The Worlds First Financial Bubble? – Tulip Mania – European History – Part 1 – Extra History #Finance

amsterdam dutch republic the 1630s here’s how the story goes a sailor is doing some business with a merchant and as they conclude their meeting the hospitable merchant rewards the sailor for his good service by giving him a fine red herring for breakfast but the sailor is disappointed

a single herring doesn’t really make a meal you know and spotting an onion on the table the sailor pockets it to have alongside the fish technically stealing of course but it’s just an onion right then a while later as the sailor had just finished his pilfered breakfast the merchant

finds him backed by a mob after being seized dragged through the streets and thrown in prison the confused sailor finally discovers the source of his predicament see the onion he stole and ate wasn’t an onion at all but a prized semper augustus tulip bulb valued at 3 000 guilders enough the

merchant says to feast the prince of orange and the entire court for the netherlands you see was in the grip of tulipmania thanks so much to curiositystream for helping us pluck today’s tale from history in the early 1600s the dutch republic was the most advanced economy in the world newly

independent from spain and reaping the benefits from the wildly successful dutch east india company they began an era of financial innovation creating formalized stock Markets business

contracts Investments and joint stock companies they positioned themselves at the cutting edge of the financial world we know today and during this golden age amsterdam exploded into a metropolis made rich off the fruits of foreign trade backed by prudent investment meaning those

living in the grand canal side mansions were not aristocrats but merchants ship owners and heads of trading houses but then the tulips came to summarize what happened let’s turn to charles mckay’s classic 1841 sociology text extraordinary popular delusions and the madness of crowds

which you know i’m sure based on the title is a very very trustworthy source it states in 1635 those eccentric dutch upper classes became fascinated by the tulip they loved and cherished them it was the fad to end all fads and everyone who was anyone had to own some these flowers they

realized were nice flipping tulips especially prized were the rare varieties the viceroy the admiral of admirals the alexander the great and especially the semper augustus these were tulip strains with unusual designs that changed with each flowering meaning each bulb was entirely unique and unable

to be replicated they really were for all intents and purposes non-fungible tulips and their prices rose higher and faster than the rest seeing this prudent investors realized that tulips were appreciating in value and decided to buy in themselves after all prices were going up fast and if you

bought in and you know could find a buyer there was a neat financial turnaround on these nice flippin tulips indeed by 1636 the trade in tulips was so hot people decided they didn’t even want to wait and see what they were getting okay check this out when you bought a tulip in the standard

way you often bought the flower hole to transplant in your garden or you could buy the bulb of a tulip to replant which gave you a genetic copy of the flower that you saw but in that old-fashioned way of thinking that meant that the trading season was confined to the flowering season where you

could see what kind of tulip you were buying but that changed when flower dealers began offering contracts on tulips still in the ground that would flower the next summer now people were not actually buying the tulips themselves rather buying a contract that allowed them to buy a tulip essentially

a Futures market you could buy a piece of paper for 300 gilders guaranteeing you the option of buying a specific tulip when it bloomed with the hopes that that tulip would ultimately be worth more than that and you could sell it for Profit you were investing

essentially in near future tulips but then people started trading the contracts for near future tulips and the market went out of control because you could turn a Profit immediately provided you bought the contract then found someone to buy that contract off of you for a higher

price some contracts changed hands that way 10 times a day with the price inflating with each exchange and it might have been all right if new investors hadn’t gotten involved to make a quick buck as the price went up and up everyone in the netherlands started throwing their money into tulips

carpenters took out Loans on their tools to buy bulbs and chimney sweeps invested what little they had it became a financial run where people snapped up every tulip available those unable to purchase the most rare and expensive bulbs instead bought more common tulips in bulk

glorying in the riches they would assuredly have when they offloaded their baskets of full bulbs absurdities became a daily occurrence a visiting english botanist unaware of the craze cut open a bulb in order to demonstrate a principle of his science and was jailed tulips began to sell for 5 000

guilders as much as a large well-appointed canal side mansion when the yearly salary for a carpenter was 250 guilders a man even traded a Profitable brewery for a single semper augustus bulb these worthless flowers which no one really wanted except to sell had created the

world’s first financial bubble and when it burst in february 1637 it ruined some of the best merchants in the country and drove many into bankruptcy the economy entered a depression and the canals of amsterdam were full of the pitiful splashes of penniless businessmen committing suicide by

throwing themselves into the unforgiving waters this is the tulip mania as you see it in business articles textbooks and even in the recent sequel to wall street and everything from the dot-com bubble to the housing bubble to beanie babies pokemon cards the rise of bitcoin and yes of course the

scourge that is nfts have been compared to the infamous time holland ruined itself over worthless flowers you know accept and i hate to do this to you almost none of what we just recounted is accurate exactly yeah turns out pop culture’s whole understanding of this event is also not fully

true oh and those stories about the sailor in the english botanist they’re both likely total fabrications in the last decade however historians have returned to the tulip mania and begun to reevaluate what happened and the lessons we should draw from it so here’s what’s true in

the 1630s the netherlands was a financial powerhouse and it did have a brisk trade in tulips some of those tulip prizes such as those going for the value of a house are well documented and accurate it’s even true that people traded Futures contracts for tulips and there was

indeed a steep decline in value in 1637 so tulip mania was a real often kind of hilarious thing that did happen it’s just the details of the popular version of the story are fundamentally wrong so we’re going to spend this series laying out how the myths formed what really happened and

what this historical tale can teach us according to recent scholarship like that of historian ann goldgar the tulip trade had a relatively small number of participants it was nowhere near as fevered as it’s often claimed and crucially it didn’t cause an economic depression in fact

golgar couldn’t find records of a single bankruptcy resulting from the tulip mania there’s even a debate over whether this famous first asset bubble was really a bubble at all this is partially because financial bubbles happen when an asset is overvalued since people are investing in

order to make money rather than because they want the asset in other words i don’t necessarily want this ugly picture of a monkey i just think i might be able to sell it to some sucker later for more than i paid for it but here’s the thing people in the 17th century netherlands really

really wanted tulips a rare tulip was a status symbol that marked you out as educated wealthy and of discerning taste people had their portraits painted holding prize tulips and displayed them in their gardens in front of those canal side mansions you know the ones they weren’t committing

suicide out of they wanted them because tulips were beautiful extremely collectible and difficult for people to grow meaning they were rare in the classic sense of the word not in some sort of digital design scarcity scheme now i know how all that sounds tulips rare in holland yeah because

let’s do a thought experiment real quick close your eyes no like actually close them and imagine what holland means to you visually okay now open them first of all if you saw the sloth on the surfboard you cheated but second i’m going to bet you imagined windmills wooden clogs canals

and fields of tulips right but here’s the kicker tulips aren’t native to the netherlands in fact they’re from western asia and only arrived in the netherlands shortly before tulip mania began and the story of how they got there is a great big neat fun tale which includes nomad

horsemen autumn insultants and pleasure gardens plus next time we’ll see how these very serious soberly dressed dutch calvinists went gaga for flowers whose beauty came not from breeding but from a disease but enough flowery language it’s time for us to pedal our favorite streaming

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platform one of which i really enjoyed was the dock the billion dollar flower market where i learned that not only is the flower industry 100 billion dollar business today but it’s actually still controlled by the dutch well for now because a new competitor is entering the field of flowers

get it because tulips in the fields and you know what i’ll just move on so head on over to curiositystream.com extra Credits right now to get both of these phenomenal streaming services for the limited time price of under 12 for an entire year that’s 42 off the regular

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