Dutch Tulip Bulb Market Bubble
Categories: Education
The Dutch Tulip Bulb Market Bubble is, surprisingly, precisely what it sounds like, and is super famous for just how big the tulip bulb bubble got.
The Dutch Tulip Bulb Market Bubble happened where the Dutch live—in Holland, part of the Netherlands—all the way back in the 1600s. Yep, we’ve been having market bubbles all the way back to at least the 1600s. No wonder economists think bubbles are inevitable.
The difference between then and now? In the early 2000s, we had a housing bubble. In the early 1600s, they had a tulip bulb bubble. Rare tulip bulbs were selling for 6x the average Joe’s annual salary. There was intense tulip speculation, as everyone jumped on board the tulip-trading train. You see, tulips were all the rage at the time...everyone was experiencing “Tulipmania.”
Eventually, the tulip bulb bubble burst, because the prices for them were so darn high that, eventually, people couldn’t pay the prices they said they would, and the tulip market caved in on itself. Sure, the tulip bulb market crash didn’t hurt the Holland economy like the housing market crash in ‘08 hurt U.S.’s economy...but it did still have the profound and lasting effects of disillusioned people from broken promises and expectations. That’s what happens when bubbles burst...we wake up from the trance we didn’t even know we were in. Sometimes it’s Tulipmania...sometimes it’s something else.
And none of this has anything to do with iconic The Rolling Stones cover, believe it or not, originally titled Two Lip Mania.
Related or Semi-related Video
Finance: What is a Bubble?5 Views
Finance allah shmoop what is ah bubble All right well
this is a bubble See what happened there got bigger
and bigger and bigger And then it popped and here's
the stock market from about nineteen Ninety two until about
two thousand It got bigger and bigger and bigger And
then it popped And yet was a bubble not just
a big fat bull market It was a crazy ludicrous
tulip mania Kind of time like start ups with almost
no revenues trading and billions of dollars Yep And tulip
mania That was a really thing One tulip sold for
forty grand go figure wasn't like if you ate it
you lived forever So yeah it was a bubble So
what caused the ninety nine bubble Well greed and it
wasn't good At least for some The internet had come
along It was a new thing consumers by the millions
could download in the privacy of their homes Art films
Yeah That's what we'll call them art films by the
terabyte money was flowing from silicon valley investors into startups
at record pace hoping to take advantage of this new
amazing internet thing and the valuations of companies got higher
And higher and higher Nasdaq went up some four hundred
percent in just half a dozen years and the blessed
cos traded at one hundred times trailing revenue not earnings
but revenue So if you think about the idea that
if you invest a dollar and you want to get
more than that back and that dollar comes from profits
of companies than one hundred times revenues cos we're probably
something like five hundred times earnings or more So for
one hundred dollars oven investment you've got like a dollar
of revenues in twenty cents of potential earnings Like maybe
a a decade later maybe yeah that's a bubble and
it burst At least you don't have that danger with
actual tulips or bitcoins Yeah they take bitcoins when you
buy tulips Would be kind of a good marriage there