Tulipmania: Difference between revisions
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One of the first and well-known [[financial panic]]s was the '''Tulip mania''' ( | One of the first and well-known [[financial panic]]s was the '''Tulip mania''' (1634–37) in [[Netherlands]]. The popular flower became a status symbol, the rare bulbs were hard to reproduce and in great demand. A large futures market formed for the seasonal flower and the speculation escalated. At its peak, the prices rose twenty-six times in January 1637, only to fall to one-twentieth of its peak price a week later. Finally, the Court of Holland judged the tulip sales to be bets under [[Roman law]] and basically cancelled all contracts. The growers of the bulbs absorbed the most of the damage and the number of bankruptcies doubled. | ||
Throughout 17th century, precious metals from the [[New World]], [[Japan]] and other locales have been channeled into Europe, with corresponding price increases. As kings throughout Europe debased their currencies, the Dutch provided a sound money policy with money backed one hundred per cent by specie. Free coinage laws (later limited) created more money from the increased supply of coin and bullion, than what the market demanded. Ironically, this acute increase in the supply of money fostered an atmosphere, that was ripe for speculation and malinvestment, and led to one of the first recorded panics or speculative bubbles.<ref name="French_Tulip_mania">Doug French. [http://mises.org/journals/qjae/pdf/qjae9_1_1.pdf "The Dutch Monetary Environment During Tulipmania"] (pdf), Quarterly Journal of Austrian Economics, Vol. 9 Num. 1. 2006, referenced 2011-01-08.</ref> | Throughout 17th century, precious metals from the [[New World]], [[Japan]] and other locales have been channeled into Europe, with corresponding price increases. As kings throughout Europe debased their currencies, the Dutch provided a sound money policy with money backed one hundred per cent by specie. Free coinage laws (later limited) created more money from the increased supply of coin and bullion, than what the market demanded. Ironically, this acute increase in the supply of money fostered an atmosphere, that was ripe for speculation and malinvestment, and led to one of the first recorded panics or speculative bubbles.<ref name="French_Tulip_mania">Doug French. [http://mises.org/journals/qjae/pdf/qjae9_1_1.pdf "The Dutch Monetary Environment During Tulipmania"] (pdf), Quarterly Journal of Austrian Economics, Vol. 9 Num. 1. 2006, referenced 2011-01-08.</ref> | ||
Revision as of 18:52, 4 April 2011
One of the first and well-known financial panics was the Tulip mania (1634–37) in Netherlands. The popular flower became a status symbol, the rare bulbs were hard to reproduce and in great demand. A large futures market formed for the seasonal flower and the speculation escalated. At its peak, the prices rose twenty-six times in January 1637, only to fall to one-twentieth of its peak price a week later. Finally, the Court of Holland judged the tulip sales to be bets under Roman law and basically cancelled all contracts. The growers of the bulbs absorbed the most of the damage and the number of bankruptcies doubled.
Throughout 17th century, precious metals from the New World, Japan and other locales have been channeled into Europe, with corresponding price increases. As kings throughout Europe debased their currencies, the Dutch provided a sound money policy with money backed one hundred per cent by specie. Free coinage laws (later limited) created more money from the increased supply of coin and bullion, than what the market demanded. Ironically, this acute increase in the supply of money fostered an atmosphere, that was ripe for speculation and malinvestment, and led to one of the first recorded panics or speculative bubbles.[1]
References
- ↑ Doug French. "The Dutch Monetary Environment During Tulipmania" (pdf), Quarterly Journal of Austrian Economics, Vol. 9 Num. 1. 2006, referenced 2011-01-08.
External links
- Tulip mania on Wikipedia