2. Contents
• What is an Economic Bubble?
• What is Tulipomania?
• Introduction of Tulips in the Netherlands
• Events Leading up to The Tulip Bulb Bubble
• The Mania Phase
• The Crash
3. What is an economic bubble?
An economic bubble is a market condition by which the price of an asset costs more than its
intrinsic value.
• In this case the buyer still buys the asset in anticipation of
gaining more by selling it to another buyer.
• The bubble bursts when buyers are no longer
willing to pay more than an items intrinsic
value.
• This causes those who own the asset to lose the amount by which they previously overpaid.
• The drop in value happens in the form of panic selling
4. What is Tulipomania?
Tulip mania also called ‘tulipomania’ is the widespread
obsession with tulips, especially of highly prized varieties,
as those of a streaked or unusual color.
Occurred during the Dutch golden age between the years 1 6 3 6 – 1 6 3 7
The rules of Supply and Demand
It was a case that played on the:
An episode that saw the rise in tulip
prices driven by speculators
Considered to be the first ever recorded
financial bubble
5. Introduction of tulips in the Netherlands
• Dutch trade with foreign lands led to the importation of exotic goods such as Tulips
• Tulips where first introduced to the Netherlands from turkey shortly after 1554
• Tulips were imported by the Dutch East India Company that traded various goods. From
spices, to blue glass and to the importation of tulips on the Dutch soil.
A symbol of wealth
Tulips were perceived as: More precious than gemstones
Form of currency
6. Events leading up to the tulip bulb
bubble
• The Dutch later saw the importation of tulip seeds.
• The farming of tulips in the Netherlands saw the spread of a virus on the tulips, which made
them look like flames and appear more appealing and attractive
• Prices of tulips were priced according to their category of variety.
8. The Mania Phase
Beginning
Phase
• Tulip prices steadily rose as their demand sky rocketed which
exceeded their supply.
• Tulip bulbs were purchased at higher and higher prices by
speculators who planned to turn around and sell them for a
profit.
9. The Mania Phase
Peak Phase
•
•
•
By the peak of tulipomania in February of 1637, a single tulip
bulb was worth about ten times a craftsman’s annual salary.
This led to more traders risking their money by investing in
buying tulip bulbs in hopes of making a fortune.
Merchants were known to sell all their belongings in order to
buy a single tulip bulb.
10. Scale of the peak phase
The tulip bulb prices rose high enough that one tulip bulb was traded in exchange for:
• A suit of clothes
• A complete bed
• A silver drinking cup
• Twelve fat sheep
Tulip bulb speculation became so widespread by
1636 that they were traded on Amsterdam’s Stock Exchange
and even to places like France and England. In particular, Paris and
London.
11. The Crash
The bubble continued to inflate beyond peoples expectations until it abruptly "popped" in the
winter of 1636-37
• This led to panic selling by tulip merchants.
• Within just a few days, tulip bulbs were worth only a hundredth of their former prices.
• The Dutch government tried saving the trade by offering to honor contracts at 10% of
their face value.
• To no avail, the market of tulips plummeted.
