Dim Bulbs

Dim Bulbs

For some of these old manias that I want to discuss the next few

weeks, I will be relying heavily on two books; Charles Mackay”s

“Extraordinary Popular Delusions & the Madness of Crowds,”

and Charles Kindleberger”s “Manias, Panics, and Crashes.” As

we explore tulipmania, together, I don”t need to remind you of

the eerie comparisons to a current mania we are experiencing. It

begins with an “I.”

The tulip was introduced into Western Europe about the middle

of the 16th century (1559 to be exact) from its home in Turkey.

For the next 10 years after its introduction, tulips were much

sought after by the wealthy. Until the year 1634 the tulip

gradually increased in reputation and soon it was deemed a proof

of bad taste in any man of fortune to be without a collection of

them. And the popularity spread to the middle classes of society,

as well. The rage among the Dutch to possess them was so great

that the ordinary industry of the country was neglected, and the

population, even to its lowest dregs (see also-DAY TRADERS)

embarked in the tulip trade.

Excitement began in earnest in September of 1636, when bulbs

were no longer available for examination, having been planted to

bloom the following spring, in their normal cycle. The excited

bidding of November, December 1636 and January 1637 was

conducted with no specimens in evidence.

Regular markets for the sale of tulips were established on Stock

Exchanges throughout Holland. Gambling took hold. At first, as

in all these gambling mania, confidence was at its height and

everybody gained (can you say, DAY TRADERS!). Actually,

these day traders were called “tulip-jobbers.”

Everyone imagined that the passion for tulips would last forever.

The riches of Europe would be concentrated in Holland, poverty

banished from its favoured clime. Nobles to chimneysweeps

dabbled in tulips. Property was converted into cash and invested

in the flowers.

Let”s look at an example of a typical transaction. With no bank

credit at this time, down payments were frequently made in kind.

In one case, a pound of White Crowns, 525 florins, was to be

paid on delivery (presumably the next June, 1637), but four cows

were to be delivered at once to the dealer. Other down payments

consisted of tracts of land, houses, furniture, silver and gold

vessels, paintings, a suit and a coat, a coach and dapple-gray pair

(of horses); and for a single Viceroy (rare), valued at 2500

florins, two lasts (a measure which varies by commodity and

locality) of wheat and four of rye, eight pigs, a dozen sheep, two

ox-heads of wine, four tons of butter, a thousand pounds of

cheese, a bed, some clothing and a silver beaker.

So the prices went higher and higher late 1636, early 1637, when

at last the more prudent began to see that this folly could not last

forever. And prices fell, never to rise again. Panic spread among

the dealers. For example, A may agree to purchase ten Semper

Augustines from B at 4000 florins each, six weeks after signing

the contract. B would be ready with flowers at the appointed

time; but the price had fallen to 300 or 400 florins, and A would

refuse either to pay the difference or receive the tulips. Soon, the

cry of distress sounded everywhere, and each man accused his

neighbor. The few who got out in time hid their wealth, not

wanting neighbors to know.

The matter was finally referred to the Provincial Council at the

Hague who sat on it for 3 months before wimping out. There

was no court in Holland which would enforce payment of the

contracts. The question was raised in Amsterdam, but the judges

unanimously refused to interfere, on the ground that debts

contracted in gambling were no debts in law. By the middle of

1637 tulipmania was over and it took quite awhile before the

Dutch economy recovered.

**Mackay had this supposedly true tale in his book. “It seems

that a wealthy merchant, who prided himself not a little on his

rare tulips, received upon one occasion a very valuable

consignment of merchandise for the Levant. Intelligence of its

arrival was brought him by a sailor, who presented himself for

that purpose at the counting-house, among bales of goods of

every description. The merchant, to reward him for his news,

munificently made him a present of a fine red herring for his

breakfast. The sailor had, it appears, a great partiality for onions,

and seeing a bulb very like an onion lying upon the counter of

this liberal trader, and thinking it, no doubt, very much out of its

place among silks and velvets, he slyly seized an opportunity and

slipped it into his pocket, as a relish for his herring. He got clear

off with his prize, and proceeded to the quay to eat his breakfast.

Hardly was his back turned when the merchant missed his

valuable Semper Augustus, worth 3000 florins. The whole

establishment was instantly in an uproar; search was everywhere

made for the precious root, but it was not to be found. At last

some one thought of the sailor.” You can guess the rest of the

story. They found him, eating the last morsel of his “onion.”

The sailor was jailed for felony theft.

Brian Trumbore