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inside reading 4, 6- tulipomania

6- tulipomania

One of the most entertaining chapters in Charles Mackay's classic Extraordinary Popular Delusions and the Madness of Crowds (1841) concerns a speculative bubble that occurred in the Netherlands in the 1630s. What makes this bubble such a curiosity is that it concerned, of all things, tulips, a variety of flower grown from bulbs and noted for their vivid colors and striking patterns.

According to Mackay's account, in the mid-to-late 1500s, tulips from Turkey made their way to Amsterdam, where they grew in popularity among wealthy people who would pay extravagant prices for the rarer varieties. The desire to possess them spread to the middle classes, and apparently people would spend a fortune to acquire a single root. The business in tulip bulbs was so great that by 1623 a single bulb could easily cost as much as a year's salary. And the rarest bulbs by 1635 could fetch as much as 40 times that. If Mackay's figures are correct, a single bulb of the prized Admiral Liefken variety was worth as much as 19 tons of butter or 440 "fat sheep." Apparently, owning such a prize denoted wealth and prestige.

Mackay enlivens his account with amusing anecdotes. A sailor, while delivering merchandise, idly stole a bulb of the prized Semper Augustus variety from a merchant, and thinking it was an onion, ate it along with a fish that the merchant had given him. The sailor was quietly sitting on a coil of ropes finishing the "onion" when the merchant finally caught up with him. In another episode, a visiting amateur botanist saw an interesting-looking root lying in a wealthy Dutchman's home. Unable to suppress his curiosity, he cut up the pricey Admiral Van der Eyck tulip to study it. The confused botanist, after being dragged by the collar to the local courthouse, found himself in prison until he could raise money to cover the owner's loss.

To accommodate the lively market for tulips, by 1636 several exchanges were established where buyers and sellers could acquire futures contracts (a promise to buy or sell a specified amount at a preset price). By buying and trading such contracts, tulip traders sought to profit from the fluctuation in tulip prices and grow instantly rich. The availability of easy credit and loans also facilitated buying. Similar to the "day-traders" during the dot-com craze of the late 1990s, who quit their jobs, borrowed money, and used their personal computers to trade volatile Internet and technology stocks, people converted their houses and land into cash in order to invest in the flowers. In small towns, taverns served as the local tulip commodity exchange.

But it was not to last. According to Mackay, once ordinary people bought tulips to sell for profit and not for planting in rich people's gardens, the price was bound to drop as the foolishness of it all became apparent. In late 1636, prices peaked and fell sharply. Sellers panicked and sold at any price, buyers defaulted on their futures contracts, and the easy credit that buyers could count on to fund their purchases dried up. Those who got out early ended up quietly rich, but many who believed themselves instantly rich were ruined. Mackay says commerce "suffered a severe shock," and took many years to recover.

Mackay's famous account serves as a warning to all those who speculate in stocks, real estate, or commodities As investment brochures routinely say, "Past performance is no guarantee of future returns." But did Mackay exaggerate? Was this really an extraordinary delusion and an example of the irrationality of crowds? Or was he too anxious to find another instance of what he called "the great and awful book of human folly"? Did the 17th century speculation in tulips really do long-term damage to the country's economic infrastructure?

Recent writers and researchers have raised doubts about the scope of this bubble and believe a more accurate history of the period better clarifies the reasons it occurred. In his book Tulipomania (1999), Mike Dash agrees the Dutch tulip market was a speculative bubble driven by inexperienced investors. But he also reveals why rational people might have become caught up in it. The flowers had unique color patterns much in demand for their beauty, but each new variety had to be propagated from a single bulb which could only produce two bulbs in the next year, four after that, and so on. When the available quantity was small, naturally the underlying value of a single bulb increased. The more abundant varieties sold cheaply by the pound. To complicate matters, the gorgeous markings on the most striking bulbs were actually the result of a virus. That made them sickly and difficult to propagate. This biologically-determined rarity added to their value and kept prices higher than would normally be expected. Until 1634 or so, tulip prices behaved normally, with rare, slowly propagating varieties more expensive than the plentiful varieties.

But how do we explain the 20-fold increase in price before the 1636-37 crash? Isn't such an increase a sure sign of speculative madness? Researchers point out that Mackay's account leaves out mention of two events that may account for some of this fluctuation. In 1636-37, the bubonic plague struck the Netherlands, an event that must have had some effect on the collapsing prices of a luxurious commodity. Mackay also neglects to mention the Thirty Years War in Europe. According to Thompson and Treussard of the University of California at Los Angeles, this devastating conflict played havoc with tulip demand. In the early 1630s, after stabilizing victories, tulip sales rose in Germany, where they grew well, but the tides of war changed in l636. Sales in Germany dropped, and gardens were literally dug up to sell the bulbs to raise cash.

Thompson and Treussard place much of the blame on government policies. As the market fell due to plague and war, the government allowed speculators to convert their futures contracts from an "obligation" to buy into an "option" to buy. In effect, sellers could not force buyers to honor their contracts. Without futures contracts to protect themselves against price drops, holding tulips became riskier and the price dropped accordingly. Thompson and Treussard caution against the "popular delusion" conclusion of Mackay and say "tulipomania" was actually an example of how market forces efficiently react to sudden changes in the prospects for profit and loss. Dash's book also makes it evident that, like the relatively mild recession following the burst of the dot-com bubble, tulipomania's economic impact was minor since only a fraction of the economy was devoted to tulip trading, with the Amsterdam exchange and others wanting no part of it.

Not all observers are willing to dispose of Mackay so readily. Kim Phillips-Fein, an ideologically motivated critic of market-based economies writing at the height of the dot-com bubble, complains that "trendy academics like to say that the tulip craze wasn't a bubble at all." Favoring market-driven economies, these researchers too easily dismiss the dangers of what she feared was a forthcoming economic disaster in western economies. Meanwhile, "contrarian" investors will most likely continue to use the tulip history to warn investors against a "herd mentality" that encourages people to buy overpriced stocks. And professional investors and financial analysts will point to tulipomania as a warning of what happens when amateurs make their own investment decisions.

Without a clear, agreed-upon chronology of events that led to the stunning rise and fall of tulip prices, we may never know the causes with any certainty, and any explanation may reveal more about the researcher's ideological bias than it does about Dutch life in l636. Was tulipomania an example of mass hysteria and human foolishness? Was it an early indictment of market-driven economies? Is it a textbook example of how markets correct themselves, and is a warning to governments not to interfere lest they compound the problem? Or is it simply a blip in history—where greed, fear, opportunity, a love for beautiful things, and bad luck converged to produce an improbable outcome?

Are there modern parallels? Tulips seem reasonably priced today, but what about star athletes? In the 1990s, the Chicago Bulls professional basketball team paid Michael Jordan tens of millions of dollars each year to play. Risky? Yes. But Jordan brought them six championships. In the 2010-2011 season, 25 players in the National Basketball Association earned $15,000,000 (U.S.) or more per season. Only one, Dirk Nowitzki of the Dallas Mavericks, played for a championship team. Hoopimania," perhaps?

6- tulipomania 6- tulipomanía 6 - тюльпаномания

One of the most entertaining chapters in Charles Mackay's classic Extraordinary Popular Delusions and the Madness of Crowds (1841) concerns a speculative bubble that occurred in the Netherlands in the 1630s. Uno de los capítulos más divertidos del clásico de Charles Mackay Extraordinary Popular Delusions and the Madness of Crowds (1841) se refiere a una burbuja especulativa que se produjo en los Países Bajos en la década de 1630. What makes this bubble such a curiosity is that it concerned, of all things, tulips, a variety of flower grown from bulbs and noted for their vivid colors and striking patterns. Lo que hace que esta burbuja sea tan curiosa es que se refiere, entre otras cosas, a los tulipanes, una variedad de flor cultivada a partir de bulbos y conocida por sus vivos colores y llamativos dibujos.

According to Mackay's account, in the mid-to-late 1500s, tulips from Turkey made their way to Amsterdam, where they grew in popularity among wealthy people who would pay extravagant prices for the rarer varieties. Según Mackay, a mediados del siglo XVI, los tulipanes turcos llegaron a Ámsterdam, donde se hicieron populares entre la gente adinerada, que pagaba precios extravagantes por las variedades más raras. The desire to possess them spread to the middle classes, and apparently people would spend a fortune to acquire a single root. El deseo de poseerlas se extendió a las clases medias y, al parecer, la gente se gastaba una fortuna para adquirir una sola raíz. The business in tulip bulbs was so great that by 1623 a single bulb could easily cost as much as a year's salary. El negocio de los bulbos de tulipán era tan grande que en 1623 un solo bulbo podía costar tanto como el salario de un año. And the rarest bulbs by 1635 could fetch as much as 40 times that. Y los bulbos más raros de 1635 podían alcanzar hasta 40 veces ese precio. If Mackay's figures are correct, a single bulb of the prized Admiral Liefken variety was worth as much as 19 tons of butter or 440 "fat sheep." Si las cifras de Mackay son correctas, un solo bulbo de la preciada variedad Admiral Liefken valía tanto como 19 toneladas de mantequilla o 440 "ovejas gordas". Apparently, owning such a prize denoted wealth and prestige. Al parecer, poseer un premio así denotaba riqueza y prestigio.

Mackay enlivens his account with amusing anecdotes. Mackay ameniza su relato con divertidas anécdotas. A sailor, while delivering merchandise, idly stole a bulb of the prized Semper Augustus variety from a merchant, and thinking it was an onion, ate it along with a fish that the merchant had given him. Un marinero, mientras repartía mercancías, robó distraídamente un bulbo de la preciada variedad Semper Augustus a un comerciante y, pensando que era una cebolla, se lo comió junto con un pescado que el comerciante le había dado. The sailor was quietly sitting on a coil of ropes finishing the "onion" when the merchant finally caught up with him. El marinero estaba tranquilamente sentado en una bobina de cuerdas terminando la "cebolla" cuando el mercader por fin lo alcanzó. In another episode, a visiting amateur botanist saw an interesting-looking root lying in a wealthy Dutchman's home. En otro episodio, un botánico aficionado vio una raíz de aspecto interesante en casa de un rico holandés. Unable to suppress his curiosity, he cut up the pricey Admiral Van der Eyck tulip to study it. Incapaz de reprimir su curiosidad, cortó el caro tulipán Admiral Van der Eyck para estudiarlo. The confused botanist, after being dragged by the collar to the local courthouse, found himself in prison until he could raise money to cover the owner's loss. El confundido botánico, tras ser arrastrado por el cuello hasta el juzgado local, se encontró en prisión hasta que pudiera reunir dinero para cubrir la pérdida del propietario.

To accommodate the lively market for tulips, by 1636 several exchanges were established where buyers and sellers could acquire futures contracts (a promise to buy or sell a specified amount at a preset price). Para dar cabida al animado mercado de tulipanes, en 1636 se establecieron varias bolsas donde compradores y vendedores podían adquirir contratos de futuros (una promesa de comprar o vender una cantidad determinada a un precio prefijado). By buying and trading such contracts, tulip traders sought to profit from the fluctuation in tulip prices and grow instantly rich. Al comprar y negociar estos contratos, los comerciantes de tulipanes pretendían beneficiarse de la fluctuación de los precios de los tulipanes y enriquecerse al instante. The availability of easy credit and loans also facilitated buying. La disponibilidad de créditos y préstamos fáciles también facilitó la compra. Similar to the "day-traders" during the dot-com craze of the late 1990s, who quit their jobs, borrowed money, and used their personal computers to trade volatile Internet and technology stocks, people converted their houses and land into cash in order to invest in the flowers. Al igual que los "day-traders" durante la locura de las puntocom a finales de los noventa, que dejaron sus trabajos, pidieron dinero prestado y utilizaron sus ordenadores personales para negociar con las volátiles acciones de Internet y la tecnología, la gente convirtió sus casas y terrenos en dinero en efectivo para invertir en las flores. In small towns, taverns served as the local tulip commodity exchange. En las ciudades pequeñas, las tabernas servían de bolsa local de tulipanes.

But it was not to last. Pero no iba a durar. According to Mackay, once ordinary people bought tulips to sell for profit and not for planting in rich people's gardens, the price was bound to drop as the foolishness of it all became apparent. Según Mackay, una vez que la gente corriente compró tulipanes para venderlos con fines lucrativos y no para plantarlos en los jardines de los ricos, el precio tenía que bajar al hacerse evidente la insensatez de todo aquello. In late 1636, prices peaked and fell sharply. A finales de 1636, los precios alcanzaron su punto álgido y cayeron bruscamente. Sellers panicked and sold at any price, buyers defaulted on their futures contracts, and the easy credit that buyers could count on to fund their purchases dried up. Los vendedores entraron en pánico y vendieron a cualquier precio, los compradores incumplieron sus contratos de futuros y el crédito fácil con el que contaban los compradores para financiar sus compras se agotó. Those who got out early ended up quietly rich, but many who believed themselves instantly rich were ruined. Los que salieron pronto acabaron siendo tranquilamente ricos, pero muchos que se creyeron instantáneamente ricos se arruinaron. Mackay says commerce "suffered a severe shock," and took many years to recover. Mackay dice que el comercio "sufrió un fuerte shock" y tardó muchos años en recuperarse.

Mackay's famous account serves as a warning to all those who speculate in stocks, real estate, or commodities As investment brochures routinely say, "Past performance is no guarantee of future returns." El famoso relato de Mackay sirve de advertencia a todos los que especulan con acciones, bienes inmuebles o materias primas Como se dice habitualmente en los folletos de inversión: "Los resultados pasados no garantizan rendimientos futuros". But did Mackay exaggerate? Pero, ¿exageró Mackay? Was this really an extraordinary delusion and an example of the irrationality of crowds? ¿Fue realmente un delirio extraordinario y un ejemplo de la irracionalidad de las multitudes? Or was he too anxious to find another instance of what he called "the great and awful book of human folly"? ¿O estaba demasiado ansioso por encontrar otro ejemplo de lo que él llamaba "el gran y terrible libro de la locura humana"? Did the 17th century speculation in tulips really do long-term damage to the country's economic infrastructure? ¿La especulación del siglo XVII con los tulipanes dañó realmente a largo plazo la infraestructura económica del país?

Recent writers and researchers have raised doubts about the scope of this bubble and believe a more accurate history of the period better clarifies the reasons it occurred. Escritores e investigadores recientes han planteado dudas sobre el alcance de esta burbuja y creen que una historia más precisa del periodo aclara mejor las razones por las que se produjo. In his book Tulipomania (1999), Mike Dash agrees the Dutch tulip market was a speculative bubble driven by inexperienced investors. En su libro Tulipomania (1999), Mike Dash coincide en que el mercado holandés de tulipanes fue una burbuja especulativa impulsada por inversores inexpertos. But he also reveals why rational people might have become caught up in it. Pero también revela por qué personas racionales pueden haber caído en ella. The flowers had unique color patterns much in demand for their beauty, but each new variety had to be propagated from a single bulb which could only produce two bulbs in the next year, four after that, and so on. Las flores tenían patrones de color únicos muy demandados por su belleza, pero cada nueva variedad tenía que propagarse a partir de un solo bulbo que sólo podía producir dos bulbos al año siguiente, cuatro después, y así sucesivamente. When the available quantity was small, naturally the underlying value of a single bulb increased. Cuando la cantidad disponible era pequeña, naturalmente aumentaba el valor subyacente de una sola bombilla. The more abundant varieties sold cheaply by the pound. Las variedades más abundantes se vendían baratas por libras. To complicate matters, the gorgeous markings on the most striking bulbs were actually the result of a virus. Para complicar las cosas, las preciosas marcas de los bulbos más llamativos eran en realidad el resultado de un virus. That made them sickly and difficult to propagate. Eso las hacía enfermizas y difíciles de propagar. This biologically-determined rarity added to their value and kept prices higher than would normally be expected. Until 1634 or so, tulip prices behaved normally, with rare, slowly propagating varieties more expensive than the plentiful varieties. Hasta 1634 aproximadamente, los precios de los tulipanes se comportaron con normalidad, siendo las variedades raras y de propagación lenta más caras que las abundantes.

But how do we explain the 20-fold increase in price before the 1636-37 crash? Pero, ¿cómo se explica que el precio se multiplicara por 20 antes del desplome de 1636-37? Isn't such an increase a sure sign of speculative madness? ¿No es tal aumento un signo inequívoco de locura especulativa? Researchers point out that Mackay's account leaves out mention of two events that may account for some of this fluctuation. Los investigadores señalan que el relato de Mackay omite mencionar dos acontecimientos que pueden explicar parte de esta fluctuación. In 1636-37, the bubonic plague struck the Netherlands, an event that must have had some effect on the collapsing prices of a luxurious commodity. En 1636-37, la peste bubónica asoló los Países Bajos, un acontecimiento que debió de tener algún efecto en el desplome de los precios de una mercancía lujosa. Mackay also neglects to mention the Thirty Years War in Europe. Mackay tampoco menciona la Guerra de los Treinta Años en Europa. According to Thompson and Treussard of the University of California at Los Angeles, this devastating conflict played havoc with tulip demand. Según Thompson y Treussard, de la Universidad de California en Los Ángeles, este devastador conflicto causó estragos en la demanda de tulipanes. In the early 1630s, after stabilizing victories, tulip sales rose in Germany, where they grew well, but the tides of war changed in l636. A principios de la década de 1630, tras estabilizarse las victorias, las ventas de tulipanes aumentaron en Alemania, donde crecieron bien, pero las mareas de la guerra cambiaron en l636. Sales in Germany dropped, and gardens were literally dug up to sell the bulbs to raise cash. Las ventas en Alemania cayeron, y los jardines fueron literalmente desenterrados para vender los bulbos y conseguir dinero.

Thompson and Treussard place much of the blame on government policies. Thompson y Treussard atribuyen gran parte de la culpa a las políticas gubernamentales. As the market fell due to plague and war, the government allowed speculators to convert their futures contracts from an "obligation" to buy into an "option" to buy. Cuando el mercado cayó debido a la peste y la guerra, el gobierno permitió a los especuladores convertir sus contratos de futuros de una "obligación" de compra en una "opción" de compra. In effect, sellers could not force buyers to honor their contracts. En efecto, los vendedores no podían obligar a los compradores a cumplir sus contratos. Without futures contracts to protect themselves against price drops, holding tulips became riskier and the price dropped accordingly. Sin contratos de futuros para protegerse de las caídas de precios, la tenencia de tulipanes se hizo más arriesgada y el precio bajó en consecuencia. Thompson and Treussard caution against the "popular delusion" conclusion of Mackay and say "tulipomania" was actually an example of how market forces efficiently react to sudden changes in the prospects for profit and loss. Thompson y Treussard advierten contra la conclusión de "delirio popular" de Mackay y afirman que la "tulipomanía" fue en realidad un ejemplo de cómo las fuerzas del mercado reaccionan eficazmente a los cambios repentinos en las perspectivas de pérdidas y ganancias. Dash's book also makes it evident that, like the relatively mild recession following the burst of the dot-com bubble, tulipomania's economic impact was minor since only a fraction of the economy was devoted to tulip trading, with the Amsterdam exchange and others wanting no part of it. El libro de Dash también pone de manifiesto que, al igual que la recesión relativamente leve que siguió al estallido de la burbuja de las puntocom, el impacto económico de la tulipomanía fue menor, ya que sólo una fracción de la economía se dedicó al comercio de tulipanes, y la bolsa de Ámsterdam y otras entidades no quisieron participar en él.

Not all observers are willing to dispose of Mackay so readily. No todos los observadores están dispuestos a deshacerse de Mackay tan fácilmente. Kim Phillips-Fein, an ideologically motivated critic of market-based economies writing at the height of the dot-com bubble, complains that "trendy academics like to say that the tulip craze wasn't a bubble at all." Kim Phillips-Fein, una crítica ideológicamente motivada de las economías de mercado que escribió en plena burbuja de las puntocom, se queja de que "a los académicos de moda les gusta decir que la locura de los tulipanes no fue una burbuja en absoluto". Favoring market-driven economies, these researchers too easily dismiss the dangers of what she feared was a forthcoming economic disaster in western economies. Favorables a las economías de mercado, estos investigadores descartan con demasiada facilidad los peligros de lo que ella temía fuera un próximo desastre económico en las economías occidentales. Meanwhile, "contrarian" investors will most likely continue to use the tulip history to warn investors against a "herd mentality" that encourages people to buy overpriced stocks. Mientras tanto, los inversores "contrarios" seguirán probablemente utilizando la historia de los tulipanes para advertir a los inversores contra una "mentalidad de rebaño" que anima a la gente a comprar acciones sobrevaloradas. And professional investors and financial analysts will point to tulipomania as a warning of what happens when amateurs make their own investment decisions. Y los inversores profesionales y los analistas financieros señalarán la tulipomanía como una advertencia de lo que ocurre cuando los aficionados toman sus propias decisiones de inversión.

Without a clear, agreed-upon chronology of events that led to the stunning rise and fall of tulip prices, we may never know the causes with any certainty, and any explanation may reveal more about the researcher's ideological bias than it does about Dutch life in l636. Sin una cronología clara y consensuada de los acontecimientos que condujeron a la impresionante subida y caída de los precios de los tulipanes, es posible que nunca sepamos con certeza las causas, y cualquier explicación puede revelar más sobre el sesgo ideológico del investigador que sobre la vida holandesa en l636. Was tulipomania an example of mass hysteria and human foolishness? ¿Fue la tulipomanía un ejemplo de histeria colectiva e insensatez humana? Was it an early indictment of market-driven economies? ¿Fue una acusación temprana contra las economías de mercado? Is it a textbook example of how markets correct themselves, and is a warning to governments not to interfere lest they compound the problem? ¿Es un ejemplo de manual de cómo los mercados se corrigen a sí mismos, y una advertencia a los gobiernos para que no interfieran, no sea que agraven el problema? Or is it simply a blip in history—where greed, fear, opportunity, a love for beautiful things, and bad luck converged to produce an improbable outcome? ¿O se trata simplemente de un parpadeo en la historia, en el que la codicia, el miedo, la oportunidad, el amor por las cosas bellas y la mala suerte convergieron para producir un resultado improbable?

Are there modern parallels? ¿Existen paralelismos modernos? Tulips seem reasonably priced today, but what about star athletes? Los tulipanes parecen tener un precio razonable hoy en día, pero ¿qué pasa con los atletas estrella? In the 1990s, the Chicago Bulls professional basketball team paid Michael Jordan tens of millions of dollars each year to play. En los años 90, el equipo de baloncesto profesional Chicago Bulls pagaba a Michael Jordan decenas de millones de dólares cada año por jugar. Risky? ¿Arriesgado? Yes. Sí. But Jordan brought them six championships. Pero Jordan les trajo seis campeonatos. In the 2010-2011 season, 25 players in the National Basketball Association earned $15,000,000 (U.S.) En la temporada 2010-2011, 25 jugadores de la Asociación Nacional de Baloncesto ganaron 15.000.000 $ (EE.UU.) or more per season. o más por temporada. Only one, Dirk Nowitzki of the Dallas Mavericks, played for a championship team. Sólo uno, Dirk Nowitzki, de los Dallas Mavericks, jugó en un equipo campeón. Hoopimania," perhaps? ¿Hoopimania, quizás?