New York Fed Research Library
Speculative bubbles have been a recurring theme in financial history. One of the first documented market bubbles occurred in the 1600s and involved a booming (or should we say “blooming”?) tulip market in the Netherlands.
This mania was documented by Charles Mackay in his book, Memoirs of Extraordinary Popular Delusions and the Madness of Crowds, published in 1841. In addition to its accounts of alchemists, fortune-tellers, and beard taxes, the book recounts stories from the Tulipomania. One such tale follows:
“Another story is told of an English traveller, which is scarcely less ludicrous. This gentleman, an amateur botanist, happened to see a tulip-root lying in the conservatory of a wealthy Dutchman. Being ignorant of its quality, he took out his penknife, and peeled off its coats, with the view of making experiments upon it. When it was by this means reduced to half its size, he cut it into two equal sections, making all the time many learned remarks on the singular appearances of the unknown bulb. Suddenly, the owner pounced upon him, and, with fury in his eyes, asked him if he knew what he had been doing? “Peeling a most extraordinary onion,” replied the philosopher. “Hundert tausend duyvel!” said the Duchman; “it’s an Admiral Van der Eyck.” “Thank you,” replied the traveller, taking out his note-book to make a memorandum of the same; “are these admirals common in your country?” “Death and the devil!” said the Dutchman, seizing the astonished man of science by the collar; “come before the syndic, and you shall see.” In spite of his remonstrances, the traveller was led through the streets followed by a mob of persons. When brought into the presence of the magistrate, he learned, to his consternation, that the root upon which he had been experimentalising was worth four thousand florins; and, notwithstanding all he could urge in extenuation, he was lodged in prison until he found securities for the payment of this sum.”
To learn more, read the Tulipomania chapter (along with other chapters on manias and bubbles) in Charles Mackay’s book, Memoirs of Extraordinary Popular Delusions and the Madness of Crowds.
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