The tulip crisis, the first stock market crash in history


The tulip crisis took place on February 6, 1637.

A class of wealthy merchants emerged in the 17th century Netherlands.

To demonstrate their new economic status, the bourgeoisie surrounded themselves with rare and precious items.

Among them: the tulip.

It was Charles de lEcluse, a professor of botany, who brought some onions back from Constantinople in 1590.

A difficult flower to produce.

The flower quickly becomes a symbol of wealth. This is of course due to its beauty, but also to the fact that it takes between 7 and 12 years for a seed to produce a flowering bulb.

Some marbled and multicolored tulips take even longer. We now know that it is due to a virus that is slowing its growth.

An unprecedented speculation.

The price of these rare flowers is skyrocketing.

Between 1634 and 1637 it increased by 5900{7d3485657e94c2a51293ca186d4450b2f27c317aa7ee3509dac6c8bbf5461118}!

The most sought-after variety, Semper Augustus, fetched the exorbitant price of 6,700 guilders, the value of two houses or fifteen times the annual salary of a craftsman!

The problem is that flowers are often bought well in advance of delivery.

The bulb can only be uprooted and replanted between June and September. Cash sales are therefore only possible during this period.

The rest of the year, at the end of the season, the light bulbs are negotiated for purchase in front of a notary. It is the birth of a futures market.

Transactions therefore mainly relate to future lightbulbs and not to immediately available lightbulbs.

At that time this speculation was called wind trade, a 'wind trade'.

But now, in 1637, the bubonic plague suddenly appeared in Haarlem, where most of the tulip trade took place.

Prices collapse, causing what some economists consider to be the first stock market crash in history.