This is the Part 2 of the “Tulip Mania As Pyramid Scheme” article. Read the Part 1.
At the peak of tulip mania prices for these goods rose so high that no other type of business could compete with the flower contract business. Even previously considered extremely profitable trade of oriental spices and opium did not to come within miles of tulip trade.
For example, why should an industrialist build a new woolen manufactory, if he could earn as much money as the factory was to bring him for a whole year of work by trading a few tiny bulbs without too much trouble for a month?
Why should a merchant send a ship to distant India, risking his own cargo and head into the sea, threatening with storms and pirates (according to statistics of that time, out of every three ships sent to the distant sea, only one ship returned back) if he could receive fantastic profits without leaving home port.
Judge: The kind of the tulip bulb — Admiral de Maan, which cost 15 guilders a piece in 1636, two months later was sold for 175 guilders. The most demanded Semper Augustus («Eternal August”) at first cost 500 guilders but in a short time rose by tenfold! That is a profit of holders of such a valuable asset amounted to 1000%! At the end of 1637 Semper Augustus was worth 10,000 guilders — worth a major ship owner’s profit a year.
It should be noted that in those times the Dutch guilder was considered one of the most stable European currencies. Many wealthy people from other countries preferred to keep their money in guilders. And to make it clear about amounts involved, as an example, we give some prices: a well-fed pig cost 30 guilders, a thousand liter (!) barrel of beer — 8 guilders, and a cow — a hundred. It is an interesting fact that passers-by could read a curious inscription on an ancient wall plate on the street in Amsterdam until the 1970s. It said that two stone houses were purchased for three tulip bulbs on this street in 1636. Now this part of ancient masonry is stored in a private museum.
Of course, the bubble had to burst at some point. The reason turned out to become the ship that brought a huge lot of bulbs to Amsterdam in spring 1637, which instantly collapsed price rates for tulips across the country. The bulbs were devalued as well as all “exchange shares” on tulips. People tried unsuccessfully to sell their shares and to cash receipts available on hand. Panic swept the country as well as a year ago it brought the tulip fever.
The rate collapse of the tulips resulted in widespread bankruptcy and economic depression from which Holland could not soon recover. It suddenly lost its title of the most developed European country, giving way to a new maritime country — Britain.
Only tulip fields which are a real gem and the hallmark of Holland remind of the tragedy now.