Tulipomania
Social
People began to sell their flowers, and fewer and fewer people were interested in buying.
This mixed with the cancelling of contracts created a panic sell off that dropped the price of the flower drimatically
People would sell off no matter the profit loss they would receive
Due to the Bubonic plague being present in the Netherlands at the time, people were making irrational decisions
Some people were trying to make the most of what they thought were their remaining months and live lavishly
This, coupled with the desire for the flower, caused people to liquidate all of their assets (like farmland, Houses, and savings) to have enough money to buy these lavish flowers
The desire for the tulips became a mass craze
Due to the non-viral disease mosaic, a "fire" pattern was created on the flower
This caused more unique and rare designs of tulips
The more unique and rare the tulip was, the more people were willing to pay for the flower
The new tulip was brought over from Turkey to the Netherlands
This caused a rarity that resulted in a desire for the flower
Political
The government began to offer roughly 10% of the face value of the contracts to the people getting cancelled contracts in order to help decrease the amount of profit loss of their citizens
The Commissarissen van De Bloemen Saecken (Commissioners for flower affairs) would meet twice weekly to come up with ideas on how to reduce this bubbles effect.
They came up with the solution that a 3.5% charge to debtors on pre-existing contracts would be put into place to deter the dealer from cancelling the contract.
There was no legal regulations on the price of the tulips
Gambling was illegal at the time so these contracts that were created by government officials in an attempt to make a quick dollar were not legally enforced.
The unrestrictiveness of the contracts being cancelled contributed to a large sell off that dropped the price of the tulip significantly
Government contracts were changed from future contracts to opinion contracts
If the investor did not like the current market price of the tulip, the dealer was not obligated to buy the product
The dealer could pay a small fine and cancel the contract
This caused a massive loss for some people who had paid large sums of money for the tulip and will never make their money back
Economic
Everyone reached a point where they were looking to sell their flowers, and there were fewer buyers
This resulted in a price drop
After the price drop, dealers began to break contracts
This resulted in a mass sell off that left a large amount of people in debt after selling their flowers for a large profit loss
Tulip bulb dealers would be paid money from the purchaser to buy the tulips, through written contracts
Once the bubble began to crash, dealers would pay a small fine in order to cancel contracts and minimize the debt for themselves, leaving the buyer in a large sum of debt
The Dutch began to liquidate all of their profitable assets in order to afford these tulip bulbs
People began to sell their farm land, houses, cash in life savings just to obtain enough money to afford the tulips
Once the bubble begin to crash and people began to sell off all of their flowers no matter the cost, people were left with large amounts of debt and fewer assets
The rariety of the flower would increase the price
The price of a tulip bulb increase twenty-fold in one month, rising from 125 florins per pound on December 31st 1636 to 1,500 florins on February 3rd, 1637.
