Saturday, March 14, 2009

Lets Make a Deal

Please forgive me for my prolonged absence from my blogging duties. I am a very amateur writer at best, and there are times when I cannot write anything interesting at all. I can think it, I just cant write it. Please accept this short story as a genuine, albeit rusty, apology.

Let’s play a little game.

Let’s pretend that you and I are in Holland in 1638. I am in possession of a small parcel that you are trying desperately to acquire through barter. Your final, desperate offer is as follows:

Two lasts of wheat
Four lasts of rye
Four fat oxen
Eight fat swine
Twelve fat sheep
Two hogsheads of wine (63 gallons each)
Four tuns of beer (a tun was approx 283.5 gallons)
Two tuns of butter
One thousand pounds of cheese
A complete bed
A suit of clothes
A silver drinking cup

Total value, 2500 florins. A very hefty sum in its day. You are a pleasant enough person and I am in a reasonably generous mood, so I accept your offer. Upon delivery of the grain and livestock and beer I will present you with the small parcel. A diamond perhaps? No. Gold? No. A precious ancient treasure? Not quite. You are immensely pleased nonetheless.

You are the proud owner of a single Viceroy tulip bulb.

The tulip was introduced via Constantinople to Europe in about 1600 after enjoying several years of popularity in Turkey. Year after year the bulbs grew in popularity until everyone from the richest to the poorest men in Holland were actively perusing, trading in or collecting any specimens that they could get their hands on. Some would spend half of their life savings on a single bulb just to show it off to friends. Needless to say the tulip market became very lucrative, to the point that a special section of their stock market was dedicated to nothing but the tulip trade.

You are happy because you got a quality bulb at a reasonable price at the height of the bubble. An Admiral Leifken would have cost you closer to 4000, a Semper Augustus would have been a steal at 5500. This particular bubble is referred to by historians as Tulipomania, and like all speculative bubbles this one was bound to burst.

The rich Dutch with substantial tulip holdings began to feel uneasy about the new found wealth producer and began to sell off all of their bulbs thereby flooding the markets and causing panic in the bulb trade. In a matter of a few months you could not unload a tulip bulb if your life depended on it. Fortunes were made and lost, some were just lost. Beggars who were elevated to high society quickly found themselves beggars once more. And, as in most bubble implosions, the folks left holding the lions share of the money that had changed hands did not flaunt it. Many turned it into foreign currencies and investments.

And what about you and your now worthless Viceroy? Like many of the common folk who got caught up in the mania and lost you probably bitterly planted the pricey mistake in your yard or somewhere in the countryside and felt foolish every time you saw it from that point forward. So many were planted that the tulip ranks with wooden shoes and windmills as a Dutch icon to those unfamiliar with the country.

And me? I am secretly drinking your wine out of your silver drinking cup. Perhaps there are contemporary lessons to be learned from the varied fortunes of the Dutch tulip traders over four centuries ago………

I recently read a wonderful book on the ginseng trade called “Ginseng, the Divine Root” by David A. Taylor which reminded me of the Tulipomania story that I had read years ago in a book titled “Extraordinary Popular Delusions and the Madness of Crowds” by Charles MacKay. This work was first published in 1841 and many of the examples and accounts used in this post are from this work. The book has chapters on manias caused by slow poisoning, alchemy, Nostradamus, mesmerism and many others. I would encourage all to read both of these works, they are quite interesting.

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