As most of you know Tulip Mania happened in Netherlands around 1937. Tulip bulbs were a luxury product with an important value of power in the country, so everybody tries to have one or more in their houses. There were few tulip bulbs with different colours so they were really expensive and people compete and pay well for these bulbs. This makes that the price of tulip bulbs increase and people start to speculate with them, his price increase about 10 times and also people change houses for a tulip bulb! It was amazing! These facts lead to a big economic bubble and also a financial crisis. People start to buy bulbs like and investment, but at the end everybody had a lot of tulip bulbs imported for other countries and their price decrease a lot, then the tulip bulb has no value. It’s said that Tulip Mania was the first economic bubble.
And my question is why people are so stupid, and invest a lot of money in a plant? Tulips were flowers that everyone can cultivate in their houses. Anybody know that this was a big bubble which at the end will exploit? This example shows the fragility of the world economy.
Hi Santi,
ResponderEliminarInteresting post. Was there an article or video that you read/watched about this that you could include?
Make sure you maintian the past tense throughout:
so everybody triED
and people competeD and paID well
this maDE the price of tulip bulbs increase..
and people startED...
Etc.
Great Santi!
ResponderEliminarIt really seems amazing that people could spend so much money in a so stupid think!
And the other interesting question, why they didn’t realize that it was a bubble?
It seems as if they were stupid, but have you realized my friend that we have done the same?
Not with Tulips, but with houses and sophisticated economic products.
It seems as if they were stupid, but I think that we are even more.
Emilee the book where I took this information is called "El economista camuflado" by Tim Harford.
ResponderEliminarWriting about the article of “The beginning of economic bubbles” written by Santi Sepulveda, and Ibeginanswering to the first question that he has answered, but so as to make the essential message of the article, I am going to exemplify the answer. The example that I am going to explain is one that we know very closed, we have a big bubble in our country few years ago, and so everybody knows what I am talking about, the Building Bubble.
ResponderEliminarSome years ago, people in Spain were paying a lot of money to get a house or a flat. They were paying much big quantities, more that they would feel that they want to pay, but people pay It. Banks have much responsibility also, they had work with the society and lend big quantities of money to people that doesn’t have any insurance to pay the loan. Then in the United States of America happened the same, they have a big problem with the mortgages and the banks. Returning to the Spanish’s bubble, people were spending more than their incomes trusting the bank and thinking that everything was happily and pink but one day the bubble, which everybody known and played inside, had to break.
In the other hand, I believe that it could happen in Holland, in tulipamania times people knew that it was an imaginary increase of real value of the products, they would know that the bulb didn’t have the value that they were paying, but they paid! In Spain we have the same fact, and then which is the problem? My answer to the problem is that we are avaricious and then when we saw a few opportunity to get more money we have to invest. Then we think if I buy this for this quantity in few times i will send it for more money (this is the point that I have talk before people pay more for the same thing) and i will earn a lot of money. That was a very good business but one day the break happened and people was crying when they “lose” their money but now they are getting the real value of their object.
Great comments!
ResponderEliminar