Tulip Mania: The First Infamous Market Bubble That Led to Disastrous Consequences
Here is a story of a flower and future trading made people go REKT in 17th century
Tulip Mania is known as one of the first famous market bubbles that occurred in Holland in 1636.
One hundred years before that, the first tulips from Iran and the Ottoman Empire were introduced to the European market. Tulips became popular among Western European aristocrats and began to be cultivated actively in France, Germany, and Holland. The business became highly profitable as tulips were considered perfect and divine.
However, the real trouble began when tulips were involved in futures trading. At first, Holland started trading ungrown tulips, meaning that people were buying planted tulips that were not yet bloomed. In 1635, Holland traders began trading contracts on tulips, and the prices started skyrocketing. Warren Buffet once said that derivatives are 'financial weapons of mass destruction,' and Holland proved it to be true.
Some rare varieties of tulips were so expensive that usual traders couldn't afford them, so they started selling low-quality varieties. This led to a disastrous bubble where prices dropped 20 times, many people went bankrupt, and the economy in Holland fell into depression.
If you want to learn more about this exciting story and the first economic bubble, we recommend reading 'Memoirs of Extraordinary Popular Delusions and the Madness of Crowds' by Charles Mackay or watching the film 'Tulip Fever' released in 2017. It's a fascinating tale to share with your family and friends, and you can enjoy it with a good book or in front of the screen on weekends.