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Term: Tulip mania Tulipomania

8 Feb 2014

Tulip mania is the name given in English to a period in Dutch history in which there was intense speculation on the price of tulip bulbs. Tulips had grown in popularity during the early 1600s following their original introduction to The Netherlands from Turkey. The market was so vibrant that tulip traders would sign contracts to buy tulip bulbs at the end of the season in which they bloom. By 1634 speculators were beginning to enter the market and prices were driven even higher. In 1636 a futures market was created where the contracts to buy tulips could be bought and sold. Tulip mania peaked in 1636-1637 when the price on the contract to buy one rare bulb was reported to be over 5,000 guilders – the cost of a luxurious house in Amsterdam and many times the 300 guilders annual salary of a skilled craftsman. Prices collapsed in February 1637 leaving some investors bankrupt.

Tulip mania is now used to refer to any period in which there is irrational speculation which appears to inflate a bubble.

 

Tulip mania in the news

In January 2014 a professor of economics writing in the FT said the craze for Bitcoin was equivalent to Tulip mania. The mania, he wrote, is not over, but he said the longer it lasted the more investors were likely to get burnt.

The association of tulips and Bitcoins was first made by Dutch central bank governor Nout Wellink who was said to have commented, in December 2013, that the hype around Bitcoin was worse than Tulip mania because “at least then you got a tulip in the end, now you get nothing”.

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