Charles Mackay published his classic work on financial “bubbles,” “Extraordinary Popular Delusions and the Madness of Crowds” in 1841. The cover of some editions features a Dutchman in a field of tulips, for it was Mackay that identified the “tulip mania” financial bubble of 1637 they swept over the Netherlands as the world’s first recorded large-scale financial bubble. Klaus Steindl directed this docudrama, which was released in 2013. Amazon suggested this movie to me since I had just watched his nature film on Lake Constance, which I should be reviewing shortly. This documentary provides both a historical reenactment of the tulip mania times, featuring Adrian the Miller, who gets caught up in the “easy money” of speculation in tavern trading, and a maid who lucks out and picks up a valuable tulip bulb, as well as commentary from modern-day financial traders.
The tulip bulb originated as a wild plant growing in Kazakhstan. From there it would travel to Turkey, then on to Vienna, and eventually to Leiden, in the Netherlands, where it truly took root, literally and figuratively. Today 80% of the world’s tulips come from the Netherlands. Most tulips however are never harvested. The flowers are allowed to wither and the bulbs are dug up, like potatoes are, and sold abroad.
A gamble on top of a gamble. A major threat to tulips is viruses. Yet they also produce some of the most unusual and valuable types. Some of those considered the most beautiful are white, striated with red. At one time during the bubble one bulb could cost four fat pigs or a 1000 lbs. of cheese. The central problem is that no one can tell what the color will be from the appearance of the bulb. Care in sorting is essential; the documentary shows how that care can be mislaid. Trust in the seller of the bulb is an even more important commodity. Chicanery was (is) often rife.
It was the Dutch, with their tulip bulbs, that invented the “futures market.” To bloom, the bulbs must be in the ground in the late fall and winter. Thus, there could be no trading of the physical bulb. So, those who made their living by trading decided to establish a market for trading pieces of paper that gave one the right to purchase a particular bulb in the future. And they invented trading on margin. No one actually had the capital to purchase an exorbitantly priced bulb. Only 10% of the purchase price would be fine, because everyone knew they could sell to “a greater fool” before the full bill became due, making that all-important handsome profit. Until one couldn’t, and sure enough, things came crashing down.
Interviews with traders and economists of today tie the mania for tulips and that market crash to the American (and global) housing market crash of 2008. The traders did not use the famous French phrase, “Plus ca change…”. Rather it was plain old English: “Nothing has ever changed.” 5-stars for an informative documentary on the world’s first financial bubble.