Tulip Mania

(redirected from Windhandel)

Tulip Mania

History's first major asset bubble. Tulips were introduced to Europe from the Ottoman Empire in the mid-1500s and became very popular in the Netherlands. As they grew in popularity, prices for tulips rose steadily, then unsustainably, in the 1630s. Prices suddenly collapsed in February 1637. Interestingly, tulip mania resulted in the creation of a formal futures market and marked one of the first times when contracts were traded without exchanging the underlying asset.
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Here is what one writer wrote about this buying mania: 

 "The immense expansion of commerce [in the Netherlands] encouraged gambling upon profits to be made from speculation in all kinds of products-.But now and again, speculation intensified into a frenzy of what the Dutch called, "windhandel," literally trading in the wind, that is, buying or selling futures without actual possession of the goods-.The fever kept getting wilder and 
 wilder until suddenly at the beginning 
 of 1637 the market cracked.
No real bulbs were actually traded, leading the Dutch, no fools they, to refer to tulip contract trading as windhandel ("wind trade").
"The Dutch," according to Dash, "called this phase of the tulip craze the windhandel. It was a term rich in meaning.