The Great Tulip Bubble
From: A Random Walk Down Wall Street by Burton G. Malkiel

In Holland during the early 1600's it was not stocks, but tulip bulbs that made investors rich beyond their wildest dreams, ruined thousands when the Tulip Bubble burst, and threw the national economy into major depression.

Yes we are talking about a flower here - the tulip. Not just any plain old tulip, but those with the mosaic virus which produced pedals with contrasting colored strips. These bulbs were called "bizarres." These infected bulbs became all the rage in Holland and the more bizarre a bulb was the more it was worth. Speculators began buying bulbs just for the purpose of reselling them at a profit and became rich doing so - so more speculators wanted in on the action and easy money which just produced more demand for the bulbs further pushing up their prices. Soon anyone could make lots of easy money buying and selling tulip bulbs--full blown tulipmania.

Tulip prices rose steadily then wildly as nobles, farmers, maid-servants, and chimney sweeps profited from the madness. The normal industry of the nation stopped as everyone engaged in profligate speculation in tulip bulbs.

The Tulip Bubble was in high gear as valuables such as land, jewels, and even once an entire house was traded for a single tulip bulb.

An option markets in tulip bulbs even developed allowing the Dutch to leverage their ability to speculate on bulbs.

One sailor thinking the red bulb on a tavern owner's counter was an onion (it was a valuable tulip bulb) carved it up as topping on his herring and was thrown in prison charged with a felony.

And then one day bulbs quite rising in price when there was no one left to pay a higher price for them. All the buyers had bought and had been taken out of the market. With no supply of buyers left to bid on bulbs they begin to fall in price and economic panic set in. Government officials assured the public that all would be all right, but dealers went bankrupt as did speculators and the general public. A severe depression set in for years with the crash of the Tulip Bubble.

Humanities Resource of Mark Hunter