I am sorely disappointed with the Washington Post’s editorial writers. These pseudo –intelligential and born-again conservatives remain pro Iraq war and anti-Democrat, to the point that at Times (pun intended) they don’t seem to read the front page of their own newspaper. As a result they are not merely often mistaken but are often simply wrong. Their Saturday editorial compared the Dutch Tulip Mania with our current sub-prime lending bust. According to the Post, financial stability is only a matter of government officials keeping their “nerve”. It is a sad suggestion, reminiscent of similar editorials from 1929. Well, read my lips, Washington Post; reality ain’t that simple.
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The beginning date is clear; 1593, but exactly what happened that year is not. One story has it that Ogier
de Busbecq, a Turkish scientist, sent some tulip bulbs to Charles de L’Ecluse, who bred the impudent little exotics to survive the Northern European climate. Or it may have been the year Conrad Guestner , the Dutch ambassador to Turkey, brought the odd looking flower back home. Yet another story says it was Carolus Clusius, a botanist at the University of Leiden, who was the instigator that year. He was looking for a medical breakthrough but he didn’t get one because, so the story goes, capitalists broke into the professor’s garden one night and dug up his experimental bulbs, selling them for an immediate profit to avaricious collectors and thus unleashing “tulip mania” on the new nation. Any one or a combination of all three stories might be true. But what followed is singularly infamous.
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The beginning date is clear; 1593, but exactly what happened that year is not. One story has it that Ogier
de Busbecq, a Turkish scientist, sent some tulip bulbs to Charles de L’Ecluse, who bred the impudent little exotics to survive the Northern European climate. Or it may have been the year Conrad Guestner , the Dutch ambassador to Turkey, brought the odd looking flower back home. Yet another story says it was Carolus Clusius, a botanist at the University of Leiden, who was the instigator that year. He was looking for a medical breakthrough but he didn’t get one because, so the story goes, capitalists broke into the professor’s garden one night and dug up his experimental bulbs, selling them for an immediate profit to avaricious collectors and thus unleashing “tulip mania” on the new nation. Any one or a combination of all three stories might be true. But what followed is singularly infamous. *
After the happy discovery in 1621 that exposure to the mosaic virus, carried by European green pea aphids, caused tulips to form multi-colored flowers (hence the title “mosaic”), breeders began producing whole ranges of tuli
p varieties; and the newer the breed of tulip, the rarer the tulip bulb, the higher the price. By 1624 the Dutch were paying as much as 3,000 silver guilders for what the Turks called “Laaleh bulbs”, which grew like wild onions from Turkey to Afghanistan. Whereas, for only 1,500 gilders, you could get Rembrandt van Rijn to paint your image into something big, like “The Night Watch.” But the tulip bubble was just beginning. Ten years later, in the winter of 1637, one bulb sold at auction for 5,200 guilders.
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p varieties; and the newer the breed of tulip, the rarer the tulip bulb, the higher the price. By 1624 the Dutch were paying as much as 3,000 silver guilders for what the Turks called “Laaleh bulbs”, which grew like wild onions from Turkey to Afghanistan. Whereas, for only 1,500 gilders, you could get Rembrandt van Rijn to paint your image into something big, like “The Night Watch.” But the tulip bubble was just beginning. Ten years later, in the winter of 1637, one bulb sold at auction for 5,200 guilders.*
Special tulip notaries and clerks recorded the well regulated sale of bulbs. Entire tulip stock exchanges were created in scores of Dutch towns and newspapers were filled with the minutia of trading in “tulip futures”. Vast fortunes were won and lost without ever seeing a tulip bloom. But the winter of 1637 was the top of the market.
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Bubonic plague returned to Amsterdam in 1636, the same year the French under Cardinal Duc de Richelieu sided against the Catholic Habsburgs, in the Thirty Years War. And in November of 1637 the Guild of Dutch florists decreed that all contracts for tulips written after November 1636 were void. In a flash, tulip mania collapsed. In 6 weeks a bulb that had just sold for the equivalent of $76,000 was suddenly worth less than one dollar. In two years, from 1635 to 1637, the number of bankruptcies in Amsterdam doubled.
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This is the wonderful morality tale the editors of the Washington Post want you to hear; boy meets tulips, boy speculates in tulips, boy panics, boy losses tulips. Ah, if only the story was that simple.
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Let’s take a couple of steps back, to 1628, eight years before the peak of the tulip mania, when the Dutch privateer Piet Heyn captured an entire Spanish Treasure Fleet, transporting 12 million guilders in stolen Inca gold and silver, and re-deposited it in the coffee house banks and trading corporations of Holland. And that was the profit from just one of the dozens of Dutch and English raids on Spain’s Caribbean properties that brought fortunes of pieces of eight back to Holland. But, because Heyn was acting as a privateer the Dutch government could deny his actions and remain at peace with Spain. But the truth was that Spanish doubloons not only fed and clothed the Catholic armies in the Thirty Years Wars but their Protestant enemies’ troops as well.
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In short, Holland was awash in cash and at peace, which drove down interest rates to historic (read artificial) lows, a phrase we should all be familiar with from economic reports over the last six years, until the Dutch were themselves were dragged into the wars and began spending to support an army and navy. Then both the government and the tulip investors were competting to borrow the same guilders; instant liquidity crunch.
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Bubonic plague returned to Amsterdam in 1636, the same year the French under Cardinal Duc de Richelieu sided against the Catholic Habsburgs, in the Thirty Years War. And in November of 1637 the Guild of Dutch florists decreed that all contracts for tulips written after November 1636 were void. In a flash, tulip mania collapsed. In 6 weeks a bulb that had just sold for the equivalent of $76,000 was suddenly worth less than one dollar. In two years, from 1635 to 1637, the number of bankruptcies in Amsterdam doubled.
*
This is the wonderful morality tale the editors of the Washington Post want you to hear; boy meets tulips, boy speculates in tulips, boy panics, boy losses tulips. Ah, if only the story was that simple.*
Let’s take a couple of steps back, to 1628, eight years before the peak of the tulip mania, when the Dutch privateer Piet Heyn captured an entire Spanish Treasure Fleet, transporting 12 million guilders in stolen Inca gold and silver, and re-deposited it in the coffee house banks and trading corporations of Holland. And that was the profit from just one of the dozens of Dutch and English raids on Spain’s Caribbean properties that brought fortunes of pieces of eight back to Holland. But, because Heyn was acting as a privateer the Dutch government could deny his actions and remain at peace with Spain. But the truth was that Spanish doubloons not only fed and clothed the Catholic armies in the Thirty Years Wars but their Protestant enemies’ troops as well.
*
In short, Holland was awash in cash and at peace, which drove down interest rates to historic (read artificial) lows, a phrase we should all be familiar with from economic reports over the last six years, until the Dutch were themselves were dragged into the wars and began spending to support an army and navy. Then both the government and the tulip investors were competting to borrow the same guilders; instant liquidity crunch.
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So the story of tulip mania is really of the story of a booming economy that could afford a little insanity, such as the tulip speculation (or a lot of sub-prime mortgages) until a war soaked up all the credit that the speculation had been fueled by. And that sounds very familiar, doesn’t it? 
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I think the economic gurus at the Washington Post ought to be a lot more nervous. The Bush vision of economic-horticulture of “don’t tax but spend” is about to go bankrupt. And a pretty big chunk of the world is about to get stuck with the bill.
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I think the economic gurus at the Washington Post ought to be a lot more nervous. The Bush vision of economic-horticulture of “don’t tax but spend” is about to go bankrupt. And a pretty big chunk of the world is about to get stuck with the bill.
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