip and Bulb crash : From Wikipedia

As happens with every bubble, after things reach dizzying heights, they come crashing down like a pack of cards as well. By 1640s, the prices had becomes outrageous.

Obviously, people decided to sell and make a profit when they did not get any buyers at such lopsided prices. As more and more people joined the selling bandwagon, the prices came crashing down. Panic spread like wildfire, the government stepped in but could do little.

People lost everything they had put in to hoard the tulips as the tulips themselves had become worthless. The bulbs, at the end of the scam, were selling at the price of onion !

This speculative bubble left Netherlands in economic despair for a lot of years.

The mania of assigning a higher price to an item when it does not deserve such a price leads to someone else coming in a putting a higher price for it. Such spectacular quick-money bubbles are sure to leave investors bleeding for their lifetime.

History is a great teacher, its just that we never learn from it ! More scams to follow. !