Did you know that the Netherlands was the first to experience an economic bubble, the tulip bubble?

In the 17th century (the Golden Age), the Netherlands was the world’s center of trade, agriculture, and industry. No other country in the world experienced comparable economic growth. This also meant that people sometimes had a lot of money to spend on “valuable” items. The tulip was a good example of this.

At the end of the 16th century, tulips were introduced to the Netherlands, and for the first 20 years, interest in them grew steadily without yet becoming a hype. Prices gradually increased during this time. The real hype began in 1635. Even before 1635, tulips were already expensive, with bulbs being sold for 45 guilders, which would be roughly €450 by today’s standards. But during the tulip bubble, which lasted about two years, prices were driven up so high that some tulip bulbs were sold for more than 4,000 guilders (now €40,000).

In the winter of 1636-1637, prices peaked, and the market subsequently collapsed. Buyers were no longer willing to pay the absurd prices, and the value of tulip bulbs rapidly declined, leading to financial losses for many traders and speculators.

The likely explanation for this phenomenon was a combination of (too) much available money, curiosity, the novelty of the product, and a lack of knowledge among buyers.

The photo above was created by Bob van der Zwaag via flickr.com.