The biggest financial crisis: the Tulip Mania

The credit crisis of 2008/2009 made a big impression in the Netherlands and worldwide. The economy shrank with all its consequences. However, this crisis was nothing compared to the Tulip Mania. In the years between 1634 and 1637 there was a major crisis in our country (Holland and Utrecht). Here too, there was a bubble that eventually burst. Everyone wanted to get in on the action and bought the tulip bulbs, which increased the value of the bulbs enormously. Ultimately, a tulip bulb could be compared to a lump of gold today. Everyone had high expectations of the value development and jumped at the opportunity to make large returns in a short period.

One ball of several annual salaries

Ultimately, one sphere represented the value of several annual salaries. This can be compared to constantly rising stock prices. In the long run, everyone will try to free-ride on this lucrative investment. Ultimately, the value of a stock is so high that it must eventually collapse. This could also happen with house prices that continue to rise due to a shortage of housing. As soon as this shortage disappears, prices will also drop sharply. This applies even more to investments in items that have little added value, such as tulip bulbs.

Value of one tulip bulb in 1634 – 1637

According to Wikipedia, a tulip bulb at that time was worth as much as a canal house in Amsterdam, or twenty annual salaries of a professional. This value development was also called bulb frenzy or bulb madness. There was even trading in options aimed at the price development of these bulbs. The brightly colored tulips were especially popular and very valuable.

The value development of the tulips

The French ladies-in-waiting have given the tulips their value. At the beginning of the 17th century, prices rose because the ladies-in-waiting paid large sums for the flowers. Over the course of the 1600s, prices rose steadily and it seemed to be a good investment. In 1623, a thousand guilders were paid for one tulip bulb. The smart traders bought the bulbs cheaply and resold them for profits of thousands of euros per month. The value was strongly dependent on the type of bulb. A record amount of 6,000 guilders was paid for the Semper Augustus in 1935.

Trade collapsed

Ultimately, the time had to come when prices collapsed. At that time there was great unrest. Agreements made were broken and traders tried to get out of concluded contracts. Traders who still had bulbs at that time tried to sell them before prices dropped even further. In order to get rid of their merchandise, they settled for lower amounts. This has created a downward spiral with prices continuing to fall.