Chinese go crazy for jade. Worth more than gold, in China, while in Poland, where there’s plenty, it’s so cheap that it’s not worth mining. Seems like there’s an arbitrage opportunity here. In the meantime, maybe we can interest our friends to the east in some collateralized securities.
Perhaps the most famous example of a speculative bubble is the “tulipmania” that struck 17th century Holland. Known for their passionate love of flowers, the Dutch highly prized the tulip upon its introduction to Western Europe in the mid-16th century. Dutch collectors devised a hierarchy of tulip varieties based upon their species and coloring, assigning values to the various flowers. Because it was impossible to determine which variegation would bloom from a particular bulb, the tulip became an object of speculation. During their earliest years in Europe, the bulbs were primarily of interest to the wealthy, but by the mid-1630s the craze caught on with middle-class and poorer families. The increased demand caused the price of the bulbs to soar.1
The market reached its height in late 1636 and early 1637, after the bulbs had been planted to bloom the following spring. People mortgaged their homes and industries in order to buy the bulbs for resale at higher prices. Charles Mackay, in his definitive history of early financial bubbles, Extraordinary Popular Delusions and the Madness of Crowds (1841), published a list of objects (and their prices) which were exchanged for “one single root of the rare species called the Viceroy”:
Two lasts of wheat (448 florins)
Four lasts of rye (558 florins)
Four fat oxen (480 florins)
Eight fat swine (240 florins)
Twelve fat sheep (120 florins)
Two Hogsheads of wine (70 florins)
Four tuns of beer (32 florins)
Two tuns of butter (192 florins)
One thousands lbs. of cheese (120 florins)
A complete bed (100 florins)
A suit of clothes (80 florins)
A silver drinking-cup (60 florins)2
In February 1637, as spring drew near and the bulbs were close to flowering, consumer confidence evaporated and the market suddenly crashed. As the price structure collapsed, Mackay reported that “hundreds who, a few months previously, had begun to doubt that there was such a thing as poverty in the land suddenly found themselves the possessors of a few bulbs, which nobody would buy, even though they offered them at one quarter of the sums they had paid for them.”3 Litigation ensued, and a government commission ruled in May 1638 that tulip contracts could be annulled upon the payment of 3.5 percent of the agreed price.