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 __//**TULIP MANIA**//__ When: Tulip Mania occurred from 1593-1663.

Causes of the Bubble: The bubble was caused because tulip bulbs became very expensive and well valued in the eyes of the people. The bulbs were being traded in auctions and from person to person as many as ten times a day. The amount of demand and the high status of bulbs made the economy boom creating a bubble. The bubble finally broke when at a regular auction one man refused to pay such a high price for his bulbs, this sent a wave of doubt within all the people and a revolt against the prices ending the expense of the balls and destroying the bubble.

Economy of the Bubble: The tulip was introduced in 1593 by a dutch botanist named Carolus Clusius. He bought it from Constanople. Carolus planted the tulip bulbs in his garden and planned to do medicinal research with them, but the Tulip Mania started when his neighbor’s broke into his garden to creat a quick profit. Over the next decades the desire for tulips increased steeply. The normal tulip bulbs were even selling for astranomical prices. The price of a regular Viceroy tulip bulb was close to $1250, and the price of the rare Semper Augustus bulb, not the rarest, could go for double that. The height of the bubble occured in 1636-37. At this time tulip bulb traders were making fortunes. A regular trader could make $61,710 a month. With such high profit margins, the government could not stop the frenzy.

After the Bubble: The tulip bubble popped, because one day a man fro Haarlem did not show up to pay for his bulb purchase. In the ensuing days people feared the same would happen to them, and the price of the bulbs was only a hundredth of what it had been before. After the bubble burst there were still contracts forcing previous investors to pay extremely high prices for the tulip bulbs, the entrepreneurs wanted these contracts to still hold strong even though the bubble was settling down. The Dutch parliament stepped in and decided they hey didn't believe the courts should enforce the contracts, they ruled that this was a problem for individuals because they essentially were gambling and the dutch government wouldn't support their falls. The Dutch government treated the contracts as they would any other gambling contract violation. For the future they passed laws communicating that future contracts were not going to be enforced at all. The economy during the bubble was very large and operating at full potential. Bulbs were switching hands almost ten times a day and were bringing in anywhere from 5,000, to 53,000 a bulb. The down side of this money coming in was that people stopped investing in things such as homes, or capital goods. People were trusting in bulbs and sold some of the most important survival items. This gave the wealth to only a certain percent of the dutch. Although the economy had a lot of money it was being invested in things that didn’t last so that when the bubble burst the people were all way worse off then they would have expected

Credit: At the beginning of the bubble, credit suffered because, similar to today's financial crisis, there were no regulations on credit requirements. Shadow auctions took place instead of formal auctions because no money was required during the auction and it was easier to get in compared to formal auctions when you needed to be a famous breeder to attend. At these late night shadow auctions there were credit requirements but no one was regulating people’s credit quality. Therefore people were buying tulips with money they didn’t have. This caused inflation where bulb prices became extreme and could even double. All of this eventually caused the tulip bubble to pop.

Government Involvement:  The government had trouble stopping the Tulip Mania because it involved demand and access. The government could not control people’s demand for rare tulips and could not control people’s access to them. Tulips were believed to show wealth and impress guests so demand was high. The tulip bubble eventually popped because the over supply of tulips led to decreased prices and dealers went bankrupt. The people who had invested in the tulip market then lost their savings. Because of the burst of the tulip bubble, the government began to have trade regulations on tulips. But still, craze surrounding tulips was seemingly uncontrollable.

Preventative Measures/Legacy: At the tail end of the bubble burst people began to realize that they had given up all of their belongings for these flowers that cannot give anything back. This was now creating a panic. The government tried to help but in stepping in the increased the crash. The government did not make it a requirement to follow the contract that people were making on the tulips and considered the further price increase as gambling. Everyone was affected by this crash because the market took a major plunge. Even the people that had not invested lost money in their investments and the value of the dollar. This left the Dutch weary about investments in anything and allowed them to seek the benefit of something before they invested their livelihood into it.

<span style="color: #1f497d; font-family: 'Times New Roman','serif'; font-size: 34.6667px;">This Bubble was Different Because…: <span style="color: #000000; font-family: 'Times New Roman','serif'; font-size: 18.6667px;">Tulip mania, in many ways, was the first of its kind. Not only was it one of the first economic bubbles, but the frenzied hype within and surrounding the tulip market had never before – and has never since – been witnessed. Humans are inclined to desire things that are difficult to attain, even moreso when everyone else seems to be wanting the same thing. This was no different during Tulip Mania. The irrational, extreme behavior of people involved in the tulip market became an epidemic. Tulip sellers drowned themselves in canals. Buyers killed themselves over bulbs. People joined in the “madness of crowds” and rioted in the streets. The influence was so potent and forceful that plays, operas, and even novels were written about Tulip Mania.

<span style="color: #000000; font-family: 'Times New Roman','serif'; font-size: 18.6667px;">BIBLIOGRAPHY

1. http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CDEQFjAB&url=http%3A%2F%2Fwww.businessweek.com%2F2000%2F00_17%2Fb3678084.htm&ei=WRw0T4LxIujj0gH1gu3NAg&usg=AFQjCNGaG0rNdap61UqwNSb_XFUhx1dtbA&sig2=FHK4E7aqL7fbHGFFf5TIrQ 2. http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&ved=0CDkQFjAC&url=http%3A%2F%2Fwww.investopedia.com%2Ffeatures%2Fcrashes%2Fcrashes2.asp&ei=WRw0T4LxIujj0gH1gu3NAg&usg=AFQjCNEvfLwhg-txmnwHV7PR8kIq48cHMQ&sig2=301ZP1QyS8iTyR8d-LqrfQ 3. http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&ved=0CEMQFjAD&url=http%3A%2F%2Fpenelope.uchicago.edu%2F~grout%2Fencyclopaedia_romana%2Faconite%2Ftulipomania.html&ei=WRw0T4LxIujj0gH1gu3NAg&usg=AFQjCNGWqL7_fXOfh0Sn2-_cYdaU_2_zAA&sig2=0Nbf2vH2vdclj1TUiR_tjg 4.http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=7&ved=0CFoQFjAG&url=http%3A%2F%2Fmises.org%2Fdaily%2F2564&ei=WRw0T4LxIujj0gH1gu3NAg&usg=AFQjCNE48ysEe0tbUveJUyvMKtFZH7Vpaw&sig2=gIqpI7I7fa3i6mFS-a3Pzg

BY KATE BORKOVITZ, KIRSTEN FITCH, STEFANI BASILAVECCHIO, CHANDLER BALLBACH AND SHELBY RICHARDSON