LEARN FROM TULIPS FROM 1634 - 1637

 WITH GERMANY RECENTLY DEMANDING IT'S GOLD

CENTRAL BANKS AROUND THE WORLD MAY PRINT THEIR CURRENCY TO BUY GOLD AND SILVER AS A HEDGE AGAINST INFLATION(WORLD WIDE)

 http://en.wikipedia.org/wiki/Tulip_mania

& http://www.investopedia.com/features/crashes/crashes2.asp 

By Andrew Beattie

When: 1634-1637
Where: Holland

The amount the market declined from peak to bottom: This number is difficult to calculate, but, we can tell you that at the peak of the market, a person could trade a single tulip for an entire estate, and, at the bottom, one tulip was the price of a common onion.

Synopsis: In 1593 tulips were brought from Turkey and introduced to the Dutch. The novelty of the new flower made it widely sought after and therefore fairly pricey. After a time, the tulips contracted a non-fatal virus known as mosaic, which didn't kill the tulip population but altered them causing "flames" of color to appear upon the petals. The color patterns came in a wide variety, increasing the rarity of an already unique flower. Thus, tulips, which were already selling at a premium, began to rise in price according to how their virus alterations were valued, or desired. Everyone began to deal in bulbs, essentially speculating on the tulip market, which was believed to have no limits.

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The true bulb buyers (the garden centers of the past) began to fill up inventories for the growing season, depleting the supply further and increasing scarcity and demand. Soon, prices were rising so fast and high that people were trading their land, life savings, and anything else they could liquidate to get more tulip bulbs. Many Dutch persisted in believing they would sell their hoard to hapless and unenlightened foreigners, thereby reaping enormous profits. Somehow, the originally overpriced tulips enjoyed a twenty-fold increase in value - in one month!

Needless to say, the prices were not an accurate reflection of the value of a tulip bulb. As it happens in many speculative bubbles, some prudent people decided to sell and crystallize their profits. A domino effect of progressively lower and lower prices took place as everyone tried to sell while not many were buying. The price began to dive, causing people to panic and sell regardless of losses.

Dealers refused to honor contracts and people began to realize they traded their homes for a piece of greenery; panic and pandemonium were prevalent throughout the land. The government attempted to step in and halt the crash by offering to honor contracts at 10% of the face value, but then the market plunged even lower, making such restitution impossible. No one emerged unscathed from the crash. Even the people who had locked in their profit by getting out early suffered under the following depression.

The effects of the tulip craze left the Dutch very hesitant about speculative investments for quite some time. Investors now can know that it is better to stop and smell the flowers than to stake your future upon one.

Read more: http://www.investopedia.com/features/crashes/crashes2.asp#ixzz2IFEXLWDB

 

Tulip mania

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A tulip, known as "the Viceroy", displayed in a 1637 Dutch catalog. Its bulb cost between 3,000 and 4,200 guilders (florins) depending on size. A skilled craftsman at the time earned about 300 guilders a year.^[1]

Tulip mania or tulipomania (Dutch names include: tulpenmanie, tulpomanie, tulpenwoede, tulpengekte and bollengekte) was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then suddenly collapsed.^[2] By 1636 the tulip bulb became the fourth leading export product of the Netherlands—after gin, herring and cheese. The price of tulips skyrocketed because of speculation in tulip futures among people who never saw the bulbs. Many men made and lost fortunes overnight, to the consternation of Calvinist elites who abhorred this artificial frenzy that denied the virtues of moderation, discretion and genuine work.^[3]
At the peak of tulip mania, in February 1637, some single tulip bulbs sold for more than 10 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble (or economic bubble),^[4] although some researchers have noted that the Kipper- und Wipperzeit episode in 1619–22, a Europe-wide chain of debasement of the metal content of coins to fund warfare, featured mania-like similarities to a bubble.^[5] The term "tulip mania" is now often used metaphorically to refer to any large economic bubble (when asset prices deviate from intrinsic values).^[6]
The event was popularized in 1841 by the book Extraordinary Popular Delusions and the Madness of Crowds, written by British journalist Charles Mackay. According to Mackay, at one point 12 acres (5 ha) of land were offered for a Semper Augustus bulb.^[7] Mackay claims that many such investors were ruined by the fall in prices, and Dutch commerce suffered a severe shock. Although Mackay's book is a classic that is widely reprinted today, his account is sometimes contested. Some modern scholars feel that the mania was not quite as extraordinary as Mackay described. Some even argue that not enough price data remain, historically, to represent an all out tulip bulb bubble.^[8][9]
Research on the tulip mania is difficult because of the limited economic data from the 1630s—much of which comes from biased and anti-speculative sources.^[10][11] Although these explanations are not generally accepted, some modern economists have proposed rational explanations, rather than a speculative mania, for the rise and fall in prices. For example, other flowers, such as the hyacinth, also had high prices with the flower's introduction, which immediately fell, and fell dramatically. The high asset prices may also have been driven by expectations of a parliamentary decree that contracts could be voided for a small cost—thus lowering the risk to buyers.

Contents 1 History 2 Available price data 3 Mackay's Madness of Crowds 4 Modern views 5 Rational explanations 6 Volatility in flower prices 7 Legal changes 8 Critiques 9 Social mania and legacy 10 In popular culture 11 See also 12 Notes 13 References 14 External links

History

A Satire of Tulip Mania by Brueghel the Younger (ca. 1640) depicts speculators as brainless monkeys in contemporary upper-class dress. In a commentary on the economic folly, one monkey urinates on the previously valuable plants, others appear in debtor's court and one is carried to the grave.

The introduction of the tulip to Europe is usually attributed to Ogier de Busbecq, the ambassador of Ferdinand I, Holy Roman Emperor to the Sultan of Turkey, who sent the first tulip bulbs and seeds to Vienna in 1554 from the Ottoman Empire. Tulip bulbs were soon distributed from Vienna to Augsburg, Antwerp and Amsterdam.^[12] Its popularity and cultivation in the United Provinces (now the Netherlands)^[13] is generally thought to have started in earnest around 1593 after the Flemish botanist Carolus Clusius had taken up a post at the University of Leiden and established the hortus academicus.^[14] He planted his collection of tulip bulbs and found they were able to tolerate the harsher conditions of the Low Countries;^[15] shortly thereafter the tulip began to grow in popularity.^[16]
The tulip was different from every other flower known to Europe at that time, with a saturated, intense petal color that no other plant exhibited. The appearance of the non pareil tulip as a status symbol at this time coincides with the rise of the newly independent country's trade fortunes. No longer the Spanish Netherlands, its economic resources could now be channeled into commerce and the country embarked on its Golden Age. Amsterdam merchants were at the center of the lucrative East Indies trade, where a single voyage could yield profits of 400%.^[17] The new merchant class displayed and validated its success, primarily by erecting grand estates surrounded by flower gardens, and the plant that had pride of place was the sensational tulip.

Anonymous 17th-century watercolor of the Semper Augustus, famous for being the most expensive tulip sold during tulip mania.

The Tulip Folly by Jean-Léon Gérôme, 1882. In this scene, a nobleman guards a virus infected plot as soldiers trample flowerbeds in a vain attempt to stabilize the tulip market by limiting the supply.

As a result, the flower rapidly became a coveted luxury item, and a profusion of varieties followed. They were classified in groups: the single-hued tulips of red, yellow, or white were known as Couleren; the multicolored Rosen (white streaks on a red or pink streaks background), Violetten (white streaks on a purple or lilac background), and the rarest of all, the Bizarden (Bizarres), (yellow or white streaks on a red, brown or purple background.^[18] The multicolor effects of intricate lines and flame-like streaks on the petals were vivid and spectacular and made the bulbs that produced these even more exotic-looking plants highly sought-after. It is now known that this effect is due to the bulbs being infected with a type of tulip-specific mosaic virus, known as the "Tulip breaking virus", so called because it "breaks" the plant's lock on a single color of petal.^[19][20]
The tulip was itself a conspirator in the supply-squeeze that fueled the speculation, in that it is grown from a bulb and that cannot be produced quickly. Normally it takes 7–12 years to grow a flowering bulb from seed; and while bulbs can produce both seeds and two or three bud clones, or offsets annually, the "mother bulb" lasts only a few years. Properly cultivated, the "daughter offsets" will become flowering bulbs of their own after one to three years. Prior to the demand for the "broken" tulips, virus-free bulbs producing ordinary single-color varieties were sold by the pound. Once affected by the virus, the "broken" exotics were an extremely limited commodity because the sought-after "breaking pattern" can only be obtained through offsets, not seeds, as it is only the bulb that is affected by the mosaic virus. Unfortunately, the virus that produced the sought-after effects also acted adversely on the bulb, weakening it and retarding propagation of offsets, so the cultivation of the most appealing varieties now took even longer. Taking this into account, it is quite probable that from the time the speculation started until its collapse, the actual number of rare bulbs that changed hands so feverishly never increased beyond the original number.